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Student Debt: Onerous for the young, a drag on society – and a major future problem

15 November 2012

Summary: While the nation focuses on the concerns of old white people (which dominated the election), our young — our future — have different problems.  Such as rising inequality of wealth & income.  Starting different children at different rungs of the ladder generates positive feedback (like a pebble thrown down a rocky hillside, with the avalanche growing as it rolls down). Today we have the crack analysts of the Liscio Report look a rapidly worsening aspect of this national illness: rising student debt.  Rising education costs block many from even getting on the opportunity ladder; large student loans will keep many on the lower rungs.

Contents

  1. “Student Debt: Onerous, and a Drag”
  2. About the Liscio Report
  3. More about student loans
  4. For More Information

(1)  “Student Debt: Onerous, and a Drag”

From The Liscio Report, 20 May 2012.
Reposted here with their generous permission.

Introduction

We have heard from a number of sources that researchers at the New York Federal Reserve Bank are worried that without some form of mortgage debt relief we may face a crisis in a couple of years that eclipses the one that took place in 2008. In line with such worries, the New York Fed has started collecting previously unavailable data on student debt, a form of indebtedness that’s a major burden on the young, and also more of a macroeconomic drag than many analysts realize. Here are some details on all that.

Runaway Inflation

The rise in college tuition has been relentless, far outpacing the famous rise in the cost of health care (see graph, below). Since 1980, the overall CPI is up 194%. Its medical care component is up 436%, more than twice as much. But its college tuition component is up 829%, more than four times as much.

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Liscio Report, 20 May 2012

It’s hard to put a finger on just what drives educational inflation. No particular category of spending is rising out of line with the averages, though contacts at a number of institutions point to a great fondness for building fancy new buildings, many of them financed with bonds secured by supposedly ever-rising student tuition and fees. This is how NYU, with its relatively small endowment, is financing its grand expansion plans in lower Manhattan. Faculties of both the business school and economics department have filed objections, citing a fearsome growth in leverage. Similar things are going on in public systems, like the University of California’s, despite continued reduction in state financing.

Instructional budgets have remained at a stable 33% of spending for the last decade, even as student/teacher ratios have fallen. The reason that those ratios could fall while the instructional share of budgets has been stable is that universities have squeezed on labor costs. To start with, the composition of faculties has changed markedly — from nearly 80% full-time in 1970 to about 50% today. Over the last decade, student enrollment is up 38%; full-time faculty is up 23%, and part-time is up 63%. But the full-time faculty haven’t been raking it in. Tuition and fees have risen 82% faster than the salaries of full-time faculty since the early 1990s at private institutions, and 149% faster at public ones.

Burdens Shifting to Individuals

At the same time costs have been rising, state governments have cut back their support of public universities and colleges. Some major state universities now get less than 10% of their income from state budgets. As the graph below shows, the personal share of higher ed spending surpassed the state and local share about ten years ago, and the two lines continue to get farther apart. (This data, drawn from the national income accounts, stops in 2010. Given budget cutbacks since then, the gap has undoubtedly gotten wider.) The feds have kicked up their share, but nowhere near enough to offset the decline in the state and local share.

Liscio Report, 20 May 2012

Of course, because of aid, not everyone pays the full published prices. According to the College Board, net costs of public institutions in 2008 were around 44% of household income for the poorest quartile of the population, 26% for the next-poorest, 19% for the second-richest, and 10% for the best off. That’s a lot of money. And more of the aid, at least until very recently, has been coming in the form of loans rather than grants. In the 1970s, loans were 21% of aid; lately, the share has been 47%. Pell Grants, the major federal program, covered 45% of the average public university tuition bill in 1990; in 2011, it covered 32%.

The Great Recession had a major effect on college choice and financing. According to a Sallie Mae – Ipsos Public Affairs survey, college costs—actually paid, not sticker prices — came down in the 2010–2011 school year, especially for higher-income families. (It rose for the poorest quartile, though.) Students traded down, looking for cheaper options (many — at all income levels — shifted from four-year public to two-year public institutions), and grants and scholarships increased (led by increases in Pell Grants from the federal government).

More middle-income families applied for financial aid — the product, no doubt, of the recession’s lingering hit to income and balance sheets. Middle- and high-income families increased their use of grants and scholarships, with both dollar levels and shares of costs paid rising over the last couple of years. More middle-income families are applying for aid, and they’re still plenty worried about rising costs.

Our new national emblem

But a lot of college funds have to be borrowed. According to Sallie Mae/Ipsos, poor families paid 25% of expenses with borrowed funds in the 2010–2011 year. The share declines as you go up the ladder, but not as much as you might think: 22% for the middle ranks, and 17% for the best off. And the trend is towards increasing reliance on loans. In 1992, 32% of undergrads borrowed; in 2007, 53% did.

Heavy Debt Loads

The result has been a relentless increase in education debt. (See graph, below, for a yearly flow picture.) We don’t know exactly how much it’s risen, since there are no official sources of the stock of loans outstanding. A private researcher, Mark Kantrowitz, proprietor of a website called finaid.org, estimates that total student debt has risen from about $200 billion in 2000 to $1 trillion today, but he’s stingy about disclosing his sources and techniques. While the trajectory is probably more or less right, we don’t know for sure.

Liscio Report, 20 May 2012

More recently, the New York Fed, using data gathered from the credit rating agency Equifax, has been publishing estimates of student debt, which are the closest to definitive we now have. The numbers are staggering. They estimate that as of the third quarter of 2011, total student debt was about $870 billion — more than credit card balances ($693 billion) and auto loans ($730 billion).

Just over 15% of adults have student debt balances. The mean balance is $23,300 — but that is pulled up, as most debt aggregates are, but a minority who are deep in debt. The median is only about half the mean: $12,800. A quarter owe more than $28,000, and 10% owe more than 54%.

Although almost all age groups owe student debt, the profile skews young: 40% of people in their 20s are on the hook, compared with just 7% of those over 40. But the numbers don’t go to 0 with age: 5% of over-60s owe student debt.

And since the young have relatively low incomes — on which more in a moment — there’s a lot of distress among the indebted. On the surface, about 10% of those with student debts are in arrears, roughly in line with credit card debt. But since many borrowers are still in school or just out, they’re not yet expected to begin servicing their debts. Adjusting for that, the New York Fed estimates that more than a quarter — 27% — of borrowers have past-due balances.

That level of distress, combined with a still-lousy job market, means that today’s young are having a hard time getting on their feet. A just-released survey of recent grads by the Heldrich Center for Workforce Development at Rutgers shows unrelated to their fields of study, and having a hard time making ends meet. Median student debt of recent grads is $20,000 — higher than the New York Fed’s figure, no doubt because of the increasing prominence of debt finance.

And it’s pinching their spending sharply: 40% have delayed the purchase of a house or car, 28% have put off additional education, 27% have moved back in with their parents, and 14% have delayed marriage.

And they have generally gloomy views of their future — personally and especially for their generation as a whole.

A Nonflattering Profile

One of the more established facts in economics is that people’s incomes tend to rise with age to a peak around their early 50s, then decline into retirement and beyond. As with many established facts, recent economic history is challenging this pattern.

Graphed below is average household income in constant dollars by age of household head. In 2010, households headed by someone aged 15–24 had an income of $28,322, 15% less than their counterparts in 1970. All other age groups were better off than their predecessors 40 years earlier, though in general, the younger the cohort, the lesser the advantage. The 65+ set, though, was almost 80% better off than their 1970s counterparts. Today’s young are about 20% worse off than those of 2000. Most other groups are 10–15% worse off than their counterparts at the century’s turn.

Liscio Report, 20 May 2012

That’s not to say that older households are doing swimmingly. In fact, the 35–44s and 45–54s are also worse off than their 1990s ancestors. And economic progress over time is looking to have stalled for the middle ranks. While the 25–34 set in 2010 had incomes 42% above the 15–24 group ten years earlier (presumably, that is, mostly the same people), the 45–54 group was 8% worse off than that cohort was when they were 35–44, and the 55–64 group was worse off.

Only the elderly have been exempt from this stagnation/downward mobility. They’re the only group whose incomes have risen consistently. But before one concludes that they’re rolling in it, the average income of this cohort was $31,408 in 2010, 36% below the national average.

Amid shifting trends and uncertainty, one thing doesn’t change: our young adults are our country’s future. It’s a good thing the NY Fed is paying attention to the burdens are best hopes are carrying.

Philippa

(2) About the Liscio Report

— From their About page:

Here at The Liscio Report we do all our own research and writing, do not manage other people’s money or receive any form of commission, and are beholden to no one but our subscribers and ourselves. We bring fresh perspectives to the data we analyze and are confident taking positions contrary to consensus when our proprietary data tells us to do so.

Our insights are regularly picked up in Barron’s, CNBC, and other publications. Additionally, we make occasional television appearances (most recently on CNBC and Bill Moyers), and were ranked by MSN Money in the top five of their annual “Best of the Best” Awards.

Doug

John Liscio founded the Report in 1992. Philippa Dunne and Douglas Henwood were John Liscio’s closest associates and, since John’s untimely death in 2000, are honored to be carrying on the research techniques he pioneered.

Other notes at Liscio Report’s blog:

(3)  About student laons

(a)  Student Loan Debt History, Federal Reserve Bank of New York

Student loan debt is the only form of consumer debt that has grown since the peak of consumer debt in 2008. Balances of student loans have eclipsed both auto loans and credit cards, making student loan debt the largest form of consumer debt outside of mortgages.  Student loan borrowing and delinquency rates vary among age groups and over time. These interactive charts provides information by age group.

(b) Grading Student Loans“, Federal Reserve Bank of New York, 5 March 2012 — “To inform the public and policymakers, we devote this post to some new findings obtained from the FRBNY Consumer Credit Panel, a unique and nationally representative data set sourced from Equifax credit reports.”

(4)  For more information

(a) About the problems of American higher education:

  1. College education in America, another broken business model, 3 July 2009
  2. The secret about our universities (seldom even whispered among Professors), 5 July 2009
  3. Women dominating the ranks of college graduates – What’s the effect on America?, 7 July 2009
  4. A better answer to “why women outperform men in college?”, 8 July 2009
  5. Is a college education worth a million dollars?, 10 July 2009
  6. What should a student learn from college? Why go to college?, 1 November 2009
  7. News You Can Use to understand the New America, 14 March 2012

(b) Posts about inequality and social mobility: once our strengths, now our weaknesses:

  1. A sad picture of America, but important for us to understand, 3 November 2008 — Our low social mobility.
  2. America’s elites reluctantly impose a client-patron system, 5 November 2008
  3. Inequality in the USA, 7 January 2009
  4. A great, brief analysis of problem with America’s society – a model to follow when looking at other problems, 4 June 2009
  5. The latest figures on income inequality in the USA, 9 October 2009
  6. Graph of the decade, a hidden fracture in the American political regime, 7 March 2010
  7. America, the land of limited opportunity. We must open our eyes to the truth., 31 March 2010
  8. Modern America seen in pictures. Graphs, not photos. Facts, not impressions., 13 June 2010
  9. A pity party for America’s rich and powerful, 8 September 2010
  10. Why Americans should love Tolkien’s Lord of the Rings – we live there, 13 December 2011
  11. News You Can Use to understand the New America, 14 March 2012 — Articles about rising inequality
  12. The new American economy: concentrating business power to suit an unequal society, 27 April 2012
  13. Jared Bernstein examines the economic impact of raising taxes on high-income households, 30 April 2012
  14. Should we despair, giving up on America?, 5 May 2012

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37 Comments leave one →
  1. 15 November 2012 2:13 pm

    Just this week in the UK they have found that raising university fees has been a major factor in inflation rising. There is a good article on it on The Guardian website, “University tuition fee increase sends inflation back up again”, available here: “University tuition fee increase sends inflation back up again“, The Guardian, 13 November 2012 — “Spiralling university tuition fees and dearer food bills helped send Britain’s annual inflation rate sharply higher last month”

    Like

  2. Sam permalink
    15 November 2012 5:16 pm

    Simple solution that will never happen: forgive the debt–jubilee. If it’s owed to the US gov’t, just write it off; the federal gov’t is not financed the way a household is financed. This frees young people to earn, save, and invest within the productive economy. If it is private debt, give students a tax credit equal to the yearly amount owed on the principal of the debt. As for the interest on the amount owed, the gov’t should tell the banks to shove it. The interest charges to students are unconscionable. The banks are getting all but free money and then screwing young people — and this in a depressed economy.

    Like

  3. david j michel jr permalink
    15 November 2012 7:56 pm

    hope and change,pull some more money off the Obama money tree! can you say bail out.

    Like

    • 15 November 2012 8:07 pm

      Michel jr,

      “can you say bail out”

      Can you explain that?

      The bailouts of the financial sector started with Bush in 2008, reached massive scale in Q4 of 2008, and continued on a far smaller scale after Obama took office on 20 January 2009.

      Like

  4. david j michel jr permalink
    15 November 2012 8:00 pm

    in ca. jerry brown conned us with prop 30,it passed to fund education.then we find out it will go to pay existing bad stock market investments made by the university.

    Like

    • 15 November 2012 8:20 pm

      Michel jr,

      “prop 30 … go to pay existing bad stock market investments made by the university”

      That’s based on an article in the Wall Street Journal on 22 April 2012, “California’s Pension Tax”. Like so much in the that once-great newspaper since Murdoch bought it, the claim is bogus. The article does not even *attempt* to support it, a tactic typical of propaganda. Make the big claim, then talk about something else. The marks reading it will assume the claim is true.

      The article says that the State Teacher’s Retirement System is underfunded — which reflects mostly the failure of the State to make contributions adequate to its pension promises (which are compensation, and legally binding).

      The article makes no attempt to show that there were “bad stock market investments”. Returns might have fallen below those forecast, but that’s life. These plans require forecasts, and everybody involved in running them knows that forecasts about the future are uncertain.

      Like

    • 15 November 2012 8:23 pm

      To readers:

      I’ve made hundreds of comments debunking straigthforwardly bogus claims like Michel Jr’s (made by those on the left and right, but mostly on the right). Never has anyone on the Right responded with anything but bluster — or just silence. Or bluster, then silence.

      I’m confident in all cases that their confidence in these bogus factoids remains unshaken.

      Has anyone ever seen any other response in “print” (ie, not verbal discussions)?

      Like

    • 16 November 2012 2:03 pm

      Hi Fabius, I think in a lot of cases they don’t really believe the “facts” they quote. It’s rare you can engage someone spouting bogus facts for long enough to see what they really think.

      Some people if they have an agenda, whether naked self-interest or a moral agenda, believe that lies in the service of the agenda are acceptable. Occasionally, if you can get into a good debate with the factoid spouter, you’ll find out:

      1. They don’t really believe the propaganda they are spouting.
      2. Their real agenda.

      Usually during such debates they abandon their first set of facts when they are proven false, but have another whole set of talking points they can shift to (sometimes they’ll shift back to the original fake facts after enough time has gone by.)

      They believe their real agenda is so important, that spreading black propaganda to support it is acceptable. The reason why they don’t try to persuade with their actual agenda is often because it would be unpalatable (or even morally repulsive) to their audience. This quote by Lee Atwater is a very good example:

      You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can’t say “nigger” — that hurts you. Backfires. So you say stuff like forced busing, states’ rights and all that stuff. You’re getting so abstract now [that] you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites. And subconsciously maybe that is part of it. I’m not saying that. But I’m saying that if it is getting that abstract, and that coded, that we are doing away with the racial problem one way or the other. You follow me — because obviously sitting around saying, “We want to cut this,” is much more abstract than even the busing thing, and a hell of a lot more abstract than “Nigger, nigger.”

      — Interview with Alexander P. Lamis (8 July 1981), as quoted in The Two-Party South (1984)‎ by Alexander P. Lamis; originally published as an interview with an anonymous insider, Atwater was not revealed to be the person interviewed until the 1990 edition.

      Like

    • 16 November 2012 2:53 pm

      PWS,

      Thanks for the comment, on a subject that’s long baffled me — and I believe that somehow is deeply related to the problems affecting America. I’ve raised this many times, and your is one of the few reponses. And one of the best responses. A few replies, based on my hundreds of rounds of debates with these people (both left and right).

      (1) “Usually during such debates they abandon their first set of facts when they are proven false, but have another whole set of talking points they can shift to (sometimes they’ll shift back to the original fake facts after enough time has gone by.)”

      Exactly me experience! After many rounds of false fact – rebuttal, they’ll return to their first false fact. Usually only those on the Right have sufficient tenacity to continue to this point. It’s important, as it reveal the entire debate was a waste of time. It’s like debating theology with someone handing out religious tracts on a street corner.

      (2) “They believe their real agenda is so important, that spreading black propaganda to support it is acceptable.”

      Agreed. There are many quotes, often quite famous, by leaders (left and right) explaining this. In the climate change debates they’re quite frank about this.

      (3) “I think in a lot of cases they don’t really believe the “facts” they quote.”

      We can only guess about this, but my impression is that they almost always do believe. They are, to use Eric Hoffer’s phrase, True Believers. I hear the voice of sincere true believers when reading the comments about wonderfulness of torture, right-wing economics, and anthropogenic climate change.

      Like

  5. Thomas More permalink
    16 November 2012 3:03 am

    FM’s article on student illuminates a hugely important problem, and just one of the many looming bubbles threatening the U.S. economy (and our society). If you take a look at the chart of college tuition increase over the last 30 years, it’s absolutely jaw-dropping. The rate at which tuition has increased over the past 30 years far outpaces the rate at which house prices increased during the real estate bubble from the 1960s-late 2000s.

    As Herb Stein remarked, “Trends which are unsustainable tend to end,” and this is certainly true of college tuition in America today. This trend is particularly poisonous since it poisons the very basis of American entrepreneurship — the ability of students fresh out of college to start a new business. Not an option if you emerge from college owing several hundred thousands in senior debt, which current draconian laws allow creditors even to garnish your unemployment or welfare payments to recoup (!) The 1998 change in bankruptcy laws which in effect makes it impossible for students to eliminate their tuition debt through bankruptcy is a stunning and hugely underrated cause of current financial turmoil.

    Even more alarming: college tuition is just one of at least five bubbles in America, each one bigger and more unsustainable than the housing bubble of the 2000s.

    We’ve got the college tuition bubble, the medical cost bubble (the problem here is that the underlying cost of American health continues to skyrocket at an unsustainable rate — and Obama’s non-reform ACA does nothing about this problem, because the ACA contains no cost controls), the military bubble with limitless ongoing increases in the U.S. national security budget (last year Obama submitted a budget which froze all domestic spending except for the military, which got an 8% bump), the police-prison bubble with states continuing to go on a wild spending spree building vast new prisons and paying to incarcerate non-violent felons well into their 70s, and the surveillance bubble (the NSA is building a vast new data center in Nevada just to house all the millions of hard drives on which every American’s emails and phone calls and text messages and bank records will be archived, even as NSA whistleblower William Binney claims that the NSA “already has a dossier on nearly every American citizen” — and we’re already seeing the unintended consequences of this crazy out-of-control Orwellian surveillance state in the implosion of Gen. David Petraeus’ career as a result of national security snooping into his gmail account).

    The DHS headquarters is larger than the Pentagon — itself already the biggest office building in the world. America is pissing away its patrimony on these crazy bubbles, bankrupting itself in the process…and when these bubbles burst, boy howdy! There’s going to be a financial upheaval the likes of which you can’t imagine.

    And yet, bizarrely, the recent presidential campaign mentioned essentially none of these bubbles. Not one.

    Like

    • 16 November 2012 3:20 am

      Just a reminder, it’s a common usage — but still not useful or technically accurate to call everything with increasing prices a “bubble”.

      But these trends, such as health care and college costs, have bubble-like characteristics. And, as More, says, these trends are not sustainable. Health care expenditures will crash when we can no longer afford our mad system, and we revert to one of the far cheaper and equally effective systems used by our peers.

      The crash in higher education has already started as technology finally hits the largely medieval college system (lectures were used because books were too expensive for everybody to have). The result will be massive unemployment among PhDs. It’s part of the robot revolution now in motion.

      Like

  6. Leper permalink
    16 November 2012 4:07 am

    The tuition increases aren’t buying anything of value either, instead they’re padding the paychecks of the bureaucrats. Money can’t be found for hiring additional faculty staff, but there’s plenty to spend on marketing and (mis)management.

    Like

  7. gaiasrequite permalink
    16 November 2012 4:17 am

    The rising cost of university level education is a sad and will have irreversible effects on future generations. We exist in a period of time when, more then ever, a college degree of some form is necessary to be competitive in America’s job market. Yet, unless you did the research necessary prior to choosing a degree, a job is not guaranteed. We have thousands of “college” educated citizens with out jobs, living with mom and dad, left paying loans by way of minimum wage jobs IF they were fortunate enough to find one. That said we have the even more dire situation of the hundreds of thousands of unskilled, uneducated, unemployed for whom the jobs are few and far between.

    We have reached a point in our society when people must begin to realize that education is the most powerful weapon, and that without it we are all sitting ducks. I am utterly embarrassed when I look art the national statistics of standardized testing, to see where we, the most powerful nation on the planet, is placed.

    If we, as a people do not begin to address the issues of poor education in this country, we WILL continue to see it slip further and further away until it becomes but a whispered memory of some past we wish we could return.

    By taking from the “common folk” their ability to use their brains efficiently and effectively, those who seek to see a return to the time of King George, where they will be the new nobility, have won their ultimate goal. Keep them stupid and they can’t fight back because they won’t know how.

    I am at a loss to begin to know how to fix this issue. But, I do believe it is one of our greatest challenges and the most important. If you or your children can not think, we can not effectively exist in a democracy!

    Like

    • 16 November 2012 2:41 pm

      “Yet, unless you did the research necessary prior to choosing a degree, a job is not guaranteed.”

      Even if you did a great deal of research into your chosen field, you still aren’t guaranteed of a job. Having a bubble based economy means that this year’s hot career option is next year’s unemployable. Oh, and the malinvestment caused by bubbles means that other jobs, that might be more sustainable, will be unfunded.

      Another problem is that the people who pay other people basically don’t want to pay them anything. That’s across the board too. If you can’t demand decent pay because you have a rare skill-set that most people, in a global market, aren’t capable of acquiring… learn to enjoy the taste of Ramen Noodles.

      Oh and by definition, having a rare skill-set means that most people can’t get decent jobs, those who do represent the lucky few.

      Like

    • 16 November 2012 2:56 pm

      PWS is correct. That’s vital to understand.

      Joke about in the 1970’s after end of Apollo and the SST projects: “What do you call an aerospace engineer? ‘Waiter!””

      Joke in the late 1980s after collapse of the oil boom: “What do you call a petroluem engineer? ‘Waiter!'”

      Like

    • Rosycurler permalink
      16 November 2012 2:59 pm

      gaiasrequite

      “….If you or your children cannot think, we cannot effectively exist in a democracy!” April 2012: CDC report for 2008: 1 in 88 children are now being diagnosed with autism. You might be interested in the vaccine injury cover-up. The US Vaccine Court secretively has been compensating vaccine-induced autism, calling it encephalopathy rather than autism.

      “Are you tired of Federal officials covering up autism issues? Would you like to do something about it? Let’s get a date scheduled for the autism hearing!
      SafeMinds website

      Response to “Anti-Vaccine Proponents Claim Court Paid for Autism Cases”, Letter from Robert Krakow to Robert Lowes regarding Medscape article

      “Using word play to avoid the unpleasant association between vaccine injury and “autism” is not helpful to our children and evidences an institutional mendacity that ill-serves our nation’s children.”

      An immunologist speaks Interview with PhD Immunologist, Dr Tetyana Obukhanych (link)

      Please do not sit idle for the legal removal of all philosophical and religious vaccine exemptions in the United States of America.

      Like

    • 16 November 2012 3:14 pm

      I let this comment stay. But it is grossly off-topic. NO further discussion of vaccines, please.

      Like

    • gaiasrequite permalink
      16 November 2012 4:19 pm

      I both agree and disagree with FM and pws. If you received a degree prior to the recession there is a chance that the jobs for that particular field have gone out the door. If you are working toward or received a degree in the last few years a little research into the job market will make your finding job placement easier. For example, someone who received a degree in women’s studies two decades ago, would have found good employment because we were in an economy where many businesses looked for the four year degree but didn’t necessarily need it to be specialized. However in today’s economy the same does not hold true. So I agree that a degree will not guarantee a good paying job, but there are some degrees now that will guarantee you don’t get a job.

      My above statement was more to point out that when we remove the assuredness of good employment by way of college education, we will see college enrollment numbers drop. When that happens colleges will increase tuition fees to make up for the lost income; which will limit others from enrolling who may have with the lower tuition. Through this we begin the process of dumbing down society, and it is my argument that we cannot efficiently have democracy if our population continues to go down the road of ignorance.

      On a side note to Rosycurler; there is a large debate about autism which questions the newly defined parameters of that disorder. It is similar to the ADHD debate in that, in today’s medical field there are doctors who will make a diagnoses for increased revenue regardless of validity of their diagnoses. We are the most heavily medicated and diagnosed of the industrialized nations. My point here being don’t believe every thing you read. A child who displays inverted characteristic traits is as likely to be diagnosed with autism as a child who actually has the disorder. This is more likely a explanation for the percentile increase then the data you provided.

      Like

    • 16 November 2012 8:50 pm

      “I both agree and disagree with FM”

      Since my comment was of *facts* about past boom-bust cycles, I would hope it was more of the former than the latter.

      Like

    • guest permalink
      16 November 2012 4:45 pm

      “this year’s hot career option is next year’s unemployable.”

      There is a clear “impedance mismatch” between the cycles of education and business. Whether one goes for a university education or an apprenticeship, the years spent in preparing oneself for the entry in the job market fundamentally commit a person to 40 years in the same domain, or in fairly closely related domains (a physician does not become a mechanical engineer or an agronomist mid-career, a car mechanic does not become a watchmaker or a tailor mid-career).

      On the other hand, business cycles, technological fads, and even the longest-range planning by a corporation may swerve the demand for skills in completely different directions on a much shorter term — sometimes even shorter than the length of studies themselves.

      The predominant thinking is that education is a market, where supply reacts to shifts in demand — but this is a warped view that does not take into account the considerable lead time and hysteresis of acquiring a reasonably complete skill set (long-term technological and economical changes, Kondratieff-like, are unavoidable, but they are of the same order of periodicity as the complete work career of an individual).

      The inflation affecting tuition fees (on the grounds that a superior education is an investment that will anyway pay itself off in the job market) and masters programs (see the abundance of short-lived specialized masters programs to cater for the latest fad) are typical of this short-termist “market” fixation. The result is an incredible waste of human skills and know-how. It will not end well.

      Like

    • sglover permalink
      16 November 2012 6:08 pm

      You could argue that these economic uncertainties make something like the old liberal arts curriculum (albeit one reinforced with a hefty dose of quantitative reasoning) more useful than is generally credited. But whether even that is worth $50k-$100k is debatable.

      A tangent:

      “see the abundance of short-lived specialized masters programs to cater for the latest fad”

      Here in the DC area, you can’t miss ads for hokey “graduate” programs in “National Security Studies” or “Cyber terrorism” or similar horseshit du jour. All of it designed to let the GS-14’s add the line to the resume’ that gets them a millimeter closer to GS-15.

      Like

    • gaiasrequite permalink
      16 November 2012 6:22 pm

      I don’t think it can be argued that the economy is poor and therefore so too is the job market. Here is an article on the subject of college degree vs. no college degree.

      http://newsfeed.time.com/2012/08/16/one-more-time-yes-college-is-worth-it/

      Like

    • gaiasrequite permalink
      17 November 2012 4:34 am

      FM speaks:

      “Since my comment was of *facts* about past boom-bust cycles, I would hope it was more of the former than the latter.”

      Now now Fabius, I am American after all; what use have I for facts.

      But yes, I believe the argument took a turn I did not intend because of poor wording choice in the original remark.

      Like

    • 17 November 2012 4:48 am

      Writing comments — even posts — is a process of making errors. Esp but not just spelling.

      Like

    • gaiasrequite permalink
      17 November 2012 5:05 am

      Are you implying I cant spel? :)

      Like

    • 17 November 2012 5:41 am

      My apologies! I was saying I cannot spell well. Also, cannot proof well.

      Like

    • gaiasrequite permalink
      17 November 2012 5:36 pm

      No apologies, just a joke I am also a horrid speller and have on numerous occasions hit “post comment ” then realize I did not do spell check.

      Like

  8. 16 November 2012 8:05 am

    They Pledged Your Tuition – An Open Letter to UC Students“, from Bob Meister
    President, Council of UC Faculty Associations, and Professor of Political and Social Thought at UC Santa Cruz
    11 October 2009

    This letter came out here in Berkeley a few years back. I’ve read this a few times, and close as I can figure what has happened is that the UC Berkeley has pledged future tuition as a collateral for bond purchases for construction in order to lower their credit rating. The accounting for these schools is weird, and apparently not all money they receive is treated the same for the purposes of setting the credit rating.

    The first way to understand this shift is conceptual: you need to grasp the fact that the revenue a public university raises through tuition (unlike its funding from the state) can be used as collateral to borrow capital markets. This means that a public university deciding to privatize will value tuition dollars more highly than state dollars—partly because it can more easily financialize tuition, and partly because the process of becoming tuition-dependent allows it to simultaneously blame all budget cuts on the state, and the fact that it can’t raise tuition enough.

    …By pledging “General Revenues” as security for each UC revenue bond, the Regents are pledging everything that they can, including tuition. This means that when any source of General Revenue goes up—including student tuition and fees—UC’s ability to borrow on private capital markets goes up, and its dependency on state capital funding goes down, After 2004, any revenues produced by a bond-funded contract would be added to General Revenue (unless this were limited by that contract); but any such projects could also be subsidized by each other, or by revenues from sources such as tuition, student activities, grant “overhead,” endowment, etc.

    Just living here I see the results. Everyone’s wondering about the staff reductions while massive construction is everywhere. Of course part of this is a new football stadium. Just goes to show where the priorities are — and considering football has never been that successful at UC Berkeley. This isn’t a paying project. “Cal’s Football-Stadium Gamble
    Amid a Costly Renovation, the School Is Short of Its Funding Goal; Tapping Campus Funds?
    “, Wall Street Journal, 20 APril 2012.

    Cal always intended to borrow most of the $474 million needed to renovate the stadium and build the training facility, and the project’s total bonded debt will be $447 million. That’s apparently an unprecedented amount of borrowing for a college-sports project…</blockquote.

    Like

  9. Stefan permalink
    16 November 2012 3:35 pm

    As seen in other corporate institutions, management bloat and unwarranted executive compensation are parts of the puzzle: “Bureaucrats Paid $250,000 Feed Outcry Over College Costs“, Bloomberg, 13 November 2012.

    Like

    • 16 November 2012 3:57 pm

      Stefan reminds us that the rising cost of college is not due to rising costs of education. It’s mostly admin bloat, increased pay to non-teaching professors, better facilities (eg, prof and student quarters are far better than during the great post-WWII vet influx into colleges), and expansion of sports programs.

      Like

    • 16 November 2012 8:32 pm

      On thing to point out regarding non-teaching PhDs is that for many larger Universities the main focus is not their public-facing learning programs but their research and patent licensing activity. There aren’t many of the large private research organizations that we used to be so proud of so there are now a lot of public/private partnerships where research is done on behalf of industry in exchange for ongoing licensing revenue which could ultimately be worth billions.

      So a focus on undergraduates might miss a large part of what services Universities provide these days.

      Like

    • 16 November 2012 8:59 pm

      mtinberg mentions an important development in the US, the shift of R&D from tax-paying private-sector corporations (eg, the great, late Bell Labs) to tax-exempt, government-subsidized university research.

      The drug industry is a poster child for this, with much of the high-risk primary research done on the public dime — with little or no participation if there are eventual profits.

      This is the industrial version of the banks’ shifting risk from their balance-sheets to the public.

      These are examples of our economy evolving to a private-profit, public-financed, public-risk economy that fuels income and wealth for the 1%. These gains are well-hidden, allowing focus on the money spent on the “mochers”.

      Like

  10. epagbretonBreton permalink
    17 November 2012 3:39 am

    Ah the beauty of the PUBLIC-private Partnerships.
    Corporatocracy at its best; well-indoctrinated by the Beneficiaries to the seemingly unsuspecting public.

    This has been going on a long time and at full gallop now, that is all that is new.

    All the Admin and management people in these Institutions drink from the same chalice (they would have been selected out of the Institution early, if they did not).

    And w/out notice, almost everything has been “commodified”

    Notice how the discussion here and on Posts about a Liberal Education transcends education for its own sake into education for a “job”.
    Food stuffs are simply commodities.
    Cattle, pigs, chickens—husbandy? Nah, the Corporation settled that arcane idea a long time ago.
    Air Travel was once a luxurious experience w/ the exceptional attention to the customer by the providers thereof—-now it is merely a commodity sold to the consumer (with excess bag fees approaching 50% of the Ticket Price!)

    Life itself is a commodity.

    Drone Strikes are “bug splats” not the death of people and families with all the commensurate terrible dissolution and metaphysical pain expereinced by real human beings, personally and at the community level.

    What a long strange trip this one has been.

    Breton

    Like

  11. whirlwind21 permalink
    17 November 2012 2:53 pm

    To me it seems the days of college education being avaiable to nearly everyone is over. We are returning to the days where only rich people can go to college. This is coupeled with the fact that the US is hurtling its way to a third world country like Latin America/Africa where a tiny elite own nealry everything and the majority of people live in shacks.

    Like

    • 17 November 2012 3:58 pm

      “To me it seems the days of college education being avaiable to nearly everyone is over.”

      That’s probably 100% incorrect. The development of e-education will open college to almost everybody. Perhaps, in well-governed nations, to everybody — as the State runs an open-admission e-college system (as nations do today for grades 1 – 12).

      This will likely represent a tiering of education, as the current colleges return to their history — limited by cost to only the rich and those getting scholarships (athletic and academic). These (eg, Harvard) will probably remain more prestigious than e-college degrees.

      Like

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