Financial Times: The US college debt bubble is becoming dangerous
- Thread starter BobPSU92
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Why are you only mentioning lecture halls that are for gen ed credits? Why are you also mentioning older buildings that had nothing to do with the facilities investments that PSU made?True.....
Thomas Building is much nicer.......MUCH NICER........than the Forum, Willard, or any number of classroom buildings on campus.
Of course, folks who can do "math", don't need to consternate (Circle-Jerk?) over a photo to know that over $0.40 of every $1.00 of tuition - as opposed to just 16 years ago - is no longer used to pay for Education and Instruction of Students........
But is now funneled into Bloated Administration and Empire Building.
Of course, being able to do add/subtract/multiply/divide math, is not a skill that all of us have
I'm trying to figure out what might be more important for the future than education and health care, and we're botching both.
There is an easy way to solve this: take the government out of the business of guaranteeing student loans.
Seriously...the parents are going to educate the kids? These are the same parents that second mortgaged their house to buy bigger and new cars, have $15,000 plus in credit card debt paying 15% or more percent, and have their own massive debt load they can hardly service. So how are they going to tell their kids taking on $100,000+ in debt to goto college is bad when they have $300,000 to $500,000 in debt themselves. Plus, they already spent their kids college fund on club sports assuming somehow their kid was going to get full ride. So tough to sit down and tell your kids that your family has lived beyonds it's means for the past 20 years so we have no money left to help you pay for college because we spent it all. Easier to tell them to just take out some loans as no big deal.
True, but I remember many an evening spent in the tv lounge in Snyder. Very few had tvs in the dorm in my day. But that was partly because you had no way to get any stations in the dorms.
You should have stopped yourself right there. You were correct until the but. If you want to see tuition get even higher and education get worse, have the govt pull a No Child Left behind or Affordable Care Act to control prices and provide "access". Cheap money, Fed guarantees, and the Feds taking over all student loans is already the primary cause of the Higher-Ed bubble. The Feds trying to regulate tuition will only make it worse.
Nah, they're going to come after *my* 403b and pension because I was smart enough to save. Recall the old fable about the ant and the grasshopper? These days the grasshopper is the "hero". I'm not joking. That is how it is now taught.
In the vast majority of cases there is no credit check to be done unless the parents are co-signing the loan. So have the lenders put their capital on the line, watch funding dry up, and then see Indiana Fats's sphincter pull in so tight that it consumes the rest of him---------- a new scientific phenomenon: the human Black Hole.
You did the right thing. Most of this "financial aid" is in the form of loans and the ones getting burned are those who borrowed irresponsibly.
As someone going through this now, I relate to a lot of what people are saying.
We too have worked our butts off to save money for our kids' college. We put as much as we could into a college tax deferred plan. We made sacrifices. And we hoped that we would get some assistance from the schools. The schools, however, penalize families that have saved. If we had spent unwisely and not saved, we likely would have received aid.
Our first just made her selection last week. She selected a tremendous school, but she gave up a significant merit scholarship that she was offered to another "lesser" school. She selected the more expensive school despite the fact that, like Art's parents, we sat her down and told her the max that we could afford and that she would be responsible for the rest. So she will have significant loans, or we will have to scrape to help her out more.
If/when the bubble eventually bursts, I think you're going to see a lot of schools (inc. some very good ones) close their doors. Giant universities like PSU will drastically downsize, and fewer people will attend bachelor (and beyond) programs. This may not be a bad thing since IMO there are way to many people earning useless degrees. I mean we all knew kids in college who had no business being there...with more candidates than there are jobs already, why spend so much money for a watered down degree that makes you no more hirable than a training program could get you?
This is actually a two-fold problem. There is no evidence that the economy needs ever increasing numbers of college graduates to the marginal jobs being created -- in fact, there were NO MARGINAL JOBS CREATED from the late 1990s until very recently, which is why the "labor participation rate" of the working age population has dropped to levels not seen since the mid-1970s where there were far more "single-earner households" to explain the lower participation rate. In essence, US Universities have devalued the degrees they are issuing by pumping out way more degrees than needed (and done so by "dumbing-down" education requirements) at the same time they have created a debt-bubble fueling the growth of the system (a debt bubble that is fueled by both the students and families - how many families have mortgaged homes and savings to pay their child's college education???). In the process, massive, unsustainable, unproductive, bloated bureaucracies have been created where the majority of the investment has gone to supporting the bureaucracies unproductive growth and gone to the bureaucrats running these unsustainable "ivory-tower" kingdoms. The massive growth in college tuition makes ZERO economic sense and shows all the signs of instability that all "debt-fueled bubbles" demonstrate and will likely burst in the same way (i.e., when the marginal debt stops flowing, ever-rising inflated tuition cannot be met......and the whole thing comes a crumbling down!).
The average cost in Tuition and Room & Board at universities has risen at a rate roughly double inflation since 1980 (and continues to accelerate relative to annual inflation), during a period of time where general CPI has been relatively benign and falling. The end result is that the cost of an education including Room & Board at the University's rate, has gone up by over 500% since 1980......all while the "value" of that degree (i.e., supply/demand for that degree in economy) relative to the "value" of the same degree in 1980 has fallen (this is especially true given the increased transport-ability of labor and capital in today's "worldwide economy" - i.e., labor and capital are far more "elastic" than 4 decades ago. Essentially, all those well-trained accountants, engineers and customer service reps in India, who can work "on the cloud" or manufacturing-related jobs can simply be "off-shored", put a lid on the value of a local degree.). The spiraling cost of education (and the kingdoms these bureaucrats are building) can only be sustained, let alone grown at the current annual breathtaking rate, via "debt fuel" by taking on massive amounts of additional debt......once the marginal debt stops flowing due to unsustainability (i.e., the lender refuses to lend marginal debt), the whole thing comes a crumbling down like all debt-fueled bubbles.
The notion that Universities are these major engines of job growth is a myth....Universities have grown far to big and filled with self-perpetuating bloat and inefficiency that has simply demanded ever increasing absurd tuition demands upon absurd tuition demands causing a larger and larger debt bubble that has become unsustainable.
The average cost in Tuition and Room & Board at universities has risen at a rate roughly double inflation since 1980 (and continues to accelerate relative to annual inflation), during a period of time where general CPI has been relatively benign and falling. The end result is that the cost of an education including Room & Board at the University's rate, has gone up by over 500% since 1980......all while the "value" of that degree (i.e., supply/demand for that degree in economy) relative to the "value" of the same degree in 1980 has fallen (this is especially true given the increased transport-ability of labor and capital in today's "worldwide economy" - i.e., labor and capital are far more "elastic" than 4 decades ago. Essentially, all those well-trained accountants, engineers and customer service reps in India, who can work "on the cloud" or manufacturing-related jobs can simply be "off-shored", put a lid on the value of a local degree.). The spiraling cost of education (and the kingdoms these bureaucrats are building) can only be sustained, let alone grown at the current annual breathtaking rate, via "debt fuel" by taking on massive amounts of additional debt......once the marginal debt stops flowing due to unsustainability (i.e., the lender refuses to lend marginal debt), the whole thing comes a crumbling down like all debt-fueled bubbles.
The notion that Universities are these major engines of job growth is a myth....Universities have grown far to big and filled with self-perpetuating bloat and inefficiency that has simply demanded ever increasing absurd tuition demands upon absurd tuition demands causing a larger and larger debt bubble that has become unsustainable.
Two bits of advice (and it's up to you whether you share them with your daughter). First, studies have been done comparing lifetime earnings of people who attended various colleges. As you might expect, on average, people who attended "elite" universities do better. However, when they looked a people who got into the elite schools, but, instead, opted to go to a less elite, but still good (often state), school they found there was no difference. Conclusion: it's the person, not the school.
Second, if your daughter expects to pursue post-baccalaureate education, the terminal (last) degree is what people look at. Save your money for that.
Finally, for you and your wife, the degree to which you may have been "penalized" for saving, while it does exist, is not as much as you might think.
The formulas most schools use to determine financial need/aid take a much smaller percentage of parents' assets (which include most tax deferred college savings plans) than assets in the kid's name. Chances are that the stories you hear leave out a lot of the details, if not outright fabrications. Take satisfaction in knowing that you did the right things and leave it at that.
Best of luck to your daughter.
Relatively speaking? Damn little (if anything, if it's done right)
Not compared the drivers that are behind the bulk of the cost explosion.
You have hit the nail on the economic head here. It is the institutions themselves that are driving this debt-fueled bubble by demanding ever higher and higher Tuition / Room & Board Fees which are rising at a per annum rate that is rising faster and already dwarfs general inflation. These ever increasing demands have been met with borrowing by both current and new students.....it has already reached a level which is not sustainable, but the College Tuition Debt-Bubble is going to be one of the worst ever experienced because it takes so long for it to actually "metastasize" (i.e., theoretically, the student will pay off the loan with future earnings.....therefore it takes well over a generation to realized that the vast majority of students have hopelessly, and unwisely, over-borrowed and will never repay. We have entered a period imho where lenders are beginning to realize that students have no hope of paying off these debts and they will only lend to students who have families which will counter-sign and have assets the lender can go after when the loan defaults.).
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There is little doubt imho that we are in the midst of a "debt-fueled bubble" in regards to the cost (and "real value") of a College Education as eloquently defined by famed Economist Hyman Minsky.
Barry is not idiotic, hypocritical or an alcoholic; and you two have to stop agreeing on things here.
You're probably right........ but I'll never admit it!!!!!!!!
Yes, Hyman (fixed it in my post) - the University of Washington (in St. Louis) Economist.
Most parents would be far wiser to tell their kids to find a trade/job and give them 250K after they turn 25.....than to waste the vast sums of $$$ being wasted on watered down degrees which will ultimately prove worthless.
By-the-by, one of the most dangerous, over-produced degrees in the debt-fueled over-built Post-Secondary Education System that breeds political, judiciary and moral corruption is law degrees.... We have infinitely more lawyers and lawyers turned professional politicians / public-servants than we need (all of them "non-value added", leeches from an economic standpoint), which has turned our society into a cesspool of litigious, zero-moral, zero-ethic "Modern Romans".
you assume most parents have kids who are willing to do actual work for a living- I'm not sure that's a safe assumption
Yeah. Quite a waste. Look at our great Commonwealth and its bloated legislative work force - over 3,000 strong. Are you kidding me? Don't know the exact figures now, but it surely hasn't gotten "better." According to a 2009 National Conference of State Legislators study, Pennsylvania employed about one of every 11 state legislative employees in the nation with barely 4 percent of the country’s population.
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Not sure what school you're talking about but both of my sons stayed at east halls which were pretty much the same as when I was there. They could only stay their freshman year and were then forced off campus to be fleeced by the apartment monopoly slum lords. Certainly no "perks" in any of the apartments they stayed in.
There was a single tv in the lounge on the ground floor of Stuart. It hardly got any stations. We survived.
All of the:
"I walked to school..... uphill ..... both ways ...... through 3 feet of snow" bravado, is exactly what the folks who are actually profiting from the REAL causes of astronomical tuition would love to see.
The ability to willfully ignore things that are right in front of ones face - with sirens blaring and red lights flashing - is absolutely stunning.
Jeebzus
"I walked to school..... uphill ..... both ways ...... through 3 feet of snow" bravado, is exactly what the folks who are actually profiting from the REAL causes of astronomical tuition would love to see.
The ability to willfully ignore things that are right in front of ones face - with sirens blaring and red lights flashing - is absolutely stunning.
Jeebzus
Thanks, your points are wise, and I actually made them both to my daughter because they match my own personal experience. I chose my least expensive college option (my state school, "Dear Old State"), and was fortunate to get into a graduate school program perceived as more "elite." As you note, for purposes of my profession, that is my school. Not that any of this logic resonated with my daughter, who hopes to go to med school
eek.
I only spent a couple of evenings in the TV lounge in Snyder, and probably was there with you (lived there Fall '76 to Spring '78). One of the times was for one of the Ali fights. Most of the time was spent studying in my dorm room as I didn't have much time for leisure with my intensive science major. Did watch some TV on my roommates black and white 10" with rabbit ears and some aluminum foil as we could get ABC and NBC on 5th floor Snyder. But certainly did not have all the perks the students have now.
it is really "funny" (in a sad kind of way) to see so many folks "rationalizing" the tripling in the price of tuition over the last 15 years.........
By talking about shit that is relatively a mere pittance - - - - but - more importantly - not even stuff that is a factor wrt tuition .
But shut that is rather a part of "room and board" - which is a COMPLETELY SEPERATE item (and has also gone up in price significantly)
Sometimes I have to ponder - are there a lot of folks who just make up stories about having actually attended (and graduated?) from college? Or was the critical thinking component of most PSU curriculums that sparse?
It wouldn't be much more than an "interesting", but meaningless, curiosity.......if not for the fact that a failure of critical thinking is such a vital component in the ability of Scoundrels to pimp out a system (or, for that matter, to pull off stunts like November 2011, and it's fallout)
By talking about shit that is relatively a mere pittance - - - - but - more importantly - not even stuff that is a factor wrt tuition
.But shut that is rather a part of "room and board" - which is a COMPLETELY SEPERATE item (and has also gone up in price significantly)
Sometimes I have to ponder - are there a lot of folks who just make up stories about having actually attended (and graduated?) from college? Or was the critical thinking component of most PSU curriculums that sparse?
It wouldn't be much more than an "interesting", but meaningless, curiosity.......if not for the fact that a failure of critical thinking is such a vital component in the ability of Scoundrels to pimp out a system (or, for that matter, to pull off stunts like November 2011, and it's fallout)
While my BS from PSU and Masters degree (elsewhere) have served me well in life, there are plenty of people out there that do quite well without the heavy dose of college of education..... I have friends and family in fields like IT Network Administration, car mechanic, commercial airline pilot, HVAC technician, RN, etc that lack 4 year degrees but still make really good money without the corresponding education debt load. It's too bad that most kids are just funneled into the school loan bubble without knowledge of what opportunities are out there.
it is really "funny" (in a sad kind of way) to see so many folks "rationalizing" the tripling in the price of tuition over the last 15 years.........
By talking about shit that is relatively a mere pittance - - - - but - more importantly - not even stuff that is a factor wrt tuition
But shut that is rather a part of "room and board" - which is a COMPLETELY SEPERATE item (and has also gone up in price significantly)
Sometimes I have to ponder - are there a lot of folks who just make up stories about having actually attended (and graduated?) from college? Or was the critical thinking component of most PSU curriculums that sparse?
It wouldn't be much more than an "interesting", but meaningless, curiosity.......if not for the fact that a failure of critical thinking is such a vital component in the ability of Scoundrels to pimp out a system (or, for that matter, to pull off stunts like November 2011, and it's fallout)
Do you consider yourself an ape? You're a (ahem) critical thinker, right? Or, are you made in (ahem) God's image?
Just curious what a college educated critical thinker like yourself has to say.
Well, I’LL BE, it looks like the university did a complete makeover of our dorms from the 60’s. Same bed, same desk, same window.
Yeah. But in the 60's you had mini skirts and free love.
