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Student Loan vs Deb Tradeoff.

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Student Loan vs Deb Tradeoff.

Postby Sandi » Wed Apr 24, 2013 5:10 pm

This thread is partly inspired by bdog's "Are high school and college anachronisms?"

Richard Vedder at Bloomberg says end student loans, don't make them cheaper. He asks why nearly 54 percent of college grads are unemployed or underemployed, when employers complain that they can't find skilled employees.

The Bureau of Labor Statistics tells us that we now have 115,000 janitors, 83,000 bartenders, 323,000 restaurant servers, and 80,000 heavy-duty truck drivers with bachelor’s degrees -- a number exceeding that of uniformed personnel in the U.S. Army.

Was college worth it? A huge part of the problem relates to federal financial-aid programs. Annual student loans, Pell Grants, tax credits and other federal assistance totaled some $169 billion a year in 2010-11 -- more than 1 percent of national output. These programs are based on two erroneous premises: that almost everyone needs higher education for vocational success, and that they reduce student costs.

More than 25 years ago, Education Secretary William Bennett argued that federal aid programs benefited colleges more than students. Recent studies by Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard University, as well as by Andrew Gillen for the Center for College Affordability and Productivity, support that hypothesis. A new study by Nicholas Turner of the Office of Tax Analysis in the U.S. Treasury Department argues that when tax-based aid goes up, institutional scholarships go down, dollar for dollar.


An acquaintance of mine Scott Kirwin, who is college educated, and lived and worked in many parts of the world writes about the loan vs indebtedness tradeoff.

As an intellectual, college educated adult and the parent of a teen, I’m concerned about the split between the job market and the educational system. Like every parent I want to provide the best start to my kid as possible. But when I look at the academic world, its cost in terms of time as well as money, I’m wondering if the path that I followed still makes sense. Vedder estimates that students spend 30 weeks a year in school and less than 30 hours a week on academics. In the best quote I’ve seen on the expense of higher education he echoes Churchill when he concludes “never have so many dollars gone to teach so many students for so little vocational gain.” With the average cost of a year of public college at $22,000 and of a private one at $43,000 a quick bit of (high school) math nets the per-hour cost of the education using Vedder’s hours spent at $24.50/hour (public) and $47.77/hour (private).

Is there a better way? For many parents and potential students there must be, but if so what?

At those rates one could realistically hire a full-time private tutor – and good ones at $48/hour. But if you do would you demand him or her teach your child about Happiness or watch HBO? If not, why would you as a parent allow your child to waste his time on such fluff – especially when he is bearing more of that cost by becoming indebted?

Indebtedness is one of the worst possible burdens one can put on one’s child. ...It’s much more difficult to pursue a once-in-a-lifetime career opportunity while an existing job makes the student loan payments.


I'm retired now, but my schooling was GED and technical college. I did ok except for retirement (lost my most of my retirement fund in the 90s Dot-com/Tech Bubble crash). Sure I probably would have done better with a degree: if my parents or myself could afford it, but being from a poor family, at what price? For that matter at what price for any family?

For many, I think high school and technical college is a better way to go, rather than spend half their working life paying for student loans.

Discuss.
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Re: Student Loan vs Deb Tradeoff.

Postby Remember_Me » Wed Apr 24, 2013 5:15 pm

Sandi wrote:Discuss.


I don't know.

I kinda like Deb.

She always brings those good donuts.

Not the grocery or gas station ones.
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Re: Student Loan vs Deb Tradeoff.

Postby fisticuffs » Wed Apr 24, 2013 5:19 pm

The numbers are pretty clear. It comes down to the degree and the individual but overwhelmingly, education pays off.
http://www.bls.gov/emp/ep_chart_001.htm
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Re: Student Loan vs Deb Tradeoff.

Postby snoqueen » Wed Apr 24, 2013 6:48 pm

Yah, that Deb Tradeoff is good peeps. It was her what drove me halfway to Stoughton, ya know?
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Re: Student Loan vs Deb Tradeoff.

Postby Henry Vilas » Wed Apr 24, 2013 7:13 pm

Sandi, I might be mistaken but I thought you are a vet. I am and got two degrees that I otherwise might not have been able to afford.
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Re: Student Loan vs Deb Tradeoff.

Postby Sandi » Wed Apr 24, 2013 7:49 pm

Henry Vilas wrote:Sandi, I might be mistaken but I thought you are a vet. I am and got two degrees that I otherwise might not have been able to afford.


Yes I am a vet, but was too stupid to take advantage of what was available when I should have. By the time I settled down and wanted to look into getting an education, almost all the advantages had expired.

fisticuffs wrote:The numbers are pretty clear. It comes down to the degree and the individual but overwhelmingly, education pays off.
http://www.bls.gov/emp/ep_chart_001.htm


In the past employers were willing to hire graduates and break them into the job. Now from what I understand, more employers want to hire "experienced" people. Your graph only shows those that have jobs, and doesn't count the unemployed, or underemployed working out of the field of their degree. Well it shows unemployed, but I think only if they are working in the field of their degree.

I don't dispute those numbers, but wonder how it would look with a $100k loan debt factored in.
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Re: Student Loan vs Deb Tradeoff.

Postby ArturoBandini » Wed Apr 24, 2013 8:45 pm

fisticuffs wrote:The numbers are pretty clear. It comes down to the degree and the individual but overwhelmingly, education pays off.
http://www.bls.gov/emp/ep_chart_001.htm

Thanks for using some numbers. I think that in this case it's harder to separate cause and effect than it seems at first glance. For instance, what if what's really happening is that success-bound individuals (those with high intelligence, good connections, family support, good behavioral habits, capital, etc) tend to go to college, instead of the converse, which is that individuals who go to college tend to be successful (and what is implied by your post)?

I think that the truth is going to be some mix of both pathways (college -> success, success -> college), but it's hard to say which is more important.
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Re: Student Loan vs Deb Tradeoff.

Postby Detritus » Wed Apr 24, 2013 9:24 pm

It is worth observing that levels of student debt vary considerably across different kinds of sectors of school (public, private non-profit, private for-profit). The College Board had a report in 2010, for example, indicating that 38% of BA graduates from public universities had no debt, only 4% of graduates from private, for-profit universities had no debt. Conversely, only 12% of graduates from public universities had more than $30K debt, but for the for-profit sector that percentage was 53%. You can find the report here.

The for-profit sector has been growing by leaps and bounds, particularly the online schools (Globe, Phoenix, DeVry, etc.), and much of their growth has focused on poor students, who are encouraged to borrow the maximum. (Those students default at much higher rates than middle and upper-class students going to public or private, non-profit four-year schools, which not only costs the federal taxpayers money, but also ruins the students' credit rating.

This is where the higher ed bubble is. It's not in the big state schools, but in the private sector, which has profited immensely from federally guaranteed student loans.

Sound familiar?
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Re: Student Loan vs Deb Tradeoff.

Postby Remember_Me » Thu Apr 25, 2013 1:13 am

snoqueen wrote:Yah, that Deb Tradeoff is good peeps. It was her what drove me halfway to Stoughton, ya know?


If she got you anywhere near Stoughton you may want to re-evaluate your friendship.
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