America’s Student Debt Machine
motherjones.com
motherjones.com
This semester before classes started we had seminars on helping students dealing with food insecurity and housing security. The whole time I’m wondering why are we asking students who are hungry or homeless to take on unforgivable debt to pay for tuition. The system is rotten.
The standards have eroded. Increasingly I see barely literate people being passed through the system. I pass people who don’t deserve to pass because I’m hounded by administration on the importance of having a high passing rate. I need a job so....
This is exactly how higher education works in many 3rd world countries, including where I come from (and America have a president to match now). Except that student loan industry is not a thing there yet. Many people do obliterate their savings or sell their land and other assets to send their kids to school. Instead of paying back loans, many also pay huge amount of bribes to place their kids in better (government) jobs.
And same for my home country (which may well be your home country). We have all of the same, except the student loan industry, which sounds like some kafkaesque version of indentured slavery.
Clearly we shouldn't enroll some students in the first place, but this just adds fuel to the fire. The growth of administrators who do nothing but keep the machine moving and growing with no thought as to what direction the machine should take is just as big of a problem.
As I understand it, your colleges and schools must adhere to certain standards or risk having funding losses or being axed.
Managers follow incentives too.
As long as we're all just following orders it's fine then eh?
The article paints a pretty bleak picture. My nieces (well, their parents) didn't have enough money to pay for a 4-year college. Instead of taking out student loans one decided not to go to college and the other one decided to join the Army for GI Bill benefits. The one in the Army has been having anxiety issues and they've started her on the path to medical discharge, which she is fighting.
It's really a shame that something we tell young adults is so necessary leads many of them to financial ruin or being a poorly paid servant to the government for years. My guess is that many of them will get sick of it and choose not to go, and the industry will have to adapt to employees with no higher education.
We tell them it's necessary because it is for most people. The decades of data made this an indisputable fact: people with college degrees earned higher salaries, had better jobs, enjoyed much lower unemployment rates, and were generally better off than their under-educated peers.
The problem is not that we push people to attend college, the problem is entirely the cost of education.
If everybody has a college degree, then those skills aren’t rare and you won’t get paid highly for them. Salary is about how hard you are to replace, not how good/qualified you are.
The problem definitely is that we push people to college. You don’t need a college degree for 90% of the jobs out there and we’ve completely watered down what a college degree is because we wanted everyone to have one.
I disagree. Your model only works under the assumption that the economy can only have so many jobs. If the US graduated 10x as many engineers from 1990 until now, the economy would be much larger than it is today. Which means that salaries may even be higher because despite a 10x increase in workforce, the demand for them may have increase by 15x.
This is an easily observable situation. Regions with concentrations of talent tend to have much higher salaries for such people than regions where that talent is scarce.
No, the argument only assumes that the number of jobs won't increase in proportion to the number of college degrees, which is obviously true.
I agree, this is a rotten system.
Although community colleges can decide on their own how to address hunger, California’s community college system offers on-campus training for faculty and staff so they can help students qualify for food stamps, according to Colleen Ganley, who works in the California Community College Chancellor’s Office.
[1] https://www.sacbee.com/news/local/health-and-medicine/articl...
At the same time, everybody seems to agree that a merit-based society is a good thing. That your intelligence, ability to make good life choices and decisions, and stick to them, should give you success. And at the same time, most of the people measure success not in absolute terms, but in relative, social ones, comparing peers. So, aren't stupidity taxes, in all of it's shapes and forms, an essential part of merit-based society?
It was not prestigious school, nor prestigious diploma, I could have continued for a master, but IMO, I value experience far more than diploma, and where I worked/work also.
So my question is Americans? What's the deal. Same for France too, I guess our profession as developers allow that, I can understand that for some other fields you need prestigious schools and requirements to get hired for a good salary.
Companies have not very often sponsored college students in America, except for some profession like rural doctors where it's local government choosing to help pay for an exceptional debt load for an unpopular lifestyle choice (being primary care physician for a large geographical area).
The other option off the top of my head for Americans is to join one of the military services to fund education.
How did you find the apprenticeship and how did you decide to choose that route? Not sure of much like that in America except some of the construction trades like electricians/plumbers.
For me, after college I was searching for that specific thing. That was my own requirement, I wanted to dev full time while getting a diploma as a "safeguard" and "to look good on my resume".
Actually school is more a side effect of me working. I continued school because it was possible to work same time, if not I guess I would have stopped after college diploma (BAC in France).
Your sentence "if not I guess I would have stopped after college diploma (BAC in France)" does not mean what you think it means. You meant (I believe, correct me if i'm wrong) that you would have stopped after high school (i.e. when passing the final "baccalaureate" exam).
PS: note however that the baccalaureate diploma is in fact (this is a little-known fact, even in France) a University degree in France. it's the first univ degree that exists in the French education system, it sanctions the end of high school. Weird, I know.
It doesn't make any sense for any company to pay to train an employee if it can be avoided. The problem though is that when companies don't directly guide the training you get people who are trained... to do the wrong thing. This leads to the perverse situation where American workers are actually over-educated (lots of fancy college degrees, certifications, etc) but still lack the necessary skills.
Overall the American system is obscenely inefficient, what with people buying $100K lottery tickets in the hope of landing a decent middle class job, but it's also very hard to disrupt because virtually all of the risk and downside is borne by less fortunate Americans whose lives don't matter anyways. For everybody else -- corporations, investors, and the government -- the system works great. It's a classic serfdom strategy where during good times the nobility takes takes a big cut and during bad times the nobility takes a big cut. Unfortunately, unlike serfs, these terminally indebted Americans don't kill themselves or run away and so there is a kind of macro-inefficiency that builds up slowly overtime.
There may be an opportunity for individual companies to take a risk and train up employees but this is a very risky strategy and it isn't necessarily a good thing for workers. It can work only if you pay these untrained employees very little money and this is the other side of the hammer, wage suppression of highly indebted workers. The more you can trap young workers with enormous debt loads the less you actually need to pay them so even companies that "take a chance" on workers can still force the worker to bear most of the risk.
Apprenticeship can work in other engineering fields (at least it does in Germany, for cultural reasons), perhaps a few other fields like sales... but you cannot extrapolate for all educational tracks
Same with other path to software engineers like self-taught or bootcamps. Very good but almost impossible to replicate in other fields with less desperate demand
Bootcamps are a decent alternative to a college tech degree. Instead of taking out $40k+ in loans, you can escape your poorly paid job by dropping $10k-$20k of your own (or your parents') money. It's usually worth it if you have the means, since your salary will probably double and you'll recoup the cost within a year.
Bootcamp students are basically useless when they graduate, but they can open an editor, write unit tests for dog.speak() and use git. The senior devs on the team they join end up training them. So it becomes like an apprenticeship system where the prospective apprentice shows serious interest by supplying a "modest" payment.
Yes, Europe has better/cheaper education, but many smart people get educated here and then get hired by USA companies, or even leave for USA. Unfortunately, money rules...
State University of New York (of which I'm a graduate) estimates the yearly expense of a commuter student to be $17,320 @ a 4-year school, less if you live at home, buy used books, take the bus, or go to a community college. It's really affordable!
And there are so many opportunities for part time work on college campuses. Everything from grunt work to being a TA to being compensated for working for a department. Hell, I worked in the nursing department as a comp sci student sorting files and research articles for professors.
Along with this, programs like CLEP and DSST exams that let you test out of gen-ed coursework for $180 a pop. The savings can be in the thousands!
So for those students who aren't going to an IVY on a full or partial ride, or those going to med school, I say do some research before committing to a private school. There is absolutely no reason in my mind why somebody ought to take on such massive debt and I am totally against the idea of our government being in the student loan business.
I do agree that public schools are generally a better financial option, as are community colleges.
public schools are also plagued with debt collectively, what a way to attempt red herring.
It's worth pointing out that certain colleges within Cornell are part of the SUNY system / state schools, so (at least in this one case) Cornell provides both options (full ride and in-state tuitions).
When the credit crisis hit, these companies were one of the first to cut off the tap. And it was a literal overnight cessation of loan originations.
Buried within these promissory notes were odd mechanisms for calculating variable interest, accounting fees, and cosigner releases. Despite the variable rate moving very little on a month-to-month basis, students in repayment would see 20% of their payment applied to principal one month, then 8% applied the next month. Some servicers would not apply extra payments to principal, opting to apply payments to the next month's payment (which results in maximum interest for the bank) unless the debtor followed a convoluted trail of paperwork to force the bank to apply the extra payments correctly. Co-signer releases would be advertised at "24 months of on-time payments" but by the time the debtor reached that mark, they'd receive letters informing them that the promissory note had a clause that allowed the servicer to change terms, and the co-signer release was now 36 or 48 months.
Even servicers of the federal student loans would engage in sketchy practices, such as charging the debtor an fee to enter into a hardship forbearance. You can Google which servicers were fined heavily for these practices by the CFPB during the last administration.
Actually, just encouraging forbearance when switching to income-based repayment was available was a legally available option was a bigger one, which the main service of federal loans (Sallie Mae—now Navient) was charged with engaging in.
1. Saved up money by working before going to Masters.
2. Lived with 3 others in a two bedroom to save money.
3. Chosen less prestigious institution in a smaller town which is significantly cheaper than one of the bigger schools to which I got admit to.
Graduated with no debt.
1. Did well in high school to qualify for merit scholarships
2. Chose a top 10 college for my field
3. Get a job starting at >100k per year
Graduated with debt paid off in less than a year
(this is comment is intentionally snarky to point out that "I did X and this is how I avoided loans" stories are usually unique to a person and circumstance, and ignores the very real problem that student loans are opaque, confusing, and intentionally manipulative for young borrowers, which was the point of this article.)
I’ve known about what works in the American education system since the 1990s and before. When I was in my early teens.
Meaning that if you were one of the people in the know, you knew the path that made you the most money.
Strangely, This is a privilege, one not enjoyed by most Americans.
2) Refinanced at 1.25%
3) Sat back and watched inflation erode the debt away
(thank you economics degree)
Getting out without debt allowed me to move to a city right after school with some meager savings, take a few months figuring out what I wanted to do, and take a job that paid very little upfront but had a large potential payoff.
I can count on one hand the number of people I know my age without any student debt. It's insane. It's also limiting with dating. It's odd to think I may inherit (in some way shape or form) 25K-100K of student loan debt from a significant other.
Hedge funds and investors go and buy all the houses, because they need to park money somewhere and no Americans can buy houses. That's pretty much hilariously apocalyptic. More police, to defend (execution-style) the empty houses owned by literally piles of abstract capital!
The fact that a handful of their age-peers (who are already quite wealthy because of the advantages of family wealth) will be fabulously wealthy on levels not seen before in history will not be of much benefit to the majority of people in those generations.
Imagine your life with zero debt for university, a solid network for getting jobs/internships, a gifted car upon graduation, and a 20% house down-payment when you married your SO. With those things, you'd probably be on track for FI/RE by your mid-30s anyway, so inheriting a few million more bucks by your 50s isn't going to make a difference.
The whole construct has seemed to deviate into the fact that even mid to high earners have no ability to actually buy the thing at the price it is worth. I first felt like that once cellphones became mandatory around the time of the original iPhone and everything was roped into weird payment agreements instead of buy phone, and pay for service. You end up with people putting aside so much income to pay for even modest sized debts, and then you have them looking for cheap things to save money not because of frugality but because you still need these essentials like pants, shirts, and so on. Then since you are buying cheap you are in the same poverty mindset where you end up spending more than you should because the necessity of now exceeds the necessity of later.
So property prices go up from general want of property values to go up (feels not correlated), people 'moving to where the money is', and the lack of the people that should be starting out in life not being able to build/otherwise afford secure housing. Many of the stories I hear are people being effectively acting like squatters where they feel like they are going to have to move at a moment's notice. There is less people moving into an apartment/townhouse with the intent to live there for a 5 years, and this is not including people moving to chase opportunity it's people just trying to persist in the same environment.
These are also people that are making 75-150k and otherwise should not be having these same kinds of difficulties but when you are slicing the pie with ~60% going to loans, and a lion's share going to rent and other ongoing necessity services like cell phone, insurance, etc. This leads to just this swath of people being risk-averse where otherwise they should be financially stable, and then the services that are generally mandatory to keep the level of income to satisfy the loans end up eating the rest of any real gains.
In essence I feel like it already has taken plenty of effect now that people have most of their income already spoken for before they receive it. It's not massive credit card debt or some sort of aggressive consumerism, it's people that because of education are so over leveraged they aren't participating in the economy in the same way as someone who didn't have those hooks. Like the article dictates as well it also becomes you versus a constant changing set of loan servicers who manage to mess ordinary things up without recourse so whatever leftovers you had get eaten by penalties and could result in a cascade of penalties and costs just like how Bank of America was dinged for how they approached overdrafts (sort for biggest and fine for each one that goes over). So maybe the additional hidden cost here isn't even the loan + interest but loan + interest + unnecessary fines + legitimate fines which slurps up more of that critical income of someone first starting out.
As for the question for property prices I believe the problem ends up being a leftover of the boomer era and that general sense that 'property prices should rise.' From an investment/speculation standpoint real estate is a wonderful thing because of that sentiment. But it feels in general like the majority of money in that market isn't individuals buying homes or commissioning construction of a new home for themselves because of these loans preventing them from having the raw remaining leverage to do so, they end up having to take whatever they can get from the existing market or getting pre-recession leveraging. If the short-term beneficiaries of a real estate purchase is the banks and construction/real estate speculators and not the person buying the home why wouldn't they want to maximize that at expense of everything else? I feel that's another layer to the luxury home/condo/apartment construction trajectory. Because of these other beneficiaries I can't reason why house prices would come down from just the heavy debt ridden individuals- all they have to do is get them to agree to purchase something they can't afford and draw out what blood is left in either mortgage money or rent money it's just the best slice of pie from a student loan holder after the student loans to be paid from.
So the root problem was jobs that didn't pay well, but the solution was student debt forgiveness? That is, find a problem, solve a symptom, the problem remains, and the symptom becomes a bigger and more expensive problem. But the politicians got more votes, and the taxpayers stuck with the bill.
This article should have focused on this. This is the lesson that voters are unwilling / unable to learn.
and perhaps ppl taking on more de
Sheesh, I paid $0 to get a MSEE as TAs pay no tuition. Then was paid as an RA, so essentially was paid to do an MSEE.
People are crazy.
I received my undergrad from a middle tier small public state university in the US.
I received a very good ROI on the money spent.
25 years later(graduated 93) the out of state cost has exploded 500%
Meanwhile starting salaries for Liberal Arts grads has barely moved since 1993, only circa 10% or so.
“Purchasing” a salary with a degree should have a positive ROI, rather than a negative ROI.
My thoughts are as follows:
Universities should have the same standards as print advertisers and used car dealers.
Graduation rates, starting salary rates, return on education $ invested rates should be independently audited(like readership audits for advertisers in print ad industry).
And education consumers should have car industry Lemon Law like protection against universities selling indentured servitude rather than value-add education.
My kids use Khan Academy, Duo Lingo, Amy.ac AI Math Tutor(disclosure, I’m on the cap table as investor), and Fender Play 5 days a week.
I’m rooting for Ed tech outfits like Khan Academy, Coursera, EdX(and of course Amy.ac) as an Ed Tech sector to transform education.
We are looking hard at Harvard Extension School for our children as a possible hybrid option for them.
1)School brand value 2)Online and in person learning requirements 3)educational rigor 3)Value of #1 & #2 & #3
While Harvard Extension School is traditionally for adult employed learners(and has been around for a long time as a correspondence school), I think their branded hybrid approach points to the future.
All I know is that countless middle to bottom tier schools are doomed.
To me, the financialisation of higher education achieves two goals:
1) Banking sector profiting from indentured servitude
2) University white collar worker bloat is akin to the “manufacturing” blue collar construction jobs that evaporated after the housing bubble of 2002-2009
Just my 0.02c
If the government didn't do credit checks, which I don't remember them doing on mine, then wouldn't this be the epitome of predatory lending?
But anyone who wants to solve this probably of deep institutional inefficiency is accused of "destroying programs".
However, I don't think the purpose of institutions is to be more efficient, but it is to grow and further entrench themselves. It's the error of the Democrat voter in believing that more complexity will help and the error of the Republican voter that efficiency can be achieved.
Not really what the answer is other than having an informed populace, but this is hard to do with the poor education we have.
This is why we have private prisons, student loan servicers, and a the owner of a student loan debt collection agency overseeing student loan reforms.
Not to say Democrats don't do the same shit, but there's an undeniable difference between Trump appointments and Obama appointments. Trump had no problem putting into power Scott Pruitt, Rex Tillerson, Ajit Pai, and Betsy fucking DeVos -- all of whom are absolutely corrupt business leaders whose entire purpose in government life is to shovel as much money as possible from tax payers into their own pockets.
Those people weren't personally picked by Trump, they were recommended by high-ranking Republicans.
If you want to understand politics: Follow the money and then follow the votes.
It depends on the details. I’m leary when a elimating I efficiencies is touted but no details given. It’s just then an empty slogan.