generation limbo: 20-somethings today, debt, unemployment, the questionable value of a college education

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maybe also bitcoins

乒乓, Thursday, 25 April 2013 14:20 (eleven years ago) link

oh and another thing that gets left out is the likelihood of leaving college in debt without finishing, which is high at lower-end institutions.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 14:26 (eleven years ago) link

yeah that's a good point and also significantly higher for low income kids.

iatee, Thursday, 25 April 2013 14:30 (eleven years ago) link

it's pretty similar to the "is law school a good investment" question -- it depends so much on the individual and the schools they can get into and the amount it will cost them that giving a generalized answer at all is kind of irresponsible

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 14:36 (eleven years ago) link

The debt issue is huge, even though it's probably easier to walk away from college debt than other kinds.

I don't know what to do about my kids or how to advise them on this issue.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 14:39 (eleven years ago) link

wrong, it's harder to walk away from college debt than other kinds

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 14:40 (eleven years ago) link

to wit, it is not possible

resulting paste of mashed cheez poops (silby), Thursday, 25 April 2013 14:40 (eleven years ago) link

not dischargeable in bankruptcy

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 14:40 (eleven years ago) link

move to finland

乒乓, Thursday, 25 April 2013 14:41 (eleven years ago) link

yeah this comment is really good

Unemployed_Northeastern•3 days ago−

"Compared to cars and houses, higher education is a much safer investment."

It's funny that this assertation has no citing authorities behind it. Here are some:

Percent of mortgages in delinquency in September 2009, at the height of the crash: 14% https://en.wikipedia.org/wiki/..., under the "Mortgage Market" section. The peak subprime mortgage delinquency rate appears to be about 25%. Ibid.

Percent of student loans in repayment that are currently delinquent: 31%, according to http://newyorkfed.org/newseven..., page 13. And mind you, barely half of outstanding student loans (56%) are in repayment. The rest are in forbearance or deferral, which generally stem from being back in school or unable to make payments.

So student loans currently have a delinquency rate more than twice as high as the mortgage delinquency rate during the apex of the housing crash.

Is it a bubble? Well, let's look at some figures:

2000: Total outstanding student loan debt: about $200 billion

2008: Total outstanding student loan debt: about $450 billion

2013: Total outstanding student loan debt: between $1 trillion and $1.125 trillion, depending on the estimate and whether private student loans are included

Punch those numbers into a graph and see what kind of growth it represents. Hint: it rhymes with flexponential.

OK, but how about granulated data?

Well, according to the NY Fed Reserve again (page 9 of the above citation), both the number of student debtors and their average balance increased 70% between 2004 and 2012. While I don't have an identical data timeline for wages, I can say that that from 2000 through 2012, salaries for college graduates 25 and under dropped 8.5% http://www.epi.org/publication.... And we already know about the growth in student loan debt from 2000 through today. Its growth has outstripped everything in America, including health care costs. Meanwhile, if we look at the epi study closely, we can see that the real hourly wages of young college graduates has only increased by about one dollar from 1989 through 2012. If we look at http://stateofworkingamerica.o..., we can see that the real entry-level wages of college graduates have only increased about 10% for men and 15% for women since... 1973.

Is it a safe investment?

According to Pew, only 42% of college graduates held college-level jobs, on average, from 2003 through 2011. Nearly that same percentage were unemployed, working in high-school level jobs, or out of the workforce. Similar outcomes have been reported in labor studies out of Rutgers and Northeastern. Every graduate discipline and professional school, save for medical school and graduate engineering and comp sci programs, are in open crisis. That does not resemble an investment; it resembles a gamble; a bet of red or black on the roulette wheel.

Oh, and here are some things that apply to mortgage debts but NOT to student loans: bankruptcy protections, the Truth in Lending Act, the FDCPA, state consumer protection laws, and the statute of limitations.

Is it a safe investment FOR INVESTORS?

Yes: "SLABS [Student Loan Asset-Backed Securities, were are comprised of private and FFELP loans] were invented by then-semi-public Sallie Mae in the early ’90s, and their trading grew as part of the larger asset-backed security wave that peaked in 2007. In 1990, there were $75.6 million of these securities in circulation; at their apex, the total stood at $2.67 trillion. The number of SLABS traded on the market grew from $200,000 in 1991 to near $250 billion by the fourth quarter of 2010. But while trading in securities backed by credit cards, auto loans, and home equity is down 50 percent or more across the board, SLABS have not suffered the same sort of drop. SLABS are still considered safe investments—the kind financial advisors market to pension funds and the elderly....

Under the just-ended Federal Family Education Loan Program (FFELP), the US Treasury backed private loans to college students. This meant that even if the secondary market collapsed and there were an anomalous wave of defaults, the federal government had already built a lender bailout into the law. And if that weren’t enough, in May 2008 President Bush signed the Ensuring Continued Access to Student Loans Act, which authorized the Department of Education to purchase FFELP loans outright if secondary demand dipped. In 2010, as a cost-offset attached to health reform legislation, President Obama ended the FFELP, but not before it had grown to a $60 billion-a-year operation." Malcom Harris, http://nplusonemag.com/bad-edu.... One might also note that the two best years for SLABS were 2006 and 2007, right after private student loans were mysteriously and retroactively rendered nondischargeable in bankruptcy in 2005. What a strange coincidence, right?

Not that is entirely germane to the discussion, but the erstwhile, long-time CEO of Sallie lives on a 250 acre estate outside of Washington DC on which he put a private 18-hole golf course. Not a private club, mind you - he built an entire golf-course in his DC-area backyard. That's the kind of wealth student loans made for the for-profit lenders.

Is it a safe investment FOR THE GOVERNMENT?

Yes. Based on whose accounting methods you believe, the Department of Education will reap between 5% and 20% profit on each year's batch of lending, over those loans' repayment periods. This is primarily due to the DOE's ability to borrow at ~1% and lend out at 6.8% to 7.9%. Even on defaulted federal student loans, the government averages about 95 cents on the dollar AFTER collection costs, and about $1.20 before collection costs. Yes, you read that correctly.

Will new income-based repayment plans help?

Yes and no. While putatively keeping under-earning graduates out of default, IBR and PAYE accomplish little else. Interest continues to accrue and principalize on the underlying balances, which can lead to negative amortization (i.e. the balance grows after each payment). It wreaks havoc on one's credit score and ability to secure a mortgage or car loan. It removes whatever speck of tuition restraint higher ed had left (law schools are openly touting IBR/PAYE as reason not to care what they charge anymore). There is no guarantee these extremely expensive programs won't be cut under future austerity measures. And under current law, balances forgiven after the end of the 25/20 year periods are counted as realized income by the IRS and treated accordingly. These plans, then, are just longer, brutal versions of Chapter 13 repayment plans.

So, student loans really aren't like other loans, are they?

No. Over the years, as Congress removed preexisting all of the aforementioned consumer protections from student loans, their treatment began to resemble overdue tax bills or child support more than ordinary consumer debts. We give the most dangerous, anti-consumer debt instruments allowed under the law to the youngest, most financially naive members of adult society, after telling them it is "good debt" and an "investment in themselves."

Have policy makers known about this for awhile?

Yes. With some digging in your closest library, you can find such gems as:

- The 1986 book "Mortgaged Futures" by Marguerite Dennis

- A 1987 College Board report entitled: "Student Loans: Are They Overburdening a Generation?"

- A 1991 report by the National Commission on Responsibilities called "Making College Affordable Again"

So why hasn't anything been done?

It's complicated, but in short: everyone makes money off the system, as I outlined above. In addition to the lenders, investors, and government, universities received about $125 billion in student loans last year, as compared to about $30 billion in gifts - and it was nearly a record year for gifts. Student lending gives states the ability to radically defund their public universities without having quality suffer (at least facially). There has long been a revolving door between the Department of Education and the for-profit student lenders. And the largest higher education think tank in America, the Lumina Foundation, with its $1.5 billion warchest, was cofounded by two student loan companies and funded by Sallie Mae. Its public goal is to have 60% of Americans sport college degrees by 2025, up from roughly 31% today. Note how that would produce 15 years of growth for Sallie, who still lends, creates and sells SLABS, and administers and collects on federal loans on behalf of the DOE.

Is it going to get worse?

Yes. Entry-level hiring has been thoroughly gutted by the economy, the unpaid internship, outsourcing, and the presence of an increasingly desperate lateral market. Supplies of college graduates are set to become even more unwieldy, as the DOE has approved federal student lending for online, competency-based education, and the monetization of MOOCs is all but inevitable. See any number of stories on the Chronicle of Higher Education or Inside Higher Ed for more on these topics.

Look, I get that the Atlantic is pro-education. It makes sense. It's a magazine founded by the 19th century's leading intellectuals: Emerson, Longfellow, Alcott, Holmes Sr., Lowell, etc. Just about every staff writer went to Harvard or Princeton or similar, and no doubt your entire circle of friends works at Goldman Sachs or the State Department or IBM. Given the insane degree of illegal unpaid internships in NYC that journalists now have to go through, I would wager that most of the Atlantic's staff hails from the upper bounds of the family income scale. But you folk are outliers. Even if one were to embark on as slight an educational "downgrade" from Harvard to BC or Princeton to Rutgers or Yale to Conn College, they would find themselves in the midst of massacre - and we are still talking about extremely excellent schools. Once we get down to Open Enrollment State or Bogus-Veblen-Good-University or Federal-Loan-Trough-For-Profit, well, what's left to say?

I can appreciate that you are trying to spin already-historic lows for home ownership, family formation, and consumer spending for the 25-34 cohort as a good thing. Furthermore, this site, like Slate and some others, likes to publish articles with a "This is what is really happening with XYZ, despite all the headlines to the contrary." But you are way off-base with the future of higher education. Look to the handwringing and clenched fists of the people who work in higher ed and write over on the Chronicle or Inside Higher Ed. Only disaster awaits.

iatee, Thursday, 25 April 2013 14:42 (eleven years ago) link

yeah, i got hit w/ that particular scam. it's a bummer :(

Mordy, Thursday, 25 April 2013 14:45 (eleven years ago) link

I didn't realize they weren't discharged in bankruptcy (and that was in 2005?). Holy shit. That's onerous.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 14:48 (eleven years ago) link

so if you haven't already opened a 529 for your kiddos, get on that, basically

resulting paste of mashed cheez poops (silby), Thursday, 25 April 2013 14:49 (eleven years ago) link

well it depends how old your kids are. I think it's reasonable to expect things to look considerably different 10 years from now.

iatee, Thursday, 25 April 2013 14:50 (eleven years ago) link

different enough that it doesn't make sense to pay down all student debt bc some might be ameliorated?

Mordy, Thursday, 25 April 2013 14:51 (eleven years ago) link

My kids are 12/10/7. I opened up 529s for them when they were born. Have been scared for the past few years that I've been lighting money on fire.

Ugh.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 14:51 (eleven years ago) link

in ten years it will still be dumb to go to a private college, unless you get a full ride

Euler, Thursday, 25 April 2013 14:53 (eleven years ago) link

ameliorated via bankruptcy, sure, I think that's inevitably coming back one day. I wouldn't bet on anything nicer than that tho.

iatee, Thursday, 25 April 2013 14:53 (eleven years ago) link

you'll only be lighting it on fire if they don't want to go to college and you make them. I'm a sucker who believes in the mission of higher ed and the value of a liberal education and of getting to fuck around in your late teens/early twenties in a weird liminal space between childhood and "real life"; just make sure they all learn how to program. xps

resulting paste of mashed cheez poops (silby), Thursday, 25 April 2013 14:53 (eleven years ago) link

i used to be a sucker who believed in the mission of higher ed too :'(

Mordy, Thursday, 25 April 2013 14:55 (eleven years ago) link

it's not like personal bankruptcy is an especially desirable option either, and also there's a good chance anything that's done to change the structure will be grandfathered (reverse grandfathered?) so it will only affect debt taken on after a certain year.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 14:56 (eleven years ago) link

Mordy, again, also keep in mind that "higher education" includes tons and tons of institutions that I would imagine aren't even going to be on the radar for most ilxors' kids. Like while "is it worth it to take on debt to go to Bennington" is a very good question to think carefully about, the person in that position is not anywhere near in for the kind of trouble that a person looking to take on debt for a for-profit U might be in.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 15:02 (eleven years ago) link

My kids will likely want to go to college, it's a family tradition and all their friends will likely move lockstep towards it. And I believe in the cause. I just don't want them to end up with shitloads of debt.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 15:03 (eleven years ago) link

I have a feeling like your 7 year old will have a way to get the letters 'BA' on his/her resume for less than 6 figures

iatee, Thursday, 25 April 2013 15:04 (eleven years ago) link

it might involve something that isn't a 4 year summer camp w/ lots of booze

iatee, Thursday, 25 April 2013 15:05 (eleven years ago) link

otm but i find just typing them on there works pretty well at this point xp

the white queen and her caustic judgments (difficult listening hour), Thursday, 25 April 2013 15:06 (eleven years ago) link

tbh people underestimate the amount of financial aid most schools give out; FAFSA calculations take into account the number of kids you have in school & will have in school, and most reputable places (i.e. anywhere but NYU) report meeting 90 to 100% of a student's demonstrated need through grants and subsidized loans. Whether your Expected Family Contribution matches your actual ability to contribute is another story I guess.

resulting paste of mashed cheez poops (silby), Thursday, 25 April 2013 15:07 (eleven years ago) link

Hopefully she will be so smart that it will cost less than that.

tbh I worry less about my kids and a lot more about other kids who are starting out with a lot bigger odds against them.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 15:08 (eleven years ago) link

the person in that position is not anywhere near in for the kind of trouble that a person looking to take on debt for a for-profit U might be in.

oh don't u worry - i rely heavily on the comfort of not being quite as screwed as most of the world

Mordy, Thursday, 25 April 2013 15:10 (eleven years ago) link

The solution to the problem: capping the tuiton fees.

Van Horn Street, Thursday, 25 April 2013 15:11 (eleven years ago) link

water flows downhill

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 15:13 (eleven years ago) link

ya some of these places use tuition as a wealth transfer mechanism ie harvard probably should raise its tuition, given what many of its students could pay. the problem is the schools that aren't harvard but use it as a point of reference.

iatee, Thursday, 25 April 2013 15:15 (eleven years ago) link

should higher ed retain its non-profit status?

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 15:18 (eleven years ago) link

it's hard to imagine how taking that away would improve things. considering how much $ comes from the govt, there's more leverage in putting strings on that than making colleges pay taxes. obama's already started down that path.

iatee, Thursday, 25 April 2013 15:25 (eleven years ago) link

that's probably just me projecting my dismay of the athletic departments influence on higher ed

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 15:28 (eleven years ago) link

believe it or not I was actually an activist in the cause of fighting the creeping influence/dominance of the athletic dept at my university, and in spite of that, I don't really think athletic departments are a major part of the picture for the issues in this thread.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 16:06 (eleven years ago) link

This is not the thread but I'd like to hear more about the athletics depts having too much influence. I know nothing of it.

Van Horn Street, Thursday, 25 April 2013 16:08 (eleven years ago) link

well they're mostly just a money sink at institutions that have more than enough money sinks. it's hard to measure their real benefits w/r/t 'branding' and alumni donations and republicans not shutting down flagship universities because they hate their rival state's football team. as long as universities are selling an entertainment package it makes sense to throw money at a football team, tho non-football and basketball sports are harder to justify as expenses.

iatee, Thursday, 25 April 2013 16:32 (eleven years ago) link

at public universities the athletic budget is generally separate from the academic budget, and is self-sufficient.

at privates who knows

Euler, Thursday, 25 April 2013 16:56 (eleven years ago) link

http://www.theonion.com/articles/man-has-alarming-level-of-pride-in-institution-tha,30853/

― iatee, Monday, January 14, 2013 10:38 PM Bookmark Flag Post Permalink

Chuck E was a hero to most (s.clover), Thursday, 25 April 2013 16:57 (eleven years ago) link

at public universities the athletic budget is generally separate from the academic budget, and is self-sufficient.

incorrect

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 16:57 (eleven years ago) link

http://usatoday30.usatoday.com/sports/college/2011-06-15-athletic-departments-increase-money_n.htm

With revenue growing faster than expenses, there has been an increase in the number of schools whose revenue generated by the athletics department activities exceeds the department's total expenses — the NCAA's benchmark for whether an athletics program is financially self-sufficient. There were 22 such schools in 2010, up from 14 in 2009; there were 25 such schools in 2008.

22 out of 218 in 2011 were self-sufficient

iatee, Thursday, 25 April 2013 16:58 (eleven years ago) link

lol that's madness.

Van Horn Street, Thursday, 25 April 2013 17:00 (eleven years ago) link

that's 218 public schools, mind you

iatee, Thursday, 25 April 2013 17:01 (eleven years ago) link

well they're mostly just a money sink at institutions that have more than enough money sinks. it's hard to measure their real benefits w/r/t 'branding' and alumni donations and republicans not shutting down flagship universities because they hate their rival state's football team. as long as universities are selling an entertainment package it makes sense to throw money at a football team, tho non-football and basketball sports are harder to justify as expenses.

― iatee, Thursday, April 25, 2013 12:32 PM Bookmark Flag Post Permalink

well, there actually are studies suggesting that athletic departments are of pretty limited benefit for universities in terms of alumni donations, because what donations do come in as a result of football are usually directed to football. The general "branding" thing is harder to measure, although the argument I used to make was that you might be increasing a university's overall visibility, but you have to also consider whether you're bringing the right kind of publicity (celebratory campus riots, academic cheating scandals, rape cover-ups, etc.) And there's the question of what kind of students you attract as a result (maybe more applicants overall, but otoh you might be putting off some of the top students in your state).

On a philosophical level, you might argue that it's more justifiable to have participatory sports that lose money than "entertainment" sports that lose money -- I don't really know why assuming the entertainment part in your post makes any sense.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 17:02 (eleven years ago) link

but as for this thread, athletic department losses have a relatively small financial impact on their universities afaict, at least in terms of things that could actually drastically affect tuition. OTOH there's a symbolic issue with not cutting athletic budgets while cutting everything else and raising tuition at the same time.

huun huurt 2 (Hurting 2), Thursday, 25 April 2013 17:04 (eleven years ago) link

if you guys want to go look at public institutional budgets & check out how this works, be my guest. these things are heavily discussed within public universities & even when they don't "break even" on the ncaa numbers, what's important is whether the money from the academic side goes to the athletic side, or whether the athletic side has its own sources of income independent of that. now in the latter case it still can be that state money is going to athletics, & that that money "could" be spent on academic things...or it could be spent on tax cuts or whatever. but the budgetary lines are made clear.

worrying about the costs of college athletics is such a dumb thing, like the reason that universities are struggling isn't that they have women's cross country teams or whatever

obviously college athletes should be paid & I'd be happy dismantling the whole system but it's a very small part of what's wrong right now

Euler, Thursday, 25 April 2013 17:06 (eleven years ago) link

On a philosophical level, you might argue that it's more justifiable to have participatory sports that lose money than "entertainment" sports that lose money

participatory sports cost almost nothing / exist everywhere...I mean I guess ohio state could attempt to organize a basketball tournament w/ its 60k undergrads but really people who want to play sports can always play sports. having gladiators to cheer for is part of the reason some people go to ohio state.

worrying about the costs of college athletics is such a dumb thing, like the reason that universities are struggling isn't that they have women's cross country teams or whatever

it's true that if college athletics disappeared tomorrow our higher ed system still wouldn't be in a great place, but it's not a non-issue either. I don't think worrying about the costs of college athletics - esp things like new construction costs and coach salaries - is dumb when it's part of the bigger picture 'misplaced priorities in higher ed' discussion. it's not *the only problem* but it is a symbolic problem.

iatee, Thursday, 25 April 2013 17:37 (eleven years ago) link

but it is a symbolic problem.

OTM.

It would be impossible to figure the exact financial impact (p/l) for college athletics, especially given the halo effect or opportunity cost or whatever. But I fail to see how it is a reasonable part of the mission of higher ed, and there are sort of these large distractions associated with it...one of them being what amounts to a semi-pro sports league that absolutely affects many decisions of college presidents and even further, to the states that run them.

Gigantic stadiums filled with millions of people every weekend seems very much symbolic of where are priorities are with education.

The Great Natterer (dandydonweiner), Thursday, 25 April 2013 19:36 (eleven years ago) link


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