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Is the education bubble the mother of all bubbles?


By Vaticanus   Follow   Sun, 27 Jan 2013, 6:37am PST   1,878 views   39 comments   Watch (3)   Share   Quote   Permalink   Like (2)   Dislike (1)  

http://www.grandforksherald.com/event/article/id/254975/

Ok, so you have hundreds of thousands of high school graduates every year some of them go on to be doctors, nurses, radiology technicians and IT specialsts. The majority of them is saddled with school loan debt along with the expectation that their education entitles them to a better lifestyle. Consequently health care costs continue to rise faster than the nominal inflation rate (just as tuition increases are growing faster than nominal inflation rate).

Could it be that cost of education at our institutes of higher education (along with fractional reserve banking where banks create 90 % of their "assets" out of thin air) creating the ultimate bubble? It is not just healthcare, you can look at he cost of education in just about any field and see that unless we continue to create money out of thin air there will not be enough money to go around and pay all this debt, or at the very least those saddled with debt will not live the lifestyle they are expecting.

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The Professor   befriend   ignore   Sun, 27 Jan 2013, 8:05am PST   Share   Quote   Like (2)   Dislike (1)     Comment 1

As a science instructor at a liberal arts college that emphasizes sports I am surprised at how little the students care about their education. Not all of them; some of my nursing and business students are really dedicated.

Many of our students are fresh out of high school. They have been trained to believe that showing up is succeeding. One of my students career goal is to become an actress if her career in professional soccer does not work out. Her major is international business.

Expectations and dreams.

The students are promised lucrative, satisfying, careers in exchange for tuition and effort. They expect high salaries and dream of glamorous jobs.

Some succeed.

Many end up with a mountain of debt and an over-educated under-experienced resume. And a job that has nothing to do with their major and everything to do with paying bills. Another non dischargeable debt slave is created.

New Renter   befriend   ignore   Sun, 27 Jan 2013, 12:13pm PST   Share   Quote   Like (1)   Dislike     Comment 2

The Professor says

I am surprised at how little the students care about their education.

Its not WHAT you know, but WHO you know...

The Professor says

The students are promised lucrative, satisfying, careers in exchange for tuition and effort. They expect high salaries and dream of glamorous jobs.

No promises are made, only implied. If promises are made but not delivered upon there may be a path for legal recourse. An implication is more subtle and more easily denied later.

So how about you Professor - what do you tell your students about their job prospects? Do you tell them the STEM labor shortage is a myth?

http://www.rand.org/pubs/research_briefs/RB1505/index1.html

http://www.epi.org/press/no-evidence-worker-shortage-stem-fields/

http://www.cjr.org/reports/what_scientist_shortage.php?page=all

Do you honestly council them as to whether graduate school is the best choice for a career in industry? How to do a cost/benefit analysis to factor into the decision? What their job prospects truly are? How to find ACCURATE information regarding job prospects, un/under employment, compensation, etc.

If you don't you are not alone. Almost all professors I have worked with were clueless about industry. Most had almost a hostile opinion of it, that industrial scientists were sellouts. NONE were of any help in mine, my wife's or ANY of my fellow graduate students transition from academia to industry.

I hope you are not in that camp. If you are you do your students a grave disservice.

carrieon   befriend   ignore   Sun, 27 Jan 2013, 6:47pm PST   Share   Quote   Like (1)   Dislike     Comment 3

In the 2010-2012 school year, undergraduate and graduate students at UND and North Dakota State University borrowed an average of $7,855 in a year, according to the university system report released Friday. That’s up 125 percent over the past decade.

For a comparison, the Midwest inflation rate in that same period was 27 percent, according to the U.S. Bureau of Labor Statistics.

The increase indebtedness is due to a number of factors, including students’ ability, starting in 2007, to borrow more than previously allowed, and the rapid increase in tuition rates, the report said.

In the past decade, Education and healthcare costs increased by 125% while wages increased by only 25%.

They are both bubbles fueled by fractional reserve banking that'll cause a burst, just like what happened to the housing market in 2007 and the flat stock market since 2000.

zzyzzx   befriend   ignore   Sun, 27 Jan 2013, 10:00pm PST   Share   Quote   Like (1)   Dislike (1)     Comment 4

Is the education bubble the mother of all bubbles?

It can't possibly be worse than the housing bubble!

The Professor   befriend   ignore   Sun, 27 Jan 2013, 11:24pm PST   Share   Quote   Like   Dislike (1)     Comment 5

New Renter says

So how about you Professor - what do you tell your students about their job prospects? Do you tell them the STEM labor shortage is a myth?

I tell them, get in, take the classes you need to get a degree, get out, and get a life.

There is always work and a job for those willing to do what it takes. A BS degree is the new high school diploma. Even though you will be over qualified for many jobs that require a degree you will not be considered without one.

Many, not all, of the students at my private college are "entitled". They come from wealthy families and paying tuition is not an issue. Others end up with huge student loan debt and little prospects. I had a foreign business major who was not putting much effort into a spreadsheet class. When I asked him what his career plans were he said he "was going to take over running the family business". When I told him how important understanding spreadsheets was he replied, "We have accountants to do that".

Like someone else said, "It's not what you know, it's who you know". A degree is a ticket needed to get on many trains but it by no means guarantees arrival at success.

TechGromit   befriend   ignore   Sun, 27 Jan 2013, 11:32pm PST   Share   Quote   Like (1)   Dislike     Comment 6

zzyzzx says

Is the education bubble the mother of all bubbles?

It can't possible be worse than the housing bubble.

I can't really see how they are remotely the same. With the housing bubble, thousands of people with huge debts just walked away leaving the banks holding the bag. You can't just walk away from Student loan debt, your stuck with it forever until you either pay it off or you die. So unless you expecting a huge spike in suicides, the banks will get along just fine.

Philistine   befriend   ignore   Sun, 27 Jan 2013, 11:41pm PST   Share   Quote   Like (2)   Dislike     Comment 7

TechGromit says

I can't really see how they are remotely the same.

I can. Tuition increases were largely made possible by all-you-can-eat student loans that were free flowing for the last 15 years. Now there's a country full of graduates (and dropouts) who are underwater on their education: loans are worth more than their degree.

I had friends in college that HELOC'ed their education, so to speak; they pulled out twice the cost of tuition in loans and used the extra money to rent sweet off-campus digs, go shopping, eat out. It was a lot more like the housing bubble than it wasn't.

Quigley   befriend   ignore   Mon, 28 Jan 2013, 12:46am PST   Share   Quote   Like (2)   Dislike     Comment 8

Software engineering and robotics. Those are the professions of the future which will be in hot demand. Software because everything will require a program. Tech engineering because everything will be mechanized, and machines break down. It's their nature. Then someone has to know how to fix them.
Business and medicine will continue to garner the highest wages, with "salesman" continuing as the highest paid profession.

zzyzzx   befriend   ignore   Mon, 28 Jan 2013, 12:58am PST   Share   Quote   Like (1)   Dislike (1)     Comment 9

robertoaribas says

My school lost over 75% of its state funding since 2005.

And we still have too many people going to college.

zzyzzx   befriend   ignore   Mon, 28 Jan 2013, 2:01am PST   Share   Quote   Like (1)   Dislike (1)     Comment 10

http://www.usatoday.com/story/news/nation/2013/01/27/study-nearly-half-are-overqualified-for-jobs/1868817/

Study: Nearly half are overqualified for their jobs

Nearly half of working Americans with college degrees are in jobs for which they're overqualified, a new study out Monday suggests.

The study, released by the non-profit Center for College Affordability and Productivity, says the trend is likely to continue for newly minted college graduates over the next decade.

"It is almost the new normal," says lead author Richard Vedder, an Ohio University economist and founder of the center, based in Washington.

The number of Americans whose highest academic degree was a bachelor's grew 25% to 41 million from 2002 to 2012, statistics released last week from the U.S. Census Bureau show.

The number with associate's degrees increased 31%, while the number of Americans for whom the highest level of education attainment was a master's or doctorate degree grew fastest of all — 45% and 43%, respectively.

Earnings in 2011 averaged $59,415 for people with any earnings ages 25 and older whose highest degree was a bachelor's degree, and $32,493 for people with a high school diploma but no college, the Census data show.

Vedder, whose study is based on 2010 Labor Department data, says the problem is the stock of college graduates in the workforce (41.7 million) in 2010 was larger than the number of jobs requiring a college degree (28.6 million).

That, he says, helps explain why 15% of taxi drivers in 2010 had bachelor's degrees vs. 1% in 1970. Among retail sales clerks, 25% had a bachelor's degree in 2010. Less than 5% did in 1970.

"There are going to be an awful lot of disappointed people because a lot of them are going to end up as janitors," Vedder says. In 2010, 5% of janitors, 115,520 workers, had bachelor's degrees, his data show.

New Renter   befriend   ignore   Mon, 28 Jan 2013, 2:30am PST   Share   Quote   Like (2)   Dislike     Comment 11

The Professor says

I tell them, get in, take the classes you need to get a degree, get out, and get a life.

There is always work and a job for those willing to do what it takes. A BS degree is the new high school diploma. Even though you will be over qualified for many jobs that require a degree you will not be considered without one.

I beg to differ - there are plenty of suitable candidates who remain unemployed because there are not enough positions for all. This is the way the system is designed to be.

Have you ever sought a job in industry yourself? Sure the degree has become ONE barrier to employment but there are far more barriers to overcome. Many employers demand a myriad of certifications and experience on top of a degree even for entry level positions. Even with the degree a graduate will not be considered for many positions because of these shortcomings.

Many, not all, of the students at my private college are "entitled". They come from wealthy families and paying tuition is not an issue. Others end up with huge student loan debt and little prospects. I had a foreign business major who was not putting much effort into a spreadsheet class. When I asked him what his career plans were he said he "was going to take over running the family business". When I told him how important understanding spreadsheets was he replied, "We have accountants to do that".

It sounds like you have given up. I understand the frustration. I ran into many such entitled students while teaching myself (and that was at a state school!)

One of the best tools I found to penetrating the armor of such entitlement was to point out how foolish the student would look if their ignorance was taken advantage of.

For example I had one undergraduate with aspirations for dental school explain to me that he did not need to learn chemistry as the sales reps would explain to him all he needed to know. I laughed and asked him how that would go over with a jury after he killed a patient with an unsuitable drug.

With your student who claimed an understanding of accounting spreadsheets was not necessary I would have pointed out that accountants are experts at masking the truth and as the head of the business it would be his ass on the line if the accountant embezzles his company dry.

Of course you can - and should - use the power of the red pen. If a student doesn't put in the work they don't earn the grade. If that student complains point out s/he said the grade is irrelevant to run the family business!

New Renter   befriend   ignore   Mon, 28 Jan 2013, 2:33am PST   Share   Quote   Like (1)   Dislike     Comment 12

zzyzzx says

Study: Nearly half are overqualified for their jobs

Nearly half of working Americans with college degrees are in jobs for which they're overqualified, a new study out Monday suggests.

Yep! Thus triggering expectation inflation!

Quigley   befriend   ignore   Mon, 28 Jan 2013, 3:26am PST   Share   Quote   Like (3)   Dislike     Comment 13

Actually I have a degree in basic science: chemistry to be exact. It hasn't made me a dime since graduation. I work repairing machines, tweaking PLC code, and massaging automated processes back to life. I think the only classes that helped were Physics and perhaps Logic. I can write like a demon, and have some stories published, but that's made me next to nothing. What pays he bills, and paid off my large student loan, is the light blue-collar job I hold fixing machinery.
I can't count the number of relations and friends I know with liberal arts degrees who are barely scraping by. One cousin has a degree in Pschology. He works as a farrier. Another has a masters in English Lit. She works as a college instructor which pays well enough for her to afford to live in a mobile home.
Friends that are engineers and computer programmers always have work that pays decently.
A liberal arts degree, these days, only guarantees that you'll fully appreciate the pathos of a poorly chosen career path.

Philistine   befriend   ignore   Mon, 28 Jan 2013, 3:49am PST   Share   Quote   Like (1)   Dislike     Comment 14

robertoaribas says

States dropped most of their funding for education, thus causing price increases resulting in bigger loans

That's why I said the tuition increases were "made possible by" loose student lending.

TechGromit   befriend   ignore   Mon, 28 Jan 2013, 4:09am PST   Share   Quote   Like   Dislike     Comment 15

Philistine says

TechGromit says

I can't really see how they are remotely the same.

I can. Tuition increases were largely made possible by all-you-can-eat student loans that were free flowing for the last 15 years. Now there's a country full of graduates (and dropouts) who are underwater on their education: loans are worth more than their degree.

Ok, so what? They CAN'T walk away from the debt. I'm not sure you understand what a economic bubble is. A economic bubble is trade of products with an inflated price. Bubbles are identified when there is a sudden drop in the price of the inflated products.

So basically there would have to be a huge drop in the number of people attending higher education institutions. Which would result in colleges having to make drastic cuts in programs and staff to survive. It's not like there's been a massive spike in the number of new colleges opening has there. Unless your suggesting colleges would cut reduce tuition rates to attract more students.

Honestly I can't see it. There may be a loosing of standards in the enrollment qualifications, so colleges can keep there student populations up, since most colleges except community colleges have way more applicants than slots available.

If there is an eduction bubble, can someone explain to me what happens when the bubble pops?

zzyzzx   befriend   ignore   Mon, 28 Jan 2013, 8:48am PST   Share   Quote   Like (1)   Dislike (1)     Comment 16

Philistine   befriend   ignore   Mon, 28 Jan 2013, 8:59am PST   Share   Quote   Like   Dislike     Comment 17

TechGromit says

Honestly I can't see it

It's a comparison. Metaphors are not 1:1 parity. The last 20 years in higher education, there is a fools-rush-in mentallity, coupled with willingness to overpay for a worthless asset with inordinate debt obligations. If you can't see how those rhyme, you are being obtuse.

The Professor   befriend   ignore   Mon, 28 Jan 2013, 9:04am PST   Share   Quote   Like   Dislike (1)     Comment 18

Quigley says

with "salesman" continuing as the highest paid profession.

yep.

New Renter   befriend   ignore   Mon, 28 Jan 2013, 9:33am PST   Share   Quote   Like (1)   Dislike     Comment 19

zzyzzx says

If only someone would pay that kind of dough to watch ME waddle...

husarsky   befriend   ignore   Mon, 28 Jan 2013, 9:41am PST   Share   Quote   Like (1)   Dislike     Comment 20

1) government needs to get out of backing and guaranteeing student loans. It has "obviously" distorted the education markets just fha,fnm,fre distorted the housing market. government gets out and tuition prices will drop like a rock.

2) we need more for profit colleges to drive prices down via competition.

3) for profit colleges should also guarantee a one year paid position at a company within the student's specified field. no pay guarantee - it could be only minimum wage - the point is to make the guarantee, so there is a strong incentive to join such a college because the student is getting a guarantee of paid experience in the field they studied. If the college can not place the student into a position in their field within a defined time frame, then the student gets the last year of tuition refunded back to them in full. The college now has a strong incentive to pay cash kickbacks to businesses willing to take students. The goal is to payout kickbacks to businesses in values ranging from 0 to slightly less than the student's last year of tuition. The better students just get jobs right away, and the college kicks in little cash to the business because these students excelled and the businesses demand them. the shittier students will require larger subsidizing incentives to businesses to take on such mediocre students. To me this seems like a no brainer to drive tuition costs down while at the same time getting job placement for students who very badly need job placements.

New Renter   befriend   ignore   Mon, 28 Jan 2013, 10:12am PST   Share   Quote   Like (1)   Dislike (1)     Comment 21

husarsky says

2) we need more for profit colleges to drive prices down via competition.

We have plenty of those already. Most are of the fly-by-night, unaccredited, A-for-pay junk diploma factories.

http://en.wikipedia.org/wiki/For-profit_education

Dan8267   befriend   ignore   Mon, 28 Jan 2013, 10:24am PST   Share   Quote   Like (1)   Dislike     Comment 22

Call it what it really is, a college degree bubble, not an education bubble.

TechGromit   befriend   ignore   Tue, 29 Jan 2013, 2:44am PST   Share   Quote   Like   Dislike     Comment 23

New Renter says

If only someone would pay that kind of dough to watch ME waddle...

The only problem I can see with having money thrown at you for "waddling" is once your sex appeal starts to wade (you get old and fat) your marketability drops off considerably. Shaking your body is a young girls game, if you don't have an exit strategy, you'll will wind up with nothing.

Vaticanus   befriend   ignore   Tue, 29 Jan 2013, 2:45am PST   Share   Quote   Like   Dislike     Comment 24

New Renter says

husarsky says

2) we need more for profit colleges to drive prices down via competition.

We have plenty of those already. Most are of the fly-by-night, unaccredited, A-for-pay junk diploma factories.

http://en.wikipedia.org/wiki/For-profit_education

Really what we need is for people to STOP encouraging the youth to go into debt. In fact, let's make it hard for them to do so, and require that those issuing the loans share the risk by making school loans dis chargeable in bankruptcy. Then the market will accurately reflect the risk of student loans, and students will better understand the true value of their education too..

varmint   befriend   ignore   Tue, 29 Jan 2013, 3:00am PST   Share   Quote   Like   Dislike     Comment 25

New Renter says

husarsky says

2) we need more for profit colleges to drive prices down via competition.

We have plenty of those already. Most are of the fly-by-night, unaccredited, A-for-pay junk diploma factories.

http://en.wikipedia.org/wiki/For-profit_education

I agree with this 100%. I would never advise anyone to attend a for-profit learning institution. The tuition is high and the degree or cert is useless crap. JC is an infinitely better option.

varmint   befriend   ignore   Tue, 29 Jan 2013, 3:12am PST   Share   Quote   Like   Dislike     Comment 26

Quigley says

Actually I have a degree in basic science: chemistry to be exact. It hasn't made me a dime since graduation.

I have a chem degree as well but was able to find a job right out of school even in recession time (2002). It wasn't the best but you have to start somewhere. I use knowledge learned from university every day.

I think people fall into the trap of having to get any job to make ends meet and they let their degree get stale. If you get a physics degree then drive a truck for 5 years, you're no longer desirable to hire as a physicist. Not saying this happened to you or that you didn't make sound choices for your situation, just a general observation.

husarsky   befriend   ignore   Tue, 29 Jan 2013, 3:12am PST   Share   Quote   Like   Dislike     Comment 27

what I'm proposing is making a for profit college that is both cheap, and the degree will mean something, because the college is now burdened with actually turning out well qualified students or face an economic penalty. there is now economic incentive for the college to both lower costs and make it up in student volume, and simultaneously avoid economic penalties of churning out moron students who learn nothing.