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Is college in a bubble?

This is the third and final installment of our Thursday bubble series. The first part looked at Canadian housing, while the second looked at gold. This one is a little more, shall we say, contrarian in nature.
These days, I don’t know anyone who will discourage a young person from going to college. (Except me. Plug alert!) Haven’t you heard about the studies? You know, the ones that say that college graduates make more than their lesser-educated brethren? Or the ones that argue the difference can be as much as a million dollars over a lifetime? If you’re not going off to get some sort of higher education, you’re missing out.

I won’t discourage anyone from attending post-secondary if they want to. Higher education is a noble goal, and often one that will directly result in higher wages since we live in an increasingly specialized world. Often, companies won’t even look at a prospective employee if that person doesn’t have a relevant university degree. A college degree is becoming the minimum barrier to entry in a lot of fields.
Keep in mind though, there are alternatives, especially for those poor students out there. Trade school generally takes a fraction of the time a full university degree does. You can start at the bottom rung of a big company with the assurance that you’ll eventually move up the ladder. You can even take a few years off to hone your ability to study. The possibilities are endless.
But we’re not here to talk about the pros and cons of getting a degree. We’re here to talk about the crippling debt levels.

Massive debt

The percentage of high school graduates who go on to take college courses is at a record high. And, partially as a result of all this demand, debt has also reached record highs. It’s not uncommon for 22-year-old kids to finish their university programs with $30,000 to $50,000 in debt, and that’s just from (comparatively) cheap Canadian schools. Students from ultra-expensive private schools often graduate with 6 figures in debt.
And then, we have the for-profit schools in the United States. (Also in Canada. But there’s not nearly as many of them.) These money-making institutions often push strictly online courses, since housing students in virtual classrooms is considerably cheaper than real ones. These schools allow you to study at your own pace, a great solution for someone who wants to work and get a degree at the same time.
There are just a couple of problems. Firstly, they’re expensive. To counter that, students do what they’ve done for decades – take out loans. These schools make it easy, often holding the student’s hand throughout the whole loan application process and encouraging them to take out as much as they can. Hey, it’s good business to make sure your customer doesn’t run out of money halfway through purchasing your product.
There’s just one problem. Dropout rates at these types of colleges are huge. There are many reasons for this. It’s tough to work and go to school at the same time. If you’ve ever seen the ads promoting these schools, they’re often directed at people who don’t have a whole lot of education to begin with or people who have been out of school for years. These people aren’t typically the best students. These people often end up with nothing more than a shattered dream and high student loans.
College debt is getting to the point where people can’t afford to take on the level of debt required to get the education.

Worthless degrees

And then we have people who are taking on all this debt to get a degree that has very little potential to be leveraged into anything more than pouring coffee. Usually, these degrees are in the arts, but there are exceptions. Or, so many people are getting into a field that they’re creating an oversupply of workers, kind of like the tech industry circa about 2003.
Which brings me to an interesting theory. As economic conditions worsen, young people can’t find jobs. So instead of joining the workforce, they go to school. Some will enroll in an undergrad program, while others will continue their education and take their masters. At some point, all these people will enter the workforce. And, since education is an investment of time as well as money, often these graduates will enter a decent job market. But, the job market improves for everyone, not just college graduates.
With college participation rates sitting at record highs, is this the peak for education? Or, will society continue to specialize to the point where everyone has to get some sort of degree? The comment section is all yours.


  1. Dave Hilton

    I’ve had discussions with friends who say even their M.B.A. is worthless, because almost everyone has one. I’m starting to wonder if the M.B.A. (since it’s usually a generalized degree) is the GED of Graduate degrees.

    That’s why I chose to get a Master’s Degree in Dispute Resolution instead of an M.B.A. The skills I learned- managing/resolving conflict- are badly needed in the workplace, government & non-profits. Mine is an M.A.- an “arts” degree, but some universities offer the same degree as a Master of Science.

    I did take out loans for the degree- but I’m already seeing a noticeable income difference. I’m even considering pursuing a PhD or JD now.

    In the future, I think degrees and careers will become even more specialized. Not sure whether that’s a good or bad thing yet. I certainly don’t envy the kids entering an undergraduate program in the next few years.

  2. W-at-Off-Road-Finance

    There’s no question in my mind that college is developing bubble-like aspects in the sense that the expense of going to college is growing much more rapidly than the unit cost of supplying the college experience. It doesn’t actually cost THAT much to put a PHD at the front of a room with some chalk once you split the cost up between 10 and 200 ways (depending on class size).

  3. cashflowmantra

    Do you really think all of these are bubbles or are they symptomatic of a fiat currency and debt bubble. If not for the effects of inflation, would we really be having this discussion? Wondering your thoughts.

  4. Sean Murphy

    I have a masters degree. Yet since I have my own business, I don’t use it or need it. I feel it was a waste of time and money. Many young people I feel have no plan when they go off to college, which I feel is the most dangerous aspect.

  5. My University Money

    When I make similar comments around the staff room table at the school I teach at I draw a lot of crazy looks. The irony is that most high school staff rooms end up being full of people who never really wanted to be teachers but took Arts degrees and then didn’t know what else to do. This of course is the perfect formula for a really unmotivated workforce who wants to the “government minimum.”

  6. Sam

    I am the program of Petroleum Geology at University of Calgary. But I found some of my friends who never went to university but just received a diploma from SAIT seems to be happier than I am.

    The point is that whatever you do make sure your happiness is more important than money. I am in a field that I don’t like so, most likely when I finish my degree I will never go in to the geology field.

  7. Paula-Manivelas puerta

    To me, there must be an exhaustive orientation process aimed at young people before they go to college to ensure they choose what they want to study and what they want to be in the future. It’s a really important decision (not only economically) accompanied with large repercussions in their future, so, why the society don’t dedicate more resources in that area?

  8. Mike

    Speaking from the experience of both recruiting graduates and a college attendance here in Australia the financial burden and results are a little different to Canada and the US.
    In terms of job prospects recruiters simply like to tick the box that you have the required degree that matches the position on offer. But often tertiary / college graduates find that the piece of paper is worthless without some kind of experience and that their trade / skilled blue collar workers friends can earn twice as much as them without having to fund 3-5 years of study.
    In terms of cost of study the Australian Government subsidizes the tertiary education with low interest loans but students often find competition for places at College far outweigh their ability to fund the degree.
    In another contrast to Canada Colleges here have aggressive marketing campaigns simply to drive leads for attendees.

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