I think Thiel is right - sort of. At least, if you consider the large amount of money spend on a college degree in the US. Let me compare this to Germany. In Germany, universities and therefore higher education is free. You just enroll, take classes, pay your rent and after a couple of years, you are done and usually have a degree that is very competitive around the world.
But every student knows that there are areas that lead to high-paying jobs such as engineering, while in other areas such as history, communications, philosophy, languages, you will have trouble finding a job, not even speaking of a high-paying job. Still, people are usually more or less aware of the fact that they might end up having an average-income job.
In the US, higher education is a financial investment where people expect a financial return. In Germany, higher education is mostly an investment of time and people are much more aware of the possible outcomes. We don't have a bubble here.
In Germany, the number of Abiturients, those who go to college prep schools has been going up for decades. They have also relatively recently opened pure universities up to certain relatively narrow classes of non-Abiturients.
Given that the number of people with college degrees has been increasing steadily by age group in Germany, and that someone is paying for it, i.e. the state, i.e. the taxpayer, I don't see that "bubble" is an inappropriate word.
Germany probably has less of a higher education bubble than any other Western country though, because they have the best apprenticeship and vocational training system in the world. I believe this is only stable because Germany is enormously class and status conscious, and as a result has early streaming. I don't doubt that some potential is wasted, but probably the fact that Hauptschüler are not hindering the eductaion of Realschüler and Gymnasien would justify the system by itself.
In Germany you dont even need to go to college to get a good education in your field. They have a system where Companies train new people from school (they have to take tests and stuff to get in) for the job. For 3 years you work in the company, go to school and get paid around 600 EUR a month. After successfully completing that you have a degree that enables you to work as a Software Developer or Media Designer for example.
But every student knows that there are areas that lead to high-paying jobs such as engineering, while in other areas such as history, communications, philosophy, languages, you will have trouble finding a job, not even speaking of a high-paying job. Still, people are usually more or less aware of the fact that they might end up having an average-income job.
In the US, higher education is a financial investment where people expect a financial return. In Germany, higher education is mostly an investment of time and people are much more aware of the possible outcomes. We don't have a bubble here.