I won't bore you with the details (but I will in a later post), so here is what I think:
Over 50% of the Private Colleges in the United States will not be functioning in 2020.
"I'd like to repeat that, because I think it sounds vaguely important!" - the late, great George Carlin
That's right. Over 50% of the Private Colleges in the U.S. will not be hosting any alumni weekend get togethers after 2020 or so.
"Peak Credit" has hit the college education market, and in its unwinding it is going to LEVEL it. The creation of a mountain of Student Debt has created a "college bubble", complete with jagoff - but tenured - professors, politically correct administrations drawing SILLY salaries and benefits, bulging budgets, and no hope of future revenue growth (actually, it is going to decline rather precipitously).
It then follows that paying $200k for an also ran private college education is rather silly, when for $40k the state schools are more than sufficient. Not that I won't send my son to a private school - that will be his decision. He can go to a state school on a full "Dad" scholarship, and maybe a nice graduation bonus... or he can go to a private college, no bonus, and maybe just a little debt to help him understand value.
I will let you know what he decides.
In the mean time, if you have kids nearing college age, ask yourself: It is now June 1, 2015 (or '16, '17, '18...). Your kid just graduated. What is he going to do for a living? Will it pay enough to warrant being in debt or you not having money to help them buy a home (or whatever)? All of this is a no brainer if you are rich. But let us say you are in between... say you have a couple of million $ net worth, 2 or 3 kids to educate, a wedding or 2 to pay for... this sums up a good percentage of the folks that send their kids to the "Also Ran" private colleges (you know, the consolation prize for spending $250k on private schools K-12 and your kid didn't make the cut at Harvard-Stamford-Yale-Princeton... this is going to sum up 99% of the parents of kids at our nations "top" private high schools, but hey, at least they taught our kids things like "honor above all", i.e. stuff that CANNOT be measured. My B*ll Sh*t Meter heads straight for the red zone whenever I am near these people.. and I know I irk them, too... nobody in that cabal likes a guy with eyes and ears and an ability for abstract thought). Please keep in mind that I believe that unemployment will be very high in the middle of the next decade.
If you doubt this... keep in mind, the "College Bubble" was funded by loans that will NEVER be repaid and furnished by Sallie Mae, and in much the same way that Fannie Mae and Freddie Mac ABSOLUTELY, POSITIVELY were the largest contributor to the HOUSING BUBBLE. Just as when the financing dried up for housing, the housing bubble popped... so, too will be the fate of the "College Bubble".
Not to worry, though. These people will work extra hard to B*ll Sh*t you, manipulate you, and out right lie to you in order to keep those latte's and co-ed's coming.
But the wheels are coming off this system, and there ain't much to be done about it.
18 comments:
Hey Greg,
I’m 21 years old and I am entering my 4th year at a private university. After attending the same college for 3 years, I can tell you that many of the students don’t have a basic understanding of algebra, but they do know how to read and ‘critically’ think about a topic matter! Most of these kids are from wealthy families, and I was fortunate enough to have tax payers pay for my tuition, hah. Just this year alone, my university increased tuition costs by 13%! Frankly I blame the state and government for creating ‘artificial’ demand by handing out loans to kids who otherwise couldn’t afford go to college.
I wanted to attend law school, but I decided to use that money and go invest it into some oil and gas companies, luckily I did it during the market lows. Figured I’ll get a normal job and just rack up the dividends for a few years and purchase some farm land.
I enjoy your blog very much and I’m wondering what advice you have for someone that is about to graduate college with no technical skills and a degree in Political Science with Business/Econ minors? Hah!
~Dennes
Dennes:
You asked....
First thing I would do is travel the world. You are young but once. I have traveled extensively, and I did it "last class". It doesn't take a lot of money to walk, bus, hitchhike, and wash dishes/odd job your way across a continent or 2.
Technical skills can be self taught, and I think it a good idea to get going on that... I did not know one end of a hammer from the other when I bought my farm, but now I can make cheese, repair the barn, engines, plumbing, break a horse, butcher a pig, and grow my own food and preserve it. You don't need someone else's approval to use your own brain to figure out how to do things.
Private schools are fine for the Rich and those that get a great deal of financial aid. For the folks in between, they border on the outright silly in terms of return on investment. Particularly for areas of study that could be accomplished for a $10 library card.
For example, I am often amused at Wall Street's love affair with MBA's. There are literally hundred's of thousands of people that started a business from SCRATCH all over the U.S., and have gone on to decent success that are still in their 20's and early 30's. Why would Wall Street pass on these people in favor of people with absolutely no experience and no history of success - but with 18 months of part time training doing important things like working in teams to build Lego sets (Harvard Bis School)?
Go figure.
I will tell you what I tell every young person. Open a business (when you get done traveling), by hook or by crook. Get used to making your own decisions and either benefiting or being hurt by them. Learn to manage people, smell Bull Shit a mile a way, save money, invest money, negotiate, and serve customers or clients. Working for someone is a dead end for most (unless you can time transport back to the 1980's and '90's and work on Wall Street). Overhead is the enemy in your business and personal life. Freedom comes from having more than you need, which simply means either have more or needing less.... and it is much easier to live modestly to gain that freedom. Being a wage slave SUCKS.
Have as much fun as possible WITHOUT alcohol or the other life enders (yea, I am a libertarian and abhor the "War on Drugs". That doesn't mean I advocate their use). Surfing, martial arts, beach volleyball, chess.... WHATEVER, as long as it is healthy and won't leave you a cripple when you are my age. Health was, is, and always shall be EVERYTHING. We have given up our health in exchange for convenience and now most Americans have dickiedoos.
(That is a technical term for when a man's belly protrudes further than his dickie do.)
Stay clear of TAXES that can be avoided. States like Cal and New York are going to tax their business people and home owners into penury. I live in a cute house in Florida that I RENT for less than the property taxes would have cost me. No, I can't trick the house out because I don't own it. So what? I can spend the money renting a house in Spain next summer. See what I mean about overhead?
Law School? Not unless they are going to pay you to go. That business is doomed. In a small town you would make more money in shoe repair.
I have this same conversation with my 14 year old daughter, on a regular bases. However, have yet to add the virtues of a GOOD partner,yet. ( in ALL aspects of life ). That has been my biggest disappointmnet in life.
Peace
A good partner?
In 21st Century America I would define a "good partner" as someone that added value, and that if or when they choose, they leave you and go in good health and blessings.
Does that sound like the outcome of divorce court? I like the sound of the word "partner".
My third daughter went to a private girls-only school from 11 to 16, then back to state. It was a conscious choice; I reckoned from 4 to 11 she should understand about all kinds of kids and backgrounds, but at 11 things start getting more serious and she needed to get good grades. She didn't need boys around at 14-plus, distracting her from work or slowing down the class. At 16 she had the work ethic and grades, and went back into college for higher levels with a good attitude, but regained her broader social skills. Come September she starts a good uni studying Psychology & Sociology, with a clear professional career path (but a realistic attitude to the future job market).
But most important of all, she's aquired an attitude of 'entitlement', a knowledge of wealthy, ambitious friends and confidence in the social graces, and an accent which will get her into anywhere she wants to go. That's worth a million!
Now, from the OTHER side of the peanut gallery ... :)
I'm 42. Went to Ivy League U that was paid for by grandma. Been working for Bush/Clinton/Bush/Obama in Chicago for 20 years, now making almost $100K with benefits .. 14 years to inflation-adjusted pension ...
My life learnings ..
#1 It doesn't matter what your major is. What is much more important is showing you can actually FINISH something. 1/4 of college freshmen don't make it to the sophomore level, and half of people who start college never finish. I got a funky kind of engineering degree. Doesn't matter at all in the work that I do.
#2 2/3rds of people in the U.S, work for the S&P 500 companies. More than half of all small businesses fail. More than half are started by "stealing money" from friends and family who may never want to talk to you again. All the great inventions in life (railroads, computers, phones, automobiles, etc.) have already been developed and have matured. Work for a company that deals in real things, not in rug cleaning services, nail salons, selling commission insurance or tattoo parlors. Real industries pay real wages. You might even try the Federal govt. :)
3) Read, read, read, read, read. More money is lost because of ignorance than anything else. Squeeze paying all commissions, fees, stupid parking tickets, ATM fees and all other wasted spending out of your life.
Donal:
My son went to an exclusive private school since kindergarden. Perhaps he would have been better served with 4 years of private boys only high school and the rest of the tuition in a trust account.
But that wasn't the point, was it?
We were talking about:
1. A cost/benefit analysis in private vs public universities. If you are rich, or have rich family near death (grandparents) that wish to pay for it... why not?
2. Many of the private universities won't be here to offer an alumni network or other services... paying $200k for that is not worth it.
Believe me, if my son gets into a Vanderbilt, Duke, or Princeton I will be happy to send him. Not that I think he will learn a single thing more or better - but our system is fucked up and it unfairly helps to be a member of an exclusive club like that. But some also-ran versus a state school? State school and perhaps a nice graduation gift toward grad school.
Recent grads are not getting hired ANYWHERE. That unfortunate circumstance is going to continue for DECADES. Be frugal in EVERYTHING, including what you pay for your "education"
#4 2/3rds of people in the U.S. work in offices. Grow up and accept the fact that your life is over and assume your place in your cubicle and embrace the fact that you have a life outside of work. Offices are also the places that pay the most money. The #1 thing girls look for in guys is if you are a "good provider." Become one.
#5 Don't waste your time traveling around the world and blowing all your money on three months of trying to find the Sistine Chapel. The world ain't going anywhere. You won't have a damn thing better to do with yourself when you are old but to travel anyway (lots of senior citizen discounts!). The first ten years of your investment life is when your base money is made. I made a hell of a lot working and investing in the right things in the 1990s (most 42 year olds don't have a $265,000 401k, and that's just one component). Traveling the world is for dreamy-eyed screwballs. Be a man and accept your position in the salt mine. :)
Some excellent points Greg!
Bureaucrat Stop being a pain.
Greg, I would like to add that a lot of capacity built in the US has been for international students who hope to be able to immigrate to the US permanently when they finish their studies. That is going be a declining trend in the medium term as the US govt gets more protectionist with the immigration policy and outlook for finding jobs within the US worsens. This is likely to be a much larger factor in the Post-graduate field but will definitely play a role in the extinction of some colleges.
When i was researching US universities I remember coming across many such which catered to foreign students. They would accept you regardless of GPA as long as you could pay their lofty fees. They would soon become and endangered species.
Also on a personal note,
I had to choose between Southern Illinois and University of Southern California. SIU offered full tuition and $1200 a month stipend. USC would cost me $28,000 a year in fees (PG course was cheaper than undergrad) plus living expenses of at least $15,000 a year.
Wasn't a tough call. Besides I hate the heat anyway.
BTW Greg, in the UK (where my daughter lives) the Degree courses (undergrad) are 3 years, fees are paid by the govt and she gets a subsidised loan for living exs. It's very low interest and she doesn't pay anything back until she's earning a decent wage. She expects to finish her Degree with about £12k ($16k) of debt.
But let's not get into discussing state-funded education again! ;-)
Most private colleges and universities along with their K thru 12 counterparts are places for the children of the elites and oligarchy to be acculturated into their class.
As Donal says, you want your child to have the right accent. Literally in the UK, figuratively here in the USA.
So I expect the private insitutions to be around for a while as the state systems will languish due to lack of funds. Then we will have libertarian paradise.:-)
And bureaucrat, a huge amount of US ignorance is based on no experience of the outside world. Every US young person would benefit from a budget, street level tour of some other part of
the world...especially in some of the poorer countries in Africa, Asia or the Americas.
If you live in Chicago, the world comes to you instead. We have lots of African and Thai restaurants (they are a major reason why everyone in the white suburbs comes into Chicago on the weekends). If there is so much to be learned from Africa (famine, corruption, depleted resources), how come half of the Nigerian (and Pakistani) population are driving U.S. cabs? Apparently they had nothing more to learn "over there."
And Scientist .. you picked Southern Illinois U over USC? Nobody goes to Southern except people trying to be pilots, and we peak oilers know the future they have (none). :)
Yes Bureaucrat. That was a a $85,000 net positive difference. That said Springfield Illinois sucks big time.
Nashville Tennessee (Vanderbilt)was much better
Bureaucrat:
I don't remember, but it sounds to me like you don't have children. I you had 3 kids to educate, and no grandparents to hand the bill off to, that would be $600k in present US$ for the 3 of them.
No offense and in all candor...Can a government bureaucrat afford that? Hence, I recommended that the young man start a business and try and make some money.
Anon @8:34 am
Bro, that could not be more true (in my poor/working class guilt).
Stay tuned on the college thing.
You're correct. No kids. Just friends with "dreams." I am a dream killer. My job is no dream. I am a pessimist and a realist. I wanted to be a cop! The numbers are clear to both you and I. Half of small businesses are one-person operations done part-time making less than $10,000 a year, and like I said, such businesses borrow huge sums from family & friends, only to likely go out of business within five years. The S&P 500 world (like the Federal government) is mundane, boring, stifling, political and does 90% of the economic work in this country. Mr. 21 year old needs to hear the truth. And yes, overpaid bureaucrats like me will very soon be the ONLY people left that can really pay for college. I'm putting one ungrateful friend thru DeVry even now. Costs as much as a real college. :)
Great post. I can relate in many ways. I saved my $$$ by going to the state U for undergrad so that I could use my limited funds, loans, and a research assistant job to pay for my 5 years of Ivy League grad work.
I've started the which-college-to-attend exercise for my oldest son. As I see it, there are around 2 dozen schools that may truly be worth the $50k/year. I feel fortunate to live in TX where we've got excellent, affordable state universities (UT, aTm, etc.). (Baylor and TCU, though private, are both solid schools and nowhere near as expensive as Stanford, Harvard, Rice, etc.)
To stop paying through the nose for private school for our kids, we pulled them out and home schooled them for 5 years. We decided to save the $$$ for college. After 5 years of excellent results homeschooling, we moved to TX. More precisely, to a town with an outstanding public school system and now we're mapping out how to take as many AP courses as possible at the local HS. I truly feel bad for those who do not have excellent public schools & universities.
FYI: We saw their SAT/Iowa basic scores rise once we started home schooling. High parental involvement & low student-teacher ratios usually equate to better student learning whether the schooling is at home, private, or public. Accordingly, we are involved in the parent organizations at our local schools (e.g., band, football, etc.).
Good lord - everyone here is blowing smoke.
In a few years, people will consider finding or growing or hunting three square meals a day to be the definition of success.
I am part of the college bubble.
I graduated from law school a couple of years ago. I have three jobs now - INDEPENDENT contractor for another attorney, developing my own practice and adjunct at a private business college that accepts many foreign students. Working as an adjunct is basically the same as being an INDEPENDENT contractor - no bennies whatsoever. I teach three courses. The college without my knowledge or assent this year increased the class size from 25 to 35 students. It makes my job much tougher and diminishes the experience of the students too. It's all about the money.
Most of the degree are BS - marketing, management and undeclared. I tell most students to either get their CPA or engineering degree. You either need a technical degree some specialized knowledge or you'll be out of luck.
A few years ago everyone and anyone could get large student loans. This enabled colleges to increase tuition by 7% or more annually. The heads of most colleges and most administrators are grossly overpaid.
I owe $100,000 in student loans with monthly payments of about $1,000. They're not getting paid.
I'm expecting to eventually have Uncle Sugar do something like he has for people who bought the wrong car, bought the wrong house and companies that made wrong decisions.
I want some too!!
Abraham
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