Article by Gary North.
In the best universities, we find mega-classes of 500 to 1,000 students. Lower division students sit in huge lecture halls and listen to a professor give a lecture that could just as well be in a digital format on a server. If an Ivy League school charges $35,000 a year for tuition, that is $1,166 per semester credit. So, a college generates well over $10,000 per student per one-year mega-course. The student is taught by a $20,000 per year graduate assistant, who runs discussion sessions. Put 1,000 students in a lecture hall for a year, and the school earns gross revenues of $10 million.
Is this worth the money? Parents think so. Donors think so. Students think so. Why? Because of the perceived prestige of the diploma. Also, the parent thinks the student will make personal contacts with high-earners.
Is this strategy working? No. Has it ever worked for most students? No. But the myth goes on. It has gone on for centuries.
A student can earn a B.A. from an accredited college by taking CLEP exams and courses by examination from anywhere in the country. The liberal arts degree will cost as little as $11,000. A student can stay at home – room and board – and work part-time in a local business, learning the basics of that business. Maybe he or she can graduate in three years. I am working with an 18-year-old who has a B.A. He got it while he took his high school work. He was home schooled.
Is a $200,000 degree from an Ivy League school going to pay off with lifetime income 18 times higher than someone who paid $11,000 to get a degree at a no-name college? Not likely. Yet there are ten applications for every freshman slot at the big-name schools. These students are the best and the brightest.
This is no bubble. This has been going on since 1636 in Harvard’s case. Parents want to get their children certified as the best. They will pay the price. Is this foolish? I think so. But let’s not call it a bubble. A pricing structure that works for almost 400 years is not a bubble. It has worked in Europe for 900 years.
Parents are buying a consumer good. “My child just got into [Prestige U].” The parent gets bragging rights. He does not perceive this as a neon sign over his mortgaged front door that says, “Sucker!”
Then in year three the kid drops out. What is the investment worth then?
The horror stories are grist for journalism’s mill. Some girl borrows $100,000 to get a B.A. degree in some useless liberal arts field like art history. She is now unmarriageable. No young man wants to add $100,000 to his debt.