The value of education.

Look at this and give me your reaction and impression.

I’m guessing the progressive/liberal perspective may be something like … That debt is terrible, we need to do something to help her; perhaps forgive the loan, lower her interest rate, find her a job, give her tax credits …

On the other hand, a more conservative person (me for example) might ask … why does getting a degree cost $200,000? Is there $200,000 value in that degree, what kind of Masters degree is it? How did she ever hope to repay that amount of money? Can she get a job with a good ROI?

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6 comments

  1. This is a subject that is near and dear to my heart and the heart’s of many of my friends. So keep it up, put it out there even if it might go against the opinions of some of your readers. Both sides of an issue are needed to help formulate a solid perspective on any subject.

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  2. Sorry, the administration has already implemented a solution. All she needs to do is take a job in the public sector or a non-profit. That will allow her to reduce her loan payments to be no more than 15% of her income, for no more than 25 years (when she reaches age 62) (percentages and durations vary – this is the longest and highest amount she would have to pay assuming no new debt after July 1, 2014). Then the feds will forgive any remaining outstanding debt.

    Her only issues are:
    – Her age, and
    – Perhaps her masters degree is not in a field with significant income potential.

    For comparison, a couple of years ago, I got a solicitation from my law school dean, at John Marshall Law School (private law school, I was working during the day and commuting to Chicago and going to graduate law school (a masters degree in a legal specialty)) two nights a week. My dean had gotten the solicitation from the law school dean at Georgetown law – a truly big bucks law school, where a law degree can set you back $200,000 (that was 2012). The Georgetown dean’s comment was that for those who would be starting expensive private law school such as Georgetown in a couple of years, they would only have to pay 10% of “disposable income”, and only for 20 years – depending on which job they took. Voila, Georgetown need not reduce their tuition costs, and, everyone can afford it.

    So, I worked up the numbers, and found that a Georgetown law graduate who took a low paying job with massive benefits (defined benefit pension plan, retiree medical, etc.) or someone who carefully sought out a high paying position with the right corporation (that maintains non-qualified, deferred compensation plans), who deferred the maximum to savings and non-qualified deferred compensation plans, would end up repaying only a minimal percentage of the debt – while accumulating well over $1MM in assets over that 20 year period. Then, at age 43, just as they were earning peak income years, the $200,000 is forgiven.

    But, it is worse than that. I did some comparisons of my private law school graduate to the GI bill benefits my two nephews in the Navy have access to. Sure enough, my modestly paid nephews are subsidizing that law school education.

    When I shared this analysis with my law school dean, he was surprisingly reticent … and would not defend the new repayment plans in a written response.

    And, of course, today the accumulated Student Debt of Americans is greater than the accumulated credit card debt.

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  3. Let’s not forget the role colleges are playing as unindicted co-conspirators. They are in the business of enrolling students and keeping them on the rolls for as long as possible. They do not view it as their responsibility to counsel students that the education they are pursuing will likely result in long term debt, in many cases life long debt. The arts and so-called social sciences exist in part by dispensing Bachelors and Masters degrees with negative worth, surely financially, and often intellectually as well.

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  4. There seems to be no shortage of stories like that of Trisha Clark. There is no doubt that there is a crisis of student debt in this country but let’s be realistic. Trisha Clark is obviously an outlier for a number of reasons. Average household student debt is around $25,000 not $200,000. She is 37 years old and still a student. At what age does she expect to be when she turns her debt for education into productive working capital sufficient to service the debt? The real tragedy is that much of the student debt is backed by the taxpayer who will get stiffed by defaults and loan forgiveness programs. Student loans are made to anyone who qualifies but the type of degree isn’t taken into account. If student loans were treated as a business loan, there would be a business plan demanded by the lender to evaluate the probability that the loan will be successfully paid back. As long as the loans are guaranteed by the taxpayer, private lenders don’t really care about the performance of the loan; they get paid back one way or another. If it is a direct government loan it is unlikely that there will be a reasonable plan to recover the debt. If it is a grant, then it is a direct taxpayer subsidy. Inflation in the cost of education has been running well above average inflation for years due to high demand. The increase in demand is being driven by almost unlimited money being available through student loans. With a system like this, more student debt not less would seem to be a self-fulfilling prophecy.

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      1. Let’s put this into current perspective. Obama just recommended a $4 trillion budget for fiscal 2016 and guess what, it contains additional monies for education among other things. I wonder if that’s more of the same education money that has already failed to yield the previous anticipated results. The promise, and it is just a promise, is that if you get a good education you should be able to get a decent job. Guess what, it’s not working that way. So it then becomes a failed promise. In order for our youth to become fulfilled post college, or whatever education they may achieve, you need to have jobs available. This is something this administration fails to understand. Spend whatever taxpayer money you have to encourage businesses, large and small, to grow, prosper and hire additional personnel. Even I would praise the President if he did that.

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