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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.

#101

Post by blahblahblah »

chopsueyar wrote: post #97
blahblahblah wrote: post #87

Earlier quoted context omitted.

Choosing an arbitrary cutoff of 6 years and then assuming that everyone who didn't complete their degree within 6 years is a college dropout is not a particularly valid way to measure dropout rates. I completed my degree after the 6-year mark and I'm certainly not the only one to do so. These statistics erroneously include people like me in the dropout category. A more accurate method of measurement would be to track…

I have enjoyed your anecdote.

Well, I really enjoyed college and I wasn't in any hurry to graduate. I took a lot of classes that had absolutely nothing to do with computer science, had a lot of fun doing so, and I think I am a much more well-rounded human being for having taken that route. I had about 70 credit-hours more than what was actually required for my degree by the time I completed the last required class.

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

#102

Post by byrneseyeview »

Retric wrote: post #58
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 graduated in 3.5 years and school cost 17k/year. Also, opportunity costs is not 25K because you still have basic cost of living either way and you can work in the summer. So run those numbers assuming school costs of 15K, opportunity costs of 5k, 23K earnings differential, and student loan costs of 3.5% tax deductable. PS: A friend of mine worked his way through school making 7.50$ an hour as a cook at without stud…

Opportunity cost is what you give up. If you are capable of finishing school in four years, you're capable of averaging a $25K income over that time.

You're right about summer jobs, but the vast majority of summer jobs pay less than 1/4 of what you'd get working the full year (plus you have to do a job search for a three-month job, versus a job-search for a multi-year job). Outside of law school summer associates, I don't know of anyone for whom summer jobs routinely mean a raise.

I like your friend's story! But imagine if, after four years, he had credible evidence that he could work extremely hard, plus tens of thousands of dollars in savings. A good situation to be in if he wants to start a business.

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

#103

Post by byrneseyeview »

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…

Part of the cost is often borne by the government. For the purpose of identifying a bubble, you have to look at that cost, too--because the problem is too much aggregate investment in education, not that it's a bad deal for everyone.

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

#104

Post by istari »

blahblahblah wrote: post #87
istari wrote: post #52

Earlier quoted context omitted.

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.

Choosing an arbitrary cutoff of 6 years and then assuming that everyone who didn't complete their degree within 6 years is a college dropout is not a particularly valid way to measure dropout rates. I completed my degree after the 6-year mark and I'm certainly not the only one to do so. These statistics erroneously include people like me in the dropout category. A more accurate method of measurement would be to track…

You're backing it up with your own personal anecdote?

That's not valid.

If you found data that said, for example, 30% of college graduates took longer than 6 years to earn their undergraduate degrees, then I would agree with you.

If it's less than 10%, then the using 6 years as a cutoff would be a very good rule of thumb estimate.

Maybe the reason why the 6 year cutoff is so often used is because someone already crunched the numbers and found it was good enough?

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

#105

Post by blahblahblah »

istari wrote: post #104
blahblahblah wrote: post #87

Earlier quoted context omitted.

Choosing an arbitrary cutoff of 6 years and then assuming that everyone who didn't complete their degree within 6 years is a college dropout is not a particularly valid way to measure dropout rates. I completed my degree after the 6-year mark and I'm certainly not the only one to do so. These statistics erroneously include people like me in the dropout category. A more accurate method of measurement would be to track…

You're backing it up with your own personal anecdote? That's not valid. If you found data that said, for example, 30% of college graduates took longer than 6 years to earn their undergraduate degrees, then I would agree with you. If it's less than 10%, then the using 6 years as a cutoff would be a very good rule of thumb estimate. Maybe the reason why the 6 year cutoff is so often used is because someone already crun…

"You're backing it up with your own personal anecdote?"

No. I provided a counterexample that falsifies an implicit assumption of the 6-year cutoff model of the college dropout rate. If you measure your dropout rate as the percentage of students who have not graduated within 6 years of enrollment, it is provably true that your measurement is an overestimate of the true value.

"Maybe the reason why the 6 year cutoff is so often used is because someone already crunched the numbers and found it was good enough?"

If someone had already crunched the numbers, the appropriate correction factor to apply to the 6-year measurement would be well-known and, instead of reporting the 6-year cutoff value, a distribution-corrected 6-year cutoff value would have been reported instead. If nobody crunched the numbers to find out what the characteristics of the distribution's tail are, then the methodology is sloppy. If a correction factor was applied but not explicitly mentioned where the value is reported, then the reporting is sloppy. Either way, a reasonable person is justified in regarding the reported value as merely an upper bound on the dropout rate and rejecting the assertion that it is an accurate measurement of the true value.

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

#106

Post by dnsworks »

muhfuhkuh wrote: post #90
dnsworks wrote: post #88

Earlier quoted context omitted.

Forgive me, "I'm 50% less likely to be unemployed in a bad recession if I go $200k into debt for college". You have me sold, where do I sign up?

Definitely not at the college that puts you 200k in debt. Not everyone goes to Harvard.

One of my friends is finishing up her P.hD in entymology at Cal and she's somewhere around $175k in debt now with no expectation of ever making more than $50k/year in her field (if she can work in it at all). Another went to a private university for undergrad, then Temple for Med school, she's just now gone through Match and is around $225k in debt. She's chosen a career path that once through her residency (with a $40k/year salary expectation for 5 years through a triple-discipline program) should land her a comfortable $250k/year salary in the middle of nowhere. The $225k she'll have was a good investment, but my friend who likes beetles?She expects to pay 20-25% of her salary to pay it off for the rest of her life.

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

#107

Post by vannevar »

kreek wrote: post #69

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. T…

I'd go even further and say that a 'crash' in the higher education market would actually be good for the economy. Unlike lower home prices, lower tuition rates would have no significant direct impact on existing college graduates, and would permit more people to seek admission, increasing competition and therefore increasing the caliber of students enrolling. Bright people whose talents would be otherwise wasted working at Walmart will instead be able to contribute at a higher level to the economy.
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