04-19-2012, 10:34 AM
- Join Date
- Mar 2010
Stop "open enrollment" at public universities and watch the laws of economics kick in.
Of course, all hell will break loose when people who barely graduated high school or got GED and those who "aren't good at taking tests" can't get into college, but who cares?
Not that people who go to vocational schools do so because they can't cut the academics, but we certainly need more plumbers, AC techs, and god knows we need more dental hygienists than we do half of the majors offered at colleges.
At the same time, we could use changes to the system to generate more American doctors so that the AMA doesn't have a stranglehold on medical costs.
What I see as a huge waste is when someone gets a four year degree in something useless just so they can get to graduate school where they learn something useful. The other thing is when people spend years of study and big bucks for what I call "credentialization". Many of the occupations (Like school superintendent) do not have any rational requirement for a Phd. The job of superintendent was long an elected position, one filled by a person with a background in management or business rather than a degree in psychology or the Application Of Cosmic Bullshit. But the require a Phd because it makes the job look more important and worthy of a $300,000 salary, contract, and golden parachute.
04-19-2012, 12:03 PM
- Join Date
- Mar 2009
One can't place a requirement that jobs which used to only require a high school diploma, now require a 4 year degree, and not expect students to do what ever it takes to acquire that. Even if you look at engineering positions, the starting salaries for entry level engineers have significantly dropped in most fields, easily upwards of 20-30k a year. That's a pretty significant portion of a starting salary, and can easily too asunder the projections one made while taking out loans.
Granted... in a number of cases, insane decisions have been made by a number of people.
Honestly, almost half the people in the last class of vocational training I taught... had 4 year degrees. A number of engineers and even people with MBA's from prominent schools were in the class. It's a shame that so many people had to spend so much, to get where people from a generation ago were able to start at... right out of high school. It's absurd, but a lot of apprenticeship programs now require 2 or 4 year degrees, just to start.
I really think that a 4 year degree has just been reduced down to the equivalent of a high school diploma. I regularly see jobs that require a 4 year degree, when historically it wasn't a requirement, nor does it particularly matter what the degree is in... employers just want it. That being the case, we're stuck in the situation where the majority of students, had better obtain one if they want a successful career outside of their own entrepreneurial endeavors.
I agree, their should be more American doctors... and there would be, if the AMA and government hasn't placed such a limit on the number of doctor programs, to prevent their wages from dropping by there being an over abundance.
Last edited by Artois; 04-19-2012 at 12:14 PM.
04-19-2012, 09:15 PM
- Join Date
- Jun 2008
I agree with Artois' points here and would like to add my own perspective.
The problem of crushing student debt is due to the student loan program itself and the feedback cycle it created with universities. In essence, the existence of Federally-backed student loans led to a 40-year university feeding frenzy. The universities admitted more students to get the Federal loan dollars. Then the universities began a building spree to provide classrooms and housing for all these new students. All of this building required more money and continued the feeding frenzy.
College costs began to rise to cover all the new building projects, and eventually a student's tuition, room and board rose at a rate far beyond the rate of inflation and far beyond the rate of middle class white collar salaries. At the same time, the glut of bachelor's degrees devalued both the degree itself and the high school diploma. Professions that formerly did not require a bachelor's began to do so, and high school graduates became much more limited in both job choices and career advancement. Good blue collar jobs (on which one could realistically raise a family) diminished in number as corporations moved off shore.
High school graduates faced the dilemma of consigning themselves to low lifelong wages or borrowing Federally backed money to get a bachelor's degree. Many chose (or were advised to choose) the latter, feeling confident that they could pay off the loans once employed. Of course, their entrance into the university system further devalued the degrees they were paying so much money to obtain, at least in terms of supply and demand. They also fed the university cycle of feeding frenzy, building spree, more feeding frenzy.
As college costs rapidly soared and salaries did not, student who had desperately needed to borrow money for college found themselves with impossible debt loads and not enough salary to pay them. Add the crash of 2008, the inflation caused by the Fed's QE I and II, and the lack of decent-paying full time jobs, and you have many former students in default. When the music ended, they were left without a chair.
One could argue that many young people should have either never gone to college or neverborrowed money which they couldn't pay back (which is essentially saying the same thing for most people). But with diminishing choices for high school grads and the common wisdom extolling the value of a college degree, many young people decided that the loans were an acceptable risk. Certainly, if young people had been furnished with crystal balls and had been able to predict the spiraling college costs and the diminishing returns of the degree in terms of yearly salaries, they might not have gone that route.
However, young people did not have crystal balls. Nor did they have control over the university-student loan bubble--and yes, I think it is a bubble--which caused the costs to skyrocket and the value of the high school diploma to plummet. The bubble was not set in motion by students, but by a nobly-intentioned but unrealistic government program (driven by the belief that everyone, regardless of background or ability to pay, should be able to go to college) and by the greed of traditional universities and colleges as well as for-profit paper mills, like the University of Phoenix, which saw government money as a boon to their bottom lines. The fact that these institutions were driving more and more students into crushing debt was not their concern. After all, society would blame the borrowers, not the government and institutions that made borrowing both essential and disastrous.
Last edited by Elspeth; 04-19-2012 at 09:22 PM.
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- Nov 2011
04-21-2012, 11:19 PM
- Join Date
- Jun 2008
Both the housing debacle and the student loan debacle come from government encouraging lenders to make loans against traditional loan criteria, which always include the presence of collateral and the ability to repay the debt. These criteria usually act as controls on the system, limiting the potential number of loans and, as a result, keeping prices from exploding in an uncontrolled way, since those doing the pricing would have to take into account the amount the average home buyer or student could borrow.
However, our current system is based on debt, and debt creates wealth for the financial services industry, even as it devastates average and low income Americans. Politicians on the financial services "take"--Barney Frank and Chris Dodd come to mind--like to find ways for more Americans to get into debt to enrich their industry friends and donors. To justify the taking on of such debt, Democrats (like Frank and Dodd) create government policies that seems to address the needs of the minority poor and working class, while they, in actuality, siphon money from these vulnerable groups.
Underlying the sub prime housing loans, for example, was a government policy encouraging lending to "sub-prime" borrowers, primarily in minority and working class communities. The ideal expressed--that everyone should be able to own a home--was used to exploit these communities, which often suffered from lack of knowledge, unwarranted optimism, or simple greed. Their sub-prime loans ended up becoming, through a bizarre Wall Street alchemy, products to be sold to investors. Like straw into gold, sub-primes became "mortgage backed securities", feeding the coffers of Wall Street and their courtesan-politicians. At the same time, housing prices skyrocketed, not because of any added value in the homes or neighborhoods themselves, but because more and more available loans created more and more potential buyers and more and more pressure on housing prices. The lack of limits on loans created a lack of limits on prices.
However, when the music stopped, those poor minorities and working class people--ostensibly the reason for this whole government policy--lost their homes, and in most cases were not permitted to restructure the loans even when they qualified to do so. The homes had to cover the bad paper in the end, and the homes were taken back. (And, of course, added to those homes was a trillion taxpayer dollars in TARP and related programs under Bush and Obama.)
Student loans are operating along the same track. Such loans were developed with minorities and low-income families in mind, although eventually the middle class was forced to use them. The ideal beneath the student loan scheme was that everyone, regardless of ability to pay (or ability to learn, in some cases) was welcome to a college education. However, with more and more loan money available at cheap rates, colleges were able to charge more, build more, grow more, and then, again, charge more. In fact, the colleges and universities seem to have been the primary beneficiaries of this program, while the value of the degrees for which the students were indebting themselves diminished, both in the marketplace and in academic rigor.
In the end, however, as with the mortgage debacle, the borrowers will end up holding the bag. The students will be required to pay back these loans over decades, with any property or wages being turned over to the financial services industry. In the meantime, they will be unable to accumulate any real wealth.
And one wonders if this is the real goal. Like state lotteries, whose government-enriching tickets are purchased primarily by the poor and the working class, these "idealistic" Federal programs promising a middle class lifestyle on unrealistic debt loads, seem to enrich the already-rich and powerful while taking what few assets the minority and working class communities have. These programs also raise the stakes on the rest of America since, by vastly increasing the amount of loan money available for homes and education, they remove normal market controls from the prices of these middle class staples. They also insert a great deal more risk into the system with borrowers who are less likely to pay back the loans. The destabilization, and the resulting, inevitable crashes, greatly affect the ability of all but the super rich to accumulate any real wealth in the long run.
04-21-2012, 11:36 PM
- Join Date
- Mar 2010
That's the way it used to be back during the days of the "robber barons" when the dollar was backed by gold. The only way to create enough money to provide for everyone was to buy more gold. The current system allows me - who started with nothing - a way to create my own wealth through responsible borrowing.
And that's key, of course; responsible borrowing. Borrowing money for an education is sometimes necessary, but then it needs to be paid back. The banks got greedy on this one; they sent students money on a regular basis knowing full well it was not needed for education - just a "college lifestyle". And the students? One expensive lesson, it seems.
Here's an article from a qualified source regarding the death of capitalism:
Last edited by Starbuck; 04-22-2012 at 12:01 AM.
04-22-2012, 03:52 PM
I'd agree that the loan program removes constraints on higher education costs and expenses, however IMO a more productive way to handle federally-backed student loan programs would be to follow the examples of several states which restrict financial aid only to majors which offer a reasonable potential to generate the salaries for graduates that will enable them to retire their loans.......
Either major in a "marketable" field, or you're on your own.....you're free to "follow your passion" into Art History, or Seventeenth Century English Literature, etal......but you get to pay for it yourself........
An approach like this would provide the means to fill the requirements of the nation's workforce, and have the ancillary effect of removing many "professional students" from the system.....having been in academia for a time, there are far more of those than one could imagine, that see a university as a refuge rather than an opportunity to prepare themselves to function productively in society.
If the government is going to become involved in "subsidizing" higher education at all (even temporarily through loans)......it should be in a manner that serves the nation's interests.......if we need more doctors, engineers, scientists, etc., that's where the money should be focused.
Last edited by TVDOC; 04-22-2012 at 03:59 PM.
#19 Matt Taibbi verifies much of what we thought about student loans
08-15-2013, 03:47 PM
- Join Date
- Jun 2008
Yes, this is an old thread, but finally someone is writing about the truth of the matter.
From Matt Taibbi in Rolling Stone
Ripping Off Young America: The College-Loan Scandal
The federal government has made it easier than ever to borrow money for higher education - saddling a generation with crushing debts and inflating a bubble that could bring down the economy
by Matt Taibbi
...but the Republicans and Democrats are snuggled in bed together on the student-loan thing, having hatched a quick-fix plan on July 31st to peg interest rates to Treasury rates, ensuring the rate for undergrads would only rise to 3.86 percent for the coming year.
Though this was just the thinnest of temporary solutions – Congressional Budget Office projections predicted interest rates on undergraduate loans under the new plan would still rise as high as 7.25 percent within five years, while graduate loans could reach an even more ridiculous 8.8 percent – the jobholders on Capitol Hill couldn't stop congratulating themselves for their "rare" "feat" of bipartisan cooperation...
...The thing is, none of it – not last month's deal, not Obama's 2010 reforms – mattered that much. No doubt, seeing rates double permanently would genuinely have sucked for many students, so it was nice to avoid that...But the dirty secret of American higher education is that student-loan interest rates are almost irrelevant. It's not the cost of the loan that's the problem, it's the principal – the appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008....
....[Former students] know they didn't arrive at gorgeous campuses for four golden years of boozing, balling and bong hits by way of anybody's cattle car. But they're angry, too, and they should be. Because the underlying cause of all that later-life distress and heartache – the reason they carry such crushing, life-alteringly huge college debt – is that our university-tuition system really is exploitative and unfair, designed primarily to benefit two major actors.
First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency – low- and middle-income students – that has virtually no lobby in Washington.
Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity.....
....Tuition costs at public and private colleges were, are and have been rising faster than just about anything in American society – health care, energy, even housing. Between 1950 and 1970, sending a kid to a public university cost about four percent of an American family's annual income. Forty years later, in 2010, it accounted for 11 percent. Moody's released statistics showing tuition and fees rising 300 percent versus the Consumer Price Index between 1990 and 2011.
After the mortgage crash of 2008, for instance, many states pushed through deep cuts to their higher-education systems, but all that did was motivate schools to raise tuition prices and seek to recoup lost state subsidies in the form of more federal-loan money. The one thing they didn't do was cut costs. "College spending has been going up at the same time as prices have been going up," says Kevin Carey of the nonpartisan New America Foundation.
This is why the issue of student-loan interest rates pales in comparison with the larger problem of how anyone can repay such a huge debt – the average student now leaves school owing $27,000 – by entering an economy sluggishly jogging uphill at a fraction of the speed of climbing education costs. "It's the unending, gratuitous, punitive increase in prices that is driving all of this," says Carey.
....A 2005 Wall Street Journal story by John Hechinger showed that the Department of Education was projecting it would actually make money on students who defaulted on loans, and would collect on average 100 percent of the principal, plus an additional 20 percent in fees and payments.
Hechinger's reporting would continue over the years to be borne out in official documents. In 2010, for instance, the Obama White House projected the default recovery rate for all forms of federal Stafford loans (one of the most common federally backed loans for undergraduates and graduates) to be above 122 percent. The most recent White House projection was slightly less aggressive, predicting a recovery rate of between 104 percent and 109 percent for Stafford loans.
When Rolling Stone reached out to the DOE to ask for an explanation of those numbers, we got no answer....
...But the main question is, how is the idea that the government might make profits on defaulted loans even up for debate? The answer lies in the uniquely blood-draining legal framework in which federal student loans are issued. First of all, a high percentage of student borrowers enter into their loans having no idea that they're signing up for a relationship as unbreakable as herpes. Not only has Congress almost completely stripped students of their right to disgorge their debts through bankruptcy (amazing, when one considers that even gamblers can declare bankruptcy!), it has also restricted the students' ability to refinance loans. Even Truth in Lending Act requirements – which normally require lenders to fully disclose future costs to would-be customers – don't cover certain student loans. That student lenders can escape from such requirements is especially pernicious, given that their pool of borrowers are typically one step removed from being children, but the law goes further than that and tacitly permits lenders to deceive their teenage clients....
"Only a small minority of those who've been to college have been told very simple things, like what their interest rate was," says Collinge. "A lot of straight-up lies have been foisted on students."...
More at the link above.
Last edited by Elspeth; 08-15-2013 at 04:14 PM.
08-15-2013, 03:59 PM
- Join Date
- Jun 2008
A few more points from the article:
Bottomless credit equals inflated prices equals more money for colleges and universities, more hidden taxes for the government to collect and, perhaps most important, a bigger and more dangerous debt bomb on the backs of the adult working population....Last November, the New York Fed reported an amazing statistic: During just the third quarter of 2012, non-real-estate household debt rose nationally by 2.3 percent, or a staggering $62 billion. And an equally staggering $42 billion of that was student-loan debt.
The exploding-debt scenario is such a conspicuous problem that the Federal Advisory Council – a group of bankers who advise the Federal Reserve Board of Governors – has compared it to the mortgage crash, warning that "recent growth in student-loan debt . . . has parallels to the housing crisis." Agreeing with activists like Collinge, it cited a "significant growth of subsidized lending" as a major factor in the student-debt mess.
One final, eerie similarity to the mortgage crisis is that while analysts on both the left and the right agree that the ballooning student-debt mess can be blamed on too much easy credit, there is sharp disagreement about the reason for the existence of that easy credit. Many finance-sector analysts see the problem as being founded in ill-considered social engineering, an unrealistic desire to put as many kids into college as possible that mirrors the state's home-ownership goals that many conservatives still believe fueled the mortgage crisis....Others, however, view the easy money as the massive subsidy for an education industry, which spent between $88 million and $110 million lobbying government in each of the past six years, and historically has spent recklessly no matter who happened to be footing the bill – parents, states, the federal government, young people, whomever.
Carey talks about how colleges spend a lot of energy on what he calls "gilding" – pouring money into superficial symbols of prestige, everything from new buildings to celebrity professors, as part of a "never-ending race for positional status."
"What you see is that spending on education hasn't really gone up all that much," he says. "It's spending on things like buildings and administration. . . . Lots and lots of people getting paid $200,000, $300,000 a year to do . . . something."
Once upon a time, when the economy was healthier, it was parents who paid for these excesses. "But eventually those people ran out of money," Carey says, "so they had to start borrowing."....
....The massive earnings the government gets on student-loan programs amount to a crude backdoor tax increase disguised by cynical legislators (who hesitate to ask constituents with more powerful lobbies to help cut the deficit) as an investment in America's youth.
"It's basically a $185 billion tax hike on middle-income and low-income citizens and their families," says Warren Gunnels, senior policy adviser for Vermont's Sen. Bernie Sanders, one of the few legislators critical of the recent congressional student-loan compromise.
Gunnels notes with irony that a few years ago, when Obama moved to eliminate private-lender middlemen from the servicing of federally backed loans, much hay was made out of the enormous profits private industry had long earned on the backs of students. The Congressional Budget Office issued a report estimating that Obama's program would save $86.8 billion over a 10-year period by eliminating private profits from the system. Obama said taxpayers were "paying banks a premium to act as middlemen," adding that it was a "premium we cannot afford."
The outrage over profits, however, was short-lived.
"It was wrong when banks were making an $86 billion profit on students, but somehow it's OK when the government makes a $185 billion profit on them," says Gunnels....
...But conservatives most of all should hate the current system for any number of reasons – for being a massive hidden tax, for being a market-defying subsidy artificially keeping ineffective and poor-performing institutions in business, and for being an example of arbitrary government power seizing not just money borrowed plus interest, but billions in additional fees and penalties from ordinary people.
Progressives should hate the predatory tactics of lenders and the sleazy way universities rely upon loan-shark collection methods to keep themselves in fancy new waterfalls, swimming pools and tenure-track jobs.
But nobody hates it enough, except for the people actually trying to pay the bills with increasingly worthless degrees. Instead, the credit keeps flowing and the debt bubble keeps expanding, thanks to leaders like John Boehner (whose daughter reportedly works at Sallie Mae's student-collections firm, General Revenue Corp.) and Dianne Feinstein (who introduced legislation to increase limits on Pell grants while her husband was heavily invested in for-profit colleges).
In a way, America itself is violating the Truth in Lending Act. It's cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn't a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo....
Last edited by Elspeth; 08-15-2013 at 04:22 PM.
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