The college bubble

[Anthony DeAngelis]

Thanks man. I appreciate it!

 

[rishab dhar]

@ Anthony Great points raised by you.

Okay. If the crux of the problem is that costs are rising because of high demand, and Americans want to study at college just for the brand name. Why not do the following:

Raise income taxes in US to a level at which the government can pay for the education costs for the people, just like in many European countries? I agree that net income will dramatically fall, but hey at least people will learn to live within their means and wouldn't have insane student debts to their name. I vote for making education (higher) a birthright for every American (Asians can continue paying the high costs or serve a minimum of 4 years in non-profit organization in US ( like in Singapore))

Also, since a huge number of students in US colleges originate from Asia (particularly India and China), opening colleges in these countries would at least have some effect in reducing demand for these degrees is US.

I assume at least some Indians and Chinese will be convinced to get these degrees in their home countries. And, if the thing really is about networking and jobs in India and China, I still think there won't be an issue ( for instance in India, the brand name of Institute counts; the location or branch doesn't really count as long the student is competent. eg IITs. We don't discriminate that a guy did his engineering from IIT Mumbai, but this guy did from IIT Roorkee. Whereas in US there is huge difference (UCB vs lets say UC Santa Cruz)).

Now I also think that if these colleges/universities are really so envied they would still attract the best recruiters from India/China ( In India almost 80-90% placements are campus based) , and they would build their own brands in India. ISB started in 1999!, and it was among top 20 in the world in 2006-2007.

Also, as the number of H1-B visas are anyway are too small, it is unlikely that most of the Indians or Chinese would be hired in US anyway. Now if they don't have US jobs but have paid US tuition fee, their ROI will always be too low. They will drowned in debt, because salaries in ,at-least, India are nowhere close to those in US. A better alternative will obviously be to apply for Indian campus for US university. Now people here may raise the same question for Indian students : "They don't care about debt.". Well they do! We are very sensitive towards costs. The biggest example is the huge drop in the number of applicants to IIM in last 3 years, even with improving salaries and buoyant economy ( No of applicants have fallen from 300k+ levels to barely 200k this year because tuition fees has been hiked by almost 50-75% in most colleges-runaway inflation).

 

[bigbadwolf]

Just outsource the universities to India, just like IT jobs were outsourced. As cost of living is drastically lower in India, the so called compensation paid to teachers would also dramatically fall. US students can come to India and study in Indian campuses of American Universities. The average tuition , as a result, would easily fall by 50-60%.

It's not professors' salaries that are causing tuition fees to escalate into the clouds: in real terms full-time tenured and tenure-track faculty are probably being paid the same -- maybe even less -- than they were thirty years ago. Furthermore, such faculty are an ever-declining percentage of the total teaching staff as universities make ever-greater use of adjuncts, grad students, and online instruction. It's all the other useless things universities do -- sports teams, extracurricular activities, fancy buildings. In the case of Harvard, Yale, and a number of other universities, huge multi-billion dollar investment funds. Also the numbers and salaries of administrators.

Raise income taxes in US to a level at which the government can pay for the education costs for the people, just like in many European countries?

The European model of the state is different to that of the US one (with the possible exception of Britain, which seems to be converging with the US, though they still have a National Health Service). Taxes in Europe are a few percentage points higher than the US -- but they are also not funding a bloated military and unnecessary wars abroad, and they don't have a military-industrial complex to subsidise. Additionally, there would be huge political opposition to such a measure from vested interests (student loans, for example, are a very lucrative racket) and even from a confused population that reacts reflexively, like Pavlov's dogs, to any hint of "socialism." It is like the healthcare sector, which thinking people know is a "series of interlocking cartels" -- but the sector has political clout and there are no countervailing forces.

 

[rishab dhar]

Okay. So there are serious issues.

Then why not use invisible taxes, of which there are many in India. Our Indian government says " we are subsidizing oil", as the state Oil market companies run into billions of dollars of losses ( selling prices of gas is below recovery rate for these companies as petrol and diesel are taxes heavily by govt- petrol sells as $1.5 a liter of which 60-75 cents are taxes). Government then says " we have to undergo huge deficits "borrow from bond markets" to keep these oil marketing companies afloat. But in reality, as the oil marketing companies are government owned, how can they be running into losses - they are making 60-70 cents on a liter in taxes.

My solution -

1) Introduce invisible taxes such as education tax (only 2-3%) on most widely consumed goods, such as oil, cars, etc. People wouldn't even realize the costs. When you purchase a $100 good. A tax of $2 is hardly gonna deter you from not buying it.

2) Then tax 3 times more all the businesses that outsource to china and India, so that any savings derived on such a move will be nullified. Companies would be forced to keep Americans employed in America.

3) Well, people on this forum may not like it. Tax businesses on the type of business being run (businesses with highest profit margins should be taxed the most). Highest taxes for banks, then IT -software (not hardware) companies, DO NOT tax oil companies ( we want more oil to be drilled to increase supply.

4) The government owns the state universities right? Use these (UCB/Michigan/UIUC/UCLA/Texas A & M) to break the juggernaut of expensive private universities, the so called ivy league ones/elite ones.

i) Reduce the costs to almost zero or negligible in these universities.
ii) Limit the number of student loans issued. To reduce them, government should tax banks, which issue these, extremely high. Limit all loans issued from government agencies.
iii) Provide night classes for people who work , so they can work as well as study. Those who cannot go to the college should be given live classes through internet by the same professors who teach in normal classes.
iv) Advertise Advertise Advertise these programs.
v) Perhaps even guarantee jobs in government agencies to those students who achieve a GPA of 3.5 or higher in these programs ( any criteria that ensures some quality of degrees being awarded), so there will be no uncertainty about their future. Throw out ( force) all those students who do not keep up (let us say a GPA of 3.0). We don't want a case in which quality of education suffers, or more precisely, the brand name of these universities gets hurt as a result of poor quality of students.
vi) Introduce quotas, like Indian Universities, in state colleges and force private colleges (ivies and others) to admit at least 30% of the class which won't be charged any tuition fee, otherwise face high taxes. The rich students can suffer ( they can afford to pay), or they too can study in state universities.

These programs will do these things:

1) Increase enrollment at state universities dramatically and reduce enrolled at private universities drastically.
2) Provide billions of dollars in taxes, which can then directly be provided to those students who are extremely poor but want to go to college. The predefined annual income could be $35k-$50k/annum, depending on which part of the US the person lives.

 

[bigbadwolf]

Then why not use invisible taxes, of which there are many in India.

Why should the US government, or the state governments, do this? There is no mass movement calling for it. There are, on the other hand, powerful forces calling for "deficit reduction" and "balancing the books."

4) The government owns the state universities right? Use these (UCB/Michigan/UIUC/UCLA/Texas A & M) to break the juggernaut of expensive private universities, the so called ivy league ones/elite ones.

Nope, it's the state governments -- California, Michigan, etc. -- that have some measure of jurisdiction over them, and subsidise them (though some Federal money does come in). But the subsidies are going down, are under attack. As they have been in California for a number of years. And again: why would they want to break the expensive private universities -- even if they could? There is no mass movement calling for affordable and equitably provided free or highly subsidised higher education. Perhaps you don't understand the USA: there is distrust of government and a search for private and individual solutions to what are usually collective problems (such as medical care, education, and pensions). To change this would require a sea change in attitudes and in mass mobilisation. At the moment there is none. The forces that affect public policy come from the private sector.

ii) Limit the number of student loans issued. To reduce them, government should tax banks, which issue these, extremely high. Limit all loans issued from government agencies.

Again, why? The "education-industrial complex" is politically influential. Which is why legislation has recently changed making it impossible for students to shrug off student loans.

 

[rishab dhar]

If this really the case, that is, the US government cares nothing about the people, and the only thing that can cause a change in attitude is a mass movement, I think US is gonna go down the drain. There is gonna be another crisis- the student loan crisis-not now,perhaps 10 years later, when students will unwillingly default on their loans on a large scale, the whole system will go down.

I thought that, with subprime crisis and the real-estate crash, perhaps students and their parents would be more thrifty and less willing to take loans, but alas I was wrong.

The Americans perhaps need to witness the great inflation like Weimar Germany to learn how to be thrifty. Germans fight for pennies.The ECB, which is influenced by Germany, is already raising rates because of rising inflation in Germany.

 

[rishab dhar]

The more I read about US the more I realize about the degree of bureaucracy and red-tape-ism in US. US seems to be a sinking ship-headed the same way as the UK (1950's)

-> 20 years ago US condemned Japan for not letting its banks fail, for letting the companies to fail in order to clean up the system was the American attitude. 20 years down the line, US itself was found bailing out its banks, throwing billions/trillions of dollars here and there, with no transparency whatsoever. US said Japan had a lost decade, but 20 years later, American witnessed their own lost decade. Stock markets are lower than they were in 2000 (ex Dow), home prices have crashed, per capita is static, no jobs were created in an entire decade for the first time in post-war (WW II) US.
-> 20 years ago and now US portrayed the then USSR at military oriented and communist, but today it finds itself in those same shoes-uncontrollable military spending, and going at war with every other nation -Afganistan/Iraq/North Korea? and now perhaps Iran.
-> 20 years ago US complained about India and China for being protective, but today it itself finds itself levying taxes on every other good imported and framing China for currency manipulation. Today, half of America's manufacturing Industry is China, and half of American tech Industry is in India.
-> 15 years ago, getting an American visa was extremely easy. Today it is tougher to get an American visa than to get an Indian visa- longer processing times, massive blunders are but the norm at the US embassy in India.
-> 10-15 years ago Indians flocked to US, in hope of better jobs etc, but today several Indians (well-settled) have returned to India, for there are much better job opportunities and much faster career growth in India.

 

[Andy D.]

I just watched the docu that Alain linked too earlier. Pretty interesting stuff for anyone who hasn't seen it.
The portion on how the default numbers are massaged screamed "next sub-prime" and a fair amount of this money is Federal in origin.
The poor folks who get saddled with debt can't clear it through bankruptcy either, I can already see another fiasco on the horizon.

 

[darth]

"15 years ago, getting an American visa was extremely easy. Today it is tougher to get an American visa than to get an Indian visa- longer processing times, massive blunders are but the norm at the US embassy in India."

Why would anyone want an Indian visa.... and moreover if they make getting an American visa easy... atleast 70% of america's population will be those of Indian and chinese

 

[bigbadwolf]

I just watched the docu that Alain linked too earlier. Pretty interesting stuff for anyone who hasn't seen it.

Yeah, pretty depressing stuff. Again, it goes to the heart of the American system: private-sector "solutions" to collective needs. As the docu makes clear, there aren't enough places in state Us and CCs to take everyone (not to mention cutbacks in these institutions because of state budget cuts), and in any case many of those who want or need vocational training are not really in a position to benefit from it: they're semi-literate or semi-numerate (at least partly due to a poor state school system). In step the smartly-dressed and smooth-talking salesmen of the private "education" racket, promising the moon.

 

[alain]

I just watched the docu that Alain linked too earlier. Pretty interesting stuff for anyone who hasn't seen it.
The portion on how the default numbers are massaged screamed "next sub-prime" and a fair amount of this money is Federal in origin.
The poor folks who get saddled with debt can't clear it through bankruptcy either, I can already see another fiasco on the horizon.

There is really interesting detail that you point out. There is really no default. So the lenders will always somehow someway recover their money (it could be slow and lengthy but they will be able to recover it).

 

[Andy D.]

Alain - Indeed that seems to be the case. And by the way, I forgot to thank you for the link above, fascinating stuff (if depressing).

Essentially, the Private Uni's grab the loan money and use the fact that, if the loan repayments cease after a two year period, then this isn't considered "default". This allows them to keep the cash flooding in, and obscures the fact that the Federal government is left trying to squeeze blood from a stone.
And we have people left with $60K worth of a debt and unable to find a job because their "medical experienced", involved going to a scientology exhibition on Psychiatry.

 

[Anthony DeAngelis]

1) Yes, there is plenty of red tape in the USA, but Europe has just as many if not more regulation and processes to go through.

2) Comparing low cost education in Europe to high cost education in the USA fails to take into account the endowment system. Most people do not pay the sticker price for school. Those that do, generally can afford it. If a university is not giving you any merit or financial aid it is probably because your not poor and not that great a student.

What needs to happen is people need to start learning trades and not getting college degrees. A voracious appetite for reading can education oneself in a little over a year. No need to drop 100K on a degree from Amherst.

3) Our economy needs more SKILLED labor, not 4 year degree holders. We churn out an endless supply of non science majors. If you are going to increase taxes for education it should go to science degrees and skilled trade schools.

4) For profit schools suck, but they also can serve a purpose. I would rather have people make mistakes and own up to them than have the government step in and try and protect people all the time. Foolish people have been separated from their money by smooth talking sales men since the dawn of time. For profit education is simply the most recent incarnation of it.

 

[Anthony DeAngelis]

The more I read about US the more I realize about the degree of bureaucracy and red-tape-ism in US. US seems to be a sinking ship-headed the same way as the UK (1950's)

-> 20 years ago US condemned Japan for not letting its banks fail, for letting the companies to fail in order to clean up the system was the American attitude. 20 years down the line, US itself was found bailing out its banks, throwing billions/trillions of dollars here and there, with no transparency whatsoever. US said Japan had a lost decade, but 20 years later, American witnessed their own lost decade. Stock markets are lower than they were in 2000 (ex Dow), home prices have crashed, per capita is static, no jobs were created in an entire decade for the first time in post-war (WW II) US.
-> 20 years ago and now US portrayed the then USSR at military oriented and communist, but today it finds itself in those same shoes-uncontrollable military spending, and going at war with every other nation -Afganistan/Iraq/North Korea? and now perhaps Iran.
-> 20 years ago US complained about India and China for being protective, but today it itself finds itself levying taxes on every other good imported and framing China for currency manipulation. Today, half of America's manufacturing Industry is China, and half of American tech Industry is in India.
-> 15 years ago, getting an American visa was extremely easy. Today it is tougher to get an American visa than to get an Indian visa- longer processing times, massive blunders are but the norm at the US embassy in India.
-> 10-15 years ago Indians flocked to US, in hope of better jobs etc, but today several Indians (well-settled) have returned to India, for there are much better job opportunities and much faster career growth in India.

1) We watched Japan stagnate and learned from this. Their situation is different from ours in a variety of ways.

2) Countries levy and tariff to protect their industries. If you think the US is bad, go look at Europe and China. We are fairly open, even to the point of being detrimental to our own citizens.

3) People might disagree with what the USA does in the ME, but we are not invading Sweden for profit. The regions we are in are unstable, effect the USA (and the world). Iran is a global issue. Saddam was also. North Korea regularly puts the entire Korean continent at risk. These are not places you want to run unchecked. Considering the USA foots the entire bill for this, while the whole world benefits.

4) People still flock to the USA. Visa's are easy if you are a student and easy if you get a job with sponsorship. With ~20% real unemployment, it is not prudent to be giving away jobs left and right.

 

[Andy D.]

3) Our economy needs more SKILLED labor, not 4 year degree holders. We churn out an endless supply of non science majors. If you are going to increase taxes for education it should go to science degrees and skilled trade schools.

True, but I think the gulf in wages (and perceived gulf) at the higher levels is what attracts people into subjects that require a degree, as opposed to say carpentry or plumbing (although a plumber can make a damn good living).

4) For profit schools suck, but they also can serve a purpose. I would rather have people make mistakes and own up to them than have the government step in and try and protect people all the time. Foolish people have been separated from their money by smooth talking sales men since the dawn of time. For profit education is simply the most recent incarnation of it.

Anthony, the government is already stepping in - with our money - all the time. That's the problem. It is giving money to people who probably shouldn't be doing degrees.
You might not like the government telling people they shouldn't make mistakes, but I don't want them encouraging and funding their mistakes either.

On top of that, many of these for-profit schools seem to be engaging in acts of fraud, if the PBS documentary is correct.
Pulling a "bait-and-switch" might not be illegal, even if immoral, however out-right lying to people and forging documents is.

Considering the USA foots the entire bill for this, while the whole world benefits.

Last time I checked the UK was also involved in Iraq, Afghanistan and Libya - I think "entire" is stretching the meaning of word somewhat.

 

[bigbadwolf]

2) Comparing low cost education in Europe to high cost education in the USA fails to take into account the endowment system. Most people do not pay the sticker price for school. Those that do, generally can afford it. If a university is not giving you any merit or financial aid it is probably because your not poor and not that great a student.

Over the years the number of university-subsidised and -funded scholarships has gone down. Not exactly sure why -- universities like Harvard and Yale are sitting on tens of billions of dollars. The number of Pell grants awarded has also gone down. Also, because of the real rise in tuition fees, it's become very difficult to "work your way through college" (people like you are the exception that prove the general rule). So people are borrowing. Hence the rise in student indebtedness.

What needs to happen is people need to start learning trades and not getting college degrees.

I agree that a lot of degrees are just useless. I know a woman with a PhD in theatre and drama who is looking for any sort of clerical work she can get. On the other hand, a lot of PhDs in rubbish like "educational leadership" end up with jobs as executives in the for-profit-university racket, as the PBS documentary shows. Sorry, my attempt at humor.

I don't know if skilled labor is what's required. The jobs being created -- such as they are -- are at the bottom end of the market. For instance, McDonald's announced 62,000 new jobs a few weeks ago. The jobs being created are in things like food preparation and service, or in nursing care (for an aging population). Same in England, and probably the same in Europe. A couple of British academics surveyed the dismal job scene in the US and UK and published a book, "The Mismanagement of Talent," back in 2004, which concluded that arming more people with college degrees was a colossal waste of time and money as the new unskilled jobs didn't need them (contrary to the pronouncements of mendacious politicians).

4) For profit schools suck, but they also can serve a purpose. I would rather have people make mistakes and own up to them than have the government step in and try and protect people all the time. Foolish people have been separated from their money by smooth talking sales men since the dawn of time. For profit education is simply the most recent incarnation of it.

Watch the PBS documentary whose link Alain posted. These "universities" are sucking at the government tit, and their "students" are merely the conduit that allows this to happen. As the docu makes clear, that's why regional accreditation is worth $10m -- it allows students to become eligible for federal loans. If these loans were stopped by the Feds, the whole lot of these "universities" would promptly fold and shut their doors. It's a racket from start to finish. Could for-profit schools serve a purpose? Maybe, but not this way, where the taxpayers and the "students" are left holding the bag.

 

[Ohad]

Watch the PBS documentary whose link Alain posted. These "universities" are sucking at the government tit, and their "students" are merely the conduit that allows this to happen. As the docu makes clear, that's why regional accreditation is worth $10m -- it allows students to become eligible for federal loans. If these loans were stopped by the Feds, the whole lot of these "universities" would promptly fold and shut their doors. It's a racket from start to finish. Could for-profit schools serve a purpose? Maybe, but not this way, where the taxpayers and the "students" are left holding the bag.

I think that the two main reasons for the fiasco are:

1.The lack of involvement from the Ministry Of Education , I was shocked when they said that they make up a course in a weekend.
The simplest way to do it and also help to improve the quality of universities in general is to have Government issued exams.
That way these for-profit schools will have to really teach their student something for them to have a chance to pass these exams.

2.According to the documentary the government is handing out too much money , they need to harshen the conditions and to place school based criteria.For example, X% graduates Y% job allocation in their fields 1 year after graduation, GPA in government issues exams, the better these numbers are the more students will be allowed to receive loans in this school.
If the school have great stats like a top Ivy league school than go ahead and give loans to the students, if it doesn't than cap the % of students that will be allowed to receive loans.

 

[alain]

I think that the two main reasons for the fiasco are:

1.The lack of involvement from the Ministry Of Education , I was shocked when they said that they make up a course in a weekend.
The simplest way to do it and also help to improve the quality of universities in general is to have Government issued exams.
That way these for-profit schools will have to really teach their student something for them to have a chance to pass these exams.

2.According to the documentary the government is handing out too much money , they need to harshen the conditions and to place school based criteria.For example, X% graduates Y% job allocation in their fields 1 year after graduation, GPA in government issues exams, the better these numbers are the more students will be allowed to receive loans in this school.
If the school have great stats like a top Ivy league school than go ahead and give loans to the students, if it doesn't than cap the % of students that will be allowed to receive loans.

I don't think you are very familiar how the US government works at various levels (Federal, State and municipalities). You are trying to apply a model from your country to the US. I don't think that is going to fly.

 

[Andy D.]

I presume the best way of dealing with this, is to pull Federal funding of loans and let States deal with it at that level.

 

[Ohad]

I don't think you are very familiar how the US government works at various levels (Federal, State and municipalities). You are trying to apply a model from your country to the US. I don't think that is going to fly.

Someone have to be the grown up on the block, it sounds ridiculous to me that after getting accreditation a school can do whatever it likes.
Someone have to put standards , isn't this why Bar Exams are held?