All Of The Signs Suggest The College Bubble Has Finally Burst

kerryvaughan via FlickrThis week, the Wall Street Journal’s Ruth Simon reported private colleges are now offering record financial assistance to keep classrooms full.

Some schools are now seeing just 20% of the students they accepted actually enrolling, versus the usual rate of 33%.

So they have increased the “tuition discount rate”— the price after grants and scholarships  —  to an all-time high of 45%.

Meanwhile, the median sticker price increased just 3.9% last fall, the smallest gains in 12 years. And at public schools, the sticker price climbed just 4.8%, also a 12-year low.

For the Washington Examiner’s Michael Barone, this makes it official: the college bubble has finally burst:

Applicants are negotiating bigger discounts than they used to. Market competition has kicked in.

What has happened is that in a recessionary and sluggish economy potential customers have been figuring out that a college diploma may not be a good investment — particularly if it entails six-figure college loan debt that cannot be discharged in bankruptcy.

The Millennial Generation that voted so heavily for Barack Obama — 66 to 32 per cent in 2008, 60 to 37 per cent in 2012 — has had a hard time finding jobs, even with diplomas in hand. Especially if their degrees are in gender studies or similar fields beloved of academics.

Moody’s Investors Service Managing Director John Nelson basically agrees, telling Simon,  “we have hit a tipping point on price.”

It was a long time coming. Check out this chart from AEI’s Mark Perry showing the rising cost of tuition outpacing basically every other good in American society for nearly two decades:

college tuition chart

Barone goes a bit further than we would about the bust’s implications (he writes that administrators actively believed they were “above market forces” and could make investment decisions accordingly).

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