This Is the Way the College ‘Bubble’ Ends

Not with a pop, but a hiss

By Derek Thompson

For the past few decades, the unstoppable increase in college tuition has been a fact of life, like death and taxes. The sticker price of American college increased nearly 400 percent in the last 30 years, while median household income growth was relatively flat. Student debt soared to more than $1 trillion, the result of loans to cover the difference.

Several people—with varying degrees of expertise in higher-ed economics—have predicted that it’s all a bubble, destined to burst. Now after decades of expansion, just about every meaningful statistic—including the number of college students, the growth of tuition costs, and even the total number of colleges—is going down, or at least growing more slowly.

First, the annual growth rate of college tuition is at its lowest rate on record. Second, the annual growth rate of student debt is lower than any time in the last decade. Third, the number of college enrollees has declined for five consecutive years. Fourth, the college premium—the extra income one should expect from getting a bachelor’s degree—is higher than it was in the 1990s, but it’s stopped growing this century for young workers. Altogether, the numbers paint a clear picture: The higher-education market is not bursting, like a popped soap bubble; but it is leaking, like a pierced balloon.

What’s going on? The explanation is a little bit of weak demand, a little bit of over-supply, a big crackdown on for-profit colleges, and, perhaps, a subtle shift in culture.

1. The college pipeline is drying up.

The United States is running out of teenagers.

For two decades, college enrollment grew and grew, bolstered by the coming-of-age of the enormous Millennial generation. But today, the number of young people going to college is in decline. It’s not that today’s teenagers hate higher education; the share of recent high school graduates going on to college has barely budged. Instead, there are simply fewer recent high school grads overall, due to declining birth rates. More than half of colleges and universities say their number of students has declined. Read full article here.