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I've read quite a few posters on this forum state that a student loan bubble might be going "pop" in the near future. What would this actually look like? It seems to me that with student loans being propped up by the government, the status of the roughly $1 Trillion in student loans in our country is fairly secure.
I'm really not that concerned. Part of the reason the number has climbed rapidly to $1 Trillion is due to a rapid increase in the number of individuals going to college. Plus:
Hmmmm..... I get your point that government would pay off the loans and banks would once more be bailed out with taxpayer money.
Therefore, unlike in the real estate market, government would continue to make bad loans to students enrolling in for profit institutions.
In a rational world, these scumbag for profit institutions would be driven out of business as they were no longer able to push student loans onto unsuspecting enrollees.
so your premise is that there are a large number of "bad" loans going to students at the relatively small number of for-profit institutions? I haven't seen this data, if it's true it would certainly be concerning. How much of the government loans are going to students at for-profit institutions?
Are there people who suffer from the entitlement mentality? Sure, they're the ones that are sitting at home on their parent's couch, not doing anything about it. I know a few of these types, and some of them are approaching 30 and still haven't gotten it together.
But the majority of people I know are trying to get ahead - even if it means making $8 an hour as a barista with their college degree. They probably live at home too, although less out of lack of motivation and more out of lack of money. The good paying jobs that everyone was promised simply aren't there, and everybody went to college on the mistaken belief that it would be a worthwhile investment.
so you believe college is not a worthwhile investment? even during this rough economic time, have you not compared unemployment rates of those with a college degree to those without? even if recent grads have not yet landed the job they hoped to upon graduating, they will soon enough. it's still a worthwhile investment. if people chose idiotic routes through college, then it's not a worthwhile investment. but that was always true.
It seems some folk here are severely out of touch with reality.
16 years ago, when I was starting high school, we were told "Go to college or else you'll wind up working at fast food chains, call centers and the like!" ... So we went to college. I was smart enough to get a MS Computer Science degree while others of my friends went into things like Pharmacy, Law School and Math. Those derided liberal arts degrees, right? Oh wait ... These people ARE working at call centers, postal service and insurance companies.
This bubble exists and it has nothing to do with people not wanting to pay back their student loans. They would love to have the jobs they were told existed in high school and pay back their loans, but those jobs just don't exist.
There is a second half to this bubble which we are starting to see come to a head. Hundreds of new college programs have opened in the last two decades to support the huge supply of high school graduates who have been told they must go to college. This supply of high school grads is even higher than before because, "No Student Left Behind" or in other words, nobody fails. It doesn't matter what your grades are to get into any old community college either. You just need to pony up the cash.
So the lower ranking students go to Community College and get a degree that is near worthless, because the people who went to good schools can't find a good job and are already taking the jobs at Starbucks.
It kills me when someone responds to this "Well I went to college and I got a good job, so it must not be the economy." Yes, there are still some new jobs every day, but it is nowhere near the supply of graduates.
You have friends that went to Pharmacy school and are working at call centers? Have they heard of states like Florida and Pennsylvania, with large numbers of senior citizens, and high demand for prescriptions? NJ is still hiring plenty of Pharmacists, though not at the same rate as maybe 10 years ago. Contract jobs at Novartis are posted right now and pay around $40/hr. CVS Caremark is hiring Pharmacists in NJ as well.
Lawyers - people for ages have had the misconception that going to Law School meant they will make 6 figures. But there have always been tons of lawyers in the supply, and there are a lot of jobs that pay $40,000 or less.
Math majors could go and become Actuaries, a job that has the lowest unemployment rate amongs any fields. Or, they could use their math skills to teach themselves programming and become web developers, a job that is quite plentiful right now.
We already have an attorney for every 265 people in the US.
Do we really need more? How about insurance agents? Do we need more of them?
One more time... the un and under employment problem is less about not having enough jobs
for everyone that might want one (or may even be qualified to do). The problem is in having far
too many people available for the jobs that actually need doing.
What will we the surplus 2/3's of the attorneys shift to doing something else?
it would seem as though it's not truly about not having enough jobs for everyone that might want one/be qualified to do so much as it is about people not willing to move to where the jobs are available, at least in some cases.
There are some. Then there are others who are fine paying the minimum each month. Then there are others who have no intention of ever paying them off. I am 25 so I know many people in all three categories.
it's an interesting point. but i know zero people in the 3rd category, and i'm not much older than you. my sister is 27, and i don't think she knows anyone in the 3rd category either.
we have to remember, average student loan debt for a 2013 graduate is $26,000. that's not very bad considering what college graduates have as earning potential.
we keep getting slammed by the media with stories of $100k + debt...it's just not that common.
It's not a student loan bubble. It's a tuition bubble.
Bubbles are formed when pricing exceeds any rational explanation. Given that tuition, particularly at private colleges, is rising at a rate 4x that of inflation, and have done so since cheap, government-supported student loans came into being in the first place, this will be a major challenge.
To be honest, my wife and I aren't 1%ers. But we're close enough. And when we look at shelling out $50,000+ annually to send a child to college -- the equivalent of buying a BMW a year -- public universities start to look really good.
The truth is that colleges are pricing themselves completely and utterly out of the market. If credit tightens up on this, or sanity simply takes hold among parents and students, it will kick the props out from under the education market. Small private colleges will die off by the carload. It will not be pretty in the least. Yet there will be a group of people who will shake their heads and bemoan the fate of these schools, never taking into account that they've been gouging their students for years.
if you were that close to being 1%ers, i would think you would be smart enough to realize that the sticker price of most private institutions is nowhere near what people actually pay. Also, there are plenty of schools out there to choose from, so anyone who does end up paying full sticker price of $50,000+ at some private schools is just idiotic.
and i love that people point to government loans as the trigger of rising tuition, when the fact remains we don't support nearly the same degree as we did 30 years ago, and government loans make up a tiny portion of many schools' advertised prices.
Actually our infrastructure was in better shape when fewer people went to college. Houses were better built, a high school diploma actually meant one could read and write and perform math equations.
We have evolved back to an agrarian society where farmers need massive numbers of cheap uneducated workers and Americans believe they are too educated to work the jobs available.
We don't need engineers when we no longer have a manufacturing industry. We have the irony of far too many unskilled jobs going unfilled or can only be filled by cheap labor immigrants while millions of Americans will never work again.
in what world do you live in that you don't think we have a manufacturing industry? we are still a leading manufacturing economy in the world. we still manufacture numerous things. we need TONS of engineers right now.
I don't think enough people know why. Here are some ideas:
How about the medical monopoly on simple medical services? For years medicine said,
"Only an MD can diagnose and prescribe for these simple ailments."
"Oh, we just don't know what to do about the doctor shortage!"
(It's funny that nurses and PA's are taking these rolls now)
The medical institution has worked hard to keep American medical schools from expanding. Presumably, this would keep doctor salaries high. However, this did not stop foreign doctors from filling the empty slots that American students could not have. What percentage of doctors in your community are from another country?
a large part of the shortage of doctors in many parts of this country is a lack of residency positions for them to complete their training (that goes for foreign doctors by the way - they need to complete the same testing and training, in some cases more, than an american medical school grad).
Not true, judges are discharging them, it's just that the propaganda like your's makes people believe they are untouchable. Judges will only have have more pressure on them for hardship discharges as a generation of $25K/yr baristas will simply not pay, or refuse to work if wages are garnished.
do you have any evidence for your claim of the quantity of college graduates making $25k/yr as 'baristas'? Maybe the kids who dropped out of college - but college graduates are getting jobs that pay far better than that.
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