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.
Whoa, there! What discount rate are you using? For the median degree, I get an NPV less cost of $47K. Here are my assumptions:
* Discount rate of 6% (we're talking about an asset with a 40-year lifespan and zero terminal value).
* $25K in annual school costs.
* $25K in annual opportunity costs. (May be conservative for people who are college material but didn't get a degree.)
* Four years to complete the degree. Which is very aggressive.
* $23K earnings differential. (The current average.)
* Forty years of post-degree work.
In this model, you get to breakeven 26 years after you start school. So, to the current high-school senior: assuming the job market in 2036 looks pretty much like it does now, treat these projections as solid.
It gets worse. If you assume a more realistic graduation timeframe of six years, the value is -$18K after 40 years. Of course, you can keep working; you'll hit breakeven after 54 years (at age 72).
I think you're overestimating the annual cost of school. I know it doesn't cost $25k/yr for me to go. I pay around $6k/yr for tuition, plus another $1k or so for books. According to College Board [1], that's about $1k less than the average for a student going to a public school, in-state.
Your figure matches about what it costs to go to a private school, but, from my experience, public schools are also more likely to give scholarships [2]. Even still, no one is forced to go to a private school.
[2]: I went to a private school my first year. It was around $30k/yr, but I was also given a scholarship that cut that price to around $18k/yr. Most of the people I met on campus also received scholarships of some sort as well.
The school I'm at costs ~ $55k per year in the end, and the grants I get bring it down to about $30ish, and my parents make not much more than $100k (by working a full time and a part time job each)
The public schools I applied to that weren't rolling-admission 5th year of highschool types ended up costing the same in the end, because they didn't give need-based aid, and their merit scholarships were not large for people who don't play sports.
Need based aid isn't really targeted towards people who's parents who make more than 100k (more than the national average).
Merit scholarships are easy to achieve, given that you are exceptional. But if you are middle class and not especially proficient, I do agree that you have one of the hardest college experiences in america.
It's unfair to use your public school costs as evidence because they are not comparable to his numbers. Here are the numbers across the board for all college students [1]:
Median: $9K
Mean: $26K
Also, if we were to put opportunity cost into the calculations (because you could work/work more if not going to school), it would quickly approach the $25K figure.
We both linked to the same article, so I'm well aware that my tuition costs are not what everyone else will experience.
A median of $9k is still less than half of what the GP used, and my cost of tuition is a lot closer to the average than the $25k the GP used.
Also, if we were to put opportunity cost into the calculations (because you could work/work more if not going to school), it would quickly approach the $25K figure.
Part of the cost is often borne by the government. For the purpose of identifying a bubble, you have to look at that cost, too--because the problem is too much aggregate investment in education, not that it's a bad deal for everyone.
I graduated in 3.5 years and school cost 17k/year. Also, opportunity costs is not 25K because you still have basic cost of living either way and you can work in the summer.
So run those numbers assuming school costs of 15K, opportunity costs of 5k, 23K earnings differential, and student loan costs of 3.5% tax deductable.
PS: A friend of mine worked his way through school making 7.50$ an hour as a cook at without student loans. He worked 80hours a week in the summer and 40 hours a week during school and graduated in 4.5 years. He also lived in a trailer with his wife and child and got an internship his senior year at 13$ an hour it was a major pay raise.
Opportunity cost is what you give up. If you are capable of finishing school in four years, you're capable of averaging a $25K income over that time.
You're right about summer jobs, but the vast majority of summer jobs pay less than 1/4 of what you'd get working the full year (plus you have to do a job search for a three-month job, versus a job-search for a multi-year job). Outside of law school summer associates, I don't know of anyone for whom summer jobs routinely mean a raise.
I like your friend's story! But imagine if, after four years, he had credible evidence that he could work extremely hard, plus tens of thousands of dollars in savings. A good situation to be in if he wants to start a business.
Choosing an arbitrary cutoff of 6 years and then assuming that everyone who didn't complete their degree within 6 years is a college dropout is not a particularly valid way to measure dropout rates. I completed my degree after the 6-year mark and I'm certainly not the only one to do so. These statistics erroneously include people like me in the dropout category. A more accurate method of measurement would be to track each cohort of students from entrance through graduation and chart a histogram of the elapsed time from initial enrollment to graduation. Once you've collected these histograms for several cohorts, you're then in a position to construct a model of the statistical distribution. Then you can make accurate estimates of the true dropout rate by fitting the known graduation data for a given cohort to the model to estimate how many of the students are in the tail of the distribution that will eventually graduate.
You're backing it up with your own personal anecdote?
That's not valid.
If you found data that said, for example, 30% of college graduates took longer than 6 years to earn their undergraduate degrees, then I would agree with you.
If it's less than 10%, then the using 6 years as a cutoff would be a very good rule of thumb estimate.
Maybe the reason why the 6 year cutoff is so often used is because someone already crunched the numbers and found it was good enough?
"You're backing it up with your own personal anecdote?"
No. I provided a counterexample that falsifies an implicit assumption of the 6-year cutoff model of the college dropout rate. If you measure your dropout rate as the percentage of students who have not graduated within 6 years of enrollment, it is provably true that your measurement is an overestimate of the true value.
"Maybe the reason why the 6 year cutoff is so often used is because someone already crunched the numbers and found it was good enough?"
If someone had already crunched the numbers, the appropriate correction factor to apply to the 6-year measurement would be well-known and, instead of reporting the 6-year cutoff value, a distribution-corrected 6-year cutoff value would have been reported instead. If nobody crunched the numbers to find out what the characteristics of the distribution's tail are, then the methodology is sloppy. If a correction factor was applied but not explicitly mentioned where the value is reported, then the reporting is sloppy. Either way, a reasonable person is justified in regarding the reported value as merely an upper bound on the dropout rate and rejecting the assertion that it is an accurate measurement of the true value.
Well, I really enjoyed college and I wasn't in any hurry to graduate. I took a lot of classes that had absolutely nothing to do with computer science, had a lot of fun doing so, and I think I am a much more well-rounded human being for having taken that route. I had about 70 credit-hours more than what was actually required for my degree by the time I completed the last required class.
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.
> It isn't going to be as bad as the housing market crash
then do you think that there will be a crash in this area, and if so, how bad do you think it will be?
i imagine it wouldn't sneak up on us like the housing crash because of the nature of the loans, but that it could lead to a longer, lingering problem kicked off by the housing crash.
It might not be as bad as the housing market crash but keep in mind that more people will be going to college in the future and take out student loans. I think higher education loans will grow at a staggering rate which will ultimately crash. If it crashed on its own, it wouldn't be devastating. If it happened right after the housing market crash, it could destroy our economy.
IMO it will be far less devastating, because it will be biased towards a higher earning, lower unemployment group of people (see statistics elsewhere in this thread).
Can you point me to more information about master's degrees being a bad idea? My wife is about to start a master's program, and it'd be good to know ahead of time.
"It isn't going to be as bad as the housing market crash, because degrees are revenue producing assets for the overwhelming majority of people and houses are costs for the overwhelming majority of people. Also, student loans do not have any mechanisms in them which are designed to induce payment shock, like ARM resets are. (I am only half sardonic there.)"
Degrees clearly are great revenue producing machines for the portion of the workforce currently unemployed with degrees. I remember a few years ago, "The housing market can't crash, it's impossible, it's the only safe investment vehicle after all of those silly tech stocks".
"Degrees clearly are great revenue producing machines for the portion of the workforce currently unemployed with degrees."
The unemployment rate for degree-holders in the US is currently 4.5%, compared to 10.5% overall. The bulk of the unemployed are in blue-collar sectors and among those who have graduated with a high school diploma or less. We can argue about what is or isn't an "acceptable rate" of unemployment, but typically for America it's been 4-5% unemployment. That even in this Great Recession, degree-holding citizen unemployment sits within the "acceptable" range, tells you that there is tons of value to getting better educated in this country at this time, and even in this climate.
One of my friends is finishing up her P.hD in entymology at Cal and she's somewhere around $175k in debt now with no expectation of ever making more than $50k/year in her field (if she can work in it at all). Another went to a private university for undergrad, then Temple for Med school, she's just now gone through Match and is around $225k in debt. She's chosen a career path that once through her residency (with a $40k/year salary expectation for 5 years through a triple-discipline program) should land her a comfortable $250k/year salary in the middle of nowhere. The $225k she'll have was a good investment, but my friend who likes beetles?She expects to pay 20-25% of her salary to pay it off for the rest of her life.
But as the parent stated later in his post, not only do college graduates earn more money, but the unemployment rate of college graduates is also far below the average unemployment rate.
In fact, it looks like the unemployment rate for college-educated workers is falling:
"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.
Exactly the opposite is true. People who make their payments get low interest rates. People who don't, get higher rates. That's the way it works.
Think about cars. Car dealerships know almost anyone coming in the door can get approved, but only if they hold prices down at a reasonable level. Beyond that level, the banks won't loan the money because the loan isn't guaranteed to be paid back. There's no such mechanism in education, because loans can't be discharged and they're guaranteed by the government, so there's no reason for schools to sell their education for a reasonable price.
You misunderstand. If the rules are changed so that fewer people will have to repay, then people will take advantage of that -- and fewer loans will be repayed. This means that the banks lose money. For them to stay in business (or at least to be able to maintain their capitalization -- investors will flee if they can't make profits), they've got to pass those default costs on to the customers. Thus, all of us will pay a higher interest rate to make up the shortfall.
Aren't the rates set by the government? At the very least, there should be ways for some of it to be forgiven for specific reasons, health reason would be on top.
Also, there are some programs where people who work for the government can get loans forgiven after a set amount a years. Maybe a similar thing (through tax breaks) could be implemented to help employers pay student loans with the student.
But the best solution is by far reduction of tuition. I'm glad I went to school in Florida, tuition was very low for a state that isn't very egalitarian usually. Education is something I feel they are doing much better than others. I now live in Canada and I see American students come here because the out of country rates are cheaper than their in state rates. And I'm all for free markets and all but the reality is, education is far from a free market. Highly subsidized and yet they still charge crazy rates for tuition. Harvard is now cheaper than some states schools, that's ridiculous.
Aren't the rates set by the government? At the very least, there should be ways for some of it to be forgiven for specific reasons, health reason would be on top.
There are for at least some reasons. There are both student loan forbearance, deferrment, and forgiveness programs available. Deferrments seem relatively easy to get (I have one currently while I attend grad school).
Forgiveness programs seem very stringent and limited, but they do exist for certain forms of public service and for extreme hardship. There are deferrment and forbearance programs for temporary hardship though and income based repayment plans.
Well I was really referring to students who's parents are making less then 120k if I remember correctly, tuition is now waved. Effectively making it cheaper. I do not know how many percent of their student body fits this but those who's parent make more than this should in effect be able to afford the tuition rate.
Tuition may be waved, but cost of living expenses might actually be higher than tuition + living at a state university. Private universities charge a ton for housing + food.
Well, maybe they should make it so that degree can be legally reposessed by the bank - even if they can't resell it, that would still be a deterrent. Stating that you have a degree while you don't should be then treated like criminal fraud, and any future employer, seeing lack of degree would know to inquire about the details.
Now that I look at my plan, it looks rather evil. But I will publish it anyway, for the sake of discussion.
"Maybe they should make it so that degree can be legally reposessed by the bank ... and any future employer, seeing lack of degree would know to inquire about the details."
This wouldn't work. They can't repossess the knowledge in your head, or the fact that you did EARN a degree, even if you don't HAVE one. Employers are mainly interested in what people know and can do, not how their finances have been in the past (though that may come into play for questions of trust).
most employers don't go checking with your university, as it stands. i don't see why they'd be more interested in doing so under these circumstances. the piece of paper itself is rarely what matters; only what you learned getting it. and an employer that doesn't recognize that probably isn't worth working for.
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.
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.
This is not how bankruptcy works. When you declare bankruptcy, you have to propose a plan for repaying your creditors to the best of your ability, and that has to be approved by a court. You don't just fill out a form and file it at the local ATM; there are judges that exist to stop exactly this sort of mischief.
If your theory is true, it should apply to all unsecured creditors---especially credit cards. Why isn't it common practice to incur tens of thousands of dollars in credit card debt during college and then declare bankruptcy the day after graduation? Credit cards aren't secured debt---Chase has no legal right to repossess your Xbox. The answer is because this is the real world and that's not how the bankruptcy code works.
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.
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.
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.
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
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?
Well, the CS education is available without the late fees, computer science is probably the easiest subject to learn from the internet.
For one thing, NYU trades on their name as well as their education, that's a big chunk of the money you're talking about.
But the more poignant question to me is whether you're getting less out of the liberal arts classes than you are out of the CS classes. I'm not sure that's clear, you can learn engineering anywhere, but 80% of the people I've ever worked with can't write for crap.
Personally, I value large chunks of the education I got in college, and think the majority of it had some value. I dunno how that value compares to the cost, and I've never seriously considered graduate school of any kind because the (tuition + lost earning) changes a bunch once you have a job.
I was mostly commenting that I thought a lot of the liberal arts education was just as valuable as the technology education, provided that I actually learned the tech so I could get a job. I learned a lot about music, literature and history that I'll have for my whole life, and that I really wouldn't have gotten off my duff to learn on my own.
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.
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.
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...
> 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.
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.
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.
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.
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.
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)
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.
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.
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.
If you know of another way to get government-subsidized, interest-deferred or interest-free loans to spend four years of your life professionally learning, and that have generous deferment provisions after you're done with those four years of professional learning, let me know. I'd love to access that money.
"Smart societies have free education, and their schools may not be always as good as those that you pay for with half of your life or so but they're adequate enough."
I would like you to name those smart societies with free education and world-class universities. Notice the Shanghai Jiao Tong University list of schools: http://www.arwu.org/ARWU2009.jsp .
The problem with "free" education is that a) it isn't really free -- someone is paying; b) as with so many "free" things, you get what you pay for to some extent; and c) people without any skin in the game aren't likely to value their "free" education as much. Any society you manage to name with a nominally free university education is going to suffer from some or all of those problems.
(Note: the above isn't to say American universities are optimal, or that they don't have problems: they do. But the solutions are not to proclaim that everything should be free, as if there is no such as opportunity cost, or that free from the student's perspective is equivalent to free from society's perspective.)
Free from the students perspective is actually a net gain for society because a better educated general public benefits everybody, not just the students.
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.
... and France's first university on the Shanghai Jiao Tong list: about 40. And it goes down from there, probably in large part because its universities are underfunded, like most of Europe's.
Free from the students perspective is actually a net gain for society because a better educated general public benefits everybody, not just the students.
The question is what happens on the margins and whether there are enough university slots for everyone who wants to go. In the U.S., there basically are, especially when one takes into the community college -> four year path. From what I understand, in most of Europe this is a continual problem.
I think your example does more to prove my point than disprove it.
There are plenty of American Universities below position 40 on that list. I also doubt that if France would suddenly start to charge its students a huge tuition fee that the scores would go up dramatically.
Given the size of the respective economies of France and the US it is actually surprising to see them in the top 40, I would never have expected that, if tuition were the secret then they should have been near position 100 or lower.
The first 39 slots are divided between the US, Japan, England, Canada and Switzerland.
I don't see this as being true. I went to a state school (UofI). It cost $700 a quarter.
I got bored and dropped out. I had absolutely no trouble finding a job. Not having a degree has not come up at all, even when working for a big corporation that does extensive background checks.
So I am not buying that college must be expensive, or that there is no way to get a job without completing college. Sure, some people are rejected from some jobs for not having a degree, and some people spend a lot of money on college for no real reason. Overspending on college is no different than overspending on anything else.
(Example: I just bought a $900 vacuum cleaner. That doesn't mean that if you don't have $900 you can't clean your house. It just means that I overspent.)
That was my whole point. College doesn't have to be expensive, in fact it can be free or nearly so.
> I had absolutely no trouble finding a job. Not having a degree has not come up at all, even when working for a big corporation that does extensive background checks.
That's good :) My impression from friends is that having a degree would have been a big plus, not just for getting the job but also for the compensation.
> Overspending on college is no different than overspending on anything else.
That's true too. But we - TrueTech Canada Inc - spent a good bit of money getting some our employees that were seriously in debt out of it, and we helped a few that were still in school to avoid going in to debt. I was quite surprised to see kids that young saddled with such huge debts, $35K in one case.
> (Example: I just bought a $900 vacuum cleaner. That doesn't mean that if you don't have $900 you can't clean your house. It just means that I overspent.)
Sounds like you have some industrial cleaning power there :)
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?
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.
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?
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?
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.
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.
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.
where i went, they did not pay the same. engineering school was the most expensive, followed by architecture, journalism, business, and then finally "arts and sciences". the difference was only a few percent at each step, though. (IIRC.)
recall, though, that we're dealing with a market. the schools will charge what they can get away with for a liberal arts degree. if folks purchasing liberal arts degrees could do the math to realize they're getting a bad deal, they'd stop paying so much for them and the prices would drop. conveniently for universities, prospective psych majors don't spend a lot of time thinking about their expected lifetime earnings and how much their degree will change those earnings.
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.
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.