It sure feels like a bubble to me. I don't know how many friends I have with six figures of student loans and no career, but it's a lot. Considering that those loans don't even go away with bankruptcy, it's waaaay too many.
I've noticed that younger students are starting to realize how much risk there is in something like that and shy away when my generation didn't. Maybe it's that I grew up in a "striving" middle class, but a lot of my friends were told "just go to the best college no matter what and don't think about cost you'll make tons later," which ended up to be only partially true, and only for some people.
I'm hoping that http://lambdauniversity.com will help overcome some of those things and extend opportunities to folks who can't afford that kind of risk. It's full-time computer science training for free up front, paid back as a percentage of income for a couple years after you graduate. If you don't make more than $50k/yr you never pay back.
I don't know, maybe it's different now, but my generation (went to school in the mid 90s) was not told to "just go to the best college no matter what": We were also advised to consider the cost and carefully choose a major so as to produce a positive expected ROI. Obviously nobody has a crystal ball and you can never tell when huge, industry-wrecking changes are coming, but it was well understood that majoring in Underwater Basket Weaving was not a great idea from a financial point of view. Have we forgotten this lesson?
> not told to "just go to the best college no matter what"
> majoring in Underwater Basket Weaving was not a great idea from a financial point of view
I've met many people in places like McKinsey or Goldman Sachs (i.e. "elite" high paying jobs) with degrees from Oxford or Cambridge in Philosophy, English, Arch & Ant or Theology (in "decreasing usefulness"). Many more than, say, graduates in accounting or business administration from Manchester University, although a few might make it. Hell, I know a Harvard philosophy major who co-authored a very useful Haskell library.
My conclusions from anecdotal evidence:
- these universities, regardless of degree, encourage very
hard, focused work, and teach and encourage critical thinking; both critical thinking and hard focused work are useful in all jobs;
- people overestimate the "technical" portion of most jobs, and how easily it can be taught (a law conversion course takes a mere few months in the UK, and banks routinely train thousands of fresh unqualified graduates every year);
- people overestimate the marketability of skills taught in most "useful" degrees especially outside its area of specialisation (e.g. is a medical major more qualified a strategy consultant than a philosophy major?);
- you gain access to a vast alumni network and its reputation (which includes world leaders, the CEO of the companies you apply to, etc.);
- the selective nature of admissions sends the market a signal about your "intrinsic" quality.
(edited to be more readable on mobile)
Obviously, if you want to become a specialist and you are sure of it, it is a better idea to study that field in the best place you gain admission to. But that has not been true of the vast majority of my former classmates.
In fact I watched a strange inversion whereby those who were certain they wanted to be engineers are now at McKinsey or banks and those who were certain they wanted to make tons of money in business are now working in "hard" engineering jobs (structural engineering, fluid dynamics for car companies, etc.).
This would be more convincing if McKinsey and GS were genuinely considered to be producing something of value.
The reality is - more nuanced. Certainly there are many who consider both GS and McKinsey to be very bad things indeed, and not in any way a professional niche that high quality graduates should aspire to.
Perhaps there may be more to "intrinsic quality" than an obsessive work ethic and social connections?
My experience has been the opposite to yours. People who don't have technical degrees but have been trained to consider themselves experts in business management generally overestimate their own skills, and vastly underestimate the skills and insights of those (nominally) "under" them.
Ah, but I'm not saying that Ivy/Oxbridge grads make better employees all else being equal (in particular salary). I'm specifically saying that on a financial/job hunting basis, it makes more sense to pick a prestigious university and "useless" degree than a "useful" degree at a non-prestigious university, in aggregate.
When you are on the other side, other variables come into play. For example, elite grads might be generally overvalued and for the same money you can get a much better community college drop out (who is on the tail end of his own talent distribution), because the market undervalues his skills. This is something that comes up a lot in the Valley and the last team I've personally hired was about half no-degree and half not-famous-degree, so you can guess my position (we hired based on technical capability and more or less ignored CVs).
Whether or not I agree with you on Goldman and McKinsey's intrinsic value adding capability, I have observed that people doing a stint at either are basically guaranteed nice employment for life, fast track to the best management jobs, get a premium on hiring, and so on. Which is what the OP was concerned with.
I think there may be some hidden variables there. For example the kids of a VP at a large company may very well go to Oxford and study philosophy and then get a job at McKinsey, but how much of that was based on the family connections rather than anything to do with the philosophy curriculum at Oxford. And some of those kids get into the ivy schools because their parents went there or made large donations, so again it may have more to do with family and socio-econimic background rather than Ivy League education. If you don't come from the right background I'm not sure that studying philosophy at Oxford is the best move.
>If you don't come from the right background I'm not sure that studying philosophy at Oxford is the best move.
Worth noting that in the UK until recently cost and university were un-related. Indeed, it's one of the aspects of the modern system that infuriates me. I despise the idea of a bright child choosing a mediocre university to save 2-3k of student debt per annum. I can't believe it's good for the state of society.
It's also worth noting that the terms of student debt in the UK are far far less usurious than in the US.
>>> This is something that comes up a lot in the Valley and the last team I've personally hired was about half no-degree and half not-famous-degree, so you can guess my position (we hired based on technical capability and more or less ignored CVs).
Please don't use code blocks like this. They force horizontal scrolling for long lines which makes your list of points very difficult to read (if not impossible on mobile).
"a law conversion course takes a mere few months in the UK"
For a start there isn't a single legal system in the UK - Scotland has a different process for qualifying than England does and NI and Wales might have different processes.
In Scotland to qualify as a lawyer if you already have a first degree in another subject requires 2 years to get an LLB and then another year to get a postgraduate diploma in legal practice (both full time) then 2 years training at a law firm.
From what I can see in England the equivalent of the 2 years LLB takes 1 year but you still have to get a postgraduate qualification and do the training.
The Law Society for England and Wales says 4 years to qualify as as solicitor if you have first degree.
Sure, I was just going in the spirit of the comment. I have a few friends from degrees ranging from philosophy and music to physics who did a few months somewhere in the City and then were working relatively well paid corporate jobs ("relatively" because London just eats everything until you make enormous amounts of money). I'm sure they were useful in some degree to the legal departments they entered after "graduating" from that course...
I know someone who went to NYU who now makes $15/hr and is $90k in debt because they majored in media studies. I am not trying to make fun of them as I love them but they believed and still legitimately believe the lie that going to an Ivy League should have been enough for them to live comfortably. Problem is that doesn't matter when your thesis is literally based on playing Second Life. Not that there's no value in her thesis but the reality is people are not hiring for that.
Specifically - the Ivy League is an athletic conference and it's members are are Brown, Columbia, Cornell, Dartmouth, Harvard, the University of Pennsylvania, Princeton, and Yale.
My experience was similar to yours. I immigrated from Russia at a young age so we had very little money. I attended a great college mostly on scholarship. My mom had always taught me to work hard and pick a major carefully, taking into account ROI.
Thanks to merit-based scholarships and need-based aid, I graduated with minimal debt, despite attending a private college with a $45k per year sticker price. Thanks to a proper choice of majors, I made good money right out of school.
I'm always puzzled when people claim that one needs to come from money to succeed.
Going to college without debt is not always possible. I tried everything to get scholarships to no avail. Picking a major with a good ROI is definitely possible.
Assuming everyone can do what you did is foolish because there's not physically enough scholarships to go around. There's probably a much greater number of people equally puzzled why they have to go to community college because they couldn't get a scholarship.
I think his point was that he went to a college he could afford. It's true that not everyone can get scholarships to pay for their entire education. But no one has to pay $40k+/year in tuition to get a good education.
In Denmark everyone can get scholarships to pay for their entire education. That and they get a stipend for living expenses. Everyone gets this, young or old, rich or poor.
> It gets more complicated in a non homogenous country
Can you please give me a simple, non-racist explanation why this matters? Please explicitly spell-out what is/is not homogeneous (I always assume race), and explain why that complicates things.
Consider the concept of a business cluster, note that the city as a cluster is a reasonable idea [1].
Note that the population of Denmark does not break top 30 in a list of global cities [2].
Conclude that the country of Denmark, with its small geographic and demographic attributes, could specialise entirely in one high-margin economic area and further specialise their laws and social systems to that.
Basically, 5 million people can be sustained by the excess wealth of a strong local cluster. 50 million people cannot be sustained by one strong cluster, and the different clusters may have different needs.
I have no idea about Denmark, but if they /are/ clustered as a country around some high-tech industry, maybe the economically rational equilibrium to give out scholarships to support the local cluster? Maybe they are just nice people?
A country with many clusters needs a one-size-fits-all legal and social system that works with all the clusters. The economic equilibriums may be different to a single cluster.
I've tried to ask this before. It's basically semi-conscious racism by people who are careful with their words. You'll not get a satisfactory response, because there is none.
You're begging the question. People are racist, that exactly what he's saying.
Not all of them but enough that it affects government at the highest levels. It definitely complicates any topic dealing with poverty becuase race usually gets tied to status in various nonsensical ways.
He's right. There's nothing wrong with being brutally honest.
If it was all delegated to them, it might work. But what you have instead is 50 secondary layers of bureaucracy, while the Federal govt holds firm control of the student loan market, and imposes control and regulation on colleges, using both carrot (R&D money) and stick (loans).
I never understood why universities need competitive sports facilities in the first place (except when it's required for the curriculum, e.g. where sports medicine is offered). I suppose it's something to do either with tradition ("our sports team has been the best for over a century") or income from sponsorship and merch sales, but not sure.
This is just one example, but my university recently revamped their football stadium due to a huge donation from an either an alumni or coach (I can't remember exactly) who donated specifically for this cause. If money comes from a donation, sometimes it's not the school's decision how money should be spent.
How do taxes work out in Denmark? I tried to work out how it would compare to the UK, but it seems significantly more complex to work out. I _think_ an average programmer on £50-60k would end up paying about 35-40% of their income in tax? Or have I completely miscalculated? Compared to about 30% in the UK
Its somewhat complicated, but you pay 8% off the bat as "Arbejdsmarkedsbidrag", then you have a lot of deductions and pay about 40% on the rest. All in all I would wager that my effective tax rate comes to just under 40%, but your milleage will vary.
In a lot of other countries education is a lot cheaper
US has become a country where profit runs everything. What happens when a large percentage of youth don't get education and make enough to buy a house?
thats partly because education consumers (students) keep demanding education to cost so much. If everyone applied to and went to the cheapest colleges they could find, universities would be clamoring to reduce their costs, not increase them.
of course, a big part of the problem is employers. Employers place a large value on Ivy league schools and expensive universities, thus creating the consumer demand in the first place.
Yea, my point was both college selection and major selection should be guided by ROI. This was pretty thoroughly drilled into me by my parents and my high school advisors / guidance counselors. We couldn't afford much so I went to a low cost state school, took advantage of as many scholarships as I possibly could, and picked an engineering major. At no point in the process did anyone ever advise me to "follow my dreams" or "pursue my passions".
I did this as well, spent my first 3 semesters at a private school that cost 40k a year had a pretty decent scholarship but the kicker was that I was in a major that had a minimum starting salary around 100k. So I felt that going to this particular school was worth the debt I'd accumulate because of 1 the major, and 2 the socioeconomic status most of the students came from.
Anyways after 3 semesters I realized that I really didn't like the major I was in so I dropped outta that school and moved home and went to community college until I got myself together and motivated. When that happened I moved into a local state school that is known for being extremely good for its cost.
I don't regret going to the expensive school even if most of the credits didn't transfer, I met some great people there who will be valuable friends to have made. I also don't regret not going there anymore because it would have been way too expensive.
The right way to put it is, "no one should have to pay $40k+/year in tuition". This is a failure of the system, period. And when the bubble explodes it will be a decade or more too late.
You need luck or connections or wealth to succeed. Connections can include parents, friends, etc. But something has to break your way -- simply attending college is not enough to tilt the odds in your favor.
Many colleges are being pressured (by accreditation committees, donors, government, etc.) to provide methods for students to acquire connections that make it easier to succeed. Networking opportunities, guest lecturers from industry, internships, and special programs are fairly common ways that colleges can make a difference for students beyond an education.
While some (perhaps many or most in some schools) professors live in the isolation of academia, lecturers or part-time, non-tenure professors often work in a field related to the subject they are teaching, and can be a good source of connections for students.
Sure, simple attendance may not be enough for many students, but most colleges do at least try to give you the opportunities and tools you need to succeed.
So that's how they justify the administrative bloat in universities these days. And it's a great excuse to keep hiring lecturers instead of faculty!
I'm not trying to be hard on you, it's just that I'm skeptical about whether new non-academic programs in universities improve outcomes enough to offset their costs to individual students. The check on administrative bloat is very weak in the US, and arbitrary ratings like the US News & World Report have more influence than customers do.
I realize this is days later, but I felt the need to respond even though I didn't feel the need to check for responses earlier.
I do see how it can be easy to believe that ratings have more influence than students. At the same time, many ratings include student surveys as a substantial part of the ratings process.
Additionally, I can see how it can be easy to believe that there is significant administrative bloat in universities, even when the reports on funding sources and costs state that the administrative costs have been going down. For many the budgets and administration of public universities simply don't have enough transparency, and even when they strive to achieve transparency there may not be enough historical data to give people any real perspective.
Further, it's easy to point the finger at all sorts of practices within a University as sources of said administrative bloat, regardless of whether the budgets support those arguments.
When you have a significant reduction in state funding for public universities, you drive those institutions to look for ways to overcome those budget shortfalls. Generally speaking, it's hard to get people to accept salary reductions, so cost-cutting measures come from other directions. Where I work, tenured/tenure-track faculty in some colleges are teaching significantly more credit-hours than they would have ten years ago, so there are fewer lecturers, students, part-time faculty teaching classes. Since the tenured faculty don't get paid more for teaching more classes, this is a pretty effective cost-cutting measure for some colleges, but it has its limits, especially since those faculty are also expected to continue with other intellectual contributions (such as research).
Every new staff or faculty member hired anywhere within the University has to be justified. They no longer hire someone simply because a position has been vacated, so when someone retires it's possible that their duties simply get distributed among others and the position goes away.
However, if someone's job is basically fund-raising, it's probably going to be easier to get approval for that position, especially if you can find a candidate with a proven history of improving the budget situation for an educational institution.
Meanwhile, programs and physical things like buildings and equipment tend to be attractive to donors. You can put up buildings and fill them with equipment by demonstrating a willingness to pay for 50% of the cost and then creating a big push for donors, and with the right people working on the project you can end up paying significantly less (or nothing). Further, you can then leverage the new building/equipment for further facilities/equipment upgrades.
Good luck getting someone to pay someone's pension or to pay the salary of any of the staff dealing with the budget, custodial work, IT, etc.
Coming from money isn't a necessity for an individual, but on a statistical basis, the correlation is undeniable - you're so much more likely to succeed if you come from money that the idea is substantially correct.
If I had a "small $1 million loan" right now, I'd be able to take much greater risks in terms of quitting my job to create a startup or whatever. Thus I'd be far more likely to be more successful (financially speaking)
It's not zero sum. As somebody who has come from money and made a lot of money in a field entirely unrelated to my parents and with zero financial help from them after university, a lot of the disparities I see between myself and others in my situation who came from more disadvantaged backgrounds is that they spend their money far less wisely because they think that, for example, a house in the country will make them happy. I know from my childhood that is not necessarily the case.
>but it was well understood that majoring in Underwater Basket Weaving
The way you make such a condescending argument and blame the victim takes away any credibility in your comment. The issue is that tuition has ballooned since the 90s. Tuition is outpacing income/inflation and most else, so regardless of what school or major, the ROI is going down for most. Also, even if you went to a top-tier school and had student loans in the 1990s, you could discharge them in bankruptcy--until Bush changed that in 2005. Things really have gotten harder, it's not as you falsely claim that people are picking useless majors.
Student loans are one of the biggest and most self-destructively predatory idiocies the "financial industry" has ever invented.
Ballooning tuition was an inevitable outcome, as was the speculative financialisation of educational institutions, and the relative loss of value of student teaching and post-grad research.
It's really just a form of compulsory loan sharking, and it's politically and economically cancerous.
Not only does it have immensely toxic second order effects, it's almost guaranteed to kill, or at least seriously damage, its host economy.
As for "useless majors" - one of the foundations of any civilised society is personal freedom, and that includes the freedom for cultural and intellectual exploration.
Forcing all activities to compete economically and sweat a profit is not freedom - it's the opposite.
I agree with you entirely. Basing everyone's college major on ROI is why public universities should be free, so that people can pursue knowledge regardless of cost or ROI. Otherwise we wouldn't have artists, musicians, journalists, authors, and dozens of other essential careers that help make life worth living.
Liberal arts grad here. Humanities education has almost completely absolved itself of any responsibility for helping its students build careers.
I did not have a single lecture or discussion with any of my professors about how I could use my degree to get a job, what kind of careers I could pursue, and how to use my degree for anything outside of academia.
Humanities education has become "education for education's sake".
That's fine and all if the cost of tuition is low. But when you're spending $30k/year on tuition, your professors believing that "everyone should just go into academia" is just a bad investment.
> I did not have a single lecture or discussion with any of my professors about how I could use my degree to get a job, what kind of careers I could pursue, and how to use my degree for anything outside of academia.
I agree, this should be something more emphasized.
I also blame (to a degree) my K-12 career for not putting an emphasis on any courses related to budgeting or Home Economics.
I also agree, but I'm also a liberal arts grad and it gave me the skills to get to where I am now, so I really can't complain. I agree there needs to be more time spent helping students find career paths. That is truly severely lacking.
Sorry, bud. I also went back to school for another go after 2005, still focusing primarily on ROI. So I think I can say I'm well aware of and lived through both current and past student loan / tuition regimes. But please feel free to continue to attack the tone of my argument rather than the content.
Your "argument" was nothing but tone, unless you're literally trying to say that people are majoring in underwater basket weaving, in which case my counter argument is "no they aren't".
Your argument is a straw man and it was a pathetic attempt to blame the victim AND it ignored the vast increases in college tuition. It was a poorly reasoned argument and it was incorrect.
Yes, but these are kids lacking your additional 20 years of experience. Congrats on your ROI, Other people are just looking to get out of dead ends, thinking the better (or any) school will provide that. Unfortunately we'll see the for-profit schools negatively affect the overall. Even so, a 11% default rate across the board is nothing to sneeze at. [1] https://www.ed.gov/news/press-releases/national-student-loan...
Student loan debt now is also far more common and larger as a percentage of expected income than it was back in the 70s. The University of California didn't start charging residents tuition at all until the mid-1970s and didn't really ramp up until Governor Reagan slashed the budget:
If random internet sites are to be believed, the $630 combined tuition plus fees in 1976 is roughly $2k today. An awful lot of students could manage that without aid.
Useless majors are only ones where the recipient fails to utilize it.
I set myself with a well-known localized (to the industry) degree (Music Performance), but still couldn't implement it; even in a sense where I could turn it into something a bit more "useful" (Music Education).
Plenty of my classmates have gone on to utilize it effectively.
He didn't claim that people are picking useless majors. He stated that the earlier post's claim that students are encouraged to pick useless majors is incorrect (at least for his generation).
It's a little bit of a different situation but when I was in rotc in 2008 we were literally told to take underwater basket weaving if it was an option because all you needed was a high gpa and any degree. The business school was like this as well, you needed something like a 3.8 to get in, so everyone applied in their first or second semester. After that you could stay in the school with a <2.0 gpa for the rest of your time there.
The only person who ever told me to consider what sort of job I'd get was the advisor for the law school who said I shouldn't go into law if I ever wanted to make money. At the time I didn't trust her because every other adult in school and my personal life was giving me the opposite advice
I think so. It's funny, despite having a relatively damn good career without a degree, I still get constant grief from friends and family. There probably hasn't been a single family visit since leaving home where someone hasn't asked me when I'm going back to college. Even after explaining that it makes no financial sense to put myself into >$100k debt, the degree comes out as more important than anything else.
It's not something I really know how to explain, except that the modern expectation of "established person" is someone with a degree. So until that expectation goes away,it seems we're going to be culturally stuck here for a while.
just get one of those super cheap online bachelors degrees. all you really need is the certificate you get at the end - then you can be cool like everyone else ;)
Don't worry, there are a lot of people who still don't go to their first choice school because it's too expensive.
But if even the second, third, fourth, fifth, etc, choices also leave you 50K+ in the hole... and nobody will give you a glance without some kind of degree... what the fuck are you supposed to do?
IME you're wildly overestimating the number of people who think they're going to make tons of money with a BA in Photography or similar. They just need to tick that degree checkbox to be employable at most places, and everyone has been telling them to go to a 4 year university their entire life, and they're all stupidly expensive.
In the 00's (and admittedly, an anecdote), we were told to "follow our passion" and weren't given much guidance on college affordability (community college for gen. ed. requirements vs in-state vs out-of-state / private). No emphasis on ROI or cost, at least at my school.
i'm in my mid 30s and my generation was taught that a good option might be going to community college for 2 years and then transferring, because of the reduction in cost by basically 50%, and to keep loans to a minimum if possible.
this recommendation was always weighed against the 'freshmen experience'.
i think the demographics and expectations of the college-bound is what has changed, not necessarily the advice. getting a good paying job after school was an amazing achievement, even for top schools like university of california's top campuses, not something expected as normal.
I was definitely told to go to the best school no matter what and to not consider the cost. But I graduated in 2008 in a perma-middle-class suburb that probably wished those things were true. I'm sure it's very different for others.
>Obviously nobody has a crystal ball and you can never tell when huge, industry-wrecking changes are coming, but it was well understood that majoring in Underwater Basket Weaving was not a great idea from a financial point of view. Have we forgotten this lesson?
The most common undergraduate major is Business. The "liberal arts and humanities" make up about, what was it, 12% of all bachelor's degrees?
I worked at a large aerospace company which had a large contingent of business majors needed for all the required compliance reporting. They weren't paid well compared to the engineers. Those business people always joked that if the could have they would have become engineers, but they couldn't handle math so they became business majors.
In terms of content, sure, but that's something we know after graduating. You try telling the kids going in that the major marked "business" is a money-loser.
>it was well understood that majoring in Underwater Basket Weaving was not a great idea from a financial point of view
It's still understood. It's just that, it's not a very useful piece of information, since _all_ degrees are more expensive nowadays -- not just the basket-weaving ones.
Bubbles are caused by speculation, often by unsophisticated investors. Since an education is a non-transferrable asset it's difficult to conceive how it could be classified as a "bubble".
Speculators buy assets that they aren't going to use themselves purely to sell it to someone else. If speculators are selling to mostly to other speculators and transactions between speculators starts taking up the bulk of the active market and it starts driving prices up... that's a bubble. What happens is that at some point speculators will panic when other speculators stop buying the asset, and they race to cash out of the asset before everyone else does, except there's mostly other speculators who are also trying to dump the asset on the market...
Those Dutch tulips or 2000-era dot-com stocks are examples of this type of asset. These are assets that didn't have much value except to speculators. (Cf. you can live in or rent out a house, or collect dividends from other categories of stock, or melt down gold, etc.) As soon as there's a price drop... every speculator is terrified of being the last one holding the bag and sees every other speculator thinking the same thing and accurately see speculators as controlling the price and they all race like hell to dump the asset as quickly as possible. The price drops to near zero.
With an education it's difficult to imagine how this sort of thing could happen. In short, it's an exceedingly difficult asset to transfer. You can't sell your education. There doesn't seem to be a conceivable way that everyone would "sell" their education all at once. Also the process of buying an education takes many years to carry out and so doesn't seem so compatible with overnight frenzies. And the value of previously acquired educations doesn't drop if people buy fewer or cheaper ones; it might actually go up instead.
If people collectively decide Ivy league educations aren't worth buying anymore... it will probably be a trend that occurs over a matter of decades.
Just because something feels dumbfoundingly "expensive" doesn't mean that it's a "bubble".
People with large amounts of debt demand high salaries (because they have to pay the debt) .
The bubble would burst when companies realize that they can pay someone who went to a trade school/bootcamp much less money, for a similar quality of work than that produced by the people with expensive degrees.
It is already starting to happen, with the insane amount of bootcampers that have appeared only in the last 3 years.
What is the market going to look like 3 years after NOW, when supply has glutted to an even more ridiculous degree?
(My experience is in the tech markets but I see no reason why this couldn't be the case for other job markets. We are the canary in the coal mine of what is to come )
Well, what will happen is that the market for new grad jobs starts to plummet, and all of a sudden those people who paid 200k are left with a fancy piece of paper, and no high paying jobs.
THEN is when things get even more interesting. Now these people with no high paying job start becoming unable to pay back their loans... At which point the whole thing comes crashing down.
The bubble is not just the college degree. It is the market and loans BEHIND the expensive piece of paper.
I have little idea if the current college situation is sustainable or not, but this argument sounds very similar to what we heard about outsourcing a couple of decades ago. Why keep paying all those expensive CS majors in the States when you can hire a smart person from overseas/bootcamp for fraction of the cost? Somehow we didn't quite get that malthusian glut last time.
I've never believed in the "speculators" argument. Either there's a market or there isn't. I believe bubbles rise and pop owing to the properties of Ponzi schemes, which rise and pop. When a market takes on Ponzi-like characteristics (usually not intentionally), that's when it becomes bubble-like. Any wealth-concentrating mechanism, capitalism itself included, is essentially a pyramid system, which needs increasing input from the bottom to keep going. Soon the bottom layer of the pyramid is so big there aren't enough new suckers to support it, and the whole thing collapses leaving everyone running for the exits.
Except what it the "market" is other speculators? We're seeing this again now in major metropolitan areas, except now it's international speculation. Foreigners looking to park their money in more stable economies and willing to pay a premium to do so. Everyday people get stuck in the middle paying higher prices, which just inflates things even more. At this rate we'll get another housing crash, and a student loan crash. Banks love student loans because they're virtually guaranteed (no bankruptcy), and the government guaranteed return is substantial--far exceeding the actual return to the borrower (remember real wages have been stagnant for twenty years).
The housing bubble was sophisticated investors thinking they swindled unsophisticated investors to some degree.
Private student loans operate similarly and have similar risks. Similarly, you can't _sell_ an education except with a job so if there is even the slightest panic a bunch of people can't pay their loans and the holder of the note can't sell the underlying "education".
I think it's more likely the bubble that bursts is in the loan market. Loads of speculators moving college debt around until everyone realizes that nobody can pay back their student loans making the debt worthless. Everyone panics and sells debt as fast as they can.
Your last paragraph describes the Australian university system. Government foots the bill to invest in your education, you pay it back gradually (and not until you're earning enough for it not to hurt).
The problem in the US system is the government feels everyone has a "right" to an education, so it will underwrite an unlimited amount of loans regardless of what you do with them.
That pumps the system so full of cash no one is quite sure what to do. They just keep raising prices and people keep coming, because what are you going to do, not go to college? Even after funding slows, the prices are still sky high, and people keep paying.
The government isn't running the schools (most of the time), it's just underwriting an infinite amount of loans for students to take and go to private companies with. So if you're a University you know a) students think they should pay however much it costs to attend and b) they have an unlimited amount of funding to do so with.
I'm not trying to comment on whether or not education should be a right, I'm just saying that believing it should be given our current system has had some negative repercussions.
I would say there is a major difference between local property owners paying reasonable sums for children to become literate (k-12)...
and a nation paying highly unreasonable and ballooning sums of money so that a functional literate adult can obtain an education that rarely leads to 10x better outcomes
You do have a right to public K-12, and it's free (your taxes pay for it).
You can pay for private K-12, or "pay up" and move to a more expensive school district (read: taxes) which would theoretically give you a better education.
School districts have problems with people claiming grandparent's home addresses to attend a better school, and it happens across the country.
Sure, but if the k-12 is necessary for employment, it follows that 12+ should be "free" as well. It seems like a college education these days is a basic education similar to 9th-12th grade.
And the UK (in principle). Although it's quite savage, as the repayments are tied to RPI if you took out your loan post 2012. You pay 9% of your income over 21k-ish until the debt is paid off. Calculator here to show just how grossly unfair this system is in practice [0].
Out of interest, what makes this system unfair? Or are you just talking about the year demarcations?
I've always quite liked that my student loan repayment is tied to my salary as it's one less bill to worry about if/when things go badly. It means that when we were getting our business off the ground and didn't take salary out, I at least didn't have to worry about the student loan.
Don't get me wrong, I'm looking forward to the day I'm not having to pay it but at the same time, I think the changes in university fees would be better received if they simply called it a graduate tax that expires after 20 years.
The problem with this incentive is that it would encourage the university to only accept applicants who have a good financial background to begin with. For example, applicants whose parents have significant assets. We don't like to admit it, but this would probably be as useful a predictor as to the student's income as the quality of education.
If universities started choosing applicants this way, we end up with a system that reinforces generational wealth, rather than lifting folks out of poverty. No easy solutions here.
They'd be looking to accept the students with the greatest aptitude for a high paying career. There may be some level of correlation, but I highly doubt it's as strong as the ivy leagues would lead you to believe.
The rationale is that you can't take away an education the way you can repo a house or car. That and something about doctors borrowing a couple hundred K, then declaring bankruptcy to discharge it after graduation.
And yet, nothing prevents me from maxing out my credit cards, and spending it all on whiskey and limousine rides... Or totaling my car (While only having liability insurance).
Lenders charge a premium over the prime interest rate because of the risk that they will never get their money back. Student loans are backed by the federal government - there is zero risk for these lenders. They seem to be under the impression that they should be getting paid for risk that they don't have to shoulder.
Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? One would expect that the lenders should be sophisticated enough to know how to deal with it, and price accordingly.
> Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk?
I upvoted you because I think you've put your finger on something, and I think part of the answer is a collective unspoken belief that people who may not be meritorious on past academic achievement and/or very low on the income spectrum should have an avenue to determine their own educational destiny through hard work if they pledge a return on the investment to help them get there. And because of an impression that the rates would be too prohibitive if left to market forces, there's a risk trade-off to keep them artificially low enough for more people to pay them back on schedule at the expense of the taxpayer. I'm not saying this is a good thing, but we the taxpayers take a haircut when these loans go into default and have to be sold off at a discount - I don't think it's right to say the student bears all of the risk. The lender plays both sides.
Except the taxpayers don't really lose out on student loans unless the borrower gets the loans discharged. They have immense power to levy bank accounts, garnish wages, seize tax refunds, and even garnish Social Security payments. Practically speaking, unless the borrower dies or becomes totally and permanently disabled, the government will get theirs. Bankruptcy discharges are very rare, and with all those ways of collecting, not paying isn't an option, unless the borrower leaves the US, never to return.
I'm not sure about that. Isn't the whole point of outfits like Navient that the govt. loses money by selling off billions of the obligations to servicers?
There are three players in the student loan game: lender, servicer, and guarantor. The lender is pretty much what it sounds like. The servicer is the agency that handles the repayment process (and any deferment or forbearance) as long as the loan is not in default. The guarantor is where the loan is transferred if it goes into default.
The guarantor will add collection fees of up to 20% of the defaulted balance, and can pursue those collection methods I mentioned earlier. They can also hire an outside agency to do collections. Their main job is to get loans out of default, either by rehabilitating the loan (a process whereby a borrower makes 12 on time, consecutive payments, and the loan is kicked out of default status), or directing the borrower to consolidate.
Navient falls under the category of lender or servicer (or both), depending on the specific loan. Their interest is in stringing out the payments as long as possible, and wring out as much money from the borrower as they can, which is why they got into trouble recently for directing borrowers to deferment and forbearance options rather than lower payment plans.
If that sounds like a lot of people interested in putting 18 year olds in debt, it is. I worked in this industry for a couple years on the consolidation front, and heard a lot of sad tales.
Given that explanation, I find it hard to understand why Navient should provoke a moral outrage over activities which seem to fall under what you describing as servicing: isn't their incentive to keep the debtor to the original terms of the loan? It could be argued that these debtors should have never signed on to begin with, but that would be on the lender's shoulders. Thanks for the explanation.
That's just it. Servicers of student loans have certain obligations that aren't required of other types of loans. There's a 600+ page book called the Common Manual that lists all the rules. I don't even know most of them, because I only ever worked with initiating consolidation loans.
These articles from The Consumerist give you a better idea what the outrage is about:
I think the first covers the "moral outrage" a bit more than the second when it mentions how Navient's public statements are all to the effect of "we're here to help you," while their actions all point the other way. The second is just some straight up shady shit they've been doing.
> Or totaling my car (While only having liability insurance).
I don't know where you live but in Canada the car dealer won't give you the keys without getting confirmation of comprehensive insurance coverage with lienholder protection. Personally just did it a couple of months ago.
> Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk?
I'm a firm believer in maturing before entering a transaction like that. Maybe even "taking off a year" or working full-time for a bit to understand how "the real world" may work from what you understood it as at home (hint: it's much easier for some than others).
Also, for those who are struggling: http://www.uopeople.edu/ They are a (nationally) accredited university. A bachelor with them is no more than $4000. They offer just AAs and BAs in business and computer science tho.
By the way, your https certificate for lambdauniversity.com is broken (it is for github, not your domain), and www.lambdauniversity.com/contact returns a 404.
In the meantime, tuition outpaces inflation 3x, administrator costs escalate, construction projects continue apace on every "higher-education" campus in the country, and financially shielded, tenured professors who have guaranteed retirement plans and have never started so much as a lemonade stand prepare our youth for the future. I mean,non-Ivy USC tuition is only 72k a year. Why not go for the fun and profit of the uni. Thanks, baby boomers. At least you have your guaranteed pensions. The world you made sucks for your kids, though. Bubble, meet pin.
Except now there's a glut of aspiring junior engineers in the market. A friend of mine who graduated 1-2 years ago from a bootcamp told me his cohort's job placement rate after 3 months was 90% whereas this year it's less than 50% at the same school.
IMO there's a glut of subpar junior engineers that don't understand CS principles. Have been doing this a while; everyone who understands data structures and algorithms gets snapped up pretty quickly.
What do you think about Make School in comparison to Lambda University? They seem to based around the same concept of paying the fee for training through salary repatriation.
I've noticed that younger students are starting to realize how much risk there is in something like that and shy away when my generation didn't. Maybe it's that I grew up in a "striving" middle class, but a lot of my friends were told "just go to the best college no matter what and don't think about cost you'll make tons later," which ended up to be only partially true, and only for some people.
I'm hoping that http://lambdauniversity.com will help overcome some of those things and extend opportunities to folks who can't afford that kind of risk. It's full-time computer science training for free up front, paid back as a percentage of income for a couple years after you graduate. If you don't make more than $50k/yr you never pay back.