Student debt and future? (Danvers, Harvard: insurance, credit, student loan)
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I've actually had some goofy late night discussions while sitting around a fire with libations around this subject. We threw out the idea of education pricing based on expected earnings. Granted it is almost impossible to implement but it goes to the point of "Value" of that degree.
It seems silly to me that an English major who is most likely heading for a career in academics of some flavor would pay the same for that degree as an engineering student. When you think about the value of those two degrees and their earning potential 2-5 years from graduation, which one is worht more to most people?
A pricing scheme based on expected earnings is exactly the wrong way to go. Most colleges aren't for-profit institutions, so price of education should be reasonably connected to the cost of that education. If pricing was based on expected earnings, the only way that could work would be by having the people studying lucrative majors subsidize those who study less lucrative majors.
Most jobs are in the free market, where the pay is related to the supply of workers and the demand for those workers. High paying salaries generally indicate that there is either a strong demand or a short supply (or both) for those workers. These tend to be in the STEM fields (science, technology, engineering, mathematics), likely because STEM degrees are fairly useful in the current economy and the field of people capable and interested is already a bit limited (perhaps because these fields are difficult, perhaps because people don't like them or the amount of work you have to do to get a STEM degree).
Now, let's revisit the subsidized major model. With equal costs, more people are choosing the easier, less in-demand majors (either because of perceived ability or other, more sloth-related incentives) when costs are equal. By adjusting the costs to favor those easier majors, you're certain to shift even more people over into the less relevant and economically less useful majors. The few who pony up the extra cash and effort to get a STEM degree will be even more in demand. As is already the case, employers will complain about the lack of qualified local talent and demand more leeway to hire overseas talent (presumably India and China aren't so short-sighted in their college education programs and have an abundance). We've essentially shifted local students from useful majors to less useful majors, which is the exact opposite of what we should be doing.
I don't know the best way to implement a solution, but the key is to better align the supply of students with the demands of society.
One way is to offer financial aid that is commensurate with expected return, rather than with the notion that everyone deserves a liberal arts education. You wouldn't offer someone a $400000 loan for a business that in the best situation would make $30000/year, so why do the same for an expensive advanced degree in a field that has little economic demand? I'm sure there are other solutions, as well.
Quote:
Originally Posted by kingeorge
Great comments! I appreciate it very much.
I would argue that we do have glut or bubble of colleges, and degrees that serve no other purpose but to enrich those who were smart enough to "organize" themselves into a institution of higher education. Many people working in those institutions are having it good for very long now and they have become very insulated, and generally detached from rest of the economy. I personally can not wrap my head around salaries for some tenured professors (that barely ever show up), administration, and especially presidents. Talk about excess! But, are they really that naive to think that those generous endowment by alumni will continue forever? Why would anyone in debt up to their ears and with no job, send any money to school after they graduate? Why such sense of entitlement on part of these institutions?
I am also very amazed about colleges general detachment from jobs market.They will offer such silly courses, tracks and diplomas that are useless, and for money that is absolutely crazy. To me that has cheapened our higher education. It is business, period. It should be treated as such, and not exempt from taxes, etc. My good friend, has son who upon graduating recently, and then wisely realizing that low-pay cubicle job is the only one he can get, promptly took apprenticeship (he was very lucky) with well respected local carpenter. Now he loves his job and makes very good money. College is not the only path to job.
Older I get, more I am becoming cautions, or a bear on our economy, and in general, on things we have taken for granted for the past 50-60 years. I also think that without some sort of fast but smart structural, and cost reorganization, many schools will be gone, and some we even might have to bail out. It is an extreme situation that hopefully will never ever happen, but out of curiosity, would you approve of such government action? Would you, as a taxpayer, bail Boston University, or UMass, or Amherst College if their existence in MA is threatened? Since colleges do make big business around here, are they vital to our strong(er) economy, or we can safely fall on other things to do, if only the strongest will survive?
In any introductory economics class they generally teach about signalling, which is one of the supposed reasons people go to college. It's not that you've learned anything useful by going to college, you've merely signaled to potential employers that you're more driven and possibly more intelligent. Given two applicants for a job, one with a degree and one without, the general consensus becomes that the person with the degree is more suitable, even if that degree has little actual bearing on the work to be done. This behavior spirals out of control and you get the bubble we see now, where people go to college because the only way to get a good job is to have a college degree because employers only hire people who have a degree because everyone goes to college.
Some colleges are more like country clubs than institutions of higher learning. Lobster night once a month, steak houses, sushi bars, valet parking, concierge laundry service, wave and lazy river pools, Grammy award winning music acts at school events, cupcake rooms and puppy petting centers to relieve stress during finals week. Need I go on? One school we visited, we were told that professors gave their students their cell #'s and students could text them anytime day or night. I was dumbfounded to think that was considered a good thing. These so called "perks" aren't free and as schools one up each other in an effort to appeal to a spoiled, entertain me at all times demographic it is adding up. It's no wonder so many students take 5 years or more to complete their undergrad degree (another factor in the staggering student debt equation). Who would want to leave this and go into the real world?
I just want to point out that there are very few professors that are tenured and barely show up. Maybe those are the ones that can pay themselves off of their own grant money or they have an endowed chair (which is private money) or they are just the bad apples. Over 70% of faculty at universities do not have a permanent position and some of those positions barely pay a livable wage.
A pricing scheme based on expected earnings is exactly the wrong way to go. Most colleges aren't for-profit institutions, so price of education should be reasonably connected to the cost of that education. If pricing was based on expected earnings, the only way that could work would be by having the people studying lucrative majors subsidize those who study less lucrative majors.
Most jobs are in the free market, where the pay is related to the supply of workers and the demand for those workers. High paying salaries generally indicate that there is either a strong demand or a short supply (or both) for those workers. These tend to be in the STEM fields (science, technology, engineering, mathematics), likely because STEM degrees are fairly useful in the current economy and the field of people capable and interested is already a bit limited (perhaps because these fields are difficult, perhaps because people don't like them or the amount of work you have to do to get a STEM degree).
Now, let's revisit the subsidized major model. With equal costs, more people are choosing the easier, less in-demand majors (either because of perceived ability or other, more sloth-related incentives) when costs are equal. By adjusting the costs to favor those easier majors, you're certain to shift even more people over into the less relevant and economically less useful majors. The few who pony up the extra cash and effort to get a STEM degree will be even more in demand. As is already the case, employers will complain about the lack of qualified local talent and demand more leeway to hire overseas talent (presumably India and China aren't so short-sighted in their college education programs and have an abundance). We've essentially shifted local students from useful majors to less useful majors, which is the exact opposite of what we should be doing.
I don't know the best way to implement a solution, but the key is to better align the supply of students with the demands of society.
One way is to offer financial aid that is commensurate with expected return, rather than with the notion that everyone deserves a liberal arts education. You wouldn't offer someone a $400000 loan for a business that in the best situation would make $30000/year, so why do the same for an expensive advanced degree in a field that has little economic demand? I'm sure there are other solutions, as well.
In any introductory economics class they generally teach about signalling, which is one of the supposed reasons people go to college. It's not that you've learned anything useful by going to college, you've merely signaled to potential employers that you're more driven and possibly more intelligent. Given two applicants for a job, one with a degree and one without, the general consensus becomes that the person with the degree is more suitable, even if that degree has little actual bearing on the work to be done. This behavior spirals out of control and you get the bubble we see now, where people go to college because the only way to get a good job is to have a college degree because employers only hire people who have a degree because everyone goes to college.
I don't necessarily disagree with you on this......your point about financial aid is similar to the random musings on expected earnings. Similar concept. Again if there was an easy solution it would have been done by now. I think everyone can agree the costs of education are out of control. That is the real area people should focus on. As you stated if education costs should be directly tied to the costs of providing that education, then the only way to reduce the expense of secondary education is to push for a lower cost model than our current $50K/yr for a middle tier to upper tier education.
The other assumption in all this is that most people seek education with the hope of a lucrative career. As people have mentioned, there is also a good portion of the college population headed toward academia or less lucrative careers from a $ basis. In a financial aid model based on expected return we could very well be discouraging some of the brightest minds from their destined fields. For example, my mother was a well known scientist in her field, her education including Phd etc. was never pursued with the goal of making $. She stuck with the much less lucrative world of navigating NIH grants etc. vs. working for a large biotech firm and making large coin. What about the cost of education for these folks?
To me the bottom line is to address the cost of education, not to encourage or support those costs by working on programs to subsidize their payment.
Like what some mentioned on here, the main problem with all of this is that the big colleges and universities (private or public) have become these huge profit making machines as they kept growing and buying properties around their cities and towns for peanuts in order to grow...Some even get tax incentives or no obligations to tax where the cities have hit hard times where they could not pay bills, meanwhile, these colleges endowments grow into the billions of dollars...
Brown University is the perfect example of this where after some talks and battles where Brown did not want to be fiscally responsible in helping their city from going into bankruptcy despite the fact that that city has let them take properties for peanuts and pay no taxes at all...Even students stepped in against Brown! Brown finally agreed to pay $31 million over the next 11 years. Peanuts over what they would pay if they were treated like a regular property owner or income generator. Just on the buildings they own in Providence alone, the value of the possible yearly tax value on the properties would be around $38 million.
They have gotten so greedy that they are now competing with each other to a point that even in sports, many of the universities have strategically moved to different conferences in order to collect more money in their big basketball and football programs...Keep in mind, there is a reason these institutions will do whatever it takes to get that next star as they can make the school tons of money, despite that students horrible gpa or scores or even in some cases, criminal history. it's ugly and disgusting to me as I grew up watching Big East Basketball and watching rivalries that have played for years are slowly getting dismantled because of opportunities to make more money...
I think more and more kids, especially parents, are starting to realize that college is not the great investment that it once was...As this happens, more and more young Americans will become proficient in other trades instead like farming, welding, building or auto trades, and even unique businesses they instead start on their own as entrepreneurs...There is plenty of opportunity to become an entrepreneur in America right now, especially in our smaller forgotten cities where it is still affordable to live and don't require a car to get around as much...
The whole idea of "loan forgiveness" in general rubs me the wrong way; I feel I'm responsible for my own actions and choices and no other taxpayer should foot the bill for them after the fact. But that is my opinion and I'm fine with people disagreeing with it. It is what it is. ...
I graduated with no debt, no loans etc. due to wise choices and parents that sacrificed certain things in order to properly save for school, back when saving for secondary education seemed attainable. Now, you would have to salary defer more to education savings than retirement, God help you if you have multiple children. Yikes.
Good for you! This kind of attitude is all too frequent in this country, whether the topic is student loans, mortgages, or a myriad of other social issues. In my experience, it is a uniquely, and grotesquely American point of view to always go right for the jugular on the "victim." You have absolutely not a clue about the individual circumstances of these people, yet you immediately assume an Ayn Randian position of "personal responsibility" being the answer.
Let's conveniently omit the fact that, starting with Reagan, what was a formerly well-regulated Federal student loan program was privatized, loan rates went way up, and the idea of interest and payment deferment until nine months after graduation largely went away for many borrowers. Let's ignore the fact that banks lobbied heavily to get us right where we are now - without any ability for students to clear their debt through bankruptcy (even mortgage holders can do that). Let's also ignore the fact that - for most of the most prestigious universities in the country - tuition, room and board starting in the 80's began increasing on on annual basis at two to three times the inflation rate (and has only recently begun to slow).
These schools, while claiming no collusion, miraculously have arrived a cost structure roughly within 10% of each other. It doesn't matter whether you're talking about a school like Reed College or Harvard College - the cost is essentially the same, irrespective of endowment, research grants, size of student body, etc. What an astonishing coincidence!
And, this is the primary reason it is going to take me a long, long time to give any money to either of my alma maters, both of which fall into this category. BTW: In case you're wondering, I paid off my student loans for both college and grad school on-time and without too much fuss. And, I didn't have the largess of my parents as an undergrad. But then, I wasn't paying the ridiculously inflated rates that students have to pay today for non-tenured, adjunct faculty.
"Elite" colleges have got it made. They've largely won the battle against tenure, continue to charge outrageous rates for school, and have an ever-increasing applicant pool (which, in many cases can easily be supplemented by full tuition paying students from abroad). But, I guess the "problem" is American students themselves, with their outrageous expectations of getting an affordable education and being able to make a living once they graduate.
I'm not suggesting that there aren't any number of students who've made bad decisions, but let's not paint with a broad brush without assigning appropriate blame where it is due. Colleges like Penn, Yale, GWU, and the banks which issue their student loans, have made this situation, not the communities they serve.
Good for you! This kind of attitude is all too frequent in this country, whether the topic is student loans, mortgages, or a myriad of other social issues. In my experience, it is a uniquely, and grotesquely American point of view to always go right for the jugular on the "victim." You have absolutely not a clue about the individual circumstances of these people, yet you immediately assume an Ayn Randian position of "personal responsibility" being the answer.
Let's conveniently omit the fact that, starting with Reagan, what was a formerly well-regulated Federal student loan program was privatized, loan rates went way up, and the idea of interest and payment deferment until nine months after graduation largely went away for many borrowers. Let's ignore the fact that banks lobbied heavily to get us right where we are now - without any ability for students to clear their debt through bankruptcy (even mortgage holders can do that). Let's also ignore the fact that - for most of the most prestigious universities in the country - tuition, room and board starting in the 80's began increasing on on annual basis at two to three times the inflation rate (and has only recently begun to slow).
These schools, while claiming no collusion, miraculously have arrived a cost structure roughly within 10% of each other. It doesn't matter whether you're talking about a school like Reed College or Harvard College - the cost is essentially the same, irrespective of endowment, research grants, size of student body, etc. What an astonishing coincidence!
And, this is the primary reason it is going to take me a long, long time to give any money to either of my alma maters, both of which fall into this category. BTW: In case you're wondering, I paid off my student loans for both college and grad school on-time and without too much fuss. And, I didn't have the largess of my parents as an undergrad. But then, I wasn't paying the ridiculously inflated rates that students have to pay today for non-tenured, adjunct faculty.
"Elite" colleges have got it made. They've largely won the battle against tenure, continue to charge outrageous rates for school, and have an ever-increasing applicant pool (which, in many cases can easily be supplemented by full tuition paying students from abroad). But, I guess the "problem" is American students themselves, with their outrageous expectations of getting an affordable education and being able to make a living once they graduate.
I'm not suggesting that there aren't any number of students who've made bad decisions, but let's not paint with a broad brush without assigning appropriate blame where it is due. Colleges like Penn, Yale, GWU, and the banks which issue their student loans, have made this situation, not the communities they serve.
Nice rant. You seem very angry.
Forgiving loans isn't the answer; It sounds like you actually agree with my position that the root cause is the increased and unreasonable cost of education. However the costs got to that point, the problem remains the fact that it costs $50K per year to get an undergraduate education at many institutions.
I have personally found it a better policy to take responsibility for my actions, if you would rather blame others, knock yourself out. Whatever blows your hair back. We don't have to agree.
Forgiving loans isn't the answer; It sounds like you actually agree with my position that the root cause is the increased and unreasonable cost of education. However the costs got to that point, the problem remains the fact that it costs $50K per year to get an undergraduate education at many institutions.
I have personally found it a better policy to take responsibility for my actions, if you would rather blame others, knock yourself out. Whatever blows your hair back. We don't have to agree.
Typical that your reflexive reaction is to paint me as "angry." I'm not angry, just past fed up with tea-baggin' solutions like yours. But, fortunately a new generation is emerging and they seem to know "which way is up."
Typical that your reflexive reaction is to paint me as "angry." I'm not angry, just past fed up with tea-baggin' solutions like yours. But, fortunately a new generation is emerging and they seem to know "which way is up."
Time will tell.
Just for clarification, your solution is to call everyone victims, ask the government to forgive their loans and accept that it is OK to charge $200K for an English degree?
Let me ask you this. When you borrow money and sign a loan, who is responsible to pay that loan back?
If you are hanging your hat on the fact that everyone borrowing for education, mortgages etc. were duped when they signed the loan, then I think you are solving for the outliers and not the largest portion of the population.
The root cause is the cost of the education, and I believe that was your position as well. Keep forgiving loans and all you do is perpetuate the overcharging by schools.
".....a new generation is emerging....." Is that more "wait and hope"? Has that ever been a winning strategy?
If you prefer to call people names on the internet to make yourself feel good, go nutts.
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Over 70% of faculty at universities do not have a permanent position and some of those positions barely pay a livable wage.
