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5 Cities Vulnerable to the Next Bursting Bubble

Lincoln, Neb.
Unemployment rate: 4.1%
Largest employer: The University of Nebraska
As a state capital, Lincoln is usually shielded from the worst effects of bubbles and recessions. As with other state capitals, including Austin, Texas, and Madison, Wis., however, a big part of its stability comes from housing the state's university.

The University of Nebraska employs nearly twice as many people in Lincoln as the state government, and while it's a big part of the reason Lincoln's unemployment rate has fared relatively well compared with that of the rest of the country, it's could also be a weakness if higher education costs ever find a ceiling. According to the nonprofit College Board's annual study of college costs, the average tuition and fees at U.S. public universities have increased at an average of 5.6% per year beyond the rate of inflation. That includes a 9.3% increase in 2009-10 at the height of the recession. As enrollment at state schools rose 33% within the past decade, per-student appropriations dropped 19%

This comes as student debt sets records, with 55% of public college students borrowing and owing an average $19,800. Critics such as PayPal (EBAY) founder Peter Thiel considers it a bubble and believes the situation arose because the college degree is "overvalued."

He and his Founders Fund partner picked 20 students under 20 years of age and will pay them each $100,000 to drop out of school and start a company instead. He feels it's a step toward bringing success to more than just those who can afford the price of tuition. Detractors in higher education and elsewhere see value in the position -- but also potential doom for their institutions.

When those institutions employ large swaths of a city's populace and are under attack, including from low-cost competitors among two-year institutions and a burgeoning online education industry, towns such as Boulder, Colo., Ann Arbor, Mich., and, yes, Lincoln have reason to be concerned.

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