This post, suggesting that college is analagous to the housing bubble, caught my attention today:
We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARs plus in debt college kids are facing ?
The point of the numbers is that getting a student loan is easy. Too easy.
You know who knows that the money is easy better than anyone ? The schools that are taking that student loan money in tuition. Which is exactly why they have no problems raising costs for tuition each and every year.
Why wouldn’t they act in the same manner as real estate agents acted during the housing bubble? Raise prices and easy money will be there to pay your price. Good business, right ? Until its not.
Well, perhaps. A house is a speculative investment, and its value is mostly driven by the desirability of the chunk of land its built on. Similarly, an education can be taken as a speculative investment whose value is mostly driven by the desirability of the skill set learned. If you choose to major in science, you are making a speculative bet that, when you graduate, scientists will be in demand. I get that, and I’m also somewhat sympathetic to the idea that college is unaffordable in part because student loans are easy to get.
A lot of the commentary in this area, particularly last year right after the Occupy movement cropped up, was that people were making really silly speculative bets on education. Take for example someone who takes on nearly 6 figures of debt to obtain a Master’s in puppetry. That doesn’t sound like a fantastic idea, because most people probably recognize that puppetry is not a very demanded field. But that line of reasoning, while I do understand the concept, makes me uncomfortable because it inevitably leads to the conclusion that betting on an education in the arts is dumb while betting on an education in a STEM field is less dumb because everyone loves an engineer (whats not to love!). I’m certainly sympathetic to the idea that, when taking on debt, one needs to weigh the potential for payback and in that sense, that line of thinking is correct. But that relies on a solely financial view of education. That is, implicit in this reasoning is that getting an education is nothing more than a speculative bet on the future of the job market.
But I disagree. An education is obviously critical for future employment prospects, yes, but I think there’s more to it than that. Higher education is a chance to learn in depth about whatever it is that you find interesting, whether that’s puppetry or biotechnology. It is a chance to enrich yourself, both for future financial gain and because you just want to. The bubble view of higher education entirely ignores that last part, but I think it’s incredibly important.
Aside from all that, I also want to quibble with this point (emphasis mine):
IMHO, the biggest problem the economy has is the enormous student debt new college grads and those leaving college find themselves with. In the past leaving college meant getting a job and getting a used car and/or an apartment with some friends. Yes there was student debt, but it wasn’t any where near your car payment. You could still afford the car and the apartment. Now its the exact opposite. Today, the minute you graduate college you face the challenge of debt against a college education whose value is immediately “underwater”
No, it isn’t. The biggest problem we have is sustained high unemployment. That college grads are having such problems paying their student loan debt is the symptom, not the cause. If these folks had jobs, they could pay their bills. They could buy their car, which would give a boost to everyone involved in making that car. They could move out of their parent’s basement which would drive new residential construction. Student loan debt is a big issue to be sure, but our real problem is unemployment.