Thursday, September 3, 2009

College Bubble?

I briefly mentioned a college bubble in the Welcome to 2009 post, and on another occasion, College/University Bubble, linking to a video on the subject that was removed by YouTube. Mainstream media (and Denninger) has decided to weigh in. Welcome to debt hell, students.

2009-09-03: Denninger - Is The Light Flickering On?

2009-09-03: Students Borrow More Than Ever for College
Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.
The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government's National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz. Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.


Tomas said...

these are scary times for anyone coming right out of college. Those who can afford to go on to a graduate program may be able to wait things out, but even that strategy is risky, as even state universities face budget cuts that, if coupled with declines in private endowments, will do immense damage.

Another thing, if colleges are doing more with less, what happens to the quality of education?

The odd thing with the WSJ article is that two examples are law school graduates. It seems that something parallel with MBA students was going on in the early 1990s. Clerking sounds like clerical or at best administrative work. There are high paying admin. jobs that require a Juris Doctorate and passing the bar, but the article isn't clear that she didn't compete against 49 high-scchool graduate typing-pool grannies for a low-paying support job.

I went back to school in mid-life and borrowed. Yes, I have debt and I hate it. I worry about paying it off. However, it is nothing compared to what I read about. I also went in with my own agenda. I feel that I will endure, one way or another. It's the younger generation I'm worried about.

Tyrone said...

Well said, Tomas.

At some point, the cost of attending college doesn't generate an appropriate ROI. There is a certain intangible benefit in higher education, but that is largely reserved for the very wealthy. Rather than being enslaved to a lifetime of debt, people will have to do the cost trade and perhaps choose another way to earn and live. As Celente says, if your kids are attending college to learn humanities, send them to a trade school, instead.

I am also worried about the younger generation.