College is a scam — so let’s make money off it (skyrocketing student-loan debt)

Market Watch ^ | 05/27/11 | James Altucher

[TigerLikesRooster]

College is a scam — so let’s make money off it

Commentary: Debt creates generation of indentured servants

By James Altucher

NEW YORK (MarketWatch) — We can’t deny it anymore: College is a scam and a bubble — and the reasons why appear below. But I’ll be the first to admit it’s going to take years for that bubble to burst. And while college tuitions are still skyrocketing and student-loan debt is creating a generation of indentured servants, we might as well benefit from it.

Many stocks will continue to go up from the multidecade college bubble, even as it eventually bursts.

The Washington Post Co. (NYSE:WPO) , which owns Stanley Kaplan, gets all of its earnings from the education side of its business, while Blackboard (NASDAQ:BBBB) is the firepower underneath online course management. Google (NASDAQ:GOOG) has all the knowledge in the world at your fingertips and also is trying to get into the online course management game. And Apple’s (NASDAQ:AAPL) increasing MacBook Air sales are due to colleges buying them for their labs. Then there’d probably be a basket of the cheaper online education schools like Apollo Group (NASDAQ:APOL) , etc.

Student-loan debt is now greater than credit-card debt for the first time ever. After the huge debt crisis we experienced in 2008 and the financial bust in housing that ruined so many lives, you would think we would be having more of a national discussion on this — but we just aren’t.

As a result, for the first time ever, we are graduating a generation of indentured servants rather than the entrepreneurs, innovators, artists and inventors that America is known for (I have no self-interest in this — I’m obviously not shorting colleges, as that’s impossible – I just hate seeing American go down the drain.)

[DIRTYSECRET]

College Degrees are like sex: It’s ONLY important when you don’t have it.

[BobL]

“Huh? I have three nephews in their early 20’s that are making over 70k a year and they only work 6 or 7 months out of the year, if that much. One is a certified diver and underwater welder. Another is a master mechanic/welder and the other is a certified explosives specialist. No college degree for either of them.”

YOU LIE!! Big College has more than made it clear that they are the ONLY ticket to a strong income and employment stability. Sure you rack up a few debts going to Big College, but you come out WAY AHEAD.

Yep, that’s what they tell us...Unfortunately most adults believe that, and if their kid actually works for a living (i.e. diver, welder, explosives handler - instead of playing with a computer all day) they will have a HORRIBLE LIFE of servitude. Yep, that is what Big College tells us.

[Founding Father]

I would add:

6. Get the feds out of the grant business.

7. All college aid be scholarship, not need based.

[blueunicorn6]

I think that the problem is that some Americans have a real hard time doing a cost/benefit/risk analysis. I also think that many young people are betting that the US taxpayer will be forced to bail them out of their education debt. Why not? The US taxpayer bailed out the greedy old people in the savings and loan debacle. The US taxpayer bailed out the auto workers union employees. The US taxpayer bailed out huge financial firms. Eat, drink, drugs, sex and be merry for on the morrow, the US taxpayer will pick up the tab.

[SunkenCiv]

For college to be other than a scam, it would have to educate. So, yeah. :’) Thanks TigerLikesRooster.

[wintertime]

If we could get this SCOTUS decision overturned, Griggs vs Duke Power Co. then the college bubble would burst.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Charles Murray has a **great** idea! Private qualifying exams!

Think about it. How many jobs in the U.S. could be done by people with the solid eight grade educations of my parent's generation? Very very few jobs require a college education. A privately administered qualifying exam could prove to the employer that the applicant was, indeed, well enough educated to do a job.

We could begin by awarding an official high school diploma from the local high school to any child of **any** age who passed the GED or similar private exam. ( Private would be better.) This would immediately open up post high school scholarship aid to the child and make entry into the military more straight forward. Eventually, the high school diploma should be made ( by law) unnecessary for the military and scholarships and the exam results alone should be ruled completely sufficient.

Qualifying exams could start in the first grade. Once a child proved he had mastered a level of a specific subject he could immediately move on to the next level. Ambitious children could complete eight grade or high school **years** sooner. Those children who were not hard working or not as bright would smack their noses against the hard reality that they did not know the material.

And... Large parts of the education could even be **free** to the student. Nearly all of the lectures and written material could be presented on-line. The producers of outstanding material, and highly reliable and certifiable testing centers, could become very rich if they accepted advertising.

Homeschoolers have proved that children can finish their elementary and secondary educations many years ahead of the expected lock-step schedule. By starting their careers years ahead they can accumulate hundreds of thousands of dollars more in wealth than their peers who are institutionalized for their educations. They can buy a home, marry, and start families. They are not locked into this emotionally (and spiritually) unhealthy and semi-adolescent educational wonderland of graduate school degrees, schooling debt, hanging-out, and hooking-up, that entangles so many in their late 20s and early 30s.

Also, if qualifying exams could start in the first grade it would encourage a vigorous private tutoring industry. Parents would also begin to take more responsibility for educating their own children. And....Think of the savings to the tax payer for every year that a child does not spend in the government schools.

As a former owner and doctor in a health clinic I testify that a high school diploma is utterly worthless in determining if an applicant for a job is literate or numerate. If an applicant had passed a well respected and private qualifying exam that would have had real value for me. I wasted far too much time interviewing high school graduates who simply could not read or do the most basic 4th grade arithmetic. Towards the end of my career, even though nearly all the work done in my clinic could have been done by those with an eight grade education, I would only interview applicants that had at least some community college.

[The_Media_never_lie]

The alternative is WalMart U. Get your degree over the internet. Let Wal Mart market it.

No real need for buildings, dorms or commie lib indoctrinating profs.

[CodeToad]

The student loan takeover by the feds was 100% political as the result is that just four private companies were given the entire loan program to service for profit.

[B4Ranch]

>>Student-loan debt is now greater than credit-card debt for the first time ever.<<

Both student-loans and credit-card debt are voluntary loans, requested by the student. If you accept the money, then you have an obligation to pay it back.

More than one successful person worked their way through college without using student loans.

[Revel]

This is because these loans are federal and guaranteed by the taxpayer. This is the current credit bubble. Without it, lending would be negative in growth.

[FReepaholic]

College Conspiracy

[Mamzelle]

Tax tenure. Defund colleges, close down at least half of all liberal-arts departments.

PhD--the P should stand for Parasite.

[LomanBill]

>>What is the alternative?

Learning to use the tools that are available...

http://www.microsoft.com/express/Windows/

...for FREE.

[Piers-the-Ploughman]

i am trying to learn something. Why is it important students be allowed to default on their loans? Seems like the exact opposite of what we should want

[packrat35]

The main way to get to poverty is student loans...the kind that cannot be discharged in bankruptcy and will take 30 years to pay off...

Learn a trade...they can’t export that overseas...

[TheOldLady]

What is the alternative?

Find something you like to do. I found electroplating and printed wiring board manufacturing. Learn every last thing there is to know about the subject, and if you're not sick of it at that point, work your butt off and prove you're valuable. I went far in that field without anything but my HS diploma and some math and science classes in night school.

[grey_whiskers]

That *used* to be true.

Since the 1970s college tuition has outpaced the cost of living by a factor of 3:

Note that that number is inflation-adjusted, folks.

Source.

In nominal dollar-terms, it's even worse: which means (given the wage stagnation of the last decade) college is close to unaffordable.

And for law school, it's been even worse:

Inflation-Adjusted Law School Tuition: $1,550 (Public), $3,418 (Private)

Brian Tamanaha (Washington U.), Information About Law Schools, Circa 1960: The Cost of Attending:

The AALS produced a comprehensive study of law schools in the late 1950s, sending detailed surveys to 129 law schools, with a 90% response rate. Here are a few interesting tidbits about the cost of attending law school:

Median annual tuition and fees at private law schools was $475 (range $50-$1050); adjusted for inflation, that's $3,419 in 2011 dollars. The median for public law schools was $204 (range $50 - $692), or $1,550 in 2011 dollars.

In contrast, here are the current tuition and fees at the top-ranked private (Harvard: $48,786; Stanford: $47,460; Yale: $52,525) and public (resident) (Michigan: $44,600; UC-Berkeley: $44,245; Virginia: $44,600) law schools.

Source.

Compounding the problem is the diabolical commitment to "diworseity" at the University, and the "Tiger Mom" mentality -- where top schools won't even look at you unless you've climbed Mt. Everest on your hands, unaided, at the age of seven.

And done it blindfolded at the age of eight.

One has the "hourglass" distribution of attendance similar to the "hourglass" of wealth -- the superacheivers, the kids who have no business being there, and nobody in between.

Fortunately, if one chooses carefully, one can get just as good an education at a good flagship State University at a fraction of the price.

Unfortunately, with the networking available at the elite schools, the practice of "credentialism", and the dumbing down / Marxism crap even at the elite schools (saving only the math and science), for most kids, it makes no difference.

Sight.

[Mariner]

"What is the alternative?"

Work.

Very few of the wealthy got there as a result of their education. It was just plain old hard work.

[redgolum]

But they can import guys from overseas who will do the trade for half of what you can.

Ask any construction worker.

[redgolum]

Ok, work at what? Yes it can happen, and has happened to many I know, but to break into many fields you need a degree. Even starting business there are many who will not buy a widget unless it has been blessed by a PE at least (for liability reasons). A friend of mine has that issue now. He is designing things, but has to have a PE sign off on it before he sends it out. The PE is ignorant of the process, but his signature is needed.