The Education Bubble

I have not always been a Peter Thiel fan—the PayPal founder and Facebook investor’s politics and ideas are complicated and sometimes they stem from what I would consider psychological projections (see: affirmative action, although even in that case I totally agree with his embracing a larger concept of “diversity”!)—but honestly, I am on board with about 75% of this extended interview with him in the National Review. One idea in particular is extremely valuable, and we will all be talking about this a lot in the next decade: that America has group-hallucinated itself into an education bubble.

Thiel:

Education is a bubble in a classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it…. [W]hen people make a mistake in taking on an education loan, they’re legally much more difficult to get out of than housing loans. With housing, typically they’re non-recourse—you can just walk out of the house. With education, they’re recourse, and they typically survive bankruptcy. If you borrowed money and went to a college where the education didn’t create any value, that is potentially a really big mistake…. I estimate that 70 to 80 percent of the colleges in the U.S. are not generating a positive return on investment.

And:

The Great Recession of 2008 to the present is helping to bring the education bubble to a head. When parents have invested enormous amounts of money in their kids’ education, to find their kids coming back to live with them — well, that was not what they bargained for. So the crazy bubble in education is at a point where it is very close to unraveling.

That’s notable that he said “the present,” actually! I hate the conception that the recession “ended” in June, 2009, because we only define “recession” through very specific economic indicators.