Friday, July 2, 2010

College Loan Bubble

From The Chronicle of Higher Education:

....there is little doubt that at least until recently [student] loans were being made, bundled, and sold without regard for repayment prospects.

They go on to speculate as to whether the price of college will decline (similar to the price of a house) now that the loan bubble has burst, and argue it will not: one is buying an education in order to sell it to someone else for a profit... If the price of college were suddenly to fall precipitously as housing prices did (a very unlikely event), people who had already been educated would not be left having to sell an asset at a deflated price.

I agree that it's doubtful college prices will fall to the extent of housing, but I do expect certain college prices to adjust in the face of demand. And while this is unlikely to be a price drop (sorry), the rate at which prices increase should fall significantly for the next few years.

The decreases are most likely in the 2-year and distance-learning programs, which generally have student populations harder hit by economic downturns than the "away from home" private and public schools. It is unclear if the Council includes those schools from its auspicious viewpoint of the collegiate landscape.

What do you think? Will decreased demand lower college prices, or is it business as usual, with 6-7% increases across the board?