Paypal founder says there's a Bubble in Higher Education

[porter]

http://techcrunch.com/2011/04/10/pet...8TechCrunch%29

[dcarrigg]

Re: Paypal founder says there's a Bubble in Higher Education

http://techcrunch.com/2011/04/10/pet...8TechCrunch%29

More college. More debt. Fewer Jobs. Less money. Bubble?


What about the future?

[sunskyfan]

Re: Paypal founder says there's a Bubble in Higher Education

Why would there be a difference between the Housing bubble and the College Bubble? Both government funded and subsidized with the same basic justification: everybody deserves a house or a college education.

[don]

Re: Paypal founder says there's a Bubble in Higher Education

housing bubble . . . wealth effect

tuition bubble . . . smart effect?

[ASH]

Re: Paypal founder says there's a Bubble in Higher Education

Why would there be a difference between the Housing bubble and the College Bubble? Both government funded and subsidized with the same basic justification: everybody deserves a house or a college education.

In a funny way, the higher education bubble is also an asset bubble -- the 'asset' is college-educated human capital. As with housing, over-building and cheap rent (too many general degrees issued; availability of educated labor from lower cost markets) undermines the inflated asset price. Although education loans aren't technically secured by a physical asset (like a house), the fact that you can't discharge education loans through bankruptcy means that the lender really does own the asset -- the labor of the individual who took out the loan. So it seems like a very close parallel.

[dropthatcash]

Re: Paypal founder says there's a Bubble in Higher Education

http://techcrunch.com/2011/04/10/pet...8TechCrunch%29

An educations value to society is immeasurable! Well.... unless you actually do measure it!

Here's what passes for competency of Illinois teachers;

http://www.icts.nesinc.com/PDFs/BasicSkills.pdf

From the sample questions it looks like a test any 10th grader with basic skills should pass. Teachers are supposed to pass this test to insure we weed out the poor performers. Of particular interest is the math portion. A passing grade is 35% but since it's a multiple choice test, a score of 13% right and an expected additional 22% right just from guessing at the remaining answers gets you a passing grade. Still to tough? You're allowed to fail this test 5 times

Gee, do you think the teachers had any input to this thing?

[lakedaemonian]

Re: Paypal founder says there's a Bubble in Higher Education

In a funny way, the higher education bubble is also an asset bubble -- the 'asset' is college-educated human capital. As with housing, over-building and cheap rent (too many general degrees issued; availability of educated labor from lower cost markets) undermines the inflated asset price. Although education loans aren't technically secured by a physical asset (like a house), the fact that you can't discharge education loans through bankruptcy means that the lender really does own the asset -- the labor of the individual who took out the loan. So it seems like a very close parallel.

One thing that concerns me about the analogy with education and property is that while some of the degrees(future focused tangible skill developing hard science and engineering stuff) attained are truly the equivalent of very well located, very well constructed, but under tenanted property that will definitely make a good long term investment at a sharper price.....the majority seem like the degree equivalent of a poorly built, poorly insulated McMansion in an exurb of a dying city with a spiking total cost of ownership....and we are going to see a lot of Liberal Science McMansions in the exurbs.

I just saw a survey of the top 10 or so paying degrees.....pretty much loaded with hard science, tangible skills stuff.

Buried in the report was Liberal Arts degrees still offering an average of $35k starting salary......the SAME it was when I got my undergrad nearly 20 years ago....at what....3+ times the average acquisition cost and much higher average living costs? It's simply INSANE....and a bloody bombshell if it gained traction as an actual news story.

It's a shame that the generally held belief that used car salesmen are crooks hasn't already transferred to include university admissions pitchmen.

"Think of your son/daughter being the first in your family to be a university graduate(and debt slave)."

"How can you put a price on your son/daughter's future(in debt slavery)?"

Appealing to people's emotions when they should be running a clinical return on education investment analysis is unethical and immoral....I put them in the same category as those culpable of pushing NINJA loans....at least in some states NINJA loans can be walked away from......not federally backed education debt....it's like debt herpes...you've got it for life.

Simply disgusting....and if I was living back in the US...something I would happily volunteer to peacefully protest over.....unless some significant reform happens(like educational debt relief, much like RE principal relief) as this cohort of education debt slaves ages and move thru the economy I believe we will stroke out due to their inability to consume and purchase sufficient property at prices that don't make the economy have a stroke.

How are these overly indebted, undereducated(in a practical, future focused sense) debt slaves any different than steelworkers in the 70's? Besides being in even greater debt of course.....

Unless remedied...I see a future of not just increasing wealth disparity....but increasing economically relevant skillset disparity.

Sorry for the incoherent rant....but this FIRE sector REALLY gets me fired up.

[Munger]

Re: Paypal founder says there's a Bubble in Higher Education

I can't tell you the number of newly-minted lawyers making $35k-$60k. Often these poor chaps have $100k+ in student loans (sometimes more like $200k+). I have friends with a high schoolmdiploma making more. It's a crime (by the law schools.)

[Munger]

Re: Paypal founder says there's a Bubble in Higher Education

Relevant:

[dcarrigg]

Re: Paypal founder says there's a Bubble in Higher Education

I can't tell you the number of newly-minted lawyers making $35k-$60k. Often these poor chaps have $100k+ in student loans (sometimes more like $200k+). I have friends with a high schoolmdiploma making more. It's a crime (by the law schools.)

It is a crime. One can only sell a perception. There are two things you can sell a person; money and sex. Law schools sell students money. When the perception dies, so goes the model. One Horatio Alger will make up for one million Tiny Tims, though. I fear the lesson will not be learned.

That being said, I recall an old adage; Go to law school if you want to follow the rules and create a practice, but remember, you must maintain bar membership. Legal trouble ends your career. Get an MBA if you want to get caught with your hand in the till and still find employment.

Now-a-days, nothing is clear.

[sunskyfan]

Re: Paypal founder says there's a Bubble in Higher Education

Close ....

housing bubble ... wealth effect

tuition bubble ... bullshit effect

Both increase the noise in our economy. In fact the signal to noise ratio in our economy is nearing zero. Price discovery is bogus. Information via money exchange is not meaningful. Those trying to fix things are yelling Theatre in a Fire.

[Chris Coles]

Re: Paypal founder says there's a Bubble in Higher Education

In a funny way, the higher education bubble is also an asset bubble -- the 'asset' is college-educated human capital. As with housing, over-building and cheap rent (too many general degrees issued; availability of educated labor from lower cost markets) undermines the inflated asset price. Although education loans aren't technically secured by a physical asset (like a house), the fact that you can't discharge education loans through bankruptcy means that the lender really does own the asset -- the labor of the individual who took out the loan. So it seems like a very close parallel.

And then match that with the decline in "old fashioned" artisan skills and the parallel decline of related employment and apprenticeships, and you have a complete sea change from independent tradesmen to a slave labour employment model; where no one is allowed to improve themselves when they cannot be controlled by debt.

[BK]

Re: Paypal founder says there's a Bubble in Higher Education

Lets Not forget the 529 Plan. Nothing like an Investment scheme hatch by Government and FIRE Industry Executives - thats a recipe for Financial success.

An entire Generation of Debtors have been convinced that they need to hand their Money over to a FIRE Industry firm every month if there is ever to be any hope of Junior Attending Harvard or Yale or Princeton.

Another great scheme to minimize Taxes in the future and minimize investment returns while firms like Fidelity collect fees.

[wayiwalk]

Re: Paypal founder says there's a Bubble in Higher Education

Which all reminds me of the current battle I have with my wife....my view on this (state schools should meet our children's needs) vs. hers (go to the best school that you can that provides the appropriate education...which definitely includes, private).

Our 15 year old is a pretty good student, but not top of his class and unlikely to get serious scholarship $$$.....and there's no way we could afford to send him to a top or second tier $200K in four years private university....no matter how much I've saved! For me, the ROI just isn't there, when you factor probability of high future earnings into the equation, ie, I don't look at just the outliers.

In case you're wondering, my wife and I met at college ( a private, second tier, university). She managed to go there with a mixed package of grants, student aid, student loan (I helped pay it off) and scholarship money. I went paying full price, thanks to mom going back to work when I was in 5th grade and the family living modestly.

It's a real sales job on some peoples perception that these colleges provide such superior value over their less vaunted peer-group schools.

Kind of like buying the no-name product vs. the popular brands at the supermarket (for many things, not all).

[sunskyfan]

Re: Paypal founder says there's a Bubble in Higher Education

Bingo!