Real Estate Bubble vs. College Tuition Bubble

Dr. Eliza Luck, senior visiting fellow at the Sy Institute of Economic Research, has been preparing a study examining the cost of living versus college tuition. According to the study, there is a far greater worry than a housing bubble, it is the education bubble.

Housing costs for the last few years have risen dramatically. Last year many American cities saw home prices appreciate over 30% in just one year. In the last several months, there has been widespread media attention focused on when the housing market will crash. It is expected that housing market will crash in much the same way that the NASDAQ did in 2001 after extensive speculation from inexperienced investors. Economists have been quoted to say that prices for homes in America have risen far above the actual worth of the properties, that the prices are not sustainable, and that the prices are been driven by speculators and low interest rates.

Based on their arguments for a housing bubble, the same should be said for an education bubble on college tuitions today. Tuition prices have steadily been on the rise for well over a decade, at a pace of about 10% annually. Tuition prices at many universities have eclipsed the starting salaries of an average college graduate. For the last few years, the starting salaries of college graduates have hovered around $32,000. The cost of tuition is exorbitant, yet no one has labeled that a bubble. Families pay tuition the same way they pay their rent or mortgage a payment, blindly believing that it is an investment and a necessity.

There are other portions of our economy that are driving up the cost of living across the board for all Americans. Health care costs have risen at a rate well above inflation, so has gasoline. Instead of turning all of our attention to the coming housing crisis, perhaps we should ask the American media to concentrate its efforts elsewhere, such as the coming education bubble.

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