The Higher Education Bubble vs. Housing Bubble
The chart above shows the historical relationship between: a) college enrollment rates for high school graduates (blue line, left scale) which have gone from 30% to almost 50% between the early 1970s and 2009, b) college enrollment rates for all 18-24 year olds (data here), which have gone from 25% to over 40%, and c) an index for college tuition adjusted for inflation (red line, right scale, only available starting in 1978), which increased more than three times between 1978 and 2009. The positive historical relationship between college enrollment rates and inflation-adjusted college tuition is similar to the positive, historical relationship between: a) homeownership rates and b) inflation-adjusted home prices, see chart below:
In the case of both college degrees and homeownership, the government decided the private market wasn't providing "enough" of either, and then created various government financing schemes to lend money to borrowers, often with questionable credit, at below market rates, along with providing other taxpayer subsidies and incentives to induce more people to go to college and more renters to become homeowners. In both cases, government policies created unsustainable bubbles, one for higher education and one for homeownership. We're just coming out of the disastrous effects of a housing bubble that crashed heavily starting in 2006, and we might be in the early stages of a higher education bubble that is just starting to show some early signs of deflating. Is that a hissing sound?