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Rethinking University education

Economists and social commentators in the US are wondering whether higher education has become a new ‘bubble,’ with many people accumulating large amounts of debt for an investment that may be overpriced.

This idea has actually been around for a couple of decades but was recently reinvigorated when American entrepreneur Peter Thiel started a Fund that would pay young entrepreneurs not to go to university.

Those who think higher education is a bubble claim that it has all the classic hallmarks.

People unthinkingly take on debt assuming it to be a worthwhile investment, though this may not be the case.

As more people are getting degrees, the potential financial value of those degrees drops, as they no longer provide the graduate with a valuable point of difference for employment.

Oversupply kills value

Many have spoken about law degrees in the US as a classic example.

Students undertake an expensive law degree believing that they will set themselves up for a lucrative career, but too many degrees are awarded for the number of people needed in the profession.

Mr Thiel hopes that his new project will help people realise that higher education is not necessary. This year he will give $US100,000 grant to 20 people under the age of 20 to further a scientific, non-profit or technical idea, as long as they do not go to university. He has received hundreds of applications and the winners will be announced shortly.

The reasons for the supposed bubble are difficult to pinpoint, but there are some clues. The Goldwater Institute, a think tank, argues that administration costs were one of the major problems, as the quality of instruction at universities had not increased despite large price hikes. It found that between 1993 and 2007, the percentage increase in spending per student on administration was 61.2% while the increase in spending on research and service was only 37.8%.

The Institute suggested that universities need to cut down their administration costs, so that students are not left with such unmanageable loans.

Thiel meanwhile, thinks that the problem is a false cultural hope in education as a source of security.

Interestingly, this bubble debate is one that tends to look at education only in terms of financial value, comparing prices paid for tuition against equivalent investments or earning potential.

But the value of education cannot be assessed in financial terms alone.

Degrees provide intangible benefits that cannot be expressed in Dollars.

However, not everyone needs to go to university to obtain these benefits.

As costs increase, more young people will be forced to consider other options for learning and development.

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