Why is college so expensive?

JeffSkilling's picture
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So obviously college tuition increases by an obscene amount year over year not because it's getting that much more valuable or less efficient, so it's got to be something else. I've always assumed that the college tuition bubble was perpetuated by the government offering student loans/grants to just about anyone even if they go on to study Art History or whatever, creating artificial demand from those whose wouldn't want/be able to go to college if those loans were not available.

But isn't it possible that the Federal Reserve is largely responsible for it as well? Or is it just simply a matter of supply and demand?

The dollar has been devalued about 98% in gold since the Fed's inception and obviously the money printing has exploded in recent years. Couldn't this explain why prices continue to climb in education, and even healthcare?

Look at this chart of Yale tuition priced in gold. Check out what it's done since 2000.

http://pricedingold.com/college-tuition/
Just curious.

Comments (106)

Dec 1, 2011

this must be one of the dumbest theories i have ever read. the price of well just about anything has declined relative to gold over the past 5 years seeing as it has tripled in value...

lets consider supply and demand before getting caught up in zerohedge / ows / end the fed conspiracy theories

Dec 1, 2011
deal_mkr:

this must be one of the dumbest theories i have ever read. the price of well just about anything has declined relative to gold over the past 5 years seeing as it has tripled in value...

lets consider supply and demand before getting caught up in zerohedge / ows / end the fed conspiracy theories

So why then?

Dec 1, 2011
deal_mkr:

this must be one of the dumbest theories i have ever read. the price of well just about anything has declined relative to gold over the past 5 years seeing as it has tripled in value...

lets consider supply and demand before getting caught up in zerohedge / ows / end the fed conspiracy theories

You realize what you're saying plays right into my point...if the dollar is getting devalued then almost everything will fall relative to gold. Why do you think gold has tripled? It's not intrinsically more valuable today than it was in the past, it's pretty clear that gold is showing us the relative purchasing power collapse of the dollar.

Dec 1, 2011
JeffSkilling:
deal_mkr:

this must be one of the dumbest theories i have ever read. the price of well just about anything has declined relative to gold over the past 5 years seeing as it has tripled in value...

lets consider supply and demand before getting caught up in zerohedge / ows / end the fed conspiracy theories

You realize what you're saying plays right into my point...if the dollar is getting devalued then almost everything will fall relative to gold. Why do you think gold has tripled? It's not intrinsically more valuable today than it was in the past, it's pretty clear that gold is showing us the relative purchasing power collapse of the dollar.

Not exactly - gold is in fact more valuable today than it was in the past, because:

  • Remaining gold is far more expensive to mine now than it was in the past.
  • Emerging economies are adding hugely to global demand, and mining supply has not increased as drastically.
  • Industrial uses of gold are becoming more common.

This is partially the reason that gold is no longer considered to be a good reserve currency; it's no longer tied to Western wealth - but is instead driven purely by consumer (not value-preservation) related supply shortages. Once you stop holding gold as an "asset" and start buying it as a consumer "good", it loses its value as a currency.

Dec 1, 2011

it dropped?

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Dec 1, 2011

cuz its a fucking sham

Dec 1, 2011

Because they can fill their classes with people willing to pay for it while offering the right SAT and GPA numbers in return.

Dec 1, 2011

I'd take the gold.

Dec 1, 2011

The government. Period. Sallie Mae loans, excessive grants, and the notion that people "deserve" to go to college. Some people just don't need to go to college, it would be better if they went to vocational school or got a job straight out of college. I think for high-paying jobs it is a necessity. But why do you need to go to college to earn $40k a year when your 30?

Reality hits you hard, bro...

Dec 1, 2011

Because US students are not yet smart enough to realize that they can get the same (in many cases even better) education and job prospects for a fraction of their fees if they came to study in Europe

Dec 1, 2011

Because we have some insane cost = quality heuristic at work here, and schools are under constant pressure to grow their endowments to climb US news. We have also created a nearly inexhaustible source of demand by effectively requiring a BA even for entry level jobs.

On the flip side, consumer subsidies increase the costs as everyone has said.

You would probably cost the University of Oslo more than you pay in tuition...but you pay back the difference through taxes.

I also think the tendency of US students to move to go to college raises costs. A lot of Canadians seem to decide on college based on which will let them live at home. Costs of living are not insignificant.

Dec 1, 2011

Because Jeebus hates you.

Dec 1, 2011

Government subsidies has to be one of the most significant driving forces behind the rise in the cost of college. This culture that believes everyone deserves to, or needs to, go to college has made it so anyone can just take out a 200k loan to get a degree in animal husbandry.

When colleges raise tuition, all else being equal, they usually see a spike in the amount of applications they receive so from their perspective they can raise the price, have a more selective student body, and rely on government loans to cover everything.

EDIT: If it is just the decline in purchasing power of the dollar, why does the rise in the cost of college education out pace everything else?

Dec 1, 2011

Your theory is partially correct in that the government is perpetuating a kind of student loan bubble. As tuition costs rise, the amount of outstanding student debt to pay for tuition also rises. Many analysts believe student debt is the next bubble to burst since the housing market. The only difference is that there is no tangible, underlying asset. If there is an across-the-board default on student debt, tuition prices will not fall accordingly. There will always be people willing and able to cough up the 50K for tuition. If americans can't afford it, there is an endless demand from international students, especially from emerging economies where prospective students believe the US has the best education. I think its a matter of supply and demand rather than $/gold/money-supply issue.

Dec 1, 2011

You should read "Harvard Envy" and "the golden dozen" ... interesting and will give you some insight

Dec 1, 2011

Two main reasons, one the government sponsored student loan bubble, two inflation. You have to realize that while inflation is high it has not come close to the rate at which gold has increased in value. But mainly it's the government mentality of " let's give a loan to anyone who can count to 5 so they can go to college."

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Dec 1, 2011

If americans can't afford it, there is an endless demand from international students, especially from emerging economies where prospective students believe the US has the best education.

That's not entirely true. First, the demand is not endless. Most internationals don't come because they believe the US has the best educaction - they do think so, but that's not the reason they decide to pay the price. They come simply because for them getting a US degree is the shortest path to getting a well-paid job in the US. Many of these internationals are on scholarships or take out loans and the moment job prospects become dim or the visa situation worsens, there is an outflow. This has happened before. The rich kids who can afford to pay everything out of pocket are a small fraction of the international students, at least from emerging markets.

Dec 1, 2011
N.R.G.:

If americans can't afford it, there is an endless demand from international students, especially from emerging economies where prospective students believe the US has the best education.

That's not entirely true. First, the demand is not endless. Most internationals don't come because they believe the US has the best educaction - they do think so, but that's not the reason they decide to pay the price. They come simply because for them getting a US degree is the shortest path to getting a well-paid job in the US. Many of these internationals are on scholarships or take out loans and the moment job prospects become dim or the visa situation worsens, there is an outflow. This has happened before. The rich kids who can afford to pay everything out of pocket are a small fraction of the international students, at least from emerging markets.

I guess my point is that we are starting to see a trend of more international enrollment, especially in private schools. When I first started at my school, intls made up about 10% and by the time I left, it was closer to 13%. Also, I am sure most of the intls are paying out of pocket. I know this for a fact because Intl students need to prove that they have sufficient funds to pay for atleast 2 years of full tuition for purposes of getting a visa. Also, I think the majority of them go back to their country of origin because having an american education is not just a status symbol but guarantees them a good job, obviously those who can get a job in the US will stay. I guess the demand is not endless, but I think US schools are becoming aware of a potention market from intl students.

Dec 1, 2011
econpty:

Also, I am sure most of the intls are paying out of pocket. I know this for a fact because Intl students need to prove that they have sufficient funds to pay for atleast 2 years of full tuition for purposes of getting a visa. Also, I think the majority of them go back to their country of origin because having an american education is not just a status symbol but guarantees them a good job, obviously those who can get a job in the US will stay. I guess the demand is not endless, but I think US schools are becoming aware of a potention market from intl students.

Internationals do need to prove that they will be able to finance their education; however they do not need to show their own funds. It is enough to show an arranged loan from a US bank, which the school certifies. Scholarship also works. Also, in countries like India and China, you can pay a fee to get funds temporarily wired to your account just to show the bank statement to the embassy in order to get a visa. This is not really legal, but that's a whole different story.

Most internationals I know in the US are either on scholarships or have taken out a loan. There are very few children of rich parents among them. With an average annual salary between 5 and 10k in the emerging markets, saving enough money to pay 50k per year is not really doable. Even if you go back and get a good job, a good salary in these countries is something in the range of 30-50k, and that's the upper end. Paying off a 150-200k loan with that salary is not feasible. Very few of these people go into local IB or MBB and get salaries close to 70-100k and above.

However, what universities are trying to do now is increase the proportion of wealthy internationals, who are willing to pay out of pocket as most banks are not willing to give loans to non-US citizens without US cosigners. Not-so-rich internationals (which are the majority now) often decide to go to lower tier schools that offer them good scholarships because these schools want to attract students with better than their average stats. But as schools see the willingness to pay of their middle-class students dwindle, I guess the logical move is to start attracting more foreign rich kids. To them this kind of education is a luxury good and price doesn't matter that much.
It's ironic that most Americans, who subsidize the educational system indirectly as taxpayers, will soon not be able to afford its services.

Dec 1, 2011

College is expensive because we keep lending more money for it.

Dec 1, 2011

I think we also have to consider the fact that high schools want to brag about how many of their students go to college so there is grade inflation on a huge scale. The increase in "qualified" college candidates increases demand and increases tuition.

Dec 1, 2011

Because people are willing to spend $200,000 on a degree from some crappy liberal arts college for a major in theater design or music therapy.

The real trouble is not with the state schools which are subsidized (although some schools such as the UCs are drastically increasing costs), or with the top tier schools that have the resources to offer excellent financial aid, but with the middle-tier/lower-tier private schools and for-profit colleges that charge a fortune for absolutely worthless degrees (if you pursue them).

Dec 1, 2011

FYI, UC drastically increasing costs '15 percent' is a matter of 1k to 1150, not 30k to 34.5 year over year

Dec 1, 2011

The price is so high because the estimated intrinsic value of the education is so high. It's pretty simple no? With greater competition causing some efficiency gains, there could be a cost side improvement which may then lead to a price decrease, but universities (at least where I come from) are horrendously inefficient government bureaucracies, with layers and layers of absolute bilge that add no value at all.

Dec 1, 2011

Sallie (and now the government) is doing the same thing that Freddie and Fannie did for the mortgage crisis. They are propping up the prices of crappy debt that almost can never be repaid. Furthermore, student loan debt can't be wiped out in bankruptcy court- so students will be saddled with it forever. I wish I could buy some CDS on CDOs of student loans. I'd be Paulson in his prime.

Reality hits you hard, bro...

Dec 1, 2011
MMBinNC:

Sallie (and now the government) is doing the same thing that Freddie and Fannie did for the mortgage crisis. They are propping up the prices of crappy debt that almost can never be repaid. Furthermore, student loan debt can't be wiped out in bankruptcy court- so students will be saddled with it forever. I wish I could buy some CDS on CDOs of student loans. I'd be Paulson in his prime.

What's the point of buying CDS if there are no defaults?

Oct 26, 2017

coll

Dec 1, 2011

Folks said the same thing back in 2006 about banks (and oh god, nobody had a clue about how counterparty correlation worked in reality back then).

There will be defaults. Theoretically, the default event would be triggered when people are unable to pay their student loans and (I worked on the high grade side so this is where it gets fuzzy) wage garnishments aren't able to cover the balance of the payments and this hits a certain threshold. At which point, you get paid notional minus the value of the debt.

But to be perfectly honest, it's tough to make money betting that bad stuff will happen, especially in this post-2008 economy. You can obviously SAVE money by avoiding these situations, but it's always more fun and generally more profitable to bet that people will succeed.

Oct 26, 2017

I've spoken with my school's finance director and she showed me the budget. There really isn't a lot of room left for cuts and all of the money that they spend seems to be reasonable. It's a public university, but Illinois is like 6 years behind paying them. The CBA is profitable. The other colleges are not.

One professor told me that his dentist asked him for payment up-front because he has a bum employer.
lul

"Mr. Perkins poses an extreme risk to the market when drunk."

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Oct 26, 2017
RustyFork:

I've spoken with my school's finance director and she showed me the budget. There really isn't a lot of room left for cuts and all of the money that they spend seems to be reasonable. It's a public university, but Illinois is like 6 years behind paying them. The CBA is profitable. The other colleges are not.

One professor told me that his dentist asked him for payment up-front because he has a bum employer.

lul

where is a majority of the capital allocated to?

Oct 26, 2017

In simple economics, it's all supply and demand. The demand for college has increased over the years, excaberbated by the increase in subsidized student loans, so it's in the best interest of the colleges to increase tuition to meet the increased demand.

Oct 26, 2017

Universities are some of the most inefficient, bloated, and top-heavy structures, employing some of the most entitled and overpaid employees in the country. The part of the article that talks about how many stupid positions there are in administration is spot on and don't even get me started on the "unionized" professors who work 20 hour weeks and get paid 6, 7 figures a year.

Of course this shit is going to cost too much and of course the more you subsidize it the more they're just going to ask for more money. "Oh you paid $40,000 a year with $10,000 a year in government money? Well then you'd pay $50,000 a year with $20,000 in government money too."

Oct 26, 2017
CRE:

Universities are some of the most inefficient, bloated, and top-heavy structures, employing some of the most entitled and overpaid employees in the country. The part of the article that talks about how many stupid positions there are in administration is spot on and don't even get me started on the "unionized" professors who work 20 hour weeks and get paid 6, 7 figures a year.

Of course this shit is going to cost too much and of course the more you subsidize it the more they're just going to ask for more money. "Oh you paid $40,000 a year with $10,000 a year in government money? Well then you'd pay $50,000 a year with $20,000 in government money too."

^ I like this answer. Another problem is the cross subsidization of nonproductive actives like humanities that would not exist on their current scale if the university system was for-profit. Instead of turning out more heath care graduates like this country needs, taxpayers are subsidizing worthless degrees. Even worse is general education requirements that act to artificially increase the demand for professors in areas such as humanities, and it prevents ambitious students from graduating earlier.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." -- William Shakespeare, Much Ado About Nothing

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Oct 26, 2017

You can send all the people you want to college, but until you increase the amount of jobs that "require" it- there's no point. The gov't having good intentions and completely missing the mark once again.

Oct 26, 2017

They are creating more jobs for academics. The university system is a ponzi scheme whereby the ranks of undergrad, masters, professional degree students must continue to grow to fund the salaries of the swelling ranks of professors who get free or mostly free education. Once the demand for undergraduate, masters, professional degree seekers shirks the foundation will collapse.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." -- William Shakespeare, Much Ado About Nothing

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Oct 26, 2017

I'm curious what people mean exactly when they say "jobs that require college degrees." For example, when you get right down to it, the job of an investment banking analyst doesn't require anything that's specifically from college. As long as you understand basic arithmetic, read a couple guides, and know how to use a computer and the Microsoft office suite, you can pretty much physically do the job required.

That's not to say that it would necessarily behoove investment firms to start hiring high school students though...

Oct 26, 2017
Going Concern:

I'm curious what people mean exactly when they say "jobs that require college degrees." For example, when you get right down to it, the job of an investment banking analyst doesn't require anything that's specifically from college. As long as you understand basic arithmetic, read a couple guides, and know how to use a computer and the Microsoft office suite, you can pretty much physically do the job required.

That's not to say that it would necessarily behoove investment firms to start hiring high school students though...

I agree with this, although I am currently in college so take my opinion with a grain of salt. It's also why I chose to minimize my undergraduate debt by going to the large non-target state school a couple hours from home.
Unless I colossally f*ck up, I'm going to pretty much graduate debt free. I could have gone to a couple of semi-targets but I would have been borrowing $20-25k/yr. $100k of debt out of undergrad was something that I just couldn't swallow with the devaluation of an undergraduate diploma.

My school isn't complete dogshit either (I think it was like top 50 in the US News when I applied) but having no debt will give me flexibility if I want to go after a MSF after graduation or MBA a few years down the road (which I want to do).

Hell I'm tempted to graduate early this year and rebrand at a MSF but I'd like to get my GPA up some and who wants to leave undergrad early haha. But I know that I am lucky with generous parents and scholarships.

Oct 26, 2017

No room for cuts at a public university? Are you kidding me? You could cut over half of the administrative positions and no one would notice a difference

Oct 26, 2017

As has been stated, the obvious answer is supply and demand. Other than commodities, pretty much every other good or service increases beyond the rate of inflation because of supply and demand. The question is, what has caused this increase in demand? I completely agree that it's mostly the "supply of money"--grants and loans--that is quite libertine. I'd also add that part of it is culture--more and more students are being pushed socially into going to college. I went to a regular public high school--I looked up the stat the other day. Something like 99% of the 2013 graduating class is attending some form of college or university. That's just ridiculous.

Far, far more people need vocational training--electrician, plumbing, construction management, nursing, etc. are occupations that pay well, can't be outsourced and will not leave the employee with a literal mortgage of student debt.

Oct 26, 2017

I'd love to be doing construction, like building houses, to be honest. Outdoors, fresh air, constant exercise, actually creating something. Sounds much more appealing than rotting at a desk.

I had this really hot teacher in high school, I think she was Italian, kind of had a crush on her...but she ended up marrying a construction worker.

Oct 26, 2017

I've heard a story(true story) about a plumber who started trading FX and became a millionaire. Plumbers FTW!

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

Best Response
Dec 1, 2011

I really think this is going to change over the next 25 years. Kids born today are going to realize what a scam college is (because if everyone has a degree then a degree has no value) and at that point it's going to go back to what you can actually bring to the table again. The first firm that hired me didn't give a shit that I hadn't sat in a classroom for four extra years. All they cared about was that I could close.

This is especially true in tech, where the colleges just can't keep up. A kid can learn more actionable up-to-the-minute skills on Skillshare than he ever could waiting for a college class to materialize.

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Oct 26, 2017
Edmundo Braverman:

I really think this is going to change over the next 25 years. Kids born today are going to realize what a scam college is (because if everyone has a degree then a degree has no value) and at that point it's going to go back to what you can actually bring to the table again. The first firm that hired me didn't give a shit that I hadn't sat in a classroom for four extra years. All they cared about was that I could close.

This is especially true in tech, where the colleges just can't keep up. A kid can learn more actionable up-to-the-minute skills on Skillshare than he ever could waiting for a college class to materialize.

Exactly. To build off of this, we are going to start seeing a 180 to interest in the trades. A college degree is becoming (has become?) so diluted that it is almost meaningless - eventually it will be what a high school diploma was in the 60s and 70s. You are already seeing cases of needing a masters degree to become competitive in the market, even for jobs calling for under five years of professional working experience.

We are going to reach a point where everyone is "educated" and "white collar" - blue collar trades like plumber or electrician will actually start paying pretty high simply due to the decrease in availability - the people to realize this first will start their own company and end up doing extremely well.

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Oct 26, 2017
Edmundo Braverman:

I really think this is going to change over the next 25 years. Kids born today are going to realize what a scam college is (because if everyone has a degree then a degree has no value) and at that point it's going to go back to what you can actually bring to the table again. The first firm that hired me didn't give a shit that I hadn't sat in a classroom for four extra years. All they cared about was that I could close.

This is especially true in tech, where the colleges just can't keep up. A kid can learn more actionable up-to-the-minute skills on Skillshare than he ever could waiting for a college class to materialize.

Good points,but how would you counter the argument that everybody has a high school degree, but you still need one to be competitive?

"Mr. Perkins poses an extreme risk to the market when drunk."

Oct 26, 2017

The vast majority of people have less than $25K in student debt. Fact. Only 30% of Americans have a bachelors so I don't think the BS/BA is going the way of the high school degree anytime soon.

Schools need to better identify people who are trade jobs bound vs college and give them equal praise. No one wants to be a plumber in school because you are treated like an idiot. Forget the fact that you'll probably make more than 90% of college grades in your high school class.

Oct 26, 2017
TNA:

The vast majority of people have less than $25K in student debt. Fact. Only 30% of Americans have a bachelors so I don't think the BS/BA is going the way of the high school degree anytime soon.

Schools need to better identify people who are trade jobs bound vs college and give them equal praise. No one wants to be a plumber in school because you are treated like an idiot. Forget the fact that you'll probably make more than 90% of college grades in your high school class.

I feel like that 30% statistic is misleading due to the amount of baby boomers that are alive. Once that generation is gone, you will easily see that percentage double.

I agree about identifying students that would be better suited for trades. I think a big problem is this country beats college into your head and if you don't go, makes it seem like you are a fucking idiot so most people either look down on the trades or don't even view it as a viable alternative. I would clean shit with my bare hands if the pay is right - I don't give a shit about "prestige" or being white collar.

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Oct 26, 2017
TNA:

Schools need to better identify people who are trade jobs bound vs college and give them equal praise. No one wants to be a plumber in school because you are treated like an idiot. Forget the fact that you'll probably make more than 90% of college grades in your high school class.

This is spot on.

Sadly it's hard for high school teachers and college professors to accept that not everyone needs to learn calculus, advanced composition, psychology, art history, and whatever else for their "personal growth." Throw some personal finance, "how to start a business," "what actually happens in politics," and similar courses in there and let these contractor-types do their thing.

While there will always be fuckups, so many get disillusioned with school because the education system fails them, not the other way around.

Oct 26, 2017

Yah. So many college grads end up doing bullshit meanial jobs anyway.

I just think this is what happens when you have an economy where wages have been effectively driven down and all the jobs are either meanial and low paying or require intelligence and a worthwhile degree. No middle ground.

Oct 26, 2017

Plenty of jobs in the world. The issue is the old shits who are unwilling to retire because they don't know how to live within their means and just want more so they work forever. Once this generation dies out, we will have so many opportunities in front of us. Especially for those of us who are already in good positions despite the economic situation. My entire floor at a BB ~200 has probably 15-20 under the age of 30, mostly VPs and Directors in their late 30s to mid 40s.

Oct 26, 2017
yeahright:

Plenty of jobs in the world. The issue is the old shits who are unwilling to retire because they don't know how to live within their means and just want more so they work forever. Once this generation dies out, we will have so many opportunities in front of us. Especially for those of us who are already in good positions despite the economic situation.

You have no right to tell anybody else when they're to retire or what their means should be.

"Mr. Perkins poses an extreme risk to the market when drunk."

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Oct 26, 2017
yeahright:

Plenty of jobs in the world. The issue is the old shits who are unwilling to retire because they don't know how to live within their means and just want more so they work forever. Once this generation dies out, we will have so many opportunities in front of us. Especially for those of us who are already in good positions despite the economic situation.

This is just so wrong. Economically, the demographics of all the boomers approaching retirement leads to a large amount of institutional knowledge loss. There are those who argue by destroying the savings of the middle class, the Great Recession may help us hold productivity gains long term.

The one exception is K-12 education, where the evidence is excellent that more experienced teachers are worse.

Also, Eddie, why is going to a class and learning practical skills on Skillshare mutually exclusive? Good schools in this country have ~10-15 hours of class a week, with maybe 1-2x required in reading/homework, depending on ability. Assuming you think 60 hours a week is about the right time to spend on self-development in college, that leaves even the worst students 15-20 hours to spend on outside learning (I understand how this could shaft Varsity athletes though, but presumably their scholarship or the chance to attend a better school than they otherwise would makes up for it to a degree).

Oct 26, 2017
yeahright:

Plenty of jobs in the world. The issue is the old shits who are unwilling to retire because they don't know how to live within their means and just want more so they work forever. Once this generation dies out, we will have so many opportunities in front of us. Especially for those of us who are already in good positions despite the economic situation.

A lot of those people can't retire because they don't have anything to retire on. Now you might say "well they should have planned better" and while I would agree, not a lot of people saw what was coming in 2008. You have a lot of people that had to take a big bite of a shit sandwich and lost a lot of their savings or nest egg.

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Oct 26, 2017

College has a couple benefits:
1) Signalling: There are places where this is done via difficult national exams, but that is unlikely to happen in the US.
2) Weeding: The selection of majors necessarily require students to assess their skill-sets. You most commonly hear about the would be engineer or pre-med who cannot handle physics or organic chemistry, but there are potential humanities majors that cannot learn foreign languages or write.
3) "Bench" Education: This is where the STEM disciplines have an advantage, as they, by necessity, include more of the base knowledge and less of the esoteric and interesting but ultimately useless courses in a four-year degree program, largely because there is more "classroom" learning that is a prerequisite for the job.
4) Critical Thinking Practice: Philosophy, pure mathematics and some of the social sciences like to hang their hat on this one, but honestly it is probably more important to would be programmers in the CS department as a job qualification.
5) Socialization: This is where the top school in the country shine in teaching student from (relatively) varied backgrounds how to to successfully interact with (relatively) qualified peers and play the game as necessary with professors, administrators and those in power positions. Oxbridge takes this to a whole another level though.
6) Maturity: Probably the number one reason you don't want to hire an analyst class of recent high school graduates - they just won't take the job seriously enough. Does anyone know if hiring high school graduates directly (and maybe having them complete degrees part time) is more common in countries like Israel and Singapore that require several years of military service?

Dec 1, 2011
meabric:

1) Signalling: There are places where this is done via difficult national exams, but that is unlikely to happen in the US.
2) Weeding: The selection of majors necessarily require students to assess their skill-sets. You most commonly hear about the would be engineer or pre-med who cannot handle physics or organic chemistry, but there are potential humanities majors that cannot learn foreign languages or write.

Yeah, this is the big one to me. College has made hiring entry level employees really easy. Pick the highest GPA/SAT score holders from the best colleges. It basically gives any hiring manager the excuse "but he went to Harvard!" if something goes sideways.

That said, it seems like most hires at every firm I've worked for have some sort of alumni/personal connection. Shifting away from the "pedigree" model would require that firms admit that hiring is not purely meritocratic. But, with labor laws as they are, this would open up the firms to considerable liability.

meabric:

6) Maturity: Probably the number one reason you don't want to hire an analyst class of recent high school graduates - they just won't take the job seriously enough. Does anyone know if hiring high school graduates directly (and maybe having them complete degrees part time) is more common in countries like Israel and Singapore that require several years of military service?

I'm not sure this is true. I think young adults will grow up as fast as they have to. When graduating high school marked the beginning of adulthood, I'd be willing to assume the average HS grad was almost as mature as the average college grad now.

Oct 26, 2017
meabric:

College has a couple benefits:

1) Signalling: There are places where this is done via difficult national exams, but that is unlikely to happen in the US.

2) Weeding: The selection of majors necessarily require students to assess their skill-sets. You most commonly hear about the would be engineer or pre-med who cannot handle physics or organic chemistry, but there are potential humanities majors that cannot learn foreign languages or write.

3) "Bench" Education: This is where the STEM disciplines have an advantage, as they, by necessity, include more of the base knowledge and less of the esoteric and interesting but ultimately useless courses in a four-year degree program, largely because there is more "classroom" learning that is a prerequisite for the job.

4) Critical Thinking Practice: Philosophy, pure mathematics and some of the social sciences like to hang their hat on this one, but honestly it is probably more important to would be programmers in the CS department as a job qualification.

5) Socialization: This is where the top school in the country shine in teaching student from (relatively) varied backgrounds how to to successfully interact with (relatively) qualified peers and play the game as necessary with professors, administrators and those in power positions. Oxbridge takes this to a whole another level though.

6) Maturity: Probably the number one reason you don't want to hire an analyst class of recent high school graduates - they just won't take the job seriously enough. Does anyone know if hiring high school graduates directly (and maybe having them complete degrees part time) is more common in countries like Israel and Singapore that require several years of military service?

Good post, I agree with all of this.

Our social system revolves around college for all of these reasons and more. If you want to bypass all of that, then youre pretty much left with going blue collar, following a trade or being some sort of entrepreneur or entertainer.

Also anyone sitting here and saying they wouldnt want their kids to go to a highly reputable school is lying.

Oct 26, 2017

Do people on the left side of the intelligence bell curve not realize where they lie? I see a lot of really mediocre people in school talking about grad school and such. Do they honestly believe that they'll get that degree and suddenly become somebody I would hire to handle my legal or financial life?

This is a serious question. Are people just delusional?

"Mr. Perkins poses an extreme risk to the market when drunk."

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Oct 26, 2017
RustyFork:

Do people on the left side of the intelligence bell curve not realize where they lie? I see a lot of really mediocre people in school talking about grad school and such. Do they honestly believe that they'll get that degree and suddenly become somebody I would hire to handle my legal or financial life?

This is a serious question. Are people just delusional?

Special snowflake syndrome. Our/my generation is ripe with it.

Hell I definitely had it at one time. I didn't give a shit what my GPA was or what college I was at. I was ME and I knew I was smart already so I didn't need paper to prove it. I knew I could be successful. I was out DOING things, productive or otherwise, instead of sitting in the library doing my homework. If I could get A's on tests, why did I care to do the assignments that constituted part of my grade? That B or C isn't that big of a deal, right?

Lord, I was retarded, and I'm still paying for it.

I think you see a lot of the other side too - people who think if they turn in every assignment and spend every night in the library that they deserve or are owed the American dream. At the end of the day, they could just not be that bright, or not that driven, or have a horrible personality, or whatever.

We've all been told how special we are - by our parents if we're lucky, by our teachers, by everyone. If you were "smart" like me and were in the "gifted" program in elementary school and in the highest classes in highschool, you got more than enough validation. Why in the world would I care about my GPA when I'm reassured how smart I am? If you were lackluster, you got told how awesome you are for trying and not giving up.

There is no reality anymore when it comes to kids, not in math, not in reading, not in gym even, and you can't be anything but positive or else the parents call you up to freak out at you for disparaging their special little snowflake.

I know I could have used some harsh reality a long time ago that tons of people are "smart" and tons are even smarter than me so I better bust my ass still. It took me WAY too long to figure that out.

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Oct 26, 2017
RustyFork:

Do people on the left side of the intelligence bell curve not realize where they lie? I see a lot of really mediocre people in school talking about grad school and such. Do they honestly believe that they'll get that degree and suddenly become somebody I would hire to handle my legal or financial life?

This is a serious question. Are people just delusional?

Indeed they are, I encountered this as well. People who were just outright fools talking about grad/law school.

College is the biggest scam going these days. Madoff wishes he sold student loans instead of securities

alpha currency trader wanna-be

Oct 26, 2017

Everyone thinks they are above average intelligence, so everyone thinks they should go to grad school.

Oct 26, 2017
leveredarb:

Everyone thinks they are above average intelligence, so everyone thinks they should go to grad school.

It goes further than that though. Often times employers actually require a masters in order to keep going. You literally reach a plateau in your career and you cannot proceed until you get a stupid piece of paper that costs 100k that really doesn't add that much more value.

I mean, iBanking is a perfect example. Do you really need to get an MBA to reach the associate level after 2-3 years as an analyst? Associates aren't doing that much more than Analysts that requires an MBA, yet most institutions require it to reach that level.

I would be willing to bet if they kept that analyst on for 4-5 years while giving increasing responsibilities and exposure to the company and tasks, you would have a better employee than if you told him he needed to stop working and go back to school for two years, ultimately leading to a better associate and probably putting him in a better position to reach VP and eventually become a leader.

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Oct 26, 2017

Not only is there a large demand for college, the demand is inelastic. 18 year olds don't truly realize the future sacrifices they are signing up for by taking out $30K+ in debt with their parents as cosignors, so going to college is, in many kids' minds, a no-brainer.

I was fortunate that things worked out for me. I had no idea what I was signing up for. I studied economics in college, and thought that after 4 years in college I would graduate and be "an economist." It wasn't until ~sophomore year that I started to figure it all out

Oct 26, 2017
MFFL:

Not only is there a large demand for college, the demand is inelastic. 18 year olds don't truly realize the future sacrifices they are signing up for by taking out $30K+ in debt with their parents as cosignors, so going to college is, in many kids' minds, a no-brainer.

I was fortunate that things worked out for me. I had no idea what I was signing up for. I studied economics in college, and thought that after 4 years in college I would graduate and be "an economist." It wasn't until ~sophomore year that I started to figure it all out

This vaguely brings up another great point. There seems to be this piss poor trend across Universities in this country of having no advisory. I had to figure it all out on my own as well. I didn't know what I would need to enter certain fields until I started to do the research on my own.

I am not saying that everyone should have their hand held, but the fact is an 18 year old kid doesn't have a fucking clue what he wants to do, what he can do or how he can get there. The lack of advisory at Universities doesn't help either.

When I was in college, I too studied Econ. My advisor was some 24 year old Chinese woman that barely spoke English. I seriously mean she barely spoke English. This was the person that was supposed to help me formulate a game plan for my life? No thanks. I met with her one time and never went to a meeting with her again.

Oct 26, 2017

@RustyFork I have no right yet you have the right to determine whether people attend graduate school and you have the ability to judge someone's intelligence? Damn aren't you special.

@meabric The boomers have over saturated the work force. Out of the ~200 people on my floor, probably 30 of them actually have difficult jobs that requires substantial education. Most of these 'jobs' are just completing the same process over and over.

@Nefarious- This is true, they can't retire because they were killed in their accounts. But regardless, they can work until whatever age they choose, I never said they are required to do anything. The point is, once they either retire or die, there will be so many jobs available for our generation for upwards mobility when it comes to the Corporate scene.

Oct 26, 2017

The problem is that one has to get a degree if everyone has one, same goes to HS diploma and so forth. It's not a scam IMO, it's progression of civilization. Doing multiplication in BC is like performing open heart surgery today, few people are skilled enough to do so. I got nothing else.

Oct 26, 2017

I believe that there are several facets of both societal perception and administrative actions that have altered the typical academic career path and the costs associated, at least here in Canada (US is even costlier no?).

Universities are mismanaged budget wise, with an overpaid, over-sized faculty. Government provides subsidies which only encourage bloating costs on the universities part. However that only explains a portion of the cost growth.

The costs have grown primarily because of the demand for post-secondary degrees, partially due to higher demand from employers, but also partially due to the demands of graduating HS students and their parents.

Employers prefer a college degree, because nowadays a HS education is meaningless. Any fool can graduate HS, you have to be extremely dense or hopeless to drop out. The government has been providing an increasing amount of aid to those HS students in need, while allowing public HS education standards to deteriorate. Students often learn the bare minimum to enter college, and many in the hard-sciences/engineering faculties fail in their first year. Students come out of HS not knowing how to speak or write properly and usually terribly immature for their age. Employers would rather pass on the costs of training to the students and taxpayers.

As for the HS students, most demand to go to college and wouldn't have it any other way. Why worry about the debt, adult life responsibilities, time wasted, or post-college job when you can party every night and skip class in the morning? Society looks down their noses at farmers, plumbers, technicians, mechanics, janitors, even as all these people provide often more essential services than those they aspire to. Many of these jobs often pay well, but few bother to look into it because they involve manual labour and aren't glamorized in Hollywood. 40 years ago most middle and lower class citizens would be content with these jobs, nowadays kids aspire to be the lawyers in Suits, consultants in House of Lies, advertisers in Mad Men or just simply famous.

The strange thing is that Canada is in dire need of technicians, plumbers, engineers, scientists, doctors, nurses, and yet we don't advertise the trades option to HS grads, don't inspire intelligent students to learn and enjoy physics, biology, chemistry; don't accept a large portion of capable Med School applicants, BUT we do subsidize a LEGION of liberal arts college kids who know every frat and sorority inside out, but can't figure out how to manage there time to stay on top of a measly 15 hour college schedule. Don't get me wrong, liberal arts has its merits, but we have tipped the scales too far and its the reason why countries like India and China are on the up and the western world silently slips into decay.

Whoo, long rant. I suppose some of you won't take my last comments lightly, they're just my 2 cents.

Oct 26, 2017

College costs too much because ppl are willing to pay for it. In hindsight I would've equally well off at a reputable state school for a fraction of the tuition. Fortunately my parents were able to afford my liberal arts education.

That said, posters are too cynical about higher education. Sure many professions don't require a college education but others surely do. To learn how to become a medical professional or even a accountant requires college coursework. To learn hedge accounting on your own would be a nightmare. And even in my cozy liberal arts education I like the social benefits that I received. Corny stuff like meeting people from more diverse backgrounds, studying abroad in Japan and throughout Europe, and just gaining general social skills. I was also introduced to the WASP culture so it was helpful because it is so prevalent in the business world. And most importantly I def sharpened my writing and critical thinking skills... even in pointless history classes.

Oct 26, 2017
mb666:

College costs too much because ppl are willing to pay for it. In hindsight I would've equally well off at a reputable state school for a fraction of the tuition. Fortunately my parents were able to afford my liberal arts education.

I was also introduced to the WASP culture so it was helpful because it is so prevalent in the business world. And most importantly I def sharpened my writing and critical thinking skills... even in pointless history classes.

I think that the WASP world has mostly faded away. Where I went to school people were mostly secular rednecks; many of whom inherited wealth from ancestors who made their money like Forrest Gump.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." -- William Shakespeare, Much Ado About Nothing

Oct 26, 2017
mb666:

Corny stuff like meeting people from more diverse backgrounds, studying abroad in Japan and throughout Europe, and just gaining general social skills.

If you do not have good social skills going into college you will probably not be very successful in the real world. If you want to sharpen your social skills just learn to emulate the mannerisms of great Hollywood personalities from the past and present like: Morgan Freeman, Arnold Schwarzenegger, Ronald Reagan, and Clint Eastwood.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." -- William Shakespeare, Much Ado About Nothing

Oct 26, 2017

Government should not be involved in education and inflate the prices so much. I pay upward of $50,000 for my college and I am fed up with the federal loans that everyone gets. It only pumps the bubble!

Oct 26, 2017

I agree as far as college goes, but I'm still hung up on primary/secondary education. I think in those cases there needs to be some sort of base education requirement, but at the same time, they need to offer vouchers for private/charter schools.

Oct 26, 2017

Supply and demand argument for rising college costs doesn't make sense. Nearly all colleges are not-for-profit. As enrollment increases, average costs should decrease as colleges scale to the new volume.

"Just go to the prom and get your promotion. That's the way the business world works. Come on, Keith!" - The Boss

Oct 26, 2017
The Boss:

Supply and demand argument for rising college costs doesn't make sense. Nearly all colleges are not-for-profit. As enrollment increases, average costs should decrease as colleges scale to the new volume.

The fact that they're not-for-profit doesn't mean the law of supply and demand doesn't hold. The law of supply and demand always holds. The demand for college degrees pushes up the cost of the degree because the universities can--and with that money they build more buildings, incredible facilities, pay faculty more, conduct more research, etc.

And FYI, not-for-profits can still make profits. Being non-profit just means there aren't investors or owners who receive profit distributions.

Oct 26, 2017

This is why you either go to an elite college or do STEM so you develop actual practical skills.

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Oct 26, 2017

I currently work at admissions at a college and I can tell you the amount of riffraff we allow in because we know its a meal ticket for the school is astounding. Just another pyramid scheme

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Dec 1, 2011

My college is free :D full tuition, I am glad I didnt go to UMich, I would be 200k in debt :( I would not have time to do anything else except 3 shifts :(

My school is a non-target, but sends about 5-8 to BBs 10-15 kids to MM and 30 some kids to Boutiques. This is for FT FO. 3 of those 7 went to GS

I want a lady on the street, but a freak in the bed,

Go Bucks!!

Dec 2, 2011

You guys know if gold gets expensive enough a lot of gold will come into the market i.e. false teeth, old/broken jewelry. Hell if it gets expensive enough people will be getting gold out of sea water.

Dec 1, 2011

Also man its simple Micro Econ.

When the demand for the product (a degree, a job, pedigree, a future) is so fucking high.

The quantity supplied and price will increase in the supply/demand curve.

The education institutions are bascially making money because this world says that in order to have a GOOD job you need a college degree, and the world says that in order to have a hot wife, great kids, a nice house, a pool, You need a good job. So the universities are using this power to their advantage by raping our pockets every year. :D

Capitalism at its finest

I want a lady on the street, but a freak in the bed,

Go Bucks!!

Dec 3, 2011

College has gone up in price way more then other goods because it is a highly subsidized good. Many many college students dont pay for their education so are not price sensitive. Anything that is highly subsidized but doesnt have any cost control will skyrocket in price...same thing happens in health care.

Oct 26, 2017

Ohio State - 40K in state / 100K out of state
http://undergrad.osu.edu/money-matters/tuition-and...
UMich - ~50K in state / 156K out of state
http://www.finaid.umich.edu/TopNav/AboutUMFinancia...
UCLA - ~50K in state/ ~140K out of state
http://www.admissions.ucla.edu/prospect/budget.htm
College is relatively cheep tuition wise. You get into serious debt when you factor living expenses in. Unless you live in the middle of nowhere, I would suggest cash strapped students should live at home and commute to a state university. Work on campus or part time and hopefully you will get some student aid also. That should lower your total student loan balance.

Does this suck? Yes. But you can still have fun and get a college education at a reasonable cost. Every case where someone complains about 200K in debt could of been avoided by choosing a cheaper school, working and going to school, going to school part time, going to community college and transferring or some combination of these options. No, not as fun as going to a private school and partying on campus for 4 years, getting wasted and going to spring break, but sometime life is unfair.

If you choose to live it up and have fun at the private school of your choice, don't blame anyone but yourself for the soul crushing debt you have to pay when the music stops. College is still one of the greatest investments a person can make. Unemployment stats and life time income stats confirm this. Make a smart decision or suck up some of the pain and move on with your life.

No one is entitled to anything.

Dec 3, 2011
ANT:

Ohio State - 40K in state / 100K out of state
http://undergrad.osu.edu/money-matters/tuition-and...
UMich - ~50K in state / 156K out of state
http://www.finaid.umich.edu/TopNav/AboutUMFinancia...
UCLA - ~50K in state/ ~140K out of state
http://www.admissions.ucla.edu/prospect/budget.htm
College is relatively cheep tuition wise. You get into serious debt when you factor living expenses in. Unless you live in the middle of nowhere, I would suggest cash strapped students should live at home and commute to a state university. Work on campus or part time and hopefully you will get some student aid also. That should lower your total student loan balance.

Does this suck? Yes. But you can still have fun and get a college education at a reasonable cost. Every case where someone complains about 200K in debt could of been avoided by choosing a cheaper school, working and going to school, going to school part time, going to community college and transferring or some combination of these options. No, not as fun as going to a private school and partying on campus for 4 years, getting wasted and going to spring break, but sometime life is unfair.

If you choose to live it up and have fun at the private school of your choice, don't blame anyone but yourself for the soul crushing debt you have to pay when the music stops. College is still one of the greatest investments a person can make. Unemployment stats and life time income stats confirm this. Make a smart decision or suck up some of the pain and move on with your life.

No one is entitled to anything.

I agree. If people want to go into massive debt to go to a private school no one should stop them. The problem is certainly not the people going into a lot debt to go to an elite private university or the people going into debt for an engineering degree at a public school because those people will have marketable degrees by the end. It's the people going into debt $50k/year for an art degree from a non-elite private school. The fact that those people are so willing to pay that much for a bullshit degree raises prices for everyone. $50k/year for an econ degree from Harvard is probably cheap in the long term, but $60k/year for an art history degree from GWU is an atrocious decision.

Dec 3, 2011

I think the last three posts were great.

Also in response to everyone wanting to buy CDS's on student debt, I was thinking the best way to play this whole student debt snafu may be just to short the publicly traded for-profit education companies. I know of Apollo and there might be one or two more out there.

Dec 6, 2011
adapt or die:

I was thinking the best way to play this whole student debt snafu may be just to short the publicly traded for-profit education companies.

Without lobbyists that would seem like a lock, unfortunately, they have them.

Dec 6, 2011

Some of the reasons people are stating have always existed, so that doesn't explain the new trend. Government lending procedures have not loosened in student finance, actually EFC goes up consistently meaning that the family is meant to kick in more every year. Also, the auditing procedures and overall thoroughness of Title IV lending has gone up consistently in the past 15 years. Professional judgment calls once were at the loan administrators discretion without any questioning. Technically they still are, but a detailed record of why they did what they did based on the information they had at that time now must be kept. A sample of these decisions are audited yearly at public and private institutions (for profit institutions are looked at the closest and generally have stricter guidelines).

If you're talking about why college has become so expensive, well, there are no regulations on what public/private institutions can charge so they seem to be steering away from the philosophy of everyone deserves an education and appending the statement "no matter the cost," since the institutions themselves don't have to deal with student loan debt except on a single semester basis. It's actually really sad, education, specifically public education, was never meant to be a cog in the wheel of capitalism and now many institutions are running the schools the same way they would a company. Part is due to a reduction in funding from the government, the other part... well take a guess.

As for student loan debt, the federal government and states have been cutting back on grants available - or at least they are not keeping up with the growing demand so there are now more hands in the cookie jar and the jar isn't much bigger.

So you've got tuition rising and the % of free money going down - this is what's creating lots of student loan debt.

Everyone rags on arts degrees, but does this correlate to default rates? People like to say a useless degree with 200K in debt, but is that really the norm?

The solution probably lies in educating prospective students about money and loan management and to present them with realistic expectations of their financial future and lifestyle based on their career options that will generally follow the degree choice.

Dec 3, 2011
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Dec 1, 2011
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Follow the shit your fellow monkeys say @shitWSOsays

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Dec 7, 2011
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My drinkin' problem left today, she packed up all her bags and walked away.

Dec 6, 2011