Education Industrial-Complex

[barbaro]

We've heard and read about the military industrial complex.

Recently, I've been hearing and reading about the Education Industrial-Complex.

Borrowing money for a 4-years Bachelor's. What are the benefits? Today?

Is the debt worth it? Are all of these classes preparing the younger generations for the secure jobs?

[barbaro]

Student loans made available by the government. Therefore schools raise tuition. Because tuition goes up to fast, the government has a solution: increase the student debt ceiling.

A revolving cycle.

In Grim Job Market, Student Loans Are a Costly Burden
Hiroko Masuike for The New York Times
“Who knows when I’ll be able to start paying my loans back?” said Gregory Westby, who has $150,000 in debt after college.



By TARA SIEGEL BERNARD
Published: April 17, 2009
They bought into the notion that if they went to college — never mind the debt — their degree would lead to a lucrative job. And repaying their student loans would never be a problem.
Skip to next paragraph Your Money Guides


Interactive College Cost Calculator



Graphic Growing Burden of Student Debt

But the economic crisis has turned those assumptions on their ear as thousands of recent graduates have been unable to find jobs or are earning too little to cover the payments for loans that are sometimes as high as $50,000.

The result has been rising default rates for student loans. And unlike other debts, student loans cannot easily be renegotiated.
“You often hear the quote that you can’t put a price on ignorance,” said Ezra Kazee, who has $29,000 in student debt and has been unable to find a job since graduating from Winona State University in Minnesota last May. “But with the way higher education is going, ignorance is looking more and more affordable every day.”

About two-thirds of the students graduating from college next month, or an estimated 1.8 million, have taken on student loans to pay ever-rising tuition and room and board. The average cumulative debt among graduating seniors is about $22,500, according to FinAid.org, a Web site that specializes in financial aid.

Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, recommends that students follow a simple rule of thumb. “Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”

Gregory Westby, a 27-year-old designer who graduated from the School of Visual Arts in New York last May, is caught in the student loan trap. He has $150,000 in debt. He hasn’t been able to find a full-time job in graphic or set design, but is using his earnings from low-paying freelance jobs and working weekends at a fitness club to pay his rent. And he’s in the process of deferring his loans, which, together, cost $1,500 a month.

“Right now I’m surviving, but who knows when I’ll be able to start paying my loans back?” he said.
While Mr. Westby has found a temporary solution, many others are in default. The most recent default rate on federal loans was 6.9 percent, the highest rate since 1998, according to preliminary data from the Education Department. But this statistic illustrates only a piece of the picture. It tracks only the students who started to repay their loans between October 2006 and Sept. 30, 2007, but who had defaulted by September 2008. And it doesn’t include loans in deferment or forbearance even though those borrowers are unable to make payments. Nor does it include loans not backed by the government.

Perhaps seduced by the idea of graduating from a well-respected university, many students tend to overlook the consequences of graduating with debts that are likely to far exceed their starting salaries. And as many borrowers have learned, student loans are among the most ironclad debts, on par with child support, alimony and overdue taxes. They stick with you no matter what.
Bankruptcy usually doesn’t provide relief, except in the most dire of circumstances. Even death isn’t a good enough excuse for discharging some private loan debts. And the government can wield a heavy hand to collect what it is due: If you fail to repay your federal loans, it can garnish up to 15 percent of your wages or take your tax refund or part of your Social Security benefits.
But if you are having trouble paying back what you owe because you’ve lost your job or have some other financial difficulty, you have options. Of course, it’s always best to take corrective action before you’re officially in default. For federal loans, it generally takes about nine months of missed payments. But you can go into default on a private loan as soon as one payment is missed, though the rules vary by lender. And collection charges are usually steep.

“The good news on the federal loan side is that there are a lot of options for borrowers, particularly those who are in shorter-term financial trouble now,” said Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “The private loan side is where we don’t have or are unable to give a lot of general information because there just aren’t as many rights.”

You first need to figure out what types of loansyou have: federal, private or a combination of both. You can find out by calling the lender, accessing the National Student Loan Data System of federal loans, or FinAid.org’s Web site. Below are several options for both loan types.
Federal Loans
¶Defer or Forbearance All federal loans have a grace period of six months after graduation. But an unemployment or economic hardship deferment and forbearance can each buy up to three years, for a total of six years of relief. Defermentsare preferred because the government generally pays interest on subsidized federal loans, though you’re still responsible for interest on unsubsidized and PLUS loans. With a forbearance, you are responsible for all interest (even on subsidized loans), which is added to the loan balance.

“Students may not fully appreciate just how much that increases the size of the loan,” Mr. Kantrowitz said. “That’s why deferments and forbearances should mainly be used as a method to solve a temporary problem.”

A six-month deferment is reasonable: it would add $345 to the balance of a $10,000 loan with a 6.8 percent interest rate.
¶Extend Term If you have taken a lower-paying job but expect to find a more lucrative one later, you may simply extend your loan’s term from, say, 10 to 20 years, though doing that may double your interest costs. You can go back to your original term the next year and there’s never a penalty for paying off principal early.

¶Alternate Repayment If you have taken a low-paying job and don’t expect your salary to jump significantly, experts suggest one of the alternate repayment plans. Starting on July 1, all federal loan borrowers will be able to consider the “income-based repayment” program, which limits your monthly payment to 15 percent of discretionary income (or income above 150 percent of the poverty line) and forgives the remainder after 25 years of payments. For government or nonprofit employees, any remaining debt will be forgiven after 10 years. And if you earn less than 150 percent of the poverty level, you won’t owe any money — and it will count as a repayment, said Lauren Asher, acting president of Project on Student Debt. To qualify, your debt needs to be high enough relative to your income.

The income-contingent repayment plan is a similar program, but the payments are usually a bit higher.
There is a major caveat for both plans. If you do find a higher-paying job, and your payments didn’t cover all of your interest, those costs are tacked onto the loan amount.
For help in figuring out your best options, start by calling your lender. The Education Department’s Student Loan Ombudsman can also assist.

Private Loans
There are fewer options with private loans, and borrowers are generally at the mercy of their lender and the loan contract.
Ms. Loonin said that some lenders might offer flexible repayment plans if you’ve encountered hard times and you’re not too far into trouble. Most private loans will also provide forbearances, but with a one-year limit. Many lenders will charge about $50 for each loan for the privilege.

Private lenders don’t have as much power as the federal government to collect, but your credit will be damaged.

Link: http://www.nytimes.com/2009/04/18/yo...tudent.html?em

[DrivingForce]

Personally I think they should allow parents to take out student loans when their children are young based on a future college education and take the child's life time to pay it off and invest the money borrowed while paying back the loan so taking the debt burden off of the future generations, making payback far more likely given that the parents have more life's experience (responsible borrowers of course) and giving the parents more opportunity to provide a college education and future for their children, if the child doesn't go to college so what?

The loan is paid back, if there is any amount still outstanding they could continue to pay it back, if the child does go to college at those rates money would be saved on interest etc. by borrowing earlier but the early money being loaned would be a boost to those families futures in most cases. It could be regulated based on a child's educational development through his/her lifetime...If it looks, through progress reports, that they might not be eligible for continued education then the loan payoff could be accelerated, but at that point it is quite possible that it is either already paid off or a very manageable balance left and with those years of responsible investing might likely have put the family in a much more favorable financial position to pay it off early or finally without any financial burden..

[nidhogg]

Personally I think they should allow parents to take out student loans when their children are young

Although this is in US issues, I'll take a chunk of this, esp as UK is heading down the same route.

To me, education should be a primary concern of the state. Education should be CHEAP, relevent, widely available and accessable to all those with the intelligence to use it.

Education (for a country) is an investment in the FUTURE of that country, and a farking large slice should be borne by the state.

My only priviso would be that the education is relevent to the future needs of the country. Engineering courses? At cost. Computer/IT courses? at cost - HARD sciences -at cost. You get the idea. You wanna study 18th century french knitting techniques - pay for it yourself.

[barbaro]

Personally I think they should allow parents to take out student loans when their children are young

Although this is in US issues, I'll take a chunk of this, esp as UK is heading down the same route.

To me, education should be a primary concern of the state. Education should be CHEAP, relevent, widely available and accessable to all those with the intelligence to use it.

Education (for a country) is an investment in the FUTURE of that country, and a farking large slice should be borne by the state.

My only priviso would be that the education is relevent to the future needs of the country. Engineering courses? At cost. Computer/IT courses? at cost - HARD sciences -at cost. You get the idea. You wanna study 18th century french knitting techniques - pay for it yourself.

Great post, nidhoog.

Please comment further here about the UK, and feel free to add anything here or even start a thread on this. Me and my British buddies talk about this vey same issue, a lot.

[barbaro]

Needed criticism of how the Uni systems are run for undergrads, grads, and the false promise of tenureship.

Op-Ed Contributor
End the University as We Know It

Alain Pilon




By MARK C. TAYLOR
Published: April 26, 2009


GRADUATE education is the Detroit of higher learning. Most graduate programs in American universities produce a product for which there is no market (candidates for teaching positions that do not exist) and develop skills for which there is diminishing demand (research in subfields within subfields and publication in journals read by no one other than a few like-minded colleagues), all at a rapidly rising cost (sometimes well over $100,000 in student loans).



Widespread hiring freezes and layoffs have brought these problems into sharp relief now. But our graduate system has been in crisis for decades, and the seeds of this crisis go as far back as the formation of modern universities. Kant, in his 1798 work “The Conflict of the Faculties,” wrote that universities should “handle the entire content of learning by mass production, so to speak, by a division of labor, so that for every branch of the sciences there would be a public teacher or professor appointed as its trustee.”

Unfortunately this mass-production university model has led to separation where there ought to be collaboration and to ever-increasing specialization. In my own religion department, for example, we have 10 faculty members, working in eight subfields, with little overlap. And as departments fragment, research and publication become more and more about less and less. Each academic becomes the trustee not of a branch of the sciences, but of limited knowledge that all too often is irrelevant for genuinely important problems. A colleague recently boasted to me that his best student was doing his dissertation on how the medieval theologian Duns Scotus used citations.

The emphasis on narrow scholarship also encourages an educational system that has become a process of cloning. Faculty members cultivate those students whose futures they envision as identical to their own pasts, even though their tenures will stand in the way of these students having futures as full professors.

The dirty secret of higher education is that without underpaid graduate students to help in laboratories and with teaching, universities couldn’t conduct research or even instruct their growing undergraduate populations. That’s one of the main reasons we still encourage people to enroll in doctoral programs. It is simply cheaper to provide graduate students with modest stipends and adjuncts with as little as $5,000 a course — with no benefits — than it is to hire full-time professors.

In other words, young people enroll in graduate programs, work hard for subsistence pay and assume huge debt burdens, all because of the illusory promise of faculty appointments. But their economical presence, coupled with the intransigence of tenure, ensures that there will always be too many candidates for too few openings.

Link & Entire: http://www.nytimes.com/2009/04/27/op...er=rss&emc=rss

[DrB0b]

Forget student loans. Forget private payment. Go back to restricted entry (based on ability) and competitive scholarships, at least that way only the best and brightest will get into university. If that were to happen a degree might actually be something worth having. A university should be a national resource, not a business, and education should be seen as something greater than just preparation for employment.

[Muadib]

^ Yep, as my father used to always say; "Son, the world needs ditch diggers too"...

Personally I think they should allow parents to take out student loans when their children are young..............

What!!! Borrow money with the hopes that you are investment savvy and can earn a return on the borrowed funds to pay for your children's education... What ever happened to saving money for future needs... This mindset of borrow today and maybe pay back tomorrow is what got the US into the mess it's in now...

To me, education should be a primary concern of the state. Education should be CHEAP, relevent, widely available and accessable to all those with the intelligence to use it.

Ahh, more socialized services funded by the tax payer... No thank you... Plus, the public education system in the US is in shambles... I can't imagine how bad colleges & universities would be if the government ran the show...

[Jet Gorgon]

^ I'm with you, M. If kids really want to go to college, uni, whatever, they will find a way. This "free" crap is nonsense and it cheapens the degrees attained and provides freeloaders and the uninspired to slack off for a few more years before they have to get a real job or likely go on the dole.

[sabang]

I'm with nidhogg and DrB on this one. Education is undoubtably a privilege, but ultimately it is an investment by society in it's own future. For first degrees at least, I've always thought this student loan system is shortsighted- let the brightest and most motivated be enabled to further their education, for the ultimate benefit of not just themselves, but society.

Several arguments back up this point of view:-

1- Student loans distort the market in favour of the Affluent, at the expense of the Talented. Almost without exception the more desirable the degree, the more expensive the cost. The more desirable the school, the more it costs. So, say, a law degree at Columbia followed by a post grad specialisation to qualify one to enter a lucrative field of law will be funded by your parents if they are affluent lawyers or whatever. But that bright kid from South Dakota who is unquestionably more academically qualified will quite likely do his law degree at a less expensive school and not pursue a post grad qualification, because of the onerous burden of his student loans- and they must look extremely onerous to the average kid who has not grown up with money. So the market is distorted, in favour of family wealth over academic talent.

2- Student Loans lower the standard of Education. A continuation of the point above really. At the end of the day, colleges are degree factories- they will churn out degrees, regardless of the academic quality of the most recent crop of undergraduates. If the overall academic standard drops overall, the requirements to pass ones degree will drop accordingly. If it rises, the opposite will be the case. Colleges and the education system in general would love you to believe the opposite, but this is manifestly not the case.

3- College Loans raise the cost of professional services. Particularly the lucrative disciplines such as medicine, law and accountancy. A college loan is taken as an investment in ones future- and as with every investment, one undertakes it with the expectation of it paying back, and with interest. Consider a student who does an MD, followed by a specialisation such as psychiatry or oncology. In the States, they may well graduate with a student debt exceeding $500,000- before they earn their first dollar of revenue! So what do they need to be paid to make it worthwhile for them? And who ends up paying for it? Us- society. This system is self perpetuating too- the more lucrative the discipline, the more expensive the education, the more the student loans, the more the cost of the professional services to pay for it. There is thus little incentive to control costs at the top end (as opposed to a basic degree from a state college)- and the system is further skewed in favour of family wealth over merit.

4- Student Loans are of dubious financial viability. Student loans are given at subsidised interest rates. They are collected over a period of several, or even many, years- and sometimes not at all. To administer this system requires a lot of resources, red tape and bureaucracy- and who pays for it (Us, again). Many, if not most, people who look into the system doubt it carries any financial viability, quite likely the opposite- especially when you consider the deleterious effect on the overall merit of the student body studying for the lucrative discoplines.

5- Student Loans perpetuate the class system, at the expense of the Meritocracy. A nice fuzzy one to get the Conservatives up in arms . Not since Edwardian times has Higher education been designed to perpetuate the class system. Or so they say . But the student loan system encourages the Rich to pursue the elite, highly paid specialisations- at the expense of those more academically talented poor or middle classes. So really, the higher education system- supposedly designed to be the great leveller, a meritocracy- is not, at all.


In short, SL's are bullshit. the system doesn't work, is counterproductive and contrary to the stated aims of society- in which the most talented should get the best jobs, not the rich kids. Get rid of 'em, and let the Cream rise to the top.

[Jet Gorgon]

^ So, what you're saying is the po kids should get into college for free coz if they have to pay a student loan they would be disadvantaged? If you let all the po kids in for free, the colleges would be stuffed with worthless kids who just want a free ride. Fekin weird ideas you libbies have.

[nidhogg]

^ So, what you're saying is the po kids should get into college for free coz if they have to pay a student loan they would be disadvantaged? If you let all the po kids in for free, the colleges would be stuffed with worthless kids who just want a free ride. Fekin weird ideas you libbies have.

No honey, he is saying make education about MERIT and not about MONEY.

[Jet Gorgon]

^ So, what you're saying is the po kids should get into college for free coz if they have to pay a student loan they would be disadvantaged? If you let all the po kids in for free, the colleges would be stuffed with worthless kids who just want a free ride. Fekin weird ideas you libbies have.

No honey, he is saying make education about MERIT and not about MONEY.

Did I say merit was not involved? A kid with ambition comes with merit and he/she will find a way to get into college. If the kid is smart enough, the uni will provide funding. Why should any kid be allowed entrance? Didn't work in the UK did it? They cut that freebie tuition sh*t out years ago. Same crap with affirmative action in the US -- brings the standards down.

[sabang]

Nidhogg is right, and actually my argument is the polar opposite of a liberal position (strange how the embattled Republican rump finds everything liberal these days ). Merit is established through academic testing, school grades, interviews and such like. It is nothing to do with quota's based on race, zip code, family income or whatever.

Nothing is free. Education is paid for, ultimately by the taxpayer. If a student loan is involved, the cost of the labour encumbered to repay the loan rises. Thats basic economics. The repayment to society is longer term, through the provision of high value added services and the benefits that accrue therefrom, including of course income tax.

No crime in your daddy being rich, but I want the Specialist that determines the future existence of my child to be the best man for the position, whatever street he comes from, not the one with the richest daddy.

[barbaro]

Serious situation. Look at the amount of debt 12 years ago by the average Uni gard, and now look at it today.

And as we've stated before: Since the gov will increase loans, it makes it easier for schools to increase tuition. And so on, and so on.

Will the younger generations ever see the light of day?

SEPTEMBER 3, 2009, 12:14 P.M. ET
Students Borrow More Than Ever for College

Heavy Debt Loads Mean Many Young People Can't Live Life They Expected



ANNE MARIE CHAKER
Associated Press A student walked on the campus of the University of Mississippi, where classes got under way for the fall semester Aug. 24.



Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.
The sharp growth is "definitely above expectations," says Robert Shireman, deputy undersecretary of the Education Department. "But we're also in an economic situation that nobody predicted." The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he says.

The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government's National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.
Lend a Hand

Some options for graduates having trouble making payments on their federal student loans:

• Borrowers can request a deferral or forbearance, which suspends payments temporarily
• The extended-payment option makes monthly payments smaller by increasing the loan term
• Income-based repayment means the borrower pays up to 15% of discretionary income each month

The ripple effects for today's heavily indebted young people are becoming palpable. A growing body of research suggests that tough loan payments are affecting major life decisions by recent graduates, forcing them to put off traditional milestones—from buying a first home to even marriage and having children.

Also, the rising levels of borrowing may ironically be contributing to the accelerating cost of college, say some college-finance experts. Loans can give colleges an artificial sense of a family's ability to pay tuition. To some extent, that false sense of security gets built into the assumptions schools make when setting prices, say experts. The idea is that as prices rise, families borrow more and more, spurring prices to rise further, which in turn requires more borrowing. Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, says this phenomenon is playing a role in why tuition grows at about twice the rate of inflation. "Instead of imposing tougher choices" on college costs, he says, it's "easier to raise prices...because this additional loan amount is made available."

Link: Student Debt Grows Dramatically - WSJ.com

[GooMaiRoo]

Borrowing money for a 4-years Bachelor's. What are the benefits? Today?
Is the debt worth it? Are all of these classes preparing the younger generations for the secure jobs?

If a student is focused and learns a skill that's projected to be in demand, college is worth it. In the USA, college degrees in accounting, environmental engineering, computer animation, nursing, education and pharmacology all come to mind. If a student goes to college in order to drink beer, screw, sort out what he wants to do with his life or pursue a discipline that has no value in the marketplace, he's just pissing money away.

[barbaro]

Borrowing money for a 4-years Bachelor's. What are the benefits? Today?
Is the debt worth it? Are all of these classes preparing the younger generations for the secure jobs?

If a student is focused and learns a skill that's projected to be in demand, college is worth it. In the USA, college degrees in accounting, environmental engineering, computer animation, nursing, education and pharmacology all come to mind. If a student goes to college in order to drink beer, screw, sort out what he wants to do with his life or pursue a discipline that has no value in the marketplace, he's just pissing money away.

Very true, especially today in the current and future times.

Bumped to provide info that exists in the "uneducated American Op-Ed" thread. The video in the OP is worth a watch. It discusses exactly what GooMaiRoo, states.

[Jet Gorgon]

^ True. Liberal arts degrees get folks nowhere nowadays, except maybe a faster track from checkout clerk to assistant mgr at Wal-Mart. Saw student posts on a Van forum here and they sobbed that their social studies degrees got them nowhere. Yep. Well, if nothing else, uni should train your brain to focus and develop new biz. Ain't so good for MBA grads these days either.

[barbaro]

^ True. Liberal arts degrees get folks nowhere nowadays, except maybe a faster track from checkout clerk to assistant mgr at Wal-Mart. Saw student posts on a Van forum here and they sobbed that their social studies degrees got them nowhere. Yep. Well, if nothing else, uni should train your brain to focus and develop new biz. Ain't so good for MBA grads these days either.

Yes, there's been discussion about the value of an MBA, recently.

Over time, the MBA became means to "get a promotion."

When this happens, it's like going through the motions, like cattle.

Recent studies indicate both holder and non-holders of MBAs that becamse CEOs stated that the MBA, was not a help, or that it would not have helped them do their CEO function more competently.

[barbaro]

Education costs in the US, continuing to sky-rocket.

College: More expensive than ever

Tuition is climbing at a faster clip than the availability of financial aid, putting a degree further out of reach for many Americans.


By Hibah Yousuf, CNNMoney.com contributing writer
October 20, 2009: 11:31 AM ET




(or part of name)

OR

NEW YORK (CNNMoney.com) -- College costs are higher than ever, according to a new report, putting a degree even further out of reach for many Americans.

Tuition and fees at private 4-year schools rose 4.4% in the current school year to $26,273, according to a survey released by the College Board Tuesday.

Charges at public 4-year universities spiked over 6% for both in-state and out-of state students, to $7,020 and $18,548, respectively.


"We're in a very strong sellers market for higher education," said Pat Callan, president of the National Center for Public Policy and Higher Education, who noted that the high school graduating class of 2009 was the largest in history.

"Colleges and universities are capitalizing on that more than any other institution in the economy. If you walk around a shopping mall, nobody else is raising prices at the same rate."

Link & Entire: College is more expensive than ever - Oct. 20, 2009

[barbaro]

Same article:

How are these students paying for this?

More borrowing. To help bridge the gap between what college costs and what families can afford, student loans are also up. Total borrowing increased 5% between the 2007-2008 and 2008-2009 school years, the most recent for which data is available.


If these trends continue, experts say that it will become even harder to get a college degree.

Link: same as above post.

[barbaro]

The real plan for public education:

[barbaro]

This makes perfect sense.

Tuition has grown so much because of the SLs (Student Loans):

Link:
http://www.courant.com/news/educatio...6363093.column

Not long ago I got into it with the YouTube investment wizard and U.S. Senate candidate Peter Schiff over college loans and the ever-increasing price of tuition.

The impish Schiff — who predicted the current economic collapse — hit me with a simple explanation to a question I cannot find an answer for: It's the government's fault for handing out so much money through loans and grants.

No government bailout, Schiffian logic goes, no inflated tuition.

"College should not be so expensive. It's the biggest recession since the Great Depression. How could college prices go up?" Schiff asked me when we talked after our dust-up on WFSB's "Face the State."

I didn't have a reply. I still believe that we need more college-educated workers for the new economy, whenever we figure out what that is. But it's worth listening to Schiff if only because every other explanation is so lame.

The fact that I couldn't get a couple of prominent university leaders to talk didn't help. The presidents of Wesleyan and UConn wouldn't touch this topic when I requested a chat.

"Unfortunately, it is one of those things that has a grain of truth to it," said Patrick Callan, president of the National Center for Public and Higher Education, when I bounced Shiff's argument off him. "We used to deny it was even a good question. We don't do that anymore."

Schiff, as his zealous followers can recite, believes that the free market is the antidote for nearly everything. I don't quite agree, but I don't have a BMW with a driver, either.

"If kids could not borrow money to go to school, they could not pay these prices. Nobody would be going," Schiff said. "Would the colleges really just shut down and say we have no business?"

"Even if they did go bankrupt, somebody else would come in and buy that university and operate it at a much lower cost," he explained. "Colleges will react quickly to a drop in enrollment. What they are going to have to do is go over their books and figure out who can we cut and how can we streamline this process. You should probably have minimal staff at a university. It should be very, very efficient."

Still, I wonder whether all this would yield a lot more schools of business and graduates who make millions of dollars off derivatives and not nearly enough comparative literature programs and stem cell researchers.

When I called Sandy Baum, a consultant to the College Board, she was quick to tell me that Schiff's antidote would be a disaster, pushing college out of reach for tens of thousands of students.

"If we didn't have [government] financial aid, low and moderate income people simply would not have the money to pay," said Baum, an economist and expert on the cost of higher education. "To think of it as supply and demand, that's not the way it works."

"It's possible that sticker prices would fall at some institutions. But others would probably end up raising their prices in order to increase their financial aid to enable students who aren't wealthy to enroll. Some colleges would probably go out of business," Baum said. "But the decline in the supply of seats would certainly not help bring prices down."

Don Klepper-Smith, an economist who advises the governor, said I am missing the larger point. It's not a question of whether government should support higher education — it's whether we are getting our money's worth. We might not be.

"Show me the return on investment. Show me the skill-set we are producing," said Klepper-Smith. "Many of our college institutions have lost sight of the fact that a job prospect is one of the deliverables due at the end of a college education."

Which makes me think that even if Schiff is some kind of libertarian savant, he's got a point. Would it be so bad if colleges had to face the free market and show that graduates will be able to at least pay off the debt that comes with a diploma?

Schiff, the genius investor who communicates with his followers via video blog, told me it really isn't that complicated.

"I'm sure I could run a university at a profit," he said. "How hard could that be?"

[barbaro]

I think there are many benefits to getting a degree. Most of the benefits are not financial. I've always felt this way.

But here is a sobering perspective, and I am seeing this a lot. Especially with the new Uni grads I'm running into.

* FEBRUARY 2, 2010

What's a Degree Really Worth?

By MARY PILON

A college education may not be worth as much as you think.

For years, higher education was touted as a safe path to professional and financial success. Easy money, in the form of student loans, flowed to help parents and students finance degrees, with the implication that in the long run, a bachelor's degree was a good bet. Graduates, it has long been argued, would be able to build solid careers that would earn them far more than their high-school educated counterparts.

The gap between pay for college graduates and high school graduates isn't as wide as has been reported.

The numbers appeared to back it up. In recent years, the nonprofit College Board touted the difference in lifetime earnings of college grads over high-school graduates at $800,000, a widely circulated figure. Other estimates topped $1 million.

But now, as tuition continues to skyrocket and many seeking to change careers are heading back to school, some researchers are questioning the methodology behind the high projections.

Most researchers agree that college graduates, even in rough economies, generally fare better than individuals with only high-school diplomas. But just how much better is where the math gets fuzzy.

The problem stems from the common source of the estimates, a 2002 Census Bureau report titled "The Big Payoff." The report said the average high-school graduate earns $25,900 a year, and the average college graduate earns $45,400, based on 1999 data. The difference between the two figures is $19,500; multiply it by 40 years, as the Census Bureau did, and the result is $780,000.

"The idea was not to produce a definitive 'This is what you'll earn' number, but to try and give some measure of the relative value of education attainments," says Eric Newburger, a lead researcher at the Census and the paper's co-author. "It's not a statement about the future, it's a statement about today."

Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it "a million-dollar misunderstanding."

One problem he sees with the estimates: They don't take into account deductions from income taxes or breaks in employment. Nor do they factor in debt, particularly student debt loads, which have ballooned for both public and private colleges in recent years. In addition, the income data used for the Census estimates is from 1999, when total expenses for tuition and fees at the average four-year private college were $15,518 per year. For the 2009-10 school year, that number has risen to $26,273, and it continues to increase at a rate higher than inflation.

Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

And just like any investment, there are risks—such as graduating into a deep economic downturn. That's what happened to Kelly Dunleavy, who graduated in 2007 from the University of California, Berkeley, with $60,000 in loans. She now works as a reporter for a small newspaper in the Bay Area and earns $34,000 a year. Her father is currently paying her $700 monthly loan payments. "It's harder than what I think I expected it to be," she says.

"Averages don't tell the whole story," says Lauren Asher, president of the Institute for College Access & Success, a nonprofit group based in Berkeley, Calif. She points out that incomes vary widely, especially based on majors. "The truth is that no one can predict for you exactly what you're gong to earn," she says.

And that includes the College Board, which recently said on its Web site: "Over a lifetime, the gap in earning potential between a high-school diploma and a bachelor of arts is more than $800,000. In other words, whatever sacrifices you and your child make for [a] college education in the short term are more than repaid in the long term."

The $800,000 number, it turns out, was pulled from a footnote of the College Board's 2007 "Education Pays" report that explained lifetime earnings. The report's author, Sandy Baum—an emeritus Skidmore College economics professor who didn't write the promotional text on the Web site—says that $450,000 is actually a more reasonable estimate of the difference in lifetime earnings, something she's said in interviews for more than a year.

Steve Talbott, a journalism professor at Cleveland State University who is researching the cost of education and student-loan debt, says he urged the College Board to take down the "misleading use" of the $800,000 number a year ago. Others have voiced their objections to the College Board figure via letters and blogs.

A College Board spokeswoman says it doesn't have a record of when the content was written and that "it's possible that during an update of the content the writer misinterpreted the data within the report." She also says the text represented old data and reflected "a different methodology." The $800,000 figure was removed from its Web site in December, once the group learned of the error, she says.

Link: Earnings Gap Between College and High School Grads Small - WSJ.com

[barbaro]

2 years and 2 months after this thread started, the costs have risen dramatically. It's gotten worse.

Article out today. Just like the Stock market tech bubble and housing bubble - there is now a student loan (borrowing) bubble. Less money in total, but it will be damaging and has ripple effects.

With more than $1 trillion in student loans outstanding in this country, crippling debt is no longer confined to dropouts from for-profit colleges or graduate students who owe on many years of education, some of the overextended debtors in years past. Now nearly everyone pursuing a bachelor’s degree is borrowing. As prices soar, a college degree statistically remains a good lifetime investment, but it often comes with an unprecedented financial burden.

Ninety-four percent of students who earn a bachelor’s degree borrow to pay for higher education — up from 45 percent in 1993, according to an analysis by The New York Times of the latest data from the Department of Education. This includes loans from the federal government, private lenders and relatives.

And....

Mr. Date likened excessive student borrowing to risky mortgages. And as with the housing bubble before the economic collapse, the extraordinary growth in student loans has caught many by surprise. But its roots are in fact deep, and the cast of contributing characters — including college marketing officers, state lawmakers wielding a budget ax and wide-eyed students and families — has been enabled by a basic economic dynamic: an insatiable demand for a college education, at almost any price, and plenty of easy-to-secure loans, primarily from the federal government.

“If one is not thinking about where this is headed over the next two or three years, you are just completely missing the warning signs,” said Rajeev V. Date, deputy director of the Consumer Financial Protection Bureau, the federal watchdog created after the financial crisis.

Entire article is worth a browse: http://www.nytimes.com/2012/05/13/bu...3&ref=business