Posted on 03/05/2012 5:26:06 PM PST by SeekAndFind
The next financial bubble to burst could be loan debt owed by U.S. college students. That's just one risk confronting the country's higher-education system, according to a new Standard & Poor's study (no public link) that examined the nation's college affordability crisis.
The credit rating agency says that colleges and universities today face three key financial threats:
1. Inadequate household income. Students are struggling to pay for college because their families' stagnating income hasn't kept up with college prices. During the past decade, average U.S. household income fell from $64,232 to $60,395. That's about what New York University costs for one year.
2. Dwindling state support. State financial assistance for public universities continues to erode. Most public university systems already receive more revenue from tuition than from their state governments. The nation's largest such system, in California, passed this milestone last year.
3. Skyrocketing student debt. Student-loan debt has ballooned, while more borrowers are defaulting on their obligations. College freshman are taking out nearly double the level of loans they did a decade ago. Federal data show that 8.8 percent of all students with federal loans, who needed to begin repaying their debt in a one-year period beginning in October 2008, failed to do so. That's the highest default rate since 1997.
Higher-ed bubble?
Such figures reflect the growing financial hardships on young people pursuing a college degree. But it's not a foregone conclusion that the higher-education system is set for a fall.
As long as colleges and universities enjoy a monopoly on credentialing -- namely, the bachelor's degree -- it's hard to imagine that the higher-ed world will face the same struggles that the American auto, steel, and newspaper industries have experienced, just to name a few sectors buffeted by change in recent decades.
(Excerpt) Read more at cbsnews.com ...
4. Using profitable products (medical degrees, engineering programs) to subsidize unprofitable ones (liberal arts, diversity studies).
College enrollment is increasing, IMO, for these reasons:
* No shop school or vocational programs in high school, so kids have to pay for it in “college”.
* College is seen as the only way to provide minimal vetting of applicants, so employers look for a degree, any degree, in applicants. This in turn drives many parents to send kids to get a degree, in an effort to ensure they can get a job.
* Many employers pay more to those who have degrees or higher degrees. School districts tend to offer a specific step up in salary upon completion of a master’s degree. Some employers automatically step up pay on completion of an MBA.
* We let kids go to school with no idea what to do with themselves. We assume that if they go to college, they’ll find themselves a career path, potential spouse and life goals. Unfortunately, they spend years bouncing between majors instead of being counseled and shepherded to a degree program that fits their talents and goals. Wasted time in school, but school gets lots of money. Those that run out of money don’t get a degree but do get stuck with debt.
* College is treated as a shelter from the unemployment line. In some states, you can get unemployment while taking classes instead of looking.
* In millions of cases, college is an excuse for a gap on the resume. “What did I do for that year and a half? Oh, I finished my degree / earned a master’s / took more classes on XYZ.”
* Keeping skills and job credentials to date often requires earning new credentials. Ask the lawyers, nurses and engineers who are required by law to take so many hours of continuing education courses in order to keep their licenses.
We need to get Khan Academy licensed to give credentials such as “completion of Physics 101” or an associates degree in math. That educational model is free, though Bill Gates is subsidizing it.
I graduated in the early 90s, and went to a state school in nearby Newark NJ that was accessible by bus (I had no car). I had to borrow for part of my last year, and when the bank offered to let me start paying it off after graduation I declined, since I was working, and starting paying it off during the school year (I was debt-free less than 1 year after graduation).
When I think about how miserable it was looking for a job in the early 90s (I voted for Bush but understood why he lost), and how much worse the job market is today (with outsourcing and import of labor), I couldn’t imagine the costs of school today versus the potential return; I wouldn’t know where to steer a teenager.
“All the monopolized “credentialing” in the world won’t make a dime’s worth of difference if students can’t afford to go.”
The State will determine who will go, and use financial pressure to make it so; no more white men. Instead we have ethnic tokens with degrees who can’t read, write, or speak. My school had a whole building dedicated to remedial courses; minorities spent years in there without earning any credits, until they dropped out from boredom. It is amazing how racially engineered our freshman class was, in comparison to our graduating class four years later - the experiment failed, but a lot of qualified students had been denied those seats in the meantime.
The other issue is to assure that the person who signed up for the course(s) is the one doing the work. This is doable, but you need to pay a testing center to monitor. Of course, if that’s all you need, it should be pretty cheap.
Key point here. Four-year colleges currently act as gatekeepers to middle-class professional careers. Take away that monopoly, and the educational edifice comes crashing down.
It used to be that businesses hired most employees, including potential managers, straight out of high school. Then came the EEOC. Businesses needed a way to protect themselves from discrimination charges, so they made the BS degree a prerequisite for most middle-class jobs, figuring that the college process would filter out the most unqualified illiterates.
Allowing businesses to hire on the basis of objective scores on tests of intelligence and literacy would once again allow them to hire out of high school. New employees could continue their education via distance-learning.
Education and research sides of universities need to be broken up. Money is poured into research at the expense of education (which has been watered down). Leftist encampments of tenured, Sixties Silver Pony Tails are indoctrinating our youth and publishing “studies” that have been re-shaping U.S. policy and culture for generations.
IT MUST STOP.
I agree, it’s a tough call as to advising a young person as to whether or not to seek a college degree. Over the last couple decades the job market in the USA has been pretty miserable. And it does not appear as though things are going to get better.
I was born in 1940 and I think my lucky stars that I was born then and was able to grow up in the prosperous 1950s and 1960s. You and today’s contemporaries have had it rough. Unfortunately, there does not appear to be any letup in the near future.
Hope that you’re doing OK now.
The inflation in college costs is beyond amazing.
Your undergraduate tuition in 1979/80 was not bad but that $2,350 for one graduate course is obscene.
I offer this for comparison. My tuition, room and board from September 1962 through January 1966 per semester was only $540.
Also, I was afflicted by Ralph Nader's negative checkoff on my state tuition bill. I doubt you had the same annoyance in 1964.
The $540 per semester costs included room and board, but then again, my first job upon graduation paid only $5,600 (which was considered a pretty good salary then). So, it evened out.
As regards Ralph Nader, there certainly was no “negative checkoff on my state tuition bill” since I had never heard of him then. And I doubt that Alabama’s higher education institutions would burden their students with anything regarding that guy then or later.
Thanks; I’m alright now. Thankfully working steady, though as with many other companies layoffs have left fewer people doing more. I don’t complain, because I feel lucky to be working; the NYC metro area lost a lot of jobs to Asia that will never be coming back. They’ve tried replacing it with an “entertainment economy”, but the jobs pay little (we even have a mall here next to Giants Stadium that was built a few years back that hasn’t opened yet, and probably never will).
I wasn’t thrilled when I got out of school, but now I see that was better than this; I could keep the job I had in college while I looked for work in my field (I had no bills, no family yet). I feel much worse for the young people today; the trend that was underway 20 years ago has destroyed much of the economy, and there is no light at the end of the tunnel (and they’re acting like they know it).
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.