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Is the education bubble the mother of all bubbles?


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2013 Jan 27, 6:37am   14,124 views  35 comments

by PeopleUnited   ➕follow (2)   💰tip   ignore  

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.

#bubbles

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12   Philistine   2013 Jan 28, 3:49am  

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.

13   TechGromit   2013 Jan 28, 4:09am  

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?

15   Philistine   2013 Jan 28, 8:59am  

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.

16   New Renter   2013 Jan 28, 9:33am  

zzyzzx says

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

17   husarsky   2013 Jan 28, 9:41am  

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.

18   New Renter   2013 Jan 28, 10:12am  

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

19   Dan8267   2013 Jan 28, 10:24am  

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

20   TechGromit   2013 Jan 29, 2:44am  

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.

21   PeopleUnited   2013 Jan 29, 2:45am  

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..

22   varmint   2013 Jan 29, 3:00am  

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.

23   varmint   2013 Jan 29, 3:12am  

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.

24   husarsky   2013 Jan 29, 3:12am  

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.

25   Shaman   2013 Jan 29, 3:42am  

Varmint : I got stuck alright. Stuck in a job with pay and benefits so good that I would have to make 3 x the national avg for a chemist to be in the ball park. It get a PhD and then land a sweet research gig. Meh, why waste more time and get more debt to buy a chance at a job I don't need or have any guarantee of?
The real traps are made of silk and feathers, not iron and wood.

26   futuresmc   2013 Jan 29, 4:29am  

The Professor says

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.

This is why there will be no bubble. You can't discharge student loan debts in bankruptcy. If that protection was ever revoked, I would definitely call it a bubble, but so long as this is the law of the land, there can be no bubble.

27   husarsky   2013 Jan 29, 4:36am  

wrong. what can't be paid back WONT! look at default rates skyrocketing. all these people will end up in permanent default, and eventually the government will revise the bankruptcy laws and there will be a mass wave of bankruptcies to follow. there is no other recourse. you can't squeeze blood from a dry turnip. the bankruptcy laws concerning student loans are perhaps the biggest criminal and immoral offenses to come from the banking lobby in the last 10 years. notice how it's the ONLY class of loan that's protected in bankruptcy. no other form of debt has such a privilege. there will be a student default revolt. it has already begun.

28   dublin hillz   2013 Jan 29, 6:43am  

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, the whole leadershit of "university" of phoenix belongs behind bars - taking advantage of low income minorities to the max - peddling diploma mills selling "american dream" to strugglilng people - just look at their tv commercials.

29   New Renter   2013 Jan 29, 7:17am  

Quigley says

Varmint : I got stuck alright. Stuck in a job with pay and benefits so good that I would have to make 3 x the national avg for a chemist to be in the ball park. It get a PhD and then land a sweet research gig. Meh, why waste more time and get more debt to buy a chance at a job I don't need or have any guarantee of?

The real traps are made of silk and feathers, not iron and wood.

So Professor, with testimonials like this are you surprised your students are apathetic?

30   anonymous   2013 Jan 29, 7:33am  

I guess it depends on what your definition of education, is,,,,

31   New Renter   2013 Jan 29, 9:27am  

Education - Discovering the hard reality that your expensive degree doesn't mean $#!*

32   Rent4Ever   2013 Jan 29, 10:08am  

husarsky says

wrong. what can't be paid back WONT! look at default rates skyrocketing. all these people will end up in permanent default, and eventually the government will revise the bankruptcy laws and there will be a mass wave of bankruptcies to follow. there is no other recourse. you can't squeeze blood from a dry turnip. the bankruptcy laws concerning student loans are perhaps the biggest criminal and immoral offenses to come from the banking lobby in the last 10 years. notice how it's the ONLY class of loan that's protected in bankruptcy. no other form of debt has such a privilege. there will be a student default revolt. it has already begun.

Allowing a 20 something to rack up huge debt on their education and then simply declare bankcruptcy, take the sting for 10 years and wake up in their 30's with a clean slate, a bunch of cash and no debt is insane. That's why 30 years ago smart law students did exactly this causing the law to be changed. NEVER going to happen, you have a better chance of the government not backing student loans than you do this ever changing.

I'm pretty tired of hearing about the average student with 20, 30 or 40k in loans and acting as if this is an insurmountable amount of money. "Why do I have to pay this back?" Sorry, but that's the cost of a new car. And when viewed in terms of their lifetime, really not that much money.

33   Rent4Ever   2013 Jan 29, 10:14am  

The problem is that in many cases, the students are spending someone else's money. "Fake" money if you will. Either their parents money, grant money, loan money, grandma's money, scholarship money, etc. This isn't a free market.

The only way to fix this is to have educated consumers. (Students and parents) Then to have these people DEMAND lower costs and make decisions accordingly. There is no excuse for the increase in education costs. With computers, the cost of higher education should be going down. Period. Students at "Liberal Arts U" will hold protest after protest siding with the Janitors' Union for more benefits and better pay. (Even though ironically this directly comes out of their pockets) But rarely will you see students protest increase in fees, tuition, room and board, etc.

34   CMY   2013 Jan 29, 10:35am  

Rent4Ever says

Sorry, but that's the cost of a new car. And when viewed in terms of their lifetime, really not that much money.

The reason you're tired of hearing about it is because the employment situation for recent grads is pretty f'ing far from ideal right now.

So while it's not a 'ton' of money it certainly feels like it when you're cash poor, and maybe facing 5-10 years of stagnant wages and/or lack of new prospects.

It's like parking that new car in your (parents) garage and never using it for years on end. That's why they're whining.

35   PeopleUnited   2013 Feb 10, 11:19am  

As the cost of education rises, the value continues to decline (depending on major field of study.)

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