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When should we expect the education bubble to pop? How can we short it?

byjacobjacob4mo9th Feb 201912 comments

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I won't attempt to summarise the case for there being an education bubble here (see links below for some pointers). Rather, my questions are:

1) assuming there is an education bubble, when will it -- as bubbles tend to do -- pop?

(This plausibly entails some disjunction of *hundreds of thousands to millions of students defaulting on their debt, *lower number of college applicants, *non-top-tier colleges laying off faculty, *substantial reductions the signalling value of obtaining a diploma, *substantial reductions in tuition fees, *reduction in the level of education required by various employers, and more)

2) Which assets will be more scarce/in demand as that happens? Are there currently available opportunities for "shorting" the education bubble and invest in ways which will yield profit when it pops?

(I hereby preface the comments by noting that nothing discussed there is investment advice and no users can be held liable for investment decisions based on it.)


Peter Thiel summarises the inside view of there being an "education bubble" well.

And here are some interesting numbers:

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2) Which assets will be more scarce/in demand as that happens? Are there currently available opportunities for "shorting" the education bubble and invest in ways which will yield profit when it pops?

Vocational schools seem like a reasonable bet. In particular something like Lambda School, where they've aligned incentives by tying tuition to alumni income.

VCs seem to agree, pouring in $14MM in a series A in October 2018, followed by an additional $30MM in a series B just 3 months later.

I learned recently that some states used to offer an equivalent of "forever stamps" for education. Meaning you pay $X at any time and you've guaranteed your payment for a state university in the future. Obviously, they discontinued it, since the costs rose and they lost money. But if you wanted to short *education cost*, you'd basically want to sell these guarantees yourself.