Wednesday, March 2, 2011

Higher Ed: Another Financial Bubble?

 Skunk cabbage coming up in the woods. Ugly, but I'm always glad to see it.

I'm not trying to exaggerate the importance of higher education as an industry here -- if there is a bubble right now, and if it does burst, I doubt the ramifications will be as severe as with the housing crisis. However, several things have me a little concerned:

First is the emergence of for-profit institutions as a force in the higher education landscape. Recently there was a blog post in the New York Times discussing for-profit education with an optimistic angle. Commenters react with a range of opinions. Taken with the comments, I think the piece covers the major points of contention. The main one for me is the fate of students who graduate from for-profits, are unable to find jobs, and who default on their student loan obligations. If I understand correctly, for-profits generally charge more than comparable institutions, and most of that funding comes from student loans. As with mortgage lending, educational lending has in the past been considered a relatively safe form of debt, but what if large numbers of students start defaulting? In a way that echoes mortgage lending, loans have increasingly been offered to non-traditional borrowers. These students have often been lured into going to college with the promise of better jobs and greater incomes. On the relationship between steady employment and a college degree, I see correlation but not causation. We're about to find out which is the case. 

Secondly but strongly related, nearly all degree-granting institutions rely heavily on the federal government for funding. It's true there are some private schools, and schools with big enough reputations and endowments, that could probably survive independently, but most would not. Recent signs from the U.S. government indicate that financial support for higher education will continue. Lately I've heard a lot of talk about investment in education as part of the national infrastructure. If higher education continues to be a prerogative for the national government and words are backed by financial support even if student loan defaults rise, maybe everything will be fine, but I have a sickening feeling that the current system relies too heavily on this single funding stream.

Lastly, a significant reason why the cost of college continues to rise is that funding from state and local governments has been declining for approximately 30 years. Funding from the national government now provides financial aid for students in a way that is almost impossible for any college to ignore. The debate in the United States about the appropriate role of government could easily lead to ever less spending on higher education. Unless tuition, alumni giving, and endowments rose, government-supported institutions would then have to shrink or close.

What does all this mean for the academic library? In a worst case scenario, a golden age of access to electronic resources is coming to an end. I can't imagine any institution wanting to maintain a print-centered collection in this day and age, yet with an increasing proportion of our collections leased rather than purchased we are now more dependent than ever on continued levels of funding. Future cuts would mean we would lose much more than with cuts in the past. It would be like switching off the light and letting the room go dark.
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Update 12/12/11: There's a recent piece by James Surowiecki in the New Yorker that addresses this more elegantly than I have here.

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