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THE UNIVERSITY BOOM: Do students lose or win??

Universities are a business like any other: they have revenues, expenses and a product. Like most companies, one of their most valuable assets is reputation: yearly rankings are the first thing parents look at and their interest usually stops there. Naturally, this results in cutthroat competition between universities: to rank higher each year by obtaining better faculty and larger facilities.

This arms race is one of the reasons why universities have become so expensive, but it is far  from being the only one. The assembly line of the modern American probably looks familiar: a tedious grind from kindergarten to twelfth grade, likely followed by an undergraduate degree. As this percentage increases, the line between higher education and k-12 becomes thinner and thinner.

It has already ceased to exist in the minds of most middle-class parents, who start saving for their children’s college before they’ve even learned to walk. It’s gotten to the point where teenagers are expected to know which university they’re going to go to and to earn college credits long before they’ve even decided what they’ll be majoring in.

Of course, people’s faith in higher education is well founded: on average, people with a bachelor’s degree earn a million dollars more over the course of their lifetime than their high school diploma counterparts. Averages, however, can be misleading. If you look, instead, at the median wage of graduates based on their major, you’ll see that not every degree was created equal.

If you look at things on a macro scale, the situation looks even worse: tuition doubles every nine years, youth underemployment is close to 50% and student debt in the US is larger than the GDP of Australia. The real winners here are universities, whose revenues have risen by 56% between 2009 and 2014.

But, how did we even get to the point where everyone is supposed to go to college? It wasn’t always like this. In fact, this ‘college is for everyone’ mantra is a very recent development. Universities have been around for millennia, but back then only a select few could join them.

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Prior to the 18th century, the vast majority of people were farmers, and they didn’t really need a degree in theology to till the fields. Once the Industrial Revolution came around, agriculture was replaced by manufacturing, but again: no higher education required. When World War 2 ended in 1945 manufacturing and services made up about an equal share of the US economy, but ever since then the industrial base of America has steadily declined. Today, the US is a service economy, with almost 80% of its GDP coming from that sector, and that’s why universities took off.

If you look at the rate of enrollment, you’ll see that it neatly coincides with the rise of services.

That’s where the highest paying jobs were, and Americans were quick to jump onboard. In the span of just a few decades, the number of enrolled students quadrupled, and universities cashed in on that big time. Once they saw just how much money they could make by admitting as many student as possible, universities started one-upping each other to stay on top. For private universities, which make 80% of their revenues from tuition, this meant investing in amenities.

Nice dorms, gyms, stadiums; anything that would keep them ahead, and to get the money to build them, universities had to raise their tuition.

To maintain graduation rates despite admitting more and more below-average students, universities have had to artificially pump their grades up. They couldn’t let actual academics get in the way of their profits now, could they? Back in the 1940s, only 15% of students got As, but today it is the most common grade across the country.

All those extra students mean more administrative work, which has actually become one of the biggest chunks of university spending. To maintain their income, universities have had to increase their tuition, which they’ve done as much as they’ve been able to. But, people can only pay so much tuition, so what do you do after you’ve bled them dry?

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You get them to borrow more money, and who better to borrow from than the ultimate lender, the government? Starting with the GI Bill from 1944, Civilian loans got underway shortly after, and since then student loan debt has become second largest form of consumer debt, ahead of auto loans and credit cards.

Today, student loans amount to $1.4 trillion of debt, 92% of which is in the hands of the government.

If you’re thinking “Hmm, doesn’t this sound familiar?” you’d be right. And, if you weren’t thinking that, it’s probably cause you’re a dirty millennial. But really, the student loan bubble is eerily reminiscent of what happened back in 2008 with the housing market crash, and the worst thing is that nobody’s doing anything about it.

No university is going to start firing staff and tearing down stadiums, and that means that the bubble is only going to get larger. As of right now, the average university graduate takes on over 37,000 dollars of debt, which they’re going to be repaying over the course of 20 years. And, all of that just to have a 50/50 shot of getting a job below their qualifications.

It’s pretty clear that higher education reform is sorely needed, and until that happens, things are only going to get worse. The good news is that community colleges have become a lot more attractive lately, and so too have online courses. In fact, the rise of online freelancing has made careers without a degree entirely possible. As long as you can do the work, nobody cares whether you’ve got some expensive piece of toilet paper vouching for you. The Internet is full of places where you can learn a vast array of skills without going into lifelong debt.

Think wisely and decide on your investment in higher education!! Question yourself about its value!!


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