There is definitely an education bubble. It's way too easy to get money for college. You hear a lot of stories about the increasing costs of college and crushing debt on graduation, but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan". Almost everyone gets approved, regardless of their future ability to pay it back.
We need a fundamental shift in the way college is paid for. Some (many?) would like to see a government funded system, others would like to see the removal of subsidized loans to bring prices back down (and leaving many unable to afford college in its wake).
Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least into a pool that pays for the next generation's college. Of course with that system, colleges would bias towards people who are pursuing profitable majors, so you'd probably see a lot more STEM degrees and a lot fewer of everything else, until it got oversaturated, but there is a very long lead time between "too many degrees" and "no one studies this anymore".
In other words, the fundamental problem is that we tell kids that college is the only path, creating insanely high demand for the product, when in reality there would be plenty of people much better served learning a trade or skill instead of four years doing something hate for a useless degree they'll never use.
> Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least into a pool that pays for the next generation's college.
I went to school for such a degree. While I don't use it in my day to day now, I still consider it priceless. There's some inherent value added to a person who pursues to study a bit of humanities, history, philosophy and art in college apart from their major. Scholarly work really helps shape the way you look at life for the better.
Part of this is that you really understand why you need to trust academic work for general human advancement. We have too many people thinking it's okay to discredit scientists and scholars because they don't understand how research works.
> you'd probably see a lot more STEM degrees and a lot fewer of everything else
I honestly think art schools are going to start running into problems convincing people it's a good idea to pay 60k a year for minimal ROI.
My cousin wants to go into stage drama, and I don't want to tell her to not pursue her dream, but I think it's a lot to ask her to put herself in debt for years for a piece of paper that says she can act.
FWIW I majored in ECE, got a job as a software engineer with 100k salary plus benefits, and I'm ~140k in debt. I definitely overpaid, but my salary gives me a way out. People who came from my alma mater who majored in drama can't say the same.
The problem I really see is that we've dug ourselves a big hole. The safety net created for the banks were done to ensure that everyone could get a loan. Banks were "worried" that people would default on their student loans and run away with the money, even though this hasn't happened or is really rare. There was an unfortunate side effect that this incentivized banks to give out riskier loans. Couple that with telling everyone to go to college, kids that don't know what they want to do, and schools that are also seeking a profit, and you get a pretty messed up system.
The unfortunate part about this, is that I believe that if you remove the protections on the loans, many students now WILL default, because they have too much debt and are incentivized to do so, if they are one of the larger loan carriers. I'd say "bite the bullet, and that's what banks get for giving out risky loans" but we know that's not going to play out that way, especially since the gov owns a fair portion.
Making tuition free is nice, but the generation that took out loans isn't helped AND this does not reduce the college price problem. The price was inflated and there is no reason for them to decrease it. Kind of a parallel to health care here. That's the cost. I like this idea, even if I have to pay back my large loans, but I think the fundamental price issue also needs to be solved.
Giving a portion of your earnings is a decent method, but you already bring up the problem with that. And this also doesn't solve the price problem, in fact it encourages the price to keep going up. (We can even tangent into how schools are over charging gov for research, but I'll leave that for another comment)
Whatever we do, somebody is going to lose. And that's the problem with bubbles. We need to, as a society and government, decide who is going to lose. Problem is I think the majority of people think the banks [gov] should lose, for giving out such risky loans. But I don't think many politicians would agree. I wonder what the economists say.
The "underwater basketweaving" so to say, may be at most 10-15% of current college graduates.
I think the solution lies more with reducing the cost of college, open source textbooks, more elearning, etc. Regardless of government funding vs subsidized loans, the cat is already out of the hat on a lot of price increases around campuses nation wide. It isn't going to be just as easy to just change the funding source.
I also sympathize with the trade school argument, but I don't think everyone going to college is a bad idea by any means.
> Another solution is to let you go to school for free and then pay a percent of all your future earnings
In Australia we have a system somewhere between this and a loan.
You go to (heavily subsidized) university, tuition is paid for by the government with an automatic interest free loan.
Once you earn above a particular (somewhat generous) threshold, your employer automatically starts taking a percentage of your income (depends on income) and pays it towards the loan.
There's no interest but the loan amount is indexed against inflation.
I graduated from one of the country's top universities with $24k AUD (~$18k USD) debt to the government and paid it all off early voluntarily. It used to be that voluntary payments got you a 5% bonus but that's gone now.
We have a system like that. Its called taxes and free education. Everyone is offered free college education, including basic living expenses. In return everyone pays a litle more in taxes. And those who choose college, often earn more, and then pay more in taxes. (Im from Denmark)
> ... but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan". Almost everyone gets approved, regardless of their future ability to pay it back.
This is absolutely not the case. Student loans have caps and they're incredibly easy to hit, especially if you go to a 5-year school where you're expected to pay tuition while doing 6-month internship blocks. Lots of people I knew in college (myself included) had to drop out in the first 2 quarters of year 5 because they couldn't get enough money to finish.
you describe a classic misattribution problem with the demand for higher ed. people use "college" as a synonym for "successful life", but those two things only have a loose correlation, which is only getting weaker with the swell of people getting degrees that they can't wield effectively.
we all want a successful life, and being good little free-market capitalists, we eagerly buy into the story that we can achieve success by simply buying a degree (hey, i bought three of 'em!) and letting the rest play out like our wildest dreams.
but of course it doesn't work that way because we didn't scrutinize the winding path between degree and successful life, because the shortcut between those two things doesn't actually exist (at least not any more).
colleges and universities have done a good job extracting most, if not all, of the value out of the higher education market, with the help of government distortions (guaranteed interest, unbankruptable debt). it's time to put to bed the idea that a degree equals success (it's also time to get rid of those market distortions). a few of us will get lucky of course, but pretty much everyone will need to create success the old-fashioned way: by working hard for it.
It'd be more correct to say that it's way too easy to get money while at college. An awful lot of college students believe that being in college means that they have a middle class lifestyle. It is cliche, but in my day (1989-1993) students were poor. You lived in a dormitory and ate in a cafeteria. Maybe you'd go to a bar once a month. And 99% of the time you walked everywhere.
I think easy of approvals for student loans combined with the 2008 recession and slow recovery led to a lot of people finding that student loans were a source of income rather than a way to pay for college.
Another part of the problem is that there's really no such thing as a useless degree. A person may never use what they learned from that degree, but the fact that they were able to earn a degree is still used by employers as a bar to judge potential employees.
It can't really be a bubble because there are no assets to be bid up in a run away cycle or that can have a sudden collapse. Bloomberg tells you what you need to know in the article but doesn't do it right upfront. The overwhelming majority of this debt is held or guaranteed by the federal government.
A bubble is one way to get malinvestment, but it isn't the only one. Here we have malinvestment but no bubble.
> ...four years doing something hate for a useless degree they'll never use.
Or 4-5 years getting a piece of paper saying "Computer Science" when they can't do the work, because society says "CS makes money" and the CS department is happy to take it. If people with only a high school degree can't make a living, we need to either make college free, or make companies pay for it.
>but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan".
I suspect that it's either because you're not listening or people aren't talking about it. I had 3 years of on the job engineering experience and an established, good credit history when I got denied a loan for my last year of undergrad at a state school. Mind you this was fairly recently and my only loan for school I applied for ever. I could be the freak accident but it doesn't seem all that probable.
>Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least in to a pool that pays for the next generation's college.
We basically already have that system. If you get federal loans (which most people who take out loans do--90% of all loan disbursements) you can sign up for an income based repayment plan.
You pay back 10% of your disposable income (income over 1.5x the federal poverty limit), for 20 years.
If you make less than 1.5x the poverty limit, you pay nothing.
You said: "...profitable majors, so you'd probably see a lot more STEM degrees and a lot fewer of everything else...". In terms of lifetime earnings, STEM is not necessarily a sure fire route:
"'Students and parents have a pretty good idea of what majors pay the most, but they have a poor sense of the magnitude of the differences within the major,' said Douglas A. Webber, an associate professor of economics at Temple University who studies earnings by academic field. He points to one example: The top quarter of earners who majored in English make more over their lifetimes than the bottom quarter of chemical engineers.
But what if you never make it to the top of the pay scale? Even English or history graduates who make just above the median lifetime earnings for their major do pretty well when compared to typical graduates in business or a STEM field."
> instead of four years doing something hate for a useless degree they'll never use
I think this comment here points to the issue of colleges -- most people have no clue what major they want to be or what type of career they want to pursue.
The result is that if they are pushed into a corner they do not want to be in, money would be spent and nothing of value would be gained.
What should be happening before college or at the earlier levels is people taking classes that allow them to explore but also teach them transferable skills.
Ideally, this is where G.E.'s should've worked. However, at the current state, they're just useless extra units that seemed be layed onto college students in order to keep them in school longer, and thus pay more tuition. In addition, most of the things they teach are not transferable - they're too specific / boring and after a semester, it's all forgotten.
Instead, the G.E. curriculum should focus on knowledge shared by every field, or that could be used in any career -- logic, data science, ethics, etc.
An improvement like this could justify the high-cost of a college education.
I would disagree that it is way too easy to get money for college. I co-founded a company that is aimed at giving loans to students who are often denied credit in the traditional market, primarily because they lack credit worthy cosigners. This amounts to about 2m students every year.
I wanted to go to college, but couldn't get a loan. Its easy for people who's parents already participate fully in the credit market-but for people like myself who's parents are poor and don't use credit for anything, it wasn't an option.
There's a good midpoint of those two. Cap student loan payments at some fraction of your income for some fraction of your life. Those seem like reasonable restrictions for a loan that isn't dischargeable by bankruptcy.
Have you read The Unincorporated Man? It's a sci-fi novel about a society like the one you're suggesting, where "investors" in humans such as parents and educators own shares in the person's future earnings. The novel/series casts this in various lights, mostly negative but with undeniable fairness and benefits. One question is where these shareholder cross the line into slaveowners. What is a reasonable rate of taxation? What can be reasonably demanded from the indebted?
>> Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least into a pool that pays for the next generation's college.
"Unlike student debt, it shifts the burden — or the risk, I should say — entirely from the student to the investor."
"That’s because the terms of the agreement, called an ISA, are made well before students launch their careers. So, even if a student ends up in a low-paying job, the pay-back percentage stays the same."
College demand is insanely high because of education inflation. Employers require a college degree for most white-collar jobs. I think a better solution would be to rework college. It doesn't make sense that you need a four-year degree including a bunch of irrelevant classes to get your foot in the door at any white collar job. The standard for higher education should be probably leaner and more focused on useful skills for a particular area. And if hiring was based more on objective tests of knowledge and ability, you wouldn't have as many people spending lots of money to go to prestigious universities.
(I don't know how or if any of this could be accomplished.)
Make student loans dischargeable under bankruptcy like any other loans, including corporate loans. Then we'll see big changes. But since we punish the young, by not letting them off the hook, these loan sharks will continue to bite.
To me, this is another implementation of the housing bubble:
- People see college graduates making a lot of money
- Politicians make it a priority to make it easier for people to get loans to go to college
- More people take out loans to go to college
- Colleges realize there is no downward pressure on price and raise tuition.
- Politicians continue to make it easy for people to go to college
- People take bigger loans to go to any school they wish
Until the music stops, things are sort of OK. People's kids can go to any school they can get into, regardless of cost. Colleges can raise their tuition with no consequences.
Politically it's a difficult problem, because the old solution of making more money available is getting out of hand, but what politician wants to stand up and tell people they can't go to the college of their dreams just because they can't afford it?
During the housing bubble, it was the cycle of "people want to own a home" => "politicians say everyone should be able to own a home and make loans available" => "companies make money packaging up these loans" => "prices go up" => "people can't afford homes" => "politicians make more money available". Until the music stops, everything is great -- everyone is making money, everyone is getting what they want. Then it unravels...
The thing I don't understand is, how does it unravel?
It feels like politically acceptable short-termism of shunting education costs onto future generations. No-one's going to 'lose' money over it. Who will suffer? It doesn't look like it will be corporations that will suffer, save some institutions will close when the endless supply of money suddenly dries up. It looks to me like it will be governments, a political ticking time-bomb much worse than the growth of numbers of pensioners vs number of workers. Is it a potential social disaster where a lot of people will end up sent to a new version of debtors prison for a bit? Or will it massively impact future GDP of developed countries, as people won't be able to spend, they'll be paying back this onerous loans. Having the exact opposite effect that it's supposed to, instead of growing GDP by growing skills, it'll be killing it by curtailing worker spending potential. Tax revenues might fall due to higher education instead of grow.
Governments seems to be making these student loans rock-solid backed by government assurances to the detriment of future generations.
I haven't looked into it enough to know and am lucky enough to have paid all mine off as it was much smaller than today's crazy amounts.
But as far as I know student loans aren't securitized and leveraged in the same way as mortgages were, so I'm not sure that the fall out will be as bad.
The root problem (as others have noted) is too many people are encouraged to go to college and even though most majors don't make economic sense students (rightly) feel that they need a college degree to be a competitive applicant for good jobs. Maybe I'm just in an ideological bubble, but it seems like there's pretty good agreement on this issue, but no real way to do anything about it.
> Politically it's a difficult problem, because the old solution of making more money available is getting out of hand, but what politician wants to stand up and tell people they can't go to the college of their dreams just because they can't afford it?
Presumably the same politicians that were around when foreclosure mania (a la 2008) occurred and ultimately were forced to change regulations that now make it much more difficult to get away with issuing subprime loans. Or in your line quoted above, substitute "college of their dreams" with "home of their dreams." The net effect, of course, is that those politicians are now telling people they can't get the home of their dreams because, gasp, they can't afford it.
Typical shitty reporting from Bloomberg. Other than the dollar amount outstanding, there's nothing else in the article that draws any similarities to the junk bond market. It's about as meaningful as saying "Apple's market cap approaches the size of the US junk bond market" or "Student Loan Debt surpasses Apple's market cap in size." In fact, there isn't really any interesting information in the article at all. There seems to be an insinuation that the size is a bad thing, but even then they don't come out and say why.
The bottom line is the college loan system needs an overhaul.
As just one example, the founders of Collegeloan.com made close to a billion dollars each prior to new laws passed in 2008. The founders have since left daily roles but themselves and current execs are still raking in money off student load debt.
This is just one of the founders houses that has been on market for 4+ years. This house was paid for off the false hopes and high interest payment loans the schlepped to kids who have long since graduated and still paying off debt.
Do some research... this is just one company that was in the upper top 10 prior to 2008 shake up. Many more made far more of the backs of kids in this country. After the shake up the companies adjusted and went back to lobbying to gain back the insane profits they once saw. Obviously by the headline we are back to all time highs.
As a current student and one who will graduate with roughly $60k in student debt, after scholarships and grants - I often question the legitimacy of the driving factors in increased tuition.
Most would say the volume of administrators has ballooned due to the increasing number of services universities now provide for the students. Better and more services offered to students should benefit quality of life.
Does the economic impact of modern universities serve as a net positive for society?
When we have more and more university staff using their salary to support their families they're contributing to the economy in a positive way.
When we have students graduating with tens of thousands of dollars of debt, they're bound to repaying their loans. In order to do this, they must find a career and become "productive" members of society.
This of course ignores the ethical and societal implications of expensive tuition...
I wonder how educators are handling this. When I was set to graduate high school a decade ago we spent a portion of our home room hour planning our collegiate futures. I think I may have been the exception -- where my advisor stressed that we had to do something. Too often I hear that, "college is the only option." I personally never experienced that, but I wonder if educators are stressing that 4 year universities aren't the only option, just one of the many options. I think, with the lack of skilled workers, people can do really well with a vocational degree in a trade. Then again, that type of work is much more physically demanding than my job as a software engineer.
One statistic that's commonly left out of these discussions & articles is how late parents save for college. According to Sallie Mae (http://news.salliemae.com/publication/how-america-saves-coll...), most families don't start saving before their oldest child reaches 7 years old. This effectively robs 1/3 of the investment period's growth potential.
Another one (as perhaps a consequence of the previous fact) is that the average family ends up saving up ~$16K, while the average grad leaves colleges with an average of ~37K in debt.
As most experts in the field agree, the key winning strategy is starting to save as early as childbirth, even if it's a small amount.
I highly recommend Matthew Crawford's Shop Class as Soulcraft, which includes a discussion of how kids are railroaded into college even though it makes no sense for everyone to go. The destruction of vocational schools is a real problem here. And in a world where any work that doesn't require physical presence is ripe for offshoring, the loss of the vocations is problematic indeed.
The fundamental problem here is that student loans have been declared a special debt not dischargeable through bankruptcy. At the same time, these loans can be Federally guaranteed through FFEL. This leads to $100K cooking schools promising to turn a recent dischargee from the Army into a pro-chef, sign here, here and here.
If student loans were subject to bankruptcy banks would be more careful. Instead we have a political system making bank from banks for ruining young people's lives.
Any libertarians care to wade in here and tell me this is a small price to pay for freedom?
Easy solution. LET the students default. Seriously, if students could default like they can buying a used car there would be lower tuition and better attention to whom you give a loan to.
These should be low yield non junk but for some reason they're high risk/high yield in spite of the principle being backed by the full faith and credit of the US Govt. and bankruptcy non-dischargability. There's a strange disconnect between the risk and the yield.
A lot of that debt is funding bloated administrative costs and other overhead that doesn’t directly make for a “better” education, just a “more expensive” education. Fixing this problem starts with getting costs at universities under control.
Taking on debt to fund education isn’t inherently bad, but having that debt back a bloated higher education sector is terrible.
What feels so deceptive about the panic around student debt is the devil is the details. I think if you drill in median student loan debt for an UNDERGRADUATE is like $12k. That's less than a car loan and we don't have a panic about that.
Most of the debt is for graduate, PHDs, law and MDs or undergrads who attend expensive private universities. These people should make more money from that investment.
My point is overall average student loan debt or the overall outstanding amount owed is horrible way to look at it and talk about it. It creates an unnecessary panic.
The current tax reform discussions look to make it even worse be removing some of the current breaks for students paying off debt [1]. There was some talk last summer about extending the current $5200 tuition exemption as an employer benefit to include tuition repayment [2]. I guess that's now off the table. I haven't seen the math anywhere, but it sure seems like it would be cheaper to give tax breaks for paying off loans then to allow them to be defaulted on on forgiven in the case of government workers.
We just hired a self made developer who doesn't have a college degree. Oh Boy, everybody think he is some sort of code clown. College is nothing, but humans like to judge based on vanity values.
There are two relevant things to realize about this:
1) Student debt is much different than normal consumer debt in that it is not dischargeable if the holder declares bankruptcy.
2) For years, many politicians have been calling for the massive increases in the issuance of student loans, presenting the issue as though the only hope for many people to obtain education is to take on massive amounts of debt.
If there weren't lots of bankers, politicians, and lobbyists getting rich off of this bubble, it might be possible to believe that they genuinely think that saddling teenagers with massive amounts of non-dischargeable debt was a good thing for society.
Student loans are the biggest handout to the financial services industry in decades, and both parties are reaping the spoils of these deals.
I majored in PolySci, so definitely non-stem. It was tough at first to manage my student loans, but with experience and pay increase, it got better until it was paid off. I knew going into this field that it's not always lucrative, and I would have to follow specific pathways to make a good living. I worry that universities don't teach students the true value of their degrees, and emphasize enough the average and typical salary expectations. There are too many college graduates saddled with enormous debt, but lacking a degree that will allow them to earn enough to pay it back, let alone develop a successful, and rewarding career.
Good thing Trump and the republicans are tackling the problem then by giving students a tax break, oh wait... they gave them a tax hike. I guess those poor rich people in the US who have gotten the bulk of wealth creation since the 80s, where in desperate need of some tax cuts.
Got to give it to the republicans. Get poor people focused on muslims, Mexicans, blacks, gays etc while they let the rich empty their pockets.
A winning formula. You would have thought people had caught on to it by now.
How come no one is talking about the actual costs of schools? Why are they so expensive? Perhaps bloated budgets, systemic mismanagement across the country...?
[+] [-] jedberg|8 years ago|reply
We need a fundamental shift in the way college is paid for. Some (many?) would like to see a government funded system, others would like to see the removal of subsidized loans to bring prices back down (and leaving many unable to afford college in its wake).
Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least into a pool that pays for the next generation's college. Of course with that system, colleges would bias towards people who are pursuing profitable majors, so you'd probably see a lot more STEM degrees and a lot fewer of everything else, until it got oversaturated, but there is a very long lead time between "too many degrees" and "no one studies this anymore".
In other words, the fundamental problem is that we tell kids that college is the only path, creating insanely high demand for the product, when in reality there would be plenty of people much better served learning a trade or skill instead of four years doing something hate for a useless degree they'll never use.
[+] [-] jackweirdy|8 years ago|reply
We could call it income tax :)
[+] [-] umbrellathorn|8 years ago|reply
I went to school for such a degree. While I don't use it in my day to day now, I still consider it priceless. There's some inherent value added to a person who pursues to study a bit of humanities, history, philosophy and art in college apart from their major. Scholarly work really helps shape the way you look at life for the better.
Part of this is that you really understand why you need to trust academic work for general human advancement. We have too many people thinking it's okay to discredit scientists and scholars because they don't understand how research works.
[+] [-] murph-almighty|8 years ago|reply
I honestly think art schools are going to start running into problems convincing people it's a good idea to pay 60k a year for minimal ROI.
My cousin wants to go into stage drama, and I don't want to tell her to not pursue her dream, but I think it's a lot to ask her to put herself in debt for years for a piece of paper that says she can act.
FWIW I majored in ECE, got a job as a software engineer with 100k salary plus benefits, and I'm ~140k in debt. I definitely overpaid, but my salary gives me a way out. People who came from my alma mater who majored in drama can't say the same.
[+] [-] godelski|8 years ago|reply
The unfortunate part about this, is that I believe that if you remove the protections on the loans, many students now WILL default, because they have too much debt and are incentivized to do so, if they are one of the larger loan carriers. I'd say "bite the bullet, and that's what banks get for giving out risky loans" but we know that's not going to play out that way, especially since the gov owns a fair portion.
Making tuition free is nice, but the generation that took out loans isn't helped AND this does not reduce the college price problem. The price was inflated and there is no reason for them to decrease it. Kind of a parallel to health care here. That's the cost. I like this idea, even if I have to pay back my large loans, but I think the fundamental price issue also needs to be solved.
Giving a portion of your earnings is a decent method, but you already bring up the problem with that. And this also doesn't solve the price problem, in fact it encourages the price to keep going up. (We can even tangent into how schools are over charging gov for research, but I'll leave that for another comment)
Whatever we do, somebody is going to lose. And that's the problem with bubbles. We need to, as a society and government, decide who is going to lose. Problem is I think the majority of people think the banks [gov] should lose, for giving out such risky loans. But I don't think many politicians would agree. I wonder what the economists say.
[+] [-] hfourm|8 years ago|reply
https://nces.ed.gov/programs/digest/d16/tables/dt16_322.10.a...
The "underwater basketweaving" so to say, may be at most 10-15% of current college graduates.
I think the solution lies more with reducing the cost of college, open source textbooks, more elearning, etc. Regardless of government funding vs subsidized loans, the cat is already out of the hat on a lot of price increases around campuses nation wide. It isn't going to be just as easy to just change the funding source.
I also sympathize with the trade school argument, but I don't think everyone going to college is a bad idea by any means.
[+] [-] Veratyr|8 years ago|reply
In Australia we have a system somewhere between this and a loan.
You go to (heavily subsidized) university, tuition is paid for by the government with an automatic interest free loan.
Once you earn above a particular (somewhat generous) threshold, your employer automatically starts taking a percentage of your income (depends on income) and pays it towards the loan.
There's no interest but the loan amount is indexed against inflation.
I graduated from one of the country's top universities with $24k AUD (~$18k USD) debt to the government and paid it all off early voluntarily. It used to be that voluntary payments got you a 5% bonus but that's gone now.
[+] [-] martin_bech|8 years ago|reply
[+] [-] Celarnor|8 years ago|reply
This is absolutely not the case. Student loans have caps and they're incredibly easy to hit, especially if you go to a 5-year school where you're expected to pay tuition while doing 6-month internship blocks. Lots of people I knew in college (myself included) had to drop out in the first 2 quarters of year 5 because they couldn't get enough money to finish.
Edit: Just checked to see what the cap was at these days. Back when I was in school, the unsubsidized loan max was 27k. Now its 31k. https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...
[+] [-] clairity|8 years ago|reply
we all want a successful life, and being good little free-market capitalists, we eagerly buy into the story that we can achieve success by simply buying a degree (hey, i bought three of 'em!) and letting the rest play out like our wildest dreams.
but of course it doesn't work that way because we didn't scrutinize the winding path between degree and successful life, because the shortcut between those two things doesn't actually exist (at least not any more).
colleges and universities have done a good job extracting most, if not all, of the value out of the higher education market, with the help of government distortions (guaranteed interest, unbankruptable debt). it's time to put to bed the idea that a degree equals success (it's also time to get rid of those market distortions). a few of us will get lucky of course, but pretty much everyone will need to create success the old-fashioned way: by working hard for it.
[+] [-] wang_li|8 years ago|reply
It'd be more correct to say that it's way too easy to get money while at college. An awful lot of college students believe that being in college means that they have a middle class lifestyle. It is cliche, but in my day (1989-1993) students were poor. You lived in a dormitory and ate in a cafeteria. Maybe you'd go to a bar once a month. And 99% of the time you walked everywhere.
I think easy of approvals for student loans combined with the 2008 recession and slow recovery led to a lot of people finding that student loans were a source of income rather than a way to pay for college.
[+] [-] jobu|8 years ago|reply
Another part of the problem is that there's really no such thing as a useless degree. A person may never use what they learned from that degree, but the fact that they were able to earn a degree is still used by employers as a bar to judge potential employees.
[+] [-] bradleyjg|8 years ago|reply
It can't really be a bubble because there are no assets to be bid up in a run away cycle or that can have a sudden collapse. Bloomberg tells you what you need to know in the article but doesn't do it right upfront. The overwhelming majority of this debt is held or guaranteed by the federal government.
A bubble is one way to get malinvestment, but it isn't the only one. Here we have malinvestment but no bubble.
[+] [-] username223|8 years ago|reply
Or 4-5 years getting a piece of paper saying "Computer Science" when they can't do the work, because society says "CS makes money" and the CS department is happy to take it. If people with only a high school degree can't make a living, we need to either make college free, or make companies pay for it.
[+] [-] jMyles|8 years ago|reply
The two aren't mutually exclusive.
In a compassionate society, we'll encourage people to pursue art or music or mathematics or dance and plumbing or auto repair.
There are enough educational resources to go around; our economy just hasn't found the right shape to make good use of them.
[+] [-] rxhernandez|8 years ago|reply
I suspect that it's either because you're not listening or people aren't talking about it. I had 3 years of on the job engineering experience and an established, good credit history when I got denied a loan for my last year of undergrad at a state school. Mind you this was fairly recently and my only loan for school I applied for ever. I could be the freak accident but it doesn't seem all that probable.
[+] [-] learc83|8 years ago|reply
We basically already have that system. If you get federal loans (which most people who take out loans do--90% of all loan disbursements) you can sign up for an income based repayment plan.
You pay back 10% of your disposable income (income over 1.5x the federal poverty limit), for 20 years.
If you make less than 1.5x the poverty limit, you pay nothing.
[+] [-] muraiki|8 years ago|reply
"'Students and parents have a pretty good idea of what majors pay the most, but they have a poor sense of the magnitude of the differences within the major,' said Douglas A. Webber, an associate professor of economics at Temple University who studies earnings by academic field. He points to one example: The top quarter of earners who majored in English make more over their lifetimes than the bottom quarter of chemical engineers.
But what if you never make it to the top of the pay scale? Even English or history graduates who make just above the median lifetime earnings for their major do pretty well when compared to typical graduates in business or a STEM field."
See https://www.nytimes.com/2017/11/03/education/edlife/choosing...
[+] [-] QML|8 years ago|reply
I think this comment here points to the issue of colleges -- most people have no clue what major they want to be or what type of career they want to pursue.
The result is that if they are pushed into a corner they do not want to be in, money would be spent and nothing of value would be gained.
What should be happening before college or at the earlier levels is people taking classes that allow them to explore but also teach them transferable skills.
Ideally, this is where G.E.'s should've worked. However, at the current state, they're just useless extra units that seemed be layed onto college students in order to keep them in school longer, and thus pay more tuition. In addition, most of the things they teach are not transferable - they're too specific / boring and after a semester, it's all forgotten.
Instead, the G.E. curriculum should focus on knowledge shared by every field, or that could be used in any career -- logic, data science, ethics, etc.
An improvement like this could justify the high-cost of a college education.
[+] [-] joshshifman|8 years ago|reply
[+] [-] a2tech|8 years ago|reply
[+] [-] moultano|8 years ago|reply
[+] [-] sempron64|8 years ago|reply
[+] [-] danaliv|8 years ago|reply
Depending on how the debt situation falls out, we might already have that. :-\
[+] [-] jpao79|8 years ago|reply
PBSNewsHour did a piece on this concept:
Purdue invests in students’ futures with new model of financing https://www.pbs.org/newshour/show/purdue-invests-students-fu...
"Unlike student debt, it shifts the burden — or the risk, I should say — entirely from the student to the investor."
"That’s because the terms of the agreement, called an ISA, are made well before students launch their careers. So, even if a student ends up in a low-paying job, the pay-back percentage stays the same."
[+] [-] drngdds|8 years ago|reply
(I don't know how or if any of this could be accomplished.)
[+] [-] jotjotzzz|8 years ago|reply
[+] [-] atom-morgan|8 years ago|reply
This is just another way of wording how you're paying your debt and who you're paying it to.
[+] [-] JonFish85|8 years ago|reply
- People see college graduates making a lot of money
- Politicians make it a priority to make it easier for people to get loans to go to college
- More people take out loans to go to college
- Colleges realize there is no downward pressure on price and raise tuition.
- Politicians continue to make it easy for people to go to college
- People take bigger loans to go to any school they wish
Until the music stops, things are sort of OK. People's kids can go to any school they can get into, regardless of cost. Colleges can raise their tuition with no consequences.
Politically it's a difficult problem, because the old solution of making more money available is getting out of hand, but what politician wants to stand up and tell people they can't go to the college of their dreams just because they can't afford it?
During the housing bubble, it was the cycle of "people want to own a home" => "politicians say everyone should be able to own a home and make loans available" => "companies make money packaging up these loans" => "prices go up" => "people can't afford homes" => "politicians make more money available". Until the music stops, everything is great -- everyone is making money, everyone is getting what they want. Then it unravels...
[+] [-] mattmanser|8 years ago|reply
It feels like politically acceptable short-termism of shunting education costs onto future generations. No-one's going to 'lose' money over it. Who will suffer? It doesn't look like it will be corporations that will suffer, save some institutions will close when the endless supply of money suddenly dries up. It looks to me like it will be governments, a political ticking time-bomb much worse than the growth of numbers of pensioners vs number of workers. Is it a potential social disaster where a lot of people will end up sent to a new version of debtors prison for a bit? Or will it massively impact future GDP of developed countries, as people won't be able to spend, they'll be paying back this onerous loans. Having the exact opposite effect that it's supposed to, instead of growing GDP by growing skills, it'll be killing it by curtailing worker spending potential. Tax revenues might fall due to higher education instead of grow.
Governments seems to be making these student loans rock-solid backed by government assurances to the detriment of future generations.
I haven't looked into it enough to know and am lucky enough to have paid all mine off as it was much smaller than today's crazy amounts.
[+] [-] workthrowaway27|8 years ago|reply
The root problem (as others have noted) is too many people are encouraged to go to college and even though most majors don't make economic sense students (rightly) feel that they need a college degree to be a competitive applicant for good jobs. Maybe I'm just in an ideological bubble, but it seems like there's pretty good agreement on this issue, but no real way to do anything about it.
[+] [-] speby|8 years ago|reply
Presumably the same politicians that were around when foreclosure mania (a la 2008) occurred and ultimately were forced to change regulations that now make it much more difficult to get away with issuing subprime loans. Or in your line quoted above, substitute "college of their dreams" with "home of their dreams." The net effect, of course, is that those politicians are now telling people they can't get the home of their dreams because, gasp, they can't afford it.
[+] [-] mikeokner|8 years ago|reply
[+] [-] uptown|8 years ago|reply
http://blogmaverick.com/2012/05/13/the-coming-meltdown-in-co...
https://www.inc.com/mark-cuban/video-student-loans-bubble.ht...
[+] [-] orchard1931|8 years ago|reply
As just one example, the founders of Collegeloan.com made close to a billion dollars each prior to new laws passed in 2008. The founders have since left daily roles but themselves and current execs are still raking in money off student load debt.
This is just one of the founders houses that has been on market for 4+ years. This house was paid for off the false hopes and high interest payment loans the schlepped to kids who have long since graduated and still paying off debt.
https://www.sandiegoreader.com/news/2013/feb/20/unreal-casa-...
https://www.zillow.com/homedetails/14385-Cypress-Pt-Poway-CA...
Another house he sold in Vegas.
https://www.realtor.com/news/unique-homes/ceo-and-poker-pro-...
He also likes million dollar buy in poker. How many interest payments did kids make for him to afford this?
http://www.pokerlistings.com/cary-katz-wsop-big-one-for-one-...
Do some research... this is just one company that was in the upper top 10 prior to 2008 shake up. Many more made far more of the backs of kids in this country. After the shake up the companies adjusted and went back to lobbying to gain back the insane profits they once saw. Obviously by the headline we are back to all time highs.
[+] [-] nsporillo|8 years ago|reply
Most would say the volume of administrators has ballooned due to the increasing number of services universities now provide for the students. Better and more services offered to students should benefit quality of life.
Does the economic impact of modern universities serve as a net positive for society? When we have more and more university staff using their salary to support their families they're contributing to the economy in a positive way. When we have students graduating with tens of thousands of dollars of debt, they're bound to repaying their loans. In order to do this, they must find a career and become "productive" members of society.
This of course ignores the ethical and societal implications of expensive tuition...
[+] [-] duncan-donuts|8 years ago|reply
[+] [-] aloukissas|8 years ago|reply
Another one (as perhaps a consequence of the previous fact) is that the average family ends up saving up ~$16K, while the average grad leaves colleges with an average of ~37K in debt.
As most experts in the field agree, the key winning strategy is starting to save as early as childbirth, even if it's a small amount.
[+] [-] danaliv|8 years ago|reply
You can read the essay that started the book here: http://www.thenewatlantis.com/publications/shop-class-as-sou...
[+] [-] CalChris|8 years ago|reply
If student loans were subject to bankruptcy banks would be more careful. Instead we have a political system making bank from banks for ruining young people's lives.
Any libertarians care to wade in here and tell me this is a small price to pay for freedom?
[+] [-] ransom1538|8 years ago|reply
[+] [-] howard941|8 years ago|reply
[+] [-] code4tee|8 years ago|reply
Taking on debt to fund education isn’t inherently bad, but having that debt back a bloated higher education sector is terrible.
[+] [-] monkseal|8 years ago|reply
Most of the debt is for graduate, PHDs, law and MDs or undergrads who attend expensive private universities. These people should make more money from that investment.
My point is overall average student loan debt or the overall outstanding amount owed is horrible way to look at it and talk about it. It creates an unnecessary panic.
[+] [-] mschip|8 years ago|reply
[1] http://money.cnn.com/2017/11/15/pf/college/tax-reform-paying... [2] https://www.cnbc.com/2017/08/17/student-loan-debt-why-employ...
[+] [-] pobo|8 years ago|reply
[+] [-] grandalf|8 years ago|reply
1) Student debt is much different than normal consumer debt in that it is not dischargeable if the holder declares bankruptcy.
2) For years, many politicians have been calling for the massive increases in the issuance of student loans, presenting the issue as though the only hope for many people to obtain education is to take on massive amounts of debt.
If there weren't lots of bankers, politicians, and lobbyists getting rich off of this bubble, it might be possible to believe that they genuinely think that saddling teenagers with massive amounts of non-dischargeable debt was a good thing for society.
Student loans are the biggest handout to the financial services industry in decades, and both parties are reaping the spoils of these deals.
[+] [-] Overtonwindow|8 years ago|reply
[+] [-] jernfrost|8 years ago|reply
Got to give it to the republicans. Get poor people focused on muslims, Mexicans, blacks, gays etc while they let the rich empty their pockets.
A winning formula. You would have thought people had caught on to it by now.
[+] [-] GoRudy|8 years ago|reply