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Higher education bubble in the United States


The higher education bubble in the United States is a claim that excessive investment in higher education could have negative repercussions in the broader economy. According to the claim – generally associated with fiscal conservatives – while college tuition payments are rising, the supply of college graduates in many fields of study is exceeding the demand for their skills, which aggravates graduate unemployment and underemployment, which in turn increases the burden of student loan defaults on financial institutions and taxpayers. Also, employers have responded to the oversupply of graduates by raising the academic requirements of many occupations higher than is really necessary to perform the work. The claim has generally been used to justify cuts to public higher education spending, tax cuts, or a shift of government spending towards the criminal justice system and the Department of Defense.

Even the nonpartisan New York Fed, in the liberal-leaning state of New York, which used "a Bartik-like approach to identify the effect of increased loan supply on tuition following large policy changes in federal aid program maximums available to undergraduate students that occurred between 2008 and 2010" found "that institutions that were most exposed to these loan limit maximums ahead of the policy changes experienced disproportionate tuition increases around these changes, with effects of changes in institution-specific program maximums of Pell Grant, subsidized."


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