College

[kmt1972]

My child is 2. I am hoping when he goes to college the college cost bubble would have popped and prices returned to normal. Right now student loan debt could be the next debt bomb to go off since defaults are at a record high and rising. One that bomb goes off education costs will fall as days easy financing of college will disappear. College does have some good value, at lot of it in terms of networking, but I think that value is more than made up for by the cost.

 

[arky]

People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.

Huh ?

 

[Katsmeow]

College in the US is sort of a flexible caste system; if you're motivated, you can advance, and if you're not, well, you might just not do as well as your parents.

This might seem to imply that people who don't want higher education aren't motivated. That might be true for some but not all. My husband has a grandson fresh out of high school who does not want to go to college even though he has the intellectual ability to do so. However, he has been accepted to Navy Seal training (yes, we know that those who successfully complete that training are a minority). To even meet the qualifications for the training and to be accepted he had to be very highly motivated.

Further, as always it is important to know what you mean by "college"? Does college mean an academic 4 year university leading to a bachelor's degree?

Does college include working for a Associates in Applied Science (a 2 year degree in a specific subject area with only a few non-career related academic courses)?

Does college include a certificate program where you spend a year and a half and learn the same career courses as in AAS degree but don't take the handful of academic courses?

If by college you mean academic school that leads to a bachelor's agree I would disagree in arguing that the person who decides to take do a certificate program isn't motivated. That person may be very highly motivated .... just not motivated to get a bachelor's degree.

 

[ShortInSeattle]

I find it curious that so far, no-one here has explicity viewed college as what (I see) it is -- an investment. Some investments do well, and others do not. Some investments are well-suited for some people, and some are not.

I agree with this. On the one hand it is easy for me to look back and say that DH and I got tremendous return for our degrees. We went to state schools, and have had strong earnings in careers that would have been inaccessible without those degrees. Perhaps more importantly, we are actually using the knowledge we acquired, school wasn't just an intellectual exercise. So you could say there is a good match between what we studied and what we have done for work.

I've also got friends who have not benefited from this investment. They majored in something with limited job prospects, decided to do work unrelated to the degree, or spent too much to get an ROI.

I also know people who have done well without college, although they seem to be working lower on the income ladder. We have a friend who is supporting his family nicely working at Costco. No college, just a steady working up the ranks. A nice living.

I do worry that employers treat college as just a box to be checked - the new version of a HS Diploma. If they aren't paying a premium for those degreed workers, workers lose out.

SIS

 

[kmt1972]

Huh ?

I think the logic works like this. There is an excess demand on college ergo college prices rise. This in turn should reduce demand on college due to market forces. But student loans allows people pay above their means for college. What will make sure such loans will be productive is the entities that make the loan since there is always the risk of default. But if student loans cannot be removed via default, then entities that make the student loans will continue to make these loans despite the risk of default since the changes of eventual repayment is higher. So fixing this will eventually fix the excess demand for college and bring college costs into line with market forces.

BTW, the worst would be the government to come in with extra aid to students. Say a student can pay X at most, and Y is the most the student can get in terms of aid (loans, government aid etc etc.) Then the college will charge X+Y. If the government make Y larger it would just mean that the college will charge more with no real benefits other than funding more college white elephant projects.

 

[Gatordoc50]

Mr. speaker, I would like to introduce a bill that would subsidize academic failure...I'm sure that if this had been law when I did my undergrad (at UF, btw), I would have failed on purpose to get 4 more years of partying!

Students who aren't performing and performing well would not be able to get loans. In fact, student loans would be hard to get, which would drive costs way way down. Kids would then be able to work part time and actually pay for college like we did. UF, by the way, is a hick school in a hick town in a hick state. It's embarrassing what they charge for their " education."

 

[Katsmeow]

Right now there is a strong economic incentive to loan money to student regardless of whether the student has the academic ability to do well in college or is a good fit for the program. The student leaves school with no degree and no training, but still has a student loan. The loan can't be discharged in bankruptcy so the student remains on the hook for many years to come. The school has no real incentive to make certain that the student is really able to do the work.

 

[clifp]

I doubt the idea of letting colleges bear some cost for students who do not earn enough with their degree will help much. Necessarily it would have to be limited to students who actually get a degree, and there are plenty of stories of folks with piles of student debt who didn't finish. Also, that immediately puts in place a perverse incentive for colleges to make finishing much more difficult. While that might not be a bad thing educationally, it would certainly be a bad thing for graduation rates and an awful lot of 18-22 year olds are slinking by, not rising to the challenge. Which is a big part of contributing to the problem in the first place.

.

The proposal I have heard was to change how student loans are handled. Right now unless students at your school are defaulting at really high rates, there is no incentive to make sure your students pay back the loans.

Say right now if the university get $100 million/year in guaranteed student loans to pay for tuition. With the new proposal instead the university will get say $75 million in cash. The remaining 25% will be held by the universities endowment fund, and/or the University employees pension funds. So if only $80 million ultimately gets repaid, the pension fund/endowment will suffer a $5 million hit.

The theory being if the teachers and administrators get hit in the pocketbook they may start paying more attention, to tuition costs and the market value of the education.

 

[Gatordoc50]

Right now there is a strong economic incentive to loan money to student regardless of whether the student has the academic ability to do well in college or is a good fit for the program. The student leaves school with no degree and no training, but still has a student loan. The loan can't be discharged in bankruptcy so the student remains on the hook for many years to come. The school has no real incentive to make certain that the student is really able to do the work.

Exactly.

 

[jollystomper]

From my point of view, we seem as a society today to be reluctant to teach the following truths to our children:

"Life is not fair"

"There are no guarantees in life beyond death and taxes"

College is not a guarantee to a more successful career, because it is not just about the grades - quite frankly it is about a combination of grades, activities, work (even if volunteer) and networking, with the ability to balance all of those with discipline to increase the odds of (not guarantee) post-college success.

As parents, one really need to assess your kids to see if they not only have the grades but also the personality and discipline to do well in school. One of the big things to look for IMHO - how to they handle situations when things do not go their way? Anger? Withdrawal? Meekness? Or acceptance with adjustment? We tried to treat our kids individually which meant not all did we push or allow to go to college - which might seem "unfair" but now the ones that are in their mid-late 20's are starting to understand why we did this.

All college majors are not created equal. Getting a STEM related degree will great increase the odds of a job after college - but even then, that is not a guarantee. Unfortunately you will never hear a college/university admit that. I caused "trouble" whenever going to a college information night or college visit by asking these 2 questions: (1) which degrees have proven the best investment for your students in terms of post college careers? and (2) What information do you have on how your graduates, as a whole, are doing 5 years after graduating?. The response is crickets, hemming and hawing, a glare a couple of times, and statements along the lines of "the important thing is the college 'experience' ".

As for costs... I graduated from an Ivy League school when the annual bill was around $6K. I had loans of $4k. But my starting salary after graduation was $16K. That school is now charging $50K or so. I'm finding it increasingly difficult in justifying that cost when I meet parents who are trying to decide if they should have their kids attend. I cannot make the blanket "its well worth the money, go for it claim"... I try to advise along the lines of the items I mentioned earlier in this post.

 

[Texas Proud]

I doubt the idea of letting colleges bear some cost for students who do not earn enough with their degree will help much. Necessarily it would have to be limited to students who actually get a degree, and there are plenty of stories of folks with piles of student debt who didn't finish. Also, that immediately puts in place a perverse incentive for colleges to make finishing much more difficult. While that might not be a bad thing educationally, it would certainly be a bad thing for graduation rates and an awful lot of 18-22 year olds are slinking by, not rising to the challenge. Which is a big part of contributing to the problem in the first place.

We currently have a system where the cost (or at least a significant part of it) is slightly visible to the consumer (student) through loans and tuition and that does not seem to have sparked much rational buying behavior. There is a little bit, but not a lot. I think a big part of this is because 18-22 year olds are barely adult. This will be among their first big adult decisions for many of them (possibly predating their first big adult decisions for many of them) and they lack the experience and context to make such a decision wisely. I know I certainly did.

Trying to think of ways to improve this system and the unfortunate confluence of young adulthood, beginning independence, educational needs, institutional issues with education, finances, loans, and disparities in wealth and ability is hugely complex. I think it is much more likely that a new element (my money is on massively parallel distributed education) comes along to disrupt the whole thing than we suddenly realize a few missing links and fix the current system, which has a lot more flaws than just high student debt loads.

I am one who put down that college should bear some of the cost.... but I will revise that to say they should bear some of the cost IF they are the ones that push student loans.... IOW, there are a lot of the technical colleges (you see them on the TV, become a whatever tech...) that really push their students to get loans... it seems all they want is to get the student to sign, get the loan and who cares if they get an education... there was a story around here where they were getting homeless people to sign loan docs, paying for tuition and the college would 'give' the homeless some money... they knew the person would not even show up for classes... pure ripoff...

But even the larger universities that push student loans should bear some risk... even if the student drops out... that might make them choose people a bit better... might not, but maybe.... and I wanted the lender to take the bigger hit... they lend money when the person is way overextended etc. and do not have to worry about it being written off by BK.... if there were risks, then they would actually do a risk assessment on lending that money... I am not saying make them eat 100%, but something...

 

[Mulligan]

I will have a narrow focus commenting only on the debt situation. I am sorry, I don't think you have to have a very big brain to understand what peril you can face by excessive debt. Look at your career choice, look at job prospects for the field, research the average salary, put the total college debt into a mortgage calculator and you can determine monthly payments. Parents can assist in determining average monthly cost of living expenses to determine if this budget can support the debt payment. I could pick a field and college in relation to my area and develop reasonable numbers in probably an hour thanks to the internet.
This is not rocket science. So the problem is either they put their head in the sand, and decide they will deal with the problem once it is a problem, or parents are not guiding them. It took 2 years, but finally in the last month my daughter "saw the light" and she voluntarily dropped her crazy "art degree" idea ,translation, full time "Starbucks Barista" into the computer field that will actually provide a degree with an employable skill.
Just last night some clueless lady with almost no retirement plan or assets, but had a paid off house was asking Suzy Orman if she should mortgage her house to pay for her sons 4 yr. college degree at a private school at $40k per year. She couldn't even answer why it was necessary for him to go to that school, other than that is where he wanted to go and it was a "better school".
In my state, if you maintain a 2.5 GPA and have 95% attendance, you will get your first two years of junior college paid for by state. Transfer to State U and you are out only less than $35k. That includes room and board and if you didn't work at all part time to defray costs.
That being said yes it is a lot harder now to pay for it than my generation, and they definitely have my sympathy. I borrowed to the max 3 years of student loans put them in the bank and snagged that 15% annual CD interest and the interest alone paid for one year of schooling. I also worked PT, so I almost came out of school debt free. The path I chose certainly is not available to this generation, so it is important they understand what the potential costs are in borrowing to go to school.

 

[tightasadrum]

This is a complex subject with many variables. Here are a few things I've thought about before:

Why should we believe that every 18-year-old is ready for college, particularly boys who tend to lag the girls in maturity? I would have been far better off waiting at least two years to start college. Two years of working would have given me some "adult responsibility" experiences and helped me shape what I really wanted to study in college, or not do college at all. (This was not an option at the time for me because of the draft and Viet Nam, but it would work now.) After college, three years in the Navy, and over a year working, I went back to grad school. It was a far better learning experience.

Our system has a shortage of skilled workers in technical trades like machinists etc. The number of skilled laborers required far exceeds the supply. Yet we push HS graduates to attend college in anything, just get that degree. I know people with college degrees who never developed generic job skills. Things like getting to work on time every day or focusing on objectives with other workers to achieve the employer's goals. Without these basic skills they never were able to be successful at anything. Work life teaches this better than college life I think.

The cost to attend college is reaching an unsustainable level. How this will ultimately shake out is hard to predict, but something has to change. As the economist said, if the cost cannot continue to increase at the current rate, then they won't, or something like that.

 

[growing_older]

I like the idea of having "technical" colleges or other for-profit schools have more participation in the success of their outcomes. That would be great. As it stands now, the school gets the money when the student enrolls, and subsequent success in the class matters only in so much as it enables enrolling in the next class. Success post-school matters only in the discussions of the placement office, which are highly suspect anyway.

I do hire technical people for software and networking jobs. I have rarely found anyone with a "for-profit" degree who could do the job and those few only because they learned real skills despite the waste of time at the for-profit school. The claims from many of these schools I see on advertisements are ludicrous in my field and the training has no useful application. It would be great to find a way to hold these "schools" accountable for those claims that got students into the program because they didn't know any better, but leave them high and dry after "graduating"

Likewise, it seems to me that there is a great deal of difference in the utility of various BA degrees. It may take a great deal of scholarship and study to become an expert in 14th century French Literature, but it is of little practical use outside of teaching a new generation about the topic. Similarly, depending on where you earn the degree, there seems to be a wide range of effort, and even knowledge, in many so-called degrees like "communications", "business" and "marketing" Some programs really do teach things that might be useful. Many do not. Many students in programs of all kinds are not paying all that much attention anyway. Which isn't a problem for lots of the critical lessons of independence and socialization going on in the dorms, parties and campus organizations but does mean that the academics get scant attention.

And maybe the academics don't do all that well anyway. I had some great classes that taught useful material, but I also had many classes taught by teachers who were terrible at teaching. If I and my colleagues learned anything in those classes, we did it together despite the teacher. In many cases we just gave up, learned nothing and went for the pass. What a waste.

 

[Sarah in SC]

I'm glad to see others advocating for non traditional routes to education. I am one of those that was (I suppose) smart enough to go to college from high school but wanted no part of it. I wanted to work, and have independence. So that's what I did. At 40 I completed my college and professional certification, and I am so happy I had those years between 18 and around 35 when I started taking classes in earnest to actually learn what I wanted to do with an education.

I don't think I missed out by not having the normal college experience. On the contrary, I learned a lot about those "life is not fair" and other fantastic life lessons by working in a wide range of jobs during my 20s and 30s. I may not have made a lot of money in my working life, but have always done what I liked, and when I didn't like it anymore, I did something else.

The problem with selecting a career based on your college degree selection at 20 or so is that you might find out that career sucks and then you are trapped by loans or other obligations.

And I do feel sorry for those with awful loans. My employer paid for my education but I had to do the work. A fair trade to me and far better than loans!

 

[jollystomper]

People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.

Beware of The Law of Unintended Consequences on this. I remember how things were when these loans could be discharged, and I knew more than few folks bragging on how they had no intention of paying the loan back.

I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.

 

[Gatordoc50]

Beware of The Law of Unintended Consequences on this. I remember how things were when these loans could be discharged, and I knew more than few folks bragging on how they had no intention of paying the loan back.

I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.

Lending should involve underwriting. As of now, there is no risk to the lender, so there is no underwriting. It's the same situation as in the mortgage crisis, but without the ability to discharge the debt. I think we can all agree on one thing. Whatever our colleges are charging for finance degrees, it's way too much. lol

 

[Redbugdave]

I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.

We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.

 

[Bestwifeever]

People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.

I was just thinking the same thing--that would make conventional lenders much harder on borrowers for these uncollateralized loans if they knew the borrowers could walk away from them. If loans were harder to get, colleges might address their costs a little more closely if they had to act as the lender and then hold the loans.

I do think anyone who wants a college education should be encouraged and advised of all their options. And those who don't right out of high school also need some guidance about what lies ahead. Fortunately neither attending college or taking another path is mandatory, but I love that in the US we don't have to be bound by our past or our parents' past.

 

[Gatordoc50]

We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.

I agree that those in the finance industry are not professionals and as such do not have a fiduciary relationship with their clients. That's why bankruptcy should be an option. To mediate improper, unethical behavior by lenders.

 

[mpeirce]

I was just thinking the same thing--that would make conventional lenders much harder on borrowers for these uncollateralized loans if they knew the borrowers could walk away from them. If loans were harder to get, colleges might address their costs a little more closely if they had to act as the lender and then hold the loans.

You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com

 

[jollystomper]

We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.

Keep in the mind that institution has a vested interest in keeping folks to "chase the dream". If you have ever gone on a college visit with your children, or attended a college information session, straight talk regarding debt, majors, and post college realities are in short supply. I have yet to hear in anything words like "if you need to take out more than $xxx in loans, choose your major wisely or you might not earn enough to pay it back - and that will impact your financial situation forever".

 

[Bestwifeever]

You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com

Either way, let the borrowers walk away and the lending programs will change (your link is subscription only, by the way).

 

[Redbugdave]

Keep in the mind that institution has a vested interest in keeping folks to "chase the dream". If you have ever gone on a college visit with your children, or attended a college information session, straight talk regarding debt, majors, and post college realities are in short supply. I have yet to hear in anything words like "if you need to take out more than $xxx in loans, choose your major wisely or you might not earn enough to pay it back - and that will impact your financial situation forever".

Yes, That's a good point. That's exactly what is happening. You have the two sides...like the college being the car dealer and the student being the car buyer. The dealer has the angles figured out, since it's all about money. The buyer needs to know what a good deal really is before buying...

 

[Texas Proud]

You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com

Which makes it worse.... in the article they said there is no credit standards or underwriting....

The below in the article is a perfect example of WHY some people should not get loans... and having some kind of standard would have prevented this... my bold...

"Joanne Smith, 53, of Port Richey, Fla., had filed for bankruptcy three times and was unemployed in 2004 when she started borrowing through the government's Parent Plus program, which enables parents to borrow for their children's tuition. Her mother co-signed the loan, which helped cover her son Tim's education at Embry-Riddle Aeronautical University in Daytona Beach. He graduated in 2010 with a degree in engineering physics. Ms. Smith, who is disabled and unemployed, now owes $184,500 on student loans. Her son owes roughly $45,000.



Ms. Smith said the government allowed her to postpone repaying the loans until this summer, and she is now two months behind. She said the $1,985 monthly tab exceeds the roughly $1,600 a month she receives in disability income. "All I could think about was I got to get my son into college," she said."