While not perfect lenders make predictions on things like that all the time using established models. Student loans aren’t like that because they are (largely, not entirely obviously) Federally subsidized and are given out to students based on what their expected educational costs are and what their family income is. It’s basically an entitlement to credit as long as the results of your FAFSA justify you getting the loan (and I think some loans are available regardless.) That means there is no real credit analysis going on.
Higher education is as important as High School was in the 50s and 60s and the government needs to address this. However, our current approach is creating a massive subsidization of colleges and their tuition revenue at the expense of students and taxpayers. Students are saddled with increasingly high tuition that results in ever larger loan balances that suck ever greater portions of future earning out of their pocket. Students are getting more in debt almost entirely because of massively increasing tuition, the interest rate issue is a side show.
Taxpayers aren’t getting it much better, we’re now looking at a huge portfolio with over a trillion dollars in loans issued and serious chances that some significant percentage are never paid back at all.
This is only vaguely true and shows the problem with not fully understanding the cause and effect of complicated economic relationships. By far, without any doubt whatsoever, the colleges are the biggest beneficiaries of student loans because they subsidize demand and revenue and allow massive tuition hikes.
Many of these colleges are for-profit businesses that do a terrible disservice to their customers and provide them with degrees that provide poor employment prospects relative to the costs associated with acquiring the degree. But even the more prestigious colleges (which are almost all not operated as for-profit companies) have incentives to maximize revenues at the cost of the customer just like hospitals and other entities. University Presidents love big operating budgets, they love the fanciest buildings, the fanciest research facilities, the spiffiest equipment etc, and they get that by continually hiking tuition. [Not to mention university Presidents are paid very well, probably earning more than the average CEO of a like-sized enterprise in the U.S.]
Also, while it was already alluded to I should point out the Federal Reserve is a system operated as a public-private partnership between government and commercial banks and has lots of features built in to disallow very much direct governmental interference with its ordinary operations. The discount window rate of the Federal Reserve is the product of the Fed’s decision makers who are not really accountable to the government, and has no real association with what rate the Department of Education would choose to loan money. Given the fact the Department of Education actually is government controlled by the President with extensive legislative oversight and the Federal Reserve mostly is not directly controlled it doesn’t make any logical sense to associate their lending rates in any real way.
I don’t have a cite, but isn’t it possible that this statement is true only because the government loan program allows everyone in the world, and his brother to go to college, thereby making a college degree equivalent to a high school degree 50 years ago? If it wasn’t for the massive amounts of loans going toward college, maybe a high school education would be sufficient for most folks who aren’t white collar professionals?
No, I think it’s that the job market just doesn’t have good paying jobs for those without advanced skills. There are many factors that account for this: automation, outsourcing, and the insourcing of immigrant labor that is in direct competition with low skill American labor.
Whatever the causes, the work force of the present and future will require advanced skills.
Today student loan is very helpful for the student,which motivates the student to achieve his goal.It helps to those people who have low economic status who are not able to complete his target of life due to lack of money.So,that’s why it is the best oppournity for the student to complete his aim of life.
Absolutely. But the money isn’t created out of thin air. It comes from taxpayers, and it is a loan. The interest rate on the loan should reflect the risk of loaning to the student.
Or, we should expand Pell Grants and reduce spending elsewhere in the domestic budget.
The government CAN print money, but that’s not really how our government spends. Our government spends through taxation and through borrowing. The Fed does not print money and hand it to the government, although sometimes the Fed will buy bonds for a stimulus effect. But not because the government wants to spend money. Ben Bernanke has total authority to stop bond buying anytime he wants. And the government still has to pay back the Fed with interest.
What advanced skills are required for these middle class jobs that require a 4 year college degree? Did Women’s Studies and Civil Antiquities class give you any advanced skills for your job?
Again, I’m not talking about things that require a graduate degree, but ordinary jobs like salespeople and middle managers that seem to require college degrees today. How much of what they learned in college is applied to the job? Or to flip it around, how long would it take to teach a middle manager the basic skills to begin in his field? 4 years? I would say a month tops.
College, unfortunately, has become an institution that everyone needs to attend, but they haven’t changed the curriculum since the days when only the elite went.
Most middle managers need more education, not less. The spelling and grammar in the average corporate e-mail would make a middle school English teacher weep.
Fair enough, but that’s 9th grade English class, not college. Does is cost $40k (at least) to teach someone proper punctuation? (And I know that I probably made 34 grammatical and spelling errors in this one post )
The point is that we expect these people to go to college because they’re not learning the basics in presecondary schools. Doesn’t seem like most of them learn in college, either, so I dunno what the solution is.
I was reading a book about how the Japanese do it back when everyone feared the Japanese were going to own the US, and it mentioned the role of tech schools. Kids are identified as either tech school candidates or college candidates and tech schools recruit heavily among the students who are better suited for that route.
I said that workers need advanced skills, college isn’t the only place to get those, and many courses of study in college are useless for the job market. We’re putting more kids through college, but are we creating more graduates ready for the job market? I’m not so sure.
BTW, are there public tech schools, or only private tech schools? We might consider having more public tech schools. Given how colleges are teaching a lot of students who would be better for tech schools anyway, we could probably pay for it just by taking it out of the budget of state universities.
There are public tech schools, and many two-year colleges also have tech programs.
As an aside, an interesting thing happened in Georgia. In an effort to reduce the numbers of students who qualify for the HOPE scholarships (where they can get a full or almost full ride to post-secondary education), they increased the GPA needed. Turns out the institutions affected were not the flagship places, but the technical colleges, community colleges, and/or 2-year post-secondary institutions. Those reported a significant drop in enrollment. And I’m guessing others who enrolled had to take out loans that they wouldn’t have had to take, had the HOPE scholarship covered them.
Yes, as a matter of fact, they did. Not the subject matter, necessarily, but the critical thinking, writing, and general behave-like-a-professional-adult, motivate-yourself-to-do-the-work-and-get-help-when-you-need-it skills.
I absolutely agree that a four-year degree should not be a prerequisite for all office jobs, but please don’t make the mistake of thinking the subject matter is all that is taught in a college course. If the time were completely wasted, trust me, those courses would be eliminated.
The problem with that is that most parents don’t see their little geniuses as tech school material, and will insist that they go to college. With the risk analysis that I proposed, they could certainly do so on their own dime, but not on mine and yours.
Doesn’t any course give the same benefits you discuss in your first paragraph? For middle managers, have a six month course of study in management, marketing, and economics. Those classes will give them critical thinking and motivation skills.
And those worthless subjects will never be eliminated in a government type bureaucracy where nothing is ever eliminated. In fact, Women’s Studies is one of the mandatory requirements at many public universities. You will always have a very vocal minority stating that their particular course of study is essential, essential I tells ya, to the future education of youth in America. They will never be done away with.
Any course? Yes, pretty much. There is some benefit to conveying those skills in a way that is indirectly related (rather that directly related) to the future work environment. There is something to be said for doing this a few terms in a row, to build these skills. Each subject matter also conveys its own information, useful and interesting but not necessarily a prerequisite for a job. And if you would care to look at university catalogues over time, you will see that courses and courses of study are, in fact, occasionally eliminated. The university system is not a glorified job-skills centre, however, so sometimes they do keep things that aren’t directly useful to the marketplace, just for the sake of the pursuit of knowledge.
Heh. Good point. They need to keep the gravy train going. But it is a bubble, and when it pops its going to be disastrous for colleges. The time to push back against the idea of a bailout is now, because when this thing goes pop they’ll try to rush a bailout bill through within 24 hours.
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