Student Loan Debts Are Unsustainable

[LowDown]

sounds like buyers remorse to me
bet you do not hear that complaint from those who were able to get good educations, good jobs and good incomes, only because the funds for an education were made possible
the data on that site is clear
those with skills provided by an education are more likely to be employed and more likely to earn a higher wage than those who did not

Regardless, the bubble bursts when prospective students no longer want to take on that debt load. The bubble is in the process of bursting, so if you have your wagon hitched to that you'd better watch out.

 

[justabubba]

Colleges have absolutely no incentives to cost control, because doing so would make them loose proportional government funds.

I don't understand why so many of my fellow college students are so pro-left on this issue. Perhaps they are too smug and naive to see that the left's policies is running up their student debt with many of them getting degrees that won't get them a job. Simply put, my generation is being riled up for slaughter by this college hoax.

or it could be that your fellow students recognize the opportunities that are available to them only because of their access to funds to go to school

 

[justabubba]

Regardless, the bubble bursts when prospective students no longer want to take on that debt load. The bubble is in the process of bursting, so if you have your wagon hitched to that you'd better watch out.

there is no bubble to burst
and no wagon to be hitched

 

[justabubba]

Yes, but some of it has to do with professor tenure and the clout of liberal art programs in colleges. Both of these provide huge resistance against cutting programs that aren't economically useful.

how does tenure and liberal art program clout preserve programs that are without economic benefit

 

[LowDown]

there is no bubble to burst
and no wagon to be hitched

Items to be de-funded by falling tuition revenues:

• High faculty salaries and excessive positions.
• Excessive administrative salaries and positions.
• Excessive physical plant and development costs.
• Unfunded departmental research.
• Among other things.

As demand falls tuitions will fall. More full courses will be offered online cutting the need for faculty, administration, and the physical plant. Institutions will compete for online students since there's no practical limit to how many a given institution can support, and they will compete in terms of offering full degrees and certifications.

It will be a snowball effect, and it's already in the process of happening. Consider the possibility of Harvard with 5 million students in each class, and, of course, little need for many other institutions.

 

[sangha]

Items to be de-funded by falling tuition revenues:

• High faculty salaries and excessive positions.
• Excessive administrative salaries and positions.
• Excessive physical plant and development costs.
• Unfunded departmental research.
• Among other things.

As demand falls tuitions will fall. More full courses will be offered online cutting the need for faculty, administration, and the physical plant. Institutions will compete for online students since there's no practical limit to how many a given institution can support, and they will compete in terms of offering full degrees and certifications.

It will be a snowball effect, and it's already in the process of happening. Consider the possibility of Harvard with 5 million students in each class, and, of course, little need for many other institutions.

That is not a "bubble"

 

[iguanaman]

wow.. okay.. let me get this straight.. it was foolish to correct a monthly inflation rate of 10%? That comment alone shows me how foolish you are and it's absolutely pointless for me to point out to you.. these facts.. Volker appointed by Carter hiked interest rates. :lol:

CPI-U uses a 1982-1984 baseline of 100. So 1982 CPI was 96.500, 2012 it was 229.594. So you get a graph something like this:

Yeah.. that's a 41% increase in prices from 1982.

The inflation was artifically created by the oil price jump. It would have corrected itself without the interest rate rise. Yes it was foolish and it made the situation worse.

 

[austrianecon]

The inflation was artifically created by the oil price jump. It would have corrected itself without the interest rate rise. Yes it was foolish and it made the situation worse.

But this is an assumption as we have spikes in Oil prices all the time. If the inflation stayed in the Oil market then I'd see your point. But once it passed to the whole market to the point basic items were inflating at 10% or more each month something had to be done or it would have been far worse as it was spiraling out of control.

 

[CriticalThought]

there is no bubble to burst
and no wagon to be hitched

There is clearly a bubble. Schools are paying outlandish amounts of money to expand in order to attract and accommodate students. That money is coming from higher and higher tuition rates. Those rates are paid by students who are taking government subsidized loans. Those students are taking on more and more debt as tuition rises with less and less prospect of getting a decent job when they get a degree.

At one point, the students will no longer see the benefit to going to school for the cost. The enrollment rates will drop which means that schools will lose tuition money. Without that money schools will no longer be able to expand. There will be a rapid contraction in the market, which in turn will cause many schools to close. The market will be flooded with highly educated people looking for new jobs. That will further decrease the job prospects and further deincentivize people from pursuing a higher education which will further drive down enrollment rates which means less tuition more schools closing and so forth.

That by definition is a bubble.

 

[sangha]

There is clearly a bubble. Schools are paying outlandish amounts of money to expand in order to attract and accommodate students. That money is coming from higher and higher tuition rates. Those rates are paid by students who are taking government subsidized loans. Those students are taking on more and more debt as tuition rises with less and less prospect of getting a decent job when they get a degree.

At one point, the students will no longer see the benefit to going to school for the cost. The enrollment rates will drop which means that schools will lose tuition money. Without that money schools will no longer be able to expand. There will be a rapid contraction in the market, which in turn will cause many schools to close. The market will be flooded with highly educated people looking for new jobs. That will further decrease the job prospects and further deincentivize people from pursuing a higher education which will further drive down enrollment rates which means less tuition more schools closing and so forth.

That by definition is a bubble.

No, that is not the definition of a bubble

 

[CriticalThought]

No, that is not the definition of a bubble

Well feel free to provide your definition but it doesn't change the calamitous situation we are approaching with student loan debt. We are going to reach a point where people simply can't pay their student loan debt because the jobs just won't be there and the situation will escalate. Playing semantic games of denial will not change that fact.

 

[sangha]

Well feel free to provide your definition but it doesn't change the calamitous situation we are approaching with student loan debt. We are going to reach a point where people simply can't pay their student loan debt because the jobs just won't be there and the situation will escalate. Playing semantic games of denial will not change that fact.

Bubble Definition | Investopedia

1. An economic cycle characterized by rapid expansion followed by a contraction.

2. A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs.

3. A theory that security prices rise above their true value and will continue to do so until prices go into freefall and the bubble bursts.

Certainly you can make an argument that the situation is not good without relying on hyperbole.

 

[CriticalThought]

Bubble Definition | Investopedia



Certainly you can make an argument that the situation is not good without relying on hyperbole.

Schools are rapidly growing as they spend outrageous sums of money and will rapidly contract as enrollments fall. I'm failing to see how your attempt to play semantic games is changing the facts.

 

[LowDown]

That is not a "bubble"

One type of bubble is when prices and supply are driven up by cheap credit. The bubble bursts when consumers as a whole decide that they don't want to take on debt to pay the inflated prices, and so there is an oversupply of whatever it is, in this case higher education. This results in a crash in which prices fall steeply and excess capacity is wound up, meaning that growth and employment in that sector falls.

This is what is in the process of happening in higher education. I mention online classes as one example of a way for educational institutions to get their costs down.

Economic bubble - Wikipedia, the free encyclopedia

 

[Rocketman]

When more than half of college graduates under 25 are unemployed or under-employed would you expect anything else? This is just more consequences of the Great Recession.
I wish the Right would stop using those consequences to further their agenda. They are the ones that caused it.

Everyone but the left wing knows the economy, weather, and life in general takes place in cycles. It is time to wake up from the this liberal dream we are in.

 

[iguanaman]

But this is an assumption as we have spikes in Oil prices all the time. If the inflation stayed in the Oil market then I'd see your point. But once it passed to the whole market to the point basic items were inflating at 10% or more each month something had to be done or it would have been far worse as it was spiraling out of control.

Again you are mistaken. What do you think would happen to prices if oil went to $400 a barrel tommorow? The price of oil effects every sector of the economy. Energy costs are a part of every product that is sold. Inflation is caused by too much money chasing too few goods. Is that what happened in the 1970's?

 

[iguanaman]

Everyone but the left wing knows the economy, weather, and life in general takes place in cycles. It is time to wake up from the this liberal dream we are in.

The Right is in constant denial of the fact that their policies are not good for real economic growth. They are good for creating bubbles and wealth maldistribution and nothing else. We have had enough of it and the jig is up.

 

[Neomalthusian]

The Right is in constant denial of the fact that their policies are not good for real economic growth. They are good for creating bubbles and wealth maldistribution and nothing else. We have had enough of it and the jig is up.

This statement is fundamentally inconsistent with LowDown's OP.

His first sentence in this thread nails it:

Freely available student loan money resulting in a rapid rise in tuition costs.

So he (a self-identified Libertarian-Right forum member) is the one who is trying to raise attention to the issue, and here you are suggesting people of his politician persuasion are creating the problem. You could not possibly be more wrong.

 

[iguanaman]

This statement is fundamentally inconsistent with LowDown's OP.

His first sentence in this thread nails it:



So he (a self-identified Libertarian-Right forum member) is the one who is trying to raise attention to the issue, and here you are suggesting people of his politician persuasion are creating the problem. You could not possibly be more wrong.

There are many reasons for the unaffordability of higher education but none more apparent than the wage stagnation of the middle class families who used to be able to afford College for their children. Yes, I blame the policies of the right for much of that. Then there is the decline of State and Federal help to colleges.

Two features of the economic landscape have had a big effect on affordability. The first is a sea change in budget priorities in the states. In 1975, states allocated roughly $10.50 to higher education for every $1,000 of per capita state income. Today the figure is around $6.00, despite a massive increase in the number of students seeking postsecondary education. This type of budgeting has resulted in tuition increases at public universities, which have negatively impacted the availability and quality of their academic programs. The effect on affordability is clear. In 1975, the states picked up 60% of the tab for a year in college while families shouldered 33%. The federal government picked up the remaining 7%. Today, the states pay only 34% while families bear 50% of the cost. The federal government’s share, through grants and tax credits, is currently 16%. Much of this surge in the federal government’s share is a temporary response to the 2008 financial crisis and recession. Over the last 30 years, the federal share has normally been in the 10% range.

Over the same span of years, the income distribution in the United States has changed dramatically. This is another major force for creating affordability problems in higher education. In the 1960s, an average person with a high school diploma could live a comfortable, middle-income lifestyle. That statement no longer holds true. As people who were once solidly middle class find themselves falling further down the distributional ladder, their children increasingly find a college education more difficult to finance.

Myths and Realities about Rising College Tuition - National Association of Student Financial Aid Administrators

 

[Neomalthusian]

There are many reasons for the unaffordability of higher education but none more apparent than the wage stagnation of the middle class families who used to be able to afford College for their children.

That does not make the least bit of sense. Complete non sequitur. The stagnation of middle class wages is not causing college costs to rise at double the pace of health care. That is the most ridiculous thing I've ever heard. The reason college costs are rising so astronomically is identified in LowDown's first sentence in his OP.

 

[austrianecon]

Again you are mistaken. What do you think would happen to prices if oil went to $400 a barrel tommorow? The price of oil effects every sector of the economy. Energy costs are a part of every product that is sold. Inflation is caused by too much money chasing too few goods. Is that what happened in the 1970's?

The "peak" prices during the 1970s and early 1980s are comparable to prices today.
http://seekingalpha.com/article/80487-what-can-possibly-explain-the-price-of-oil

To hold that position which you have; is to ignore the whole of the 2000s (including now) and the position that there was little inflation in the whole of the economy from the fiat currency supporters (i.e. Government and many on this forum). This mean there was no real estate bubble, no bond bubble or oil bubble or gold bubble. Except we know there was these things. So the difference between these two peak oil position was the raising of interest rates to combat inflation. Your argument that nothing should have been done by Volcker was the position of Alan Greenspan and Bernanke which allowed for a real estate bubble, bond bubble and oil bubble.

 

[imagep]

the short sightedness of folks who believe this crap is disappointing
look at this site and see the actual benefits of making sure our citizens have access to a higher education:
Education pays
8.3% unemployment for HS grads vs 4.5% for those with a 4 year degree
weekly pay $652 vs $1066
so, in an information age, those with better educations enjoy higher earnings and lower unemployment rates
and that is something you think the government should quit making possible
such a narrow, uninformed view

Taking this one step further, the extra monthly $1600 is plenty enough to pay for student loans as student loan payments are rarely over $400 a month. I just paid off my student loans in December, my college education was well worth the $33.10 a month I paid for 25 years.

 

[imagep]

There is clearly a bubble. Schools are paying outlandish amounts of money to expand in order to attract and accommodate students. That money is coming from higher and higher tuition rates. Those rates are paid by students who are taking government subsidized loans. Those students are taking on more and more debt as tuition rises with less and less prospect of getting a decent job when they get a degree.

At one point, the students will no longer see the benefit to going to school for the cost. The enrollment rates will drop which means that schools will lose tuition money. Without that money schools will no longer be able to expand. There will be a rapid contraction in the market, which in turn will cause many schools to close. The market will be flooded with highly educated people looking for new jobs. That will further decrease the job prospects and further deincentivize people from pursuing a higher education which will further drive down enrollment rates which means less tuition more schools closing and so forth.

That by definition is a bubble.

thats the definition of the free market system reaching a point of equalibrium.

 

[imagep]

Well feel free to provide your definition but it doesn't change the calamitous situation we are approaching with student loan debt. We are going to reach a point where people simply can't pay their student loan debt because the jobs just won't be there and the situation will escalate. Playing semantic games of denial will not change that fact.

If that is true, then we need to concentrate on creating more jobs, and higher paying jobs. Seems to me that college isn't the problem, it's the economy.

 

[imagep]

Schools are rapidly growing as they spend outrageous sums of money and will rapidly contract as enrollments fall. I'm failing to see how your attempt to play semantic games is changing the facts.

Since the begginning of the recession, college student enrollment has increased mostely due to a lack of jobs. It's only logical, and I have to argue that it's a good thing to have lots of people becoming educated.

If college enrolment starts to drop, then unemployment will only increase as we add substantially to the number of people seeking jobs. If colleges start reducing their spending, that will additionally add to the unemployment problem.

Are people better off sitting on the couch or getting an education?