The One Trillion Dollar Bubble

We’ve discussed this before, but how on earth is the amount of money we are spending on student loans sustainable?

Obviously it depends on ones school, course of study, scholarships, etc. but there eventually comes a point where for your average, say, history major, attending college becomes a negative ROI proposition.  I think we are closer to that point than many realize.


  1. Have you seen the recent Facebook campaign postings forgiving student debt? While it seems to me that the student loan requirements have some predatory tendencies, I’m not up for bailing our every college grad who made irrational decisions about pursuing a non-marketable major.

    There was a recent story in the Milwaukee Journal Sentinal about a UWMilwaukee student with nearly $100,000 in student loans for a teaching degree. Seriously, who evaluates that educational investment equation and thinks, ‘Good plan!’?

    I also think there are way too many institutions hawking useless majors – pulling in naive students with an implied promise of employment security-who’ve ridden the student loan gravy train for too long. Seems to me a loan forgiveness program insulates those with bad decision-making skills and over-zealous marketing tactics from accountability.

  2. Randy in Richmond says:

    Well said RL. This is what happens when Robin Hood becomes leader.

  3. jimspice says:

    “Nearly half of all federal student loan defaults occur at for-profit schools, although the schools have only 10% of higher education students…”

    You know, DeVry, Phoenix, Herzing, Kaplan. And this is the direction you want to take for primary and secondary education as well?

  4. jimspice says:
  5. That’s an interesting point. There is a difference, though, in that the individual is asking for a loan to attend those schools. In school choice, the student takes money already assigned to them for education.

    Yet another example of the importance of following the money.

    I still think this is the issue that will implode any economic recovery over the next decade. People have no idea how bad it is, but then, they didn’t pay attention to the same for housing, either.

  6. jspi. I think the point you’re trying to make to compare private / secondary education track to higher ed for profit is misdirected. At issue is the risk factor of the ‘investment’.

    To analyze investment in parent-directed educational decisions ( and as CK explained, monies are already assigned to that student) and draw the conclusion that the same risk – outcome is attributed to that group as to a for-profit business educational model, is minimally, misleading. They are not even in the same category as far as I’m concerned, even though both models may be called ‘education’. Discernment is needed to clarify the actual transaction occurring. One transaction (for profit higher ed) is a deal made for services between consenting adults, on a sales basis. The other (Choice schools, I’m assuming that’s your target) is a fulfillment of service for a legislated requirement for public good. It’s about Purchasing versus Redeeming ( as in a gift certificate of sorts).

    Purchasing the higher Ed service has risk. The old saying, ‘Buyer Beware’ should be applied, but unfortunately these consumers are either sold a bill of goods, living in LaLa Land over career preferences or personal abilities, or maybe just desperate to have a job. As the article you linked to says,

    “For-profit schools have higher default rates because they serve riskier non-traditional students, Moran says. “Our students are often looking for a second, third or even fourth chance, so naturally they have higher risk factors.”

    This is not your typical population of a traditional college, uni, or tech school. Nor, obviously, is it your private or choice school. So I think your comparison and judgment of the two is off the mark.

    As I read the default number, it also doesn’t add up. Of ALL the loans out there- some have to be 20 years old- it is the higher Ed for-profits that have the highest number of defaults? They haven’t been around THAT long. How did they acquire that percentage of default in such a short span of time? Something doesn’t add up – I wonder about those numbers, don’t you?

    I think the real risk is in the article linked within the article you posted the link to.

    It states that the burden of oppressive student loan debt which will delay the cycle of life purchases – car, marriage, house, starting a family- placing a drag on the economy and creating “wage slavery”.

    “It’s going to create a generation of wage slavery,” says Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers.”

    I don’t think there’s a credible link between the red herring argument on the perils of school choice and the piranha-like sales approach used by the likes of those for profit ‘educators’.

  7. jimspice says:

    In both cases it’s easy government money the “educators” are after. In the case of primary and secondary it’s the voucher money, in the case of colleges and universities it’s federal loans.

    And if you don’t think national for-profit outfits have an interest in WI politics, think again. Like they say, follow the money. Just the other day it jumped out at me that the plot that landed Mark Block in hot water way back 15 years was a shady for-profit school funded undertaking, as was the recent Scott Jensen Hispanic mis-districting fiasco. They’re everywhere.

  8. No, jimspice, I think you are trying to make it conveniently easy to maintain your argument.

    We have, as a community, decided to educate young children. That money exists. The loans are loans. It’s a business decision of sorts to take one out for education.

    Because, we, as a community, have decided higher education is not the same right as a lower school education.

    What constitutes a right? That is a recurring problem when discussing issues from the liberal or conservative point, isn’t it.

    As far as that last paragraph of yours, it’s not like you to go all name-calling-batty on us. What’s up?

  9. jimspice says:

    Let’s start with the “What is a right.” It WOULD be nice if we could all agree on that, wouldn’t it. You’d think that the brighter minds that have preceded us would have made it clear by now. You can’t use the “God given” definition, because then each religion would be entitled to its own set of rights, right? Unless, of course, we’re only talking about one god in particular, wink, wink.

    No I think the best definition is: a right is anything a given society agrees is a right. Works cross-time. Works cross-culturally.

    And by THAT definition, education is not a right. I don’t see it codified in the Constitution. Yes, it is valued by society, but not as fruition of some lofty individual goal. It is valued because it benefits society in general. It creates competent workers and makes us competitive with those who struggle with economically. If society got nothing back, do you really think it would be provided? Just look at how art or music or philosophy are viewed by so many. Worthless, worthy of no funding. Education for education sake is not a goal in itself.

    And though I’ve worked backwards a bit, THAT is why I think my initial point stands. Whether via voucher or loan, in BOTH cases it is society making a conscious decision in it’s own best interest. Society needs advanced degrees to remain competitive just as it needs HS diplomas. They are in our COMMON best interest.

    And as for my last paragraph, I thought it was pretty mild, but OK, I retract “shady” and hereby substitute “fiasco” with “situation.” I still mean it, but yeah, I know, play nice.

  10. Ok, I love this.

    No, education is not a constitutional right, but by legislating education (mandated for certain ages) and collecting taxes to provide for that legislation, I’d call it a mutually agreed priority by the community.

    So, no. Education is not a right.

    I see your point, and I appreciate that you took the time to clarify. You trumped my argument on rights. I like that. I will maintain a difference exists between a community decision (educate youth) and a personal decision (take out a loan.)

    Thanks for amending your last paragraph. 😉 It had less to do with your choice of words than my surprise in your using them.

  11. As I am an individual surrounded by educators in my personal life, I’m a little surprised that it is ‘easy government money’ that ‘educators’ are after. I’m not privy to that motivation. The folks that I know who teach, do so because they want to TEACH.

    I am curious, jimspice, if you think voucher schools have any motivation for existence other than obtaining this easy government money? Are none redeemable as providers of instruction and learning? And conversely, are non-voucher schools exempt from your judgment of myopic greed?

    I’m not trying to be cheeky, just want to understand if you are thinking voucher schools and private higher Ed institutions are the culprits, or if the economically unresponsible consumer of education is the remiss party. In your mind, who is at fault for this trillion dollar bubble?

  12. “…‘easy government money’ that ‘educators’ are after. ”

    I put “educators” in parenthesis for a reason. In my opinion, for the outfits I’m concerned about, education is secondary to profit.

    “…if you think voucher schools have any motivation for existence other than obtaining this easy government money?”

    My beef is not with the small standalone schools, and I’m sure there may be larger groups who have honest motivations as well.

    “…are non-voucher schools exempt from your judgment of myopic greed?”

    I can’t really think of any that pulling in the cabbage hand over fist.

    Ask yourself, why have for-profit schools and their industry groups dropped hundreds of millions of dollars on lobbying and political contributions over the last decade? K12, an online charter school chain founded by William Bennet, Secretary of Education under Ronald Reagan, and Godman Sachs investors has spent $681,000 on lobbying since 2007 in Pennsylvania alone! The co-chair of the 2011 ALEC Education Task Force is a rep from K12. They are neither stupid nor selfless. They see a payday down the road should privatization play out.

    Read the thorough NYT expose and see if this the future you want for our kids.

  13. Jimspice. Too much to go into statistics on this topic, but, briefly, while you cite a for-profit ed example lobbying amount of $681,000 over 5 years, I was quite astounded at the overall $102,000,000.00 (I’m rounding down) of educational lobbying in 2011.
    You’ll see, the preponderance of monies directed at lobbyists are public or private traditional educational institutions, not the occasional for-profit example you cite.

    While you don’t see the greed of public education, I do. You’re looking for a truckload of cabbage, I see stockpiles of sauerkraut. It’s all in the perspective, I guess. My take is that the ‘profit'(cabbage) in public education is hidden. There’s plenty of payoff in that system, just consider the monies directed to political campaigns and ballot expenditures by teacher orgs in 2008, which was close to $62 million dollars.

    I’ve read that Fortune Magazine considers the NEA one of the the top 15 of its Washington Power 25 list for influence in the nation’s capital.

    Additionally, through 2010, unions have spent three times the amount of ALL corporations combined for political ads (Heritage Foundation).

    To somewhat quote a pretty smart guy I know of,
    “Ask yourself, why have (pubic schools, union orgs and their constituency) schools and their industry groups dropped hundreds of millions of dollars on lobbying and political contributions over the last decade?”

    Wake up and smell the ‘kraut cooking, jspice. There is influence peddling and greed in every corner. Me? I’m for any school, any teacher, any parent that puts the student first in the equation. In my experience that DOES include Choice, private, public and yes, even some for-profit entites. I’m for “all of the above” if it helps kids learn. I’m against predatory lending and bait and switch educational sales techniques for unattainable income goals used on unsuspecting prospective students ( tactics used by for-profits, private and public higher Ed). I am also opposed to people with cabbages for brains who think they can pay back $100,000 of student loans in a job sector THEY picked that pays low salaries. I’m also “cheesed off” that “we” could end up bailing out another group of unresponsible lenders and receivers of government cabbage.

    I apologize for the obsessive usage of and besmirchment of my favorite crucifer. But you started it.