The scandal has thrown an unflattering light on US college admission procedures and the influence of money. It also raises questions about whether the sector is displaying the sort of "bubble-like" characteristics akin to the pre-2008 US housing market.

The retired chief of bond investment giant Pacific Investment Management Company, Douglas Hodge, has been sentenced to nine months in prison after pleading guilty to bribing US universities to accept four of his seven children. Hodge, who paid nearly $1 million in bribes, is an example of a scandal that sheds light on what some view as a “bubble” in Western higher education.

Hodge has received the longest sentence of the high-profile parents convicted so far, according to the BBC (February 7, and other outlets). In October 2019, Hodge pleaded guilty to money laundering and fraud.

Reports said that Hodge paid $850,000 in bribes over a decade to have four of his seven children win places at Georgetown University in Washington DC and the University of Southern California as fake athletic recruits. Prosecutors say Hodge also tried to bribe his way into a seat for a fifth child at Loyola Marymount University in Los Angeles. They had asked for Hodge to serve two years in prison.

Judge Nathaniel Gorton reportedly said he would have given a prison term of a year, as Hodge had participated in the scam repeatedly and for the longest time, but took into consideration Hodge's charity work. His defense lawyers said that Hodge deserved a reduced sentence in light of his history of philanthropy.

In recent months the higher education world in the US has been rocked as defendants were indicted for allegedly cheating and bribing to get their children into universities such as Yale and Stanford.

US actress Lori Loughlin, of the sitcom Full House, for example, is among the total of 50 individuals - including coaches and other associates - who is charged in the case. Desperate Housewives star Felicity Huffman has been sentenced to 14 days in prison and was ordered to pay a $30,000 fine last October for paying $15,000 to participate in an exam cheating scam.

The saga has undoubtedly grabbed the attention of many ultra-high net worth individuals who have gifted billions of dollars to academic institutions in recent years. The affair may also raise questions over whether such gifts are also attempts to help offspring obtain academic places.

The affair also comes at a time when in the 2020 presidential election year, the status of super-wealthy individuals is likely to come under assault. Such stories can be politically toxic. The Democrat Party has seen individuals such as Senator Elizabeth Warren, for example, champion the case for a wealth tax.

The tax implications of the affair are explored here
Higher education in the US – and certain other countries – has gotten so competitive for entrants that it already causes controversies such as the treatment of minorities (Harvard is being sued by Asian students who say current affirmative action policy puts them at a disadvantage), and how the value of a degree in the job market often far exceeds the actual value of the information a person learns. 

One academic, Professor Bryan Caplan, economics professor at George Mason University, has argued that the “sheepskin” value of a university degree accounts for about 80 per cent of its job market value (The Case against Education: Why the Education System Is a Waste of Time and Money, January 2018). 

With a fixed number of college positions available and strong demand-side pressure to get into “elite” institutions", “credential inflation” has skyrocketed. Another US academic, Professor Glenn Reynolds of the University of Tennessee (also a widely-followed blogger), calls US education a “bubble” and says it has similar characteristics to the mortgage market prior to the bankruptcy of Lehman Brothers.