Search the Site

Mark Cuban on the "College Bubble"

Mark Cuban, who answered reader questions here a while back, compares rising college tuition costs to the housing bubble in a recent blog post.  Here’s his argument:

It’s just a matter of time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.

And it can’t happen fast enough.

IMHO, the biggest problem the economy has is the enormous student debt new college grads and those leaving college find themselves with. In the past leaving college meant getting a job and getting a used car and/or an apartment with some friends. Yes there was student debt, but it wasn’t any where near your car payment. You could still afford the car and the apartment. Now its the exact opposite. Today, the minute you graduate college you face the challenge of debt against a college education whose value is immediately “underwater”

Cuban argues that college debt is to blame for many of the economy’s woes.  “The crush of college debt has taken an entire generation of graduates, current and future out of the economy,” he writes. “Which is exactly why the economy hasn’t grown and won’t grow beyond microscopic growth rates we have seen so far.”  Interestingly, student debt doesn’t seem to have soured university grads on the college experience; recent survey data indicates that only 3 percent of college grads regret having gone to college.

Related: we are working on a Freakonomics Radio podcast about “the value of college,” which is so interesting (to us at least) that it might become a two-parter, set for release sometime this summer.