Bonus Material on The Value of Higher Education

A while back I wrote about my perception of the declining value of college education. While the thoughts are not absolute, I believe strongly that many higher education degrees have unnecessarily placed students into great debt and into jobs that require them to work hard (paying off their debt) at things that are not God’s-kingdom-related. Alternative approaches that our family is exploring are community college credits while homeschooling, as well as internship and ultimately, business ownership. All of this, with a goal of no debt along the way.

It seems I’m not alone on this topic. Maybe it’s because I have been thinking about the topic, but I suddenly noticed articles popping up all over the place about this very subject. Whether it is about student loan debt, or the limited value of certain college degrees, there seem to be a lot of people questioning the same topic.

Here are some examples:

Higher Education Bubble About To Burst – Glenn Reynolds is a professor of law at the University of Tennessee. But in a very candid way, he acknowledges that higher education is not what it should be. He points out the dangerous circle of ballooning costs with the seemingly cheap credit that allows students to amass hundreds of thousands of dollars of loans – before they ever even begin to start their career. One student’s quote – "I don't want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back."

Placing The Blame As Students Are Buried In Debt – More detail on the student quoted above. She went to school for four years to get a degree in Religious and Women’s Studies, amassed $100,000 in debt (credit that she obtained far too easily), and now struggles to scratch together enough income to pay her $700-per-month student loan payments. “It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners.”

Subprime Goes To College – This one is a tough, technical read. Click on it if you want to understand how the federal government subsidizes a great deal of the education loans in this country – very inefficiently. And a lot of it is a gimmick designed to enrich the educators, not the students. “At one Corinthian Colleges-owned Everest College campus in California, students paid $16,000 for an eight-month course in medical assisting. Upon nearing completion, the students learned that not only would their credits not transfer to any community or four-year college, but also that their degree is not recognized by the American Association for Medical Assistants. Hospitals refuse to even interview graduates.”

Getting An Efficiently Delivered Education – The author argues that the value received in return for the amount paid to receive a college education has become a negative incentive, and has been this way for the last two decades. I believe this may be true for Ivy League institutions and some of the more expensive and elite colleges. It’s probably not as valid for state colleges where the student gets an in-state tuition break. “Most importantly, commercial colleges are stealing the sophisticated non-bubble students who are able to calculate the cost of education, match the specific appropriate academic field or training, and benefit from an efficiently delivered education. Plus, commercial colleges put a lot of resources into making sure their graduates get jobs.”

Did You Know That Student Loans Aren’t Erased By Bankruptcy? – “If you run up big credit card bills buying a new home theater system and can’t pay it off after a few years, bankruptcy judges can get rid of the debt. They may even erase loans from a casino. But if you borrow money to get an education and can’t afford the loan payments after a few years of underemployment, that’s another matter entirely. It’s nearly impossible to get rid of the debt in bankruptcy court, even if it’s a private loan from for-profit lenders like Citibank or the student loan specialist Sallie Mae.” I have to confess that I did not know this – once student loans are granted, even bankruptcy won’t take them off of your books. Unlike any other loan I can think of, student loans appear to be permanent. This may explain why some people are still saddled with these loans even as much as twenty years after school.

8 Reasons College Tuition Is the Next Bubble to Burst – Some interesting points: “On average, college tuition increases at around 8 percent per year, which means the cost of college doubles every nine years.” Or, “Today, 66% of students borrow to pay for college, taking on an average of $23,165 in debt.” And here’s one that’s hard to believe, “Schools are spending on luxurious amenities to lure in more students. At High Point University in North Carolina, students are treated to valet parking, live music in the cafeteria and Starbucks gift cards on their birthdays.” And what prevents all of this from coming back into balance in today’s economy? “When your ‘customers’ have easy access to credit and pay you with money they don’t have, the economy doesn’t really matter, does it?”

All is not lost. The education bubble may burst soon, driving down the cost of a college education, and prompting universities to re-evaluate their priorities. But in the absence of that, there are alternatives to getting your student an education, a job, or even their own business. And you may be able to do it without incurring debt.

***********
Back to the Higher Education series

- or -

Exchanging Higher Education For A Trade

A Debt Burden for Future Generations

One of the life lessons I continually strive to teach my children is this – don’t get into debt. A modest home mortgage is usually acceptable, but I urge them never to make a credit card charge that they can’t pay off at the end of the month, and not to take on student debt loans which will saddle them with debt precisely at a time when they can’t afford it.

Something even worse than taking on excess debt would be to take it on with no intent to pay it back – but instead, to pass the debt burden on to my kids. What kind of parent would do something like that? Hopefully no one you know.

But this is precisely what the government is doing with yet another spending measure. Oh, they will tell you that the Congressional Budget Office claims that the bill will reduce the deficit. But did you know that the House can send the CBO’s study back to them as many times as they need to – and change the assumptions used until the “facts” fit the story they want? It’s true. And you will note that the CBO’s report was due out last week, but the release kept getting delayed until it was finally produced yesterday, with numbers that Nancy Pelosi said she “loved”? What I want to know is this – what did the CBO come back with the first time? This is no different than hiring a crooked accountant to cook the books for a company until it looks profitable – except that the Congress-CBO game is perfectly legal. Such is the system we live in – but no one will talk about this rule.

The graph above shows that we cannot afford the government programs that we already have in place past the year 2035, and this is only taking into account Medicare, Medicaid, and Social Security - three government programs which have been run with poor financial discretion to date (can you say “bankrupt”?). I'm fairly certain that Medicare wasn't sold to the people as a deficit-producing program - but that is exactly what it has become. Add to this the certain deficit that bailout bills and healthcare will accrete, and the conclusion that I draw is that our children will be born into debt slavery. It’s not fair to them – they never had a choice.

Thomas Jefferson suggested a unique approach to the issue of taking on debt. Jefferson believed strongly that any new government debt should be paid off by current taxpayers, so as not to burden the next generation. He favored limiting any government debt terms to nineteen years – precisely to keep the repayment in the generation which enjoyed the benefits. What a brilliant idea! If only we had adhered to that concept after Jefferson proposed it!

Current-generation debt, not next-generation debt…I could live with that. As long as the CBO is obliged to tell the truth.