I was aware of higher education potentially taking on the characteristics of a bubble as long as a year ago -- tuition that is rising at double the rate of consumer price inflation, weakening job market fundamentals which act to make it progressively harder to pay back student loan debt, and now, rising unemployment.
The chain of events goes all the way back to 1972, when the United States government created Sallie Mae as a government sponsored enterprise (GSE) with the purpose of creating, collecting, and handling college student loans. This event corresponds to the late stage of Cycle wave IV, just before Cycle wave V started in 1974. Deregulation is generally characteristic of Cycle (and above) degree fifth waves in social mood, motivated by ebullience and extreme optimism. This is where the creation of the education bubble got started.
The privatization of Sallie Mae started in 1997 and was completed in 2004 as the deregulation trend continued to unfold in the United States. This event also helped to fuel the education bubble. The next important development occurred in 2005 when George W. Bush signed a decree that student loan debt could not be purged by bankruptcy.
There is already awareness of the bubble. Peter Thiel wrote an article on the education bubble, which can be accessed here. Socionomics Institute has also written articles on the subject as well over the last month.
For-profit colleges, such as University of Phoenix, are at the heart of the education bubble. These schools are funded by taxpayer dollars. Also at the heart of the education bubble are the prestigious schools such as Harvard, Princeton, Yale, and a few others of the same class -- they charge much higher tuition for the same type of education as "lower-tier" colleges and universities do, and yet, there exists the sentiment that going to an elite school means exceptional payoffs in the future in spite of the massive load of student loan debt that gets incurred.
There are already signs that the education bubble is about to burst. The end game is already being played out on various fronts, which will work together to cause the bubble to burst.
1 -- The California budget crisis is the first part of the end game. With tax revenues drying up, the state government cut funding for all of the colleges and universities in the state. Colleges and universities responded to the cuts by hiking tuition by 32% a year to make up for the shortfall -- which was followed by protests by students. With tax revenue drying up, states are implementing austerity measures to balance their budgets. One of the consequences of austerity measures is funding cuts for higher education -- which is then followed by colleges and universities implementing massive tuition hikes to make up for lost funding. Expect this trend to accelerate in the coming months and years. This will cause student loan debt to go parabolic.
2 -- The coming collapse of the job market -- As Primary wave  down unfolds in the stock market, and consequently in the economy and job market as well, there will be a massive wave of layoffs. The loss of 8.4 million jobs that took place during the so-called "Great Recession" (which would be identified as Primary wave  down in the job market) is just a teaser-trailer preview of what is yet to come. The job market follows the same wave path as the stock market. With Primary wave  down unfolding in the job market, corporations and businesses will implode in a massive cascade of debt defaults, which will result in the net loss of 36 million jobs over 5 years (more on that later). The result will be a massive cascade of student loan defaults.
3 -- Rising doubts about the value of a college education -- There are already signs of exhaustion starting to unfold, such as declining applications for law schools. Exhaustion signs are indicative of a bubble in its late stages. Expect to see signs of exhaustion in colleges and universities as tuition continues to rise and with a resumption of layoffs.
Expect the education bubble to implode within the next several years (if not within the next several months), with dramatic consequences for elite schools and for-profit colleges as the most immediate aftermath of the event.