The next bubble bursting: could be student loans.

[Direckshun]

I think this piece will prove to be prescient.

http://www.washingtonpost.com/opinio...iOV_story.html

Subprime college educations
By George F. Will
Published: June 8

Many parents and the children they send to college are paying rapidly rising prices for something of declining quality. This is because “quality” is not synonymous with “value.”

Glenn Harlan Reynolds, a University of Tennessee law professor, believes that college has become, for many, merely a “status marker,” signaling membership in the educated caste, and a place to meet spouses of similar status — “associative mating.” Since 1961, the time students spend reading, writing and otherwise studying has fallen from 24 hours a week to about 15 — enough for a degree often desired only as an expensive signifier of rudimentary qualities (e.g., the ability to follow instructions). Employers value this signifier as an alternative to aptitude tests when evaluating potential employees because such tests can provoke lawsuits by having a “disparate impact” on this or that racial or ethnic group.

In his “The Higher Education Bubble,” Reynolds writes that this bubble exists for the same reasons the housing bubble did. The government decided that too few people owned homes/went to college, so government money was poured into subsidized and sometimes subprime mortgages/student loans, with the predictable result that housing prices/college tuitions soared and many borrowers went bust. Tuitions and fees have risen more than 440 percent in 30 years as schools happily raised prices — and lowered standards — to siphon up federal money. A recent Wall Street Journal headline: “Student Debt Rises by 8% as College Tuitions Climb.”

Richard Vedder, an Ohio University economist, writes in the Chronicle of Higher Education that as many people — perhaps more — have student loan debts as have college degrees. Have you seen those T-shirts that proclaim “College: The Best Seven Years of My Life”? Twenty-nine percent of borrowers never graduate, and many who do graduate take decades to repay their loans.

In 2010, the New York Times reported on Cortney Munna, then 26, a New York University graduate with almost $100,000 in debt. If her repayments were not then being deferred because she was enrolled in night school, she would have been paying $700 monthly from her $2,300 monthly after-tax income as a photographer’s assistant. She says she is toiling “to pay for an education I got for four years and would happily give back.” Her degree is in religious and women’s studies.

The budgets of California’s universities are being cut, so recently Cal State Northridge students conducted an almost-hunger strike (sustained by a blend of kale, apple and celery juices) to protest, as usual, tuition increases and, unusually and properly, administrators’ salaries. For example, in 2009 the base salary of UC Berkeley’s vice chancellor for equity and inclusion was $194,000, almost four times that of starting assistant professors. And by 2006, academic administrators outnumbered faculty.

The Manhattan Institute’s Heather Mac Donald notes that sinecures in academia’s diversity industry are expanding as academic offerings contract. UC San Diego (UCSD), while eliminating master’s programs in electrical and computer engineering and comparative literature, and eliminating courses in French, German, Spanish and English literature, added a diversity requirement for graduation to cultivate “a student’s understanding of her or his identity.” So, rather than study computer science and Cervantes, students can study their identities — themselves. Says Mac Donald, “ ‘Diversity,’ it turns out, is simply a code word for narcissism.”

She reports that UCSD lost three cancer researchers to Rice University, which offered them 40 percent pay increases. But UCSD found money to create a vice chancellorship for equity, diversity and inclusion. UC Davis has a Diversity Trainers Institute under an administrator of diversity education, who presumably coordinates with the Cross-Cultural Center. It also has: a Lesbian, Gay, Bisexual, Transgender Resource Center; a Sexual Harassment Education Program; a diversity program coordinator; an early resolution discrimination coordinator; a Diversity Education Series that awards Understanding Diversity Certificates in “Unpacking Oppression”; and Cross-Cultural Competency Certificates in “Understanding Diversity and Social Justice.” California’s budget crisis has not prevented UC San Francisco from creating a new vice chancellor for diversity and outreach to supplement its Office of Affirmative Action, Equal Opportunity and Diversity, and the Diversity Learning Center (which teaches how to become “a Diversity Change Agent”), and the Center for LGBT Health and Equity, and the Office of Sexual Harassment Prevention & Resolution, and the Chancellor’s Advisory Committees on Diversity, and on Gay, Lesbian, Bisexual and Transgender Issues, and on the Status of Women.

So taxpayers should pay more and parents and students should borrow more to fund administrative sprawl in the service of stale political agendas? Perhaps they will, until “pop!” goes the bubble.

[Dayze]

Originally Posted by Amnorix

This isn't about a bubble bursting, this is about an economic model (colleges) that isn't sustainable in the long run. There is a highly dysfunctional system involving kids with too much debt, the federal government taking on too much risk, and colleges that think that 8% increases in tuition fees EVERY YEAR is perfectly reasonable regardless of what the economy is doing.

Combine that with EVERY middle and upper income family thinking that a college degree is ABSOLUTELY required, and you have a recipe for disaster, probably at taxpayer's expense ultimately.

We need to wean our society off the notion that EVERYONE should get a college degree, and EVERYONE should own a house, and the taxpayer should underwrite all of it. All we do is screw up the economics around those sectors and then have the inevitable breakdown down the road.

100% agree. It's almost like there is a machine that pushes for everyone to get into debt up to their assess to they HAVE to work; and have to be forced to take low paying jobs because the companies hold all the cards based on unemployment rate.

[Amnorix]

Originally Posted by La literatura

Income Based Repayment. With this program, a prosecutor who makes $45K out of law school can based his repayment on his salary. To say this helps is quite an understatement when he might have $120K in loans. Instead of a $1200/mo payment, he has a $500 (and even less if he's married and/or has kids). At the end of 25 years, he's paid roughly 100K into the system, and gets a discharge of $80K that the public basically paid.

I can't tell you how ****ing excited I am that $80K taxpayer dollars went to a law school that really, REALLY needed that money to increase its endowment and continue to rip off students by offering a program that has an impractical method for training another zillion lawyers that we don't freaking need.

We are over-lawyered. Not slightly, but MASSIVELY.

We could seriously just eliminate half the law schools in the country (or halve the student body) and it would be the BEST thing we could do. Instead, the economics of law schools (they are MASSIVELY profitable to their institutions) demands that they churn out more and more young people with mountains of debt, most of whom are poorly trained to actually BE lawyers, and only half of whom (at best) are NEEDED to be lawyers.

And the public is funding this.

Joy. Oh joy.

Yes, there are a lot of schools who can't get graduates jobs, but a top 100 law school will still work out for a student.

But, I fully support reduction in law schools and grads.

Top 100 sounds fine. Unfortunately there are 200 or so. So yeah, cut the number in half and we'd be good.

What really needs to happen is a recognition by people going to college that (1) soft majors are likely worthless, and (2) law school is no longer a good option for what to do after you graduate college with your worthless soft major.

Once those two things are firmly embedded in the minds of potential college students and their parents, they can start making far more rational decisions about these things.

Until then, they will continue to be burdened by debt, and Joe Taxpayer will continue to underwrite useless degrees for people who are contributing little/nothing to American enterprise and the country's GDP.

[La literatura]

I agree with you for the most part. And so do many undergrads who decide not to go to school. At my law school, we saw a drop from 200 entering students in 2010, to 180 in 2011, to about 160 in 2012.

The ABA needs to shut off the accreditation to a lot of these loser schools (not in the top 100) that do send kids into spiraling debt with no hope of gainful employment.

Still, the IBR plan is a good policy because although we may have a lot of litigators or 26 year olds who dig through boxes of papers, there are a lot of segments of society that do need lawyers. Like small communities with old men running a county firm.

[mlyonsd]

This is like watching Denny Crane and Alan Shore sitting in overstuffed chairs on a balcony smoking cigars.

[Amnorix]

Originally Posted by La literatura

Still, the IBR plan is a good policy because although we may have a lot of litigators or 26 year olds who dig through boxes of papers, there are a lot of segments of society that do need lawyers. Like small communities with old men running a county firm.

I'm not saying zero government support for college and other higher education tuition, but the massive support, when it's basically the colleges deciding who will get the support, with the feds writing a blank check, is creating massive economic distortions, including burdening the same students they're trying to help with more and more debt.

Why do you think tuition goes up 8% every year like clockwork? Easy, it's because society has a screwed up understanding of the value of a college degree, and the colleges have NO RISK that their students won't pay the tuition. The repayment risk is entirely on the students and the federal government, so why not fleece them for every dime?

[Amnorix]

Originally Posted by mlyonsd

This is like watching Denny Crane and Alan Shore sitting in overstuffed chairs on a balcony smoking cigars.

Can I have some scotch too? Macallan 12 please... Thx.

[La literatura]

Originally Posted by Amnorix

I'm not saying zero government support for college and other higher education tuition, but the massive support, when it's basically the colleges deciding who will get the support, with the feds writing a blank check, is creating massive economic distortions, including burdening the same students they're trying to help with more and more debt.

Why do you think tuition goes up 8% every year like clockwork? Easy, it's because society has a screwed up understanding of the value of a college degree, and the colleges have NO RISK that their students won't pay the tuition. The repayment risk is entirely on the students and the federal government, so why not fleece them for every dime?

So . . . do we allow student loans to be dischargeable in bankruptcy in an attempt to get schools to lower spending, or hold off public funding to the school (which will just have the schools raise student fees). Or dry up the loan process, which will cause the public to complain about lack of education opportunity.

[Cave Johnson]

Originally Posted by La literatura

So . . . do we allow student loans to be dischargeable in bankruptcy in an attempt to get schools to lower spending, or hold off public funding to the school (which will just have the schools raise student fees). Or dry up the loan process, which will cause the public to complain about lack of education opportunity.

B. Tie future student loan approval to default rates for grads of underperforming schools.

[Cave Johnson]

Originally Posted by Dayze

100% agree. It's almost like there is a machine that pushes for everyone to get into debt up to their assess to they HAVE to work; and have to be forced to take low paying jobs because the companies hold all the cards based on unemployment rate.

Fun fact: almost 1/2 of college grads are in positions that don't require a degree.

About 48 percent of employed U.S. college graduates are in jobs that the Bureau of Labor Statistics (BLS) suggests requires less than a four-year college education. Eleven percent of employed college graduates are in occupations requiring more than a high-school diploma but less than a bachelor's, and 37 percent are in occupations requiring no more than a high-school diploma.

http://gawker.com/5979579/we-need-fe...lege-graduates

[Amnorix]

Originally Posted by La literatura

So . . . do we allow student loans to be dischargeable in bankruptcy in an attempt to get schools to lower spending, or hold off public funding to the school (which will just have the schools raise student fees). Or dry up the loan process, which will cause the public to complain about lack of education opportunity.

The student loans are owed to the government, not the schools, right? Or are guaranteed by the government anyway, right? So discharging it in bankruptcy doesn't change the economics from the school's point of view.

Federal guarantees of all student loans should discontinue. It's really that simple, unfortunately. It's having a massive distorting effect, and driving up the cost of college education for everyone, largely negating the benefit it was supposed to confer. Loans may be cheaper, but because it's driving up demand exponentially, and eliminating payment risk, colleges are just jamming it to students in the form of massive tuition increases.

Some scholarship / grant programs can certainly remain to help those who are incapable of funding from paying, but otherwise, eliminate it.

Of course, this will hit the middle class the most. Those who are wealthy pay their way, and those who are poor get need-based grants. But that's not really different than what goes on now.

Without the feds standing behind everything, EVERYONE needs to analyze what a college degree is "worth". Banks or colleges who give loans, and students who take them out. The pool of college applicants will (and should) shrink, especially as to less worthy degrees.

Frankly, there is no reason that a history student should have the same tuition cost as an engineering student, nor that a history teach gets paid the same as an engineering teacher. The market DEMANDS that they not be treated equally, because they just ARE NOT worth the same. Yet the professors get paid the same, and the students pay the same, when they are demonstrably, measurably, PROVABLY not equally valuable.

Whole system is ****ed up.

Whatever, this is all pie-in-the-sky. None of this will happen. Eventually, maybe, when a college tuition and loan takes an average of 40 years to repay, people will wise up. Until then, forget it.

[J Diddy]

Originally Posted by Amnorix

The student loans are owed to the government, not the schools, right? Or are guaranteed by the government anyway, right? So discharging it in bankruptcy doesn't change the economics from the school's point of view.

Federal guarantees of all student loans should discontinue. It's really that simple, unfortunately. It's having a massive distorting effect, and driving up the cost of college education for everyone, largely negating the benefit it was supposed to confer. Loans may be cheaper, but because it's driving up demand exponentially, and eliminating payment risk, colleges are just jamming it to students in the form of massive tuition increases.

Some scholarship / grant programs can certainly remain to help those who are incapable of funding from paying, but otherwise, eliminate it.

Of course, this will hit the middle class the most. Those who are wealthy pay their way, and those who are poor get need-based grants. But that's not really different than what goes on now.

Without the feds standing behind everything, EVERYONE needs to analyze what a college degree is "worth". Banks or colleges who give loans, and students who take them out. The pool of college applicants will (and should) shrink, especially as to less worthy degrees.

Frankly, there is no reason that a history student should have the same tuition cost as an engineering student, nor that a history teach gets paid the same as an engineering teacher. The market DEMANDS that they not be treated equally, because they just ARE NOT worth the same. Yet the professors get paid the same, and the students pay the same, when they are demonstrably, measurably, PROVABLY not equally valuable.

Whole system is ****ed up.

Whatever, this is all pie-in-the-sky. None of this will happen. Eventually, maybe, when a college tuition and loan takes an average of 40 years to repay, people will wise up. Until then, forget it.

A student is required to take classes, at least at my school, regarding the employment prospects, the hiring trends and the cost of loans and their impact. They are well educated on the likelihood of what's coming and chose to live for the now.

The most intelligent solution is for the schools to assign a risk rating on degrees and adjust loan payouts accordingly.

Furthermore, history is valuable as well as some other programs and to keep them costs the same, so I can see the reason for tuition being equal. However, the big problem is trying to attract students to the campus to compete with other campuses in the "student mill." I have been here for a year and their have been 5 proposed rate increases. Each one was campus improvements in such areas as expanding the student center, building a new performing arts center, new practice gym, and other cosmetic changes. Keep in mind that the biggest pain in the ass at my school is the ungodly parking situation. There has been no proposed remedy for that.

[cosmo20002]

Originally Posted by Comrade Crapski

Don't confuse going to college with getting educated.

I think most people go in dumb, and come out dumber.

You must have multiple degrees then.

[notorious]

No sympathy here.

[patteeu]

Originally Posted by Amnorix

The student loans are owed to the government, not the schools, right? Or are guaranteed by the government anyway, right? So discharging it in bankruptcy doesn't change the economics from the school's point of view.

Federal guarantees of all student loans should discontinue. It's really that simple, unfortunately. It's having a massive distorting effect, and driving up the cost of college education for everyone, largely negating the benefit it was supposed to confer. Loans may be cheaper, but because it's driving up demand exponentially, and eliminating payment risk, colleges are just jamming it to students in the form of massive tuition increases.

Amnorix is trying on a sensible libertarian streak. Bravo.

Originally Posted by Amnorix

Some scholarship / grant programs can certainly remain to help those who are incapable of funding from paying, but otherwise, eliminate it.

Of course, this will hit the middle class the most. Those who are wealthy pay their way, and those who are poor get need-based grants. But that's not really different than what goes on now.

Without the feds standing behind everything, EVERYONE needs to analyze what a college degree is "worth". Banks or colleges who give loans, and students who take them out. The pool of college applicants will (and should) shrink, especially as to less worthy degrees.

Frankly, there is no reason that a history student should have the same tuition cost as an engineering student, nor that a history teach gets paid the same as an engineering teacher. The market DEMANDS that they not be treated equally, because they just ARE NOT worth the same. Yet the professors get paid the same, and the students pay the same, when they are demonstrably, measurably, PROVABLY not equally valuable.

Whole system is ****ed up.

Whatever, this is all pie-in-the-sky. None of this will happen. Eventually, maybe, when a college tuition and loan takes an average of 40 years to repay, people will wise up. Until then, forget it.

Unfortunately, this is probably right too.

[J Diddy]

Originally Posted by patteeu

Amnorix is trying on a sensible libertarian streak. Bravo.



Unfortunately, this is probably right too.

College can be done cheaply if that is the goal.