College: Like Herpes With Compound Interest

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college college debt, education bubble, higher education, student loans

 

Student Loan Debt: It’s Not Worth It

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higher education, student loans

Pew Research Center has a new set of data on student loans that show nearly a fifth of American households have student loan debt, a jump of almost 5% since 2007, when the economy went to pot. One of the reasons for this is that workers are trying to retool and reeducate themselves in an attempt to ride out the economic downturn. Unfortunately, increased college education means “certification inflation” as competition increases due to more people have similar qualifications. It also means more debt and less opportunity to find employment that would give a positive benefit to the cost of the degree.

Among households owing student debt, the average outstanding student loan balance increased from $23,349 in 2007 to $26,682 in 2010. Most debtor households had less than $50,000 in outstanding student debt in 2010, but the share of households owing elevated amounts has increased. In 2007, 10% of student debtors owed more than $54,238. By 2010, 10% of student debtor households owed more than $61,894 (all dollar figures adjusted for inflation and in 2011 dollars).

Particularly for those foolish enough to pursue liberal arts educations, rather than vocational or scientific/technical degrees that have a higher return on investment, the need to pursue higher degrees with commensurate increases in debt leave these high-debt household in an untenable position. Household income is shrinking, life-long debt increases.

This is no accident. The federal usurpation of student loans places the taxpayers that use loans to fund educations in thrall to the government. The education pushers in both political parties want a population deep in debt to the federal government — the only purveyor for student loans thanks to a provision in the Affordable Care Act (Obamacare.) Debt limits your options in life, negating the force multiplier education provides, but it does benefit the lender — in this case the federal government.

Work experience and vocational skills are, for most of the workforce, a better choice than the typical liberal arts education, which was originally designed to provide well-to-do men with a wide (but not deep) knowledge of history, politics, and other subjects that were of some use in public service. Engineering, sciences, and other vocational subjects — the ones of real use and high earning potential — are still worth the investment, but a masters or doctorate in history or philosophy or English prepare you for little more than a life in academia. Niche “victims’ studies” are even more useless.

Simply put, if you are looking for that fast track management career at Starbucks or a call center, you’d be better off working your way up the ladder than wasting your money on a liberal arts degree that will lock you into perpetual debt.

Should College Be Free? That’s About What a Degree Is Worth, These Days: Nothing

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college degree, katrina vanden heuvel, progressivism, socialism, student loans

Katrina vanden Heuvel is the editor and co-owner of The Nation — the famed Progressive/socialist rag. Here she’s writing in The Washington Post that college educations should be provided free of cost to students. She rightly points out that college costs, as with healthcare, have skyrocketed — far exceeding the inflation rate — but fails to identify the culprit of this trend: both of these service areas tend to be paid for by third parties (insurance companies, state lottery schemes, student loans.) The cost is masked by having another vendor pick up the immediate burden. As with taxes, which are sipped from your paycheck, rather than gulped in April, the pain of the cost is deferred or mitigated.

Except, after a few decades of luring students to schools with “cheap” money in the form of loans, the bill is due. Student loan debt is one of the biggest anchors to a young (or not so young) worker. This is vanden Heuvel’s reasoning for proposing making college free. Well, that and this, “Making public colleges free would cost, it is estimated, somewhere around $30 billion a year. We could afford it….”

Really…at $16 trillion and counting in debt, a lackluster 2.2% growth in GDP (at best), and record unemployment and underemployment? I guess when you’re wasting trillions, billions doesn’t seem that much.

Having taught at a couple of state schools (and currently attending one), the students at these institutions are not well served. Many come to college barely literate, as it is; this is a product of the “free” public schools. They barely pick up any information, much less critical thinking skills due to the monolithic ideological makeup of liberal arts curriculum and faculty. Since the bachelors’ degree is unlikely to gain you better employment than a similar number of years experience in the workplace would (although there certainly is a ceiling to what you can do without one, thanks to the certification inflation created by idiotic, hire-to-specifications human resources departments), and you aren’t learning much, the degree is worth very little. For the value, you could make a credible argument it should be free.

Andrew Coulson over at the Cato Institute has an interesting alternative to shoveling money to state-funded schools to save a bloated and corrupt system:

“How about this: instead of handing control over that education to someone else, decide what it is you would like to learn over those four years and then… learn it. Thanks to the Web, the material covered in virtually every undergraduate program is readily available at little cost—and the same is true for many advanced programs. And, having learned it, spend a few hundred dollars to create a website or even simply a YouTube channel on which you demonstrate your new skills/understanding. Conduct research. Write it up. Build something. Translate Cyrano into English, maintaining the Alexandrine meter and rhyme. Whatever it is. Then, when you’re ready to apply for work, submit your resume with a link to this portfolio of relevant work.”

Unemployment by Majors

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college degree, student loans, unemployment

The gray bar is graduate degree holders, green line the experienced bachelor degree holders, the yellow is recent bachelor-level graduates.

The Debtor Prison in Your Future

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debtors prisons, government corruption, police state, student loans, taxes

The states have started bringing back the debtors’ prison. Poor people that can’t pay court costs often find themselves imprisoned for the inability to pay court costs, many of which get tacked onto a fine or fee that was imposed on them. Arizona throws a maintenance fee on top of your prison sentence — something that was standard in the old days of the debtors’ prisons, which would lead to people being perpetually jailed for minor debts or offenses.

Which raies the question: With the takeover of the student loan industry by the government (an amendment in the Affordable Health Care Act [Obamacare]), how long before the government begins jailing folks for failure to pay? Will they use the new MAP 21 Act (Moving Ahead for Progress in the 21st Century Act) tacked onto the transportation bill to keep you from emigrating or expatriating? Better yet, if you do escape the United States, will the United States be successful in their attempts to create a “minimum global tax” — expanding IRS authority outside the borders of the United States? (Unlikely.) They’ve already taken away the ability to use bankruptcy, thanks to the doctor students that abused the system in the 1970s to avoid their loans. (Once again, thanks Baby Boomers! The worst generation ever.)

I had this discussion with my wife this morning, in which she asked, “What’s the alternative?” Answer: You could garnish wages. You hit their credit rating. The market has a system to handling deadbeats. Putting people in jail so they can 1) not earn and pay their bills, and 2) cost more money by putting them in jail — remember, they’re incarcerated, so they’re not going to be paying off those “maintenance fees” is stupid. It’s unproductive at best, counterproductive at worst.

3 Reasons Not to Forgive Whiners’ Student Loans

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occupy wall street, student loans

Don’t Bail Out Students’ Loans

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student loans

I have a metric buttload (that’s 2.4 craploads) in debt due to being stupid enough to pursue a PhD in a field that’s going to make me $50k/yr teaching…if I’m lucky. And no one should have to pay for me.

But the government also shouldn’t be guaranteeing the loans.

Outstanding Student Loans At $1 Trillion (and coooounting!)

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student loans

USA Today informs us the outstanding student loan debt has surpassed $1 trillion…all of which is, like the bad mortgages of Fannie and Freddie, about to land on all our heads. Unlike the mortgages, though, you can’t discharge these debts through bankruptcy or any other means (A violation of the 14th amendment’s equal protection, perhaps..? Why would this be the only kind of debt you cannot discharge? Come on, lawyers, make yourself a chunk of money here! Oh, and thanks, baby boomers, for screwing us all when you bankrupted to get out of your loans in the 1970s.)

 

As with medicine, education is growing at rates far exceeding inflation because it has become a third party payer system: students don’t see the debt incurred, they just know the govenrment has paied for their four years of loafing about, with the excess from their tuition and fees going to whatever iPod app or other goodie they spent the money on. Oops! How did I rack up $32k in debt in four years?

Even better, now that practically everyone is going to college, the value of your degree has eroded through certification inflation — that BA is as good as a high school diploma was ten years ago: enjoy paying that $32k on a Starbuck’s salary. The MA — well, you can’t teach at a community college anymore; they want a PhD. Doctorate holders (me) — you’re screwed unless you’ve got 5 years experience teaching or postdoc studies now. As in the Soviet Union where you had generals cleaning toilets and doctors working as mail carriers, school is simply not worth it anymore.

It’s simply a way for the government to bilk you into de facto indentured servitude, working to pay the state, or General Revenue it’s 28% off the top of your payments, should you default.

But hey — Belize is English-speaking, a non-extradition country, and it’s $500 to get a residents visa. Best of all, if your income is from outside Belize, you don’t pay income tax.

Student Loans: The Next Big Bubble to Burst

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student loans

Here’s a great infographic from one of our readers at healthcareadministration.com:

Note how the baby boomers instantly played the system and screwed all the following students by immediately declaring bankruptcy to avoid paying for their educations. To prevent that, from happening again, the government has essentially locked college students with loans into wage servitude to the state. If you default, you have your wages garnished, your tax returns stolen, and a quarter of that goes to government-backed “private” company General Revenue.

Like Fannie Mae and Freddie MAc, Sallie Mae has made a stunning amount of loans, which has — much like third-party insurance payments have with medical care — pushed the prices of tuition higher. It creates a terrible feedback loop where the costs go up, requiring more loans, which steadily erode the returns of an investment in education. And if all goes poorly for the student borrower, they find themselves through their fault or no unable to pay…they cannot declare bankruptcy. There is no second chance, no equal protection under financial laws.

And you sure as hell aren’t getting bailed out — you don’t contribute enough to the political coffers of our would-be lords and masters. For a four-year hiatus from work that the liberal arts university has become, it’s a terrible deal. You’d be better off doing an apprenticeship or taking loans on a short-period certification program like motorcycle maintenance certification, or the like.

As an aside, a forgiveness of all student loans at the beginning of the financial meltdown, rather than the bank bailout, would have been cheaper — as the money was already gone — than to borrow $1 trillion to reward the irresponsibility of the financial sector.

The Next Big Bubble: Student Loans; UPDATE: Also Seeing More Bankruptcy in College Graduates

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college, student loans

Student loan defaults are up this year from 7 to 8.8%…and it’s just getting started.

The more you’re on the hook to the Feds — now that they’re broke — the more likely we are to find that “affordable” education will lock you into some for of government “service” (i.e. indenture…) For the massive debt most students incur, you get very little bang for your buck in the job market; a return to vocational training would be wise — about half the student body at liberal arts colleges don’t finish and really shouldn’t have been there; college is a means to put off the hardships of having to get and keep a job and be responsible for oneself. (Hell, that’s why I originally went!) They needed skill training, not a deconstruction of Wordsworth or a bit of propagandizing on the utility of the New Deal.

UPDATE: Just in case you weren’t convinced, here’s a piece from the Wall Street Journal on the spate of bankruptcies being declared by college graduates. It’s up across the boards for all degrees — because a degree isn’t a guarantee of success; it’s a force multiplier to be one. Worse, the higher the degree, the more indebted you are and the less time you have to recover from them — especially if you’re an older person going back to school to make yourself marketable again. Here’s the visuals –