The Great College Hoax

Quote from adams135 : Reminiscence of the housing debacle yes .. Hoax … hardly Using the house debacle as an example. Yes, easy money but last I heard no one held a gun to anyone’s head and forced them to take a loan they couldn’t afford. When I bought the home I live I now I was told I could afford a mortgage double of what I was borrowing. For some crazy reason my wife and I knew what we could afford and didn’t need a mortgage broker to tell us .. let alone talk us into borrowing more than we wanted. The same applies to a college education. Do you listen to a 30-45 sales pitch about college, earning after college, and loan amounts and rates and just take it for gospel or do you put some effort into it and use the basic math skills hopefully your High School taught you and do you own analysis of the cost, debt payment, and probably and decide for yourself how much loan debt you can afford. When you do this the State University starts looking a whole lot better. Like everything else now days people always believe nothing is their fault so it must be someone else’s fault. Funny how the Government holds an individual adult responsible when it come to murdering someone else but to make a bad financial decision .. nope .. then it is always someone else’s fault. The American people, especially the 18-30 years olds who have no problem voting need to realize that bad decisions have consequences ….. consequences they are responsible for not someone else. Unless it’s fraud, then don’t cry on my shoulder .. God knows my wife and I have made many mistakes over the last 42 years but have always paid for them and learned .. never have we expected someone else to pay for our mistakes like the ME E ME entitlement generation does now days.

It is a hoax or a fraud from the standpoint of the cultural perspective that dominates people's vision... the presumption is that you must go to college to 'make it' in America, and that presumption is reinforced by the fact that so many jobs, even entry level jobs want, and expect people to have a degree of some sort as a gateway into the world of adult work.

I don't know that anyone needs to cry on anyone's shoulder... but we do need to bring this hoax to the attention of younger people. Being a plumber is not all that bad of a gig, and you can't outsource a leak repair to India.

Your suggestion is that people should use math and due diligence to determine how one might make a living... but when we consider that law schools were reporting any employed graduate as a 'working attorney' we see that there was indeed some overt fraud in the mix too. Many career paths that once existed as fruitful have been decimated... being a professor comes to mind... that is no longer a viable option as the tenure track jobs are much more scarce now... much teaching is done by adjuncts and the like. Being a lawyer is far less lucrative than it once was based on the number of lawyers out there driving down wages, and the continuing increase in law school cost making that a less appealing option. Medicine as a ticket to a life of upper middle class living is going to be fixed as well once the full implications of Obamacare are worked out over the next 15-20 years.

The inflation in college costs has impacted the state universities as well, and the article (now 4 years old) notes that a degree from a state school is 46K. Would it have been cheaper to finance every minute of a 4 year degree in 1970 vs now? Yes. The inflation factor in education is eating away at the earnings advantage over high school, and trade school.

The worst offenders of all are 'for profit' schools where in many cases there is overt fraud in terms of the quality of education provided. The fact that these schools are allowed to continue functioning and continue to prey on the lower class people, and people who are less well educated to begin with is criminal. That they are admitting 'students' who by and large couldn't get into other 4 year schools should be a giant red flag. Community colleges are good, and do a similar service at a fraction of the cost, for profit schools are bad. Entire careers and corporate entities are allowed to be built on the backs of the gullible millions who aren't aware that their credit worthiness is being harvested for someone else's gain. In that sense it is very much like the housing bubble as you also say.

You mention the government holding people responsible for things, and seem to imply that the government would not hold people responsible in this instance, but I think it should be noted that, as the article mentions, you cannot discharge this debt via bankruptcy. In that sense college debt often becomes a kind of indentured servitude.

Quote from Doctor_Wu : It is a hoax or a fraud from the standpoint of the cultural perspective that dominates people's vision... the presumption is that you must go to college to 'make it' in America, and that presumption is reinforced by the fact that so many jobs, even entry level jobs want, and expect people to have a degree of some sort as a gateway into the world of adult work. I don't know that anyone needs to cry on anyone's shoulder... but we do need to bring this hoax to the attention of younger people. Being a plumber is not all that bad of a gig, and you can't outsource a leak repair to India. Your suggestion is that people should use math and due diligence to determine how one might make a living... but when we consider that law schools were reporting any employed graduate as a 'working attorney' we see that there was indeed some overt fraud in the mix too. Many career paths that once existed as fruitful have been decimated... being a professor comes to mind... that is no longer a viable option as the tenure track jobs are much more scarce now... much teaching is done by adjuncts and the like. Being a lawyer is far less lucrative than it once was based on the number of lawyers out there driving down wages, and the continuing increase in law school cost making that a less appealing option. Medicine as a ticket to a life of upper middle class living is going to be fixed as well once the full implications of Obamacare are worked out over the next 15-20 years. The inflation in college costs has impacted the state universities as well, and the article (now 4 years old) notes that a degree from a state school is 46K. Would it have been cheaper to finance every minute of a 4 year degree in 1970 vs now? Yes. The inflation factor in education is eating away at the earnings advantage over high school, and trade school. The worst offenders of all are 'for profit' schools where in many cases there is overt fraud in terms of the quality of education provided. The fact that these schools are allowed to continue functioning and continue to prey on the lower class people, and people who are less well educated to begin with is criminal. That they are admitting 'students' who by and large couldn't get into other 4 year schools should be a giant red flag. Community colleges are good, and do a similar service at a fraction of the cost, for profit schools are bad. Entire careers and corporate entities are allowed to be built on the backs of the gullible millions who aren't aware that their credit worthiness is being harvested for someone else's gain. In that sense it is very much like the housing bubble as you also say. You mention the government holding people responsible for things, and seem to imply that the government would not hold people responsible in this instance, but I think it should be noted that, as the article mentions, you cannot discharge this debt via bankruptcy. In that sense college debt often becomes a kind of indentured servitude.

I guess my problem is I don’t consider it a Hoax .. more of a misconception, a misconception that too many promote.

One of the reasons for this is too many people look down on those without college degrees. I guess it makes them feel superior (part of the Me ME ME attitude … I’m better than <fill in the blank>). How many times have you seen derogatory comments about Red Necks on this board alone.

When I was in High School (long before most on these boards were born) and WAY before the Internet you read the paper and went t the Library to find out not only the Salary in your area of jobs but also what was needed and what wasn’t as well as what education would be needed for any job you were interested in. And yes, to a lot of the know it alls on here some type of additional education was needed for a LOT of non-college jobs. As an example, if you wanted to be an electrician you had 4 years of NIGHT school to look forward to.

I think a lot of the kids now days are just too lazy to do the research required in order to make an intelligent informed decision.

Just like the Ivy League schools .. It doesn’t take much research to figure out most of the time they aren’t worth the money if you have to take out loans which you will be paying off for years vs. a good state college/University.

Again .. if these so called kids can be drafted into the Military or go to jail for the rest of their life because they murdered someone then they should be responsible for enough to understand the pros and cons of their decision for an education.

Just like when you buy a house … YOU should know what you can afford and not rely on some banker or mortgage broker. If you are old enough to sign on the dotted line you’re old enough to be prepared to face whatever consequences of what happens when you do.

I’m tired of hearing how everything is always someone else’s fault. People need to grow up and if they want the all the good stuff of being an adult accept the responsibility of being one.

BTW .. your fraud comment .. if it is fraud then I would think some law has been broken.

Quote from adams135 : I guess my problem is I don’t consider it a Hoax .. more of a misconception, a misconception that too many promote. One of the reasons for this is too many people look down on those without college degrees. I guess it makes them feel superior (part of the Me ME ME attitude … I’m better than <fill in the blank>). How many times have you seen derogatory comments about Red Necks on this board alone. When I was in High School (long before most on these boards were born) and WAY before the Internet you read the paper and went t the Library to find out not only the Salary in your area of jobs but also what was needed and what wasn’t as well as what education would be needed for any job you were interested in. And yes, to a lot of the know it alls on here some type of additional education was needed for a LOT of non-college jobs. As an example, if you wanted to be an electrician you had 4 years of NIGHT school to look forward to. I think a lot of the kids now days are just too lazy to do the research required in order to make an intelligent informed decision. Just like the Ivy League schools .. It doesn’t take much research to figure out most of the time they aren’t worth the money if you have to take out loans which you will be paying off for years vs. a good state college/University. Again .. if these so called kids can be drafted into the Military or go to jail for the rest of their life because they murdered someone then they should be responsible for enough to understand the pros and cons of their decision for an education. Just like when you buy a house … YOU should know what you can afford and not rely on some banker or mortgage broker. If you are old enough to sign on the dotted line you’re old enough to be prepared to face whatever consequences of what happens when you do. I’m tired of hearing how everything is always someone else’s fault. People need to grow up and if they want the all the good stuff of being an adult accept the responsibility of being one. BTW .. your fraud comment .. if it is fraud then I would think some law has been broken.

17-year-old kids are gullible. Yeah, they are capable of being shot or locked up, but they don't have the experience to have developed sound judgement. And lots of people are lying to them, telling them to go to college in order to figure out what they want to do, promising that the alumni "connections" are almost guaranteed to land them a white-collar job. I'm not sure if these family members and teachers just enjoy telling tall tales or if they are in a bubble from the past or the government sector, but most people don't realize that 99% of people are bullshitters until they are at least 20.

Quote from adams135 : I guess my problem is I don’t consider it a Hoax .. more of a misconception, a misconception that too many promote. One of the reasons for this is too many people look down on those without college degrees. I guess it makes them feel superior (part of the Me ME ME attitude … I’m better than <fill in the blank>). How many times have you seen derogatory comments about Red Necks on this board alone. When I was in High School (long before most on these boards were born) and WAY before the Internet you read the paper and went t the Library to find out not only the Salary in your area of jobs but also what was needed and what wasn’t as well as what education would be needed for any job you were interested in. And yes, to a lot of the know it alls on here some type of additional education was needed for a LOT of non-college jobs. As an example, if you wanted to be an electrician you had 4 years of NIGHT school to look forward to. I think a lot of the kids now days are just too lazy to do the research required in order to make an intelligent informed decision. Just like the Ivy League schools .. It doesn’t take much research to figure out most of the time they aren’t worth the money if you have to take out loans which you will be paying off for years vs. a good state college/University. Again .. if these so called kids can be drafted into the Military or go to jail for the rest of their life because they murdered someone then they should be responsible for enough to understand the pros and cons of their decision for an education. Just like when you buy a house … YOU should know what you can afford and not rely on some banker or mortgage broker. If you are old enough to sign on the dotted line you’re old enough to be prepared to face whatever consequences of what happens when you do. I’m tired of hearing how everything is always someone else’s fault. People need to grow up and if they want the all the good stuff of being an adult accept the responsibility of being one. BTW .. your fraud comment .. if it is fraud then I would think some law has been broken.

Not fraud outright, but I have heard of cases where schools will guarantee prospective students that they will have a job when they graduate. It's likely these are isolated incidents of loose lips by an admissions officer.

Other than that, kids have no one else to blame but themselves, and every idiot in their life that told them that college was a must...

Quote from pur : ... but most people don't realize that 99% of people are bullshitters until they are at least 20.

And yet we let them carry a gun (military of nothing else) and Vote .. damn that's scary.

yes 17, 18, 19, 20+ yr olds are gullible...but people that age are gullible about a lot of things if they aren't raised right. should we also prevent this age group from getting credit cards, buying cars, having sex, etc. bottom line is that at 18 you at the mercy of capitalism. hell there are plenty of 30+ yr olds that make horrible financial decisions so maybe its better that these college kids get to learn early....gives plenty of time to repair their credit and learn about finances.

Quote from Doctor_Wu : It is a hoax or a fraud from the standpoint of the cultural perspective that dominates people's vision... the presumption is that you must go to college to 'make it' in America, and that presumption is reinforced by the fact that so many jobs, even entry level jobs want, and expect people to have a degree of some sort as a gateway into the world of adult work. .

didn't read the entire thread...but of course its a hoax....just get as many people in to borrow, and borrow, and create debt... just a legal pyramid scheme in where the banks and schools are at the top raking it in, and only a small percentage really get decent jobs, while the others look for real work while working at TJ Maxx or the mall... most will never wake up to the entitlement, healthcare, big pharma, educations shams ...

Welcome to subprime U [cnn.com]

Quote : Make no mistake: the student loan market is a disaster. The Wall Street Journal recently reported that a third of borrowers in the $900 billion market are subprime, and about a third of those subprime borrowers aren't paying bills on time. Lending standards are not rigid. College education prices are inflating. And, at the very least, young college students facing a poor job market are offered seemingly endless amounts of cash with little initial recourse. It's tempting to draw parallels to the U.S. mortgage market. But the two markets, at close glance, are nothing alike. A blow-up in the student loan market would have few immediate consequences -- and that is its biggest risk.

Quote : The most important distinction between the student loan and mortgage markets, apart from size (the mortgage market was nearly $11 trillion at the peak), is that the world's most creative lenders, big U.S. banks, are hardly involved. In mid-2010, the Department of Education began lending to students directly. Credit Suisse reckons the United States government now backs 88% of student loans.

Quote : The closed-market dynamic could also make student lending more dangerous in some respects. Banks had several different types of watchdogs when the mortgage market started to get out of control. Short sellers drew attention to bank balance sheets. The SEC checked up on accounting marks. Investors demanded explanations for loan criteria and valuations. But the government has no one keeping watch.

Quote : The government exercises an accounting quirk that encourages risky lending to support the budget. Here's how it works. When the government issues a loan to a student, it considers future payments it expects to receive. As part of its budget calculation, it takes the value of all those payments, including interest and fees, discounts them, and books the net present cash value in the budget. The money lent to a student is offset by the value of the assumed cash it will receive in the future -- the promised principal and interest after accounting for amount lost to default. But the government's little quirk comes in the way it discounts the cash payments. Typically a private sector company would have to look at the risk associated with receiving those future payments. The riskier the payments, the higher the discount rate becomes, and the lower the present value of the cash. Despite student loans having higher delinquency rates than mortgages and auto loans, the government uses the Treasury rate -- akin to having no risk -- to discount the loans. This makes present values higher than they would be if you accounted for the risk associated with those loans by using a fair market discount rate.

Interesting article and discussion (though I only read the last 30 posts).

Like many things in America, capitalism is a big driver of this trend. Not only in promising kids more money and the American Dream, but also the for profit schools trying to increase admission any way possible. This includes admitting kids who have a high chance of failure, and no real way to pay back the money once they do drop out. No one is forcing those kids to go to these schools, but college is idolized in a way that I didn't see when I lived in Australia.

Many Australians take a "gap year" when they complete high school to go travel the world, learn more about themselves and what they enjoy, or just work. This wasn't a concept I'd ever even heard of before I lived there, and I wish I'd done something similar after high school. Instead, here in America, kids face a huge pressure to go straight to college so they can get a good job.

Additionally, Australian schools are far, far less expensive than American schools - though many are propped up by foreigners paying much higher tuitions (as I did for my MBA). More importantly, being a plumber or construction worker is not a job that one turns their nose up at- those construction workers are making better wages than the average American construction working (28k/yr, $13/hr in 2010 [bls.gov]). Compare to Australia where the minimum wage for construction workers is about 28k/yr- link [gov.au]. Minimum wages are higher in Australia ($15-20/hr for those over 21, less for younger workers) as it is considered a "living wage" - another difference with the US. I'm not sure this is why blue collar jobs pay much higher wages, but it may be a factor. If you're willing to take a job as a miner, 6 figure salaries are not difficult to get a hold of.

The degrees that kids study also makes a huge difference- do we really need more history, poetry and communications graduates? I'd argue that if this is where your interests lie, a 4yr degree isn't the best way to go about improving your knowledge. We're importing foreigners hand over fist to fill the huge gap we have in technical fields. I work in Silicon Valley, I see it happening- we don't have enough engineers, programmers, or even analysts to fill the roles that are open.

Kids should be educated on the options available- technical schools, apprenticeships, community colleges and universities. That is what guidance councilors should be doing.

Quote from Captal : That is what guidance councilors should be doing.

Antoine Laconte: I'm a gigolo.
Deuce Bigalow: Giga-who?
Antoine Laconte: Women pay me to... give them pleasure.
Deuce Bigalow: How did you get that job?
Antoine Laconte: I just sort of fell into it.
Deuce Bigalow: I'm gonna kill my guidance counselor!

Going into debt to go to college doesn't make it a hoax. It's a lack of responsibility. It's a bet. You're betting that you will be able to pay the loan. The bank is betting you won't. If you do or not, the bank still wins. I paid my way through college with small supplemental scholarships and grants only paying for maybe 25% of my total tuition.

Quote from RPGROB : Going into debt to go to college doesn't make it a hoax. It's a lack of responsibility. It's a bet. You're betting that you will be able to pay the loan. The bank is betting you won't. If you do or not, the bank still wins. I paid my way through college with small supplemental scholarships and grants only paying for maybe 25% of my total tuition.

The bank is betting you won't be able to pay the loan? If you don't, they don't get paid.

Quote from ASG : The bank is betting you won't be able to pay the loan? If you don't, they don't get paid.

As long as you're in debt, you're the bank's slave

Quote from ASG : The bank is betting you won't be able to pay the loan? If you don't, they don't get paid.

when the fed guarantees it? also let's not forget that SL's are unlike any other debt in that it's just about impossible to discharge a SL in bankruptcy.