Jay
Bork! Bork! Bork!
+2,006|4781|London, England
A growing chorus of economists and educators think that the higher education industry will be America's next bubble. Easy credit, high tuition, and poor job prospects have resulted in growing delinquency and default rates on nearly $1 trillion worth of private and federally subsidized loans. Now the ratings agency Moody's has weighed in with a chilling diagnosis: "Unless students limit their debt burdens, choose fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place."

In August 2010 financial aid guru Mark Kantrowitz announced that student loan debt had, for the first time, surpassed credit card debt. A month later, the Department of Education announced that default rates for student loans had jumped from 4.6 percent in 2005 to 7 percent in 2008, the most recent year for which data is available. While the two announcements went largely unnoticed, some took the data points as evidence that America's next big bubble—higher education—was becoming dangerously inflated.

I ran that thesis—shaped by data that show the default rate for student loans (two-thirds of which are guaranteed by the government) have steadily increased over the last decade—by Kantrowitz last year. “You can’t flip an education,” he told me. In other words, higher education can’t be a bubble because there’s no speculation. Howard Horton of the New England College of Business and Finance was on the fence in 2009 about the higher ed bubble, but when demand for college degrees increased during the recession, Horton suggested that the college industry had more in common with Detroit than the housing crisis.

“These subsidies are kind of like propping up the auto industry with cash for clunkers, or the housing industry with cash for first-time buyers,” he told me last year. “We have this financial aid system that is keeping the system alive.”

Moody's new report has a much grimmer take: While "delinquency and loss rates on outstanding student loan balances remained steady throughout the recessions," the report reads, "the performance of other consumer loan segments has significantly improved as the economy has recovered." But that's likely to change soon, and not for the better. Moody’s projects that delinquency and default rates will actually get worse, even if the economy recovers in the next few years (itself an increasingly unlikely prospect).

To start, it helps to understand why student loans are doing poorly. Unlike home and auto loans, the conditions for which have been tightened drastically since 2008, student loans are for everybody. Borrowing isn’t based on income or even a salary expectation, but the promise that a college degree will pay for itself. But with unemployment hovering around 9 percent, college graduates from the best programs and schools are finding that’s not not the case. Eventually, the snake eats its own tail: Easy credit and the college myth have caused tuition to double since 2000, while tightened credit requirements have caused home prices to plummet.

"The dollar volume of student lending is expected to grow at a faster rate given rising costs, although the growth rate of total tuition paid over the past decade may slow as students seek out cheaper options from proprietary and traditional educators,” the report reads. Yet due to gainful employment regulations handed down by the Department of Education, the proprietary sector—composed of for-profit colleges—is likely to shrink. The rules are designed to staunch the flow of federal aid to schools that have high drop-out and loan default rates, and it appears that the effect is being felt across the sector. The Washington Post Company announced today that that revenues at its biggest moneymaker, the for-profit college company Kaplan, were down 64 percent in the second quarter.

Moody’s also points to digital education tools driving down educational costs, but adds that “the expectation is that tuition will continue to rise at a rate greater than overall inflation over the next 10 years, thereby contributing to persistent growth in new loan originations.”

The threat of a prolonged recession means that an increase in borrowing will most likely lead to an increase in delinquencies and defaults. Students and workers alike see higher education as a shelter from the poor economic climate. But while a two- or four-year program may seem like a sensible way to wait out a recession, more and more students are emerging on the other side with improved skills—that’s if they studied an applied science, as opposed to humanities—and no job prospects. While entering a weak job market with an advanced degree makes many debt-saddled MBA recipients (for example) overqualified for the entry level jobs available to them.

The report authors anticipate bleak times ahead if the federal government and private banks maintain their relaxed lending standards, especially if they continue to lend with the expectation that students will be able to pay them back: “Unless students limit their debt burdens, choose
fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.”


To his credit, Kantrowitz anticipated a future in which would-be students shy away from expensive higher educations, due to the double-whammy of high debt and and gloomy job prospects. But he puts that future at least 20 to 30 years away, when today’s college graduates are likely to still be paying back student loans and thus reluctant to extravagantly finance their own children’s educations as well. Moody’s sees that problem coming to a head possibly within the next decade, and anticipates that the aftershock of declining demand for higher education will hurt both college towns and big cities, which rely on students (and their borrowed money) to keep businesses afloat during down times.

Even in the absence of speculation, says Moody’s, “Fears of a bubble in educational spending are not without merit.” The higher education optimists might want to batten down their hatches.
http://reason.com/archives/2011/08/05/m … arm-on-stu

Something had to give I guess. For too long people have assumed that getting a degree was the path to becoming wealthy, or comfortable, and the entire system has become saturated by it. Now we've reached a point where actual job experience in a field outweighs a college degree when it comes to finding work.

I expect a lot of 'government should cover the entire cost of education' arguments coming from certain members of this board, but that's clearly not the right answer. The market is already saturated. Footing the cost for yet more peoples degrees on the public dime won't help the situation. If anything, it would drive up costs even further. If I'm not mistaken, this has been occurring in the UK for quite a number of years now.

I'm not saying that people should be denied a higher education, far from it, but perhaps the entrance standards should be raised so as not to water down the entire system. Actually, scratch that. Print degrees for everyone, GPA and school reputation will win out in the end for those that actually earned the degree.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Winston_Churchill
Bazinga!
+521|6162|Toronto | Canada

I've done 2 years in uni now debt free paying by myself, and already almost have enough saved up to pay for the third.  Hopefully I'll be able to do the entire thing debt free
Stimey
­
+786|5543|Ontario | Canada
I get 7.5k more in debt each year
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Jay
Bork! Bork! Bork!
+2,006|4781|London, England

Winston_Churchill wrote:

I've done 2 years in uni now debt free paying by myself, and already almost have enough saved up to pay for the third.  Hopefully I'll be able to do the entire thing debt free
That would be awesome man! Hope it works out for you. One of the primary reasons I joined the military is because I wasn't sure what degree I wanted to pursue and thus didn't want tens of thousands in student loans hanging over my head once I graduated.

I'm all for pursuit of whatever degree you want to hold, as long as you accept the consequences of that decision. I think a large part of the problem is in expecting 18-22 year olds to make long term life decisions when they have zero life experience. It is, in my opinion, a fundamental flaw in the system that kids go straight from high school into college life and are immediately overwhelmed by the fact that they have to plan out their future. When I was 18 I had no idea what I wanted to do. I honestly don't have any solutions to the problem.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
KEN-JENNINGS
I am all that is MOD!
+2,953|6055|949

It would be interesting to see the statistics on student loan debt by major/field of study
Shocking
sorry you feel that way
+333|5422|...
“Unless students limit their debt burdens, choose
fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.”

I'm getting tired of this tbh. A degree is what you make of it, if you graduate cum laude it barely matters what field it was in, you'll land a job. Furthermore, the problem is people not interesting themselves in what kind of jobs they can get with their future degrees before they start college, this is usually done afterwards.
inane little opines
Macbeth
Banned
+2,443|5009

I still think people really complain way too much about student debt burdens anyway. A 40 or even 50K debt burden isn't impossible or life ending even if you don't graduate with a degree in engineering or economics. It's just take some time and bit more hard work.

A bit off topic but whatever. as for useful degrees- at my current university (Rutgers) they are expanding their campus with a whole new section of buildings focused on business and economics. At my old school, NJCU, they were doubling their campus to provide a new schools with a focus on engineering and stuff. I have heard through my HS friends of similar things at their universities which are spread all across the north east.

I have feeling that eventually those useful degrees that lead directly to jobs are going to be horribly devalued in the future. There is no way those useful degrees are going to hold their value if all of the universities are going to start pushing them harder.

Last edited by Macbeth (2011-08-07 12:00:42)

Jay
Bork! Bork! Bork!
+2,006|4781|London, England
We graduate 60,000 less engineers per year than the country needs. It's not a lack of opportunity to attend engineering school that's the problem, it's that calculus terrifies people for some reason. If I end up with more competition, so be it.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Bertster7
Confused Pothead
+1,101|6004|SE London

Jay wrote:

I expect a lot of 'government should cover the entire cost of education' arguments coming from certain members of this board, but that's clearly not the right answer. The market is already saturated. Footing the cost for yet more peoples degrees on the public dime won't help the situation. If anything, it would drive up costs even further. If I'm not mistaken, this has been occurring in the UK for quite a number of years now.
I think what you've done there is confused rising tuition fees with rising cost of a degree. Tuition fees have risen sharply in the UK, this is due to government cuts - the cost of the degree is not significantly impacted, just the government pays a smaller slice.

University top up fees needed to be introduced over here due to the obsession with everyone going to university. More students in universities, more cost to the government.

Therefore, whilst you're making a lot of sound points about graduate markets being saturated and degrees being far worse value now than they previously have been - the point you make about publicly funded degrees driving costs higher doesn't stand up.

If anything, the best solution is to have all degrees completely publicly funded and only available to those who truly excel acedmically. A pure educational meritocracy with massively slashed university intake rates and reduced pass rates.
Macbeth
Banned
+2,443|5009

Jay wrote:

We graduate 60,000 less engineers per year than the country needs.
Got a source for that?
Jay
Bork! Bork! Bork!
+2,006|4781|London, England

Bertster7 wrote:

Jay wrote:

I expect a lot of 'government should cover the entire cost of education' arguments coming from certain members of this board, but that's clearly not the right answer. The market is already saturated. Footing the cost for yet more peoples degrees on the public dime won't help the situation. If anything, it would drive up costs even further. If I'm not mistaken, this has been occurring in the UK for quite a number of years now.
I think what you've done there is confused rising tuition fees with rising cost of a degree. Tuition fees have risen sharply in the UK, this is due to government cuts - the cost of the degree is not significantly impacted, just the government pays a smaller slice.

University top up fees needed to be introduced over here due to the obsession with everyone going to university. More students in universities, more cost to the government.

Therefore, whilst you're making a lot of sound points about graduate markets being saturated and degrees being far worse value now than they previously have been - the point you make about publicly funded degrees driving costs higher doesn't stand up.

If anything, the best solution is to have all degrees completely publicly funded and only available to those who truly excel acedmically. A pure educational meritocracy with massively slashed university intake rates and reduced pass rates.
You have a much different system than we do. More students for you would not raise costs because your schhols are largely state owned. Our private universities view easy student debt as a great opportunity to raise revenue since the cost of tuition becomes less of a limiting factor. As long as students desire for prestigious degrees remain strong, they'll continue raising tuition. With the government backstopping loans, its essentially a blank check. Universities are big business here.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Stimey
­
+786|5543|Ontario | Canada

Jay wrote:

We graduate 60,000 less engineers per year than the country needs. It's not a lack of opportunity to attend engineering school that's the problem, it's that calculus terrifies people for some reason. If I end up with more competition, so be it.
I hope I get 60k job offers when I get out of school.
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Bertster7
Confused Pothead
+1,101|6004|SE London

Jay wrote:

Bertster7 wrote:

Jay wrote:

I expect a lot of 'government should cover the entire cost of education' arguments coming from certain members of this board, but that's clearly not the right answer. The market is already saturated. Footing the cost for yet more peoples degrees on the public dime won't help the situation. If anything, it would drive up costs even further. If I'm not mistaken, this has been occurring in the UK for quite a number of years now.
I think what you've done there is confused rising tuition fees with rising cost of a degree. Tuition fees have risen sharply in the UK, this is due to government cuts - the cost of the degree is not significantly impacted, just the government pays a smaller slice.

University top up fees needed to be introduced over here due to the obsession with everyone going to university. More students in universities, more cost to the government.

Therefore, whilst you're making a lot of sound points about graduate markets being saturated and degrees being far worse value now than they previously have been - the point you make about publicly funded degrees driving costs higher doesn't stand up.

If anything, the best solution is to have all degrees completely publicly funded and only available to those who truly excel acedmically. A pure educational meritocracy with massively slashed university intake rates and reduced pass rates.
You have a much different system than we do. More students for you would not raise costs because your schhols are largely state owned. Our private universities view easy student debt as a great opportunity to raise revenue since the cost of tuition becomes less of a limiting factor. As long as students desire for prestigious degrees remain strong, they'll continue raising tuition. With the government backstopping loans, its essentially a blank check. Universities are big business here.
Well, then problem is clearly having universities as big business. It's a strategy which is getting the US into difficulties in many areas - like healthcare.

Making essential services into big business is a bad idea. You'd think it would drive costs down - in practice it always seems to do the opposite.
Jay
Bork! Bork! Bork!
+2,006|4781|London, England

Bertster7 wrote:

Jay wrote:

Bertster7 wrote:

I think what you've done there is confused rising tuition fees with rising cost of a degree. Tuition fees have risen sharply in the UK, this is due to government cuts - the cost of the degree is not significantly impacted, just the government pays a smaller slice.

University top up fees needed to be introduced over here due to the obsession with everyone going to university. More students in universities, more cost to the government.

Therefore, whilst you're making a lot of sound points about graduate markets being saturated and degrees being far worse value now than they previously have been - the point you make about publicly funded degrees driving costs higher doesn't stand up.

If anything, the best solution is to have all degrees completely publicly funded and only available to those who truly excel acedmically. A pure educational meritocracy with massively slashed university intake rates and reduced pass rates.
You have a much different system than we do. More students for you would not raise costs because your schhols are largely state owned. Our private universities view easy student debt as a great opportunity to raise revenue since the cost of tuition becomes less of a limiting factor. As long as students desire for prestigious degrees remain strong, they'll continue raising tuition. With the government backstopping loans, its essentially a blank check. Universities are big business here.
Well, then problem is clearly having universities as big business. It's a strategy which is getting the US into difficulties in many areas - like healthcare.

Making essential services into big business is a bad idea. You'd think it would drive costs down - in practice it always seems to do the opposite.
I disagree vehemently. There is nothing wrong with privatization, it's the government subsidies that drive up costs. You can't hand free money to private companies and expect them to not try to rape the government for all that they can get away with. Our system would be a lot less broken if the government would stop trying to 'fix' issues. Mixing socialism into our capitalistic system just creates opportunistic leeching.

I don't view college degrees as 'essential services' anyway. They're a nice thing to have, but hardly necessary to succeed in the world, or wouldn't be if everyone wasn't walking around with them due to free handouts.

Last edited by Jay (2011-08-07 12:32:41)

"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Bertster7
Confused Pothead
+1,101|6004|SE London

Jay wrote:

Bertster7 wrote:

Jay wrote:


You have a much different system than we do. More students for you would not raise costs because your schhols are largely state owned. Our private universities view easy student debt as a great opportunity to raise revenue since the cost of tuition becomes less of a limiting factor. As long as students desire for prestigious degrees remain strong, they'll continue raising tuition. With the government backstopping loans, its essentially a blank check. Universities are big business here.
Well, then problem is clearly having universities as big business. It's a strategy which is getting the US into difficulties in many areas - like healthcare.

Making essential services into big business is a bad idea. You'd think it would drive costs down - in practice it always seems to do the opposite.
I disagree vehemently. There is nothing wrong with privatization, it's the government subsidies that drive up costs.
But in the US you have a problem with this. In other countries where these things are more heavily subsidised by the government the problem is far less severe. How do you make a case to support your assertions when what is happening in the real world tells a very different story?

Is it going to be the age old story of "other countries can get away with it because they're not the US, there are other factors here"?

The facts are that the costs in many of these systems which are highly privatised in the US and highly socialised elsewhere in the developed world, such as higher education and healthcare, are rising far faster in the US than anywhere else. You can scream about mitigating circumstances all you like, but you're wrong.

Jay wrote:

You can't hand free money to private companies and expect them to not try to rape the government for all that they can get away with. Our system would be a lot less broken if the government would stop trying to 'fix' issues. Mixing socialism into our capitalistic system just creates opportunistic leeching.

I don't view college degrees as 'essential services' anyway. They're a nice thing to have, but hardly necessary to succeed in the world, or wouldn't be if everyone wasn't walking around with them due to free handouts.
You don't consider a system of higher education to be an essential service?

That's pretty silly.
Macbeth
Banned
+2,443|5009

Bertster7 wrote:

You don't consider a system of higher education to be an essential service?

That's pretty silly.
Nope. Not at all. That's why it's called higher education. I think everything a normal human being would need to know to function should have been taught in in high school and elementary school, their basic education. Higher education isn't and shouldn't be for everyone...

Last edited by Macbeth (2011-08-07 12:54:29)

Bertster7
Confused Pothead
+1,101|6004|SE London

Macbeth wrote:

Bertster7 wrote:

You don't consider a system of higher education to be an essential service?

That's pretty silly.
Nope. Not at all. That's why it's called higher education. I think everything a normal human being would need to know should have be taught in in high school, their basic education. Higher education and college isn't and shouldn't be for everyone...
So having no universities in your country would be fine?

No graduates? Having a workforce that are educated to a lower standard than the rest of the world would not put your country at a disadvantage at all?


It being an essential service doesn't mean it's for everyone. It means it needs to be there.
The fire brigade are an essential service, although most people will never have their house burn down or be trapped in a burning building, it still needs to be there.
Stimey
­
+786|5543|Ontario | Canada

Bertster7 wrote:

Macbeth wrote:

Bertster7 wrote:

You don't consider a system of higher education to be an essential service?

That's pretty silly.
Nope. Not at all. That's why it's called higher education. I think everything a normal human being would need to know should have be taught in in high school, their basic education. Higher education and college isn't and shouldn't be for everyone...
So having no universities in your country would be fine?

No graduates? Having a workforce that are educated to a lower standard than the rest of the world would not put your country at a disadvantage at all?


It being an essential service doesn't mean it's for everyone. It means it needs to be there.
The fire brigade are an essential service, although most people will never have their house burn down or be trapped in a burning building, it still needs to be there.
Are you retarded.
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RTHKI
mmmf mmmf mmmf
+1,726|6160|Oxferd Ohire
i dont think thats what macbeth is trying to say..but v0v
https://i.imgur.com/tMvdWFG.png
Macbeth
Banned
+2,443|5009

lol
Jay
Bork! Bork! Bork!
+2,006|4781|London, England

Bertster7 wrote:

Jay wrote:

Bertster7 wrote:


Well, then problem is clearly having universities as big business. It's a strategy which is getting the US into difficulties in many areas - like healthcare.

Making essential services into big business is a bad idea. You'd think it would drive costs down - in practice it always seems to do the opposite.
I disagree vehemently. There is nothing wrong with privatization, it's the government subsidies that drive up costs.
But in the US you have a problem with this. In other countries where these things are more heavily subsidised by the government the problem is far less severe. How do you make a case to support your assertions when what is happening in the real world tells a very different story?

Is it going to be the age old story of "other countries can get away with it because they're not the US, there are other factors here"?

The facts are that the costs in many of these systems which are highly privatised in the US and highly socialised elsewhere in the developed world, such as higher education and healthcare, are rising far faster in the US than anywhere else. You can scream about mitigating circumstances all you like, but you're wrong.

Jay wrote:

You can't hand free money to private companies and expect them to not try to rape the government for all that they can get away with. Our system would be a lot less broken if the government would stop trying to 'fix' issues. Mixing socialism into our capitalistic system just creates opportunistic leeching.

I don't view college degrees as 'essential services' anyway. They're a nice thing to have, but hardly necessary to succeed in the world, or wouldn't be if everyone wasn't walking around with them due to free handouts.
You don't consider a system of higher education to be an essential service?

That's pretty silly.
I'm not wrong at all Berster. Tuition costs are rising so quickly in the United States because student loans and financial aid are handed out like candy. Because student loans and aid are handed out so freely, tuitions rise. If we had a national university system this would not be an issue because the government could cap the cost of tuition in order to decrease its own costs. This is not the case, nor will it ever be the case. Thus, the only solution is to get the government out of the loan business.

And no, I don't believe that higher education is an essential service. The vast majority of college graduates don't even work within the fields they studied at university. All a college degree tells employers is that the applicant is tenacious enough to complete a course of study, and that they have the ability to learn the skills the company will have to teach them if they are employed. Do you think my fiancee's English degree helped her in her job in IT marketing? Not one bit.

Is it nice having an educated workforce? Sure. But it's a luxury rather than a necessity.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Macbeth
Banned
+2,443|5009

Macbeth wrote:

Jay wrote:

We graduate 60,000 less engineers per year than the country needs.
Got a source for that?
???
Bertster7
Confused Pothead
+1,101|6004|SE London

Stimey wrote:

Bertster7 wrote:

Macbeth wrote:


Nope. Not at all. That's why it's called higher education. I think everything a normal human being would need to know should have be taught in in high school, their basic education. Higher education and college isn't and shouldn't be for everyone...
So having no universities in your country would be fine?

No graduates? Having a workforce that are educated to a lower standard than the rest of the world would not put your country at a disadvantage at all?


It being an essential service doesn't mean it's for everyone. It means it needs to be there.
The fire brigade are an essential service, although most people will never have their house burn down or be trapped in a burning building, it still needs to be there.
Are you retarded.
Are you?

I would consider anyone who doesn't view a solid system for higher education as an essential service for any developed country to be pretty retarded.
Stimey
­
+786|5543|Ontario | Canada
He said it isn't for everyone.
So you eliminate every university in the country?
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Jay
Bork! Bork! Bork!
+2,006|4781|London, England

Macbeth wrote:

Macbeth wrote:

Jay wrote:

We graduate 60,000 less engineers per year than the country needs.
Got a source for that?
???
http://www.mlive.com/business/west-mich … neeri.html
http://www.engtrends.com/IEE/0502C.php
http://education.yahoo.net/articles/six … egrees.htm

or, if you want to look at supply and demand...

https://www.payscale.com/chart/121/Top-10-College-Majors-That-Lead-to-High-Salaries-2011-v1.0.png
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat

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