Higher education’s “tuition bubble” is going to burst, warns Mark Cuban – Affordable College Tuition
Higher education’s “tuition bubble” is going to burst, warns Mark Cuban

Outside of the ivory towers on college campuses across America, the clarion call for financial reform in higher education is sounding from business leaders and entrepreneurs such as Mark Cuban, who rails against the destructive forces of ever-higher college tuition increases and rising student loan debt.

Cuban, the billionaire owner of the NBA’s Dallas Mavericks and panelist and investor on ABC’s Shark Tank, has been outspoken for years on his negative view of the “college tuition bubble” that he believes is poised to burst.

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Appearing on The Dave Ramsey Show with noted financial counselor Dave Ramsey, Cuban sounded off — yet again — on the college tuition bubble and the destruction it sows. More than 43 million Americans carry student loan debt that has surged to $1.3 trillion.

Ramsey, who launched Ramsey Solutions in 1992 to provide biblically-based, common-sense education and empowerment to help free people from burdensome debt, prefaced his discussion with Cuban of the college tuition bubble by referring to the “stupidity of the student loan crisis.” On Ramsey’s show, he has heard from families struggling to make ends meet under as much as $800,000 in student loan debt.

When asked by Ramsey if America is in a college tuition bubble, Cuban had a one-word answer: “Absolutely.” He described a bubble as where there’s a lot of easy money with companies taking advantage of that source of revenue to inflate their own revenue.

“What colleges are doing are no different,” Cuban said. “It’s easy to borrow money to go to school to get a student loan because it’s all guaranteed. And colleges are happy to take it. And it’s easy to raise tuition because as long as students can borrow what they need, why wouldn’t you raise your tuition? Why wouldn’t you spend it on nonsense at a college? Why wouldn’t you build buildings you don’t need and hire administrators that you have no use for? Because the money keeps coming in.”

Cuban predicts the bubble is going to burst, impacting colleges and universities. Not only that, the crushing student loan debt is having a significant negative effect on the American economy, he said.

“Kids can’t graduate from school and go lease new apartments, or buy new homes, or buy new cars, or go out and buy a new suit,” he said. “Instead they’ve just got to pay back their student loans. And that’s just a huge drain on our economy.”

Outside of America, economists and observers are noting with alarm how the American college system saddles students with ever-rising debt that’s leading to dire consequences.

The Organisation for Economic Co-operation and Development (OECD), with a membership of 35 countries and a mission to improve the economic and social well-being of people around the world, describes the American higher education system as the “most expensive” in the OECD, according to an article in the The Economist.

The Economist article highlights the divergent graduation rates of rich and poor Americans, describing how tuition and fees nationally have doubled in 20 years.

“Big bills mean big debts,” according to the article. “Nearly a third of students are in default, and the rate is rising. Student loans can rarely be discharged, even by bankruptcy, so default damages people’s credit history, makes it hard to get mortgages and thus both harms people’s welfare and acts as a drag on the economy. Given unprecedented default rates, there are worries that the federal government will be stuck with a lot of the debt.”

Which sounds like a classic bubble that savvy American entrepreneurs and business leaders like Cuban have been warning us about.

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