Posts Tagged ‘College’
Now I think I’ve seen it all.
Let’s cut the crap — colleges market themselves to young men and women on the premise that their educational services will provide you a means to get a better job than you would otherwise obtain. That’s the entire purpose of a career-focused education and the only justification for the outrageous tuition charges they assess.
Well, as it turns out if you fail to benefit from the alleged “education” that these people sold you, and in the process you borrowed money using Perkins loans, the college is very likely to come after you, including in court!
Oh, and lest you think they’ll just sue to the principal and accrued interest, nope.
As I’ve pointed out to a number of High Schoolers contemplating going to college and taking out loans, there are statutory penalties that apply if you default. In the case of Perkins loans these amount to an additional 30% of the principal, increasing to 40% on a second collection attempt and another 40% on top of that if they sue.
That basically doubles the amount you owe.
Of course colleges don’t talk about this before you matriculate. After all, “education” as offered in these edifices is only partial, and the representations, both expressed and implied are many — but the warranties few.
My advice to young adults stands: DO NOT BORROW MONEY TO GO TO COLLEGE.
My advice to parents stands: DO NOT, UNDER ANY CIRCUMSTANCES, CONTRIBUTE TO YOUR NOW-ADULT KIDS BEING BAMBOOZLED BY THESE FINANCIAL TRAINWRECKS KNOWN AS “UNIVERSITIES” AND “COLLEGES.”
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The Nearly-Free University model would revolutionize higher education, enabling a universally accessible college education at a very low cost.
The key to understanding higher education in the U.S. is to grasp that it is at heart just another debt-dependent neofeudal cartel. In other words, it is just like sickcare and the national defense complex.
Each cartel shares these features:
1. Compelling PR “cover” for cartel extraction of wealth. ”Healthcare” (i.e. sickcare that profits from illness, not health) is a “right.” The defense industry is the bulwark of democracy, and “educating our children” is the key to future prosperity. Each portrays itself as sacrosanct.
These “Mom and apple pie” cover stories enable monopolistic exploitation: $300 million a piece fighter aircraft (replacing $54 million aircraft), $150,000 college diplomas, and “healthcare” spending that is two times more per capita than competing advanced democracies.
2. Government (monopoly) protection and funding. The largest monopoly is of course the Central State, which holds a monopoly on taxation, coercion and distribution of swag. All these cartels have gained control of Federal (monopoly) funding.
3. Illusory competition. Each cartel is protected by wide, deep regulatory moats and complexity fortresses that protect the Status Quo income streams from any real competition or innovation. Within each cartel, meaningless variations in price are offered as “proof of competition,” but everyone knows the price of each cartel’s “product” ratchets higher, regardless of conditions in the real economy.
That’s the way cartels and monopolies work. The most implacable enemy of innovation is monopoly. If you’re protected from real competition, then you have no incentive or need to innovate. That is the essence of cartel-capitalism and the neofeudal model.
In the case of the higher education cartel, the Federal funding is both cash grants and loans issued to newly minted debt-serfs. Student loans cannot be discharged in bankruptcy like other debt; these loans have ballooned to about $1 trillion.
This is the essence of the neofeudal model: a protected Elite parasitically extracts wealth from the debt-serfs below. Should the debt-serfs resist, the State steps in to coerce compliance.
The problem with protected cartels (neofeudal fiefdoms) is that they are unsustainable. Freed of any competitive pressure or need to innovate, cartels inevitably follow an S-Curve of diminishing returns: it takes more and more money just to sustain the bloated Status Quo, even as the value created by the cartel declines.
For a taste of diminishing returns in the higher education cartel, please read Bureaucrats Paid $250,000 Feed Outcry Over College Costs (via Maoxian). Yes, top research universities have to manage grants and research projects; but only a relative handful of universities need enormous administrative staffing, and even fewer can justify paying managers $250K+ each.
All Federally protected cartels are living off debt. One in every three Federal dollars is borrowed, and this doesn’t even count the $1 trillion in student debt which is nominally private-sector debt.
Debt that skyrockets higher while the real economy that supports it stagnates is unsustainable.
As I note in my new book Why Things Are Falling Apart and What We Can Do About It, complex systems based on diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. This can be a conscious process or it can be a default process, where the system becomes increasingly fragile and then suddenly undergoes a phase-shift that is widely viewed as “impossible,” i.e. the system freezes up or collapses.
The Internet has already opened up an alternative to the neofeudal higher-education cartel. I call it The Nearly-Free University, a development I anticipate will take shape within the next decade. Once the model has been proven, it will rapidly spread, as it is a very advantageous adaptation that is faster, better and cheaper than the present bloated cartel.
The entire education industry on the U.S. is based on an inflexible, increasingly marginal-return “factory model,” something I have written about since 2005. Is Our Education System Based on a Factory Metaphor? (November 15, 2005)
We are “training” millions of people in an assembly-line based on the assumption that academia is a limitless growth industry, when in fact it has reached the zenith of diminishing-return complexity and cost.
The Nearly-Free University may or may not have a physical plant. If it does, it will be a cheap re-use facility such as an abandoned office park or factory. It may not have a physical headquarters at all; “classes” may meet in cafes when the need arises. This is the new distributed model of global corporations, some of which have no headquarters at all. Physical plant is now unnecessary for pretty much everything but lab work.
In the current high-cost model, the physical plant only available at certain times and in a specific locale. The Nearly-Free University would be available anywhere there is an Internet connection and other people willing to self-organize and collaborate. In many cases, if space is required, it could be shared. Vast campuses are no longer needed.
The coursework will largely consist of free lectures and tutorials from non-profits like the Kahn Institute or classes already distributed for free online by institutions such as Stanford and M.I.T.
In place of costly professors and overworked, underpaid non-tenured teachers, the instruction will be overseen by part-time mentors from the real world who act as guides, occasionally lecturing but more often encouraging peer-to-peer tutoring and collaborative projects that are not “study groups” but actual work projects that produce something of value in the real world.
The mentor is a working professional who “works” at the Nearly-Free University on a flex-time basis. Their “job” is to suggest a practical foundation of basic courses in the student’s chosen field; these courses are taken while the student is engaged in the core curriculum, which are the work projects.
These mentors choose to devote time to Nearly-Free University because they enjoy it; their fee will be modest. Most will work part-time while they pursue their primary career.
Students will move seamlessly from online coursework to projects undertaken in real-world enterprises and communities, learning by doing and from collaboration with others in self-organizing groups.
Mentors would have access (as in the Kahn Institute’s classroom software) to a visual display of the student’s coursework and work-project progress.
Student would be encouraged to earn money via the work projects undertaken. Instead of owing $120,000 after four years of passive study, students might complete their University experience with earnings in the bank.
Very few people continue on to research or scholarship within academia, corporations or the national laboratories. A relative handful of large research universities would be enough to train those who needed PhDs for scholarship or high-level research. The Nearly Free University model would educate the 95% who do not need PhDs.
Instead of an essentially opaque diploma—what exactly does a diploma communicate about the student’s mastery, interests, coursework or accomplishments? —students will be issued a C.V./resume listing all their completed courses and their work projects.
Prospective employers would be able to scan this C.V. and get a real sense of the person’s coursework, mastery and work results in the real world.
A decentralized non-profit network of organizations would arise to accredit the coursework shared by the Nearly-Free Universities. There would be no centralized “gatekeeper” that could demand a premium for its accrediting or testing services. Verification of coursework, work history and skillsets would be provided by multiple-sourced, voluntary transparent networks on the Web.
Credentialing is another system that has reached the top of the S-Curve and is slipping into stagnation and decline. What you can accomplish in the real world will rapidly become more valuable than a credential such as a conventional college degree. The credentialing gatekeepers are protecting an “asset”–the college diploma–that is largely a phantom asset for the vast majority of students.
The total cost of the Nearly-Free University might be $3,000 tuition and fees for 3-4 years compared to $60,000+ today. (This does not include room and board, of course.) The credential issued upon “graduation” (an arbitrary concept in an economy that rewards perpetual learning and improved skills) would be secondary to what the student has learned to create, accomplish, fix and innovate in the real world.
This is how innovation works: costs don’t decline by 5%, they decline by an order of magnitude.
There would be no student loans. The low costs of the Nearly-Free University would be paid in cash or hours of labor that the University could “cash” for goods or services it needed to operate in a cash-free labor exchange.
Like many of the concepts discussed in this blog, this model is considered “impossible” within the confines of the Status Quo even though it is the only truly sustainable model of universal education.
The value of higher education for many is the network they establish during their university years. The Nearly-Free University model actually enables far more robust networks to self-assemble than the static, high-cost classroom model. “Lifelong learning” would not be a cliche in the Nearly-Free University, it would be an affordable, dynamic, exciting reality.
Charles Hugh Smith – Of Two Minds
Student loan shark industry – total revolving debt contracts during recession while student loan debt increases by a stunning 80 percent on an annual basis. A college degree for working at McDonald’s?
College sticker shock is probably stunning many parents as college aged students now sign their intent to register at thousands of schools across the country. You can almost feel the panic when Johnny or Suzie tells mommy and daddy she is going to University of Break the Bank while they watch their home equity plummet. What should be a proud time is now becoming a scary prospect for many parents looking at backbreaking student loan debt. If not the parent, many teenagers are looking at going into debt similar to taking on a mortgage without even owning a brick and mortar house. Many private schools now charge $50,000 or more per year in tuition and fees. Given that the average annual income for an American worker is $25,000 this one year cost is daunting. In the past if you picked the wrong major or school you ended up with a nice looking piece of paper and a likely opportunity to work in the blue collar world as a backup earning a relatively decent income. Today, pick the wrong career and school and not only do you have that same piece of paper but you also have limited prospects in finding even a basic job to service your college debt, forget about paying the rent or filling up your car with $4 a gallon gas. To expect teenagers to pick the right college and have their lives figured out early on is a bit much to ask. Students in the past did not have this same albatross hanging over their head. The big problem now is the massive cost of college.
Student loan debt outpacing all other forms of debt
Probably the most disturbing development in the last few years is with households deleveraging on mortgage and credit card debt there is a doubling down in student loan debt:
The above chart looks at the Sallie Mae portion of student loans on the government balance sheet. While total revolving credit has gone negative year-over-year since 2008 student loan debt has increased by 20, 40, and even 80 percent year over year. Some will argue that this is usually the case in recessions. Well look at the recession of 2001. Student loan debt quickly decelerated at this time. Why? Many simply jumped into the real estate industry as mortgage brokers, agents, construction, or other industries that were fine with simply a high school diploma. These positions paid very well. But it was all a bubble. Today the few sectors with employment growth and solid pay do require a college degree and even that isn’t sufficient to secure a job. If we look at the raw amount of student loan debt we can see this problem more clearly:
Student loan debt has far surpassed the total amount of credit card debt outstanding in the United States. Currently there is over $900 billion in student loan debt and is quickly approaching the $1 trillion mark. Yet simply looking at the above charts you would concluded that colleges are doing a great job luring people into their expensive libraries and selling people on their deep pocket sports teams. Yet how is this translating in the work world?
Source: Calculated Risk
Those with a college degree are now seeing higher rates of unemployment as well. The cost keeps going up because these loans are secured tightly to students where debt can be collected similar to tax liens. There is no walking away from student loan debt (at least not as easy as it is with say credit card debt or a mortgage).
The profit machine of colleges
The cost of going to college has surpassed every category in the magnitude of price hikes:
College tuition and fees have gone up faster than housing, income, and medical care costs which are already stripping bare the balance sheet of American households. This is a similar question I had during the housing boom. How is it possible for home prices to go up while incomes are stagnant? In the case of housing it was massive and easy to get credit. Why are college costs soaring when middle class income is shrinking? Again it is access to this debt as seen above.
While other sectors decline colleges can rest assured their money is secured by the Federal government. The largest source of funding for education is the government:
Nearly half of college funding comes from the government. There have been studies showing that for each jump in loan access tuition subsequently rises. No shocker here. Colleges are trying to get as much profit as possible even if results are not showing up in the overall economy. Of course it depends on what university you go to as well.
Attend a top private school and you are likely to make solid connections that will yield a solid return on your investment. Yet I would argue that this goes for the top 50 colleges in the country. We have over 4,800 institutions of higher education. If not a top 50 private then a public college. Public colleges however are now getting more expensive as well because of poor state budget issues. The fact of the matter is most people attend okay to mediocre to bad schools. When the economy tightens up like it has career choice and quality start to matter much more. Many of the for-profit institutions are one step above paper mills.
McDonald’s hiring lures thousands of people
Many lob jokes at “McJobs” and burger flipping yet McDonald’s recent hiring campaign of 50,000 workers is yielding thousands of applicants:
“(Yahoo) Managers at a McDonald’s in Cincinnati said a dozen or so applicants had lined up by 7 a.m., an hour before the restaurant planned to start interviews. By 10 a.m., the store had interviewed 100 people and had 25 more waiting.
Tiwian Irby, 28, was hoping for a full-time job and wasn’t particular about what it would entail. He said he’d had trouble finding regular work since getting laid off from his construction job two years ago.
“A job is a job to me,” said Irby, a father of three. “I’ll take whatever is available.”
McDonald’s and other fast-food chains, once an entry point into the work force for teenagers, appear to be turning into an employer of more adults, a legacy of the recession, industry watchers said. The average age of a fast-food worker is 29.5, up from 22 in 2000, according to the U.S. Census Bureau.”
This little summary virtually sums up the current situation. You have someone that lost a good paying job in construction and is now looking for work at McDonald’s. What is also the key here is that the average age of a fast-food worker went from 22 in 2000 to 29.5 currently. Welcome to the new world of low wage capitalism. The choice then becomes accept this low paying work or go into massive debt to enter college?
It is no surprise then in these desperate times that people will fork over tens of thousands of dollar for a college education. But for every one solid college institution you have fifty seeking to take student financial aid and provide an experience similar to a rollercoaster ride; fun for a brief moment but what are the longer term results? So far with student loan defaults rising and the results in industry, the numbers are not positive.