Harry S. Dent | Thursday, May 23, 2013 >>
William Bennett, former Secretary of Education, just published a book called Is College Worth It? In it he explains that only 150 out of 3,500 colleges are worth attending because they have a positive return on investment.
That’s fractionally more than 4%.
That’s just nuts!
The cost of high-end private colleges is now more than $200,000 for a four year degree. If kids invested that money instead of blowing it on an over-priced education that’ll give them zero advantage in an impossible job market, they’d be millionaires within 20 years. They’d be able to retire at age 40!
Instead, these kids tie a ball and chain around their ankles… and when they leave school it holds them back from starting a family, buying a home, spending more money as they age.
And we ALL pay the price for that down the road…
So the question we should all be asking now is: Is it worth it?
The top 10 schools in Bennett’s list of 350 – that’s 3% of the 4% – are Ivy League schools like Stanford, Harvard and Wharton. I’ve always seen these schools as a screen for the brightest and most motivated young people. The very fact that you got in and graduated puts you in the top tier for jobs, whether the education is really that superior or not.
Bennett also says that if you specialize in practical skills like engineering or applied science or business, second tier degrees and state universities can pay off.
That may be so, but the soaring cost of education – well into bubble territory at this point – makes it hard to get the return on investment students deserve. And people studying English and Philosophy… well, they’re just doomed.
Here’s a chart to show you how ridiculous the education bubble is today…
As you can see, private education has seen the greatest inflation. Far more than any major consumer category. It has even outstripped health care by a major margin.
The CPI has averaged 3.3% since 1980. Health care 5.5%. Education has averaged a whopping 7.4%… and it has been accelerating since 2001.
There is simply no way in hell that this bubble is sustainable. It WILL burst… for the same reason the housing bubble burst after peaking in early 2006: When costs get so high no one can afford them anymore.
And just like the housing bubble, government is doing everything in its power to keep the bubble going by making it easier and more affordable to get college loans. As a result, we now have $ 1 trillion in student loans… and signs that this secondary bubble is bursting as defaults rise rapidly.
So what now? A revolution. That’s what.
In the next decade, we will witness a revolution in education.
Teachers have enjoyed tenure… they insured their futures, like labor unions, against the interests of parents and students. That will have to change to reward higher productivity and later retirement.
Then there’s the huge fixed cost of real estate and facilities. In an Internet world, campuses could be halved. Students can take some classes live and some online. That would cut massive costs and allow colleges to sell off or lease facilities to businesses or research groups for income… which would help to further reduce costs.
But the best benefit of Internet learning is that students can have access to the best professors and experts around the world, not just the professors on their campus.
Students could have a course and career concierge (or browser as I call it) that helps them identify their aptitudes and natural talents, and then custom-tailors courses (or servers) for them, in classroom and on the Internet. The quality of education would go up and the costs would come down.
With education costs at such extremes, and employment opportunities at such low levels, this revolution is coming sooner rather than later. Only when it does will it once again pay to get a college education.
Until then, consider putting that college money to better use.
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