Posted on 07/22/2014 2:50:39 PM PDT by Kaslin
Much noise has been made about the growing student loan bubble and what kind of impact it will have on the economy when it goes “boom.” It is a reasonable question, but if you are thinking this is just like the housing bubble, or the tech/Internet- stock market bubble, you are wrong. There is no doubt that the rapid spike in student loans over the past five-years has been alarming, especially since the funding and now the risk comes at the expense of taxpayers.
However, being accustomed to getting the short end of the stick when the world is turned upside down, taxpayers would loath having to pay for defaults on loans without their consent. There was a chain of events that brought the nation to this point.
Beginning with the 2008 semester loan limits that were placed on Stafford loans, putting a deep chill on private lending:
In the 2011-12 semesters, the federal government issued 93% of all college loans. The numbers are staggering and now it is a Main Street concern. According to a 2011 Pew research survey, one in five US households were holding student loans at an average balance of $23,300. The bottom line is that college is not cheap and the burden of student loan debt continues to impact Main Street and the economy.
|
Tuition 4-Year Colleges |
All |
Public |
Private |
|
1981-82 |
$9,554 |
6,942 |
15,306 |
|
2011-12 |
$23,066 |
16,789 |
33.716 |
U.S. Department of Education, National Center for Education Statistics
The administration took control of student loans, along with other large foundations including medical and financial ones, when the rug was pulled from under private lenders in 2010. The result has seen student loan debt, largely sponsored by taxpayer funds, spiking more than 50% since 2009.
Despite the burden, those screaming that college isn’t worth it must look at current and future economic reality. It is not just that college grads have lower unemployment rates; these rates are lower on significantly higher participation rates.
|
Jobs Picture By Education |
Unemployment Rate |
Participation Rate |
|
|
June 2013 |
June 2014 |
||
|
Less than High School |
9.1 |
45.5 |
43.3 |
|
High School |
5.8 |
59.1 |
57.8 |
|
Some College |
5.0 |
67.4 |
67.6 |
|
College |
3.3 |
75.1 |
75.2 |
A study of minimum wage highlights the risk of starting college and not finishing.
|
Minimum Wage By Education |
% Working Minimum Wage |
Total Working Minimum Wage |
|
Less than High School |
9.8% |
927,000 |
|
High School |
3.7 |
980,000 |
|
Some College |
4.2 |
1,133,000 |
|
College |
1.8 |
260,000 |
However, there is a collection-risk concern and ultimately, something must be done to curb tuition cost. I think the key is the return of private lenders. They would certainly balk at overpaying for degrees with limited return on investment:
The good news is that private lenders are easing back into student loans (see WSJ graph).
Moreover, how close we are to the “bubble” popping remains to be seen. Obviously, a much more improved economy would mitigate the risk. Still, the conundrum is real. College grads are working, but newer grads are working in occupations in which they are over-qualified, and yet, we have a nation thirsting for the right kind of skills. For now, college is worth it, but I cannot say that's a given for much longer…
College probably is not worth it for a significant minority of the people who attend, especially when you add into the mix the fact that many of them could attend a good trade school or other non-university educational program to learn a useful skill.
I am in the recruiting business and most companies are screaming for technician level trades people. These positions can earn anywhere from $20-30 per hour if they have the right background. Mechanics, electricians, etc...$40-60k plus OT. It’s out there...for those who aren’t the college type, this is where its at!
The world needs ditch diggers too!
But don't forget, a college degree is not always needed. With a good head for business and a good work ethic you too can have own a fantastic clothing store ...
My daughter and two daughters in law went to 4yr colleges. Now they are all stay at home Mothers. When I asked them if the cost of a college education was worth it they said they would get back to me when they try to find jobs when it was time to go back to work.
One of them has been out of the work force for 9 years and recently applied for a position with an aerospace company. Technology can change considerably in 9 years and she wasn’t up to speed on the way things are being done now. She didn’t get the job.
HS diploma is not required. No college necessary.
Have a VCP, CCNP, CCIE etc. and you can write your own ticket. No urinalysis required either.
Why do those employers refuse to train their own employees?
The pendulum is always in motion.
I've watched the situation devolve for several decades.
Skilled experienced technicians being “managed” by newly hired “educated idiots”, and summarily being replaced by cheaper outside (mostly foreign) subcontractors, then the company declaring some version of financial bankruptcy.
All the bright young theorists eventually hit the brick wall of the real world.
If one doesn’t know what one wants to do for a career at 18 college is a waste of money.
Trade colleges are good options tho.
“http://en.wikipedia.org/wiki/Benjamin_Franklin_Institute_of_Technology
==
This little school in Boston is great.
“Mechanics, electricians, etc...$40-60k plus OT.”
...but doesn’t that mean getting my hands dirty? NO THANKS. I’ll stay at home with the parents and work at McDonald’s. Eventually someone will discover my value.
It keeps them outta the job market for 4 years!
TADA!
“Do you look at a menu and say, ‘OK’?
When you go to the zoo do the elephants throw YOU peanuts?”
“Do you look at a menu and say, ‘OK’?
When you go to the zoo do the elephants throw YOU peanuts?”
LOL
I agree for the most part with what you say...I’ve seen and heard many war stories over the years. (24 to be exact) The best boss is the guy who rode it up through the ranks.
The less successful is the highly educated but no experience guy coming through the white collar side of the business.
I’ve also seen young engineers turn their noses at jobs because they are “green” minded and want to protect the environment and the company they interview with might be working with a chemical or process that goes against their belief. I actually had a young girl who was not working for 7 months and collecting unemployment turn down a 60k offer because of that.
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