We've heard a lot in recent years about bursting bubbles in the financial and housing sectors. Now the analogy is creeping into higher education.

In a stark opinion piece published earlier this month in the Washington Examiner, University of Tennessee law professor Glenn Harlan Reynolds declares that the higher education bubble is about to burst. "The product grows more and more elaborate, and more and more expensive," he explains, "but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy." Remember, he's talking about college degrees, not houses. So if there's an educational bubble, what's inflating it?

The primary cause: skyrocketing costs. Inside Higher Ed reports that private colleges are increasing tuition this fall by an average 4.5 percent, which is extremely modest compared to a 10-year prerecession average of 6 percent per year. (To be fair, student aid is also increasing in these institutions, which isn't always the case in other sectors of higher education.) The problem is that over the last 30 years tuition has far out-paced inflation (as measured by the Consumer Price Index). University of Michigan economist Mark Perry graphs the percentage of increase in housing since 1978 -- a four-fold increase over the CPI -- and then overlays the increase in tuition during the same period -- a ten-fold increase!

"The college tuition bubble makes the housing price bubble seem pretty lame by comparison," says Perry.

At the same time, the Department of Education is getting serious about programmatic assessment. The implied question is this: Are educational institutions delivering on what they promise? Is the product or service really worth the high cost and deep debt?

This new environment is only exacerbated by the new Direct Lending program for student loans. On the one hand, it takes the private lenders providing cheap credit out of the picture. On the other, it means that the U.S. Government has purchased a stake in the quality of higher education and now has a direct interest in the success of students who borrow. It's institutions of higher ed that are now standing between the lender and borrower.

No doubt, this is a game-changer.

So what does all this mean for theological schools? What questions should governing boards and senior administration be asking in this climate? Is there indeed a bubble in theological education, and is it about to burst? 

Read Part 2 of this post.

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