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Old 02-21-2010, 08:03 PM   #41
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Well perhaps that is because the people looking at the raising costs of college aren't economist. I agree that there are many factors, and that the case isn't as clear cut as the housing bubble fueled by easy credit but here are somethings to consider.

According to the National Center for Education Statistics "Enrollment in degree-granting institutions increased by 14 percent between 1987 and 1997. Between 1997 and 2007, enrollment increased at a faster rate (26 percent), from 14.5 million to 18.2 million." A similar increase was seen in the number of students taking the SAT test.

I couldn't find data on the increase in the number of colleges, but as an example in the last 20 years California UC system added one school UC Merced and in the last 10 years the Cal State College system went from 22 to 23 campus. So clearly demand for college outstripped supply by a healthy margin. We know from Econ 101 that when demand raises faster than supply prices raise and sure enough that is what we have seen.

We also know from various source including threatened lawsuit that the top private university are very aware of the tuition of their peers, and even collude on making financial aid offers to students. We have seen a tremendous increase in the profits endowments of top universities for example Harvard's endowment in 89 was 5 billion 99 12 billion and 2009 25 billion.

The article you linked and the WSJ article point out the tremendous increase in the amount of borrowing of student loans. Much like the housing market, where people didn't ask is this fixer upper in California worth a million bucks, but rather what are the monthly payments, we are seeing the same thing with college. Increasingly students aren't asking is worth 50K a year to go to top school or even if I borrow the money can I pay it back, but rather simply can I borrow enough?

As I thought experiment think about what would happen if we simply eliminated government subsidize student loans? I think we would all agree that a lot less kids would go to college. I contend it would also cause tuition prices to fall, along with force Universities to be more efficient, for example doubling professor teaching loads unless they were able to get grants.
Well, some economists that have looked at college pricing of tuition have concluded that there is a lot of market failure in the higher education industry as well as low price elasticity for tuition. Economics 101 principles of supply and demand don't work well in this industry. I think if one eliminated government subsidized loans you would pare down some student access to some postsecondary educations (such as proprietary trade and technical schools) but I doubt it would have a major affect on student enrollment and tuition prices at most private or public colleges; many of the selective private and public colleges would simply make up the shortage in government loan assistance by dipping into their endowments to offer generous loan or grant assistance to worthy students.
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Old 02-21-2010, 10:36 PM   #42
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Whenever it is easy to get credit on good terms for any good or service, the price of that good or service increases. In fact, one reason why faculty salaries increase is that students can get credit to pay outrageous tuition.

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Old 02-22-2010, 05:22 AM   #43
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Well, some economists that have looked at college pricing of tuition have concluded that there is a lot of market failure in the higher education industry as well as low price elasticity for tuition. Economics 101 principles of supply and demand don't work well in this industry. I think if one eliminated government subsidized loans you would pare down some student access to some postsecondary educations (such as proprietary trade and technical schools) but I doubt it would have a major affect on student enrollment and tuition prices at most private or public colleges; many of the selective private and public colleges would simply make up the shortage in government loan assistance by dipping into their endowments to offer generous loan or grant assistance to worthy students.
Ah I see this time it is different and supply and demand doesn't apply. Sorry I don't buy it. College use to be only for rich kids. Then we had public universities, and private university started to give scholarships and college was for rich kids, and really smart kids. Then much like home ownership the government got in the loaning money business, and the market got distorted and suddenly everybody should go to college.


I'd suggest doing a bit of looking at the number and type of people who went to college pre GI bill. In only a few generations the country has gone from a college being restricted to only a few to obtainable by most everyone. If we dry up the source funds, lots of colleges would go out business, and I also think the surviving college (excluding the Ivy league) would start lower prices. We've already seen some slow down in college cost in this recession.

The reason most kids go to college, and certainly the reason most parents foot the bill, is the believe, based in the no small measure on the relentless marketing the kids with college degrees make a trillion bucks (ok maybe only 800K) more than those without degrees. In that context spending (or rather borrowing ) $200k makes sense. The problem is that for average high school student, who goes to school cause mom and dad insists on it spending that kinda of money often doesn't result in a significantly better jobs.
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Old 02-22-2010, 06:50 AM   #44
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........... The problem is that for average high school student, who goes to school cause mom and dad insists on it spending that kinda of money often doesn't result in a significantly better jobs.
So you are saying that my niece with a BA in history and working as a cashier, is not a fluke?
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Old 02-22-2010, 09:49 AM   #45
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So you are saying that my niece with a BA in history and working as a cashier, is not a fluke?
No; she needs to borrow another $200k, go to a low-rated law school, then work as a cashier!
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Old 02-22-2010, 09:53 AM   #46
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The reason most kids go to college, and certainly the reason most parents foot the bill, is the believe, based in the no small measure on the relentless marketing the kids with college degrees make a trillion bucks (ok maybe only 800K) more than those without degrees. In that context spending (or rather borrowing ) $200k makes sense. The problem is that for average high school student, who goes to school cause mom and dad insists on it spending that kinda of money often doesn't result in a significantly better jobs.
Not only that, but there is a stigma attached to NOT going to college these days. Not only are the people stigmatized as not "skilled," but their parents are likely to be seen as failures because their kids didn't go to college. (No pressure there.)

These days for most of the middle class and above, the default assumption is that you WILL send all your kids to college, and as a result college degrees have become dime a dozen -- the point where many careers without college (such as those in the trades) are more lucrative than many careers with college (and don't start their careers with $50-100K in student loan debt). Many of the so-called "unskilled" jobs without college are a lot harder to offshore to India and China, too.

Because of the huge supply of folks with bachelor's degrees these days, the advanced degree has become the new bachelor's degree, the educational "distinction" between the highly educated and the less educated.

The bottom line is that there are good reasons to go to college, but the assumption that getting a degree, any degree, is financially "better" than not getting a degree is no longer as true as it used to be, and it's increasingly based on elitism than reality. (Depending on your course of study, of course.)
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Old 02-22-2010, 11:18 AM   #47
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No; she needs to borrow another $200k, go to a low-rated law school, then work as a cashier!
Well.....ironically, she actually did - could never pass the bar exam.
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Old 02-22-2010, 11:28 AM   #48
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According to the National Center for Education Statistics "Enrollment in degree-granting institutions increased by 14 percent between 1987 and 1997. Between 1997 and 2007, enrollment increased at a faster rate (26 percent), from 14.5 million to 18.2 million." A similar increase was seen in the number of students taking the SAT test.
Read on.

"From 1985 to 1992, undergraduate enrollment increased each year, rising 18 percent before declining 2 percent and stabilizing between 1993 and 1996."

Since the "free" money came about in 1992, what caused the run-up to 1992? Further, what caused the decline of 2%? If the "government-loans" theory holds water, wouldn't there be a sharp increase from 1993-1996?

Instead, the slight increase of the typical college-age student ("[T]he percentage of 18- to 24-year-olds enrolled in college remained relatively stable (37 percent in 1997 and 39 percent in 2007)" only starts in 1997. Again, what happened in 1997 if the market-changing loans started in 1992?

If the enrollment has increased but the enrolled has stayed almost the same, what happened? People dropped out? Older students? (But "Between 1995 and 2006, the enrollment of students under age 25 increased by 33 percent. Enrollment of people 25 and over rose by 13 percent during the same period.")

Maybe other people besides (White) Males are enrolling?
1) "During the same time period, the number of females rose 29 percent, compared to an increase of 22 percent in the number of males." If these loans altered market forces, why wouldn't males not want to participate as much?
2) "Minority enrollments rose by 50.7% to 4.7 million between 1993 and 2003, while the number of white students increased 3.4%, to 10.5 million, the report says."

White students increased at a lower rate than the populaton growth, while minority students enrollment increased by over 1.5 million. Why didn't the market-altering government loans alter the white student enrollment as much? Since white student enrollment was lower than population growth, maybe the government loans actually hurt them!?!

http://www.usatoday.com/news/educati...10-29-minority enrollment_x.htm



Conclusion: It's more complicated than "government loans alter the free market!" There are additional factors at work.


PS. Look at state funding. It has decreased substantially. When subsidized tuition drops, who makes up the difference?
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Old 02-22-2010, 12:15 PM   #49
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Well.....ironically, she actually did - could never pass the bar exam.
I was going to add the bit about not passing the bar exam, too. Don't worry, it happens to a lot of people. DW went to one of the "lower tier" law schools that have a pretty bad bar passage rate. Lots of her classmates didn't pass the bar, or didn't take the bar. Most who did pass don't end up making the six figure salaries that people think lawyers make. I think the average salary was more like $45000 back when DW graduated in 2005.

Lucky for them the tuition was only a few thousand bucks a year, but they were still eligible to borrow $18,500 a year federal loans plus private loans. So plenty of graduates went on to careers where they are making less than $50,000 a year and may have combined student loan debt from undergrad and grad school of over $100,000.
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Old 06-01-2010, 07:03 PM   #50
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Here is one young women who owes $100k and only makes less than $50k.


placing-the-blame-as-students-are-buried-in-debt: Personal Finance News from Yahoo! Finance
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Old 06-01-2010, 11:02 PM   #51
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Here is one young women who owes $100k and only makes less than $50k.


placing-the-blame-as-students-are-buried-in-debt: Personal Finance News from Yahoo! Finance
Uh, she got a degree in Religion and Women's Studies? Exactly how much money did she think she was going to make after finishing school? I'm sorry but if you are going to have that much in student loans, the least you can do is research the job market BEFORE you pick your discipline and pick a discipline that you enjoy AND that is in high demand.

DH had quite a bit in student loans when he finished but at least his undergrad degree is in Economics and he has an MBA with a focus in Finance (both of which are in high demand in our local economy).
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Old 06-02-2010, 12:19 AM   #52
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I saw this article earlier today. I can't tell where the tone of the article is going. Part of it says, "yeah, I realize I have huge student loan debt, but I'll find some way to get to paid off, but..." -there is always a but- "someone should have stopped me from getting this far in debt in the first place. Why didn't Citi stop me or the financial aid office?" Someone else is to blame.

I'll just be a professional student for the next 5 years and keep it in deferment. That will make it go away?!?
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Old 06-02-2010, 05:47 AM   #53
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Uh, she got a degree in Religion and Women's Studies? Exactly how much money did she think she was going to make after finishing school?
As the article says, there was a substantial amount of naivete on the part of both the girl and her mother. This may be a particular problem where the child is the first family member to go to college (although I could not tell if that is the case here).
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Old 06-02-2010, 08:31 AM   #54
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She makes monthly payments on those loans—now $209,399—for $990 a month, with only $100 of it going toward her original balance. The entire balance of her federal loans will be paid off in 351 months. Dr. Bisutti will be 70 years old.

The debt load keeps her up at night. Her damaged credit has prevented her from buying a home or a new car. She says she and her boyfriend of three years have put off marriage and having children because of the debt.
I made 39k coming out of college and had about $80k in debt (14k over 6 years of undergrad). My payments were about $800/mo.

Based on the numbers alone, I do not sympathize with her at all (I did not read the article). I paid my loans off in 8 years or less (most had 10 year repayment plans), and if this lady finds 5%-10% of the payment balance, paying them off until age 70 won't happen (meaning pay $100 extra per month, about 10% of payment, and those loans will be gone MUCH sooner).

I rounded up all my payments (sent $200 in when payment was $190, sent $100 in when payment was $95) and it was amazing how quickly the balanced dropped on all my loans (about 10% interest rate was what I was paying).

If she stops complaining, she can pay down that debt with ease. How many here paid down a $500k mortgage, and how long did it take?
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Old 06-02-2010, 09:11 AM   #55
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As the article says, there was a substantial amount of naivete on the part of both the girl and her mother. This may be a particular problem where the child is the first family member to go to college (although I could not tell if that is the case here).
Somebody should have told this little diva that she didn't need to go to college at all to work for a photographer! There are plenty of better paying jobs than that which require no degree!!
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Old 06-02-2010, 10:00 AM   #56
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As the article suggests, maybe she should have considered a great school in the SUNY system.

A good friend of mine followed an eerily similar path as this girl. Seduced by the ivory towers, he went to NYU and earned a Masters in Creative Writing or something like that, and also incurred large student loans (big five figures from what I gather). He is of course not using his degree (he's in business/marketing now), and pissed that he wasted all that time, effort and money (and now is in debt) just to get a frivolous degree from a very expensive school, when he had a great state school available at a fraction of the cost (in a lower cost of living area to boot).

I guess it is hard to resist the appeal of hanging out in Bohemian Greenwich Village after classes are over for the day.
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Old 06-02-2010, 10:05 AM   #57
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Maybe she would be better off if she had chosen to work full time while taking a full load of classes, something that many of us have done in order to get through college. Then after graduating, she could ease right into moonlighting until those (now smaller) loans were paid off.

For some reason, people just seem to think that moonlighting is just out of the question these days, though many of us did so years ago out of necessity and managed to survive the (unpleasant) experience.
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Old 06-02-2010, 12:07 PM   #58
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I just read the article. I think it correctly apportions blame. I don't condemn her statement that she does't want to spend the rest of her life trying to pay for an education that she would gladly give back.

People on this board are extremely disciplined, and make choices that many more average people absolutely could not. She was a sheep, she got into an exposed position and the wolves ate her belly.

College is the most overmarketed service there is. It is really a conspiracy to be sure that students and unsophisticated or besotted parents do not understand reality.

And college can be a real hurdle to sane family relations. Try to tell the average emotion driven head-strong high school girl that she shouldn't spend $40,000 a year to study Women's Studies. Maybe it gives Dad cold chills, but maybe Mom feels that her husband has suffocated her and squelched her voice with his over-controlling nature. So maybe she supports daughter's choice as a vicarious rebellion of her own. Or maybe Dad is wrapped around his daughter's finger and doesn't want to disappoint his little darling. Or maybe as in Cortney's case Dad is dead and Mom is partly motivated by what "Dad would have wanted for her"

My sister's marriage broke up in part over her husband's flat refusal to pay tuition or co-sign loans for a daughter's journalism education. My niece is a very talented writer and she graduated with an excellent record from a top Midwestern journalism program, but she never could get a well paying job doing that, and now she makes a pretty good salary, with benefits, managing a dry cleaner. She keeps getting promoted to busier and busier locations and in spite of having over $45,000 in private loans she is doing OK and making some headway on her loans. (Dad wouldn't fill out the federal aid form). At age 24 she continues to live at home even though she would love to be farther away from her mother. She is a realistic person, but she absolutely did not ever get a good explanation of what she was gettig herself into with the loans. Many people really are just not interested in personal finance, or any other kind of finance. I think I could have pointed out the flaws in 30 minutes, but then I would be stepping into an already living family conflict. Not for Ha!

My sister is not a bad or immoral person, she is just an emotionally ruled idiot. But also a head-strong and arrogant one. I think her former husband did the best thing he could possibly do for himself and his family of 4 children when he left her. You can't let an unrealistic and deluded person sink the family ship, but you also often cannot reason with or compromise with one either. She thinks that considering money is immoral or impure, which figures as she has always been supported by some man or other.

Our education system is jsut one more example of the giant ball of dysfunction
that we call America. We have been maipulated into a place where our secular religion of non-judgmentalism means that every idea, or delusion presented as an idea, is as good as any other one, as long as none of these ideas violate some taboo on the ever changing PC Taboo List.

No wonder many things do not work.

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Old 06-02-2010, 01:23 PM   #59
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I've got a good one for you: Friend's daughter gets undergraduate degree at Yale in archeology, grad degree at Harvard $$$$$(paid for by mom and dad). Gets out and can't find a job in her chosen field...because what she degreed in is a job used by museums only...with volunteers!

Met a lady this week at the auto dealer waiting for the old oil/lube/filter job. We start talking, and she tells me her son has a degree in some fancy-type of engineering (sorry, engineers here, but I have no clue what it was), then gets a Masters in some advanced engineering--along with an MBA = 3 degrees$$$. She goes, "but guess what he does now?" He runs a sailing boat excursion company in Key West, loves it and is happy she said. She and I both had a good chuckle over it. She said he was making money, so...."whatever" was her attitude. I agree.

(Is there some degree like biochemical engineering? That's what just popped in my head.)
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Old 06-02-2010, 03:21 PM   #60
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Two stories that I have... that are at the extremes...


the first one was a blue collar worker who was in the navy for many years... his son was graduating from HS... so dad asked 'do you want to go to college?'... his son said he did... so dad held out his hand, shook his son's hand and said 'good luck with that'.... (I heard this from the dad)


This one is from when I first started to work.. I worked at one of the big accounting firms... there was a story about this guy who started to work in the tax dept... his first day they gave him grunt work, which he did not like... went to one of the partners and said he should be meeting with clients and doing higher level work... was told not just yet... so he quit...

He want back and got a law degree... worked for awhile (a couple of years is all I got when I asked)... and decided that he did not like that..

SOOO, he goes back and gets a medical degree and becomes a doctor... I am told he did stick with this...

We used to joke that he was the only doctor who could defend his own malpractice suits and do his own tax returns

I understood his family was rich, so it did not matter about all the wasted money...
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