Why Elite Education is the Next Ponzi Scheme to Collapse

Last week I recorded a podcast with a friend who works in private equity. More on that later. He mentioned that his firm looks at education the same way they looked at housing in 2007 - a market propped up by cheap debt, artificial scarcity, and mass delusion about underlying value. But the more we talked, the more I realized we're not looking at one bubble - it’s a triple threat. A wealth bubble, a debt bubble, and a cultural bubble all reinforcing each other.

Let's start with some numbers that should terrify anyone paying attention:

The average cost of attendance at an elite private university is now over $80,000 per year. This means a four-year degree costs roughly $320,000 - more than the median home price in most American cities. Total student loan debt has topped $1.7 trillion. These numbers represent two completely different markets masquerading as one system.

At the top, it’s all cash on the barrel. Wealthy parents fork over obscene amounts of money, transforming elite universities from places of learning into glorified luxury brands. Education has nothing to do with it—it’s just buying the shiny logo.

Below that, middle-class families take on crushing debt trying to buy something that looks similar but isn't. It's as if we had two different housing markets: one where billionaires buy mansions with cash, and another where regular people go into debt buying photographs of those mansions.

The Great Cultural Scam

But neither the wealth bubble nor the debt bubble could exist without the elaborate cultural mythology we've built around elite education. It might be the most successful marketing campaign in history, selling three interrelated myths that have become cultural gospel:

1. The Meritocracy Myth: Elite universities claim they select purely on merit, creating a façade of fairness around what's essentially inherited privilege. They admit just enough brilliant poor kids to maintain the illusion while ensuring their primary function of wealth preservation remains intact. It's like a casino letting a few players win big to keep everyone else betting.
2. The Transformation Myth: These institutions sell the idea that four years in their hallowed halls fundamentally transforms teenagers into superior beings. The reality? Rich kids mostly hang out with other rich kids, make connections, and learn the social codes of their class. The actual education is secondary to this process of elite socialization and class reproduction.
3. The Golden Ticket Myth: Perhaps the most insidious is the idea that an elite degree is a guaranteed passport to success. This myth is particularly cruel because it drives middle-class families to pursue devastating levels of debt chasing an illusion. Most success stories from elite schools are about pre-existing advantages being confirmed rather than real mobility being achieved.

The Wealth Bubble

At the top tier, we have what's essentially a luxury goods market masquerading as education:

1. Universities keep raising prices because wealthy parents will pay any amount
2. This drives up perceived value - if rich people pay this much, it must be worth it
3. The credential maintains value through artificial scarcity
4. But the astronomical costs require the credential to provide real advantage
5. That advantage depends on continued recognition of the credential's value
6. Which requires continued buy-in from wealthy families...

It's a perfect circle: wealthy parents buy their children membership in an exclusive club, which justifies the children's future wealth, which lets them buy their own children membership in the same club.

The Debt Bubble

Just below the luxury tier, we have a massive debt-fueled bubble that looks not dissimilar to the 2008 housing crisis:

1. Schools can raise prices because federal loans will cover any amount
2. Students take on massive debt believing the credential is worth it
3. The credential's value depends on employer recognition
4. But employers increasingly question the value proposition
5. Which threatens the ability to repay the debt
6. Which could collapse the whole system...

The genius of it all is how these bubbles reinforce each other. The existence of the wealthy-parent tier helps justify the debt-fueled tier. After all, if rich people are willing to pay $320,000 out of pocket for Harvard, surely it makes sense to borrow $150,000 for a less prestigious degree?

It shifts one form of capital into another with an elegance that feels almost natural. It starts with economic capital—wealth—that flows effortlessly into cultural capital, embodied by elite education. This cultural capital then metamorphoses into social capital, the powerful old boys’ clubs that open doors and sustain influence. And finally, like clockwork, it all cycles back into economic capital, wealth compounded and secured for another generation.

Collapse Scenarios

The higher education bubble is vulnerable to collapse from three distinct directions:

Culturally, the cracks are showing. The promise that hard work and a piece of paper guarantee success is wearing thin. People are waking up to the reality that the game isn’t merit-based—it’s rigged. Meanwhile, society is starting to care more about what you’ve built, posted, or coded than the school crest on your résumé. And then there’s the classic story of college as a transformative rite of passage—pretty hard to sell when a $100 online course delivers the same skills without the dorm drama or the debt.

Wealth is another pressure point. Rich families might decide it’s cooler to flaunt their status with something flashier than a Harvard acceptance letter. Big-name companies are already experimenting with ditching degree requirements, and international schools are breaking up the old monopoly on prestige. If the elite start changing the rules, the whole system will feel the shake.

And then there’s the money. The whole setup is propped up by student loans, but that tower is swaying too. A real loan crisis could tighten federal purse strings and leave families saying, enough is enough. If that happens, the rise of cheaper, faster, alternative credentials will stop being an option and start being the norm.

None of these shifts are happening in isolation. Each one has the power to start the domino effect. Together, they paint a picture of a system on the brink—one big push, and the entire model could collapse faster than anyone expects.

What Comes Next

The system can't last forever. But what replaces it? Some possibilities:

1. The Great Bifurcation: Elite education becomes explicitly about buying status, while everyone else focuses on actual skills
2. The New Taxonomy: "Real" education (focused on skills) separates entirely from "status" education (focused on networking)
3. Tech Disruption: Distributed learning finally delivers on its promise, forcing traditional institutions to adapt or die
4. Status Revolution: New markers of prestige emerge, making traditional credentials less relevant

But hey, what do I know? Maybe three bubbles are better than one—like some kind of twisted economic safety net. Maybe those fairy tales about merit and transformation are so baked into our collective psyche that they’ll keep limping along forever. Or maybe we’ll just get creative and invent shiny new ways to dress up the same tired Ponzi schemes, like slapping a fresh coat of paint on a crumbling facade and calling it progress.