I couldn't agree with Thiel more. Higher education (especially the top schools) are purposefully exclusionary driving an unnatural supply and demand. The only reason people don't refer to it as a bubble is because it's not as clear who's profiting and how I can jump into the game. If I could buy some Harvard stock then I certainly would...
If you're looking to hire someone, it's easy to pull hundreds of resumes. Every candidate will have a college education, and therefore it becomes a prerequisite to have a college education (if not a Masters or PhD) to get a simple job that most likely doesn't really require the lessons learned in college. I'm not condoning this, I'm stating how I view the situation.
Because of the above scenario, high school kids and their parents decide that college is required for a good life so they will take whatever loans are necessary to attend. And the colleges know this, and they charge for it. And while education is getting more expensive, the value is going down due to supply and demand of college educated people.
So how does this bubble burst? I believe it will happen through the decentralization of education. At some point, the price will get too high and people will realize that free/cheap internet classrooms taught by real-life experts (not professors) allow for just as much learning. Combined with some cheap apprenticeship (much like today's lab work in a college environment) a full education program is available for free/cheap.
I'm not sure when this change will take place, but I'm positive it will. (Well, almost positive... I'm still putting money into my kids' 529 just in case). Once it does, the bubble will burst as fast as the tech bubble and housing bubble because everyone will quickly realize how inflated everything was. And college staff's will suffer, as will those that already paid their college fees.
I'm continually watching the trend of decentralized education online, and ready to invest when I find the right opportunity.