Student Loan, Leech on Society?

Dr. Leon Stanley Talaska's Medical Degree for ...

Image via Wikipedia

In a previous post I asserted that the quality of a college degree is more a function of talent and work ethic than it is of instructional quality, and that universities are basically selling prestige and a monopolistic imprimatur.  The more the prestige, the greater the cost.  As to the substance of the product, I could find no evidence of any standard for what constitutes a good college education.

In a second post on student debt I provided a link in which Jack Hough of SmartMoney showed a startling hypothetical example, contrary to myriad articles in the press, of how a student who does not go to college can have lifetime earnings larger than an otherwise equal student who does.  How can this be?  The trick is simple, while his college counterpart is running up debt, the high school graduate is making regular investments in a low-cost mutual index fund. This holds true for prestigious schools with high tuition, but it is even true for public schools now!

For the chart of  Hough’s example, go to this Link – it is the second chart.  (I can’t get it to insert into the post.)

So, just how bad is student debt?  Student loan debt has now surpassed credit card debt and a year ago was $826 Billion dollars.  Wow.  Approaching the big “T”!  I ask you, isn’t that a lot to pay for a product that has no standards?

The New York Times published a startling column on student debt in 2008.  It said,

But much less attention has been paid to what happens to students after they borrow. Lenders who make loans guaranteed by the federal government can more easily take steps against borrowers — like garnishing wages and benefits — than they can with other kinds of unsecured consumer debts. And all student loans, federally guaranteed or not, are extremely hard to get rid of in bankruptcy proceedings, more so than credit card or other debt.
More borrowers may begin to discover the harrowing consequences of reneging on student loans in the current economy. Numbers of borrowers behind on payments and in outright default are rising for some types of loans, and the tight job market makes it harder for graduates to find jobs that let them pay off debts. At the same time, investors are pressuring lenders to raise revenue by minimizing losses. Investors also expect more revenue from those lenders that operate collection agencies.

The anecdotes in the article are shocking.  Students and parents are fully invested in the meme that since a college education is vital, and since they see that “everyone does it”, they sign whatever loan documents are put in front of them.
Look, the Great Recession was caused, yes caused, by profligate borrowing for mortgages and enabled by inexcusably lax, almost absent, government oversight.  Now, with student loans, we have guess what?  Profligate borrowing enabled by inexcusably lax, almost absent, government oversight.  And if you’re a medical student the whole thing gets worse.  If you have read my previous posts you know that some new docs graduate half a million dollars in debt, and that this is impacting the structure of medicine for the worse, both morally and functionally.

Image representing Steve Jobs as depicted in C...

Steve Jobs, via CrunchBase

I believe that student loan debt is as big as the housing collapse and has the potential to be just as damaging.  It is not the next big thing, it is the hidden present thing.  It is even now affecting the economy at this critical time when we are trying to climb out of the Great Recession.  The system desperately needs reform.  What to do?  I can only refer you to the msm.com article and urge you to spread the word that the meme of a college education is terribly flawed.  Businesses especially need to understand this when they hire.  (Can college dropouts succeed?  Try Bill Gates and Steve Jobs for starters, and then read about more HERE.)

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
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7 Responses to Student Loan, Leech on Society?

  1. Pingback: Student Loan, Leech on Society? | Γονείς σε Δράση

  2. ansonburlingame says:

    Jim,

    For sure, this is a new subject and approach for current ills in our society and I am not all sure where it “fits” exactly.

    First, I am pretty sure there are far more home mortgages than student loans for college or post grad school (including law and medicine). I wonder how the default rate on the two cateories would look viewed separately. Is the % of home mortgage default greater than student loan default and how would the total $ defaulted compare. I’m not sure, are you?

    Now what is the underlying cause of home mortgage default as opposed to student loan default? Again, I don’t know.

    If doctors, young doctors are so overburdened by student loan debt, then why are most doctors that I see RICH and living high on the hog? Same to a degree with lawyers maybe.

    How does student loan debt relate to class standing? How many student loans are in default because the student actually did not complete the course of study for whatever reason?

    In other words how many students took the loan money and “goofed off” then defaulted later on?

    Now for the “worth” of a college education. I agree it means less today, probably, than in our days. But I know for sure that when I entered college I was a “boy” and when I left I was a “man”. Yes, different college and different times, but……

    However I do believe this simple point. If a student goes to a “good” college, works his/her butt off, studies hard, plays moderately and focuses on LEARNING to develope the right habits and interest to continue learning for the rest of his/her life, then NOTHING can beat a good college education.

    Ultimately it boils down to the student. A college can only “show the way”. Give me a good student willing to work and just about any college can make them a better man or woman. But put a pampered “slug” or a deadbeat into any college and chances are the same “character” will graduate and proceed on in life accordingly.

    And for sure if I was an employer, I would seek ONLY college graduates for high level entry positions. Just the fact that they persevered thru a college cirriculum says “something”. But of course I would look far more closely than just the sheepskin for such employment. It is like an obstacle course. Anyone with a chance of competing and doing well in the whole obstacle course must get over the initial hurdles. A college degree is on of those first hurdles in my view and experience.

    Anson

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    • Jim Wheeler says:

      Anson,

      You raise some interesting questions about the demographics in the first part of your comments. I don’t know either, but plan to explore. Perhaps others will comment as well.

      You said,

      If doctors, young doctors are so overburdened by student loan debt, then why are most doctors that I see RICH and living high on the hog? Same to a degree with lawyers maybe.

      I would surmise that they (doctors) are rich and successful because America pays more than double what other countries pay for comparable healthcare, and that money goes not only to pay off student loan debt, but also to a rich lifestyle once the doctors and lawyers are out from under the debt. BTW, are you aware that it is not uncommon for hospitals to pay off doctors’ student debt as part of their contracts for affiliation? I wasn’t, but it’s true. it’s not hard to see the effects of that on medical costs, is it?

      As for lawyers, America is I believe the most litigious society in the world and lawyers, once armed with that ticket-punched diploma, are free to exploit all manner of troubles, especially class-action suits. Just ask John Edwards, our almost president.

      You don’t mention if you read my post on the Great Talent Filtering Machine, so I assume you didn’t read it, but the last half of your comments seems to be an affirmation of what I said in that post. They say imitation is the sincerest form of flattery, so . . . thanks.

      Jim

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  3. ansonburlingame says:

    Jim,

    A huge part of controlling health care costs is controlling how much doctors charge for services, equipment vendors charge for equipment, hospitals charge for whatever, etc. Student loans only effects the doctor and (maybe a part of) the hospital end of things.

    I know a surgeon that can no longer obtain malpractice insurance because he lost several litigations in such law proceeding. Whether he was guilty as charged is beside the point though you can imagine his and his family’s views on such “trials” (in KC).

    But he now works for a hospital and receives a HUGE salary. Is he a good doctor. Seems to be despite the allegations in law suits, but who knows for sure. But he sure found a new professional “home” to practice and still live high on the hog. Now compare that to you or me had we run our ship’s aground and been found guilty of negligence???

    I think the REAL effects of high higher education costs deserves careful scrutiny and ecourage your effort in such. But again, I am not sure how big it’s effect is on our really big GOVERNMENT debt and deficit issues might be.

    And while the “mean salary” of all doctors in America might be close to $200K per year, I don’t think that comes close to Joplin just for an example We must be at least twice that mean salary around here including all the “sawbones” that you would not let touch your big toe.

    I have several doctors in my extended family and…… Must be careful with that one however as you can understand I hope. But I will also offer that in “family” discussions related to health care costs the ONLY solution they offer is tort reform. Far more is needed in my view BUT tort reform should be part of the package as well.

    Anson

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  4. Jim Wheeler says:

    For those few of you who have followed this subject thus far, here is an ironic update on the state of college education. An Ivy League college this year invited as its commencement speaker a comedian, one Conan O’Brian. Mr. O’Brian earning his emolument by speaking truth disguised as humor, said,

    When I got the call 2 months ago to be your speaker, I decided to prepare with the same intensity many of you have devoted to an important term paper. So late last night, I began. I drank two cans of Red Bull, snorted some Adderall, played a few hours of Call of Duty, and then opened my browser. I think Wikipedia put it best when they said “Dartmouth college is a private Ivy League University in Hanover, New Hampshire, United States.

    He also said,

    Graduates, faculty, parents, relatives, undergraduates, and old people that just come to these things —-Good morning and congratulations to the Dartmouth Class of 2011. Today, you have achieved something special —– something only 92 percent of Americans your age will ever know: a college diploma. That’s right, with your college diploma you now have a crushing advantage over 8 percent of the workforce. I’m talking about dropout losers like Bill Gates, Steve Jobs, and Mark Zuckerberg. Incidentally, speaking of Mr. Zuckerberg, only at Harvard would somebody have to invent a massive social network just to talk with someone in the next room.

    Then, just for political giggles, I must note what Mr. O’Brian said as an introductory statement after recognizing the presence of former president George H. W. Bush, viz.

    Before I begin, I must point out that behind me sits a highly admired President of the United States and decorated war hero while I, a cable television talk show host, has been chosen to stand here and impart wisdom. I pray I never witness a more damning example of what is wrong with America today.

    I would add something myself, but given the context of this post I think this speaks for itself. Unfortunately.

    Link: http://teamcoco.com/content/watch-conan-give-dartmouth-college-commencement-address

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