This is what I believe could come true in the wake of recession cycles. This can be predominant in USA and Europe owing to the higher fees for their courses.
The popular courses in these countries are MBA, MS and Engineering. Lets do some sampling around the courses starting with the high paying MBA. The average cost of MBA in US is around $1,00,000 for 2 years while that in Europe is around $70,00,000 for 1 year. Each university has 300-400 seats on an average. Financial times reports the ranking of the top 100 universities around the world. So roughly, there would be at least 100 * 400 = 40,000 'quality' professionals coming out every year. Since not every one is born rich many take loans so that they can repay later - the margin being 70-80 %. This is compounded annually by banks at a meagre rate. Professionals - 'Lemons' or 'non-lemons' until proven - coming out is the same number each year. They compete with not only their peer group but also with their seniors who are already recruited.
From the macro-economics in a country we can conclude that during the recessions cycles people are unable to get jobs and so are unable to pay up for the company products nor are they getting any credit money from banks. This reduces the profit margin of the companies. In response the companies try to be more competitive - trim their organization to give high quality and low price products. In this process, certain ratio of the employees are squeezed out of their organizations.
This gap in the employment creates the monetary deficit in clearing the bank loans. Soon the student gets bankrupt and the bank's defaulters list keeps growing. This is just a sampling interference of the example MBA group (that too from the top 100 universities only) we are referring to. The actual numbers may indicate that it can potentially lead to a financial crisis.
Governments may have to intervene and rescue it in some discernible means to counter this.
Although it could be a statistically hypothetical analysis about this type of recession, it is possible some are already facing this undesirable journey and trying to stay competent each morning. The much hyped FOREIGN DEGREE now might not escape itself to face this at some point in time. Its due for a very long time.
The popular courses in these countries are MBA, MS and Engineering. Lets do some sampling around the courses starting with the high paying MBA. The average cost of MBA in US is around $1,00,000 for 2 years while that in Europe is around $70,00,000 for 1 year. Each university has 300-400 seats on an average. Financial times reports the ranking of the top 100 universities around the world. So roughly, there would be at least 100 * 400 = 40,000 'quality' professionals coming out every year. Since not every one is born rich many take loans so that they can repay later - the margin being 70-80 %. This is compounded annually by banks at a meagre rate. Professionals - 'Lemons' or 'non-lemons' until proven - coming out is the same number each year. They compete with not only their peer group but also with their seniors who are already recruited.
The invention of crisis
It is widely believed that to ward off a loan(for MBA) it takes no less than 5 years in continuous employment. If we do a little economics we understand that 5 continuous high paying jobs are difficult now a days given how quick recessions are showing up and in all parts of the world each impacting one another.From the macro-economics in a country we can conclude that during the recessions cycles people are unable to get jobs and so are unable to pay up for the company products nor are they getting any credit money from banks. This reduces the profit margin of the companies. In response the companies try to be more competitive - trim their organization to give high quality and low price products. In this process, certain ratio of the employees are squeezed out of their organizations.
This gap in the employment creates the monetary deficit in clearing the bank loans. Soon the student gets bankrupt and the bank's defaulters list keeps growing. This is just a sampling interference of the example MBA group (that too from the top 100 universities only) we are referring to. The actual numbers may indicate that it can potentially lead to a financial crisis.
After-math of the "education recession"
At some point banks may be forced to give out a loan only with sturdy mortgage guarantees. This will squeeze the paying capacities of the talented and eligible students. So the universities will not be able to fill-up their seats and so they may not be able to generate funding necessary for its administrative subsistence. These universities have to either close out or decrease the fee to increase the capacity or take 'mortgaged' bank loans if necessary. The university may find/replace with cheap staff who may be less competent. This puts the education system itself under tremendous pressure and the quality of education might possibly wilt.Governments may have to intervene and rescue it in some discernible means to counter this.
Although it could be a statistically hypothetical analysis about this type of recession, it is possible some are already facing this undesirable journey and trying to stay competent each morning. The much hyped FOREIGN DEGREE now might not escape itself to face this at some point in time. Its due for a very long time.
