The education balloon
19/1/13 17:55![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png)
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Source: http://www.washingtonpost.com/blogs/wonkblog/post/chart-of-the-day-college-tuition-is-out-of-control/2011/10/27/gIQABi4sMM_blog.html
In a nutshell, the tuition fees in the US universities have increased 4 times for the last quarter of a century, and the student loans have surpassed $1 trillion:

Much could be said about the curse of higher education: as soon as the student has graduated, he or she already has piled mountains of debt. The young educated Americans need more and more time to pay back to their creditors. And many of them never manage, and they sink down into a debt spiral.
The university tuition in the US has passed the 1 billion mark, which is more than all the debt on credit cards for all Americans. There are thousands, if not millions of personal stories of students who are paying hundreds of dollars every month, just to cover the interest on their loans. It is like paying a mortgage on an imaginary house that doesn't even exist in the material sense. Still, at least they have supposedly received something in return for their indebtedness - either education at Berkeley, or Harvard, or some of the other, more or less prestigious education institutions in the country. All financed through a private loan. Some of them even come back to teach in colleges or universities. And the wheel keeps turning.
Still, for each of those who manage to pay it all back, there are dozens who never find a proper job after graduation. And their number keeps growing. As well as the number of those who fail to serve their debts that they have piled during their studies. The share of 90+ day delinquency has increased from 9% to 11% for 2012.

The economists are warning of a danger for a new "balloon" coming up, one that could plunge the country in a new crisis. The education balloon could have much graver consequences than the real estate balloon, because, unlike the owners of real estate, students cannot just "return" their education. And whoever has interrupted their studies or has chosen a discipline that has yet to assert its place at the labour market, would virtually remain empty-handed.
More and more university graduates work as waiters and janitors. Some of them never even finish university - about 40% of them interrupt their studies. One-third of the debtors are over 40 years of age, and one in four households consisting of 35-45 year old high-education graduates are still paying back their student loans.
The average US student with a bachelor degree leaves the university with $ 27,000 of debt (if they manage to graduate at all). And those who study medicine, law, or who have chosen some elite private university, could end up with a 6-digit debt.
The problem is that the salary growth rates simply lag way behind the growth rate of student loans. The Economist reports that in 2007 the US university graduates earned salaries comparable to the 1979 levels, while in the meantime their education expenses have risen exponentially.
This is a disturbing trend, and sounds like financial enslavement of vast proportions. It is an enormous hindrance to the well-being of an entire society, because as we know, education and the youth potential is essential for the long-term growth of an economy, and hence the prosperity of a nation. And while many people are so focused and invested in other issues and seem to believe that the worst of the economic crisis is behind their backs, this mine field keeps getting wider and denser. And it is bound to explode at some point. And this time the consequences will be very profound.
I wish I had a solution to this problem. But, as I am obviously lacking the insights an American would have, I guess I am stuck at the "raising the issue" stage at this point.
(no subject)
Date: 19/1/13 16:27 (UTC)(no subject)
Date: 19/1/13 16:59 (UTC)It gives Libertarianism a new meaning. The liberty to sell oneself into debt-slavery.
(no subject)
Date: 19/1/13 22:27 (UTC)More like America will have few non-upper class American educated PhDs in philosophy, dead languages, sexology, basket weaving, etc. Smart, talented, hard working people who pursue useful degrees will probably be less affected.
(no subject)
Date: 20/1/13 00:33 (UTC)(no subject)
From:(no subject)
Date: 20/1/13 01:23 (UTC)(no subject)
Date: 19/1/13 17:28 (UTC)The bubble is largely in part due to the guarantee of loans by the government - loans that cannot be wiped away by bankruptcy, loans that are given away pretty freely. If a prospective student will pay anything for college (because, after all, college is believed to be essential for a good paying job), and the payment will be easily paid by the loan, a loan that will be guaranteed by the government, where's the incentive to keep costs down? That incentive is nowhere to be found.
We have two problems, at the end of the day. One is the loan issue, which is basically done by the government these days and thus lacks any actual risk. The other is the fact that we push students to go to college, regardless of whether they should. A lot of it is our obsession with international rankings in elementary, middle, and high school compared to our international peers, since it pushes a college prep-style curriculum, which means that going to a trade school is discouraged.
tl;dr, everything in education is a messy, terrible cluster of policy that needs to be nuked from orbit.
(no subject)
Date: 19/1/13 17:31 (UTC)(no subject)
Date: 19/1/13 17:35 (UTC)The question for me is not whether this would limit who enters these colleges, but rather figuring out the state interest in pushing college above other options regardless of the student, and then hanging the taxpayers with the inevitable bill.
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Date: 19/1/13 19:27 (UTC)(no subject)
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Date: 19/1/13 19:50 (UTC)Meanwhile, banks (who made very little money on student loans in the past) saw this trend at the same time that they saw all other revenue streams in trouble. They pushed the legislation that exempted student loans from bankruptcy proceedings, and since they own their legislators and regulators (more on this on a later post) they got it.
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Date: 20/1/13 11:51 (UTC)Funny that whole bubble of tuition hikes has been highest in those lovely private sector inventions.
(no subject)
Date: 19/1/13 19:44 (UTC)Learning how to get out of debt teaches us real world problem solving. It is a problem facing the entire world, some worse then others. And there are solutions.
Some solutions are proactive. Don't go to university until/unless you can afford it. I know this is contrary to everything most of us have learned. This same advice applies to saving up for a car before you buy one. Or a house. or what ever big purchase. Avoid the bank, and other lenders/loan sharks whenever possible.
Of course not everyone can or wants to be proactive. That's why there are reactive solutions as well. They're just never going to be as effective.Going into debt means having to crawl out of debt. It's the same pace as saving up but you get to put the cart before the horse. Most cars are rear wheeled drive for a reason, not necessarily a good reason.
If you take out a loan for education you expect to have higher income upon graduation. This means you can pay off tuition faster then you would have, if you saved up on an uneducated person's wage. But then there's generally interest applied to the loan (some student loans are interest free, at least for a set period of time). This assumes of course that you got a high salary upon graduation. Many graduates either can't find a job or settle for lower wages then they had been taught to expect.
Most graduates have colleagues in the same boat. Those with the same degree have similar education, similar mindset, and similar knowledge of the way things are done. So they have resumes. They apply for jobs. They compete like lemmings after then same few jobs. It works out for some. Works out for a while anyway. And for many others it doesn't work out as planned. That fallback plan of working with dad at the factory wasn't much of a safety net because the factory closed.
Seize the Day is probably the best advice to give a person. Especially for a young person. Take advantage of the opportunities as they present themselves. Before you get old, before you get sick, before your loved ones pass away, do what you can as soon as you can. I don't know if buying a house, a car and an education is the best thing you can do before you can afford it is exactly seizing the day. Maybe it is. I would rather you go back packing across Europe and the Americas while your knees still bounce. I would rather you fall in and out of love before you become bitter with loss. I would rather you earn the full cost of your degree before you have a sense of entitlement to it.
(no subject)
Date: 19/1/13 20:07 (UTC)I'm not sure we can adequately discuss this topic (which needs to be discussed on a far more public platform) without considering demographics (http://talk-politics.livejournal.com/1545748.html). But that's just me.
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Date: 19/1/13 20:19 (UTC)(no subject)
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Date: 19/1/13 21:49 (UTC)(no subject)
Date: 19/1/13 20:09 (UTC)Some arguments are so predictable.
(no subject)
Date: 19/1/13 20:30 (UTC)http://pacificaconsultants.wordpress.com/2010/03/26/comparison-of-tuition-costs-of-higher-education-around-the-world/
Capitalists should be happy, because what used to be almost universally a socialised system, is now slowly turning into a banker's pipe dream in some places (UK isn't very far from there at this point, having the 3rd most expensive education in the industrialised world, etc).
Ultimately, it boils down to this: can smart policies be crafted that wouldn't torpedo the national budget while providing a sensible framework that would allow maximum access to higher education - or not? And if yes, should they be pursued, or should legislatures roll over in front of the lobbyist pressure of the financial sector? I think at this point the question has become more rhetorical than it should be.
(no subject)
Date: 19/1/13 23:58 (UTC)(no subject)
Date: 20/1/13 12:25 (UTC)These things get discussed on my school board, where I am very active, being the deputy principal. Sometimes people could come up with novel ideas, if they have been exposed to different perspectives. So that's what I am trying to do here. Exposing myself to different perspectives.
I hope this answered your curiosity to a satisfactory extent. :-)
(no subject)
Date: 20/1/13 22:35 (UTC)On your school board, what did they come up as for a reason for such an increase in American college costs?
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Date: 20/1/13 07:18 (UTC)(no subject)
Date: 20/1/13 12:26 (UTC)(no subject)
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