My master's wasn't worth it...

OK, then here is a non-lying number for you: 11%. That is the percentage of all outstanding student loan dollars that are now delinquent or in default (i.e. not getting paid back), as of 4Q12. The delinquency rate has been rising steadily for years, is now at an all-time high, and appears to be still going up. Note that this rate is much higher than it was when you were in school.

So for every 1 out of 9 student loan borrowers (and climbing), the tangible ROI is provably negative. If someone cannot pay back their student loans, then we can assume that whatever financial benefits they have accrued from the college educations are less than the costs of financing those educations. In other worlds, negative tangible ROI.

Note also that student loans are not dischargeable in bankruptcy -- which again, is different from when you were in school. For most of those in the unfortunate 11%, their credit will be permanently ruined. Yes, they will undoubtedly enjoy intangible benefits, but unfortunately lenders demand tangible dollars.

Admittedly, higher education still provides net benefits (both tangible and intangible) for most students. But it is not working for a significant (and growing) minority. There is now a very real chance -- 11% and rising -- that enrolling in college will leave you in worse financial condition than not enrolling. This is a point that has to be considered, very very carefully.

Be open to the economic reality that is -- not just what it used to be. You'd be shocked.

 

You're missing the other positive numbers-- the ones that state that unemployment is lower for students with advanced degrees.

Being pragmatic and saying there are increasing numbers of loans going into defaults is understandable. It's also understandable to be broadly optimistic and say that people can achieve more with higher education. I think the best way is to look at this is a middle ground-- people should shop carefully for degree programs that will help them move forward, but without incurring untenable debts. And that's something people have been saying on this board for a long, long time.

 

I didn't miss that. Here's what I said:

-- "higher education still provides net benefits (both tangible and intangible) for most students. But it is not working for a significant (and growing) minority."

Just like I would also say:

-- "Home ownership provides net benefits (both tangible and intangible) for most homebuyers. But in recent years, it has not worked out for a significant minority".

If you agree with the second statement, then note that the delinquency rate on student loans is now higher than the delinquency rate on mortgages. Also note that student loans -- unlike mortgages -- cannot be discharged in bankruptcy.

Look, everyone in the world agrees that "untenable debt" is bad. But how exactly do you recognize "untenable"? The millions of people who are now in default on their student loans all thought that the debt would be manageable when they signed the papers.

Unfortunately, it isn't always clear whether or not a long-term investment is "tenable". Past performance is no guarantee of future results -- the same investment in higher education that worked out great for your parents may not work out well today. Tuition is way up, debt is way up, and the job market is way down.

 

This is unnecessarily antagonistic and filled with very valuable points.

My comments were predicated on the notion that one would not spend money one could not pay back. Just like any investment of time, money, effort, etc., one has to consider the ability to realize one's goals for that investment. I'm just trying to point out that it isn't only about ROI. That doesn't mean the other extreme--that the money doesn't matter--is true, either. That's a reductio ad absurdum reaction to my post.

The rules on not discharging student loans in most bankruptcies applied to me, too. I'm not sure why you said that.

I'm much more concerned about the following: That the higher education market operates as a cartel, facilitated by the accreditation process. We see it all the time. Once a school gets DETC accreditation, its tuition goes up. When it gets RA, its tuition goes up even higher. And this is NOT attributable to the cost of the accreditation process. It's because, as Bourdieu reminds us, there is an exchange of capital in this process (your money and their credential) and the value of one (the credential) just went up. This cartel--in the U.S. anyway--is the single gatekeeper. You have no alternative in terms of career growth but to go to this cartel and pay your dues to get your degrees. And as Hapgood told us, this requirement is increasing. What used to require a high school diploma now requires a college degree. You want to be competitive in the white collar world? Get a master's. Etc. He talked about this 40 years ago and he's proven to be an oracle.

So what to do? Absent action by employers--and they don't have a dog in this hunt since they get the benefit of higher education without paying for it--there are three distinct possibilities, and government is the only source possible for each. (Yes, government, that thing that acts for our collective good.)

First, government could step in to regulate colleges and universities. This isn't an unreasonable possibility given the amounts of money taxpayers invest in subsidizing student loans. The government could regulate the costs charged, the degrees offered, and the number of people admitted/graduated from these programs. That wouldn't stop other people from taking degrees from other programs in other amounts (and paying whatever), but gamble with your own cash, not ours.

Second, government could take over higher education. Private universities are not known in some countries, marginalized in many others. Perhaps education (like health care and fighting wars) is something required for the collective good and not best left to the private sector. (The higher education and healthcare arguments are remarkably parallel.)

Third, the government could create (in partnership with extant organizations) a strong qualifications framework, allowing people to pursue work and higher credentials simultaneously, credentials earned outside the higher education system, yet universally recognized by employers. You want to become an accountant? Instead of going to a university for 4 years, take a recognized diploma program, start working as a book keeper, study further and pass standard exams. Many countries have this kind of system. They don't try to shove everyone through the university system like we do. (Telling kids they won't amount to anything if they don't go to college--which is now, sadly, true.) Existing professional standard-setting bodies like the AMA, SHRM, ASTD, PMI, etc. could establish and maintain credentialing requirements, keeping them up-to-date in partnership with the government and employers.

Are there objections to each of these ideas? Sure. But poking a hole in one or another with an objection should not defeat the idea. The fact is, we're failing ourselves by relying on higher education alone to credential our workers. (I know, tertiary learning is available from non-collegiate sources, but almost all of the widely-recognized credentials come from universities' degrees.) We need effective alternatives to complement higher education. We need other ways.

 

It was in this spirit, I think, that the Skills for America's Future program to link employers, industry groups and community colleges in collaborative training programs got a visible push from the Administration directly in a late 2010 launch, and indirectly in the 2012 State of the Union.

 

OK, my original statement was only partly correct. You would have been able to discharge private student loans in bankruptcy -- but not federal loans. Now you cannot discharge either.

Simpler actions that the govt could take:

(1) the govt could put realistic caps on the size of federally-backed loans, and
(2) make private loans dischargeable in bankruptcy again (as they were until a few years ago).

Both of those would be relatively easy steps, but they would profoundly affect the current system. Limit the availability of $$, and schools will be forced to limit their tuition. Well qualified students with sound academic plans will be deemed good credit risks, and will still be able to get supplemental private loans. Poor students with untenable career goals will not.

 

"Fourth, the government could stop flooding the market for higher education with money from guaranteed loans. Ask any economist -- tuition rates rise to soak up all the available money. Title IV is a classic example of how government breaks your leg and then hands you a crutch and says, "See? We're here to help!" When a kid right out of high school can borrow a hundred grand with nothing more than a signature and a pulse, how is that not supposed to be incredibly distorting?"


Federal Stafford Loans for dependent undergrads (which is most of them under 24 yrs. old) are limited to 31K (23K subsidized). UGs are also ineligible for PLUS loans. The yearly amount increases incrementally each school year. Independent students max out at 57K. So, these student who take out 100K or more for UG study are going into to private market to get most of it. So don't be so hard on Uncle Sam, he's trying.

Subsidized and Unsubsidized Loans | Federal Student Aid

 

This is the smartest 20 something person I have seen in a while. Kudos to you, MC, for your wise planning. With that kind of planning, "struggling" may be the worst thing you ever have to experience.

 

I agree, except that the first violates the whole purpose of student aid: to allow people a chance to invest in their future and rise up from their circumstances. And, IIRC, they already DO cap the amount of Stafford borrowing you can do each year: Subsidized and Unsubsidized Loans | Federal Student Aid

 

Instead of "going back to a high school hobby as a job", with his degrees I don't see why he couldn't just become a high school teacher in Wisconsin. They have a shortage of science teachers in that state and just about every other one as far as I know: http://www2.ed.gov/about/offices/list/ope/pol/tsa.pdf

It may not be his "dream job" but it pays a salary and could lead to something else for him later on.

 

Yeah, but dealing drugs carries some heavy downside risks.oke:

 

I couldn't watch Willie Wonka and the Chocolate Factory without pausing and running out and buying a chocolate bar. That's why I can't watch Breaking Bad. :wink:

 

That's kind of what I was thinking. I know teaching isn't the dream job for everyone, but it's a job. Would you rather be rotting in debt waiting for the government to bail you out with a welfare check, or would you rather get off your butt and work, putting your knowledge and skills to use? It seems like a simple question to me.

I was also just curious because all I hear about is STEM this, STEM that. STEM is the big push these days, and if there are no jobs in STEM fields, why are we pushing it?

-Matt

 

I have my Master's from Walden, also, but I used it to try to raise my retirement benefits because I don't have enough years in to reap the higher benefits. I hope it was worth it; I'm about two years from retirement with a student loan!