Undergrad Tuition Bubble?

Investor Glossary details that bubbles are formed:

When excessive speculation enters a market. Instead of viewing the intrinsic value of an asset, speculators in a bubble market instead focus on the resale value of the asset. This is sometimes referred to as the greater fool theory of investing. In a bubble, it doesn't seem to matter that a price is irrationally high - it only matters that it can be sold for an even more irrational price at a later date. Bubbles often end with steep declines, where most of the speculative gains are quickly wiped out.

Chronicle (hat tip Infectious Greed) details that almost 10% of private undergraduate schools now cost more than $50k / year to attend (bold mine):

The ranks of the most expensive colleges have grown again: 100 institutions are charging $50,000 or more for tuition, fees, room, and board in 2010-11, according to a Chronicle analysis of data released last week by the College Board. That's well above the 58 universities and colleges that charged that much in 2009-10, and a major jump from the year before, when only five colleges were priced over $50,000.

This year marks a milestone as the first public institution has joined that elite club: the University of California at Berkeley is charging out-of-state residents $50,649 for tuition, fees, room, and board. (The price for in-state residents is only $27,770.)

Below is a chart of the top 20 such schools.



My thoughts:

1. education is not necessarily a traditional "asset", but an undergraduate education definitely has an intrinsic value
   
2. the cost of many / most private school undergraduate educations are (insanely) over-inflated relative to their intrinsic value; simply compare the cost to similar, yet more affordable alternatives (i.e. schools that don't cost more per year than GDP per capita)
3. the perceived benefit of these schools is in many cases focused on the resale value of the education (i.e. the value a corporation may perceive of that brand, which may be re-sold in the form of higher compensation, rather than what was actually learned)

Based on the above, I am comfortable claiming that private school tuitions are now in a bubble.

Amazing (to me) is that these schools have not only been able to raise the price of tuition / room / board to levels that are ridiculous in both absolute ($50k a year x 4 = $200k!!!) and relative (the national average is a still unreal $21k / year) terms, but they have done it in the years directly following the worst economic downturn since the Great Depression.

Stay in School

Interesting analysis from the BLS detailing the average number of weeks worked for all individuals over a 30 year period (1978-2008). As we've seen before, education has a HUGE impact on the percent employed for those very uneducated, but surprisingly not for those finishing high school (I personally expect the high school category to be dragged down in coming years ).

Source: BLS

College Enrollment Rate at New High

Economix details:

More than 70 percent of the members of the high school graduating class of 2009 were enrolled in college last October. That is the highest portion on record, which goes back to 1959, according to a new Labor Department report.

The below chart provides details of how likely these high school graduates (aged 16-24) were to enter the work force, as well as the success they have had getting actual work.



Not a surprise that those not enrolled in school are more likely to enter the workforce than those enrolled full time, but surprising to me is the lack of relative success someone not enrolled in school has getting a job. My guess is they are looking for the more difficult to get full-time jobs, but that difficulty is likely to explain why the college enrollment rate among high school graduates has continued to increase.

While a tough job market has been a negative over the short-run, an educated work force will hopefully pay dividends over the longer term.

Source: BLS