The American Interest points to a disturbing report from Goldman Sachs on the state of higher education.

Goldman Sachs: Higher Ed Ripe for Disruption

A Goldman Sachs investment research report issued last month paints a very grim picture of the state of American higher education (h/t Bryan Alexander). The bottom line: “returns on a college education are falling,” and quickly.

According to a striking graph included in the report, the average “wage premium” from going to a four-year college (that is, the difference in incomes between college graduates and high school graduates) and college tuition (including room and board) rose in tandem throughout the 1990s. Then, starting in about 2002, something changed—the wage premium growth started growing more slowly, even as tuition kept rising as fast as ever.

This disconnect, Goldman notes, is not a problem for all classes of colleges. It appears that the top institutions (as ranked by SAT scores) are still delivering good returns, while the returns for schools in the bottom half, and especially the bottom quarter, are falling off steeply. This can’t go on forever. If costs continue to exceed returns, the bubble will burst eventually—even if Washington keeps subsidizing it.