Eds and Meds (Philadelphia, Pittsburgh: credit, student loans, buying a home)

[ajl777]

Both are bubbles right? Are we going to see crumbling with reduced state funding for universities and the Highmark vs UPMC battle?

[jimmyev]

Originally Posted by ajl777

Both are bubbles right? Are we going to see crumbling with reduced state funding for universities and the Highmark vs UPMC battle?

Bubbles are caused by reckless speculation. Entrepreneurs and venture capitalists aren't sinking money into either education or health care. Therefore there is no bubble.

[pman]

Originally Posted by jimmyev

Bubbles are caused by reckless speculation. Entrepreneurs and venture capitalists aren't sinking money into either education or health care. Therefore there is no bubble.

I don't think this is right. the speculators in this instance are people hoping a degree will help them get a high paying job and like most speculative bubbles, it's fueled by credit (student loans, for stocks it was buying on margin). not all growth in eds is speculative, there is a legitimate demographic bubble driving it as well.
well, that stands or eds, meds is a bit different but you have to wonder how long job growth in something that is already too expensive will be maintained.

[jimmyev]

Originally Posted by pman

I don't think this is right. the speculators in this instance are people hoping a degree will help them get a high paying job and like most speculative bubbles, it's fueled by credit (student loans, for stocks it was buying on margin). not all growth in eds is speculative, there is a legitimate demographic bubble driving it as well.
well, that stands or eds, meds is a bit different but you have to wonder how long job growth in something that is already too expensive will be maintained.

I always thought bubbles were caused by people throwing around vast amounts of money hoping for returns of 100-1000% within a few weeks. That's how the tech bubble went, the housing bubble, and the energy bubble. Might be happening here in the near future with a Marcellus Shale bubble. A degree takes at least four years of investment and can easily be mutated from one field to another. That would be a long-term investment.

[madg0at]

Growth in health care is largely demographically driven and will certainly collapse after the baby boomers have passed away. In the short to intermediate terms, however, the boom is on.

The education market has been in bubble territory since the explosive growth of the for-profit entities over the last decade or so. That's where the collapse will be seen, not as much in the traditional 4-year programs. I fear for many of the smaller state-run schools nationwide though as the tea party-inspired gutting of education continues.

[globalburgh]

The education industry is sustainable. Pittsburgh, like Philadelphia, is great at attracting students from out of state. Given the declining demographics, that's been a necessity. On top of that, you have CMU and to a lesser extent Pitt driving economic development in other industry sectors.

I don't see meds tethered to the local market, either. UPMC has a very aggressive global strategy. You can see a similar trajectory in finance with PNC. I can even envision more people moving to Pittsburgh just for health care.

I think this boom, such as it is, is good for another 30 or 40 years.

[pman]

Originally Posted by jimmyev

I always thought bubbles were caused by people throwing around vast amounts of money hoping for returns of 100-1000% within a few weeks. That's how the tech bubble went, the housing bubble, and the energy bubble. Might be happening here in the near future with a Marcellus Shale bubble. A degree takes at least four years of investment and can easily be mutated from one field to another. That would be a long-term investment.

nope, bubbles are most often caused by the excessive use of credit to pay more for things than they are worth. if people don't get those higher paying jobs, then they will have difficulty paying back the debt. not so different from buying a home on credit and not being able to pay it back because you can't sell it.
\
mind you a collapse in student loan debt doesn't necessarily mean fewer degrees but it might mean bad things for bloated educational bureaucracies (and no, these are not limited to state run colleges). OTOH, few other businesses can ask for income info and then offer a price based on that...

[madg0at]

Originally Posted by globalburgh

The education industry is sustainable. Pittsburgh, like Philadelphia, is great at attracting students from out of state. Given the declining demographics, that's been a necessity. On top of that, you have CMU and to a lesser extent Pitt driving economic development in other industry sectors.

I have to respectfully disagree. As pman pointed out upthread the growth in the education market (in particular the for-profit portion) is driven almost entirely through student loan growth. Loans that cannot be discharged through bankrupcy thus are seen as safer by lenders and therefore are less concerned with overextending the borrowers since they always stay at the front of the line for collection. In order to keep their numbers up they push products (degrees, programs) on students who cannot afford or even need them (sound familiar?). The Department of Education is investigating these predatory practices, but the for-profit education sector and lenders are circling the wagons so don't hold your breath for change until things get really bad on the default side of the equation.

Traditional 4-year programs also turn out students who cannot get jobs in their chosen fields of study and will suffer as a collateral consequence.

[globalburgh]

Originally Posted by madg0at

I have to respectfully disagree. As pman pointed out upthread the growth in the education market (in particular the for-profit portion) is driven almost entirely through student loan growth. Loans that cannot be discharged through bankrupcy thus are seen as safer by lenders and therefore are less concerned with overextending the borrowers since they always stay at the front of the line for collection. In order to keep their numbers up they push products (degrees, programs) on students who cannot afford or even need them (sound familiar?). The Department of Education is investigating these predatory practices, but the for-profit education sector and lenders are circling the wagons so don't hold your breath for change until things get really bad on the default side of the equation.

Traditional 4-year programs also turn out students who cannot get jobs in their chosen fields of study and will suffer as a collateral consequence.

I don't think the for-profit model is sustainable. It is a fad, a fading one. Regardless, a declining domestic market doesn't equate to a Pittsburgh bubble that's about to pop. The region is in excellent position to get a bigger piece of that shrinking pie. And there is much more to the bottom line than enrollment. Public universities in particular have adapted well to declining government support.

However, I would concede that cheap credit for higher education is bubblicious.

[gameguy56]

Computer Science and Biomedical Research aren't going anywhere.