View Full Version : Rising cost of higher education is part of vicious FIRE economy cycle

08-16-08, 08:24 PM
Below you'll find excerpts from the book Generation Debt by Anya Kamenetz, published in 2006 with just a couple of my clarifications in parenthesis. There is some valuable data in the book amongst personal accounts from young debtors and some other stuff.

She puts together quite a vicious circle -

way too many people attend four-year institutions chasing a lottery for jobs after graduation that will actually afford them to become economically independent, StateGov and FedGov grants and funding levels have decreased, private borrowing has skyrocketed, tuition has skyrocketed all around, only part-time jobs available to current students do not afford ability to pay for education, etc. FIRE economy fingerprints are all over this mess.


College tuition has grown faster than inflation (author uses official FedGov numbers) for three decades, and faster than family income for the past fifteen years.

Between 1994 and 2005, the total volume of federal student loans rose 249 percent after inflation, to over $61 billion. Two-thirds of four-year students are graduating with loan debt, an average of up to $19,200 in 2004 and growing every year.

The nationwide high school graduation rate peaked in 1970 at 77 percent. It was around 67 percent in 2004.

...in 1970, the nation's largest private employer was General Motors. They paid an average wage of $17.5 an hour in today's dollars. The largest (private) employer in the postindustrial economy is Wal-Mart. Their average wage? Eight dollars an hour.

McDonald's is the nation's largest youth employer; workers under twenty-four make up nearly half of the food service, department store and grocery story workforce nationwide.

In 1981, 45 percent of all federal undergraduate student aid dollars came in loans, 52 percent in grants. By the end of the 1990s, the proportion was more than reversed; loans made up 58 percent of federal financial aid, and grants just 41 percent.

Tuition at public colleges, where 76 percent of American students are enrolled, went up 59 percent after inflation between 1994 and 1995, and 2004 and 2005; median family income went up just 2 percent.

...the "echo boom", an upturn that will lead to the largest high school class in history in 2009.

One major factor is the decline in state appropriations to public college and universities. The late '90s brought fiscal crises to forty-one states;...tuition hikes tracked closely with downturns in local economies. Higher education was known as the "budget balancer" for states cutting essential services.

New expenses, especially for technology, have contributed to price hikes.

The factor in college prices that probably gets the most attention is spending caused by increasing competition among schools.

Besides paying for new perks, pricing itself can be deployed as a marketing technique.

...an inflated price leaves more room to give incentive discounts...

During the 1990s, tuition grants themselves became the fastest growing expenditure for most four-year private colleges and universities. This phenomenon justified a masterpiece of circular reasoning; increased financial aid appropriation is driving the explosion in tuition prices.

Enrollment in higher education doubled from 7 million in 1970 to 14 million in 2002, while the total population of young people barely budged from 36 to 39 million.

...up to half of these students don't persist to graduation, but they stay enrolled long enough to cause overcrowding at state universities nationwide.

Colleges alone did not cause the student loan explosion; it would not have been possible without a change in federal policy (as I've learned, what debt explosion isn't?). The sixth reauthorization of the HEA...happened just as Bill Clinton first took office in 1992. President Clinton chose not to raise the maximum Pell Grant, the largest federal student grant program...he raised student loan maximums, made subsidized federal loans available to higher-income families for the first time, and created a new unsubsidized loan program for students of any income...Federal student loan borrowing climbed by 50 percent in just the new two years after 1992, and doubled by the end of the decade.

Pell Grants and other aid programs...are not automatically tied to inflation or to college prices and must be adjusted each the time acts are reauthorized. In 1976, the maximum Pell Grant covered 72 percent of costs at the average four-year public school; in 2004 it paid just 36 percent...

The student loan system currently does a great job of delivering billions in profits to lenders while amply protecting them from risk through generous federal subsidies and guarantees (much, much more on that topic here: Pilfered Dreams: The Story of Student Loans and Sallie Mae (http://www.itulip.com/forums/showthread.php?t=4649)).

After a decade that saw a 47 percent jump in public tuition in constant dollars, the Senate held hearings on the "college cost crisis" in 2003. They warned that half of all students who qualify for college cannot afford a four-year institution.

Except in a small number of highly specialized "career education" programs, it (a high school diploma) prepares you for very few jobs and now makes only a small difference in average employment and earnings...(AND)...two-thirds of U.S. high school collect a diploma, but less than half are actually prepared for college-level work, as measured by their scores on entrance exams.

"If you go back to the '60s, in the grocery industry for example, three-fourths of the jobs were career, full-time," Tannock (Stuart Tannock author of Youth at Work) says. "About one-fourth were part-time - students, moms, people not fully in the workforce. Now that's completely flip-flopped. The majority of the jobs are part-time, and employers are explicitly thinking of young people as they design these jobs."

"In industry after industry, as unionized high-wage jobs start to disappear, more and more young folks are turning toward higher education as the only way out," Tannock says. "One big problem is that...no more than 30 percent of jobs are going to require a college education. So what we have now is a essentially a lottery system. A lot of people are going into debt for college, and the promise is illusory."

In 2002, according to the BLS, 26.9 of the workforce needed a college degree or more to do their jobs. This share will rise by just one percentage point by 2012, says the progressive nonprofit Economic Policy Institute.

(tie-in to housing bubble) Between 1995 and 2004, according to the U.S. census, the percentage of people under age twenty-five who owned homes leapt 59 percent, while the percentage among those twenty-five to twenty-nine rose 17 percent.
Kamenetz, A. (2006). Generation Debt. New York: Riverhead Books.

08-17-08, 04:26 AM
the model for the US is to become the world's lender: produce nothing and just consume, letting exporters finance our inflation by compelling them to use the USD.

The problem is, you have this employment issue... I guess that's where the wars and blackwater come in!

02-11-09, 03:07 AM
the Delta Project on Postsecondary Education Costs, Productivity, and Accountability (http://www.deltacostproject.org/index.asp):

The Delta Project has released its newest report, Trends in College Spending: Where Does the Money Come From? Where Does It Go? This analysis presents recent trends in revenues, spending, and results in higher education, and includes state-by-state data.

Full Report (PDF)
Executive Summary (PDF)
Presentation Summary (PDF)
Recommendations for Action (PDF)
Frequently Asked Questions
State Data

Our Mission

The mission of the Delta Project on Postsecondary Education Costs, Productivity, and Accountability is to help improve college affordability by controlling costs and improving productivity. The work is animated by the belief that college costs can be contained without sacrificing access or educational quality through better use of data to inform strategic decision making.

The Delta Project is an independent non-profit organization committed to the creation of analytical tools to:

Document trends in college spending;
Understand where and why college costs are increasing;
Translate technical accounting information into benchmarks for institutional and policy audiences;
Identify and promote best practices that generate the greatest return on investment for access and success; and
Promote institutional and policy strategies for improved productivity.

02-11-09, 11:57 AM
I attend a community college, so it is a bargain school to begin with. :p

02-11-09, 01:20 PM
The cost of the Bargain Community College (in most states) is covered by the Taxpayers of the State.

I was visiting a Community College in Pennsylvania yesterday and the over spending in facilities is amazing.

Most States have Over invested in their Community College and State College systems. This is very good for the Unionized State College employees - but, its part of the up coming CRISIS for all States.

There just won't be enough Revenue to support all of the Universities and Colleges the way they are designed. You don't have to move away from home, stay in a dorm to learn about Freshman Chemistry - it can be done today with On-line learning.

Of coourse - the Union employees aren't going to like this very much!

02-11-09, 09:05 PM
You don't have to move away from home, stay in a dorm to learn about Freshman Chemistry - it can be done today with On-line learning.

Want to know something amusing and incredibly vexing? In Tennessee, they actually charge MORE for online courses than traditional courses.

03-14-09, 07:56 PM
Rising cost of higher education in US :

Many designated research universities have STAFF ~= STUDENTS.

The staffing numbers often do not budge very much when you throw out any attached medical schools.

The US research Uni staffing numbers generally don't budge when you throw out university hospitals (that legally are quasi-separate entities only affiliated with the Uni for research funding purposes only).

Athletics staffing, even when you include the massive bloat assocated with running substantial sports facilities is less than 5% ... Work Study Students make this possible.

This overall effect of having STAFF ~= STUDENTS has to be an important part of the cost explosion at universities in the US -- not that Canada has been totally immune to these effects (but they are there to some extent).

One would think that if you were using a pension payment model that there would need to be about

10 students per instructor, and 0.25 support staff
5 students baseline in about 10% of the departments
15 to 20 in most departments
10% foreign students are needed for the books to balance, no matter what ... but 15% of them leads to "externalities costs" tending to break even

The tragedy of US higher education system

America has had an internal Middle Class / Upper Middle Class campaign to keep professional jobs (Engineer, Doctor, Lawyer etc...) strictly inherited.

One of the side effects of this many poorer people are permanently kept from having professional technical jobs -- regardless of their talent.

US Engineering schools especially want to be populated only with IIT (and like equivalents from the rest of the world) students that are paying top dollar -- while stepping on domestic students (unless they are Middle Class and meet all the right stereotypes).

The university [and K-12] war against domestic talent in the US probably has a end game price tag of 20% of the US economy. Ultimately, the US will be doomed to become a flash 3rd world nation...

My particular geopolitically embarrassing example

I had to give up getting a technical degree at a US uni and switch to a less technical degree ... but the [sub] department I ended up in had a yearly budget of 1.0m M USD.


I was the only student in the department.
The department had only one full time person running it, one shared secretary and one instructor (retired).
The department had two part time grad students that were not instructors in the sub-department -- they were also not getting specific grad degrees in my sub-department.
Half (by now what with the global finance crisis, 1/3 or 1/4) of the department's budget came from a foreign government (that I have citizenship in).

The tragedy being that if the foreign government that was paying for me finally getting a non-technical degree just bought me a house outright where I could pursue a technical degree in my home country ... at least said government would be able to claim getting one more technical person on the payrolls.

My uni degree is a US higher education tragedy, but it is a tragedy for my homeland as well.

I have started my own technical consulting business anyway, degree or not. The irony is that an Engineer is a person that can come up in one night an idea or infrastructure that can keep them employed for 20 or 30 years. The aspect of getting formal degrees from universities is only a post 1900 idea as the profession has not worked that way for the past 3000 years.

The irony is that I will probably weather this 20 or 30 year global depression just fine -- the US uni people that kept me from getting a degree will probably end up homeless for decades (or at least their children will).

However at the moment I am by UN definition technically homeless (75%+ income to rent) and in a state of more or less involuntary exile from my homeland.