This is something a friend showed me. The article is particularly relevant to our class because it compares student loan debts with the subprime crisis to predict what would happen if the bubble burst. The whole thing is pretty interesting, but here are some high points:
"Last August, student loans surpassed credit cards as the nation’s single largest source of debt, edging ever closer to $1 trillion.... Since 1978, the price of tuition at US colleges has increased over 900 percent, 650 points above inflation. To put that number in perspective, housing prices, the bubble that nearly burst the US economy, then the global one, increased only fifty points above the Consumer Price Index during those years"
"the Student Loan Asset-Backed Securities (SLABS) were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007."
And this was particularly troubling to me: "What analysts at Barclays Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” "
It's like they're saying its a bubble, and don't even realize they're saying it. What do you think? Is an education worth the $160,000 or so K is charging?
In discussing the culture of capitalism, a professor commented last quarter that it’s sad – members of our generation and those to come will never know the true value of what we consume. With the unprecedented, inflated costs of education and the state of the economy, I’m not yet sure whether the $160,000 (plus interest) is worth it. I myself will be paying off student loans for the next 25 years or more. Assessing the value of my education requires an assessment of alternatives. Unfortunately, the state of the manufacturing industry and the labor class in this country is such that low-skill has become inextricably linked with low-pay, and we have witnessed a glaring drop in the ability of unskilled, uneducated laborers to provide a comfortable lifestyle for themselves. The “American Dream” is for the educated only. In this way, it seems any amount of money is worth it, because the alternatives are generally bleak. But where is the line drawn between economic tool and economic burden? At what point does a student loan burden a student more than it supports? And how does that determination reflect the state of the economy? Moreover, how does the state of the economy affect that determination? The value of my education will play out in years to come as I navigate the economy and the effects of the recession. Educated but burdened with debt in a recession, am I still better off than if my uneducated counterpart?
ReplyDeleteWhy must there be such a harsh trade-off? Many developed and less-developed countries around the world effectively provide their citizens with quality higher education without saddling them with debt. In a political and democratic context, the larger implications worry me; how are we supposed to have an effective democracy – system of rule by the people – if the people are not educated? The costs of an education, and subsequent obstacles to accessing it, are far greater and more obstructive for those who are not members of the elite – most minorities – than those who are. And so their representation, along with the integrity of our political system, is compromised. There are so many levels to this.
I think this could definitely be considered a bubble. With tuition costs rising far above cost of living raises, the increase in the cost of higher education is becoming unsustainable. The vast majority of Americans can't actually afford the colleges they choose to attend, yet they do so anyway, which is exactly what happened with the housing bubble.
ReplyDeleteThe large investment firms really have to watch what they say because of their own incentives. They certainly can't call it or even imply that it is a bubble because then people would respond. As for an opinion no this education isn't worth $160,000. However, very few to almost no students pay the whole $160,000.
ReplyDeleteI definitely agree with all responses so far. The thing about education is... its priceless. So is a safe place to live. A good life is not something that we should be putting a price on, but that's what's happened in our capitalism-gone-out-of-control society.
ReplyDeleteNow we need REAL policies to even things out... but also REAL changes in mindset. I have no idea what the monetary value of my education is... none of us do, and it will be different for all of us depending on what we do with it.
One thing that strikes me is the over-valuation of degrees. While I whole heartedly believe I made the right choice in going to a four year college, and am willing to pay the price for it, others may not benefit enough to justify the cost. The problem is that a college degree has become the standard expectation for our nation's youths. We consider it a right of passage and because of this, ignore other very viable options for gaining the skills we need later in life. Community colleges are considered less glamorous than four year institutions, but can provide very practical classes for young people looking to make their way into the world. Additionally, students can take the classes they need at a university without registering for a four-year degree. In their pursuit of a college degree, many young people forget that it is the skills they gain that truly matter. While attending a four year university is an excellent way to gain these skills, it is hardly the only way. Students should consider at their own goals, aspirations, and means before deciding whether a four year university is right for them. If not, there are plenty of alternatives.
ReplyDeleteThat said, if a student DOES decide that a four year university is right for them, we, as a nation should work hard to make sure they can attend regardless of their economic situation.
ReplyDeleteI have long argued that 4 year degrees are over-valued relative to their cost. I think that too much emphasis is put on the piece of paper itself. Especially since many people end up working in fields other than what their degree is in. I would rather hire someone with no degree and years of experience than one with a 4 year degree and no work experience. The problem is that we dont really have a choice. The degree is valued by employers, so we spend 160k to get it.
ReplyDeleteThe interesting thing is people but such a value on "you get what you paid for" that colleges that raise tuition almost always see more students apply the next year because they see the price to be a reflection of the education, "if it's expensive it must be good."
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