The student loan crisis will dwarf the housing market crash.

http://www.mikekarnj.com/blog/2010/08/11/college-inc/

by mikekarnj • 16 years ago

65 105 16 years ago

frossie2• 16 years ago

Interesting article.

2-year Universities: Who made up the rule that we have to attend college for 4 years?

Tertiary education does take a hell of a long time in the US. In my field, and in my generation, most UK students got their PhDs around 24-25 years of age; for the US students it was more like 27-28. Yes, if that is a real effect that would definitely be a problem.

I can think of two factors that may be affecting this (I have no data):

1. The level of the student arriving at college. Yes you can probably get a professional degree in 2 years with no holiday breaks, provided your college doesn't have to teach you basics.

2. The fact that US colleges cost so much money potentially create a vicious cycle - you need a job to pay for college, which means you need enough spare hours in which to work, which means you have to space out your courses, which means you need more money etc etc.

I would be certainly interested in views from US graduates as to why they feel it takes so long.

powrtoch2• 16 years ago

I graduated from a major US university, and was going to reply to the 2-year idea anyway. I think, while many students do take jobs, most of them are happy (for now) just to amass loans and bank on (increasingly difficult to secure) future employment. For some the vicious cycle you propose might be an actual improvement.

What I'd like to see is major Universities taking some of the ideas used in technical colleges: goal (job/career) oriented degrees, focus on actual experience, and for the love of all things sacred don't require (for example) CS majors to take dance appreciation and psychology. Students could shave a year or two off the time it takes them to graduate, and in doing so save themselves a lot of money. All without harming the "integrity" of the degree.

jbooth4• 16 years ago

Well, you don't have to take dance appreciation or basket-weaving, but there is some value to liberal arts education in addition to vocational training.

gsmaverick• 16 years ago

I am currently going into my second year university in Canada, but we have a similar situation. 60%-75% of first year course material was largely useless and/or so basic I was surprised people didn't already know what was being taught. My four year degree could easily be a 3 year degree. I personally believe the best thing to pursue at university is a double major, because it cuts down on the "broadening your horizon" courses.

muzz3• 16 years ago

Isn't there an equivalent of "Advanced Placement" in Canada? I.e. if you know the material of that freshman course, you can demonstrate it via an exam and be credited for the course.

sliverstorm4• 16 years ago

I'd say it's a combination of your #1 - I 'relearned' a LOT of stuff in my first year- and the same phenomenon inside the university, between classes.

It's terrible, and eats a lot of time. Essentially, your professors can't completely count on what professors of pre-req classes have taught you, and often have to review some things. This problem is compounded when the school admits community college students, whose classes inevitably never match up well to the University courses, so they wind up trailing.

I've also been in classes where a class that was NOT a pre-req SHOULD have been a pre-req; for example, I took a class in sensors, and learned a lot about filters in the process. A huge component of using electronic sensors is filter design, so it was a very appropriate class to learn about filters in. After that, I took quite a few classes that used filters, but didn't require any pre-existing filter courses, so the professor would have to (briefly) teach filters again every time.

ultrasaurus• 16 years ago

It's a shame that there aren't more half-courses. Running both a course on filters and "a tiny course on the stuff about filters you need to you for other courses" (that could maybe be as little as a few optional classes + a test) shouldn't be beyond our organizational skills.

Maybe what I want is more tests as pre-requisites rather than only full fledged courses (my alma mater had an English test that could be taken in lieu of one mandatory course)

evgen• 16 years ago

> in my generation, most UK students got their PhDs around 24-25 years of age; for the US students it was more like 27-28

The programs were not quite equivalent. US Ph.D. programs have traditionally included more courses and include a comprehensive examination in addition to a dissertation. A US Ph.D. candidate must demonstrate a broader understanding of the field and cannot just jump into thesis work upon starting their Ph.D. program.

frossie2• 16 years ago

The programs were not quite equivalent.

Sure, they may not be identical but they were teleologically equivalent. Newly minted PhDs from both countries proceeded to compete for the same jobs on a seemingly equal footing.

krschultz• 16 years ago

"3. College Loan Repayment Reform: If anyone files for bankruptcy, the student loan should go along with it."

No, no, no, no. This penalizes the people who pay back their loans far too much. Who wouldn't just go into bankruptcy if they couldn't pay back the loan? Unlike other loans, the bank can't take your degree back. Interest rates will go up for everyone as it becomes a riskier loan. Suddenly people who had fully intended to pay the loan back will be crushed under higher interest rates.

sliverstorm4• 16 years ago

Exactly. The ONLY plan worth taking would be graduate high school with no assets, take out a big student loan and live off that, graduate college, and file for bankruptcy. Tada, 4 years of your life absolutely free, and a degree they can't take away to boot.

nkassis6• 16 years ago

Bankruptcy isn't exactly fun. You won't be living the high life afterwards.

spudlyo• 16 years ago

And 7 years later all evidence of this is gone from your credit history.

imack• 16 years ago

I doubt the banks would give a loan to someone with no assets who could discharge the loan with little trouble 4 years later. In all likelihood, banks would require co-signing of loans with parents.

While this would definitely limit access to post secondary education, it might also have the benefit of causing people to a more honest evaluation of their education options.

isamuel• 16 years ago

This is not how bankruptcy works. When you declare bankruptcy, you have to propose a plan for repaying your creditors to the best of your ability, and that has to be approved by a court. You don't just fill out a form and file it at the local ATM; there are judges that exist to stop exactly this sort of mischief.

If your theory is true, it should apply to all unsecured creditors---especially credit cards. Why isn't it common practice to incur tens of thousands of dollars in credit card debt during college and then declare bankruptcy the day after graduation? Credit cards aren't secured debt---Chase has no legal right to repossess your Xbox. The answer is because this is the real world and that's not how the bankruptcy code works.

nkassis6• 16 years ago

Aren't the rates set by the government? At the very least, there should be ways for some of it to be forgiven for specific reasons, health reason would be on top.

Also, there are some programs where people who work for the government can get loans forgiven after a set amount a years. Maybe a similar thing (through tax breaks) could be implemented to help employers pay student loans with the student.

But the best solution is by far reduction of tuition. I'm glad I went to school in Florida, tuition was very low for a state that isn't very egalitarian usually. Education is something I feel they are doing much better than others. I now live in Canada and I see American students come here because the out of country rates are cheaper than their in state rates. And I'm all for free markets and all but the reality is, education is far from a free market. Highly subsidized and yet they still charge crazy rates for tuition. Harvard is now cheaper than some states schools, that's ridiculous.

muzz3• 16 years ago

> Harvard is now cheaper than some states schools, that's ridiculous.

Which schools would those be? And are you using out-of-state numbers?

timwiseman• 16 years ago

Aren't the rates set by the government? At the very least, there should be ways for some of it to be forgiven for specific reasons, health reason would be on top.

There are for at least some reasons. There are both student loan forbearance, deferrment, and forgiveness programs available. Deferrments seem relatively easy to get (I have one currently while I attend grad school).

Forgiveness programs seem very stringent and limited, but they do exist for certain forms of public service and for extreme hardship. There are deferrment and forbearance programs for temporary hardship though and income based repayment plans.

http://www.finaid.org/loans/ has more details.

Lendal2• 16 years ago

Exactly the opposite is true. People who make their payments get low interest rates. People who don't, get higher rates. That's the way it works.

Think about cars. Car dealerships know almost anyone coming in the door can get approved, but only if they hold prices down at a reasonable level. Beyond that level, the banks won't loan the money because the loan isn't guaranteed to be paid back. There's no such mechanism in education, because loans can't be discharged and they're guaranteed by the government, so there's no reason for schools to sell their education for a reasonable price.

jbooth4• 16 years ago

That's not how it works.

My brother had a credit card number stolen 3 times, so he cancelled the card. BANG! 750 to 690.

So he said, well, if I reopen the card, will that fix things?

"Oh, god, don't do that! That'll be an even bigger hit!"

CWuestefeld2• 16 years ago

You misunderstand. If the rules are changed so that fewer people will have to repay, then people will take advantage of that -- and fewer loans will be repayed. This means that the banks lose money. For them to stay in business (or at least to be able to maintain their capitalization -- investors will flee if they can't make profits), they've got to pass those default costs on to the customers. Thus, all of us will pay a higher interest rate to make up the shortfall.

DenisM• 16 years ago

Well, maybe they should make it so that degree can be legally reposessed by the bank - even if they can't resell it, that would still be a deterrent. Stating that you have a degree while you don't should be then treated like criminal fraud, and any future employer, seeing lack of degree would know to inquire about the details.

Now that I look at my plan, it looks rather evil. But I will publish it anyway, for the sake of discussion.

billybob• 16 years ago

"Maybe they should make it so that degree can be legally reposessed by the bank ... and any future employer, seeing lack of degree would know to inquire about the details."

This wouldn't work. They can't repossess the knowledge in your head, or the fact that you did EARN a degree, even if you don't HAVE one. Employers are mainly interested in what people know and can do, not how their finances have been in the past (though that may come into play for questions of trust).

sigstoat3• 16 years ago

most employers don't go checking with your university, as it stands. i don't see why they'd be more interested in doing so under these circumstances. the piece of paper itself is rarely what matters; only what you learned getting it. and an employer that doesn't recognize that probably isn't worth working for.

Lendal2• 16 years ago

This crisis won't be the same at all, because you can't discharge student loan debt. There is currently no reason for a lender to bother examining the loan because repayment is virtually guaranteed. Having the federal government take over the loans will only make the problem worse. Educational institutions are able to raise their prices precisely because they know that with a combination of federal and state grants and loans, anyone can go to college so why not inflate the prices sky-high?

That's what happens when you mix unlimited government subsidies into what used to be a free-market system.

nkassis6• 16 years ago

I agree that gov backed student loans are making the situation worse but removing them would be disastrous. Maybe and I can't prove this but maybe, if the gov was the sole lender, they could pressure universities into reducing tuition?

mikekarnj3• 16 years ago

Scary thing is that the government will be the sole backer of educational loans. We all know how slow and antiquated they operate. I don't know if this is going to be a good or bad thing for the economy.

hnal943• 16 years ago

The type of pressure universities will get from the government will only be the kind of pressure that is politically expedient. We have enough affirmative action university system as it is.

rsheridan6• 16 years ago

I think this is a misconception. You can't discharge a student loan, but you can just stop paying them. The worst that can happen is that your credit gets ruined and you get your wages garnished at a rate which has a cap based on your income (which isn't much if you don't make much$$$).

Three years ago they thought people wouldn't walk away from underwater mortgages either.

ezl• 16 years ago

Seems false.

1. Housing market debt dwarfs higher education debt in notional value. >14 Trillion vs 830B.

2. Most mortgages are non-recourse, meaning you can walk away. Most education loans are not. So people can't just leave banks on the hook without much more severe penalties.

When a homeowner walks away from a 600k mortgage on a house only worth 500k in the market, he/she is implicitly trading credit for 100k in cash. For some people that trade becomes much bigger 900k loan on a now 500k house. A lot of people will trade credit for 400k.

If walking away from an education loan was easy(which it isn't), I'm selling my credit for the value of my loan outstanding. That number tends to be a lot smaller, and most college-grads don't find it worth losing your credit for it.

* edit for readability

patio11• 16 years ago

It isn't going to be as bad as the housing market crash, because degrees are revenue producing assets for the overwhelming majority of people and houses are costs for the overwhelming majority of people. Also, student loans do not have any mechanisms in them which are designed to induce payment shock, like ARM resets are. (I am only half sardonic there.)

If your loan repayments are $700 a month when you graduate, they will be $700 a month for the next ten years. There is no mechanism by which they'll suddenly jump to $3,000.

Even for degrees which you wouldn't expect great things from -- like, say, English -- the value of the degree exceeds the price by huge amounts. The NPV of a bachelor's degree in English is about a million bucks. You still come out ahead with virtually any college/loan combination possible, as long as you find a job with it, and unemployment among college graduates is still at ~4.5%.

There are a few degrees which are exceptionally bad decisions, but they are the exceptions rather than the rule. One example is culinary school, particularly the ones which will load you with the federal max of loans so that you can get a $12 an hour job as a line cook. There is one glaring sore thumb in the data for master's degrees, too.

If folks are interested, I'll blog about this in a few weeks. I did a project for a client looking at government data and a few other sources to try to get numbers on the worth of degrees by majors. The work is 99% over but, clients being clients, there are some more steps it has to go through before they want to launch it publicly.

pchristensen• 16 years ago

Here's a vote for "interested".

mikekarnj3• 16 years ago

I second the vote for the article. Would love to read it.

I think most people got mortgages because it was a sure thing investment that appreciates over time. That didn't hold true.

I'm arguing that a college education doesn't exactly equate to a higher salary these days.

dnsworks3• 16 years ago

"It isn't going to be as bad as the housing market crash, because degrees are revenue producing assets for the overwhelming majority of people and houses are costs for the overwhelming majority of people. Also, student loans do not have any mechanisms in them which are designed to induce payment shock, like ARM resets are. (I am only half sardonic there.)"

Degrees clearly are great revenue producing machines for the portion of the workforce currently unemployed with degrees. I remember a few years ago, "The housing market can't crash, it's impossible, it's the only safe investment vehicle after all of those silly tech stocks".

loire280• 16 years ago

But as the parent stated later in his post, not only do college graduates earn more money, but the unemployment rate of college graduates is also far below the average unemployment rate.

In fact, it looks like the unemployment rate for college-educated workers is falling:

http://blogs.reuters.com/great-debate/2010/07/28/high-unempl...

muhfuhkuh2• 16 years ago

"Degrees clearly are great revenue producing machines for the portion of the workforce currently unemployed with degrees."

The unemployment rate for degree-holders in the US is currently 4.5%, compared to 10.5% overall. The bulk of the unemployed are in blue-collar sectors and among those who have graduated with a high school diploma or less. We can argue about what is or isn't an "acceptable rate" of unemployment, but typically for America it's been 4-5% unemployment. That even in this Great Recession, degree-holding citizen unemployment sits within the "acceptable" range, tells you that there is tons of value to getting better educated in this country at this time, and even in this climate.

noodle• 16 years ago

> It isn't going to be as bad as the housing market crash

then do you think that there will be a crash in this area, and if so, how bad do you think it will be?

i imagine it wouldn't sneak up on us like the housing crash because of the nature of the loans, but that it could lead to a longer, lingering problem kicked off by the housing crash.

mikekarnj3• 16 years ago

It might not be as bad as the housing market crash but keep in mind that more people will be going to college in the future and take out student loans. I think higher education loans will grow at a staggering rate which will ultimately crash. If it crashed on its own, it wouldn't be devastating. If it happened right after the housing market crash, it could destroy our economy.

yoden4• 16 years ago

IMO it will be far less devastating, because it will be biased towards a higher earning, lower unemployment group of people (see statistics elsewhere in this thread).

byrneseyeview3• 16 years ago

Whoa, there! What discount rate are you using? For the median degree, I get an NPV less cost of $47K. Here are my assumptions:

* Discount rate of 6% (we're talking about an asset with a 40-year lifespan and zero terminal value).

* $25K in annual school costs.

* $25K in annual opportunity costs. (May be conservative for people who are college material but didn't get a degree.)

* Four years to complete the degree. Which is very aggressive.

* $23K earnings differential. (The current average.)

* Forty years of post-degree work.

In this model, you get to breakeven 26 years after you start school. So, to the current high-school senior: assuming the job market in 2036 looks pretty much like it does now, treat these projections as solid.

It gets worse. If you assume a more realistic graduation timeframe of six years, the value is -$18K after 40 years. Of course, you can keep working; you'll hit breakeven after 54 years (at age 72).

See sheet two for my assumptions:

https://spreadsheets.google.com/ccc?key=0AjzB7A88UMCBdGVrUUN...

ahlatimer2• 16 years ago

I think you're overestimating the annual cost of school. I know it doesn't cost $25k/yr for me to go. I pay around $6k/yr for tuition, plus another $1k or so for books. According to College Board [1], that's about $1k less than the average for a student going to a public school, in-state.

Your figure matches about what it costs to go to a private school, but, from my experience, public schools are also more likely to give scholarships [2]. Even still, no one is forced to go to a private school.

[1] http://www.collegeboard.com/student/pay/add-it-up/4494.html

[2]: I went to a private school my first year. It was around $30k/yr, but I was also given a scholarship that cut that price to around $18k/yr. Most of the people I met on campus also received scholarships of some sort as well.

Retric• 16 years ago

I graduated in 3.5 years and school cost 17k/year. Also, opportunity costs is not 25K because you still have basic cost of living either way and you can work in the summer.

So run those numbers assuming school costs of 15K, opportunity costs of 5k, 23K earnings differential, and student loan costs of 3.5% tax deductable.

PS: A friend of mine worked his way through school making 7.50$ an hour as a cook at without student loans. He worked 80hours a week in the summer and 40 hours a week during school and graduated in 4.5 years. He also lived in a trailer with his wife and child and got an internship his senior year at 13$ an hour it was a major pay raise.

xutopia• 16 years ago

Do you take into account the years that someone without a degree work?

istari2• 16 years ago

You didn't factor in the very high possibility of someone dropping out.

Google "college dropout rates". Consensus figures seem to be around 40% of enrollees don't have a degree 6 years later.

harry2• 16 years ago

60% graduation rate is about on par for open admissions schools. (http://www2.ku.edu/~oirp/profiles/current/9-601.pdf) Usual retention melt from fall to fall is around 20% dropouts after the first year. http://www2.ku.edu/~oirp/profiles/current/9-505.pdf

It's something the feds and various boards are really interested in.

blahblahblah3• 16 years ago

Choosing an arbitrary cutoff of 6 years and then assuming that everyone who didn't complete their degree within 6 years is a college dropout is not a particularly valid way to measure dropout rates. I completed my degree after the 6-year mark and I'm certainly not the only one to do so. These statistics erroneously include people like me in the dropout category. A more accurate method of measurement would be to track each cohort of students from entrance through graduation and chart a histogram of the elapsed time from initial enrollment to graduation. Once you've collected these histograms for several cohorts, you're then in a position to construct a model of the statistical distribution. Then you can make accurate estimates of the true dropout rate by fitting the known graduation data for a given cohort to the model to estimate how many of the students are in the tail of the distribution that will eventually graduate.

texel• 16 years ago

Can you point me to more information about master's degrees being a bad idea? My wife is about to start a master's program, and it'd be good to know ahead of time.

nkassis6• 16 years ago

One thing no one talks about, why do all degrees virtually cost the same in most universities. Why would a engineer pay the same as a liberal arts student. The reason I saying this is maybe the cost should be proportional to the expected earnings?

brown9-2• 16 years ago

Well, what is the university charging students for - the services that they produce to give you your education, or the expected value of your salary after graduation?

In theory, universities are not for-profit.

Is there something about an engineering school education that is inherently more expensive than a liberal arts education?

nkassis6• 16 years ago

Yes in fact it cost more in equipment, facilities, salaries of professors to educate an engineering student compared to a mathematics student or English student.

muzz3• 16 years ago

The Univ of California system adds a "professional fee" to certain graduate programs (MD, JD, MBA, etc) that expected to have higher earnings.

rbanffy2• 16 years ago

If we select tuition based on price, we will, collectively, drive prices downward - with a proportional decrease in quality (much like we do with airlines). There are lots of schools in this position. Prestigious ones have the luxury of setting their tuition as high as their target market will bear, because they are focusing on quality, not price.

sigstoat3• 16 years ago

where i went, they did not pay the same. engineering school was the most expensive, followed by architecture, journalism, business, and then finally "arts and sciences". the difference was only a few percent at each step, though. (IIRC.)

recall, though, that we're dealing with a market. the schools will charge what they can get away with for a liberal arts degree. if folks purchasing liberal arts degrees could do the math to realize they're getting a bad deal, they'd stop paying so much for them and the prices would drop. conveniently for universities, prospective psych majors don't spend a lot of time thinking about their expected lifetime earnings and how much their degree will change those earnings.

startuprules• 16 years ago

Actually, the commercial real estate market crash will dwarf both the student loan and the housing market crash.

"Over the next five years, about $1.4 trillion in commercial real estate loans will reach the end of their terms and require new financing"

Elizabeth Warren Warns About Commercial Real Estate Crisis, 'Downward Spiral' For Small Businesses, Local Banks http://www.huffingtonpost.com/2010/02/11/commercial-real-est...

CWuestefeld2• 16 years ago

I got as far as

The pursuit of profit is a common theme in all of the documentaries I have listed, which is what ultimately led to the predicament we are in today.

That tells me that the author doesn't have the slightest understanding of economics. That being the case, there's no sense reading about his economic predictions.

UPDATE: I think I overstated that. What I really should say is...

The author appears to be of the class that believes that if something is done profitably, it must necessarily be bad. While it's true that many evil things are driven by greed, it's equally true that a pursuit of profits leads one to provide the goods and services that society values the most. Since the opening of the article seems to ignore the latter aspect, I don't expect that any economic analysis it might engage in will have any depth.

csmeder• 16 years ago

Yeah. Maybe he meant? - "The pursuit of short term profit is a common theme in all of the documentaries I have listed, which is what ultimately led to the predicament we are in today."

Meaning that instead of building a brand that people trust and will bring in wealth for years, they are using tricks to swindle people and make a lot of money in the here and now. Like what the mortgage companies did before the recession.

yoden4• 16 years ago

Great post. Companies making profit is generally good, because it grows possibilities for all. Granted, if they're doing it by exploiting consumers, that isn't true, but the author doesn't even consider that case.

ja27• 16 years ago

I don't want to discharge my student loans. I just want to be able to refinance them again based on current market rates.

Teese• 16 years ago

I want to know why I can't. Nobody has said why, just that you can't

nolite• 16 years ago

looking forward to my bailout

c1sc0• 16 years ago

Whatever happened to studying for the sake of it? You know, like learning new things & stuff. When did that shift from studying as exercise for the spirit to studying as a way of fattening your wallet come about?

sigstoat3• 16 years ago

uh.

people have always wanted to fatten their wallet. always will.

they just noticed 50-70 years ago that people who know more have fatter wallets.

harry2• 16 years ago

I've been curious about this myself. Through my work I get to take whatever college level course each semester I want. Been dabbling in physics and the like, but it hasn't really proven to be worth it. The material is COOL and when the professor is really allowed to 'open up' and sorta spin their tales and views it is amazing. However, the basics are only taught in this rigorous get-er-done style with 4-5 major exams a semester.

My past experiences felt so accelerated and like the goal is to cram material in the smallest available time frame - thus making enjoying the material difficult.

jacquesm4• 16 years ago

Student loans are a rip-off. The market is set up in such a way that to get jobs you have to have a degree, and to get a degree you have to borrow a bunch of money so that you can pay your way through school if your parents aren't wealthy enough.

The end result is that you'll be beholden to a bank for a good sized portion of your life (as if having a mortgage or rent isn't enough to hold you down).

Smart societies have free education, and their schools may not be always as good as those that you pay for with half of your life or so but they're adequate enough.

The main reason why education should be free is because education not being free creates an inequality between people born rich and people born poor, the poor will end up getting their education but pay for that with a significant portion of their time later on, the rich don't care.

jseliger2• 16 years ago

"Student loans are a rip-off."

If you know of another way to get government-subsidized, interest-deferred or interest-free loans to spend four years of your life professionally learning, and that have generous deferment provisions after you're done with those four years of professional learning, let me know. I'd love to access that money.

"Smart societies have free education, and their schools may not be always as good as those that you pay for with half of your life or so but they're adequate enough."

I would like you to name those smart societies with free education and world-class universities. Notice the Shanghai Jiao Tong University list of schools: http://www.arwu.org/ARWU2009.jsp .

The problem with "free" education is that a) it isn't really free -- someone is paying; b) as with so many "free" things, you get what you pay for to some extent; and c) people without any skin in the game aren't likely to value their "free" education as much. Any society you manage to name with a nominally free university education is going to suffer from some or all of those problems.

(Note: the above isn't to say American universities are optimal, or that they don't have problems: they do. But the solutions are not to proclaim that everything should be free, as if there is no such as opportunity cost, or that free from the student's perspective is equivalent to free from society's perspective.)

jacquesm4• 16 years ago

Free from the students perspective is actually a net gain for society because a better educated general public benefits everybody, not just the students.

France comes to mind:

http://en.wikipedia.org/wiki/Education_in_France

Not 100% free but the stipend more than makes up for the very low tuition fee. There are also private schools and universities in France, they charge considerably more.

jrockway2• 16 years ago

I don't see this as being true. I went to a state school (UofI). It cost $700 a quarter.

I got bored and dropped out. I had absolutely no trouble finding a job. Not having a degree has not come up at all, even when working for a big corporation that does extensive background checks.

So I am not buying that college must be expensive, or that there is no way to get a job without completing college. Sure, some people are rejected from some jobs for not having a degree, and some people spend a lot of money on college for no real reason. Overspending on college is no different than overspending on anything else.

(Example: I just bought a $900 vacuum cleaner. That doesn't mean that if you don't have $900 you can't clean your house. It just means that I overspent.)

jacquesm4• 16 years ago

> I am not buying that college must be expensive

That was my whole point. College doesn't have to be expensive, in fact it can be free or nearly so.

> I had absolutely no trouble finding a job. Not having a degree has not come up at all, even when working for a big corporation that does extensive background checks.

That's good :) My impression from friends is that having a degree would have been a big plus, not just for getting the job but also for the compensation.

> Overspending on college is no different than overspending on anything else.

That's true too. But we - TrueTech Canada Inc - spent a good bit of money getting some our employees that were seriously in debt out of it, and we helped a few that were still in school to avoid going in to debt. I was quite surprised to see kids that young saddled with such huge debts, $35K in one case.

> (Example: I just bought a $900 vacuum cleaner. That doesn't mean that if you don't have $900 you can't clean your house. It just means that I overspent.)

Sounds like you have some industrial cleaning power there :)

waterlesscloud• 16 years ago

You had a subsidized education. The cost of the education was not $700 a quarter, that was just the share of it that you paid.

joe_the_user• 16 years ago

The frustrating thing about the article is that it never asks why the cost of four year education has been up faster than inflation for many, many years.

His answer to the problem is less education. That seems like a problem to me.

The reason we had affordable state school was that education was a good for society as a whole. America, as a whole benefits from having well-educated people.

The state schools we had were affordable for both the student and the states. Why is that no longer the case? The article misses this question entirely.

kreek• 16 years ago

There's a huge difference between the housing crash and a potential student loan 'crash'.

A house is an asset. A unique asset at that, the only kind you can live in (other than your car). An underwater house, despite the term, becomes illiquid. You literally can not sell it. If you become unemployed you can not move to find work without walking away and trashing your credit.

A drop in house prices affects everyone. The student loan crisis affects very few and even fewer who make a meaningful contribution to the economy.

An underreported aspect of the housing crash was the end of the house as a magic ATM machine. People were spending vast amounts of HELOC money during the boom. Literally doubling their mortgages by pulling out cash against their house. With the crash that has stopped and the economy has ground to a halt.

What market would a student loan crash take down? Are people flipping degrees somewhere? If people feel a degree isn't worth it they'll go to a state school or transfer in from a community college. At worst schools will be forced to drop tuitions.

The post mentions student loan debts in the billions, subprime losses alone are in the trillions. That's the money out in the open. There's even more money off the books as banks don't have to report a loss until they sell REO property. There's a shadow inventory of foreclosed homes right now that matches the houses you'll find on the MLS.

The student loan crisis will in no way shape or form "dwarf" the housing market crash.

vannevar• 16 years ago

I'd go even further and say that a 'crash' in the higher education market would actually be good for the economy. Unlike lower home prices, lower tuition rates would have no significant direct impact on existing college graduates, and would permit more people to seek admission, increasing competition and therefore increasing the caliber of students enrolling. Bright people whose talents would be otherwise wasted working at Walmart will instead be able to contribute at a higher level to the economy.

The student loan crisis will dwarf the housing market crash.

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