|By Ted Solley, originally published in the June 2011 Socionomist|
The education-at-any-cost mindset remains firmly embedded in the American psyche. So does its corollary, the inevitability of tuition inflation. College enrollment per capita is at or near record highs. Student loans finance an increasingly large share of the cost: Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with fewer than half in 1993. Total outstanding student loan debt, which surpassed total credit card debt for the first time in June 2010 (Figure 1), is poised to top a trillion dollars in 2011.1
Nevertheless, as Alan Hall anticipated in the February 2011 issue of The Socionomist, we are beginning to see weakness in the inflationary psychology supporting the student loan bubble. Using Yale tuition prices as a proxy for tuition prices in general (Figure 2), Hall identified a complete five-wave advance, suggesting that tuition prices were ripe for a correction. As that issue went to press, University of the South, a private university in Sewanee, Tennessee, announced a 10% reduction in its $46,000 tuition, effective this fall. The decision, which a university spokesperson describes as “bold” and “risky,” is unique so far among the top tier of U.S. News and World Report’s rankings of liberal arts colleges. With fewer students able to pay full freight and more choosing state-subsidized public universities, Sewanee’s vice chancellor explained that “given the realities of higher education in the current economy, we believe that some college or university needed to step up and say, ‘Enough.’”2
Meanwhile, as The New York Times reports on the growing burden of college loans on graduates,1 disaffected students are raising their voices, evidenced by an online phenomenon, the “scam blog.” Law students, who historically viewed outsized student loans as the ticket to a lucrative career, have created dozens of blogs aimed at dissuading other prospective lawyers from finding themselves deeply indebted and underemployed. With websites named “Exposing the Law School Scam,” “But I Did Everything Right,” “Subprime JD,” and “Big Debt Small Law,” these “young would-be lawyers are turning [against] their alma maters, blaming their quandary on high tuitions, lax accreditation standards and misleading job placement figures.”3 The job market for law school graduates has deteriorated so drastically that some students are filing lawsuits demanding refunds, claiming fraudulent misrepresentation by the schools. Other students have resorted to hunger strikes and YouTube documentaries to call attention to their plights.4 Recently, the student presidents of 55 law schools petitioned the Department of Education to support legislation that would “strengthen oversight by giving authority to the Department of Education to ensure that current and prospective students receive sufficient, accurate information” regarding debt loads and job prospects.5 These efforts by students grappling with debts already incurred may exemplify the “uh-oh” effect, wherein “a few observers have finally spotted the potential for an unhappy resolution.”6
The president of a nonprofit organization whose goal is to make college more available and affordable (presumably through more federally subsidized debt) says there is “much more awareness about student borrowing than there was 10 years ago. People either are in debt or know someone in debt [from student loans].”1 The consequences are growing. Already saddled with mortgages on their degrees, many graduates are moving in with their parents and refraining from buying homes or starting businesses. PayPal co-founder (and Stanford University and Stanford Law School graduate) Peter Thiel received a big response to his offer to award $100,000 grants to 20 young entrepreneurs willing to leave college and start a company instead. Of the more than 400 applications, “most were from very high-end schools, including about seventeen applicants from Stanford.”7 Even tying the knot is getting, well, knotted: Student loan debt is becoming known as “the anti-dowry.”
As predicted in The Socionomist, a shift in the attitude that created skyrocketing student loan debt levels is now prompting questions about whether education is worth the price. A May 2011 study from the Pew Research Center illustrates the dichotomy.8 A majority of survey participants opined that American colleges are too expensive and fail to provide students with good value. Of the record number of students leaving college with substantial debt burdens, about half report struggling to pay other bills because of their student loans. Thirty-eight percent of the college presidents participating in the Pew survey say the higher education system in this country is headed in the wrong direction. Nevertheless, 94% of parents expect their children to attend college, and 86% of college graduates believe their college education was a good investment. If The Socionomist is correct in its forecast, a greater percentage of college presidents will soon believe the system is headed in the wrong direction, and far fewer than 94% of parents and 86% of graduates will be bullish on college.
Looking forward, the still-nascent forces of crushing debt levels and an increasingly hostile class of debtors should result in lower tuitions across the board. In the interim, some schools will try to hold the line on tuition and fees while slashing course offerings, extracurricular activities and campus amenities. Moreover, if social mood waxes negative, the backlash should spread to campuses nationwide. Expect even more books and articles making the case against education. Expect declining enrollment. Expect protests. And, expect political pressure for and against student loan bailouts.
In summary, 2011 may be the last carefree “endless summer” for the buyers and sellers of higher education.■
[Ted Solley is a lawyer and amateur socionomist from Atlanta, Georgia. He has no regrets about his student loans.]
1Lewin, T. (2011, April 11). Burden of college loans on graduates grows. The New York Times, Retrieved from http://www.nytimes.com/2011/04/12/education/12college.html on May 31, 2011.
2Lewin, T. (2011, February 16). Bucking trend, college will cut price. The New York Times, Retrieved from http://www.nytimes.com/2011/02/17/education/edlife/17tuition.html?_r=1 on May 27, 2011.
3Kwoh, L. (2010, August 15). Irate law school grads say they were misled about job prospects. The Star-Ledger, Retrieved from http://www.nj.com/business/index.ssf/2010/08/irate_law_school_grads_say_the.html on May 31, 2011.
4See, for example, http://abovethelaw.com/2010/08/unemployed-j-d-goes-on-a-hunger-strike/, http://abovethelaw.com/2010/08/hunger-striker-reveal-scambloggers-unimpressed/, http://abovethelaw.com/2010/10/how-many-jaded-cynical-attorneys-does-it-take-to-discourage-one-law-student/, http://abovethelaw.com/2010/10/boston-college-3l-asks-for-his-money-back-hilarity-ensues/, http://abovethelaw.com/2010/07/student-v-school-charlotte-school-of-law-sued-by-student-seeking-admissions-for-bankruptcy-proceeding/, http://abovethelaw.com/2010/03/nyu-3l-takes-unemployment-plight-to-youtube/
5Mystal, E. (2011, May 17). Enough with the aba; law students appeal to the Doe to force law school transparency. Abovethelaw.com, Retrieved from http://abovethelaw.com/2011/05/enough-with-the-aba-law-students-appeal-to-the-doe-to-force-law-school-transparency/ on June 1, 2011.
6The Elliott Wave Financial Forecast (2011, May).
7Lacy, S. (2011, April 10). Peter Thiel: We’re in a bubble and it’s not the internet. It’s higher education. TechCrunch, Retrieved from http://techcrunch.com/2011/04/10/peter-thiel-were-in-a-bubble-and-its-not-the-internet-its-higher-education/ on June 2, 2011.
8Is college worth it? (2011, May 15). Pewresearch.org, Retrieved from http://pewresearch.org/pubs/1993/survey-is-college-degree-worth-cost-debt-college-presidents-higher-education-system on May 31, 2011.