Thursday, August 13, 2009

Student Loans and the College Credit Crash

Taking on $100k in student loans for an under grad degree is a thing of the past.  Taking out a mortgage on the family ranch to pay for little Jimmy's college education ain't happening anymore.  The scholarship endowments have been HAMMERED, and the (college) credit market will not go back to 2006 in the life time of anybody reading this.

Paying ANY amount of money for a degree in many of the humanities will prove to be something only the very rich, and very poor, will be well served in doing.

The old "frog in boiling water" applies.  Nobody notices that the water got too hot - until now.  In REAL terms there has been NO inflation (if you take housing into the mix) for nearly a decade - yet colleges and private schools feel it is their G-d given right to jack their fees about 7% per year (on average).  Anybody reading my stuff knows that 7% compounded means a DOUBLING of tuition fees every decade or so (rule of 72 or e).  Got that?

(Consumer prices are down by 2% in 2009, but my son's private school went up by 5%... WTF? 

You see, these institutions have made the same lethal error that the municipalities have made.  They made silly assumptions and and then made promises they cannot keep based on ever expanding credit availability to pay for their product (student loans for degrees in underwater basket weaving, woman's studies, and African American/Gay/Native American/Polish American/ Irish American et al... studies).  Boy, would I feel good about a degree in African American studies from Harvard with the head of the department so bloody dumb he got arrested for disorderly conduct in his own home (not).... that should lead to an important career wasting taxpayer's money some place important.

America spends BILLIONS so that young adults can have 4 leisurely years partying, ordering in pizza, and swapping STD's with their fellow students - with just a bit of studying thrown in for positive distraction.  WOW! That ought to prepare them for the real world, eh?

(Think I exaggerate?  Compare the 4 year experience of the average student at your average state school with the 4 year experience of a cadet at one of the U.S. military academies.  I think you will find the differences quite glaring (and no, I am not advocating a military career... just pointing out the obvious)).  

Sorry, but in a world of intense credit contraction and oil supply contraction the market will NOT be able to support that system under any circumstances.  Being the last grad out the door before they close those ivy covered halls for good will not be worth the price of admission under any circumstance.  Especially for an education in something that can't actually DO anything.

You don't need $100k in debt in order to study history and many of the other humanities.  Join your local library - its free.  And study - we NEED historians (clearly, the elite do not know their European history terribly well... if they did, they would not be so hot for gun control... and I am not talking about Nazi Germany... take a walk through the history of the Dark Ages and the subjugation of the peasants by the nobility and royalty, the elite of the time... the elites had weapons... the peasants had rape, murder, and robbery.)

At some point SOMEONE is going to notice that we do not need another PAID lecture on a host topics.  These lectures can be seen over and over again over the CENTURIES on youtube or whatever takes its place.  Pi is Pi, e is e, and 2 +2 will still be 4 in the year 2500. The internet is the ULTIMATE tool for distributing education - text books don't even come close... so why has it not been embraced?  MONEY.  Yea, I know I am exaggerating... but you get the point...

Our educational system is yet one more boondoggle.  

Libertariananimal (at) gmail (d0t) com


bureaucrat said...

I mentioned it before and I'll say it again. I have a degree in Industrial Engineering. I started in Electrical and washed out. The other real engineering majors (Mechanical, Electrical, Civil) called it "Imaginary Engineering." Yet in the end, I kinda liked it and still got out in 4 years. But what I've found in my "life experience" is that most people never get jobs in their area of degree. What is way more important is showing you actually know how to COMPLETE something .. complete ANYTHING .. cause in the end, your job is what teaches you everything you need to know to make a buck. We can laugh all we want about "Gay Studies" majors, and how irrelevant they are, but if you make in thru in 4 years and write all those papers and take all those tests, and don't quit, you're qualified to work almost anywhere. 99% of jobs ain't rocket science. But 99% of them expect you to find a way to complete assignments.

Stephen B. said...

Over the past 20 to 30 years, but especially the last 10, many private colleges and universities went on building binges extraordinaire. Huge, new, luxury dorms, monster academic buildings, fancy cuisine dining halls, mega athletic, gymnasium, aquatic, and field house facilities, fancy student centers - all built because competing for prospective students with other schools seemed to demand it. But now the schools' customer base - middle class America's kids - is about to be forced away in droves by lack of credit as Greg points out.

I'm thinking of Middlebury College in the Vermont town of the same name. The College just about doubled in size over the past two decades and has come to completely dominate everything about the town of Middlebury which in fact, is basically a factory town now. Several new high-rise dorms were built. Hundreds upon hundreds of highly paid staff and faculty drove demand for fancy homes in the tiny, dairy towns around Middlebury through the stratosphere, forcing the native farm economy out to make room for the new $800K palaces being built in the old pastures on the surrounding hilltops. But now schools like Middlebury, having severely misjudged the future, will have to make savage cuts in their budget and in their whole operation, if they even survive at all.

I wonder if Academia has any clue as to what is in store for them regarding all this. This is going to be UGLY.

Donal Lang said...

It's even worse than you say. it's not just that kids get useless degrees and huge debts, it's also that hardly anyone gets a proper training in DOING something anymore, like production engineering, or farming & horticulture. Those careers are just not good enough for the bright kids!

We talk of post oil, but we also reached 'peak-skills' about 30 years ago, and we're now definitely on the downslide. The people who had those skills are now retiring, so who will teach them to the upcoming generation?

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Lenny said...


You are so right. Most humanities degrees could be obtained for pennies on the dollar from the library. My kids will get their education on the trading desk and the farm. If they want to get college or post grad education it better be for something useful (read: hard science or math).

Best regards.


Greg T. Jeffers said...


I do agree. Most people DO NOT WORK in their college field of study.

Does not that make the point? If you do not use your specific training, or said another way... nothing in the market place demanded this form of training...

Why, exactly, did you spend $200k for it?

Ahhh... for the "experience", right?

There are infinitely better experiences to be had for $200k.


You nailed it. The "All Seeing" liberal elite running America's colleges and universities were so busy whoring themselves at the trough (not too differently from politicians, no?) to notice that they have overbuilt and over "improved" their college version of the McMansion to notice that they have destroyed their customer base with too much debt.

bureaucrat said...

I did make two lifelong friends from college (so far), so I guess it wasn't a total waste. A college degree is a "job certificate." It shows that you will do things you don't want to do, and that makes you a better risk for an employer than someone without a degree. I think we both agree the degree can really be in any subject. Today's $200,000 experience (mine was $60,000) I don't think is entirely wasted. For one thing, you are forced to learn the best ways to work a washing machine. :)