Are we dealing with a mere (!) law school tuition bubble or an overall education bubble? This question is important because people try to wait out recessions by going back to school. Sounds like a reasonable plan right? Well, no. This is something that’s always bugged me about neoliberalism: theoretically, when people are thrown out of work, the solution is to reeducate the workers and they’ll get new jobs in the recovering economy. In practice, there’s no reason to believe that jobs that vanished during a recession will be replaced with jobs for which the workers are training. Unless the government boldly decides to plan the post-recession economy (good luck seeing that with Uncle Sam), we could just as easily see many people leave universities with useless degrees and more debt. In these circumstances, we’d predict an education bubble, yet universities tell us they’re in a pinch. What the buh?
If there were a higher education bubble, we would see two things: (1) rising tuition across the board, and (2) expanding programs. I’ll lay out the situation for public and private institutions.
During a recession, public universities lose funding due to state budget cuts. In one dramatic example, SUNY Stony Brook decided it will shut down its entire undergraduate program. More commonly, universities cut humanities departments. They then make up the income difference in higher tuition. Net result: tuition rises but programs contract.
Private institutions depend on their endowments and tuitions for funding. The endowment contracts because it’s invested in the deteriorating market, so tuition increases compensate. Unusually, in this recession, tuitions are rising slowly to make up the shortfall. I should mention now that Beloit College, my testudinal alma mater, lost 35% of its endowment in the recession and cut forty positions two years ago. Not exactly bubblicious.
For further reading, see Recession Realities in Higher Education
In Bart II of the Bubble Battles, the law school tuition bubble enter the circle.