NET VALUE

Some truly staggering data here about the total amount of student loan debt outstanding in the U.S.; more specifically, the growth thereof in the last 14 years. Brookings provides the data.

Look carefully at those figures. The "leading" school in debt outstanding grew from $2.2 million to $35.5 million in just over a decade. I wonder if starting salaries have grown by a factor of seventeen since 2000? Total student debt in that time period has quadrupled. Mean wages have too, right?

The numbers are alarming enough, but if you really need to lose sleep look at where all the money is going. The top 12 schools are, with the exception of crushingly expensive Ivy League bastion NYU, for-profit or non-profit in name only (Nova SE is an open enrollment joke school that is barely accredited, and we all know Liberty University is, uh, rather a thinly veiled moneymaking scheme for the homeschooled crowd). And that raises the question: Who in the name of god is taking out this much money for such demonstrably worthless degrees? The average online degree holding graduate (the 2% of enrollees who actually graduate) is earning $21,000. $21,000! You could make that at Burger King without a high school diploma. We know that for-profits unfairly target susceptible, vulnerable populations like the poor, unemployed adults, and discharged veterans. But we're talking about loans here – money that inevitably has to be paid back. People are taking on debt to get something that is worth less than nothing.

Can that many people really be that gullible? I realize large numbers of Americans are extremely gullible, but we're also notoriously tight-fisted when it comes to education. Unless you're a government employee who is guaranteed a move up the pay scale by acquiring a Master's Degree – any MA, from any school – I do not understand how anyone can talk themselves into going deep into debt for a degree that advertises during Maury Povich. I'm guessing that there are very few "traditional" college students in this boom. There is not, contrary to what brick-and-mortar colleges fear, a ton of kids fresh out of high school enrolling in these diploma mills. It has to be composed primarily of adults with stagnant wages rolling the dice, even in the face of overwhelming statistical evidence to the contrary, on coming out on the other end with greater earning potential.

At some point the dynamic in this market shifts from predatory lending – and there has been plenty of that – to something a sentient consumer recognizes as a scam. Expecting something from a for-profit degree is close to being on par with expecting a fair game of three card monte in a back alley at this point.

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33 Responses to “NET VALUE”

  1. Scott Peterson Says:

    "Can that many people really be that gullible?"

    That many people can really be that scared and desperate.

  2. Mo Says:

    So on the one hand we have the resentful hordes who just don't have what it takes to get the cash to throw their weight around [cf last post], and on the other hand we see their predators.

    Nice. Now wadda we do?

  3. Katydid Says:

    My co-worker's daughter simply *had* to go to Tufts to study art to the tune of $70,000/year in tuition, living expenses (Boston ain't cheap), mandatory studio rental, etc. More than $250,000 later, she's working…part-time in a plant nursery in Maine–she cleared about $15,000 last year. Her father is always ranting and raving about the cost of student debt, but seriously, WTF did he expect? She could have lived at home and studied art at one of the several schools in our state with art programs (one is a school dedicated to art) for roughly $15,000/year.

    So, a quarter-of-a-million in debt to work part-time in a plant nursery in a cold, snowy state–she needed college for that?

  4. HoosierPoli Says:

    Katydid,

    Hopefully his daughter is on income-based repayment. If ten percent of her income for the next 25 years can't wipe away that debt (and it probably can't), the balance gets forgiven.

    On-topic: No for-profit college should be able to receive accreditation, period…much like no for-profit church should be able to register as a charity. These are non-profit endeavors philosophically, and practically, as we have seen, it doesn't work.

  5. Hobbes Says:

    The first couple of paragraphs sound like Ed's referencing an article but I don't see a link – does anyone know what the source article is?

    Also: as a 30-year-old, my cohort on down to the one in college right now were told to go to the "best school you can get into", not the "best school you can afford". I went with the latter, because I'm terrified of debt, but with my test scores and extracurriculars and valedictorian standing I could have easily gone Ivy and a lot of people STILL act like the fact that I didn't was a massive waste of talent.

  6. verbal Says:

    There are a LOT of factors in the total student debt burden right now. A lot of that total is due to the fact that more people are going to college – those "nontraditional" students are now more than half of all current post-high-school students. That includes truck-driving school, English majors, beauty college, phlebotomy certifications, etc.

    The per-student burden, however, is ALSO alarmingly high.

    w/r/t Katydid's co-worker's kid, most of that enormous debt isn't going to be discharged through income-based repayment: That only covers federal loans. You can't get a six-figure debt for an undergrad degree in Stafford loans. Katydid's co-worker almost certainly co-signed private loans or borrowed Parent PLUS to get to that degree, meaning it's not the student, but the parent, who's heavily indebted.

  7. AstroBio Says:

    I used student loans to raise my kids as a single mom. A student schedule was the only way I could have any time to spend with them. I'm also (very fortunately) a natural at the learning thing so it just didn't require too much effort to get science degrees. Sure, we were flat broke most of the time but I was available for the kids and had time to cook real (cheap) meals. During the real-estate boom years I was also able to procure a cheap mortgage in what turned into a desirable location. Now I'm an empty nester with 2 master's degrees and a shit ton of debt. I can choose between continuing to live close to ground and pay about 0.00 on IBR until I'm very old or I could take the molecular ecology show on the road to where the non-existent jobs are.

    This was not really supposed to be about me. I think I am suggesting that many people choose student loans as a financial life-preserver. Of course, it only works if you go to a public school, in-state.

  8. Infamous Heel-Filcher Says:

    Article's got a solid point, but for the love of god can we stop calling NYU an Ivy? Hell, can we stop pretending it's a respectable institution of higher learning instead of the cargo cult of academic trappings it is?

  9. Chicagojon Says:

    "Can that many people really be that gullible?"
    Isn't this the same post as yesterday?

    American's have bought the fallacies of 'The Greatest Generation', 'Home ownership', 'College Degrees', 'Gun Rights', 'American Exceptionalism', 'Socialism=Bad', 'Two Party System', 'Upword Mobility', 'Post Racial America' and on and on and on. It's all bullshit but the majority is clueless and the press, government, & elected officials support it because it suits their interests.

    Is tomorrow's post about USians playing the lottery in droves when the return rate is ~50 cents on the dollar? Another circle in the Venn diagram of the idiot American.

  10. Khaled Says:

    @Chicagojon-
    Is the lottery scam even close to 50 cents on the dollar ROI? I would have assumed closer to 10 cents on the dollar.

  11. Townsend Harris Says:

    "many people choose student loans as a financial life-preserver"
    Yer darn' tootin', AstroBio.
    The first shocker at CUNY was seeing all the full-time students cobbling together part-time jobs and working 30+ hours a week.
    The second shocker at CUNY was learning those overworked, underpaid students needed to enroll full-time for the sake of aid, despite already working too many hours outside of school.
    The third shocker at CUNY was learning the students maxed out their loans in order to help support their families.

  12. Nate Says:

    "Expecting something from a for-profit degree is close to being on par with expecting a fair game of three card monte in a back alley at this point." Ed, you are an educated insider with a considerable IQ. If you were low to average IQ, and had made regrettable mistakes that had screwed your education potential sometime early in life, how would you possibly have the skills to discern that these for-profit companies with their slick ads are a complete crock of shit? Its like telling kids who have been abused that they should have known better.

    No. The system allows these shitty shitty corporations to present themselves as trustworthy and to make promises they can't fulfill, and then market to people who do not have the education– or even know anyone who has the education and experience– to discover how shitty they are. It is less like playing cards in an alley and more like a pedophile in a van going to a park and offering kids to play with puppies.

  13. dieselross Says:

    I think a lot of people just don't really understand the difference between for-profit and traditional schools. If you're an 18-year-old first-gen college student graduating from a crappy high school, who the hell is going to explain it to you? It's not gullibility, it's information asymmetry, and it's something that for-profit colleges ruthlessly and deliberately exploit.

    Reference here, for instance: http://www.slate.com/articles/business/moneybox/2013/08/for_profit_education_let_s_stop_condescending_to_students_of_for_profit.html

  14. sluggo Says:

    Screwing over young people with this predatory lending is not only immoral, but just dumb. Like eating your seed corn dumb.

    Garnishing Social Security checks??? That's just cruel.

  15. NYD3030 Says:

    Got a story for you all. Way way back in 2009 I was working in the data entry department for Alumni Relations at Northwestern University in Evanston, IL. For anyone unaware, Northwestern is one of the best universities on planet Earth.

    Because Northwestern is a private school the benefits it offers have not been eviscerated by state legislatures, so taking a course as an employee is incredibly cheap – around $200. It was something like 3k per course otherwise and they are on the quarter system, so 60k a year.

    One of my coworkers was a single mom with an infant son who was very hard working and driven to build a better life for her family. So knew that education was her only ticket up and so she did the only logical thing – she enrolled in Criminal Justice courses at Kaplan Online University to the tune of twenty grand a year.

  16. NYD3030 Says:

    *she knew…

  17. Champs mom Says:

    In the 80's I worked for a for- profit vocational school that made so much money the owner bought Saint Ronnie a helicopter for his Iran- Contra war. True story. Most of our students were on welfare or had been laid off from manufacturing jobs. Been going on a long time ….

  18. TomW Says:

    I have an acquaintance who did an associates degree in Business Studies at a for-profit school. I met this guy at a party just before he started the program and my first question was why he was going to the for-profit instead of the much cheaper community college in our city that also offers a variety of associates degrees in various business fields.

    He had three reasons, he could start sooner at the for-profit school, the for-profit provided free e-books for all of their classes so he wouldn't have to spend money on expensive textbooks, and his friend had gotten an associates degree (Medical Assistant) at the for-profit and they had helped her find a good job right away. He somehow didn't get that not spending money on textbooks wasn't really a savings to him in the long run given the much higher tuition. (I suspect he wasn't used to spending money on books at all and had heard about the outrageous prices charged for textbooks.) He also didn't seem to get that his friend's experience as a medical assistant (in very high demand in our area) wasn't really relevant for what he was doing. Since finishing that degree he has worked in retail, as a waiter, and as a bartender. I don't know if an associates degree from the Community College would have done anything different for his career trajectory, but it would have been MUCH cheaper.

  19. Skippper Says:

    Can that many people really be that gullible?

    Of course. Our whole and political systems are built on that premise. And people have been carefully and systematically dumbed down. It wasn't an accident.

    People have been taught that critical thinking is "elite" and "boring" and to believe what the people on the tee-vee tell them, whether it's who to vote for, what to believe, what to wear, what to drive, and — most importantly — what to think ABOUT.

    So if the bright-faced people on the tee-vee tell you how Bob & Joe's University at the local strip mall will change your life, you damn well better believe it.

    Of course, if students at traditional colleges did some critical thinking and did the math, they wouldn't be there either.The value of a college education is shrinking as we speak. It's not going to be long that — except for a very few exceptionally talented and trained people — we will be an economy of temp workers. It's already happening. About 30 percent of workers in high-tech companies are currently "contingent" workers. In some companies it's 50 percent. And execs are trying their best to increase those numbers.

    If the "job creators" could make their profit with zero workers, they would have accomplished their goal.

    I have to laugh when people start hating on the lottery. For me, the lottery is entertainment, and despite the long odds, I could win something. So, I see it as harmless.

    Things I think are dumber than the lottery.

    Sending money to a national political candidate. They will get 99 percent of the money they need from the banksters and gangsters. They don't need your vacation money. And at any rate, you lose.

    Giving money to preachers — who will reward you with fairy tales and superstition.

    Buying the latest piece of crap that the man on the tee-vee tells you that you need in order to be a good person.

    Nigerian email scam — We all laugh at it, but it brings in about $10 billion a year. It's the second-largest industry in Nigeria. (So that answers the original question about gullibility.)

  20. Skippper Says:

    Oops — "economic and political systems"

    This comment section sorely needs an editing function

  21. el mago Says:

    @Skipper re: first post. Yeah, no shit.

  22. postcaroline Says:

    Reminded of the lawsuit involving GOP frontrunner The Donald, in which plaintiffs allege Trump University was a scam:
    https://www.washingtonpost.com/local/education/was-donald-trumps-education-venture-trump-university-a-scam/2015/09/13/299ed9c8-52c0-11e5-933e-7d06c647a395_story.html

    Now, to me I think "how did they not know this was a scam to begin with?" But as other posters have pointed out, what looks like obvious bullshit to some looks like tantalizing fruit to others.

    Also, there is the debt relief for students of the now-defunct Corinthian Colleges:
    https://www.insidehighered.com/news/2015/06/09/us-will-erase-debt-corinthian-students-create-new-loan-forgiveness-process

    I want to highlight that CC students will have their loans forgiven due in part to Dept of Ed (ha!) determination that CC misled students about job placement rates.

    So, I'm being glib here, but if loans can be erased because educational programs mislead applicants about job prospects, that sounds like the experience of nearly every college grad I know! Myself included. I was gullible too in that way.

  23. anotherbozo Says:

    Enjoying the comments, but can I be the idealist here and remind everyone that college isn't always about income opportunities and sometimes about enhancing, say, the rest of one's life? And I speak of physical campus interactions with live people on a daily basis for at least four years. The quality of one's fellow students is as important, if not more so, than one's professors, but in fact they seem to be interrelated.

    Personal testimony! Coming from a small town, I found that not everyone was a smug, self-satisfied hayseed with deep suspicion for any book that didn't have the words of Christ printed in red. A community of intelligent people asking what was good and valuable in life–together with tools to continue the search for the duration. You can't bottle that experience, send it over the Intertubes, or find it, necessarily, at one's local junior college. I say go for the best quality college possible.

    Many here can phrase what I mean better than I can. I merely wanted to distract you from your pocket calculators for a minute.

  24. Alan Says:

    Your point about for-profit "universities" is well-taken, but the notion that "crushingly expensive" tuition at Ivy League schools is the cause of significant student debt is simply incorrect. All Ivy League schools meet 100% of every student's financial need, and most do so with the expectation that the student will graduate debt-free.

    NYU is most assuredly not an Ivy League school, and it does not come remotely close to meeting all student financial need. In fact, according to US News, the school's financial aid package was sufficient to meet the needs of only 5.4% of students who applied; on average, only 57.5% of need was met.

    The fact is that for 90%+ of high school graduates, attending an Ivy League college is significantly LESS expensive than attending a public university. The biggest hurdles isn't cost, it's getting in. That, and overcoming the mistaken notion (perpetuated here) that the high sticker price is any indication of what a student can reasonably expect to pay.

  25. Carter Says:

    http://birthmoviesdeath.com/2013/04/18/should-you-go-to-film-school

    One of my other favorite bloggers, a man (I think) who writes about movies as if he were the Incredible Hulk (bear with me) has what I think is the best article about deciding to go to college or not. It's specifically about Film School, but it applies to pretty much any challenging aspirational career that doesn't technically require a degree, but where a degree might be very useful. He directly addresses the issues of class and money.

    If the all caps bothers you, copy and paste it into Word or Open Office and reformat it.

  26. Skippper Says:

    @anotherbozo

    The problem is that the physical campus interactions are disappearing. Students at the online for-profit debt mills definitely don't have them. They stare a computer screen and do online tests.

    For students at the strip-mall "colleges," campus interactions are virtually non-existent. And the same goes for many not-for-profit schools.

    Students pop in, sit through a class, and then hop back in the car to go to one of their two jobs. Or pick up their kids at daycare. There are no bullshit sessions in the snack bar like there were when I went to college. Many students work at least one, maybe two, jobs — and have families.

    I went to the local two-year college to take a course — just to keep active. The only student interactions I saw were during the breaks, and even those "interactions" were outnumbered by the people who spent the breaks texting. I don't remember having one discussion about academic material during these "interactions."

  27. ec Says:

    As someone who was gullible enough to go to a not-top-tier law school (and did really well), and now can't find a job. I would say the scams are more than just online schools.

    Don't go to law school kids.

  28. Katydid Says:

    @Skippper; I went to college in the 1980s, and I usually worked 40 – 60 hours/week on top of my class load, to pay for college at the rock-bottom state school I attended. There were many students like me, working multiple jobs on and off campus. Whatever socializing we did was during breaks, before the professor showed up, or at each other's McJobs. If you were really lucky, you got a McJob with your friends so you could see them during the week. True, we didn't have cellphones back then (if they existed, they certainly weren't readily available or affordable to people making $2.85/hr).

  29. Steve in the ATL Says:

    I had a conversation with the guy bagging my groceries who was studying Criminal Justice courses at Kaplan Online University because he wanted to be a lawyer. I told that I was a lawyer and my law school had -0- Criminal Justice majors in it and -0- on line university grads in it, and that Criminal Justice teaches you to be a parole office, not a lawyer. He looked shocked and scared but appreciated my recommendation to go to community college instead.

    I assume he is still bagging groceries and still attending the wrong school.

  30. el mago Says:

    Once upon a time I helped a diverse handful of students negotiate the SAT's and apply to private universities, hand holding for scant renumeration while helping them get accepted into expensive private school paper mills where failure is an unlikely option as long as costs are met. I knew what I was doing and avoided both guilt and self recrimination without lapsing into cynicism for participating in what I see as a rigged system where forging connections with others who can afford the same privileges is the education and reward. Not to dismiss other tech and personal survival skills incidentally gained in that world.

    No. The thing is I thought and think it's all bullshit and unnecessary, this higher ed game as played in these times. People ruin their lives buying into it. Well, you know, debt and all, but talking about other deaths of the 1,000 cut variety.

    Comment without solutions from a holder of an expensive MFA rarely used and to small gain or result when trotted out. This culture's institutional bondage never quite took in my case.

  31. Katydid Says:

    @Steve; one of my yoga teachers went to law school, did well…and is teaching yoga. I get the impression that law school isn't the open door to prosperity that it was promised to be.

  32. Heisenberg Says:

    Great points. One quibble: NYU is not in the Ivy League. They wish.

  33. fasteddie Says:

    A college degree is a fence that the well to do are putting up to keep out the riff-raff. An unpaid internship is another one. My brother works for a major bank in Chicago, and has for 20+ years – when he is hiring they toss out ALL candidates without internships. Grants, etc can help a poor kid from the country get a degree, but an unpaid internship in the big city means that only those who can afford living expenses and being unpaid for 2-3 months. Again – it is just the well-to-do pulling up the ladders so that only their kids can get in. We are all just mice fighting over the crumbs.