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The student loan crisis will dwarf the housing market crash.

mikekarnj.com

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Re: The student loan crisis will dwarf the housing market crash.

#61

Post by sprout »

ahlatimer wrote: post #56
byrneseyeview wrote: post #33

Earlier quoted context omitted.

Whoa, there! What discount rate are you using? For the median degree, I get an NPV less cost of $47K. Here are my assumptions: * Discount rate of 6% (we're talking about an asset with a 40-year lifespan and zero terminal value). * $25K in annual school costs. * $25K in annual opportunity costs. (May be conservative for people who are college material but didn't get a degree.) * Four years to complete the degree. Whic…

I think you're overestimating the annual cost of school. I know it doesn't cost $25k/yr for me to go. I pay around $6k/yr for tuition, plus another $1k or so for books. According to College Board [1], that's about $1k less than the average for a student going to a public school, in-state. Your figure matches about what it costs to go to a private school, but, from my experience, public schools are also more likely to…

Yeah, no one whose parents make less than $100k/yr pays more than $20k/yr, even at the pricey private liberal arts schools.

Re: The student loan crisis will dwarf the housing market crash.

#62

Post by jacquesm »

Student loans are a rip-off. The market is set up in such a way that to get jobs you have to have a degree, and to get a degree you have to borrow a bunch of money so that you can pay your way through school if your parents aren't wealthy enough.

The end result is that you'll be beholden to a bank for a good sized portion of your life (as if having a mortgage or rent isn't enough to hold you down).

Smart societies have free education, and their schools may not be always as good as those that you pay for with half of your life or so but they're adequate enough.

The main reason why education should be free is because education not being free creates an inequality between people born rich and people born poor, the poor will end up getting their education but pay for that with a significant portion of their time later on, the rich don't care.

Re: The student loan crisis will dwarf the housing market crash.

#63

Post by aero142 »

sliverstorm wrote: post #46
ultrasaurus wrote: post #41

Earlier quoted context omitted.

It's a shame that there aren't more half-courses. Running both a course on filters and "a tiny course on the stuff about filters you need to you for other courses" (that could maybe be as little as a few optional classes + a test) shouldn't be beyond our organizational skills. Maybe what I want is more tests as pre-requisites rather than only full fledged courses (my alma mater had an English test that could be taken…

Tests as pre-reqs are pretty useless IMHO. I 'tested into' the second level of calculus before I had taken pre-calc, but I would not have been able to pass the class, not a chance.

That only proves that the test was poor, not the theory.

Re: The student loan crisis will dwarf the housing market crash.

#64

Post by sigstoat »

DenisM wrote: post #25
krschultz wrote: post #4

"3. College Loan Repayment Reform: If anyone files for bankruptcy, the student loan should go along with it." No, no, no, no. This penalizes the people who pay back their loans far too much. Who wouldn't just go into bankruptcy if they couldn't pay back the loan? Unlike other loans, the bank can't take your degree back. Interest rates will go up for everyone as it becomes a riskier loan. Suddenly people who had fully…

Well, maybe they should make it so that degree can be legally reposessed by the bank - even if they can't resell it, that would still be a deterrent. Stating that you have a degree while you don't should be then treated like criminal fraud, and any future employer, seeing lack of degree would know to inquire about the details. Now that I look at my plan, it looks rather evil. But I will publish it anyway, for the sak…

most employers don't go checking with your university, as it stands. i don't see why they'd be more interested in doing so under these circumstances. the piece of paper itself is rarely what matters; only what you learned getting it. and an employer that doesn't recognize that probably isn't worth working for.

Re: The student loan crisis will dwarf the housing market crash.

#65

Post by harry »

istari wrote: post #52
patio11 wrote: post #20

It isn't going to be as bad as the housing market crash, because degrees are revenue producing assets for the overwhelming majority of people and houses are costs for the overwhelming majority of people. Also, student loans do not have any mechanisms in them which are designed to induce payment shock, like ARM resets are. (I am only half sardonic there.) If your loan repayments are $700 a month when you graduate, the…

You didn't factor in the very high possibility of someone dropping out. Google "college dropout rates". Consensus figures seem to be around 40% of enrollees don't have a degree 6 years later.

60% graduation rate is about on par for open admissions schools. (http://www2.ku.edu/~oirp/profiles/current/9-601.pdf) Usual retention melt from fall to fall is around 20% dropouts after the first year. http://www2.ku.edu/~oirp/profiles/current/9-505.pdf

It's something the feds and various boards are really interested in.

Re: The student loan crisis will dwarf the housing market crash.

#66

Post by rbanffy »

nkassis wrote: post #22

One thing no one talks about, why do all degrees virtually cost the same in most universities. Why would a engineer pay the same as a liberal arts student. The reason I saying this is maybe the cost should be proportional to the expected earnings?

If we select tuition based on price, we will, collectively, drive prices downward - with a proportional decrease in quality (much like we do with airlines). There are lots of schools in this position. Prestigious ones have the luxury of setting their tuition as high as their target market will bear, because they are focusing on quality, not price.

Re: The student loan crisis will dwarf the housing market crash.

#67

Post by joe_the_user »

The frustrating thing about the article is that it never asks why the cost of four year education has been up faster than inflation for many, many years.

His answer to the problem is less education. That seems like a problem to me.

The reason we had affordable state school was that education was a good for society as a whole. America, as a whole benefits from having well-educated people.

The state schools we had were affordable for both the student and the states. Why is that no longer the case? The article misses this question entirely.

Re: The student loan crisis will dwarf the housing market crash.

#68

Post by rbanffy »

jbooth wrote: post #35
yummyfajitas wrote: post #24

Earlier quoted context omitted.

At NYU (where I used to work), a CS major requires 12 courses in CS and 32 courses total. The degree costs just short of $93,000. Do you really believe that a liberal arts education is worth $62,000 tuition + 2 years of lost wages (roughly another $140,000)? Particularly when, to borrow a phrase from Good Will Hunting, that liberal arts education is available to anyone for about $4.25 in late fees at the public libra…

Well, the CS education is available without the late fees, computer science is probably the easiest subject to learn from the internet. For one thing, NYU trades on their name as well as their education, that's a big chunk of the money you're talking about. But the more poignant question to me is whether you're getting less out of the liberal arts classes than you are out of the CS classes. I'm not sure that's clear,…

> computer science is probably the easiest subject to learn from the internet.

Only for some values of "computer science". There is a lot of very tough math involved and having a teacher will save you ages.

Re: The student loan crisis will dwarf the housing market crash.

#69

Post by kreek »

There's a huge difference between the housing crash and a potential student loan 'crash'.

A house is an asset. A unique asset at that, the only kind you can live in (other than your car). An underwater house, despite the term, becomes illiquid. You literally can not sell it. If you become unemployed you can not move to find work without walking away and trashing your credit.

A drop in house prices affects everyone. The student loan crisis affects very few and even fewer who make a meaningful contribution to the economy.

An underreported aspect of the housing crash was the end of the house as a magic ATM machine. People were spending vast amounts of HELOC money during the boom. Literally doubling their mortgages by pulling out cash against their house. With the crash that has stopped and the economy has ground to a halt.

What market would a student loan crash take down? Are people flipping degrees somewhere? If people feel a degree isn't worth it they'll go to a state school or transfer in from a community college. At worst schools will be forced to drop tuitions.

The post mentions student loan debts in the billions, subprime losses alone are in the trillions. That's the money out in the open. There's even more money off the books as banks don't have to report a loss until they sell REO property. There's a shadow inventory of foreclosed homes right now that matches the houses you'll find on the MLS.

The student loan crisis will in no way shape or form "dwarf" the housing market crash.

Re: The student loan crisis will dwarf the housing market crash.

#70

Post by yummyfajitas »

jbooth wrote: post #59
yummyfajitas wrote: post #48

Earlier quoted context omitted.

For one thing, NYU trades on their name as well as their education,... If college is just an exercise in signalling, why bother with classes at all? Why not just replace classes with final exams, give out the paper, host a few networking events and save billions of dollars?

Hey, you're the one who worked there :) Personally, I value large chunks of the education I got in college, and think the majority of it had some value. I dunno how that value compares to the cost, and I've never seriously considered graduate school of any kind because the (tuition + lost earning) changes a bunch once you have a job. I was mostly commenting that I thought a lot of the liberal arts education was just…

Hey, you're the one who worked there :)

What do you think made me so anti-college?

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