Is the Present a Harbinger of the Future for Our Youth?

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Vast number of Americans live paycheck to paycheck

Indentured Servitude - It's Back

If you have a child or grandchild who is planning to attend college you must listen to this. If you are interested in the economic prospects of future generations (as am I) this is for you too.

A Ticket to the Good Life???

I happened to notice the "U,S, Consumer Debt Profile" in the newspaper the other day (It is shown below). I calculated the monthly payments required for each debt and added a debt payment required for a car loan. 

It appears that the typical middle class person (a college graduate) will see $1710 regularly consumed from his monthly paycheck by these ongoing obligations. This will require a pretax income of $28,160 (assuming a federal tax bracket of 25% and not considering FICA, unemployment, pension, health care contributions and state tax withholdings). 

The average starting salary for a college graduate is $45,327. His salary in five years will be $50,044 (calculated at a compounded rate of 2% per year which is the typical rate of  salary increase). This leaves $16,413 after federal taxes but again not including the aforementioned withholdings. 

This is $1367 monthly or about $300 weekly left for retirement savings, child rearing, food, clothing, utilities, insurance, education and other essentials?

Some average tradesman salaries (and remember - no college debt and they have been earning during the four to six years while college students spend at school)

Plumbers -- averaging $52,390 per year.

Nonresidential construction workers averaged $48,330.

Brick layers $54,000.

Am I suggesting that students should abandon the idea of a college education? Not at all - but I am suggesting that it shouldn't necessarily be viewed as a "ticket to the good life" (with a gigantic price tag) as it once was! 

Is Anybody Looking Down the Tracks?

  A collision between robotization and student loan debt is inevitability on course. Tens of thousands of students are now being prepared for jobs that will soon be replaced by robots and A.I.(owned by corporations and the wealthy). An even sadder part is that they are incurring trillions of dollars of debt to become eligible for the non-existent jobs of the future. (See my post  - http://teachersdontsuck.blogspot.com/2015/07/i-robots.html). 

Not only will they have the prospect of few available jobs but also the burden of huge debt which they will have no means to repay. 

How will the housing market endure? Who will buy the new "driver-less" cars? Will the middle classes' disappearing act finally be  completed?

Might these be bigger problems than even terrorism for the capitalist system in the not too distant future?

Even less encouraging is that I have heard few it any politicians addressing the likelihood of these probable circumstances and how they should be addressed?

Learnin' Stuff Ain't Cheap!

It appears that in order to obtain a college education a student or his parents must become indentured servants of banks and/or the government!

BTY - Many of those indebted leave college without a degree! And if you've noticed the advertising by "for profit" schools is constant on both radio and TV (DeVry, Berkeley, Star, Phoenix, etc.). There must be a ton of money in the "education business".

The New $200K Tee Shirt

I'm sure all you Latin scholars know what "fregit" means?

Living Life in a Bubble

In a recent conversation with my son's friend I was surprised when he told me that he was still paying a student loan debt of $600 per month. I was surprised because he is 38 years old and I assumed that student loans would be long paid off by this age - 15 years after graduation that is!

Well, my assumption was obviously wrong and then a short time later I saw the article below. It appears that the plight of my son's friend is far from unusual.

After reading the article I began to think about the recent housing market bubble. It was kind of the same thing in that people were loaned vast sums of money without regard as to whether they could really handle the debt. But then I began to realize maybe the student loan problem is even worse! The housing debacle at least had some collateral behind it even if it was poor collateral it was better than none. What collateral do student loans have?

You might say that the projected income after graduation is the collateral but my further reading on the subject revealed that only 16% of the degrees obtained are in the highly employable STEM areas.  A large portion of the rest is in fields that have poor employment prospects and are likely to leave those graduates unable to pay off their loans. Additionally, only two kinds of debt are immune from discharge in bankruptcy, taxes and student loans and therefore I  wonder if they can even be legally written off by the issuer? This means that these loans will follow individuals for a lifetime (continually accumulating interest) until they are fully paid.

If the housing problem was called a "bubble" what term can be used to accurately describe this? I don't think "bubble" will do! How about "economic Armageddon"?

After thinking about all this for a while it occurred to me that maybe all my dread is unwarranted. The advent of on line learning could come to the rescue. College costs should surely plummet when students can take course at home with no classroom or actual instructor required.

Well, I'm wrong again!

Look at the article below this one describing the cost of on line course at SNHU, a highly advertised New England college.

Coming Soon to a Commencement Near You - The Rolling Stones !

$140K per Hour and She'd be Underpaid !!

The cost of a college degree in the United States has increased "12 fold" over the past 30 years, far outpacing the price inflation of consumer goods, medical expenses and food.

According to Bloomberg, college tuition and fees have increased 1,120 percent since records began in 1978.

The average debt owed by New Jersey college graduates in 2012 was $29,287, according to the Project on Student Debt 2012. That’s up from an average of $27,610 in 2011 and $23,792 in 2010.

Most of New Jersey’s public colleges and universities do not pay their commencement speakers, though they often cover their travel expenses. Rutgers recently began paying speakers $30,000 to $35,000 in a bid to attract bigger names to its ceremony. The money comes from donations to the university’s foundation, not tuition or state funding, Rutgers officials said.*

Rice was scheduled to receive $35,000 for her Rutgers speech before she bowed out. (The speech was planned for 15 minutes - that's $140,000 per hour.) Kean, her replacement, has turned down the fee and Rutgers has not said if LeGrand will be paid for his remarks.

Kean University has also paid its speakers in recent years. Musician John Legend earned $25,000 in 2011 for a 15-minute speech and the performance of two songs. In 2006, Kean paid filmmaker Spike Lee $25,000 for a 10-minute graduation address (that's $150,000 per hour).

New Jersey colleges seem to want to give away over two years of tuition for a typical undergraduate student so as to have a "Big Name" commencement speaker? I think this shows the height of  arrogance and total disregard for the students who struggle to pay the exorbitant tuitions and fees these school demand.

*Should such donations be used to line the pockets of "Big Name" fifteen minute speakers? I certainly think it would be better used to help lower tuition costs if even just an iota! They say that university foundations pay the speaker fees?  Does that mean that when I get phone calls for contributions to Rutger's Foundations I  was being asked to contribute to this pompous folly.? I had no idea that might be the case!

Had I known I surely would not have contributed as I have done over the past fifteen years. The next time I am called I will be sure to ask if any of my money will be eligible for the "Big Name" speaker program? If  the answer is "yes" - I will just simply hang up the phone!

"Free Speech" - I Don't Think So!

"Her grandfather was a sharecropper" - my grandfather was in the Prussian Army -  "So what ??"

Ms. Rice is to be paid $35,000 plus expenses for this commencement address!
Does that sound like "free speech"?
And who is paying - RU students with tuition and fee costs that have risen almost 100% during the past decade (much paid with student loans).
Couldn't they find someone to give the address for free and award an honorary degree to that person as compensation?
How about Cory Booker?

Oh - wait a minute - I almost forgot!
He gave a commencement address at The College of New Jersey a year or two ago and charged $10,000 !
Well but at least he's cheaper -
Oh -wait a minute again - now that he's Senator Booker maybe he wouldn't be that cheap after all?
Maybe we could go with "The Governor"?
He's always talking about containing costs and saving taxpayer's money (unless it's being handed out to lawyers)!
I bet he would do it (if there was a free meal involved)!

The Big (Con) Game

So here's  the way this works. Colleges and universities with outlandish tuition rates pour tons of money into sports programs so as to supply what are essentially farm teams for the Pros. To make matters even worse,  our public "institutions of higher learning" are eager to vie for the opportunity to participate in "pro grooming". 

Additionally, not only does the public provide these  free feeder programs  for Pro Athletics they also build pro sports stadiums and arenas with public funds ("Of the 20 stadiums built or renovated since 1997, all but one have used public money"- Charlotteobserver.com ).

Now to add insult to injury, these pro sports "Leagues and Associations" are non profit - tax exempt! What this means is they don't have to kick in a dime to public coffers, don't have to help support states and municipalities, schools or colleges. All they have to do is pay outrageous salaries to executives and keep shoveling the bullsh*t to the public. All we get  is  a constant stream of trivia about Eli, Lebron, Tiger,  A-rod etc. We don't hear much about Joe and Jane Student who are struggling to pay tuition and fees* required by the college co conspirators in this sports scam. 

I frequently watch "American Greed" on CNBC and most of the scams and swindlers portrayed are amateurs as compared to the  professional sports organizations.  
But, in conclusion, if the public keeps on loving the hype, who am I to complain?

* And for many they will continue to struggle to pay for decades due to student loans and for added punishment, students loans cannot be discharged via bankruptcy!

You Are Kidding??

I'm absolutely amazed by the ignorance of "smart" people running for public office.
Here's a guy that says, just ask your parent for college tuition money ??
Sure, "Hey Dad you got an extra $200K laying around you could give me?"
If he didn't realize the stupidity of the statement before he said it, all he had to do is look at how well that exact comment worked out for his Republican colleague, Romney.
However, to his credit he doesn't hesitate when supporting a change in federal marijuana laws.The current federal policy on marijuana use is a travesty in that it has destroyed the prospects of many young people before they even get started in life and all for no good reason.
On the other hand Mr. Booker says he wants a "national conversation" on marijuana. What the hell does he think has been going on for the past ten years??
The real reason that he wants a  "national conversation" is because he lacks the courage to make a clear statement as did Mr. Lonegan.
If he is elected to the Senate, will he require a "national conversation" on every controversial topic that is presented to him?

A Friend Just Sent This Email to Me

A friend just sent this email to me and I replied and thought that maybe you might be interested too -

BTW - What's your opinion ??

Email 

Walt,

What do you think of the proposal for the state to take part of your income in exchange for paying for your education.

Reply

C______,

It’s good to hear from you.

I’m flattered that you ask for my opinion.

As to my feelings about the current plan, it’s just another mechanism to avoid confronting the real issue, “Why is college so expensive?”

When you and I went to school the tuition was but a fraction of what it is today. You might say “Sure but everything was cheaper too” but so were incomes and so that’s not a good excuse.

(See my previous article - Monday, August 12, 2013  - The College Loan Bubble - Toil and Trouble).

Back to the question you asked about the currently proposed scheme – any plan that indentures people for a lifetime to pay outlandish college costs, whether it be upfront or back door, doesn’t appeal to me at all !

All this will do, as the student loan program has done, is to encourage even higher tuitions and fees. The whole thing is similar to credit cards, which certainly have induced even more spending by consumers and allowed

prices to rise even more than the would have without them.

Thanks again for asking.

Walt

The College Loan Bubble - Toil and Trouble

Let me add a little personal, anecdotal history about college tuition in New Jersey.
In the early 60s when I graduated from high school I had no money for college. Consequently, I got a job as a carpenter's assistant for $1.25 per hour. When I finally accumulated enough money I applied to Montclair State College and was accepted.
The tuition rate was $75 per semester and I don't remember any additional fees being involved.
The reason I applied to MSC was because of the lower tuition, RU was somewhat higher but still not exorbitant by comparison. At the end of my four years, the tuition rate had not changed.
Many of my peers at MSC had applied for and received the State Scholarship which covered all their tuition costs. Since I did not enter college immediately after high school I did not qualify and never received its advantage.
But that is not my point.
How is it that now tuition rates throughout the state (and everywhere) are sky high ?
Why are students now required to saddle themselves with tens of thousands of dollars of debt ?
Who could work their way through college today ?
Why is the national Student Loan debt over a trillion dollars ?
I guess you might say inflation, things are much more expensive today but of course wages are much higher too so it all kind of evens out.
Well, I'm not so sure !
The average minimal wage in the early 60s was about what I was paid, maybe a bit higher, $1.50 - $1.75 per hour, Let's say today that wage is $10 per hour. This means it has increased roughly sevenfold. Certainly, seven times $150 (the yearly tuition at State schools in the 1960s) does not come close to today's rates and fees at these schools.
Am I saying that tuition today should be $1050 ? No, but it surely shouldn't be $10,000 either !
Now, how about the student loan situation ?
The recent furor over loan rates being raised resulted in their being capped (to some extent anyway) and people cheered. Not me !
I think the conversation should have been directed at why tuitions are so high and how they should be lowered. Instead, loan rates where lowered (I mean not raised as much) which simply encourages more borrowing.
To add insult to injury not only have the costs increased to dramatic heights, at the same time the school year has been sharply reduced.
In the 60s and before, the first semester started at the beginning of September and extended to mid January with a one week Christmas break. After the first semester was completed there was a one week intermission and the second semester began. The last day of the school year occurred the second week in June.
I've done some calculations and I find that today's college four year education is actually a full year short of that of the 1960s.
The bottom line -  lots less for lots more !
Another math exercise I did was to figure out the cost per hour of class time. At RU it is over $30 per hour (in state students). A ticket to a Broadway show which lasts for two and a half hours is about $75 (a reasonably good seat). You do the math !
And to make things even worse, many classes consist of hundreds of students, all herded into an auditorium with the professor appearing the size of a dime below. Questions from the students, I don't think so. Questions are reserved for the TAs, low cost graduate students trying to pay their own tuition bills.
My own college experience consisted of class sizes of twenty and less with student questions handled by the professor during class time. (And the professor was always available after class for more questions).
Is college today a scam on the middle class or is it just my cynicism showing through as usual ?