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2012 September 30 Sunday
Student Loan Debt: The New Serfdom

Americans can't escape student loan debt thru bankruptcy. A rapidly rising percentage of households carry the burden of student loan debt.

About one out of five (19%) of the nationís households owed student debt in 2010, more than double the share two decades earlier1 and a significant rise from the 15% that owed such debt in 2007, just prior to the onset of the Great Recession, according to a Pew Research Center analysis of newly available government data.

The Pew Research analysis also finds that a record 40% of all households headed by someone younger than age 35 owe such debt, by far the highest share among any age group.

The burden of student debt has increased even more because incomes declined during and after the Great Recession. The burden will only grow heavier in the next recession. The Republican Party is missing out on a great campaign issue where they could promote far cheaper ways to get an education and valuable training.

The poor can't afford debt payments of course. They've got too little money for basics, let alone for debt. This educational system that lures people into education that will not boost their earning potential is cruel.

It also finds that, whether computed as a share of household income or assets, the relative burden of student loan debt is greatest for households in the bottom fifth of the income spectrum, even though members of such households are less likely than those in other groups to attend college in the first place.2

Since 2007 the incidence of student debt has increased in nearly every demographic and economic category, as has the size of that debt.

"The Undiscovered Jew", In the comments of a post by Half Sigma, has recently made the point that Republicans could achieve multiple goals by promoting alternatives to the current expensive liberal higher education system.

Scott Walker in Wisconsin, who is the most effective conservative in America because he's the only conservative making aggressive moves to cripple the liberal bureaucracy rather than simply knocking out Democrat polls, has a good idea.

His education reform plan would let anyone test out of classes in any subject to earn their degree faster. On the surface, this only appears to be an attempt to save undergraduates tuition debt by letting them skip classes they have already mastered.

However, his plan is actually a stealth attack on the liberal arts because liberal arts classes are the easiest classes to test out of because there's no math or science involved in the tests. However, because Walker doesn't overtly say he wants to defund the humanities, Walker is able to gain public support for his plan because ordinary voters like the fact Walker's flexible degree program will cut tuition costs.

This is the way to defund the liberal arts - by getting fewer students to take lib arts classes. This will defund the liberal arts because department funding is to a large extent based on how many students are taking x amount of credit hours in the department. The fewer students taking lib arts credit hours, the more starved of funding the liberal arts becomes.

While TUJ emphasizes the partisan advantage of basically defunding left-leaning propagandists I think efforts to cut higher education costs are essential in an environment of declining living standards and higher education costs that rise faster than inflation. People can't afford higher ed. Technology enables cheaper forms of lecture delivery. Online lectures and online books can slash costs. Online tests for practice drilling can help speed learning. Education delivered online is also hugely more convenient. Watch lectures or take tests any time and anywhere you have power and a broadband connection. If you can trouble yourself to download in advance then your only need will be power.

I want to weld Walker's flexible degree program with giving undergrads the option of skipping their gened requirements completely to focus only on their major, as is done in Britain and Australia.

I've made this point repeatedly in the past. The current status quo is unsustainable. Higher education costs too much. We need online lectures for most topics (and YouTube has them for a large assortment of topics). We need online tests that let you check your knowledge and to drill to enhancement your memory recall and mental skills. Then we need proctored tests where you can pay to just take tests.

Tim Worstall sees the current structure of universities as medieval.

I first saw this point over at Brad Delongís. That the whole teaching structure of a university is based upon the medieval expense of books. No individual student could possibly hope to afford even one book directly, let alone the small library required to read all around a subject. Thus the form of tuition of the lecture, where the Master reads to the assembled from the text.

Higher education is next in line for massive restructuring. After that comes medicine. Everything that costs a lot and has soaring costs is in line to get restructured. When world oil production starts coming down off its current bumpy plateau the downward pressure on living standards will assure that both higher education and medicine lose their privileged status.

By Randall Parker    2012 September 30 08:39 AM Entry Permalink | Comments (9)
2012 February 20 Monday
Student Debt In America Nearing $1 Trillion

The parasitism of higher education has become too expensive.

As outstanding student debt approaches $1 trillion, itís one more reason record-low interest rates arenít doing more to boost housing.

Really, we can't afford this. The increase in number of college degrees issued has done nothing to increase the supply of technically skilled workers.

The debt load has impacts in living standards. Younger folks (who also are less skilled than previous generations) can't afford houses any more.

The Fedís white paper said 9 percent of 29- to 34-year-olds got a first-time mortgage between 2009 and 2011, compared with 17 percent 10 years earlier.

Among the more educated student debt is too high to qualify for mortgages. Plus, the growing ranks of single women with babies is probably partly the result of high costs of family formation. Though changing demographics due to immigration is another cause.

LORAIN, Ohio ó It used to be called illegitimacy. Now it is the new normal. After steadily rising for five decades, the share of children born to unmarried women has crossed a threshold: more than half of births to American women under 30 occur outside marriage.

Single parenthood lowers living standards. We can't afford the higher education racket any more because we have too many other things going wrong. We need to start cutting costs to compensate for all that is going wrong.

By Randall Parker    2012 February 20 06:22 PM Entry Permalink | Comments (7)
2011 December 31 Saturday
Cancer Risk Versus Student Loan Bankruptcy Discharge

A reminder to tell anyone thinking about attending a very expensive college: You have to die to escape student loans. Best not to take them on in the first place.

According to the Educational Credit Management Corp., a guarantee agency that manages the student loans of federal borrowers with an active bankruptcy filing, about 72,000 federal student loan borrowers filed for bankruptcy in 2008, but only 29 succeeded in obtaining a full or partial discharge of their loans. Thatís 0.04 percent. Youíre more likely to die of cancer or in a car crash than to have your loans discharged in bankruptcy.

A big student loan burden amounts to debt servitude at the beginning of a working career even before taking on a mortgage. For people who didn't major in anything useful (i.e. for the overwhelming majority of college students) starting out with tens of thousands of dollars of debts starts one on a rather bleak pathway thru life.

Necessity is a mother. Alternatives are beginning to emerge. Check out the courses at the Academic Earth website. Few lead to credit now. But that'll change. MIT's new online learning initiative M.I.T.x will let you learn from MIT courseware and test yourself online to earn certificates. They won't grant you college credit from MIT, let alone a degree. But imagine taking their courses without enrolling in college, getting to know the material really well, and only once you know a couple of years of engineering material go enroll for a couple of quarters or a semester with double or more course load to get the ability to take tests for credit. Pay tuition for less than half the time that a regular college student pays tuition (and going for 5 or 6 years to get a bachelors degree is surprisingly common today).

Imagine colleges letting incoming students take a large assortment of finals tests to test out of the first couple of years of materials. Already the SAT Advanced Placement tests let one do that for a number of topics. One could watch online course, take the MIT tests equivalent to AP subjects (and likely tests from other major schools when more schools follow MIT). Then go take the API tests when you are sure you can pass them. I expect we will see a movement beyond the list of subjects offered for SAT AP tests where colleges will offer the ability of students to prove their knowledge to earn credit without taking courses.

I can imagine prospective employers using MIT's tests as part of a job interview. "Here, sit at this computer and take a few MIT course tests while we watch and we will see if you know enough chemical or mechanical engineering to do the job we need done." Smaller companies in particular don't need the credentials as much as they need people who can do the actual work. So why not basically repurpose online tests to use them to evaluate job candidates?

Update: A reminder on Glenn Reynolds' proposal on student loans: make colleges liable if students default.

For higher education, the solution is more value for less money. Student loans, if they are to continue, should be made dischargeable in bankruptcy after five years -- but with the school that received the money on the hook for all or part of the unpaid balance.

What's key here: Incentivize colleges to have students run up less debt and economically do better on graduation. We need reforms that align incentives of colleges toward producing better economic results for students.

By Randall Parker    2011 December 31 09:44 PM Entry Permalink | Comments (3)
2011 August 29 Monday
Administrators Driving Up Costs Of Higher Education

Why has the inflation-adjusted cost of higher education tripled since 1980? Writing in Washington Monthly Benjamin Ginsberg argues Administrators Ate My Tuition.

Between 1975 and 2005, total spending by American higher educational institutions, stated in constant dollars, tripled, to more than $325 billion per year. Over the same period, the faculty-to-student ratio has remained fairly constant, at approximately fifteen or sixteen students per instructor. One thing that has changed, dramatically, is the administrator-per-student ratio. In 1975, colleges employed one administrator for every eighty-four students and one professional stafferóadmissions officers, information technology specialists, and the likeófor every fifty students. By 2005, the administrator-to-student ratio had dropped to one administrator for every sixty-eight students while the ratio of professional staffers had dropped to one for every twenty-one students.

Education has grown up a big parasite class that lives off it. They run a university prestige racket that cons parents and prospective students, graduating students into debt peonage. We can no longer afford this, what with stagnant (or worse) living standards and bleak prospects for economic growth. Plus, the returns on investment from higher education are exaggerated. I argue for online education in large part because we need to break away from the high cost model that conventional higher education has evolved into.

By Randall Parker    2011 August 29 11:20 PM Entry Permalink | Comments (5)
2011 April 19 Tuesday
Student Loans The New Debt Peonage

Student load debts have surpassed credit debts in the United States.

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

ďIn the coming years, a lot of people will still be paying off their student loans when itís time for their kids to go to college,Ē said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.

This sets up a whole generation of students for debt servitude. Student loan debt is very hard to discharge in bankruptcy.

Gradually, bankruptcy law changed. In 1998, Congress ruled that federal student loans were not allowed to be discharged except under the undue hardship provision. In 2005, private loans, which can carry terms up to 25 years, came under the same regulations.

With the new debt peonage college graduates are bound in servitude to spend many years paying off their college debts. The law makes escape from that debt very difficult. Kids growing up are taught a myth about how education will put them on the road to wealth. This primes them to accept the debt peonage.

Mish Shedlock says Obama wants to kid some kids a debt servitude deal working for the government as a way to pay oft their debts. My advice: avoid college debts in the first place and then you won't have to become a debt servant.

Obama's solution is for kids to graduate from school deep in debt work 10 years in public service to get out of debt. At the end of 10 years, whatever education the kids got in school would be useless.

The solution involves slashing education labor costs by delivering video feeds (live or recorded) of college lectures and standardized tests cheaply purchasable. Automated online education is key to avoiding debt peonage.

By Randall Parker    2011 April 19 10:59 PM Entry Permalink | Comments (23)
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