THE EDUCATION BUBBLE
My latest issue of the AARP mag has a piece in it about people whose Social Security retirement checks are being threatened with attachment to pay off delinquent student loans. The federal courts are trying to figure out whether this is legal.
Got that? These are retired folks whose student loans have been pending for upwards of fifteen years. The article indicates that they are not lifelong deadbeats. They just never got a chance to make all that education pay off well enough to pay for itself.
They are, undoubtedly, the tip of the iceberg. I know a couple of people who are on the verge of retirement and still paying student loans. The situation is apparently not unique. I myself am a member of the last generation of lawyers to enter the profession with no student loans hanging over me. I graduated in 1977.
What’s a bubble? you may well ask. The cutest and most memorable one is probably the Tulip Craze in 17th-century Holland. For reasons best known to gardening enthusiasts, everybody suddenly went wild over tulips. Preferably tulips with unusual colors or fancy stripes and dots and streaks. Tulips, it seems, are unpredictable. You don’t know what a tulip is going to look like merely from knowing its ancestral stock. It’s a gamble. So people started buying into tulips as an investment, much as some people buy into art today. They were betting on what kind of tulips they could produce, but mostly they were betting on how much other people would be willing to pay for them. This went on for several years. And then, suddenly, the Craze faded. Nobody was interested in tulips any more. Which left a lot of people with a lot of tulips on their hands, for which they had paid (and often, borrowed) a lot of money, and could now recoup absolutely nothing.
Today, a number of economic mavens worry about a real estate bubble. People are bidding up the price of houses and condos. When you buy a home, you expect it to be worth three, or five, or ten, or even one hundred times what you paid for it, one of these days. So far that’s been a good bet. Our own humble condo is now worth at least five times what we paid for it 25 years ago. And, like most homeowners these days, we have refinanced it to the hilt. So, like the economics mavens, we occasionally worry that the bottom might drop out of the housing market, leaving us with a mortgage worth more than the property behind it.
Well, friends, that has already happened to James Lockhart and Dee Ella Lee, the parties to the court cases mentioned earlier, and to lots of other people too. The educations they bought, and borrowed money to pay for, are no longer worth the price. Possibly they never were.
Part of the problem is that, unlike a winning lottery ticket, the value of an education depends partly on the demographics of the purchaser. Education pays off less for women than for men, less for racial minorities than for whites, less when purchased by middle-aged workers than by twenty-somethings.
Yet another determinant of how well an education pays off is at least as speculative as the Tulip Craze—how much a student seeking a particular credential will be “worth” when it is finally obtained. The longer it takes to get the credential, the harder it is to guess what will happen in the meantime to the job market it gets you into. Engineering credentials are always zipping up and down like a roller coaster. People who go into engineering programs this year because engineers are “hot” right now may graduate just in time for their degrees to be a dime a dozen. Medical degrees are worth a lot less now than they were ten years ago. You get the picture.
In short, the value of some kinds of education is already less than what the graduates paid (and borrowed) for it, and this seems to be an accelerating trend.
Analysts of education trends among racial minorities and “lower socioeconomic groups” (poor people) decry the unwillingness of youth in those groups to take out student loans and get all the education they can mortgage. The result of that unwillingness, often, is a lifetime spent in dead-end jobs with no benefits. But the alternative may often be a lifetime in the same dead-end jobs with the vultures circling to pounce on the one dependable asset such people will ever have—a Social Security check. Scary, folks?
Got that? These are retired folks whose student loans have been pending for upwards of fifteen years. The article indicates that they are not lifelong deadbeats. They just never got a chance to make all that education pay off well enough to pay for itself.
They are, undoubtedly, the tip of the iceberg. I know a couple of people who are on the verge of retirement and still paying student loans. The situation is apparently not unique. I myself am a member of the last generation of lawyers to enter the profession with no student loans hanging over me. I graduated in 1977.
What’s a bubble? you may well ask. The cutest and most memorable one is probably the Tulip Craze in 17th-century Holland. For reasons best known to gardening enthusiasts, everybody suddenly went wild over tulips. Preferably tulips with unusual colors or fancy stripes and dots and streaks. Tulips, it seems, are unpredictable. You don’t know what a tulip is going to look like merely from knowing its ancestral stock. It’s a gamble. So people started buying into tulips as an investment, much as some people buy into art today. They were betting on what kind of tulips they could produce, but mostly they were betting on how much other people would be willing to pay for them. This went on for several years. And then, suddenly, the Craze faded. Nobody was interested in tulips any more. Which left a lot of people with a lot of tulips on their hands, for which they had paid (and often, borrowed) a lot of money, and could now recoup absolutely nothing.
Today, a number of economic mavens worry about a real estate bubble. People are bidding up the price of houses and condos. When you buy a home, you expect it to be worth three, or five, or ten, or even one hundred times what you paid for it, one of these days. So far that’s been a good bet. Our own humble condo is now worth at least five times what we paid for it 25 years ago. And, like most homeowners these days, we have refinanced it to the hilt. So, like the economics mavens, we occasionally worry that the bottom might drop out of the housing market, leaving us with a mortgage worth more than the property behind it.
Well, friends, that has already happened to James Lockhart and Dee Ella Lee, the parties to the court cases mentioned earlier, and to lots of other people too. The educations they bought, and borrowed money to pay for, are no longer worth the price. Possibly they never were.
Part of the problem is that, unlike a winning lottery ticket, the value of an education depends partly on the demographics of the purchaser. Education pays off less for women than for men, less for racial minorities than for whites, less when purchased by middle-aged workers than by twenty-somethings.
Yet another determinant of how well an education pays off is at least as speculative as the Tulip Craze—how much a student seeking a particular credential will be “worth” when it is finally obtained. The longer it takes to get the credential, the harder it is to guess what will happen in the meantime to the job market it gets you into. Engineering credentials are always zipping up and down like a roller coaster. People who go into engineering programs this year because engineers are “hot” right now may graduate just in time for their degrees to be a dime a dozen. Medical degrees are worth a lot less now than they were ten years ago. You get the picture.
In short, the value of some kinds of education is already less than what the graduates paid (and borrowed) for it, and this seems to be an accelerating trend.
Analysts of education trends among racial minorities and “lower socioeconomic groups” (poor people) decry the unwillingness of youth in those groups to take out student loans and get all the education they can mortgage. The result of that unwillingness, often, is a lifetime spent in dead-end jobs with no benefits. But the alternative may often be a lifetime in the same dead-end jobs with the vultures circling to pounce on the one dependable asset such people will ever have—a Social Security check. Scary, folks?
posted by WiredSisters at 1:57 PM
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