Monday, February 20, 2017

University Bubble 99 - Remedial Global Financial Stupidity at the U

First off readers, this post is a prerequisite for the understanding of University Bubble 101. If you mistakenly read that post before this one, you must:

a) Report to the adviser for Global Financial Stupidity Studies, get a signature, and bring that paperwork over to the registration building to sign back up and pay your fees again (not to worry, it will all get lumped onto your school loans - no hassle for you).

b) You may "test" out of this remedial level course by showing proof to the Dean of the College of Global Financial Stupidity that you have perused and commented on ZeroHedge for the last 3 semesters. You WILL NOT RECEIVE CREDIT for the course, if you have not used the phrase "Gold, bitchez" at least on one occasion. There are NO EXCEPTIONS."

OK, housekeeping aside now, let's start by saying that the University Bubble 101 post was premature. I understand that the reader may wonder how this writer made a simple financial dealing at the local restaurant into a BIG FINANCIAL BUBBLE. Let's give some background in this post then. 

The higher education business is different from most big business for a number of reasons. The first is that it is not clear who is the real consumer - sure students pay tuition and expect a service out of that, but the state government chips in a significant share for many colleges. The idea is was that the entire state will benefit if the population is educated; they'll be more doctors, engineers, scientists, etc that, in the old days, would most likely stay in state and improve the economy and the quality of life in the state. Even in the case of humanities majors, the point was that a portion of well-educated people would benefit the state. This was the reason in-state tuition used to be set at very low rates vs. tuition for outsiders, not to mention foreigners. This entire concept doesn't seem to mean much anymore, as people in general are very mobile, and a significant portion of the students in a given college may be from out-of-state and out-of-country (these days), but also the chance of the graduates remaining in the state are also much smaller than in the past.

In the case of private colleges, there are donors who really want the type of learning that goes on there to continue. It was somewhat more of a free market, as, before recently when the loan-bubble ramped up, tuition would be what the market for this sort of thing would bear on the part of the students.

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