Tipping Point: Student Loan Debt and the Higher Education Bubble

Peter Wood

Americans increasingly recognize that college degrees have been oversold.  The prices are too high relative to the benefits.  (Though establishment figures vehemently disagree, millions of Americans have drawn their own conclusions.)  To obtain a college degree, many students go deeply into debt, and a large portion of these debtors find it very difficult to dig their way out.  They find the market value of the credential is much less than they had believed.  Nevertheless, the major voices of the education establishment insist ever more urgently that the pursuit of a college degree is a “good investment” for the individual and that our “national competitiveness” depends on sending a substantially greater percentage of young people to college.  The establishment’s answer to a gross oversupply of college graduates is to seek to double that supply.  This is a source of the public’s deep distrust of the cultural elites who defend our current system of higher education.

This growing distrust means a substantial number of Americans are ripe for cultural defection from traditional higher education. “Cultural defection” is the rejection of what have been long-standing assumptions about goals and pathways in favor of new approaches. Crushing student loan debt is a likely tipping point that will cause Americans to seek other paths to success besides college.

A few signs that the tipping point is near:

  • The New York Times last year devoted a front page story to student debt as an obstacle to marriage.
  • USA Today profiled a young Wisconsin teenager named Brian who “would rather sit atop a tractor than behind a desk,” and enrolled in an apprenticeship program to prepare for a career in farming. The article was titled, “What if a college education just isn’t for everyone?”
  • Searching for alternative pathways to prosperity was the subject of a recent Harvard Graduate School of Education report, which advocated “a cultural shift in mindset,” giving us openness to options other than college.
  • James Altucher’s “Eight Alternatives to Sending Your Kids to College” sparked a discussion about avoiding student loan debt. One reader wrote, “I hope you prove to be an inspiration to the many kids who got locked into student debt without realizing they had great fulfilling alternatives.” 
  • A professor writes in Inside Higher Ed, “Get Out While You Can”:
  • Students gamble on the future when they fund their education with debt. Our current economic difficulties, however, are making Americans pessimistic about the long-term fate of our economy, and it wouldn't surprise me if many parents are no longer willing to let their kids load up on debt. That is especially true if the parents have sent another child to college only to see him moving back home after graduation and taking a job that didn't require a college degree. Unfortunately for professors, every capable kid who doesn’t go to college reduces the stigma of not pursuing higher education.

More and more families are asking, “Is college a profitable investment – will it be worth it in the end?” President Obama and others argue that more education is always a wise investment, but certainly sending large numbers of young people to overly expensive institutions and loading them with insupportable debt as they move forward – debt that could affect their entire lives – is not good stewardship.

If Americans did choose to defect from this norm and the “higher education bubble” were to burst like the housing bubble, what would happen? There would be unpleasant short-term consequences. Students would be displaced from existing colleges. Whole academic disciplines, surviving on inertia, could disappear or be returned to the category of amateur pursuits.  Faculty members could find themselves in large numbers seeking alternative careers.

But it would force colleges and universities reform, pare down, and become much more practical and affordable. The rise of online education may be one “disruptive technology” to emerge as an alternative to the traditional college experience.

In the meantime, we should look seriously at student loan debt as a national rather than an individual crisis – one that may permanently change the face of higher education as we know it.

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