The next bubble after 2008
…..is the education bubble!
We are in the midst of an education bubble and not many people realize this.
Higher education costs a lot and the debts incurred are humongous. The starting pay of a typical university graduate is not as much as to cover the debts they incurred during their study. Not to mention the interest rates they pay as well. This combination doesn’t work parallel with each other and hence, students are stuck in an endless loop of the debt payment.
Whenever something is overvalued, it gets converted into a bubble. The housing bubble which crashed the market down in 2008 was one such example. Another example was the dot com bubble which ended in 2001. People haven’t started to experience this but the education bubble is growing due to highly inflated tuition fees charged by universities.
Here’s the deal: education is thought of as an insurance policy. And it’s an expensive policy which is never questioned about the value of return you will get after expiration. Questioning higher education is chaos. It’s taboo. It’s like telling the world there’s no Santa Claus. This insurance policy is the fixed path that convinces you to live a normal life. Wrong! It’s no longer insurance. People are still left unemployed or underemployed with multiple degrees on their resume. In the last 20 years, the supply of college graduates has increased by 11%[Source: Education Data] and the skillset expectations are being increased for each student.
Take a look at the unemployment and underemployment data of Federal Reserve Bank of New York:
The dot com bubble
A similar kind of thing happened in the dot com bubble crash. Investors got highly interested in internet companies and began investing in the hopes of making huge sums out of it. Technology was rapidly advancing which fueled investors to put more and more money into startups. Peter Thiel, in his book Zero to One, remarked that some of his friends filed for an IPO(initial public offering) from the living room of their house. As the market peaked, NASDAQ crashed with around 78% loss. Companies with capitalization in millions soon became worthless.
The higher education bubble
Something similar to the dot com bubble is happening with higher education. People are pouring in millions with hopes of getting high returns. Tuition prices are rising or being overvalued which sooner or later, will create panic and hence, the downfall in the market. The bubble burst will make millions of degrees worthless and the world will witness a decline in the education system. Unemployment will be widespread among recent college graduates accompanied by huge amounts of debt in the form of student loans, credit card bills, etc. Incredibly large expenses and liabilities with no income is like the worst time we could imagine! Underemployment with low wages can sap your self confidence and mend fears about ever having a bright future you hoped for.
Students with certain major like liberal arts, media, performing arts, ethnic studies, criminal justice, anthropology and philosophy are suffering unemployment and underemployment rates more than other majors. It appears that college curriculum isn’t preparing students for the current job scenario. The risks inherent with certain majors are never informed or talked about.
The education bubble burst
The education bubble has indeed begun to burst. Most internet companies like Google, Apple, Tesla, etc have removed the requirement of a Bachelor’s degree. They don’t give a tiny rat’s ass about you having a degree. They just want to get their job done. Startups are following a similar pattern. Snowflake recently announced their scraping of the college degree requirement. And the number of companies that are adopting this policy is not decreasing. It’s continuously rising. These are early signs of a decline in the value of a college degree.
The competition is beginning to pick heat. When you hire someone to build your house, you see the projects the builder has done in the past. You’re least concerned about what the builder scored in his 101 classes. Similarly, companies are more interested in what you could build with the skills you have rather than asking for your GPA. Technology is pacing up and the requirement for people who could innovate is increasing with it. There is a decline for those who can score well but can’t demonstrate it on the field.
These factors coupled together will bring down the value of higher education, thus ending the bubble.
