patrick.net

That's a very valid observation.

See this article, published back in April:

http://techcrunch.com/2011/04/10/peter-thiel-were-in-a-bubble-and-its-not-the-internet-its-higher-education/

Higher education is definitely another bubble. I mean its unsustainable, these fee increases.

Student loans at such a low interest with not-so-bright future repayment prospects (given the job market is not improving enough) is a recipe for disaster.

This is another downward pressure on house prices.

All these young people will be strapped for cash and paying off HUGE (student loans now total more than US car loans) student debts, which can not be relieved in bankruptcy.

Thing is, they already are. Even before UC raised its undergrad tuition significantly in the last few years, plenty of other schools have depended on cheap loans to survive. This effect has already started, and is applicable even for law and business schools.

Huffington just had an article stating student loan debt rose 25% since 2008. The economiccollapseblogspot, back in May had an entry, 21 stats that will make you think twice about college.

They all state, apparently not to clearly that a college degree is not a ticket to the middle class any more.

Hit those two articles for lots of commentary. More downward pressure would be great, IF families were buying the homes, and not investors. It's boomers fueling this economy, who else has disposable income?, or savings?

I was lucky enough to get to go to college, but I had to pay for it myself, not to mention working a 30 hour week to keep a roof over my head, however back in 1990-1995 tuition was still about $1000 a semester.

everything says

Huffington just had an article stating student loan debt rose 25% since 2008.

A student loan jubilee (e.g. something like $X,000 paid down of student loans) would be a big economic stimulus, and it would at least help the right people for the most part.

austrian_man says

I mean its unsustainable, these fee increases.

I don't think so, doesn't look that way from here, at least for the top and middle tier UC's. Here in the Bay Area, Wealthy Tiger Parents in The Fotress will do whatever it takes, for their cubs to get admitted as freshman to the coveted UC's. A little thing like Big Tuition will not get in the way. If anything, it'll price out some of the competition for the "slots".

Housing market alone is going to stifle housing market being so overpriced. Student debt is just icing on that cake.

sybrib you sound jealous of the people that have money in the bay area.

Hysteresis says

sybrib you sound jealous of the people that have money in the bay area.

That's because you didn't read all my posts.

That's exactly why it's good to invest in college related stocks.

The oldest baby boomers are retiring now. I've said this many times before, since the housing correction was prolonged up to the point where boomers are starting to retire, there will not be another boom in housing until the last boomers die of old age around 2050.

Gen X is too small to buy up all that housing. The Millennials will have to buy the bank a McMansion before they can buy themselves a starter house due to their exorbitant student loans.

Between high college costs and rampant unemployment, the Millennials are going to be renting for a very, very long time. The only solution I see for them is to keep living with their boomer parents until their parents die and then inherit the house. Maybe that's the solution that will play out.

My wife and I are two "Millenials" who recently graduated from top So Cal business schools with near $200K in student debt.

We worked hard and the bump in pay from our previous positions, plus the increase in future earning potential, makes that expense worthwhile.

Even so, there is no question in our minds that it makes a lot more sense to rent than to own, until such time as we can afford to pay 20% down, with 6 months of our combined salary saved up.
Given these goals and our current savings rate, it will be 11 years before we can afford to purchase a home.

Note that our combined salary is more than double the median income for our area. Yet, due to our back end debt, it makes no sense to purchase a home. I joke with my parents that we already own a home - it's called an education.

This is no charity case and I don't expect anyone to shed tears because some b-school graduates making twice the median income can't afford a house. The point is that our purchase will be delayed.

I wrote about this more than a year ago.

The next generation of home buyers has too much college debt to buy a house

http://www.burbed.com/2010/06/06/the-next-generation-of-home-buyers-has-too-much-college-debt-to-buy-a-house/

FortWayne says

Housing market alone is going to stifle housing market being so overpriced. Student debt is just icing on that cake.

Well-said. My thoughts entirely, to me it's all finally hit the fan the real story will be how many fools buy into manipulated bullshit again after seeing the horrific results.

What kills me is just the idea of what these so-called "non-profit" universities are charging. It is as insane IMHO as someone thinking an average house sales price should be anywhere over 150K.

I cant believe people actually fell for the student loan bs! it was a rip off right from the start. there were never any guarantees you could get a good job or any job at all. I have a degree, but I got it in the 70's. back when education (& loans)WAS a good deal, but even then NO GUARANTEES. and back in those days one could get 3 jobs in a week, take your pick. You didnt need a college degree to get a job. so this is progress? every time the govt offers anything & starts dangling that carrot..youre gonna pay for it. become self sufficient! get thru this WITHOUT THEM... doesnt anyone seem to remember the 'FREE TRADE AGREEMENT? that started this whole mess? I never hear anyone talk about it any more. deals, nego, payoffs, special rights corp greed institutionalized..this is what our country has become...and BUYER BEWARE

corntrollio says

A student loan jubilee (e.g. something like $X,000 paid down of student loans) would be a big economic stimulus, and it would at least help the right people for the most part.

Why? In two years, outstanding student loan debt increased 25% from 400 billion to 550 billion for the period 2008 to 2010.

What stimulative impact did that have on the economy?

And who are the "right people" to help?

Tuition prices are increasing for two keys reasons.

1) Government and government related institutions continue to subdize higher education. In alll of human history, any time a government subsidizes an activity the cost will never fall despite increases in demand.

2) Higher education is also a political plantation to place campaign workers that help elect politicians to higher offices. This quid pro quo market is evidenced by the amount of tuition that never makes it to the classrom, but instead is used to fund bloated salaries for low skill labor that maintains the campus.

yep. theyre controlling (poorly or not for our benefit) schools, jobs, housing taxes the stock market..on & on.and spending like drunken sailors. they have abused and corrupted their powers.the same circumstances on which our country was founded. now where are we to go? or what are we to do? for myself, Im battering down, staying put and waiting...but for what? the uncertainty is killing me. I wish I had a crystal ball.

How will buy the boomers houses in 10 years, when they want to retire?

Boomers are already in their 70's. How long can we keep predicting what the Boomers will do in ten years?

I think Student loans are default more than ever, it will become popular to just ignore them, and seek other unrelated careers.
I think there will be protective legislation passed in the next 10 years, that will make paying back school loan more optional than ever. School loans have enjoyed a spot at the front of queue for a long time.

More people are going to start viewing a classic college education as a waste, and opt to not get a degree. But instead there will be more online learning resources, people will use instead.

As an alternative to a "collapse" in higher education due to "bubble" conditions may simply be a steady reduction in the number of individuals who pursue a higher education degree. Ultimately, our fellow "average" citizens will wake up and realize that college is just too expensive, causing ever increasing numbers to just say no. Interestingly enough, this may result in an increase in a skilled and unskilled labor pool for manufacturing jobs, etc. Funny...just what this country needs. Could we be on the long road to a more balanced work force of production vs. service professionals?

Tenouncetrout says

Boomers are already in their 70's.

Sorry to tell you this TOT but the baby boom was 1946 to 1964. The first baby boomer to hit 70 won't be until 2016.

hooch_raider says

As an alternative to a "collapse" in higher education due to "bubble" conditions may simply be a steady reduction in the number of individuals who pursue a higher education degree. Ultimately, our fellow "average" citizens will wake up and realize that college is just too expensive, causing ever increasing numbers to just say no. Interestingly enough, this may result in an increase in a skilled and unskilled labor pool for manufacturing jobs, etc. Funny...just what this country needs. Could we be on the long road to a more balanced work force of production vs. service professionals?

We can only hope. My great hope is that we start to value people that actually DO something for a living, people that build things and support the infrastructure of this country. It would also be nice to see us reject the cheap disposable crap that is being manufactured and sold and barely used and discarded, and start making things that work well and last.

I was just having a conversation with someone yesterday about stoves, most are cheaply made and full of electronics that go bad quickly, they take a ton of natural resources to make, but last a few years and are thrown out and replaced. The thing is, there are 100+ year old stoves that people still use and maintain, simple gas stoves that you light with a match and work great. Let's get back to building quality things, and appreciating the people that build and maintain them for generations.

There's another perhaps even bigger reason why the housing market could be stifled due to lack of purchasing power of today's younger generation: Unemployment. 20-somethings today are in the highest percentage group of those without a job. Partly because boomers are now working longer before retirement since their houses and stock portfolios have fallen. Students with loads of debt certainly doesn't help either.

Tude says

I was just having a conversation with someone yesterday about stoves, most are cheaply made and full of electronics that go bad quickly, they take a ton of natural resources to make, but last a few years and are thrown out and replaced

The gas stove in the house we rent is barely 10 years old yet is falling apart. The handle comes loose all the time even after being re-tightened. The ignitors break all the time and the motherboard for the time fried last year. I remove the burners to clean them once a year and they're rusting out. The parts are cheap though but still- its a POS. On the other hand most of the appliances we own ourselves- the mixer, blender, and toaster are all from the 40's-60's and built like tanks. They'll probably still be around long after I'm gone.

corntrollio says

everything says

Huffington just had an article stating student loan debt rose 25% since 2008.

A student loan jubilee (e.g. something like $X,000 paid down of student loans) would be a big economic stimulus, and it would at least help the right people for the most part.

Jubilee? And who are these right people? Are they stupid people who take out loans that that they cant' possibly pay back for something that they can't even use?