Higher education bubble in the United States

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The higher education bubble in the United States is the possibility that excessive investment in higher education could have negative repercussions in the broader economy. Although college tuition payments are rising, the supply of college graduates in many fields of study is exceeding the demand for their skills, which aggravates graduate unemployment and underemployment while increasing the burden of student loan defaults on financial institutions and taxpayers.[1][2][3] Moreover, the higher education bubble might be even more serious than load of student debts.[4] Without safeguards in place for funding and loans, the government risks creating a moral hazard in which schools charge students expensive tuition fees without offering them marketable skills in return.[5][6] The claim has generally been used to justify cuts to public higher education spending, tax cuts, or a shift of government spending towards law enforcement and national security.[7][8][9][10] There is a further concern that having an excess supply of college graduates exacerbates political instability,[11][12][13] historically linked to having a bulge in the number of young degree holders.[14][15][16]

Some economists reject the notion of a higher education bubble, noting that the returns on higher education vastly outweigh the cost,[17][18][19][20] while others believe that the number of institutions of higher education in the United States will fall in the 2020s and beyond, citing reasons of demographic decline, poor outcomes, economic problems, and changing public interests and attitudes.[21][22][23][24] According to the U.S. Department of Education, by the late 2010s, people with technical or vocational trainings are slightly more likely to be employed than those with a bachelor's degree and significantly more likely to be employed in their fields of specialty. The United States currently suffers from a shortage of skilled tradespeople.[25] The Federal Reserve Bank of St. Louis noted in 2019 that investment in higher education has reached a point of diminishing marginal returns.[26] Undergraduate and graduate enrollments have both been in decline,[27][28] while trade schools continue to attract growing numbers of students.[29][30] Many faculty members are leaving academia,[31] especially those from the humanities.[32] At the same time, university graduates are likely to regret having studied the humanities and liberal arts.[33][34] While academics maintain that certain subjects are worth studying for their own sake, students are more concerned with increasing their earning potential.[35][36] So far this century, numerous institutions of higher learning have permanently closed,[37] especially community colleges,[38] and for-profit institutions.[39][40]

It is possible that the bubble will not burst, but rather deflate.[39]