'Let's Pretend Student Loans are about Education'

U

UT1986

500+ Posts
Yikes, glad I graduated from UT in the mid 80s.

"We also have a "let's pretend" education/student-loan game running: let's pretend college is "worth" the investment, and let's pretend student loans are about education. There are three dirty little secrets buried under the education/student-loan complex's high-gloss sheen:

1. Student loans have little to do with education and everything to do with creating a new profit center for subprime-type lenders guaranteed by the Savior State.

2. A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold.

3. Many people are taking out student loans just to live; the loans are essentially a form of "State funding" a.k.a. welfare that must be paid back.

We've got a lot of charts that reflect reality rather than hype, so let's get started. Despite all the bleating rationalizations issued by the Education Complex, higher education costs have outstripped the rest of the economy's cost structure. Funny how nobody ever asks if there is any real competitive pressure in the Education Complex; there isn't, and why should there be when students can borrow $30,000 a year?"
The Link

“(Department of Education) The U.S. Department of Education today released the official FY 2009 national student loan cohort default rate, which has risen to 8.8 percent, up from 7.0 percent in FY 2008. The cohort default rates increased for all sectors: from 6.0 percent to 7.2 percent for public institutions, from 4.0 percent to 4.6 percent for private institutions, and from 11.6 percent to 15 percent at for-profit schools.”

"This rate is horrifying. The ways these are measured are reflected by two-year default cohorts so you have 15 percent of the entire group defaulting within two-years! The real default rate is much worse if we tracked these out for the life of the loan. In other words, you have many going to for-profit paper mills and coming out with very little job prospects but with the added burden of massive student loan debt. Clearly the student did not benefit but the profits at these institutions are enormous. The government backing is the only way these lenders and schools even survive. If a bank had to lend their own precious money you think they would give someone $40,000 or even $100,000 in student loans to pursue a degree at an unranked paper mill? Reminds you of people buying tiny condos in Florida for $500,000 with no verifiable income."
The Link
 
I dont know what job I could do to replace my salary that doesn't require a degree. Start a lawn service? I would have considered my degree a good value at twice the price and I make under 50k a year. I have quite a few friends w/o a degree and wouldnt change places with any of them. To a certain extent, people are willing to pay the high prices because the jobs they want require a degree.
 
To me, the issue of importance is kind of beside the point. Very clearly, doctors and lawyers need higher degrees. Plenty of professions do, and plenty more see its practitioners benefit from earning degrees. For the most part, the value in a college degree is exposure to varying schools of thought and a demonstration of the commitment needed to finish and earn the diploma.

The real issue is that the educational system continues to raise rates knowing that one way or another, they will be paid. The question is no longer "can I afford to go to college", the question is "how will I go about stringing out my student loan payments".

I've read more and more of late about the increasing status of government serfdom that's rising out of higher and higher tuition. More kids going to college and doing it through guaranteed loans, racking up debt that they may or may not be able to pay and essentially becoming indentured servants to the loan-holder - which btw is more and more becoming the federal government.
 
The financialization of education has become poison to many. Banks were willing to loan to "subprime" borrowers to buy houses because the banks were then able to sell the loan to somebody else (Fannie Mae for example). The banks couldn't lose and any losses at Fannie would be paid by the American public.

Similarly, banks now make loans to "subprime" students. By that, I simply mean that the lending institution doesn't give a damn whether or not any of the money is paid back our even if the kid can't read. The loans are backed by the American public. Colleges can continue to jack up costs because everyone qualifies for a loan. As long as people are willing to go into greater debt to go to school, colleges are going to raise tuition, banks are going to lend, and taxpayers will eventually pay for astronomical defaults.
 
He prefaces his comments based on obtaining a diploma in the "post-financialization economy". "A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold."

If you start out with a Geology degree (I have one of those) and $100,000 or more in the hole with student loans when you graduate, it will likely take several years to pay off that student loan, unless you live very frugally. Yes, I'm glad I have my Geology degree and I value it. But I would certainly wonder if it was worth it if I had graduated in this day and age with say a different degree where my "value" in the workforce was only worth $30,000 - $35,000/yr in compensation for foreseeable future and I had mountains of debt staring at me in the face for quite some time. So yeah, the criticism works.
 
At some point, costs will level off. Tuition can't continue rising triple the rate of inflation. At some point, you're going to be asking someone to pay $35,000 per semester in hopes of obtaining a $60,000 job 4 years down the road, and the math will say that it isn't worth it. I think we've just about reached that point.
 
If the other option is a 25k/yr job it would still be worth paying the insane tuition. I dont understand what y'all think a person without a degree is going to do to have a decent quality of life, provide for a family, and eventually retire.
 
"If the other option is a 25k/yr job it would still be worth paying the insane tuition. I dont understand what y'all think a person without a degree is going to do to have a decent quality of life, provide for a family, and eventually retire."

Larry I have several friends that I went to high school with in the late 70s who never took 1 college course, much less earned a degree who are now earning mid to upper 5 figured salaries. Of course it has taken them awhile to get there, but they don't have the burden of tens of thousands of dollars in student loans, either.

Most of the blue-collar operators/workers that work at the refineries and chemical plants have no college degrees and those guys do quite well with a decent salary - $60,000/yr or more depending on years of experience.

It can be done without a degree, of course you do have to have some sort of technical skill or craft or creative entrepreneurial spirit that allows you to earn a living.

My wife and I are friends with a couple who never went to college, but both owned their own business: the wife owned a tax preparation/booking keeping business for small firms and her husband started a business cleaning thread protectors for drill pipe. Both sold their businesses within the last 6 years and 1 year, respectively and have a nice 2-story house in Houston suburbia and own a condo in Colorado and a beach house on Galveston and are putting both of their kids through college. They are doing better than me for sure and I have the Geology degree. Of course, not all non-degreed folks will achieve this level of financial success, but some do.
 
We need to distinguish between going to college and acquiring a skill. A HS grad who just screws around and doesn't try to learn a skill won't make much if any money. However, you can acquire a skill without going to college. You can also go to college and not acquire a marketable skill.

My brother joined the Navy out of HS to get scholarship money, but he drank too much beer and blew his honorable discharge - forfeiting the scholarship money. However, he learned how to build computers and set up computer networks. Now he makes about $90K per year and has no student loan debt.

I know many people who got out of college and "arts and crafts" degrees that are lucky to find $35K per year jobs and are staring down $100K of debt. They are in holes that will be at a minimum very painful to climb out of.

The student loan program is the problem - plain and simple. It is making credit available to people who otherwise couldn't get it and who are willing to spend whatever it takes to get through college. Nobody is telling them how bad of an investment college can be (if you choose the wrong major), and they're too dumb to figure it out themselves, because high school graduates don't have any brains anymore.

The whole scam needs to be eliminated. The colleges need to bring their costs under control, and the corporate welfare to the student loan lenders needs to end. If that happens, the colleges will have two choices - bring down the cost of tuition (by a lot) or close their doors because no one can afford what they're offering. They choose the former course, not the latter.
 
The thing that a lot of parents and kids don't look more into is to go to a local community college first to get the basic courses out of the way and then transfer to a major university. That's what I did from 1980 - 1983 and then transferred to UT. My folks had divorced a few years earlier and there wasn't a lot of money available to send me to college right after high school. There's definitely ways to be creative in order to avoid getting saddled with tons of debt.
 
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