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The College Bubble Won’t Just Pop

The managerial class props up the devalued diploma. Only a paradigm shift can end the grift.

Although taken for granted by millions of Americans, the choice to obtain a college degree mystifies economists. Teenagers making the first significant financial decision of their lives are paraded through prospective student tours—essentially timeshare presentations for minors—and finally make an arbitrary pick where they will spend around a quarter-million dollars of borrowed or parental money. For some, the degree results in open doors and respectable careers. For others, it’s a scam that wastes their time and money.

Across the nation, colleges are losing customers because young people are wising up to the risks of credentialism-based debt. These institutions are no longer able to tout learning as their main selling point; the best and most current materials, along with some excellent instructors, can be found much cheaper online. Even the classic college experience of wild dorm life and coming-of-age camaraderie has been discarded in favor of prolonged Covid-19 restrictions. The only justification left for skyrocketing tuition costs is the diploma—and the true value of this artifact continues to elude.

Observers have been calling the higher education industry a “bubble” for over a decade now, since Peter Thiel announced in 2011 that college degrees were overvalued and the market for them would crash. In 2012, Glenn Harlan Reynolds wrote The Higher Education Bubble and predicted of ballooning tuition costs, “when the investment runs well into the six figures, students would be crazy not to worry about the return.” Numerous articles have since predicted—with updated news hooks every few years—that the bubble was about to burst. Covid-19 was supposed to be the final pinprick.

But even after significant losses in student enrollment following the pandemic, higher education trudges on—and despite clear economic pressures, it seems unlikely to collapse like other outmoded markets in the past. That’s because college isn’t like other markets—the term “bubble” implies an unstable system that will “pop” on its own. What would that even look like for higher education?

It couldn’t pop like the subprime mortgage bubble of 2008. While banks in that crisis could circle their wagons against uncreditworthy home buyers, “subprime” student loans will always be freely available as long as they cannot be legally discharged through bankruptcy. Plus, 92 percent of all college loans are owned by the U.S. Department of Education, making tuition assistance one of the nation’s largest federal welfare programs. Higher education is less of a bubble and more of a swindle run by the banks and enabled by pliable policymakers.

The con game’s most important element is its referees: the managerial bureaucrats who fill the cardboard tube received at graduation with its “fiat” value. As long as the diploma earns the respect of hiring recruiters, graduate faculty, and other industry functionaries and patronage networks—and as long as the system remains under the thumb of such gatekeepers—colleges will serve a similar function as the Uchraspred of the old Soviet nomenklatura. For young people without money or clout, an endorsement from the politburo managerial class is crucial for future career success.

Unlike a bubble that pops, this swindle can simply switch up its grift in response to a shifting market. As demand for vanity diplomas from expensive liberal-arts schools declines, for example, elite universities with more prestigious names and larger endowments can simply increase advertising for their lower-tier programs that accept nearly all applicants—under their official brand. Faculty will continue capitulating to administrators’ demands for lighter workloads and lower standards until the average graduate’s career preparedness hits rock bottom. The federal government will expand tuition handouts into a full-scale free college system, until nearly every young American receives his or her meaningless diploma. It’s easy for the higher education industry to avoid economic consequences. Unfortunately, this bubble won’t pop until somebody pops it.

In a recent article for RealClear Education, I argued that Republicans can use their majorities in state legislatures to restore a job-focused middle-class mission to state college systems. Such action could differentiate institutions offering practical training from those offering ideological indoctrination. It would only be a first step, as public colleges account for less than half of student enrollment. But if these colleges begin providing education with objective value, they would become a clear alternative to our current system of credentialism.

The battle against our politburo will not be won until we create more such valid alternatives to the name-brand degree. Only then will the bubble pop—because innovators change the culture and blaze new trails. Of course, outposts of American government like Harvard and Yale cannot simply be outcompeted by innovation. They are institutionally inextricable from our global financial, scientific, political, industrial, media, and legal systems. The Ivy League’s star cannot fall without a total epochal shift.

But the higher education monopoly on career credentialing cannot continue forever on the backs of a tiny network of elite schools. Nascent alternatives to the average four-year degree are already cropping up. Some, like the Bloom Institute of Technology, offer skills certificates in programming and data science that charge tuition only as a percentage of a student’s first well-paying post-graduation salary. This “payment on delivery” model eliminates the need for student loans and prioritizes personal responsibility over limitless government subsidy. Others, like Praxis, help young people launch their careers through paid apprenticeships and on-the-job training without the need for college.

The highest-profile college alternatives are also the most competitive. The Thiel Fellowship gives young people $100,000 to skip college and build something innovative instead under the mentorship of other founders, investors, and scientists. The OnDeck Fellowships are a career accelerator and startup incubator that provide programming and networking that mirrors an elite college experience, without the onerous cost and wasted time. Its founders do not seek to replace college, but some commentators believe they soon will.

Not all solutions to credentialism come from educational innovators—some come from the employer side. In 2020, Elon Musk derided college as “basically for fun and to prove that you can do your chores” since “you can learn anything you want for free”—while the billionaire tech mogul called for more job postings to omit degree requirements. Top companies like Apple and Google have been moving in this direction, allowing job applicants to fill openings after a six-month skills-training certificate paid for by the company. Alternative credentials of this kind are becoming popular with other tech companies like IBM, Salesforce, Meta, and Microsoft, who have realized that some of their best developers are not degree-holders.

While the U.S. is decades into the era of diploma inflation, we are just beginning to widely recognize it. Developing and scaling college alternatives will take years, and only a time-tested, reputable competitor can disrupt an industry that is so entangled with government bureaucracy and managerial culture. One thing is certain: only a paradigm shift away from the status quo will restore educational opportunity and end the perverse incentives that have swindled a generation of American youth.

Andrew Cuff writes on conservative issues and policy reform from Latrobe, Pa. Follow him on Twitter @AndrewJCuff.

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