Tuesday, November 17, 2015

When will the university bubble burst?

A local business owner I know has hired several Rochester Institute of Technology students to write software. “Are they graduates?” I once asked him.  “Some are; some aren’t,” came the reply. He didn’t really care.  He only cares if they can do the job.

He’s not alone. “Coding boot camps” are popping up all over the country.  Venture Beat reports that the percentage of bachelor’s degrees in computer science has dropped by half since the turn of the century.  Meanwhile, the graduates of coding boot camps are growing at 280 percent per year. 

And, it’s not just computer science that is experiencing changes.  

Roger Martin, former dean of the University of Toronto’s Rotman School of Management, compares the state of our business schools to that of General Motors before their bankruptcy.  In his analogy, tenured college professors are stand-ins for UAW workers with lavish salaries and benefits.  Martin points out that enrollments in the nation’ B-schools are being propped up by an increasing percentage of foreign students.  The annual number of graduates has doubled in the last 20 years as tuitions skyrocket and demand for grads tumbles.

So, how are universities responding to these disruptive forces?  By raising tuitions, of course. 

A key driver of tuition increases – at least at public universities -- has been state budget cuts.  However, there are other forces at play.  Costs are spiraling upward as universities add amenities and build new sports stadiums.  So, students take out larger loans supported by federal government programs and graduate into a job market that doesn’t offer economic opportunity sufficient to pay back the loans. 

Meanwhile payrolls are increasing not because faculty salaries are on the rise but rather because administrative staff is growing at twice the rate of faculty.  As administrative expenses increase, colleges reduce costs by augmenting faculty with part-time adjunct professors.

So, the complete picture looks like this:  kids go away to college, pay exorbitant tuitions for an education delivered by less than qualified teachers in classes they can attend online from their posh dorm rooms.  All of it is supported by loans that banks wouldn’t make were it not for guarantees from the federal government. 

Does that sound like a sustainable model to you?

When I was at the Naval Academy, there was a cross-town curiosity called St. John’s College, a hippie haven “known for its distinctive curriculum centered on reading and discussing the Great Books of Western Civilization”.  To this day, St. John’s eschews costly amenities that attract a lot of students – intercollegiate sports, swimming pools, hot tubs and movie theatres – in favor of providing a great education. 

I grew up during the Cold War and the space race.  Engineering was the most valued degree.  A degree in liberal arts was then, as now, often derided as inapplicable to a demanding job market.

Yet, I have to say that St. John’s is on to something. 

The founders – among them Washington, Adams, Jefferson, Madison, Franklin and Webster – advocated for a national university.  In Washington’s words, “a primary object of such a National Institution should be, the education of our Youth in the science of Government. In a Republic, what species of knowledge can be [more] important … than to patronize a plan for communicating it to those, who are to be the future guardians of the liberties of the Country?”

The founders were well aware that government institutions decay over time.  A national university would provide for a common understanding of philosophy and history.  Should not graduates be prepared to contribute to our society based on a fundamental understanding of our institutions of government, our history and our social needs? 

And, yet, we hear more and more about students who don’t want to hear anything that might challenge their understanding, beliefs or feelings.  Students at Columbia objected to a classroom discussion about the origins of Ovid’s poetry because it included a summary of violence and rape in the times of the Roman Empire. 

Speakers have been shunned because their views don’t fit the social and political narrative of the students.  IMF president Christine Lagarde and former Secretary of State Condoleezza Rice were cancelled as commencement speakers by Smith College and Rutgers University, respectively, because they represented institutions and points of view that were deemed to be politically incorrect. 

A better response might be to demand a balance.  If the university invites Paul Krugman, demand John Mauldin.  If the special guest is Dick Cheney, insist upon John Kerry too. 

We should expect our universities to produce graduates with an understanding of how to contribute to our society by engaging in productive work and by having the perspective to constructively participate in our national dialog.

Otherwise, you might as well go to a coding boot camp.



  1. Hi John:

    Three thoughts;

    1. This was excellent!

    2. A more appropriate title for this issue might be “WHO WILL LISTEN?”

    3. Your blog is filet mignon; my BIRDBATH is a serving of flan. They are both OK with me.

    Best regards and Happy Thanksgiving.


  2. John -

    Good article and I agree that the cost has spiraled beyond the marginal utility received on graduation day. I think one of the greatest mistakes made is Pell Grants. All this does is increase revenue to the university as they usually raise the tuition an equal amount and the net to the student is the same.

    About 20 years ago I did a cash flow analysis of going to MCC and getting a trades degree vs. going to a 4 yr. college/university. The break even point was age 41 before the college grad started to exceed making more overall than the tradesman. It would be an interesting analysis today and would probably be around retirement age. This would be a great ad for MCC.

    Keep up the informative posts.

    Best regards ... Hugh

  3. I agree with most of the blog, but would make one addition: Many problems start in the K-12 education system. When students go to College a lot of things have already happened … .

    Also, Universities are in a "closed society among themselves". I do not see how "the University bubble" can burst, because in the U.S. there are no alternatives. And we spend a lot of money to advertise the "great things Universities have, offer, and do" to make us look attractive for foreigners.

  4. John,
    This is a good article. College costs are mostly paid by parents or through loans and so somebody is looking for a return on investment. Universities should be institutions of higher learning. If you're looking acquire skills for a good job, tech schools are a better option.