Bursting the education bubble?
In an online comments section of the New York Times, a Columbia University (New York) professor today makes the following comment:
The next bubble to burst will be the education bubble. Make no mistake about it, education is big business and, like other big businesses, it is in big trouble. What people outside the education bubble don’t realize and people inside won’t admit is that many colleges and universities are in the same position that major banks and financial institutions are: their assets (endowments down 30-40 percent this year) are plummeting, their liabilities (debts) are growing, most of their costs are fixed and rising, and their income (return on investments, support from government and private donations, etc.) is falling.
Not everyone may like the reference to higher education as ‘big business’, but the central point is an important one. All over the world right now – and that very much includes Ireland – universities are being driven into a financial and operational disaster. Public funding is being cut dramatically, while at the same time regulation is tightening, non-public sources of income are falling away, students are facing hardship. But unlike the financial sector, or for that matter pretty much any other sector you might identify, universities are not only not seen as organisations that may need to be supported or even rescued, but rather are being targeted for still harsher treatment.
In Ireland universities are walking a financial and operational tightrope right now, and most are in deficit or at risk of falling into one; some have very substantial deficits. All over the sector investment that is needed to maintain buildings, update equipment and provide essential services is being withheld as institutions struggle to maintain front line services. And while public funding is being cut, the ability of the universities to raise money from other sources is being restricted, and highly bureaucratic controls are being increased.
As we consider higher education strategy nationally, we need to face some of these realities, and we may even have to ask ourselves whether the continuing growth in student numbers is affordable. If the education bubble does burst, the consequences will be frightening. We need to ensure this doesn’t happen. As a country we have built a reputation as a place where we educate skilled graduates in sufficient numbers and produce world class research that will support knowledge-intensive investment. We must not lose that reputation, for if we did, the losers would extend far beyond higher education.
July 1, 2009 at 6:41 am
There is only one group of people on this island where cuts should not be made, those on the basic level of state income, E204.80. Those people only because they are the sole group that push all of their income into the economy and any reduction will pull out far more than any benefit, coupled with a pure loss of control.
Over the past few years at least 40% has been wiped out, gone, vanished, poofed into the ether. But there are a large number of groups still hovering, expecting that they will continue to receive the same level of income when the receipts on which that income is based is on the floor.
But there the one thing you and many others on this island have to worry about and that is pegging your income to others outside the state. Something done between 1921 and the late 1980, and which caused a stagnation on this island where the stink is now being vented-see Ryan report-.
Educations best hope is that you make the cuts yourself before you are forced to make them from outside. And I also believe the quicker you remove yourself from marking your pay to the Civil Service the better you will be, for I suspect there is a very cold wind of change blowing in that direction. FG, has laid down a marker on that matter and it is way too easy to include the Universities under that mark.
July 1, 2009 at 12:15 pm
Isn’t part of the problem that the Internationalisation of Education in Ireland has been held back and stymied by the public service ? In other countries such as the UK and Australia, billions of euros are generated by the intake of international students. Here, if i recall, we take in a total of 300 million in international student fees. In New Zealand the figure is 1.5 billion ; in Australia 8 billion and in the UK, 12 billion.
Surely a simple model is to allow the international education sector to develop by having, say, 60 per cent of international fees kept by the various institutions, and the 40 per cent going to a ring-fenced central fund ; then using that fund for research, for upgrading, for marketing or even divvying out to the whole sector.
Isn’t is rather unambitious to have the HEA 10 year target of doubling the number of international students ? Just doubling ?? Why not quintupling ?
July 1, 2009 at 1:15 pm
Fennis, many thanks for your comment. Right now the universities retain all of the overseas student income – are you suggesting that this should be reduced? That would not motivate us much to increase the recruitment! Actually, there are probably more international students here than you realise. They currently account for about 12-15 per cent of the entire student body in the universities. Increasing that significantly is not necessarily a good idea – a balance between domestic and international needs to be kept. I agree however that their presence is hugely valuable.
July 1, 2009 at 2:14 pm
Thanks for your kind reply.The idea of splitting the fees is based on increasing the numbers so the net amount would not decrease. The idea of a central fund is to avoid the problem of some institutions getting all the loot — which would be unfair to the whole sector. Re the numbers : I understand there are about 13000 non-EU and around 2000 EU, though US students who come for one semester only are covered in that. I would guess that puts the overall figure at around 12000, with 10,000 paying international fees. I think that the total for all third level students is aaround 250000 so that would equate to around 3 per cent.
The other point is that the some insititutions like the College of Surgeons and the Private third -levels account for a large number of the non-EU students.
I would think that increasing the numbers significantly can only be of benefit in times of financial constraint as it allows institutions to move towards financial autonomy — which is not necessarily a bad thing. Hope I’m not becoming a figures bore – and I probably need to get out more !!
July 1, 2009 at 3:37 pm
An over reliance on overseas students for 3rd/4th level funding is a recipe for disaster. Whilst ireland may have missed out on some of the educational ‘bonanza’ this money represented, at least there isn’t going to be the need for a very painful readjustment when it is curtailed (as will happen in countries mentioned by the previous poster).
July 1, 2009 at 6:28 pm
Hi Phil
not sure if disaster is the right word — there are 125000 people employed in Australia in the sector — I think we wouldn’t mind having a disaster like that here at the moment.Or over the next few years.
Regarding the future, all I know is that the OECD did a review of the international education policies and experiences of all its European members — except for Ireland.
So internationalisation may well be here to stay internationally — but not here. It reminds me a little of the fact that for years we believed we couldn’t have an underground in Dublin because the soil didn’t suit. In the same way, internationalisation won’t work here as in other countries.
July 1, 2009 at 6:59 pm
However, the OECD did review Ireland…
July 1, 2009 at 3:11 pm
Fennis, there is no evidence that a central fund will help to deliver more students. Our experience (or non-experience) with Education Ireland, a goverbment initiative, underscores that. The fee income universities currently get from international students really only covers their cost. Any attempt to tax us on these will mean that we will actually stop recruiting those students. I’m afraid this would not work!
July 1, 2009 at 3:21 pm
Thanks for taking the time to reply.
While not meaning to question your experience, I’ll need to do some sums ; it seems odd to me that international students who pay 8000 per annum only cover their costs.
Thanks again for your attention as I know you’re a very busy person. If I come up with something interesting I’ll get back to you. It just seems to be that internationalisation works in other countries and I can’t figure why the same economic laws don’t apply here.
BTW If you have time in the future on your blog I’d like to hear your views on Education Ireland (RIP)
Cheerio !