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US education system collapse will make finsec crisis worse (for more decades)...

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  • US education system collapse will make finsec crisis worse (for more decades)...

    The US education system has more or less collapsed.

    Clearly this will make global finsec crisis worse for the US due to all of the carry on effects.

    The global finsec crisis will last for more decades for the US as well because of this problem.

    Because
    • Western Europe
    • Eastern Europe
    • Australia, Canada & NZ
    • Japan, and other parts of Asia with adequately functioning education systems (although there are some creativity issues here)

    have had better functiong education systems than the US -- these nations will leave the crisis sooner as well as adapting to its systemic problems better.

  • #2
    Re: US education system collapse will make finsec crisis worse (for more decades)...

    Harvard, Private Equity and the Education Bubble

    March 3, 2009, 10:42 am E-mail This


    There have been a number of bubbles over the past decade that we now know about. Unfortunately, we are also about to find out if there was an education bubble.

    Fueled by endowment gains and tuition increases, universities in recent years have gone on a building, faculty and program expansion spree. I have personally seen it in the law school realm. Instead of the historical 12-credit loads, the norm over the past few years in law schools has trended towards nine to ten credits. This allowed for more research, but also meant that the faculty needed to expand to continue offering the same course levels. Salaries also rose as law schools and other areas of universities competed for top talent.

    But the same forces buffeting the general economy are affecting the university.

    Yale recently froze all faculty salaries for employees paid more than $75,000, and Harvard froze all faculty salaries at its arts and sciences school. The big private, elite universities appear to be particularly at risk. To understand why, let’s take a look at the Harvard endowment.

    As of June 30, 2008, this endowment stood at $36.9 billion, and last year, it paid out $1.6 billion to Harvard. The Harvard endowment has grown at a torrid pace in recent years — it was just $22.6 billion in 2004 — fueled by portfolio gains and especially a 28 percent, 10-year return on its private equity portfolio. That compares to a total portfolio five-year return of 17.6 percent as of June 30.

    But like everyone else, the endowment was hit by the downturn. It has not announced definitive 2008 results, but Harvard has said that it expects returns to be down by about 30 percent. I think the situation is much worse than that. In 2007, approximately $5.16 billion of Harvard’s total portfolio was in private equity, and by my estimate, a total of $11.2 billion, or 26 percent, in all kinds of illiquid assets (the others being real estate and land). Here, this figure is for all of the general investment assets managed by Harvard. That figure was $43 billion as of June 30, 2008, with the bulk being the $36.9 billion endowment.
    ...

    http://dealbook.blogs.nytimes.com/20...cation-bubble/


    What happened in the US from WWII up until now ?


    I've heard good education was free in the past. How did it change or did it change? Here in Germany we don't have to pay much for university maybe a small fee of 100€ for a semester.

    Is there something like the GI Bill now that is sufficient or are veterans becoming homeless ? And how high are the interest rates for student loans, much higher than in the past?

    The G.I. Bill (officially titled Servicemen's Readjustment Act of 1944, P.L. 78-346, 58 Stat. 284m ,) provided for college or vocational education for returning World War II veterans (commonly referred to as GIs or G.I.s) as well as one year of unemployment compensation. It also provided many different types of loans for returning veterans to buy homes and start businesses. Since the original act, the term has come to include other veteran benefit programs created to assist veterans of subsequent wars as well as peacetime service.

    ..
    An important provision of the G.I. Bill was low interest, zero down payment home loans for servicemen
    http://en.wikipedia.org/wiki/GI_Bill


    How the U.S. Credit Crisis Will Lead to an Overhaul of the U.S. Student Loan System


    ...
    The 2007-2008 school year was the most difficult year on record for student borrowers. The Massachusetts Educational Financing Authority was unable to meet loan commitments, forcing 32,000 students to seek alternate funding sources. Another non-profit lender, the Michigan Higher Education Student Loan Authority, stopped making loans. Major banks, including: Bank of America Corp. (BAC) and Wachovia Corp., have exited the student loan business altogether. So did Northstar Education Finance Inc. and CIT Group Inc. (CIT), two other active student loan lenders.

    More than 100 student-loan lenders withdrew or ceased operations from 2007 through 2008, according to Finaid.org, a financial aid Web site catering to student borrowers.

    Then there’s the giant of them all, SLM Corp. (SLM), commonly known as Sallie Mae. This onetime government-sponsored enterprise (GSE) was privatized in 2004 and manages more than $130 billion in student loans for more than 10 million borrowers. Like many student loan providers, SLM originates federally guaranteed loans under the Federal Family Education Loan Program. And like many other student loan lenders, SLM has experienced its share of controversy.

    In 2005 , a former Sallie Mae employee alleged in a federal lawsuit that the company engaged in “a pattern and practice of granting forbearance in a purposeful effort to increase total student loan debt.” The particularly onerous practice - by Sallie Mae and many other loan management and servicing companies - of extending and consolidating loans for borrowers for substantial fees and at higher interest rates has gained national attention. A year later, CBS News’ “60 Minutes” profiled Sallie Mae and its controversial business practices.
    http://www.moneymorning.com/2009/03/...credit-crisis/
    I've heard the term Junior College and I assume it's free, but comedians call it High School with ashtrays, why is that?

    Comment


    • #3
      Re: US education system collapse will make finsec crisis worse (for more decades)...

      The rise in prices of higher education is coincident with the credit bubble.

      The dynamic was very straightforward: rising endowments meant universities could charge much more, but use contributions from the endowment to subsidize lower income entrants.

      The recent collapse in endowments is going to severely restrict this practice.

      But for the nonce inertia will keep the prices going...

      Comment


      • #4
        Re: US education system collapse will make finsec crisis worse (for more decades)...

        Let's not cry for the Harvard Endowment. If they need money, dip into the capital.

        Opps. Confused the threads.
        Last edited by cjppjc; 03-09-09, 11:11 PM.

        Comment


        • #5
          Re: US education system collapse will make finsec crisis worse (for more decades)...

          Originally posted by D-Mack View Post
          What happened in the US from WWII up until now ?

          I've heard good education was free in the past. How did it change or did it change? Here in Germany we don't have to pay much for university maybe a small fee of 100 for a semester.
          I don't have a solid answer for this question but over a longer history in the U.S., higher education was at first very expensive and exclusive, then became quite affordable for the middle class, primarily through government-sponsored education loans and grants, and then became more expensive again despite those loans.

          Is there something like the GI Bill now that is sufficient or are veterans becoming homeless ? And how high are the interest rates for student loans, much higher than in the past?
          The GI Bill still exists and is distributed as a monthly assistance payment to those who are enrolled. It helps, but tuition, fees, and boarding have far outpaced increases in the GI Bill disbursement amounts over the years.

          Student loan interest rates generally go up and down with other credit market rates, so they are currently relatively low, say 5% to 6%. I believe Stafford loans (one particular and common type of government student loan) are capped at no more than 8.5%.


          I've heard the term Junior College and I assume it's free, but comedians call it High School with ashtrays, why is that?
          Junior colleges are definitely not free. They are however usually significantly cheaper than a university, both at a tuition-hour rate and total cost. There are typically less services offered, such as student housing, and many junior colleges have no competition-level athletics teams. Professors are more likely to only teach part-time, maintaining a "real" job in their area of expertise, or teaching at multiple junior colleges in a large city. There is a perception at least that the quality of education received at a junior college is inferior to a university... hence "high school with ashtrays".

          Comment


          • #6
            US education system K-12 collapse will make finsec crisis worse

            US education system K-12 collapse will make finsec crisis worse...

            For some reason this thread seems to have gone in the Higher Education direction -- and I was not predicting that it would happen when I initially posted.

            The K-12 problems in the US are profound, and not new -- the collapse was all but permanent at the end of the Cold War (1989-1992).

            The US has a vast part of its population, of Adult age (but young aka Under 40) -- that is not interested in learning and totally out of touch with reality.

            For about ~35% of the US public school population, it is almost impossible to distinguish between Special Education kids and the normal ones (NB: The SP ED kids are at least more obedient or academically inclined, Believe it or not...).

            Unlike in the 1930s when the economy collapsed -- the education system held in a simi-intact sate. The end result was a boom time after WWII ... and intense technological and social innovations and changes.

            That will not happen with this Titanic Hyperdepression.

            The US population with 1982-Present graduation dates is not like this so called American Imperialist "Greatest Generation" (it is not a Canadian or Mexican concept, least you forget).

            I am not against this thread continuing on with respect to the problems of US higher education, but the K-12 problems have grown so profound that the US universities may soon find themselves admitting fewer and fewer domestic students -- or even firing 50% of their workforce (UW Seattle has about 30,000 Students and STAFF, since when did a ~1:1 ratio like this come into being ... and this research uni is not unique.).

            Continue to the fixed thread at:
            http://www.itulip.com/forums/showthread.php?t=8634
            Last edited by billstew; 03-11-09, 04:19 AM.

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