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Fusion of Life & Money Education Bubble
Fusion of Life & Money Education Bubble | Education Bubble |
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$23,712. That’s the average annual price of private school for 2007-08 according to collegeboard.com. For public four-year schools it is $6,185. Both private and public schools experienced over a 6 percent rise in costs from the previous year. That is a nice chunk of money for undergraduate studies, we won’t even begin to discuss grad school.
Bubbles have been receiving a lot of attention as of late due to the real estate bubble bursting and the previous stock market bubble. How bubbles come about and how to define a bubble varies; Put briefly a bubble represents a rise over the fundamental value of an Asset, this Wikipedia article gives more information http://en.wikipedia.org/wiki/Economic_bubble. What we do know is that when there is a rush to an Asset it drives the price up, as people rush blindly to the Asset they ignore the true underlying value of that Asset. Kinda like lemmings. Because higher education has always been associated with higher wages over a lifetime, and rightly so, more and more families are breaking the bank to ensure their children get a piece. When financers saw the dust coming from the hoards of people looking to go to college, they jumped in with both feet. But then the game changed.
While starting salaries for new grads have generally increased over the past couple of years so has inflation. Today, new grads are entering an economy with a shrinking workforce and stiff competition. This is bad news for banks in this business. Like I told Sallie Mae, if I don’t get paid then you don’t get paid. Apparently I’m not the only one if you check out their stock price. SLM
What the Expert said
In my discussion with Dr. Brian Fitzpatrick of
Consolidation: Smaller and middle size schools that are highly dependent on tuition to keep them going may be forced to join up as students look for less costly alternatives.
Increased enrollment at Community Colleges: Why pay for two years of education when you can get the same two years for a fraction of the cost.
Return to technical/trade schools: Don’t get it twisted. Carpenters, plumbers, electricians, auto mechanics, etc. make nice bread. Wearing a shirt and tie to work does not equal more money. Trust.
The Verdict
All in all advanced education is a good thing. But like any Asset, you don’t have to overpay for it. If the costs outweigh the benefit explore other options. After all it is your money.
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