Reviewed by David M. Kinchen
BOOK REVIEW: 'The Higher Education Bubble': Just Like the Housing Bubble, But You Can't Walk Away from Student Loans

For a long time -- eons, it seems -- the mantra from guidance counselors and just about everybody else to high school seniors is go to college if you want to succeed in America. Now comes Glenn H. Reynolds, a law school professor no less, who says in Encounter Broadside No. 29 "The Higher Education Bubble" (Encounter Books, 56 pages, $5.99) that the nation is facing a higher education bubble.

To top off this latest catastrophe in the making -- many think it's already upon us -- once a student graduates from a college he or she may not be able to find a job that will enable him or her to pay off tens of thousands of dollars in student loans. The loans are usually not dischargeable in bankruptcy, so they'll be like the albatross around the neck of Coleridge's Ancient Mariner -- an albatross that will last for decades.


Like the housing bubble, the higher education bubble was fueled by cheap credit coupled with popular expectations of ever-increasing returns on investment, Reynolds says. As with housing prices, the cheap credit has caused college tuition costs to vastly outpace inflation and family incomes.

I came across a story in USA Today that confirms many of the views expounded by Reynolds. (Link:

The story -- which I recommend since it's written in the accessible style made famous by the colorful Gannett national daily -- says that social scientists compare 2012 college graduates to Americans who came of age in the early 1930s, "both in the economic upheaval they confront and in the attitudes toward success, contentment and risk aversion that they are forming."

From the story: "The economic situation (of young adults) is completely parallel and analogous to the (Depression-era) GI generation — raised in relative affluence, and then just as they are to start in that affluent world, it all comes crashing down," says Morley Winograd, who has co-authored several books on Millennials, the generation born from 1982 to 2003. "And so they have to find new ways to persevere. They just have assumed that everything that came before them was a mirage — that it was false, built on unsafe foundations."

"We have prepared the path for the child instead of the child for the path," says Tim Elmore, an author and lecturer who specializes in the development of young adults. "We have paved the way, but now there are unpaved roads out there that are rocky and dirty."

Graduating college seniors are nothing if not realistic, according to the USA Today story:

"A Harvard University Institute of Politics survey in March and April found that more than three out of four college students expect to have a somewhat or very difficult time finding a job. And 45% expect student loans to affect their financial circumstances "a lot" after they graduate.

"Their pessimism is based on the experience of the 20-somethings just ahead of them. A Rutgers University study this spring of 444 graduates who received bachelor's degrees from 2006 to 2011 found that 51% were working full time. The rest were in graduate school, unemployed, working part time or no longer in the job market.

"One in four were living with parents. Those who got jobs beginning in 2008, the height of the Great Recession, earned a starting salary, on average, 10% less than those graduates who entered the job market in 2006 and 2007, according to the Rutgers survey. All this has happened as the total amount of student loan debt in the USA surpassed $900 billion."

So read the broadside by Reynolds, the USA Today story and weep. It's going to be a bumpy ride!

About the format (from the publisher):


ENCOUNTER BROADSIDES: Uniting an 18th-century sense of political urgency and rhetorical wit (think The Federalist Papers, Common Sense) with 21st-century technology and channels of distribution, Encounter Broadsides offer indispensable ammunition for intelligent debate on the critical issues of our time. Written with passion by some of our most authoritative authors, Encounter Broadsides make the case for liberty and the institutions of democratic capitalism at a time when they are under siege from the resurgence of collectivist sentiment. Read them in a sitting and come away knowing the best we can hope for and the worst we must fear.

About the author

Glenn Harlan Reynolds is the Beauchamp Brogan Distinguished Professor of Law at the University of Tennessee. He writes for such publications as The Atlantic Monthly,Forbes, Popular Mechanics, The Wall Street Journal, and the Washington Examiner. He blogs at