Based on my personal experience and that of friends and acquaintances, 23-24 year olds with a bachelor degree working at Starbucks (or equivalent) is not at all rare. The 'crisis' may be overblown by the media a bit, but it is definitely not something that can be ignored. Every media and politic mouthpiece also said everything was perfectly fine, right up to the 2008 crash. I take anything like this with a healthy dose of salt.
Yeah, I'm actually pretty damn disappointed that NPR would print such garbage. They used to be more respectable than that. Now, they'll apparently publish any idiotic claim, whether or not it has any evidence whatsoever to back it up.
Heck, that's what I did--25 years ago. The low value of many bachelor degrees in terms of employment has been a common experience for a lot of Americans.
Your odds of working in a low skilled service position or manual labor job without a college degree (as a young person) are a little over 50%. With a college degree, it's about 25%/
I think a big point that wasn't touched on in the article (maybe her book does, I haven't read it) is that the increased debt load on students means they are delaying or forgoing buying other major purchases, such as homes and cars. Both of which are huge economic drivers. It isn't that people can't afford the loan payments, it is that the loan payments are reducing the disposable income of those students for quite some time.
I can see how car buying increases GDP (as each new car must be produced) but the same doesn't necessarily apply to home buying. Home supply is relatively fixed. Increases in demand cause asset price inflation, more than they do additional homebuilding. So home purchases don't 'drive the economy' in the sense of causing additional economic output.
Home supply is fixed in some areas, but certainly not in all. Plenty of people around me are buying new houses in brand new subdivisions. When I bought my house, the sellers were moving to a brand new house. If someone hadn't bought their house, they would't have bought a brand new house. My area is growing by thousands of people per year, and the existing houses are already filled. If people want to move in, they have to build more houses.
Meanwhile I buy only used cars, so me purchasing a car doesn't drive the economy any more than buying a used house does.
Cars vs houses is actually a pretty interesting comparison. Houses wear out after a decade or two as well, we're just willing to spend more money keeping a house in good working order than we are keeping a car running. If your central air goes out, it could cost you $7000 to fix it. If your car's engine goes out, that repair would cost $4000. But no one throws away their house, they just pay to get a new air conditioner put in. Few people would put a new engine in their car, though.
The average price to replace a roof is $12,000. But again, people are more likely to replace a roof than they are to replace an engine in their car. They'd just scrap it and buy a new car.
Houses wear out just as fast as cars do, but we're more willing to fix our house versus fixing our car. And it's not just a function of cost: you can get a new modular home for $50,000 and it will last decades. The double-wide I grew up in was installed in 1994 and there are still people living there over 20 years later. Very few people keep $50,000 cars for 20 years, though. And I see a lot of people with $5000 used cars parked in front of $150,000 houses. But if they bought a $50,000 brand new manufactured home, they could be parking a BMW out front instead. And if they wanted to, they could throw the house away just as fast as they throw away their car.
Buying the home itself may not increase GDP but people tend to upgrade their furniture and appliances a bit when they feel secure enough to buy rather than rent.
Also if the car is manufactured in a foreign country it doesn't really benefit the US economy. Maybe in some complicated and indirect way it does. But if that's the strongest argument for subsidizing education, we should just give the money to car companies directly and skip the middle man. Or whatever economists say is the most effective use of that money, perhaps giving it directly to the poorest.
This is completely wrong. Housing starts - the number of new home units which began construction in a given quarter - have long been a significant economic indicator.
More specifically, new residential construction accounts for roughly 15% of the GDP, compared to the 3-3.5% from the automobile industry.
Housing supply is so far from being 'fixed' that it contributes 5x more to the GDP than automobiles.
You are correct. I was forgetting the fact that homes in the US are produced in the US, but that, on the whole, cars, and especially car parts, are not.
It shows the value added rather than gross GDP. So if I import $7000 of parts from Asia, and use them to make a $12000 car, that would show up as a $5000 value add, representing the work that was done in the US.
From this data it appears that construction is about just under 4%, and motor vehicles are just under 1%. So, 4x, which is not far off the 5x you stated.
Complete anecdote, but I have a friend who went to the same college, for the same major, and we started the same year. He went on for six years before he got his degree (plus a minor), I "dropped out" of being an on-campus full time student after two and only continued to take classes when I was able to pay for them out of pocket, which meant one or two classes per semester while working full time.
Now granted I got lucky and found a company that was willing to pick me up as an intern, then hire me part time, then hire me full time while I was working on my degree. Five years past graduation, my friend and I work for the same company now making roughly the same money in exactly the same job. I bought a house a year ago, he lives with his parents. I got into the workforce and started making money four years before he did, and he racked up four years more student loan debt than I did, so his monthly payments are over $800. That's the price of my mortgage.
We make the same money in the same job with the same education credentials, but instead of him making a house payment, he makes a student loan payment of the same size.
As a data sample of one, roughly 2.5 years post graduation: I've found "quality of life" to be far higher in the professional world than it ever was as a student. Managers are generally more reasonable than stodgy tenure track professors and "group projects" have a lot more buy-in from group members when everyone is getting cut a paycheck at the end of the week.
I've been a full-time student (twice!) and a professional worker, and I would never, ever choose to go back to the lifestyle of being a full time student. Ever again. Full stop.
It's just like work, but instead of making money you're losing it--both gradually and in large chunks every 6 months. The workload is the same (probably greater as a student), the pressure is the same, the lack of free time is the same. You're subject to the same arbitrary deadlines and due dates. Plus, as a student, you have the privilege of needing to take high-stakes tests every semester or so. It's basically years of hazing for a credential that's become a requirement for getting any job later.
It's as if devised by a Bond villain: "I know, Let's have a system where we take a bunch of people in the prime of their lives, work them like slaves, subject them to enormous pressures and tests, put their social and productive lives on hold, and if they make it through N years of this hazing, only then do we let them participate as full members of society. AND TO TOP IT OFF THEY WILL PAY US FOR IT!"
The only thing I truly enjoyed about the time I lived on-campus was hanging out with my friends. Fortunately most of them are still around and we get together several times per year.
I seriously do not miss studying, attending classes, doing homework, or having to walk everywhere. These days if I'm reading something boring, it's because I want to read something boring.
This seems like two extreme examples, though. You were able to pay most of your way through college and start your career early, he for some reason took six years for an undergraduate degree and paid for it all with loans. Most people are somewhere in the middle, spending 4 years in college with maybe some internships and/or part-time jobs to help out.
It is, which is partly why I picked him as an example. I have another friend (in a different field) who did it in four and had an internship during his last year. He's doing well for himself, though he makes a bit less due to his career choices versus mine.
But don't be fooled into thinking a part-time job pays for college in any way, any way at all. I had a full time job making $40k and could only afford one or two classes per semester, and I lived extremely frugally. Paid-off car, apartment under $400/mo, no vices, no parties, and no pets. Someone making $8.15/hr for 20 hours a week only makes ~$8000/yr, or ~$4000 per semester. My mid-size state university costs over $13k per semester, plus books.
Indeed you were lucky. Most land grant colleges are in far off rural areas. The local economy is built around the university so it can be very hard for students to find part-time or even full-time work that isn't service jobs. If you can find an employer that will work around a class schedule then you've hit the jackpot.
That was actually part of the challenge for me, my school was 50+ miles from the nearest real city. I didn't have a job that worked around my school schedule, I had a school schedule that worked around my job, which is why it took so long for me. Lots of online classes and classes transferred from the local community college.
Yes. Starting your professional life with a large debt obligation is severely limiting. The interviewee completely ignores the opportunity cost, what else graduates could do with that money that would be productive or fulfilling.
I'm still surprised that more people haven't started talking about birth rates. There are too many people who are coming out with student debt where having a child is just something people feel financially priced out of. It's definitely not the immediate debt, just that a lifetime of production for an individual is not going forward, it's flowing backwards.
A lot of expensive things and events get deferred with the sword of student debt hanging over your head. Home buying, marriage, children, hobbies, investment. I barely managed to pay off my student debt by 40 and can now start on some of these things. My parents ('Boomers) were well into them all by the time they were in their late 20s. I'm finding the age at which I have most of my life events is about 10 years or so delayed from the age at which my parents did all these things.
Certainly some people are struggling with student debt, and I don't want to look down on their struggle. From a macroeconomic standpoint, though, the Student Loan "Crisis" is at least an order of magnitude smaller than the Mortgage Crisis.
How many finance professionals were saying "I don't want to look down on struggling homeowners, but from a macroeconomic standpoint the housing loan "crisis" is at least an order of magnitude smaller than the early 2000's tech bubble or the S&L scandals of the 80's" in 2006?
AFAICT, pretty close to zero. There were people that were denying a problem even existed, and people portraying it as an enormous bomb poised to go off anytime, and very few people in the middle.
Yes, racking up $100K of debt may seem good because you now have a 6 figure job which is good for the economy. However, what they don't explain is why $100K of debt was needed, and not say $10K. Or why you shouldn't just take $1M of student loans out because wow you'd really be productive!
I think universities are addicted to visa students and that drives tuitions through the roof.[1]
Visa students don't require government funding, they just pay cash. And often those students, who come from the rich families of the entire world, money is no object, so tuition naturally rises to meet the price that they will bear.
Of course government funding for domestic students does not keep up with that price inflation.
Back in the late 80s, I paid for my Bachelors by working part time jobs, and I was a full time student. I don't think I could do that today, unless I worked nights and never slept.
[1] Canadian universities anyway, may also apply to all north american ones.
Maybe not in isolation. It has to be taken as part of a larger picture.
There is tremendous downward pressure on wages and has been for a long time due mostly to outsourcing, foreign competition, and automation. All those things are deflationary in general.
Central banks have tried to fight this via traditional inflationary monetary policy but it's not working. Since the pressure on wages is so deep and structural, those policies are just inflating other things. Chief among these are housing and education because these are financed with debt.
I think this is the wider picture. It's not so much a student loan crisis as a larger breakdown of the entire 20th century economic formula.
A third of college students who earn a four-year degree graduate with no debt at all. Zero.
Frankly, that is extremely alarming. Only a third? It's strange how people can look at the same numbers and draw completely different conclusions.
Here's my take on the issue: The government inflated prices of education not unlike banks inflated house prices. All the loaners of student loans should start making provisions now, and big ones at that. People are defaulting or taking a longer time to pay back than anticipated. At the end of the day, I anticipate nobody will act until it blows up and then the state (and thus the common people) will pay up every single dime of this debt - just another case of privatized profit and socialized losses, it becomes boring to watch this game.
I suggest a radically different form of funding education. I would start a pool for every branch of education and invite private companies to fund education and institutes they need (which is already happening at some scale). Then I would have the state multiply the collected amount of money by a number, say, 2 (or whatever the public agrees to and is reasonable), and pay that on top of the collected funds, and that is how much funding this branch of education gets. Maybe there's some minimum too. And I'd make tuition fees very low but still high enough to disincentivize just fooling around - full stipends would be granted to poor people who are doing well at school and show potential.
> loaners of student loans should start making provisions now
But it's vastly more difficult (i.e., nearly impossible) to discharge student loan debt. Even if it takes years and years, most students will be required to pay back what they borrowed. I don't think we need to be worried about the bubble popping, but rather the secondary effects that the weight of student loans will cause. For example, companies have a natural advantage negotiating with graduates carrying debt who need a job more urgently than those who have no debt.
> I suggest a radically different form of funding education.
I'm slightly less radical, but along the same lines -- fund institutions, not students. Making students into consumers forces schools to compete on features & amenities (things students care about) rather than focusing on providing quality education at low cost. Public colleges don't need to be country clubs to provide an education.
Yeah, you're right. If the student was the customer, everyone would get perfect grades and uni would be an amusement park. The student should not be considered the customer.
That reminds me of a first year lecture of discrete mathematics that I took. The professor is pretty renowned and does a good job, but he's also incredibly strict and demanding, especially when it comes to exercises and exams. I still know pretty much all of the stuff we learned there and it's come in handy year after year i.e. in crypto and graph theory. Anyway, we could write anonymous feedbacks for this professor and some students really hated him. He read some of them to us and they contained things like "you are an a * * * ole" etc. I understand the frustration with him, it was one of the toughest courses, and it did cause suffering, but it was also a learning experience and the students left the course with newly acquired knowledge and skills. I'm pretty sure many people who were mad with him were even more mad with themselves and likely dropped out, because among the ones who passed, only few people hated him.
Colleges determine the cost of education, not the government. I don't know how it works for state universities, it must be a grey area. But anyway, across North America, governments have been defunding higher education, which leads to colleges raising prices. It's totally unlike the housing bubble.
What's needed is an education policy that doesn't leave the amount of students in each program entirely up to the number of students who apply for such programs, but also constricts some programs based on market demand, and provides financial incentives for students to go in programs where there is high demand in the marketplace.
the same public unions that support clinton and sanders are the ones that created the "for profit" school debt problem. many union contracts offer mandatory pay raises for nonsense masters degrees pumped out online.
the government subsidizing student debt with artificially low interest rates has increased the size of the load as well as the cost of said education.
You do understand that a massive portion of this issue is private schools costing so much? Most private schools have nothing to do with the unions or politics you're talking about.
private schools cost a lot for two very important reasons: (1) consumers believe they're worth it and (2) said consumers can borrow money to pay tuition at extraordinarily low interest rates.
I think one of the biggest draws to private schools is they typically don't require admissions testing such as SAT, ACT, GMAT, etc.
Of course, when you hear "private school," many people think private high schools, which are typically superior to public, particularly in southern US regions. The different is these are "for-profit," which can easily be confused, particularly by someone right out of high school.
Finally large marketing expenditures and high pressure sales targeted at people who believe people are required, morally or legally, to be honest.
stanford, harvard, yale, university of chicago, mit, williams, amherst, princeton, penn, cal tech, ... all private schools that not only require standardized test scores, but prefer top percentile.
Replace "private" with "for-profit." I conflated the terms a bit. Many people mistake "for-profit" schools for private schools. For profit schools are perfectly fine with the ambiguity.
> I think one of the biggest draws to private schools is they typically don't require admissions testing such as SAT, ACT, GMAT, etc.
I think you are confusing "private schools" with "for-profit" schools. But, even here, lots of programs targeting mid-career workers offered by non-profit (public and private) institutions don't rely on admission testing.
> The different is these are "for-profit," which can easily be confused, particularly by someone right out of high school.
Is there are a large "right out of high school" population going into private, for-profit schools? Most of the marketing I've seen from them is directed at mid-career workers, not recent high-school grads.
It's not a 'massive portion' of the issue. Public school tuition in many states has increased dramatically as well. Both of them are going up for one primary reason - the federally backed student loan programs have increased the supply of money available.
teachers with masters degrees offer no bump in student performance but cost a lot more (see bill gates on this if you don't like brookings). where do you think they're getting these degrees, harvard and yale? they're getting their masters degrees online, at home, at night (devry, university of phoenix, etc.), and they're getting them in made up bullshit fields of study.
I have no quibble with the assertion that advanced degrees do not correlate with better performance, but no evidence there that unions 'created the "for profit" school debt problem'.
Where there are incentives for higher degrees in teaching, there is quite often a restriction that, to qualify for the incentive, the degree must either be in the subject area being taught or Education, so, while its quite possible that they are going to private for-profit schools (though, IME, there are plenty of evening, online, and distance-education programs targeting that market from traditional public and private nonprofit schools, so that's probably not that common), they probably aren't in "made up bullshit fields of study".
(If they plan to keep the door open to going into administration, they'll usually do Education, because an advanced degree in Ed is selected for in hiring -- and sometimes an outright requirement -- for administrative positions.)
the incentive is to achieve the credential while spending the least amount of time and money earning it. in the private sector, you'd get laughed out of an interview holding one of these credentials; in the public unions, you get an automatic pay and pension increase.
Another overlooked problem is that easy debt financing (not to mention need-based aid) inflates the cost of attending university for those who have to pay full-price, including those who borrow the cost. This raises the sticker price required to remain competitive as an institution, and is terribly distorting as the many schools with no or poor endowments compete with wealthier universities for students, professors, and capital.
That should only be temporary. Assuming there's competition (and it seems that there is - no university has a monopoly), the influx of money allows the industry to grow. The prices should level out over time.
One would think that is true, that tuition is seeking a new equilibrium based on: subsidized lending; lack of bankruptcy protection from student loans; desire of high school grads to enroll in university. However, we do not seem to have reached a tuition plateau yet. Further, the expensive tastes of both public and private institutions, and the leverage undertaken by students, means that this system overall is fragile. If there is a rapid change in economic circumstances, we will find that overlevered students (including those that we thought had "reasonable" debt loads) and high-cost institutions will fail at an alarming rate. Endowments will shrink overnight. States will slash funding for state universities / research. Tuition will not possibly be able to come down fast enough, in those circumstances. Until then -- business as usual!
For better or for worse the social contract in this country is that parents finance their children's education commensurate with their ability to do so.
We could lobby Congress to stop considering parents' resources in calculating financial need, but I doubt you will find much sympathy among voters for an agenda of "life is too difficult for children of wealthy families."
When our federal government gets involved in something, the potential for corruption is too great - there's just too much money. We saw it with federally backed mortgages, federally backed student loans, and will see it with federally mandated health insurance. The intentions may be good but it's only a matter of time before opportunists screw it up.
The figures at the end of the article seem to be cherry-picked in a way to hide the full details. Instead of telling us what a quartile looks like, why not show the full distribution?
I didn't mean to imply corruption strictly by the federal government. I meant more broadly that whenever there is a huge pool of money, many actors (individuals, corporations, government agencies) will do whatever possible to get a piece of that.
A con man selling a book spilling the secrets of his cons? Sounds like a con - I'm kidding (mostly). Reminds me of how self-help superstars peddle their wares.
The book is a wild, wild ride. He regularly sold "investments" that would ostensibly benefit the Nazis, and never did a mark make moral objections to the investment. Another striking aspect is the value that con men put on their props: there were cottage industries at the time to produce formal-looking documents and fake telecommunications equipment. The Sting was surprisingly accurate, it turns out; there really were many cons of that sort.
What bothers me most about these discussions is that no one seems to advocate making college cheaper. The solution space always seems to gravitate towards finding more money. I do not see how that approach can sustain itself forever.
Agreed. As much as I personally would like to see a smaller federal gov't, I think that if the federal gov't is going to concern itself with something big like energy, health care, or education, then it might as well take it over completely. As much as that scares me, it's probably better than this perversion of a free market society that we currently have.
Actually, this is a lot like the housing crisis. The banks lent money in excess of the value of the home to people that could not afford the debt. With the student loan crisis, the Federal government has been lending money to students assuming that the value of the education is equal to what the institution charges for it. This has resulted in severe tuition inflation and a massive debt burden.
I think a good solution both now and going forward is to:
1) Calculate the value of the education based on the Institution, the Major, and the Degree. We should be able to calculate this based on the Federal student loan information cross-correlated with IRS data.
2) Forgive all debt in excess of the value of the education
3) Only finance student debt up to the expected value of the education.
This will do a lot in terms of removing the tuition market distortion and in relieving the debt load.
So you ignore and refuse the well argumented conclusions of the book author interviewed in the article and instead give some arbitrary opinions because...?
Because, I am sure we could have found a mortgage expert in 2007 to assure us that there was no mortgage crisis.
In addition, the concept of federal government offering loans with no independent verification (which we could easily do) as to the value of what they are giving the loan for seems like a good way to create a bubble (see Fannie Mae).
I agree with the author that student loans are good in that it enables people who would otherwise have not been able to afford college to be able to get a degree. However, student loans are an issue that a major constituency in the United States think is an issue (see Bernie Sander's campaign). To dismiss that concern as just due to media scare tactics does not seem reasonable.
I am surprised this interview seems to ignore that the larger problem is coming from students who take loans out, but then drop out of the program before graduating, making it even harder to pay back their loans.
I'm surprised you comment without reading the article. Not really though.
>The problem is that we have a lot of people actually borrowing small amounts of money, going to college, not completing [a degree] or completing credentials that don't have labor market value. They tend to be older. They tend to come from disadvantaged, middle-income families and they're struggling. [But] not because they owe a lot of money.
Totally support you pointing this out. However I hope you will indulge a random person, and let me suggest that your angry, aggrieved tone diminishes your contribution.
Yes but the interview seems to imply that this diminishes or somehow makes the case for the problem overblown. It says yes this is a problem, but doesn't really go into any specifics on why it's a bigger problem for those borrowers or that this is where the defaults are coming from. I guess
I could have worded my comment better to say that I felt it wasn't given enough attention or depth.
Wow, such a misleading premise. The majority of readers will come away with the simplistic conclusion that "there is no problem with student loans, unemployment among the educated, etc."
NPR is my go-to radio station for news but more & more it sounds like National Propaganda Radio, but maybe I'm just turning into a grumpy old conservative.
It's not "free". Someone is paying for it?
It's either people whop didn't gain the benefit of either, or it's you later on, only instead of a transparent loan, it's opaque taxes so you don't realize you are paying.
Gov can still be considerably cheaper depending on the structure of the underlaying circuit, how much intrest does the gov charge vis a vis the banks, I'm sure for profit institution charge a lot more, leading to a higher fraction of income going into repayments, depressing overall demand, thus GDP, thus higher gov debt ratio. etc ...
buuut really, what is the cost to record the best roman history lecture in the world and put it on youtube. OR pay an editor to edit together all the best courses into a metacourse/documentary.
what percent of college education is either lecture or textbooks? if curriculum includes video lectures, and can serve millions instead of hundreds per year, the cost should be drastically reduced. lecture portions can be reused from year to year.
now college costs should just be discussion/lab/feedback/etc
by clinging to live lectures, they can limit supply and control price. no matter how you spin it, college is overpriced, compared to how it could be if there were incentive to serve everyone and distribute all the information. its an exclusive club people pay to enter.
Yes I win less money because my employer pay tax. But on this way it's cheaper for everyone and everyone get health care and education. No matter they are rich or poor. If I get sick one day I can benefit from this system. And if i'm not someone else benefits.
The student loan "bubble" is essentially an attempt to paper over the lack of jobs and serves as a welfare program for youth funded (as are most government programs) with debt.
I can't help feeling this is somewhat orchestrated.
This author was an adviser to Clinton's campaign. Clinton has already said this is a problem, but the reality is that she will do nothing about it (for various reasons). So, it seems the best way to make that palatable to her base is to start a new narrative that says, "there is no problem".
Like a Jedi brain trick, her followers will parrot the same thing and repeat the cherry picked statistics in these talking points.
Especially considering how this started under Bill Clinton's administration (see Title IV) [1]. I remember watching how proud he was of it [2][3]. Maybe the intentions were good but coupled with the repeal of Glass-Steagall and rise sub-prime mortgage crisis makes me wonder.
Nothing is a pretty low bar. Offering a Federal refinance option wouldn't necessarily cost anything, it would just forgo revenue. Figuring out which schools are worthless and making it harder to spend federal loans at those schools is win-win-win. Incentivizes for public schools to limit cost increases can probably work. So there is enough room for improvement that expecting nothing is pretty pessimistic.
Another angle is to look at it from a business perspective.
Early on, Lending Club introduced roughly 10 categories of loans, one of which was "Student Loan".
In the first few years the risk models worked out pretty well for the other 9 categories of loans and they turned out to be pretty good investments from the viewpoint of the lender and roughly similar in return/risk profile.
Student loans were a disaster, with the interest mostly eaten up with defaults. They stopped making student loans.
People think abstractly that education is a good thing, but from the viewpoint of improving your job prospects it is a risky thing. If it wasn't for government guarantees and subsidization, however, student loans would not exist today except for people who don't need them. It just is not a good business (as a business) to make loans that have a high chance people can't pay them.
The stats regarding the horrifying amount of student debt in this country speak for themselves. The stats regarding historically low levels of household formation and milestone purchases (home, car, etc.) among millennials also speak for themselves. This article is garbage.
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[ 2.9 ms ] story [ 170 ms ] threadYour odds of working in a low skilled service position or manual labor job without a college degree (as a young person) are a little over 50%. With a college degree, it's about 25%/
Meanwhile I buy only used cars, so me purchasing a car doesn't drive the economy any more than buying a used house does.
But cars are different from homes:
1) No zoning preventing new cars from being built
2) Cars wear out within a decade or two
The average price to replace a roof is $12,000. But again, people are more likely to replace a roof than they are to replace an engine in their car. They'd just scrap it and buy a new car.
Houses wear out just as fast as cars do, but we're more willing to fix our house versus fixing our car. And it's not just a function of cost: you can get a new modular home for $50,000 and it will last decades. The double-wide I grew up in was installed in 1994 and there are still people living there over 20 years later. Very few people keep $50,000 cars for 20 years, though. And I see a lot of people with $5000 used cars parked in front of $150,000 houses. But if they bought a $50,000 brand new manufactured home, they could be parking a BMW out front instead. And if they wanted to, they could throw the house away just as fast as they throw away their car.
More specifically, new residential construction accounts for roughly 15% of the GDP, compared to the 3-3.5% from the automobile industry.
Housing supply is so far from being 'fixed' that it contributes 5x more to the GDP than automobiles.
I looked at this data from 2014: http://www.bea.gov/industry/gdpbyind_data.htm
It shows the value added rather than gross GDP. So if I import $7000 of parts from Asia, and use them to make a $12000 car, that would show up as a $5000 value add, representing the work that was done in the US.
From this data it appears that construction is about just under 4%, and motor vehicles are just under 1%. So, 4x, which is not far off the 5x you stated.
Now granted I got lucky and found a company that was willing to pick me up as an intern, then hire me part time, then hire me full time while I was working on my degree. Five years past graduation, my friend and I work for the same company now making roughly the same money in exactly the same job. I bought a house a year ago, he lives with his parents. I got into the workforce and started making money four years before he did, and he racked up four years more student loan debt than I did, so his monthly payments are over $800. That's the price of my mortgage.
We make the same money in the same job with the same education credentials, but instead of him making a house payment, he makes a student loan payment of the same size.
It's just like work, but instead of making money you're losing it--both gradually and in large chunks every 6 months. The workload is the same (probably greater as a student), the pressure is the same, the lack of free time is the same. You're subject to the same arbitrary deadlines and due dates. Plus, as a student, you have the privilege of needing to take high-stakes tests every semester or so. It's basically years of hazing for a credential that's become a requirement for getting any job later.
It's as if devised by a Bond villain: "I know, Let's have a system where we take a bunch of people in the prime of their lives, work them like slaves, subject them to enormous pressures and tests, put their social and productive lives on hold, and if they make it through N years of this hazing, only then do we let them participate as full members of society. AND TO TOP IT OFF THEY WILL PAY US FOR IT!"
I seriously do not miss studying, attending classes, doing homework, or having to walk everywhere. These days if I'm reading something boring, it's because I want to read something boring.
But don't be fooled into thinking a part-time job pays for college in any way, any way at all. I had a full time job making $40k and could only afford one or two classes per semester, and I lived extremely frugally. Paid-off car, apartment under $400/mo, no vices, no parties, and no pets. Someone making $8.15/hr for 20 hours a week only makes ~$8000/yr, or ~$4000 per semester. My mid-size state university costs over $13k per semester, plus books.
Visa students don't require government funding, they just pay cash. And often those students, who come from the rich families of the entire world, money is no object, so tuition naturally rises to meet the price that they will bear.
Of course government funding for domestic students does not keep up with that price inflation.
Back in the late 80s, I paid for my Bachelors by working part time jobs, and I was a full time student. I don't think I could do that today, unless I worked nights and never slept.
[1] Canadian universities anyway, may also apply to all north american ones.
There is tremendous downward pressure on wages and has been for a long time due mostly to outsourcing, foreign competition, and automation. All those things are deflationary in general.
Central banks have tried to fight this via traditional inflationary monetary policy but it's not working. Since the pressure on wages is so deep and structural, those policies are just inflating other things. Chief among these are housing and education because these are financed with debt.
I think this is the wider picture. It's not so much a student loan crisis as a larger breakdown of the entire 20th century economic formula.
Frankly, that is extremely alarming. Only a third? It's strange how people can look at the same numbers and draw completely different conclusions.
Here's my take on the issue: The government inflated prices of education not unlike banks inflated house prices. All the loaners of student loans should start making provisions now, and big ones at that. People are defaulting or taking a longer time to pay back than anticipated. At the end of the day, I anticipate nobody will act until it blows up and then the state (and thus the common people) will pay up every single dime of this debt - just another case of privatized profit and socialized losses, it becomes boring to watch this game.
I suggest a radically different form of funding education. I would start a pool for every branch of education and invite private companies to fund education and institutes they need (which is already happening at some scale). Then I would have the state multiply the collected amount of money by a number, say, 2 (or whatever the public agrees to and is reasonable), and pay that on top of the collected funds, and that is how much funding this branch of education gets. Maybe there's some minimum too. And I'd make tuition fees very low but still high enough to disincentivize just fooling around - full stipends would be granted to poor people who are doing well at school and show potential.
But it's vastly more difficult (i.e., nearly impossible) to discharge student loan debt. Even if it takes years and years, most students will be required to pay back what they borrowed. I don't think we need to be worried about the bubble popping, but rather the secondary effects that the weight of student loans will cause. For example, companies have a natural advantage negotiating with graduates carrying debt who need a job more urgently than those who have no debt.
> I suggest a radically different form of funding education.
I'm slightly less radical, but along the same lines -- fund institutions, not students. Making students into consumers forces schools to compete on features & amenities (things students care about) rather than focusing on providing quality education at low cost. Public colleges don't need to be country clubs to provide an education.
That reminds me of a first year lecture of discrete mathematics that I took. The professor is pretty renowned and does a good job, but he's also incredibly strict and demanding, especially when it comes to exercises and exams. I still know pretty much all of the stuff we learned there and it's come in handy year after year i.e. in crypto and graph theory. Anyway, we could write anonymous feedbacks for this professor and some students really hated him. He read some of them to us and they contained things like "you are an a * * * ole" etc. I understand the frustration with him, it was one of the toughest courses, and it did cause suffering, but it was also a learning experience and the students left the course with newly acquired knowledge and skills. I'm pretty sure many people who were mad with him were even more mad with themselves and likely dropped out, because among the ones who passed, only few people hated him.
What's needed is an education policy that doesn't leave the amount of students in each program entirely up to the number of students who apply for such programs, but also constricts some programs based on market demand, and provides financial incentives for students to go in programs where there is high demand in the marketplace.
the same public unions that support clinton and sanders are the ones that created the "for profit" school debt problem. many union contracts offer mandatory pay raises for nonsense masters degrees pumped out online.
the government subsidizing student debt with artificially low interest rates has increased the size of the load as well as the cost of said education.
Of course, when you hear "private school," many people think private high schools, which are typically superior to public, particularly in southern US regions. The different is these are "for-profit," which can easily be confused, particularly by someone right out of high school.
Finally large marketing expenditures and high pressure sales targeted at people who believe people are required, morally or legally, to be honest.
I think you are confusing "private schools" with "for-profit" schools. But, even here, lots of programs targeting mid-career workers offered by non-profit (public and private) institutions don't rely on admission testing.
> The different is these are "for-profit," which can easily be confused, particularly by someone right out of high school.
Is there are a large "right out of high school" population going into private, for-profit schools? Most of the marketing I've seen from them is directed at mid-career workers, not recent high-school grads.
[1] http://forprofitu.org/2013/06/seiu-testimony-at-a-department...
teachers with masters degrees offer no bump in student performance but cost a lot more (see bill gates on this if you don't like brookings). where do you think they're getting these degrees, harvard and yale? they're getting their masters degrees online, at home, at night (devry, university of phoenix, etc.), and they're getting them in made up bullshit fields of study.
(If they plan to keep the door open to going into administration, they'll usually do Education, because an advanced degree in Ed is selected for in hiring -- and sometimes an outright requirement -- for administrative positions.)
as it is, the most expensive universities are seen as better, more prestigious.
We could lobby Congress to stop considering parents' resources in calculating financial need, but I doubt you will find much sympathy among voters for an agenda of "life is too difficult for children of wealthy families."
The figures at the end of the article seem to be cherry-picked in a way to hide the full details. Instead of telling us what a quartile looks like, why not show the full distribution?
On the subject of corruption I can't recommend reading this highly enough: https://www.amazon.com/Conman-Master-Swindler%C2%92s-Library...
A con man selling a book spilling the secrets of his cons? Sounds like a con - I'm kidding (mostly). Reminds me of how self-help superstars peddle their wares.
Ditto for health care.
I think a good solution both now and going forward is to:
1) Calculate the value of the education based on the Institution, the Major, and the Degree. We should be able to calculate this based on the Federal student loan information cross-correlated with IRS data.
2) Forgive all debt in excess of the value of the education
3) Only finance student debt up to the expected value of the education.
This will do a lot in terms of removing the tuition market distortion and in relieving the debt load.
In addition, the concept of federal government offering loans with no independent verification (which we could easily do) as to the value of what they are giving the loan for seems like a good way to create a bubble (see Fannie Mae).
I agree with the author that student loans are good in that it enables people who would otherwise have not been able to afford college to be able to get a degree. However, student loans are an issue that a major constituency in the United States think is an issue (see Bernie Sander's campaign). To dismiss that concern as just due to media scare tactics does not seem reasonable.
Makes total sense.
This is an interesting article in The Atlantic on that subject: http://www.theatlantic.com/business/archive/2016/07/the-scar...
>The problem is that we have a lot of people actually borrowing small amounts of money, going to college, not completing [a degree] or completing credentials that don't have labor market value. They tend to be older. They tend to come from disadvantaged, middle-income families and they're struggling. [But] not because they owe a lot of money.
Music to NPR's ears.
what percent of college education is either lecture or textbooks? if curriculum includes video lectures, and can serve millions instead of hundreds per year, the cost should be drastically reduced. lecture portions can be reused from year to year.
now college costs should just be discussion/lab/feedback/etc
by clinging to live lectures, they can limit supply and control price. no matter how you spin it, college is overpriced, compared to how it could be if there were incentive to serve everyone and distribute all the information. its an exclusive club people pay to enter.
"Credit Crisis: The Sky is not falling [2007]": http://www.brookings.edu/research/papers/2007/10/mortgage-in...
"Growing Foreclosure numbers don't spell doom [2007]":http://www.businesswire.com/portal/site/google/index.jsp?ndm...
You can find lots more, I just did a cursory search.
This author was an adviser to Clinton's campaign. Clinton has already said this is a problem, but the reality is that she will do nothing about it (for various reasons). So, it seems the best way to make that palatable to her base is to start a new narrative that says, "there is no problem".
Like a Jedi brain trick, her followers will parrot the same thing and repeat the cherry picked statistics in these talking points.
[1] https://www.congress.gov/bill/103rd-congress/house-bill/2264... [2] https://youtu.be/b1TdC9g4XBQ?t=32m28s [3] http://www.pbs.org/newshour/bb/politics-july-dec96-clinton_0...
Early on, Lending Club introduced roughly 10 categories of loans, one of which was "Student Loan".
In the first few years the risk models worked out pretty well for the other 9 categories of loans and they turned out to be pretty good investments from the viewpoint of the lender and roughly similar in return/risk profile.
Student loans were a disaster, with the interest mostly eaten up with defaults. They stopped making student loans.
People think abstractly that education is a good thing, but from the viewpoint of improving your job prospects it is a risky thing. If it wasn't for government guarantees and subsidization, however, student loans would not exist today except for people who don't need them. It just is not a good business (as a business) to make loans that have a high chance people can't pay them.