The College Bubble Begins

Over the last decade, professors and pundits have begun to notice a change in higher education. They have bemoaned falling academic standards, uninterested students, and a campus culture of partying instead of learning. On top of these concerns, parents, students, and taxpayers face mounting college costs.

All these problems are symptoms of  a college bubble.” Like the nation’s housing bubble, which eventually burst, the college bubble is caused by a number of factors. But the biggest force is, as my colleague George Leef has often pointed out, the overselling of higher education. The housing bubble was created, at least in part, by the conviction that everyone ought to own a home; the college bubble is occurring because so many people believe that everyone ought to attend college.

The evidence for the overselling—and its magnitude—lies in enrollment growth figures. (Scroll down to see graphs with these figures.) Since the 1940s, enrollment in colleges and universities has been on the rise in the United States and in North Carolina. At the beginning of the 20th century, college attendance was relatively rare—limited to only the very brainy or very wealthy. Most young people acquired skills via on-the-job training or life experiences. Most universities were private, placing little burden on taxpayers.

Throughout the 20th century, universities changed. By 2009, 70 percent of high school graduates enrolled in a college or university. Most college students attend public colleges and universities. Federal Pell grants, direct loans, and state need-based and merit scholarships, zealous parents, and helpful guidance counselors encourage more students to attend universities than ever before. President Obama wants more students in college as well, saying, “By 2020, America will once again have the highest proportion of college graduates in the world.”

But this growth is unsustainable.  And if it is predicated on the assumption of value that isn’t really there, the conditions are ripe for the bubble to burst.

The graphs below show how far we have come in promoting college.

Many U.S. citizens already have college degrees. And many more have “some college.” As of 2009, the U.S. trails only Norway in the percentage of adults ages 25-64 who hold bachelor’s degrees. As the chart below indicates, 30 percent of all Americans now have a bachelor’s degree or higher degree, while approximately 55 percent have had some college.

Educational Attainment of Americans 25 Years and Over: 1940-2009

As the second chart reveals, the percentage of high school graduates who enter college is at an all-time high—70.1 percent. Given that the average high school graduate has only “basic” literacy levels (according to the National Assessment of Adult Literacy), it’s likely that all interested and qualified students are already enrolling in college.

College Enrollment of Recent High School Graduates 1959-2009

North Carolina’s experience mirrors the national trend in college enrollment. Since 2003, the number of students enrolled in the University of North Carolina system has outpaced population growth considerably. As the chart below indicates, in the period between 1999 and 2009, North Carolina’s total population grew 20.1 percent. The UNC system’s undergraduate enrollment grew twice as much—40.2 percent.

UNC Enrollment and NC Population Growth

As costs continue to rise and students see lower returns from their investments in higher education, the bubble is likely to burst.

Next week, I’ll lay out the evidence showing that college costs are also part of the bubble.