Federal meddling and the higher education bubble

In his latest Freeman column, economics professor Steve Horwitz examines the connection between federal meddling with interest rates and the higher education bubble, or mini-boom as he prefers to call it. Just as artificially cheap loan rates due to governmental intervention gave us a destructive housing bubble, so is it giving us a higher education bubble, as students “invest” in college degrees. People who foolishly bought houses assumed that they’d rise in value, and similarly people who borrow money for college degrees that entail little or no useful learning assume that they will gain just from having a college credential. Horwitz points out that there is more to this than just cheap loan rates, however. Politicians and higher ed spokesmen keep saying that young Americans need to go to college not only for their own good, but because it will strengthen the economy. That’s nonsense. Spending time and money to get an empty credential no more strengthens the economy than did buying a house you couldn’t really afford.

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