Tag archives: College Debt

Millennials Have a Tough Economic Row to Hoe

by Chris Gacek

October 21, 2013

Evan Feinberg, president of Generation Opportunity, recently had an insightful article in Forbes, “Heavily in Debt Millennials Now Must Foot the Federal Deficit Bill, Too.” Feinberg focuses on the difficult economic times facing Millennials. His observations rest on some pretty basic facts. First, the typical college graduate is trying to pay down about $32,500 in student loan debt. Then, the unemployment rate for those ages 18-29 is a near-record 16%. Feinberg proceeds to note that the burdens of the massive, growing federal debt are going to fall most heavily on those who are just starting their careers. That will be painful for decades as the entitlement state implodes but will probably entail decreased benefits and higher taxes.

I would add that Obamacare is going to be an immense, crushing burden unless it is repealed. We already see companies not hiring to avoid having fifty employees and triggering Obamacare requirements. There is also the trend to hire only part-time workers. It is hard to pay off college loans when you don’t have a full-time job.

Needless to say these trends are devastating to the formation of families and having children. Even worse, may be the impact of Obamacare’s pricing structure. It will take some time to see how this all sorts out, but it appears that young families will have much higher premiums, very high deductibles, and co-pays on the order of 40% … for a “bronze” or lowest-quality plan. If this is true, middle-class families will be devastated as they have to cut back on necessary expenditures like child-care to pay for the insurance. Many industries like the vacation and leisure industries, for example, should take note. There won’t be any money for that stuff and other disposable goods.

This could get ugly quickly.

Adding Insult to Injury: The Latest Shoe to Drop in Today¿s College Scam

by Chris Gacek

September 12, 2013

It used to be that the quality of an American university or college degree spoke for itself.  An employer could evaluate one’s academic achievement by looking at a transcript and making a fair assessment.  Well, those days appear to be fading fast.  Decades of academic bureaucratic bloat, grade inflation, and dumbing down curricula have had such a profound effect that a standardized, online college exit exam is being introduced in the spring of 2014.  The 90-minute test, produced by the non-profit Council for Aid to Education, is called the Collegiate Learning Assessment Plus (CLA+), and its scores can be shared with employers.

This article and this letters column (“Dear Joyce”/ Joyce Lain Kennedy) from the Chicago Tribune provide good background information on the CLA+.  From these articles it becomes clear that “grade inflation” has destroyed the value of the college transcript.  Here is another interesting observation:

Additionally, some employers are rethinking the value of famous-name institutions.  Is a degree from Harvard or Stanford really worth multiple times that of a solid state university? That rethink is why the CLA+ could level the hiring field by valuing the individual over the institution.

Wow.  So, these bloated educational bureaucracies are producing wildly overpriced educations that may soon have to be validated by a $35 national test that assesses “analysis, problem solving, writing, quantitative reasoning and reading.”  Now that is adding insult to injury.

Student Reliance on Federal College Aid and Debt at Highest Levels Ever

by Chris Gacek

August 20, 2013

According to Libby Nelson in the Politico, the Department of Education has just released a quadrennial report (“2011–12 National Postsecondary Student Aid Study (NPSAS:12): Student Financial Aid Estimates for 2011–12”) analyzing the manner in which students are paying for college. Based on data from 2011-12 that uses a sample of more than 100,000 students (mostly undergrads), the report indicates that for the first time a majority – 57% — of undergraduates are receiving federal financial aid of some kind. Also, a higher proportion than ever are taking out loans. Secretary of Education Arne Duncan stated that “[i]n total, the number of Pell Grant recipients has increased more than 50 percent since 2008….” Pell grant spending has increased from $12.8 billion in 2007 to $35.6 billion in 2011.

So, just as national awareness of the harms of college debt have become more and more clear, students are becoming more indebted. According to Nelson, “About 41 percent of all undergraduates took out loans, up from 35 percent four years ago.” This is tragic.

President Obama is set to take a bus tour later this week to discuss holding down college costs. Unfortunately, it doesn’t seem like anyone in Washington is discussing the promotion of alternate types of education (e.g., online) and alternate degree credentialing systems that could actually lower the cost of higher education. Lowering college costs will require unleashing market forces for a product that remains resistant to competitive forces. That has to change.

Is College Worth It?

by Family Research Council

August 15, 2013

Please take a look out our excellent lecture discussing the net value of a college education for all students in a world of economic uncertainty, heavy debt accumulation, and low-quality degrees.  Our speaker is Dave Wilezol who co-authored Is College Worth It? with Bill Bennett.  (Yes, that Bill Bennett.)  Mr. Wilezol discusses a range of topics but focuses on the need for prospective college students to be hard-nosed about a number of factors that will determine whether a college degree is the best path for a person to take.

Some More College Debt News: Domestic and International

by Chris Gacek

May 27, 2013

The Washington Post published an revealing story by Nick Anderson that discusses how colleges are pumping out master’s degrees:

The nation’s colleges and universities are churning out master’s degrees in sharply rising numbers, responding to a surge in demand for advanced credentials from young professionals who want to stand out in the workforce and earn more money.

From 2000 to 2012, the annual production of master’s degrees jumped 63 percent, federal data show, growing 18 percentage points more than the output of bachelor’s degrees. It is a sign of a quiet but profound transformation underway at many prominent universities, which are pouring more energy into job training than ever before.

Needless to say: this is the opposite direction in which a society saturated with education debt should be heading.  We need undergraduate degrees that are substantial enough that they provide the basis for a solid career.  But the schools are doing what makes sense economically.  Pump out graduate degrees, degrade the values of such degrees, and rake in more money.

* * * * *

It turns out that college debt is becoming or has become a major international problem.  One organization of college debt analysts, CollegeStats, has a webpage tracking college debt in these countries: the United Kingdom, Canada, China, Japan, and Australia.  It looks like American grads have it the worst, but the U.K. and Canada are not far behind.  It is a growing problem in a number of countries.  CollegeStats has done excellent work in aggregating this international data.

Fifty Questions to Ask Before Going to College

by Chris Gacek

April 26, 2013

Fifty Questions to Ask Before Going to College” is the title of an article by Lynn O’Shaughnessy, a writer with CBS MoneyWatch.  I think she is correct that these questions focus the mind on the “rubber meets the road” issues.  She concentrates on topics like graduation rates, class size, who does the actual teaching, what honors programs exist, job placement rates, rates of tuition increases, levels of graduate indebtedness, and student load default rates.  These are much more practical topics than: “How many rock climbing walls do you have?”

Clearly, anyone going to college needs to develop a profile for each potential school like the one outlined in the article.  This article provides a well-grounded list of questions from which potential college students and their parents can improvise and create their specific set of questions.

A Nice Summary of the College Debt Mess

by Chris Gacek

March 9, 2013

Charles Blow of the New York Times has written a very helpful analysis of recent statistics and realities pertaining to the College Debt Crisis.  His column appeared in the March 9th print edition (“A Dangerous ‘New Normal’ in College Debt.”)  See the online article with excellent links to a number of studies, reports.  He begins with the observation, “We are reaching a crisis point in this country’s higher education system.”  A statement that is undeniable. 

He concludes as follows: “Our national educational aspirations and the debt crisis that they’re creating are colliding. We are on an unsustainable track. This will not end well.”  Again, undeniable.

I don’t know if this is sequester-driven brinksmanship or part of a larger budgetary trend, but the Army Times writes that “[t]he Army’s popular Tuition Assistance program is being suspended because of the budget squeeze, although the many thousands of soldiers currently enrolled in courses will be allowed to complete those courses.”  The shutdown began at 5 p.m. EST on March 8th.  If it is the former, it is despicable.  However, I fear that even if sequester-driven politics is in play, the long-term outlook for military budgets keeping up with ever-escalating college tuition is not great.

Debt Doesn’t Take a Holiday

by Chris Gacek

January 24, 2013

I don’t think we are even approaching the point at which American government’s love of debt will shatter, but a couple of noteworthy events took place this week that may indicate that a new day is dawning.

First, the New York Times article described a bond-ratings agency’s actions this way:

Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications.

If this had happened ten years ago, this announcement would probably have meant more and produced a greater effect.  Maybe.  Unfortunately, the bond-rating agencies’ credibility was shattered after their complicity in the mortgage debt debacle of the late-2000s was exposed. Now, so much of what they say sounds like Charlie Brown’s teacher: Wah-wah-wah-wah…. That will change eventually.

The second event was described in an AP article by Justin Pope:

Moody’s Investors Service on Wednesday downgraded its outlook for the higher education sector to negative across the board, saying even prestigious, top-tier research universities are now under threat from declining enrollment, government spending cuts and even growing public doubts over the value of a college degree.

There has been a great focus on student indebtedness, but much less attention is given to the decades-long binge of building and bureaucracy construction that has taken place at institutions of higher learning.  That doesn’t appear to be Moody’s focus either – or the article’s.  That is why did tuition increases need to exceed inflation for decades?  Moody’s is looking at revenue shortfalls as if spending levels were set atop Mount Sinai.  That’s OK, we will figure it all out, and many schools are going to go broke.  To borrow a phrase: Academia’s chickens are coming home to roost.

It just may be that debt is not so harmless as the Keynesian ethos would lead us to believe.

Community College Can Be a Better Deal than Four-Year Options

by Chris Gacek

January 2, 2013

There is some surprising news regarding post-graduation earnings of community college grads.  Martha C. White, in her article for NBC’s “Today Show” website, discusses findings from CollegeMeasures, an organization that analyzes earnings and education data.  The data indicates that community college graduates can earn a good bit more after graduation than some with four-year degrees. 

The key is that the community college degree must be in a technical or occupational field like nursing.  (The analysis is discussed by Mark Schneider, president of College Measures and a vice-president at the American Institutes for Research.)

Thinking Outside the Box about College at the American Thinker

by Chris Gacek

December 18, 2012

The American Thinker blog has posted this thought provoking article on the college debt debate by Gary Jason.  Jason has many interesting ideas, but I am glad to see that he brings up the need for more vocational training in high tech economy:

There is another pertinent point worth noting: there is a shortage of high-skilled trade workers.  A recent article in the WSJ points out that the value of American manufacturing output per hour is 30% higher now than a decade ago, and 125% higher than a quarter-century ago.  But this proliferation of productivity requires manufacturing workers who are trained in a post-secondary program (typically vocational training delivered at a local community college or trade school), and companies are reporting shortages of such trained personnel.

A big part of the problem lies in the fact that many high-school grads are turning their backs on skilled manufacturing programs in favor of bachelor’s degrees of dubious use in finding appropriate work.

Jason notes how the current loan programs have perverse incentives that need to be adjusted so that fewer loans are made for goofy programs of study while developing private industry education alternatives.  This is an agenda which conservatives can support while the Left is forced to defend the Blob and its Robber Baron kleptocracy.

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