I've often thought about higher education today as a kind of economic bubble, though I've always wondered if that's quite right. It seems to have the traits of a bubble: It seems overpriced, herd behavior and social conformity appear operative, and there's good data suggesting it doesn't do what it claims to do. But "bubble" is a fancy word easily deployed to describe anything that looks or feels vaguely unsustainable, so its informal usage as a term probably tends to overstate the economic significance of many phenomena. Student debt kind of feels like a bubble, but it's probably not quite that bad, right?

Well, I've recently learned that "bubble" is not quite the right way to understand the higher education problem. It understates the severity of the problem.

One problem for applying the bubble term to higher education is that you can't sell off student debt. The boom-and-bust pattern of the bubble phenomenon, requires that at the unsustainable breaking point of the boom, people realize the thing is overvalued and ditch it. Once this starts, others start selling off as they fear a continued collapse of the price, and they will sell at a loss if necessary (in the bust period, taking a loss now is at least better than taking a loss tomorrow).

I got this from Marshall Steinbaum of the Roosevelt Institute, who recently made this point in a Vice interview. Vice paraphrasing Steinbaum:

"…student debt couldn't explode in a traditional "bubble" because it tends to be unsecured… That piece of paper might become worth way less than you paid for it, but ultimately you're stuck with it."

So it's not that "bubble" is a naïve and fear-mongering metaphor for the problem of higher education: It's an overly generous and insufficiently alarmist metaphor for the problem of higher education.

The second reason higher education is not a bubble is that there is no path to relief for student debt. You can't default or go bankrupt from student debt, so even if nobody can pay their student debts, there is no mechanism for this to translate into a market crisis. The basic problems can be every bit as severe as a bubble, but we may never learn this like we ultimately do with bubbles because, ultimately, everything is held together by the US government. Though the US government is not holding this all together by absorbing losses, it's holding it all together by law enforcement on college graduates.

"You're not going to see the entire market bottom out, I don't think, like we did in the foreclosure crisis, because you won't see everyone default and then the bank is left holding the bag… Here, everyone defaults and the government just takes their wages, tax refunds, or Social Security benefits."

Persis Yu, staff attorney at the National Consumer Law Center

There's a sad irony here. People want the US government to provide financial aid for higher education in order to spread opportunity among young people, but the US government's involvement is precisely one of the reasons why the student debt catastrophe is an inescapable nightmare for so many young people, rather than just a bubble that might have popped long ago.