Student Loans May Be Driving the Tuition Explosion
bloomberg.com
bloomberg.com
Unlikely?? Are you kidding me? Did we learn nothing from the 2008 housing bubble?
Financial gamers inherently desire airtight abstractions so they can leverage the heck out of them. But this doesn't mean they should get this wish, since the purpose of the financial system isn't simply to perpetuate itself but to optimize for people.
Everyone needs a place to live, so under financial primacy the only limit on housing prices in a developed area is the economic rent on the principal. A college degree is worth a heck of a lot over one's lifetime, so the fully-optimized market solution is for most of that surplus to go to the credentialer.
In all cases of secured credit, the effect is for prices to rise such that things that used to be able to be owned are instead rented by most people.
... are you arguing against secured loans?
Destroying 'collateral would be quite drastic. I'm pointing out that it is equivalent to making student loans non-secured, regardless that one arises out of contracts and the other from more recent lobbying.
Simpler would be to eliminate banks conjuring money from thin air, or perhaps to just raise interest rates to the point that essentially interest-only loans once again become untenable.
That said, we cannot continue to fund the system we have which according to R. Arum's Academically Adrift, leaves many students with a mountain of debt and few marketable skills. As the authors of "Paying for the Party" note, these students had a great time but learned little. Both books (and Arum's follow up book tracking graduates) are sobering reads...
there is an old saying--it is hard to get a man to understand something when not understanding is vital to his livelihood.
In other words, many of the rich and powerful people and institutions that own, control and influence the media, and on whose support the corporate media requires, make their living off the higher education scam.
This "economy" depends on americans going into debt.
The corporate media is not going to be too hard on or notice too much about this scam.
Good God, this man may be on to something.
Particularly in the developed world the trend seems to be that we raise children telling them the whole way that they're smart, they're amazing and they are entitled to pretty much everything.
The problem is we're complementing what children (ostensibly) are rather than what they do. This is really damaging:
http://nymag.com/news/features/27840/
I remember seeing this:
http://money.cnn.com/2015/03/24/pf/college/student-debt-1000...
Here's an example:
> Salvagin dreamed about being an actress, and even studied to be one. But she has put aside her dreams, and has taken on two jobs -- as an executive assistant at an advertising agency and at a nonprofit doing events -- to pay off her debt load.
> She's managed to lighten it a little -- Salvagin graduated with $95,000 of debt.
What possessed anyone (who obviously can't afford it) to spend ~$100k at a private school to study acting?
Louis CK talks about entitled 20 year olds:
https://www.youtube.com/watch?v=LTaZkf4dih8
> You know why, because you're 20. That's why. Because you're a 20 year and you have no idea how the world works. Because you think you deserve better. You think you're too interesting a person to have a shitty job. Every 20 year old that I encounter behind the counter gives me that look. "This job sucks." Yeah, that's why we gave it to you. Because you're 20, which is a mathematical guarantee that you have no skills and nothing to offer anybody in the world. You're 20. For 2 decades you've been taking and sucking up. Education and love and food and ipods. Just sucking it up and judging it.
Is it really any wonder that no thought goes into how much earning potential you have before spending 6 figures on a private school to study art history?
The purpose of college is to make one educated. If one wants to study art history, then one should study art history. One can easily build up skills on the side to complement one's education (I did programming on the side with my philosophy major and have a great job).
Ideally (and as it happens in civilized countries) the state should be paying for an education, and students should study just whatever they damn please. College shouldn't cost 6 figures in the first place.
Not wholly American. I have a coworker in Brussels who was surprised to find out that most of the programmers in the states only have BS degrees. In Belgium, he tells me, it's hard to find a programming job with less than six years of university on your résumé.
> If one wants to study art history, then one should study art history.
I agree, but the problem is the mixed messages. The messages being told to prospective students (and they were told to me) are (1) "Study whatever you are passionate about; the purpose of an education is to make you a well-rounded human being" and (2) "After 4 or 5 years of this, you'll be able to get whatever job you like". It's perfectly acceptable to tell someone #1 but with the caveat that there aren't a lot of jobs in art history. It's also reasonable to tell someone #2 with the understanding that they need to study, e.g., STEM.
> College shouldn't cost 6 figures in the first place.
Wholly agree.
I understand that some people have no interest in being productive members of society, and I don't own them; they own themselves and can make their own decisions and choices about their lives.
I'm happy that there is art in the world, and I support artists by buying art, and I think it is a shame that art isn't valued by society enough to provide a really outstanding living for all but a select handful of artists. However, that's the world we live in. I like to read science fiction novels occasionally. Should I expect others to pay me to do that? Of course not, I consider that my own choice and I limit how much I do of that to what I can afford to pay for out of my own resources.
Artists and art historians don't have a right to make me work to support them simply because the choices they make don't result in the life or education that they want. If they believe they can write a book or produce a piece of music that I will purchase more power to them. However, people (and universities) shouldn't go around saying "follow your bliss" or "study whatever looks like fun" and mislead them about where that course of action will end up.
A mathematician says "How do I prove that?", a scientist says "How do I investigate that?", a businessman says "How do I produce that?" and an art history major says "Do you want fries with that?".
But seriously, how can this be a surprise to anyone? Easy credit = increased demand (since people who otherwise would be unable to pay for the good can now afford it) = increased prices. This is an obvious result of generous access to student loans, not a surprising one.
The universities have new luxurious dorms, outdoor swimming pools that look like Vegas resort pools with lounge chairs for sunning, large new fitness centers with indoor tennis courts, elaborate climbing walls, yoga and spin classes, etc. The universities simply raise their tuition to cover these expensive facilities. It's kind of like visiting one of the best health clubs you could imagine, except filled with beautiful people all your age and all looking for new relationships (or looking to hook up) and not having any parents around and having a free, really great cafeteria, and being told that being a member there for four, five, or even six years is going to be really fun (football games and parties, yay!) and finally being told that its not going to cost anything right now you can just pay for it later. During the sales pitch, you're told how good for you it will be and how you will come out knowing how to think and being given examples of all the people that were members of this club in the past and went on to do great things.
The evolution of universities into playgrounds for young adults has also had an impact on the educational choices begin offered. For example, universities now support large fine arts programs where students can work for years on majors where most will have no hope of obtaining meaningful employment in the field once they graduate.
I've been to a large "job fair" kind of event, except for there being no jobs, given by a very large university's college of Fine Arts--I went with a friend that was already a freelance musician at the professional symphony level who was going back to work on a graduate degree in oboe. The final, most memorable, talk was given by an alumnus of that college of Fine Arts which spoke about how one gets a job with a degree in music. The speaker related how difficult it was living in a shitty apartment in New York while playing jazz in clubs and how he finally after a few years started making a reasonable living by switching from playing bass to web-design. This was the best example the Fine Arts department presented of a "successful" graduate. By the way, my friend, the amazing oboe player, years later ended up selling her oboe in disgust and never played again.
All the schools are expensive now. With an exception of in-state schools, tuition at almost every university each of our kids considered was both high and practically the same across the board. Finally, although slightly off-topic, in my neighborhood children attend one of the very best public high schools in the country so the excellent and less expensive state university here is actually too hard to get into because admission there is based on class rank and doesn't take into account how much harder it is to be in the top 7% at the local public high school vs almost every other public high school in the state. It's possible to be admitted to Stanford but not make the 7% cutoff to get into the state University.
The fact is that it's socially unacceptable to be unemployed for more than a few months, and so people who can't find jobs are then told to go back to school. This would be basically OK (with me, at any rate; but I have a stronger-than-average work ethic) except for the fact that, for some of them, it's on their fucking dime that they don't fucking have.
The price of social acceptability and the difference between having a chance at a career versus being written off as a loser forever is going to be very high, and will increase without bounds if the availability of credit increases in tandem.
A major part of the problem is that universities are no longer non-profit in any meaningful way. They have top administrators making high-six and seven-figure incomes, they evaluate professors based on their fundraising ability rather than their teaching or their contribution to the community, and the cling to the prestige of their non-profit status in order to keep for-profit education a ghetto because if it weren't that way, the likeness of movements on stage would embarrass them.
I don't know how to solve this. The demand for labor is so low in this world (or, perhaps, the supply is too high because society mandates that people work to have an income, being averse even in most liberal countries-- and not for bad reasons-- to redistribution) that people are now expected to do years of preparatory labor at negative pay.
But is the majority of the growth in college-goers due to non-traditional students (those not starting a BS program right after high school)? My impression is that it's mostly due to an increasing number of high school graduates going to college. I would guess they're much more likely to get government loans as well.
The ugly fact that can't be mentioned is that college isn't for everybody. The uglier fact is that there isn't a ton of work left out there that can support a $40k lower-middle class income for those that don't have the capabilities to get through a rigorous college degree. They also tend to be hard, dangerous, dirty jobs that you can't realistically expect to keep doing once you lose your strength, youth, and health working them for 15-20 years. Also a problem, is that those who took that route sometimes didn't make it to 40, often not 50, and those that managed to hit 60 or 62 and could retire on Social Security almost invariably croaked shortly thereafter.
So, if there's a limitless fount of money to go to college, and there little realistic chance of a comfortable life without a college degree, and everything that you are programmed to believe through your primary education tells you that you need to go to college, then everybody is going to make an attempt at going to college. And then 40% wash out the first semester, another 20% after the first year, another 20% bounce around majors, take on extra debt, but eventually finish, 10% make poor choices and choose degrees with marginal prospects, and maybe 10% make it through the wringer with an acceptable GPA, and employable major, in four years or less.
Also, with unlimited money available to marginal students, the market expands to provide supply for that demand, and schools of marginal quality cater to the marginal students, offering watered-down programs. However, it doesn't seem like the watered-down quality ever equates to much of a watered-down price; there are many mediocre private colleges that are 75% of the tuition cost of a top-tier school, not to mention out-of-state tuition rates at public universities. So the general signal of having a college degree becomes starkly gradiated by where that degree comes from.
Maybe if you had to qualify for student loans similar to the way you need to qualify for a mortgage, it'd be a better system, as far as not saddling people with worthless degrees and mountains of debt. Aptitude tests a la credit reports. Having to justify the future earnings the degree would confer versus price similar to not being able to take on a mortgage to buy a property at vastly more than it is assessed.
Maybe if companies need college-educated workers in certain fields, they could sign contracts to fund that education, in exchange for binding employment for X years. Yeah, that is indentured servitude...
The official taboo on the idea that a person might exist who lacks that ability isn't helping here.
If the workers form a cartel, their rational policy is to charge about Y -- they cannot charge more than that without driving the company out of business.
Labor unions are basically such a cartel. When they were ascendant in the mid-20th-century, the American middle class was vibrant, there were lots of low-skill jobs which provided good income.
With globalization, the business can now simply move its operations to a country where workers are poorer, regulations on environmental and workplace conditions are laxer, and organization is illegal. This has two effects: X gets smaller, and wages become close to X.
Globalization has some good effects -- increasing the world's total wealth by letting countries specialize in what they're good at, and reducing the probability of conflict by making countries more interdependent.
But the part few people in our corporate-owned governments want to talk about is that the price of these good things is, in effect, redistributing much of the wealth generated by companies from workers to owners.
In order to get to the end-game where nobody works, we will have to pass through a point where, say, 50% of the people have to work -- and it seems like determining which half works, and what sort of accounting is used to justify the non-working half's resource consumption, is a recipe for revolution. Because it's a point that's so far away from what our institutions and culture have been set up to deal with.
This is actually a function of student loans. Because higher education is accessible to a much larger portion of the population than it otherwise would be via easy credit, a bachelor's degree is no longer a differentiator. Hence the need for more advanced degrees to set oneself apart from other job candidates.