2009 September 04 Friday
Students Going Deeper In Debt
The overselling of the value of education causes students to go deeper and deeper into debt. Their ability to borrow more money will just cause schools to raise prices to get that money.
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.
Lots of these students aren't even learning anything economically useful. The article reports on a journalism student graduating from an unimportant university with $60k in debt. With newspapers shriveling up and dying left and right her job prospects are bleak. Another student in the article is got a law degree from U Pitt with $181k in debt, spent a year looking for a job, and finally got one at a small office that probably pays poorly.
As Half Sigma keeps pointing out (again and again and again and a whole lot here) in the United States unless you attend a top 14 law school you are wasting your time and money. The debt students are racking up at lower tier law schools is just a burden that stands in the way of their advancement in life.
Students need detailed data on salaries and job prospects for their areas of interest. They need that income data combined with projected money loan payment costs so they can steer away from schools and majors that put them on the path to poverty and failure. Most of them probably have no idea how deep a hole they are digging for themselves. Many should take a hard look at online courses and reduce their use of bricks-and-mortar schools.
"unless you attend a top 14 law school you are wasting your time and money."
As someone who attended a school ranked between 15 and 20, I find this cliche irritating. Well over 2/3rds of my class (myself included) landed BigLaw jobs, and the other 1/3 aren't starving. I was accepted into one of the Top 14 and declined because of scholarship offers. Check with the bottom half of Georgetown's class- you'll find plenty of unemployed's there.
That said, yes, law is saturated. So is finance. Science degrees generally won't land you a great salary, just a solid one. Have fun picking a career!
how many young people do you picture giving up on life and live like hikikomori? I suppose young people in Japan realized there prospects in the labor market are grim and that school would be pointless so they live like hikikomori.
Randall, do you think it is more efficient for society to spend more money on make-work jobs instead of education?
I wonder if it is "economically efficient" to simply cut a large portion of education spending (although the government would spend on people who actually have requiste "g") and use the money saved for make-work jobs. Of course, make-work jobs are extremely "inefficient," but immigration restriction and protectionism are options which are regarded as "inefficient" by most economists. (Immigration restriction and protectionism also reduce budget problems, as the first order effects for the former would be less benefits for illegals and the latter revenue from tariffs. The second order effects include higher wages and that would at least preserve the tax base from being beaten down by wage deflation. Furthermore, those two policies would reduce demand for state services because real wages would be up.)
I wonder if it is more "economically inefficient" to obtain a signal such as education, than simply to enact policies such as protectionism and make-work jobs. Education is inefficient since it is a signal and doesn't increase GDP significantly. In Sweden, I heard they are encouraging more people to go to university, not because they think it is an "investment" in human capital, but because it ties up people for a few years. This keeps people out of the labor force and lowers the headline unemployment number. The unemployment number from Sweden is depressed due to make-work jobs (called "labor market political activities" there) and people on early retirement
Re: "Have fun picking a career!"
I would say every job is fun near the top, and that requires devoting your life to it, so follow your interests. Anyway, organizations and humankind in general win when more people work harder/smarter. Read, and you'll be smarter than most people.
IMHO, non-productive recreation is meaningless anyway... evolution pulling our puppet strings.