patrick.net

"That $24,000 can quickly grow during deferments when the bororwer has no job for several years. $24,000 is what they have in debt on the day of graduation. PLus, in many cases, those students will go on to grad school where their loan balance will quickly skyrocket. Law school will add $120,000 to that balance. Med school will add $250,000 to that balance."

Law school is around there..not sure about med. Grad school frankly is cheap, I actually pay a tad less than undergrad because you take fewer classes and it isn't as long (45 credits vs 120..yes night classes are slightly more to pay but even then it's cheaper)

What this is really about is how FAFSA raises the tuition. Nearly anyone can get student loans. But because there's limited amounts of teachers, staff and buildings the tuition keeps going up. If you can gurantee demand (which the government does) and supply stays the same..in any market prices will go up.

It is a bit funny because old presumptions aren't as true. Private schools already have higher tuition than public so if it can't fill the classrooms they actually lower standards rather than lower pricing. I'm in a public university and I know a private one of the same program that went from 48 credits to 42 where ours is 45...and they don't require a comprehensive exam at the end!

The for profit schools (DeVry, U of Phoenix, Kaplan) are going to probably close in the next few years. The Obama administration has said it wants more disclosure of results of their students and if they get cut off from FAFSA then there's no way students would be able to pay for it.

If we wanted to reverse this simply replace FAFSA with block grants to states to expand their university systems. Schools would have to compete and prices would go down.

In terms of why higher education is persued there's more openness from it than an employer. Students have grades, few employers will open up employee records. Turnover can be high with an employer which can render references moot. Schools have tenure which can last decades.Employers move and are more apt to close, schools not so much. Employers probably won't teach skills that are useful somewhere else because there is no incentive and why would they want to lose an employee to someone else?

"...or refusing to go to the higher cost colleges - we’re nowhere near that point yet."
Um we've been there for years now. I'm in mass and if you think that higher tiered schools aren't having a hard time getting students then you should come here. During the 90's ivy leagues pretty much started handing out large grants instead of loans to students because it was the only real way to add diversity.

Eventually what might end up happening..maybe this might be decades from now...large firms will eventually create a different set of standards maybe by industry certification or whatever in lieu of a degree.

Of course the other issue with all of this is frankly a high school diploma isn't nearly as much of what it was worth before. Heck nearly half of detroit supposedly can't read!
http://detroit.cbslocal.com/2011/05/04/report-nearly-half-of-detroiters-cant-read/

We still for some reason allow people to drop out of school fully knowing that there are no employers that will hire them (I know people that work at box stores and fast food..they don't hire them).

I agree that the term "bubble" is being thrown about a little loosely here.

There was a discussion I saw somewhere that tried to define it a little more carefully.... aha, here it is: http://www.gnomanomics.com/2011/04/tuition-bubble.html

terriDeaner says

Out of the blue… know anyone who used mortgage debt to pay off their student loans?

Personally? No. But I have read/heard countless stories and testimonials during the bubble's collapse about "victims" who did nothing wrong other than "consolidate" their debts. Congrats to them for cheating their way out of student loans, hard to blame them on that. A more honest way to have done it would be to sell the house for a profit, use the proceeds to pay the debt, and rent for a while. But greed and hope for continual equity growth kept them there.

EastCoastBubbleBoy says

I think the biggest problem with education is the fact that almost every high schooler in the country is told “you need to go to college” the focus is put on what schools they can get get accpeted into, not how to make sound career choices.

I agree, and this is in large part because so many jobs will not accept somebody without a college degree, even though there's nothing about the job that would necessitate it.

terriDeaner says

I think the point has been made before, but these are not particularly well paying jobs at the entry level. And depending on where you end up in the hierarchy of these career fields, those 10 years of debt slavery could end up being pretty rough.

I still don't think it excuses the Obama mentality where if one works for the government they should be treated better then a private sector. Huge special interest favoritism, government is not and should not be allowed to treat people different based on their employer.

"That said, there is a difference between spend 150k for an “acting” degree vs. spending $250k to get your JD and pursue a legal career. "

I don't see any difference between the JD and the acting degree. At the end of they day, the actor and lawyer will both be on the unemployment line. Each year, thousands upon thosuands of delusional lemmings enroll in law school thinking they are going to get a $160,000 BigLaw job. Sure they will. And I am going to marry into the British royal family.

Higher education is no doubt the largest domestic bubble of our times.

The question though: how to short it? I can't really think of a way....those for-profit schools have so many other issues factoring in to their valuation...but I suppose that's the easiest target.

I'd rather short mid-tier private, non-profit colleges or the vast amounts of bogus administration jobs where all this excess money goes to. Like people working as the assistant to the assistant to the president or people who are 'consultants to assist student athletes in choosing the optimal course schedules.' Of course, this is impossible to do :P

"thats terrible favoritism. Obama is really a big socialist after all. Way to stick it to the private sector."

How is that sticking it to the private sector? Let the private sector offer the same deal.

For profit schools are not the problem. Your falling for a trap set by the higher education lobbyists to distract you from the real problem. Of the 100 most expensive colleges in the U.S., NONE of them are "for profit."

HousingWatcher says

How is that sticking it to the private sector? Let the private sector offer the same deal.

unfortunately, gov't has to take money from the private sector to pay these student loans off.

the only conservative argument that has any traction with me is that it's too easy being generous with somebody else's money.

Fortune 500 companies are making record profits. They could always scale back their bloated executive compensation packages.

Florida corporate tax reduction goes to Gov. Scott

TALLAHASSEE, Fla. -- Corporations would get a tax cut of $1,100 each under a bill going to Gov. Rick Scott.

The Republican governor wanted a much bigger corporate income tax reduction than the one the GOP-controlled Legislature sent him Thursday.

Read more: http://www.miamiherald.com/2011/05/05/2202638/florida-corporate-tax-reduction.html#ixzz1LVFtuCGP

Yeah, and I have no doubt that corporatiosn are going to hire people since they now have an extra $1,100. No wonder the economy will never improve. Unemployment is going to be high for at least 10 years.

Corporations are hiring people... in China and India! I hope all of our software engieneer friends here don't enjoy their jobs too much. Pretty soon you might have to train your H1-B replacement!

HousingWatcher says

For profit schools are not the problem. Your falling for a trap set by the higher education lobbyists to distract you from the real problem. Of the 100 most expensive colleges in the U.S., NONE of them are “for profit.”

They're not the root of the problem but they benefit from the high price/federal loan subsidization/guarantees endemic with the mainstream, non-profit schools.

It's like people in the medical device industry making millions due to the health care cost bubble/Medicare payments. They aren't the cause of the problem, but they make money off of the problem.

Since the for-profit thing keeps coming up, I thought I'd point out an earlier thread that has relevant info:

For-Profit College infographic
http://patrick.net/?p=657973

What are the stats on relative successfulness for grads of profit vs. non-profit anyhow?

shrekgrinch says

Bubbles aren’t about those details (who holds the bag, etc). There definition is much more simple. Here’s wiki’s explanation:
From: http://en.wikipedia.org/wiki/Economic_bubble

Good article.

terriDeaner says

Since the for-profit thing keeps coming up, I thought I’d point out an earlier thread that has relevant info:
For-Profit College infographic

http://patrick.net/?p=657973
What are the stats on relative successfulness for grads of profit vs. non-profit anyhow?

Yeah, I think the big problem with for-profits is the predatory recruitment aspect that is comparably non-existent in non-profit schools.

I think the answer is simple.

WE DON'T CARE

The effect of student loan debt is less obvious. You default on your house you get booted out on the street. You can't pay back your student loans, they going to repo your education? No.

I think student debt is fine. It's self-balancing. If it's too heavy, well then they won't pay it. They'll NOT PAY in large enough numbers to put an end to the current looseness of student lending, then the tuition bubble will have been pricked.

If it's heavy but bearable, well other aspects of their financial life will suffer and they'll not dig that hole any deeper (go back for MBA) and they'll keep their kids out of it next time around.

The end.

Human survival improves alot with safe shelter from climate and predators.
Human survival does not improve at all with a BA in liberal arts from Berzerkely.

It makes sense to go into debt to avoid death from exposure to climate or predators.

It make no sense to go into debt to get a degree in underwater metaphysical bong making.

Higher education is feeling the effects of the "welfare state of mind" in their system now. Enjoy.

The only true purpose of a college degree is to fulfill the HR (human resources) barrier of entry, into the white collar world.

Only a dozen years ago, a person with an associates degree could work as a paralegal. Today, that person would need to have a bachelors degree, even if it's in modern basket-weaving or ancient Etruscan bong making.

So what's changed, in the world of clerical work, where the undergraduate degree is the key to getting in the door? Pretty much nothing. It just creates an artificial barrier to justify the existence of personnel depts or the notion that white collar work is socioeconomic class-oriented.

Rin,

I think you've pretty much nailed it. A lot of it is a racket of artificial barriers to entry.

wthrfrk80 says

I think you've pretty much nailed it. A lot of it is a racket of artificial barriers to entry.

Yep, and thus, Thiel's argument is a bit off the mark.

There are only so many Michael Dells or Steve Jobs in the world. For the most part, anyone who isn't a part of a starting circle of biz executives, needs at least one qualification to be 'seen' in an office. If Mark Zuckerberg were to mysteriously have his FB equity be stolen, he wouldn't even be qualified to apply for a job at his former company.

What Thiel should argue for instead, is the elimination of HR depts, nationwide, and have people submit national exam scores, like a combination of SAT IIs/GRE subject tests, in lieu of a college degree, to prove that they're academically qualified to be shuffling paper in an office. People can study on their own, take exams, and submit exam scores for entry level jobs. After a generation, the college degree will in effect, become obsolete for a majority of office workers.

Rin says

What Thiel should argue for instead, is the elimination of HR depts, nationwide, and have people submit national exam scores, like a combination of SAT IIs/GRE subject tests, in lieu of a college degree, to prove that they're academically qualified to be shuffling paper in an office. People can study on their own, take exams, and submit exam scores for entry level jobs. After a generation, the college degree will in effect, become obsolete for a majority of office workers.

Agree, except that so many are invested in the current system (racket). It's sort of like how everyone is invested in Brawndo stock in the movie Idiocracy.

Rin says

What Thiel should argue for instead, is the elimination of HR depts, nationwide, and have people submit national exam scores, like a combination of SAT IIs/GRE subject tests, in lieu of a college degree, to prove that they're academically qualified to be shuffling paper in an office.

I think that this will just end up being the same thing as over-paying for college. There will be all sorts of American Standardized Scoring (ASS) prep-courses that only people with money, people that borrow a lot of money, or Asians will ever do well on. Standardized testing is a good idea in principle, but it is so wide open for being gamed that it inevitably becomes sort of worthless. What would be the difference between a hiring manager looking for "BA In Underwater Bong Making" and "ASS Score of 666+"?

You guys need to start a for profit college to give out degrees in bong making or men kissing or afrolesbian studies or whatever. The feds will pay you wateva you want for tuition. Get in on the money makin!

bmwman91 says

Standardized testing is a good idea in principle, but it is so wide open for being gamed that it inevitably becomes sort of worthless.

But isn't the 'Game' ... the whole point?

At this moment, there are certification tests for Oracle D.B.A., Cisco Network Engineer, etc. All folks, in the aforementioned areas, are gaming for those exams. And then, the same goes for the Patent Agent or the Certified Public Accountant (CPA) exams.

The issue here is that the majority of the information, needed to score decent on exams, like the SAT2s or the GRE subject tests, are either on the Net (http://academicearth.org, http://ocw.mit.edu, etc) or the public library. Thus, the bubble of paying $80K to $200K for a BA is out the door, in place of something else, which can be done on the cheap.

And so while some "ASS scorers" may overachieve with 666+ with a lot of private tutors but in reality, I don't see that as any different than those, who'd spend 2-4 years prepping for the medical college admissions test (MCAT), which clearly comprises at least ~40% of one's admissions chances to a medical school. The end result is that in place of spending a fortune on college, you can submit a high "ASS", gain an internship, and if you do well at the job, you may even get an offer. And plus, at some point, let's say that "ASS" level is 550+, the higher the number has less predictive ability on how well a person may perform at a job. So all and all, it'll be more like this ... what's your internship record (i.e. research analyst for Motorola, 6 mos) and then, what's you "ASS" average? And that'll be enough of an assessment for a new worker bee.

Rin says

At this moment, there are certification tests for Oracle D.B.A., Cisco Network Engineer, etc. All folks, in the aforementioned areas, are gaming for those exams.

Those don't mean shit any more.

People want to know you have EXPERIENCE in an area. They have plenty to pick from and don't need your freshly-printed CCNA paper.

Vicente says

People want to know you have EXPERIENCE in an area. They have plenty to pick from and don't need your freshly-printed CCNA paper.

Actually ... as time goes by, HR depts want to see a Cert exams, unless the college/grad degree is specifically Computer Science or Electrical Engineering, prior to assessing the experience base.

So it's kinda the same thing

Here's a sample resume ...

Experience:

5 years as Oracle DBA at Wyeth Pharmaceutical. Managed large schemas, migrated clinical data, integrated clinical and pre-clinical systems.

Credentials:

Certified Oracle DBA (Larry Ellison approved)
BA in Basket-weaving w/ Math & Economics minor

Rin says

Here's a sample resume ...

Experience:

5 years as Oracle DBA at Wyeth Pharmaceutical. Managed large schemas, migrated clinical data, integrated clinical and pre-clinical systems.

Credentials:

Certified Oracle DBA (Larry Ellison approved)
BA in Basket-weaving w/ Math & Economics minor

Thus, if the degree is Computer Science, the resume can simply be ...

Experience:

5 years as Oracle DBA at Wyeth Pharmaceutical. Managed large schemas, migrated clinical data, integrated clinical and pre-clinical systems.

Credentials:

BS Computer Science

Then, the cert matters less

I can tell you from having worked with people who write job descriptions, that certification as an absolute gate-level requirement is frequent where the job is "open" to a chosen applicant only. It doesn't matter that YOU have a CCNA, it matters that Jimbo's good friend Larry has one. The cert requirement fits Larry's resume to a T, and no matter how hard you try your application will not best it. It just guarantees you a pointless interview where everyone picks their nose and goes through the motions for HR.

EastCoastBubbleBoy says

Although I agree it may not be a bubble per-se

If there are more college graduates than there are jobs for them (that require the use of their degree), then there is most likely a bubble.

EastCoastBubbleBoy says

a time will come when its cost far outweighs what it "should" when you look at the benefits of having said degree.

That time already came years ago.

http://finance.yahoo.com/news/1-2-graduates-jobless-underemployed-140300522.html

1 in 2 new graduates are jobless or underemployed

WASHINGTON (AP) — The college class of 2012 is in for a rude welcome to the world of work.

A weak labor market already has left half of young college graduates either jobless or underemployed in positions that don't fully use their skills and knowledge.

Young adults with bachelor's degrees are increasingly scraping by in lower-wage jobs — waiter or waitress, bartender, retail clerk or receptionist, for example — and that's confounding their hopes a degree would pay off despite higher tuition and mounting student loans.

An analysis of government data conducted for The Associated Press lays bare the highly uneven prospects for holders of bachelor's degrees.

Opportunities for college graduates vary widely.

While there's strong demand in science, education and health fields, arts and humanities flounder. Median wages for those with bachelor's degrees are down from 2000, hit by technological changes that are eliminating midlevel jobs such as bank tellers. Most future job openings are projected to be in lower-skilled positions such as home health aides, who can provide personalized attention as the U.S. population ages.

Taking underemployment into consideration, the job prospects for bachelor's degree holders fell last year to the lowest level in more than a decade.

bout 1.5 million, or 53.6 percent, of bachelor's degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41 percent, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields.

Out of the 1.5 million who languished in the job market, about half were underemployed, an increase from the previous year.

Broken down by occupation, young college graduates were heavily represented in jobs that require a high school diploma or less.

In the last year, they were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).

According to government projections released last month, only three of the 30 occupations with the largest projected number of job openings by 2020 will require a bachelor's degree or higher to fill the position — teachers, college professors and accountants. Most job openings are in professions such as retail sales, fast food and truck driving, jobs which aren't easily replaced by computers.

Vicente says

I can tell you from having worked with people who write job descriptions, that certification as an absolute gate-level requirement is frequent where the job is "open" to a chosen applicant only. It doesn't matter that YOU have a CCNA, it matters that Jimbo's good friend Larry has one. The cert requirement fits Larry's resume to a T, and no matter how hard you try your application will not best it. It just guarantees you a pointless interview where everyone picks their nose and goes through the motions for HR.

“Eagles are dandified vultures” - Teddy Roosevelt

That's also a perfect description of how H1B's work. I like seeing ads for people with a CE masters degree, 3 years experience, fluent in manderin, willing to work for 30k. I can see why there were no "qualified" US applicants.

Yes, in summing up the various posts above ... the college degree, BA in { X, Y, Z }, is really for the human resources dept.

In reality, many high schoolers, with a modicum of intelligence, can do at least half the white collar jobs out there. This is possibly one of the greatest *open secrets* out there, which no one wants to acknowledge formerly.

Thus, it's not so much a college bubble but it's more that the majority can't accept that college is worthless, for a vast pool of the educated population. If a person simply wants to attend college, to be 'seen' as being smart, well, that's one thing but to have a college degree, simply because it satisfies an artificial checklist of sorts, is another.

Rin says

Thus, it's not so much a college bubble but it's more that the majority can't accept that college is worthless, for a vast pool of the educated population. If a person simply wants to attend college, to be 'seen' as being smart, well, that's one thing but to have a college degree, simply because it satisfies an artificial checklist of sorts, is another.

I think we have a winner here!!!!

.

looks like student loans balance is reversing course and dropping since first quarter of this year



.

Could just be a reporting artifact, a delay in the numbers arriving.

Patrick says

Could just be a reporting artifact, a delay in the numbers arriving.

good point, but they could use a projection and then adjust it later when the actual numbers are available

.

Patrick says

Could just be a reporting artifact, a delay in the numbers arriving.

I think fewer people are choosing to go to college. And boomers are also dying now with a decent chunk having assets the kids will inherit. The boomers with assets likely were smart to save and pushed college on the kids. Same with grandparents dying. This always happened of course, but the numbers are just greater than in the past which is why I think people are dumping the debt sooner

I've noticed colleges seem desperate for students. I have about 5-6 friends with college aged kids that applied everywhere and got accepted everywhere no problem. Nice kids but not the sharpest knives in the drawer. Put this way, I wouldn't have been accepted to half the colleges they got into. I think it's literally a 4 year party bill at this point and it's been dumbed down outside of STEM fields.

My 2¢. Could be wrong but that's what I've observed since covid and seeing friends kids go off to school.

WookieMan says

I think fewer people are choosing to go to college.

Need to track enrollment numbers or college students population such as through the Census Bureau.

Also, find out about colleges and universities merging, downsizing or shutting down due to diminishing enrollment like St Paul's College in Virginia.

There may be more students going to community colleges for the first 2 years in order to save money (and they do not have to take borrow as much student loan money).

.

The loan amount outstanding is dropping not because people are paying them off, but because Biden has been forgiving billions upon billions of dollars of loans.

Misc says

The loan amount outstanding is dropping not because people are paying them off, but because Biden has been forgiving billions upon billions of dollars of loans.

good point ..there is now $1.737 trillion in student debt ... Biden admin wrote off about 7% of student debt (or $127 billion) ... I wonder how much more is Biden going to forgive in student debt and what happens if a Democrat wins the White House in 2024 ....

^^^^^^^^^^^^^^^^^^^^^^^^^^^^

" Biden has managed to erase $127 billion in student debt so far for more than 3.5 million borrowers — more than any other president in history. His administration has used existing programs that were previously hard to access for many borrowers to deliver that relief."

https://www.cnbc.com/2023/10/29/biden-administration-has-forgiven-127-billion-in-student-debt.html#:~:text=Still%2C%20Biden%20has%20managed%20to,borrowers%20to%20deliver%20that%20relief.