OT: Why does a college degree cost so much?
Very detailed and insightful piece from CNCB that does a great job addressing the question:
"With the total level of student debt outstanding at more than $1.2 trillion, parents, students and researchers are now asking: how is this sustainable? And why does college cost so much?"
With plenty of great charts, facts and figures covering public and private, every state, most major schools - 26 schools in Michigan, for example.
My University tuition was less than my Jesuit high school tuition - about $250 a semester.
http://www.cnbc.com/id/102746071
Sent from MGoBlog HD for iPhone & iPad
have free WiFi and soy lattes? Maybe the prisoners won't even notice they're in prison.
you simple took your statement and then basically said the thing. What is the size of the mortgage market vs. student loan market? What expected default are you assuming? Who are the holders of the defaulted paper and what is their likely outcome?
Assuming there are a massive wave of defaults, yes it would likely cause a recession in the US economy as spending slows, hell maybe even a depression; but pretty sure ther are lots of tools that the government would use to prop up the economy. They may not directly bail out the borrows but they would prop up the economy other ways, just like in 2008. It may not be QE but I am sure it would be in some other form.
Our entire economy is built on credit and as large as the student loan market seems it is probably by far the smallest compared to consumer, home, corporate etc. Like I said before a massive default is a problem but by no means the biggest
will likely be the future students, all that will happen if defaults go up is that the gov't will probably raise the rate to make up the difference in expected defaults. I get that it can't be discharged but people can still refuse to pay and just destroy their credit.
Yes consumer debt has no recoverable value and you can't just look at fannie and freddie, you have to look at all of banks. And rocoverable value sure but home values were immediately eroded during the firesale times and the banks barely recovered a lot of it.
And again there is not shadow market on student loans like there were with the housing markets in the form of derivatives or CDO^2 etc. It's a straight forward product with an expected default rate. Defaults start to rise and the holders will adjust reserves etc
assume the quick google machine is correct;
student loan debt 1.2TN
mortgage debt 8TN
and 900bn of credit debt (of which some are transactors vs. revolvers, aka balance carriers)
so student loans are higher than cards, but are probably 30 years at an interest rate that is roughly 1/3 to 1/4 what credit cards charge
I don't know where autos falls on there but I have to imagine its also sizeable.
and I think eventually we will honestly rely less and less on credit. I think people will get smarter with decisions on education, what home they can afford, whether they need the latest iGadget etc, mostly out of necessity since credit will be scarce.
like i said below I don't think it will be that bad because everyone is screaming that this is a bubble. The truly bad bubbles come from no where where most people aren't expecting them. Someone will get it right, but it won't be us fools on a college sports blog message board! Go Blue!
Are you know for sure that there is no secondary or shadow market of students loans? I will google to find out. but just asking in case you know.
Since the Wall Street meltdown of 2008, it seems to me that any and all sources of income can be used in a secondary market.
heard of a credit default swap on a pool of student loan collateral but maybe there are some; who knows.
I think everyone is just rushing to say "OH OH OH OH THIS IS A BUBBBBLE!!!! AHHH MELTDOWN" without having any basis to those facts whatsoever.
Also if everyone is screaming its a bubble then odds are its not.
Who else is going to pay for Jim Harbaugh to travel the United States?
Not the people paying tuition. For the million and first time, Michigan Athletics are a self-sustaining entity.
Sent from MGoBlog HD for iPhone & iPad
Probably around the same time that trolls stop being trolls....so never.
supply and demand - everyone wants a degree because they think they are better off with one but not all degrees are created equal. People don't assess their degree as an investment that has to provide returns so they get something nice looking instead of useful.
I would wager a bet that a engineering degree at a local university that is lower priced can get you same as a degree from a private liberal arts school.
Don't forget people who are better off going to trade schools, going to liberal arts schools instead due to the prestige factor.
Sad that trade schools are devalued so much nowadays.
and completely agree! that four years of earning vs. four years of negative earnings has a HUGE long term impact assuming you spend and save wisely.
It is a shame, and many students are going to college that would be far better off in trade school, which would save them tons of money and time, and give them just as good a chace at a job. Trade schools need a major PR effort and support from government to change that.
I think my Michigan Engineering degree has opened more doors for me than say a WMU or Tech degree would've, so in that regard it seems to be worth it. Either way though, engineering degrees tend to be good investments.
The insane thing to me is when I see people go to K College to get an English degree and then end up working at a coffee shop afterward (I know some people like this). Awful investment if you're not going to actual make money afterward
I think trade schools are a great resource.
I will say that I hate when people assume that the only usefull degrees are "Engineering" and "Business". I was an English major, and I work a job making just as much as an engineer at the same point in their career-- in fact, my official job title has "Engineer" in it. The one problem I have is that schools have plenty of support to help Business, Finance, Marketing, and engineers find jobs, but have bubkis for anyone else.
"everyone wants a degree because they think they are better off with one but not all degrees are created equal."
I really wish my family understood this. My parents still have that 70's mindset of "getting a college degree in any field automatically means you have a massive leg up on everyone else because that means you went to college and passed."
I don't have the heart to tell them that my business degree isn't worth the paper it was printed on.
companies now require everyone to have a 4 year degree just to get their foot in the door. A ton of jobs can be done by smart people with just a HS education, assuming that the HS was good.
There are way too many people going to college in this country, and way too few going to trade schools.
Trade schools really do need to make a comeback. 4 year college is not the right and only answer for everybody.
come back for what? We don't build anything in the US anymore. This is a simplistic answer and I don't have the data, but anecdote-ally we're simply not creating the jobs that require traditional trade skills. Isn't that the case?
This is a falacy. There is a lot of manufacturing in the United States. On an absolute dollars basis, this is likely at all time highs. (Inflation drives some of this.)
What you are much of the media are reacting to when one utters "we don't build anything in the US anymore" is that there aren't the same number of manufacturing jobs as there once were, but this fact doesn't imply manufacturing doesn't happen. There is much more automation than there was in the past.
What has changed is that the very low skill jobs with decent wages creating products that can fit in a shipping container are gone. And will probably never return. What we as a country have are fewer manufacturing jobs that require skills. These jobs are far less likely to move off-shore as there is likely a reason the product is produced in-country (shipping expense/difficulty, need for rapid customer response, incompatibility with slow supply chains, etc.).
Trade schools don't just teach manufacturing skills, but also medical / technical / other immediately marketable skills.
This is absolutely true. I wouldn't be surprised if 50% of the jobs in America just need smart, hardworking people versus degreed people. Once you get past STEM, healthcare practicioners (do these classify as STEM?), law and accounting (and I'm sure I'm missing others), a degree is just used by HR as a first screen to weed people out.
The Business world has driven the young people to college. If you only look at job requirements for new job postings, they almost all say a degree is required.
Human Resource Departments have way to much control over the qualifications that a person has to have to be hired.
Because there is essentially no accountability of the boards/presidents of public universities when it comes to maintaining a budget. They spend as the want and jack up tuition as needed.
The crystal and gold palaces that universities have built over the last 20-30 years are absolutely NOT requried to provide an excellent education.
When I attended Western Michigan in the late 80s, in-state tuition was less than $40/credit hour. My daughter starts there in the fall paying an out of state rate of $956/credit hour.
The campus has been hugely expanded and entirely transformed in the last 25 years. There is a new freshman dorm that looks like a five-star hotel. None of the fancy buildings and structure enhace education- they are just testaments to the egos of the people running the joint.
All of this is financially ruining the middle class of the next generation and the economy is going to suffer for it. They won't be able to buy homes, new cars, etc. because they'll be saddled making loan payments for decades instead of investing in their futures and the economy.
It's utter maddness.
All of this is financially ruining the middle class of the next generation and the economy is going to suffer for it. They won't be able to buy homes, new cars, etc. because they'll be saddled making loan payments for decades instead of investing in their futures and the economy.
You hit the nail on the head dude. My sister, brother and I are well-educated (2 masters, 1 JD) and we are up to our asses in student debt. My bro said to me the other day "$800 a month forever sucks" and said if he ever haas a kid he won't let him go to school in the States. I pay about $650/month. I've been out of school for 10+ years and I still have about $40K left on my goddamn undergrad loans.
I think sooner or later, realtors/home builders, auto manufacturers and other durable consumer goods makers will realize that a whole generation isn't buying their products. Not because they don't want to but because they simply can't. Most of their paycheck is going to banks and student loan providers.
I'm in my mid-to-late 20's now (yuck) and I know a good amount of people still paying off loans which naturally inhibits your ability to save, buy a home, etc. It's all going to blow up eventually
But isn't a substantial part of that cost based on your daughter's choice to go to a public university out of state? There are ways to limit the costs. Commute to a local school, even community college and transferring, or go to a less costly school (and perhaps less prestigious), then go to a better place for a master's degree are just a few ways to help keep costs down.
She got a scholarship that made the cost at WMU about that same as Washington State.
And in-state tuition is still about 10 times (a 1000% increase) what it was when I was there, for no reason. Minimum wage has only doubled in the same time period.
There's an easy fix: Cap tuition and under-the-line increases at public univiersities. Of course this only works if the public funding system is metered to increase with inflation, too. Here in Washington state, this funding has been severely cut so the state can give Boeing, Microsoft, et al massive tax breaks.
Rich get richer, middle class gets anihilated.
Sent from MGoBlog HD for iPhone & iPad
Thanks for posting this. Hopefully ill get to read the whole thing later. This topic has been fascinating me lately and I've become obsessed with it.
This is the most disturbing snippet I've read so far:
This fall, Harvard's annual tuition and fees (not including room and board) will set you back $45,278, more than 17 times the 1971-72 cost. If annual increases had simply tracked the inflation rate since 1971, next year's tuition would be to just $15,189.
Ouch.
I think there are many, many answers to this question. "Administrative bloat" is certainly a factor--look at the number of staff/administrators at colleges and universities (and their salaries) over the past few decades. I would also suggest that high tuitions pay for the amenities that students want/need/expect--new luxury dorms, extracurricular activities, more food options in the dining halls, a variety of student support services (academic, psychological, etc.).
I think another factor is that people still believe--probably with good reason--that the cost of higher education is worth it. People with a college degree earn more during their lifetime, on average, than people without a college degree. I don't know if other commenters are right that this will change--that's obviously hard to predict. But I guess in some ways people are making a rational choice that the cost of a degree--even as high as it is today--is worth it.
If my own experience is any indication, faculty salaries are *not* a factor in the increased cost of higher education.
There are more administrators and administration positions at Colleges than there are professors and TA's. Think about that. And that is a recent development. Also look at the explosion in salaries for those administrators.
There's also a lot to be said for the fact that universities are now basically run like corporations, rather than academic institutions. The presidency of most universities has now become a Chief Fundraiser position. Deans and department chairs are increasingly accountable not for their divisions' and departments' research and teaching value, but how programs contribute to the university's bottom line. Meanwhile, teaching responsibilities are increasingly placed on adjuncts and lecturers, hired for pennies with no promises of job security and certainly no benefits, and graduate students, who universities treat as students only when it isn't financially sound to treat them like employees. Mix in the rat race for amenities for undergrads (i.e., a gelato bar at East Quad)... The priorities are all out of whack.
I'm not saying universities shouldn't care about the bottom line--they absolutely should. But I really wonder about how institutions are going to be able to sustain this while still keeping some trace of their academic mission.
To continue on my soap box, working with undergrads every day, I'm increasingly seeing that students are making a value calculation on their education. They treat course evaluations like Yelp reviews, evaluating not what they've learned or what the instructor could do differently, but rather how easy the class was, how little of the reading they had to do or how many classes they needed to attend, and what kind of distrubition requirement it checked off the list. No curiosity at all. And then when they do poor work, or god forbid get a grade lower than an A-, they complain because they think they're entitled to it, in large part because they truly think they're not paying all that money for B's. They want the piece of paper, they want the good GPA to go on their CV, they want the good summer internship to turn into a better job, and that'll be it.
Good points Bando. I'm not sure if you can share online, but what do you do at a college/university?
I've spoken to colleagues and we've speculated about the prospects for a college that offered a stripped-down education: good professors, adequate facilities, and that's about it. You could learn from faculty who are equivalent to other strong institutions, in a classroom (as opposed to an education that is affordable because it is online), but you wouldn't have the sushi bar at the dining hall, or student activities center, or a brand-new dorm, or the student "outward bound" experience, or athletic teams (they may earn money at Michigan, but they cost money at most other places), or some hypnotist or pop musician giving a free show, or free snacks during finals week, or any of those other "extras."
Would students be willing to pay much less money for a college experience that was all about, well, learning? I have no idea, but I kind of hope some visionary billionaire tries something like this just to see if it would work.
I'm a PhD student, teaching and writing and working towards trying to get a job on the academic job market. It's grim, to say the least. But I love what I do.
Plan as if you won't get an academic position. Take advantage of being in a university to obtain skills that will allow you to get jobs other than academia
Well, right. Feel like I'm going to another free lunch talk on the non-academic job market about once a week. That's the nature of the beast, and luckily my institution is training us for what may come next.
Good luck--it's a tough slog, and as this thread shows if you "succeed" then you still get to deal with long hours and a low salary. Still, as many people have mentioned, there are lots of reasons to love an academic job if you can get one. But keep going to those brown bags!
I think you are right about presidents as "chief fundraisers". I just wish their efforts and all the money they raise would actually go to reducing the cost of the college experience for students.
A lot of the presidents' efforts go towards beefing up the endowment, which is another arms race in higher education. UM, like a lot of other top schools, has an absurd endowment of several billion dollars, that rivals the assets under management at hedge funds. I think its a shame that, as college costs spiral out of control, there is a massive untouched pool of money that the university controls but it doesnt go towards the students...
My institution just got a new CFO that came from a commensurate institution, and supposedly his first meeting with the trustees, he zoned right in on our enormous endowment, wondering why they were so content to just sit on it as it grew bigger and bigger. They didn't want to touch it, despite pressing needs for infrastructure upgrades, non-commensurate support for graduate students and faculty hires, and other things that would impact the academic life of the university--which the board of trustees apparently didn't perceive or (perhaps worse) see as valuable investments. He called them on it, and all of the sudden, we all got raises and money started being spent at more than a deliberately slow pace.
Of course, when we recently found out our stipends were getting bumped up at an unexpectedly high amount, the president was the first to email us and take the credit for it, followed by the head of the graduate school.