Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.
4 Signs To Keep An Eye Out For
While an education bubble exists, it won't pop [update: replacing with the softer term of "pop"] until a combination of a few of these things occur first:
1. Bankruptcy laws change for student loans. If students can discharge their loans through bankruptcy, lenders will be reluctant to lend money to students for school. At this present time, students have no bankruptcy options for their loans (except in heteroclite circumstances), so lenders see little incentive to stop lending. This does not apply to forgiveness programs, as student loans being forgiven will still encourage lenders to lend since they're getting free money from whoever is forgiving the loans (private or public entities).
2. The perception of education changes. Echo Boomers were inculcated with "get a degree" messages from everywhere. As Echo Boomers mature and make less money than they expected, they will communicate their disappointment with education to the next generation. Unless Echo Boomers look back on education with rose color glasses, the next generation will hold a different outlook on education than their parents.
3. A major recession returns to the United States. If a major recession returned to the United States, and students were unable to pay back their loans (ie: the principal balances kept growing), this event could trigger a collapse in the education bubble. Lenders would fail to receive their money they lent and would struggle with educational institutions over funds.
The problem with this point: the Federal Reserve might bail out these lenders, continuing the cycle of borrowing money for school (like we see for housing). This sets the stage for an even larger collapse (like we're seeing with housing). The collapse could be the currency. Or it could be something else that's even worse.
At some point, central banks around the world will stop favoring dollars. You cannot keep handing institutions money that creates inflation and maintain the value of the currency. For instance, I observed that after the 2008-2009 (which will someday be viewed as highly inflationary because asset inflation is still inflation), both Russia and China significantly reduced "dollar" based business in different ways. Russia bought gold. China started purchasing materials' producers, ports and other hard assets while only adding a fraction to the US dollar (think of a 90-10 approach, where it seems like they're addinng dollars, but they're actually buying real assets).
In other words, there's a limit to bail outs.
4. Students become overwhelmed by negative news. The education bubble could pop tomorrow if students suddenly became depressed about their prospects and stopped attending school. Ironically, in this case only, students might receive much better prices later if every student in higher education boycotted educational institutions (won't happen because American parents don't think like this). However, if students stop believing that their education is serving them, what's the incentive for continuing to pay?
If any of this occurs soon, the major problem is the actual student loans. Many homeowners "strategically defaulted" when they realized their house was wasting their money. Why wouldn't students just drop out of society if their student loans were high enough? Of course, if these things occur, tax payers will be on the line, just like they were during the housing bubble.
Private Discussions - Updated and Shared Later
Privately, among home schooled groups, I have advised parents to stop sending their children to American colleges. In addition to poor quality education, many in media have written about a kangaroo court system. I won't dive into details in this article, but I speak about this with home schooled groups with details shared by attorneys who are often called into these situations.
Historically, prosperity hides and prevents genius - many philosophers have noted derivatives of this view. American colleges have received an abundance of income, but have students been better off? In addition, are students intellectually superior to the people who graduated in the past? The latter question is more subjective, but when you start to consider costs and result, many parents admit they don't think the cost is worth it.
This is not the case in non American universities. For one, admissions standards are extremely difficult. Two, students often have little time except to study and learn. Third, if the student is also applying a new language (Mandarin Chinese, Spanish, etc), they have the added benefit of double learning. Finally, many non American universities are cheaper. I highlight many examples in my presentation where students can get a 4 to 5 year degree for less than $10,000!
