Sense on Cents

LD – I believe this “time bomb” has massive implications…you have long pointed out how our education system is failing to remain competitive vs much of the developed world..our “literacy” in math and the sciences has been on the decline for decades..the nature of the college finance system – especially so at the private schools – is anachronistic, mispriced, and vulnerable..the problems graduating seniors now face in “monetizing” their educations are well chronicled and will not be solved anytime soon – especially with the current Administration’s thinking that bigger government is the answer to all of society’s problems..only fractions of the dollars allocated in the crisis linked small business lending program have actually found their way into loans, the loans into small business growth, and business growth into jobs! Somewhere/somehow the misguided values of society have directed college students into law school, into MBA programs – not intrinsically evil in itself, but we have lost our liberal arts compass – i.e. an understanding of the arts, philosophy, religion – the intrinsic worth of our human dignity and the responsibilities to build a community of man…no jobs there, I guess…when a year’s tuition, room and board at a well thought of private school crests $50K, and that is an after-tax number,it’s no wonder things have gone haywire..btw, watch how this epidemic spreads globally – consider the demographics..I may hail from days of yore, but I remember doing work/study at my college, holding a 25hr/wk part time job and taking 21 credit hours a a semester= as the oldest of four I needed to carry some college debt – but it was nonetheless a manageable number (no future in prostitution for me)…there is no nostalgia for the good old days, but honestly, I believe the product that the colleges delivered was a better one then…as an investor, one must be wary of the impending nightmare in delinquencies and non-payments in all forms of Student Loan programs…most states got caught up in the ARS problem as part of managing their guarantees on student loans and are trying to restructure those exposures…I’m drawn to remember a comic schtick by Stephen Wtight, who found himself fielding a phone call in the middle of the desert from his student loan administrator…when asked what he had been doing since college and why he wasn’t paying, the answer was simply that he was busy developing a weapon, and he would appreciate it if the bank stopped bothering him…funny?, listen to the original bit..prophetic, you bet…I remember some contrarians pointing out that “College was not for everyone”…have we reached a point in our own devolution where the truth is that “College is only affordable by those blessed by parents with resources” – just another brick in the wall as we march toward the decline and fall of our American way of life…you nailed it again, LD!!!

I agree that this is a dark storm on the horizon… My student loan payments are 1200 per month and will be for the next 25 years if I don’t pay them off sooner.

Fortunately, I chose a profession to where that is a good days pay, so by the grace of God, for now, it is not a hindrance to me and my family…

Unfortunately, we all know that there are many more grads with less then profitable degrees that will be hammered by this…..

Why will people pay their loans on time? We already saw the government forgiving mortgage debt.. there is no reason why they won’t do the same on college loans… It is bad enough, but the government is making it much worse for the future…

Simple solutions – eliminate every dean position with an “associate” or “assistant” included in the title and eliminate the fluff majors.

Eliminate tenure, and require all faculty to teach.

Require all universitities to use a certain percent of the endowment every year to support tuition reductions.

From Bloomberg,

May 15 (Bloomberg) — Colleges and universities are due for
a meltdown as students are increasingly saddled with debt they can’t repay, according to Mark Cuban, the billionaire owner of the HDNet cable-television channel.

As the CHART OF THE DAY illustrates, the amount owed on
loans for tuition and other educational expenses exceeds the
comparable totals for credit-card or auto debt, according to
quarterly data from the Federal Reserve Bank of New York.

Student debt rose to $867 billion last year, according to
the New York Fed, whose methodology for compiling the data was
revised during the year. More than $1 trillion of loans are
currently outstanding, according to the Consumer Financial
Protection Bureau.

Borrowing to pay for higher education is “the collegiate
equivalent of flipping houses,” Cuban wrote two days ago on his blog. “At some point, potential students will realize that they can’t flip their student loans for a job in four years.”

For-profit education companies are among institutions at
risk as students look to other schools, according to Cuban, who lives in Dallas and owns the Dallas Mavericks basketball team.

He cited the University of Phoenix, run by Apollo Group Inc.,and Strayer Education Inc.’s namesake schools in the posting.

Cuban received a bachelor’s degree in business
administration from Indiana University’s Kelley School of
Business in 1981. He went there because tuition was the lowest among top-10 business schools at the time, according to a story on Kelley’s website.

I teach part-time at a very expensive New York private university.

It is more expensive per hour to take an undergrad foreign language class for credit in a large group setting taught to 20 students than to take private one-on-one lessons from the very same teacher who moonlights for extra money. 2X to 3X as expensive.

That makes little sense.

“The notion that universities can do business the very same way has to stop,” said Mr. Gee, who is also the chairman of a commission studying college attainment, including the impact of student debt.

College presidents across the country are confronting the same realization, trying to manage their institutions with fewer state dollars without sacrificing quality or all-important academic rankings. Tuition increases had been a relatively easy fix but now — with the balance of student debt topping $1 trillion and an increasing number of borrowers struggling to pay — some administrators acknowledge that they cannot keep putting the financial onus on students and their families.

Increasingly, they are looking for other ways to pay for education, stepping up private fund-raising, privatizing services, cutting staff, eliminating departments — even saving millions of dollars by standardizing things like expense forms.

And Wall Street is watching.

Moody’s issued a negative outlook for a majority of colleges and universities heavily dependent on tuition and state revenue.

“Tuition levels are at a tipping point,” Moody’s wrote, adding later, “We anticipate an ongoing bifurcation of student demand favoring the highest quality and most affordable higher education options.”

Read the entire article at Slowly, as Student Debt Rises, Colleges Confront Costs

The amazing this is how the adjunct-system has driven down the cost-per-hour of teachers. I cannot help but think that this aided and abetted the explosion of college building and course offerings. There might be a parallel with the way unorganized (and often illegal/undocumented) workers played a role in the housing bubble, but this is just speculation. Were both of these enabled by easy-lending and unrealistic expectations of returns on both sides of the deal?

The short-term (5-10 year) financial impact of education morass is one thing. The long-term societal implications is another.

For two generations (three if you count WW2 veterans) the deal has been simple: keep out of trouble, get a college degree in something vaguely useful, and be prepared to work a job for thirty or forty years, after which you can expect some sort of a pension, social security, as well as seeing your offspring end up doing the same as you but better thereby.

This deal is over. Kaput. We can argue about why, but the simple fact is that our economic future had no space for tens of millions of college-educated workers. (Of course, the larger problem is this: Our global economic future will have no place for hundreds of these millions of workers, period.)

An entire generation went into debt to obtain an education. The political-economy has not produced jobs for them.

To wave a copy of Atlas Shrugged at the problem and say, “Well, there’s no guarantees in life” is a short-cut to thinking. A foundational part of American life has been shredded.

To say that we need to funnel students into expected growth areas isn’t very wise either. First, a glut of health care administrators, for example, will simply drive down wages for health care administrators. Second, recent experience has caused me to doubt our capacity to accurately gauge these needs more than a few years out. I remember in the mid-90s when people were being encouraged to go into computer repair. Where are those people now? Same place as typewriter repairmen.

Far better to develop critical thinking skills and, above all, basic ethics and functional literacy and writing skills.

People have to learn how to learn. This cannot be done in classes of more than about fifteen students. It also ought to be done in public schools and at younger ages. And this means people are going to have to be taxed and tenure eliminated. Many students spend a fifth or even sixth year getting a four-year degree because they come out of secondary school unable to handle college-level work. But even after all of this, they emerge with degree in hand unable to handle actual work in a real-life workplace.

The economics of this is the easy part. The long-term effect on societal relations is the real issue that needs to be addressed. It is possible that the entire notion of higher education for large numbers of citizens has run its course, at least if it is viewed through a narrow and soul-less cost/benefit lens. Yet I cannot believe that this puts us on the right side of history…

I got a bachelors degree. College was a good time but it wasnt necessary.

After graduating (with about 17K in debt) I could only get part time jobs like waiting tables and delivering fruit baskets. Eventually I found great full time work as a car salesman.

I’m living at home and saving lots of money driving a car I bought with cash. I paid off my student loans in under 3 years. I don’t know what I’ll do next. I don’t want to get married because I dont like how divorce laws in this country favor women so much.

Anyway, bottom line, college is really unnecessary and this will soon become the mainstream thinking. And grad school is the DUMBEST decision you can make if you’re paying for it yourself.