9 ms·

The student loan crisis will dwarf the housing market crash.

65 points by mikekarnj 16y ago

frossie 16y 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.
- powrtoch 16y 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.
  - jbooth 16y 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.
    - barkingllama 16y ago
      I actually just created an account (pretty grueling process, I deserve some credit) to add my 2c: while focusing on professional skills and experience is a great thing for any curriculum, there is a value in "broadened horizons" that cannot be ignored. Specifically, I found that the networking (meeting those outside your potential field) and ability to see things from other perspectives was invaluable in my college experience. This breaks down the "siloing" effect that I see a lot of talented CS majors have problems with, an effect that is consequently ruining the business world. Taking off the blinders once in awhile is a good thing, regardless how seemingly useless that Drama 101 class is. It's all what you make of it...
    - kiba 16y ago
      This is a meme "I learn this, and you should learn it too!" There are alway value to an education, in anything. The question is if it is really worth learning about? Beside, people can learn to appreciate basket-weaving and dance appreciation in their own time. All they need to do is get rid of their TV and get a hobby. People don't need an overly expensive course to do that.
      - powrtoch 16y ago
        This was exactly my point. I think there really is value in learning the arts, and in learning other unrelated fields. I'm a big music enthusiast, and sociology was one of the best classes I took. But that doesn't change the fact that they are totally unnecessary to a programming career. If you're interested in them, you'll find your way to them, and you'll probably do it a lot cheaper.
    - yummyfajitas 16y ago
      At NYU (where I used to work), a CS major requires 12 courses in CS and 32 courses total. The degree costs just short of $93,000. Do you really believe that a liberal arts education is worth $62,000 tuition + 2 years of lost wages (roughly another $140,000)? Particularly when, to borrow a phrase from Good Will Hunting, that liberal arts education is available to anyone for about $4.25 in late fees at the public library? http://cs.nyu.edu/webapps/content/academic/undergrad/majors http://cs.nyu.edu/webapps/content/academic/undergrad/majors http://webcache.googleusercontent.com/search?q=cache:CS5fT5za3JcJ:cas.nyu.edu/object/bulletin0810.ug.degreereq+nyu+degree+requirements+cas&cd=1&hl=en&ct=clnk&gl=us http://webcache.googleusercontent.com/search?q=cache:CS5fT5z... http://www.nyu.edu/bursar/tuition.fees/rates10/ugcas.html http://www.nyu.edu/bursar/tuition.fees/rates10/ugcas.html
- gsmaverick 16y 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.
  - muzz 16y 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.
- sliverstorm 16y 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 16y 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)
    - sliverstorm 16y ago
      Tests as pre-reqs are pretty useless IMHO. I 'tested into' the second level of calculus before I had taken pre-calc, but I would not have been able to pass the class, not a chance.
      - aero142 16y ago
        That only proves that the test was poor, not the theory.
- evgen 16y 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.
  - frossie 16y 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.
  - deleted 16y ago
    [deleted]
krschultz 16y 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.
- sliverstorm 16y 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.
  - nkassis 16y ago
    Bankruptcy isn't exactly fun. You won't be living the high life afterwards.
    - sliverstorm 16y ago
      You're in your early 20's fresh out of college. You wouldn't have been living the high life anyway.
  - spudlyo 16y ago
    And 7 years later all evidence of this is gone from your credit history.
  - imack 16y 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.
Lendal 16y 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.
- nkassis 16y 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?
  - mikekarnj 16y 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 16y 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 16y 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 16y 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 16y 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 16y ago
  Here's a vote for "interested".
  - mikekarnj 16y 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.
    - dpritchett 16y ago
      Lifetime earnings should be a better predictor than median salary at a given point in one's career given the point made upthread about unemployment being lower for college graduates. Even if diploma-wielding programmers can command high salaries in boom times, they have a tougher time getting jobs when there are unemployed programmers with degrees applying for the same jobs during a recession.
nkassis 16y 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 16y 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?
  - nkassis 16y 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.
    - elai 16y ago
      Many universities have different prices for different faculties classes. What end's up happening is that business costs the most, sciences cost the same as any other class and engineering/comp sci. is only marginally higher. (450/500/680). From a purely cost point of view, that is a bit skewed.
- muzz 16y ago
  The Univ of California system adds a "professional fee" to certain graduate programs (MD, JD, MBA, etc) that expected to have higher earnings.
- rbanffy 16y 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.
startuprules 16y 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-estate-wa_n_458092.html http://www.huffingtonpost.com/2010/02/11/commercial-real-est...
CWuestefeld 16y 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 16y 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.
- yoden 16y 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 16y 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 16y ago
  I want to know why I can't. Nobody has said why, just that you can't
nolite 16y ago
looking forward to my bailout
c1sc0 16y 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?
- sigstoat 16y 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.
- harry 16y 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.
jacquesm 16y 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.
- jseliger 16y 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 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.)
  - jacquesm 16y 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 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.
joe_the_user 16y 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 16y 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 16y 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.

65 points by mikekarnj 16y 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.

powrtoch 16y 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.
- jbooth 16y 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.
  - barkingllama 16y ago
    I actually just created an account (pretty grueling process, I deserve some credit) to add my 2c: while focusing on professional skills and experience is a great thing for any curriculum, there is a value in "broadened horizons" that cannot be ignored. Specifically, I found that the networking (meeting those outside your potential field) and ability to see things from other perspectives was invaluable in my college experience. This breaks down the "siloing" effect that I see a lot of talented CS majors have problems with, an effect that is consequently ruining the business world. Taking off the blinders once in awhile is a good thing, regardless how seemingly useless that Drama 101 class is. It's all what you make of it...
  - kiba 16y ago
    This is a meme "I learn this, and you should learn it too!" There are alway value to an education, in anything. The question is if it is really worth learning about? Beside, people can learn to appreciate basket-weaving and dance appreciation in their own time. All they need to do is get rid of their TV and get a hobby. People don't need an overly expensive course to do that.
    - powrtoch 16y ago
      This was exactly my point. I think there really is value in learning the arts, and in learning other unrelated fields. I'm a big music enthusiast, and sociology was one of the best classes I took. But that doesn't change the fact that they are totally unnecessary to a programming career. If you're interested in them, you'll find your way to them, and you'll probably do it a lot cheaper.
  - yummyfajitas 16y ago
    At NYU (where I used to work), a CS major requires 12 courses in CS and 32 courses total. The degree costs just short of $93,000. Do you really believe that a liberal arts education is worth $62,000 tuition + 2 years of lost wages (roughly another $140,000)? Particularly when, to borrow a phrase from Good Will Hunting, that liberal arts education is available to anyone for about $4.25 in late fees at the public library? http://cs.nyu.edu/webapps/content/academic/undergrad/majors http://cs.nyu.edu/webapps/content/academic/undergrad/majors http://webcache.googleusercontent.com/search?q=cache:CS5fT5za3JcJ:cas.nyu.edu/object/bulletin0810.ug.degreereq+nyu+degree+requirements+cas&cd=1&hl=en&ct=clnk&gl=us http://webcache.googleusercontent.com/search?q=cache:CS5fT5z... http://www.nyu.edu/bursar/tuition.fees/rates10/ugcas.html http://www.nyu.edu/bursar/tuition.fees/rates10/ugcas.html
gsmaverick 16y 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.
- muzz 16y 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.
sliverstorm 16y 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 16y 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)
  - sliverstorm 16y ago
    Tests as pre-reqs are pretty useless IMHO. I 'tested into' the second level of calculus before I had taken pre-calc, but I would not have been able to pass the class, not a chance.
    - aero142 16y ago
      That only proves that the test was poor, not the theory.
evgen 16y 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.
- frossie 16y 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.
- deleted 16y ago
  [deleted]

krschultz 16y 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.

sliverstorm 16y 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.
- nkassis 16y ago
  Bankruptcy isn't exactly fun. You won't be living the high life afterwards.
  - sliverstorm 16y ago
    You're in your early 20's fresh out of college. You wouldn't have been living the high life anyway.
- spudlyo 16y ago
  And 7 years later all evidence of this is gone from your credit history.
- imack 16y 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.

Lendal 16y 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.

nkassis 16y 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?
- mikekarnj 16y 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 16y 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 16y 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 16y 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 16y 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 16y ago
Here's a vote for "interested".
- mikekarnj 16y 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.
  - dpritchett 16y ago
    Lifetime earnings should be a better predictor than median salary at a given point in one's career given the point made upthread about unemployment being lower for college graduates. Even if diploma-wielding programmers can command high salaries in boom times, they have a tougher time getting jobs when there are unemployed programmers with degrees applying for the same jobs during a recession.

nkassis 16y 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 16y 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?
- nkassis 16y 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.
  - elai 16y ago
    Many universities have different prices for different faculties classes. What end's up happening is that business costs the most, sciences cost the same as any other class and engineering/comp sci. is only marginally higher. (450/500/680). From a purely cost point of view, that is a bit skewed.
muzz 16y ago
The Univ of California system adds a "professional fee" to certain graduate programs (MD, JD, MBA, etc) that expected to have higher earnings.
rbanffy 16y 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.

startuprules 16y 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-estate-wa_n_458092.html http://www.huffingtonpost.com/2010/02/11/commercial-real-est...

CWuestefeld 16y 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 16y 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.
yoden 16y 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 16y 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 16y ago
I want to know why I can't. Nobody has said why, just that you can't

nolite 16y ago

looking forward to my bailout

c1sc0 16y 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?

sigstoat 16y 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.
harry 16y 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.

jacquesm 16y 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.

jseliger 16y 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 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.)
- jacquesm 16y 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 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.

joe_the_user 16y 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 16y 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 16y 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.