While there are certainly similarities between real estate and tertiary education, the title claim is obvious and unmitigated rubbish. A bubble is only possible when prices are drive up by speculation. Where exactly is there a speculative market in college degrees?
Thanks for the feedback. Let's look at your statement:
A bubble is only possible when prices are drive up by speculation.
And who says they aren't? There are two sides to college: the actual paper, and the underlying financing. The latter is where I think we will find the bubble.
Analagous to the housing market, the demand for college would not be as great if easy-credit financing were not available. And college loan companies would have less incentive to give out finaid if it were not backed by the federal government. That's where the speculation lies, in the packaging and securitization of tuition loans.
Maybe I'm not up to date on trading fads, but as far as I'm aware, the "packaging and securitization of tuition" is an exception rather than the norm. At most, it creates a theoretical potential for a speculative market and thus a bubble.
But there's still a fundamental difference: a degree cannot be sold, and acquiring one is a multi-year undertaking, which puts a tight limit on the number of degrees on person can hold.
Even the securitized aspect of the housing bubble depended very much on the inflated resale price of the underlying asset to yield ROI fairy tales. With tuition, there is no resale price, and basing valuation on the cost would be absurd. The only sensible base is the income gap - and for that to be driven up by speculation would require a rather different world from ours, where companies buy and sell ivy leage graduates at inflated wages and with inflated severance payments to the previous employer.
Oh yes, there is a market that works like that. Only, it's not in college graduates but in professional soccer players.
i'm also not sure what you mean. how does the speculative bubble come from the government guaranty? doesn't the guaranty make it intrinsically _less_ speculative? FFELP loans also have fixed interest rates. less common in private (not govt-backed) student loans.
another thing to consider would be the Obama administration's clear intention to end FFELP in favor of direct federal lending and other programs (no middleman bank's balance sheet involved, so no need to securitize)
Students and parents believe a college degree and graduate degrees are a path to riches. Believing that, they go further into debt, justified by the promise of higher incomes.
