Absolutely. I just read an article that Class of 2013 grads are averaging 35k in debt. What do you think should be done to address the increase in cost of tuition? What’s causing it, in your opinion?
I feel like the recent college bubble will be the next to burst. Just like the housing and mortgage bubble, it burst because of inflated prices and people under qualified to pay. Do you feel in the next 5 to 10 years, there will be a College Bubble?
By Damien Christian
There is absolutely no doubt that the college loan bubble will burst in the near future. How near is highly connected to wall street, the FRB, and how much money the gov wants to pump into SallieMae (SLMA) before they realize that giving out free money is going to come back and bite them in the ass.
In the housing bubble banks gave everyone and their mother loans they were highly unqualified for. Oh you make $50k a year but want a loan to buy a $1 million house? Sure here’s money….and then the banks turned around and acted surprised when people couldn’t pay them back. It’s the exact same with SallieMae. We want to give everyone the chance to educate themselves, but the price of college has skyrocketed bc our society believes everyone needs a college education. I’m not saying that people should be denied their rights to an education, but the prices of universities will only continue to rise while the government supplies students with millions upon millions of dollars in free money to finance education.
I certainly have no idea how to solve the problem, but it’s something that needs to be addressed. The people who truly need the loans are the ones who may be the least likely to pay them back. Graduating with a bachelors almost guarantees at least $30k in debt, and then this newly minted college graduate enters into an economy where jobs are incredibly difficult to find, most of which prefer to hire those with experience, and you, as the indebted college grad have six months to find a job before the loan payments start coming in.
As a general rule of lending, the lender should have, in the absence of actual collateral , some realistic plan for repayment of the loan. This should also hold for studen loans unless we rename them “grants”.
At a minimum the college loan should be based on the expectation that the education being sought will educate the student in a discipline likely offer employment or opportunity that will generate income sufficient to live on and repay the loan.
The student should have a serious plan that analyzes how much can be profitably borrowed and repaid for the intended education.
There are many jobs for which too many people have been trained and therefore many will be unemployed in their chosen field and unable to repay the student loan.
Just like real estate lenders will not loan on developements where there are too many vacancies, lenders should reduce or eliminate loans to over populated professions.
This is not to say the courses and opportunities should be denied, just that financing should then require different criteria than for loans to disciplines where shortages exist and probabilities of repayment are more certain.
Colleges offer numerious courses which, while interesting,indeed noble, are not likely to result in very gainfull opportunites.
I suggest if the colleges had to have participation in the studen loans that they would be more circumspect in the lending reqiurements.
This would also cause students to take a much more realistic decision about the real value of college and to more fully examine the very real options.
I know a lot of extremely successful people without degrees.
Tuition even at instate public schools are rising. Add that to the doubling of Federal student loan interest rates and you have a recipe for disaster. The question is, what does this mean. Will it be like Mitt Romney said, that people should only receive the level of education they can afford? Will only the rich be able to attend college in the future, or will the community colleges rise up and become the accredited public institutions of tomorrow?
There are several sectors of college students these days.
One group is those who have family money to pay the tab.
That group is intact and there will be no stop to it.
The next group is those who receive scholarships and grants.
Many colleges have so much $$$ in their baskets for these
benefits, they are trying and encouraging lots of students to take
these benefits. This group is intact and there will be no stop to it.
The next group are students that come from the armed forces or from the
general workforce. Generally, this group is a little older than Group 1 & 2
above, have either benefits provided or have figured out how to manage the
costs. This group is intact and there will be no stop to it.
The last group is kinda the everyone else Group. These kids need to borrow
funds for all their expenses.This is the Group that is going to get killed UNLESS
they can get a decent job when they graduate. Will a job be available???
This is why I have stated that the ONLY WAY to get our economy going is to have all
the multinational US companies which have parked trillions of dollars overseas and have not paid a dime of income taxes to the US for that loop-hole, is for the US to give all these companies a one-time, 2-year AMNESTY program to bring the $$$$ back to the US on a tax-free basis so long as they agree to (1) spend 80% of these funds for capital development, research, growth and investment within the US within at least a 10-year period; and, (2) create new US jobs from the group of outsourced, non-US labor-related personnel which are independent contractors to these companies and a means of bringing back jobs to the US
What is really troubling is the cost of private schools for K-12 . When it costs $ 22,000/yr to attend Kindergarten at a private school, now we have a huge problem!
I agree with part of your thinking,however I feel strongly that Government specifying the use of capital is a certain formula for misplaced capital.
Capital needs to go where it is most productive. Period.
Also it must be said that if you get a degree in an oversupplied discipline you are not likely to get a good job. That needs to be thought about before deciding what to study. A rich person can study about collecting old string bits. So can a poor person but taxpayers shouldn’t have to bear the cost.
The law of supply and demand is pretty unforgiving.
Gary, the 80% rule to entice Companies to bring $$$ back to the US tax-free would not specify where in the US or how that capital has to be spent in the US. Each company could pick and chose its capital deployment as it pleases. It would merely require it to be spent in the US,
not kept in the bank, lent out to others or distributed to shareholders or bond holders. No different than1031-type rules, only much much simpler.
I agree that if someone decided to study subjects in college so that they could get a
job with a company which manufactures telecopiers , demand and supply would probably dictate that the kid is taking the wrong classes !
What do you think of having colleges carry a part of the outstanding college loan?
They might be more careful about the value of the courses they teach with a bit more incentive to be sure the student ends up with marketable skills?
Well, banks are being asked to carry back part of the loans they underwrite, so it is not an original concept.
Besides, at Costco you can get your money back,no questions asked if you are not satisfied.
Thats an even better solution.
Return a useless Diploma for a refund.
Where does the line form up?
I know, stupid answer, but seriously there are a lot of Diplomas that really have little value.
I agree, the Student chose the courses, and the responsibility should rest there. But thats not what happens.
The really stupid part is the taxpayers being on the hook.
Why should the taxpayer be liable to fund a relatively worthless education?
Soldiers earned their right to a Government student loan. Most don’t.
I’m just pointing out that unless there is some realistic plan for repayment,these loans are in reality, grants.
That may be fine,but call them what they are and see if the voters will support that instead of misrepresenting them as loans that have little or no probability of repayment, then acting shocked when there are defaults..
Personally as a college student, I think college is overpriced. I am a senior and when I started tuition was about $3500 now just four years later is $5000. It is ridiculous and over coarse our elect officials do nothing about it.
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