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Problems in Education

There is an ongoing debate of whether there is a higher education bubble in the USA . Some people say that is not correct to compare education and, e.g. houses, since houses are resalable assets, which can lead to fast price deterioration in case of a bear market. But it is not possible to resell your education to someone else. Others say that there definitely is at least a “student loan bubble”.

Time will show us how the situation evolves. However, let’s take a look at a few facts:

Tuition fees are over 550% higher today than in 1985, and college textbooks prices increased over 800% since 1978. Medical care, housing prices, and consumer price index didn’t grow that fast, not to mention the average income growth.

Current US student loan debt approaches $1.3 trillion, growing at a rate of over $3,000 per second. 

40 million people have student loans, 27% of the debt is delinquent, while it is not possible to write off this debt. In fact, instead you can get penalties, ruin your credit rating, etc.


Whether it is technically correct or incorrect to use the word bubble for the situation, most people would agree that it is scary and seems to be getting out of control, not only on the student end of the market, but also with high chances of colleges and universities going bankrupt. 


There are multiple recommendations of what needs to be done, as well as explanations of the causes, with some of the most notable reasons named being fast tuition costs growth due to fast growth of administrative services and jobs, tenure, availability of loans, reduction of state and federal funding, increased demand for education due to prestige and foreign students, lack of protection of students due to federal law changes making it not possible to declare bankruptcy, making lenders interested to give as many loans as possible, and even more interested in students to default. 


Many people are concerned about the problem and get involved in finding solutions, and hopefully they will. However, I would like to touch upon a different part of the value/price equation that is talked about not so often.

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