
The student loan crisis is really an underemployment catastrophe - paulpauper
https://medium.com/@eric_seufert/the-student-loan-crisis-is-really-an-underemployment-catastrophe-96181e937a10
======
asabjorn
This is a bit like saying "People buying luxury cars is just a problem with
people not having high-paying jobs".

It seems more fruitful to focus on what product is being sold through state-
subsidized loans and if they provide the necessary value. Bloated
administrations is largely to blame for the increased cost, and a middle class
student getting a student loan they can't default on for a degree without
earning potential is not a good choice.

~~~
derefr
In this case, though, the "product that [was] being sold" that made these
students originally _go_ to school, _is_ employment—or rather, a proxy signal
for employability that the consumers of the product hope will get them
employment. People consume education when they can't find a job, in the hopes
that they'll become more employable, even though this makes the problem of
their unemployment more dire rather than less (because it adds debt.)

It's sort of like taking stimulants when you're hungry.

~~~
JamesBarney
I guess we have to decide whether the it's "We have a problem with too many
snake oil salesman!" or "We have a snake oil effectiveness problem".

~~~
sorenn111
I think you present a false analogy, but I found your phrasing very funny

------
ineedasername
I'm not sure the author's suggestion that potential students be diverted to
trades/coding bootcampts etc., will solve too much, and instead may simply
shift the problem into those trade industries as well. Somewhere in the
ballpark of 2,000,000 students earn a bachelors degree each year. Let's say
25% of students should be diverted into trade schools instead. That will mean
an additional 500,000 student per year entering those fields, which will then
have the impact of making those jobs ever more scarce and probably depressing
wages as workforce supply outpaces demand.

That's not to say diversion of this sort wouldn't help at all, only that it is
not a cure-all. I think we're simply approaching a point in economic history
where fewer workers are needed to produce more value/gpd/products/whatever.
I'm not sure what the solution to that problem is though.

~~~
jseliger
There are two books that cover this subject well: _The Case Against Education_
: [https://jakeseliger.com/2018/03/12/the-case-against-
educatio...](https://jakeseliger.com/2018/03/12/the-case-against-education-
bryan-caplan/), which argues that most "education" is really signaling, not
human capital acquisition, and _Paying for the Party_ :
[https://jakeseliger.com/2014/04/27/paying-for-the-party-
eliz...](https://jakeseliger.com/2014/04/27/paying-for-the-party-elizabeth-
armstrong-and-laura-hamilton/), which argues that many schools have evolved
some substantive majors and some non-substantive majors. If we can move people
from non-substantive majors into trades and the like, that will likely be a
win for just about everyone.

I also don't think we're going to see a cure-all, but it's hard for almost any
intellectually honest person in the non-elite parts of the higher-education
industry to look at what's going on and think it's great.

 _I think we 're simply approaching a point in economic history where fewer
workers are needed to produce more value/gpd/products/whatever_

Then we'd see soaring productivity, which we don't see:
[https://twitter.com/paulkrugman/status/1140259227908411392](https://twitter.com/paulkrugman/status/1140259227908411392)

~~~
uoaei
It behooves one to read the comment thread replying to Dr. Krugman's post.

Many arguments emphasizing the disparity between real output vs. employment in
manufacturing. Paul Krugman is wrong surprisingly often about these sorts of
things. He cherry-picks one graph and says that this graph, combined with the
opinions of cherry-picked esteemed colleagues, supports his conclusion, when
ample evidence exists and is provided in near-real-time to refute it.

~~~
icelancer
>> Paul Krugman is wrong surprisingly often

Not that surprising if you examine his incentive structure. It is best for him
to misrepresent issues like this, QE methods during the Bush/Obama
administrations, etc.

------
robohoe
One thing that I noticed in this article and charts was the unprecedented
growth of auto loans. They too have skyrocketed. That seems like another
"bubble" waiting to happen.

~~~
thrower123
In the last twenty years, new vehicle prices have doubled. My eyes just about
roll out of my head when I see what the sticker price is for a new truck or
minivan. I assume people must be leasing more than they used to, because I
can't see any other way to get the payment down into a palatable $500/month
range.

~~~
kevin_thibedeau
Buying new is basically a fools game now. Take note of vehicles with proven
longevity and snatch them up when the depreciation makes them affordable.

~~~
papln
The market is rather efficient in these vehicles, so depreciation isn't a way
to save money. Dealers beg 3-yr-old car owners to sell their cars back so they
can flip them. Like real estate, cars are cheap to buy. The expense comes when
you _sell_ them, losingthe residual becase you won't get a good price. The
most important factor in auto afforidability is _how long you own the car_ ,
not how good a deal you get at purchase time. And buying a "reliable" used car
is a risk, because you don't know what damage _this particular_ used car has
suffered. Unless you have good intel on why the previous owner gave it up, and
how they treated it, you're taking a gamble.

~~~
sokoloff
You can pretty blindly buy a no-accident 3-year off/lease Honda or Toyota and
be overwhelmingly likely to have a great ownership experience.

------
luisaguimaraes
It's such a shame that the state can't support the education system
financially, so that 20-year old people wouldn't have to take loans to study.
It works in other countries, so why not in the US?

~~~
Brain_Thief
The simple and honest answer to your question is greed. The fact is that the
USA has more than enough money to support a healthy and well-educated
population through government-funded healthcare and education (including what
you asked about - higher education), but the capture of significant portions
of our government by corporate interests has successfully stopped that kind of
progress from occurring so that an ever-shrinking number of people can become
unfathomably wealthy. This has been accomplished primarily through the use of
emotion-based propaganda over a series of decades and has been incredibly
effective at poisoning the national discourse.

~~~
taway90210_0
It might be more nefarious -- to essentially maintain a permanent underclass
of society with just broad strokes.

------
FussyZeus
The amount of labor required for an individual to attend even a community
college has increased more than 5-fold. This is for basic tuition at a no-name
university, obviously the numbers are far worse for ivy league. You can slice
that in terms of markets demanding more, costs going up, administration bloat
or whatever else how you like but the fact of the matter is, when a college
education is more critical than ever for many fields, it costs five times what
it used to, optimistically.

If we want college grads able to leave school and not be saddled with debt for
the remainder of their lives, make college free. I'm not interested in hearing
about how someone might dare learn something that isn't inherently profitable;
I reject the assertion that just because something cannot be successfully
monetized does not automatically make it worthless. Art, culture, history, all
of these are more valuable to society at large than the highest valued
startup. End of. Argue it.

~~~
defen
> This is for basic tuition at a no-name university, obviously the numbers are
> far worse for ivy league.

It's worse, but opposite of the way you're thinking. Harvard/Yale/Princeton
are basically free if your parents make less than about $65,000 per year. So,
a smart ambitious kid with non-rich parents can graduate from a top school
with an extremely strong network and have no debt. But an "average" kid with
non-rich parents will have to work a side job or two, and graduate with
substantial debt, all for a not particularly useful degree.

~~~
FussyZeus
> So, a smart ambitious kid with non-rich parents can graduate from a top
> school with an extremely strong network and have no debt.

Or the kid could win the lottery, with effectively the same odds of success.
That does not make this a good system.

~~~
defen
I'm not saying it's a good system, but we've effectively ended up in a
situation where some of the kids least in need of a leg up end up getting a
huge boost, and the ones who need more help get nothing.

~~~
FussyZeus
Except this argument is an offshoot of a problem caused by a greater fault. To
take this in a programming metaphor, you're attempting to make an
unmaintained, old library work with new code, when there are perfectly good
alternatives available with better functionality and support, and good use
cases.

Instead of band-aiding the bad solution, throw it out. Get a better one.

------
gerbilly
The money has slowly been taken out of everything.

It's a deliberate program.

When a new market opens up, like say the internet in the 90s, then the
investors and the people in charge will allow some of us to be overpaid for a
while.

It's really not out of the goodness of their heart's. At that point they are
focusing on market capture, and they need bodies to help them do that.

Eventually they find a way to make that market 'efficient' (read bad for
everyone employed in it) and unless a new market opens up, it can be really
bad for workers.

I can't think of a significant new market that's been opened up since the app
bubble of 2010 or so.

~~~
aaronblohowiak
Efficiency is a “bad deal” in a place with a very low floor of benefits /
lifestyle. In economies with very high minimums, efficiency is not too bad!
Would you prefer a dynamic market with winners and losers or a stable market
that’s kinda ok for a lot of people? This trade off seems pretty easy but over
long periods of time the stable market starts to look like a stagnant market
that may not allow new entrants to new industries, creating a permanent
lagging behind the dynamic/higher-outcome-variance market. So you want some
turmoil / “creative destruction”. This is why imho barriers to firing people
is bad. I’d rather have the gov’t be the social safety net than the employer.

~~~
gerbilly
These are all theoretical benefits, if you can't afford a decent place to live
and feel like you have to delay having kids till 38.

------
AmericanChopper
Talking about underemployment as a problem for college graduates in general
doesn’t seem very insightful to me. It seems obvious that not all degrees have
problems with underemployment. So which ones do? Why are people doing those
degrees? Are they under the mistaken impression that those degrees will lead
to employment opportunities that don’t actually exist?

~~~
_carl_jung
I believe (partially anecdotally and partially from reading articles over the
years) that a big part of this problem is more like "mis-education", rather
than "under-education". In primary and high school education in the UK,
computing is a dire situation.

It's clear that being good at using a computer is a huge asset in modern
society, so why don't we gear education towards it? Programming ought to be
seen as vitally important as English and Maths.

~~~
chrisco255
I wouldn't put programming as valuable than English and Math. It's clearly
good to know, but honestly since we're talking about exploding debt, how about
fiscal education in schools??

~~~
xwdv
Practical fiscal education in schools is almost a political nonstarter. If you
were to educate high school freshmen on how savings, loans, investments, taxes
and retirement planning works for a semester it would greatly alter the voting
habits and priorities of that generation.

~~~
cf141q5325
Just giving out a brochure "What are taxes and how do you pay them" would
already be an enormous leap forward.

I would assume going into some of the topics you suggest would lead to school
getting swamped by insurance sales people.

------
zaroth
I’m looking at the Underemployment vs Unemployment of Recent College Grads
graph, and then the following graph of Unemployment of Young Workers vs Recent
Grads and they seem like they should share one of the curves in common, but
the graphs are different?

Underemployment rates for non-farm jobs in the US, 2005–2018 — Unemployment of
Recent Grads

Vs

Unemployment rates for non-farm jobs in the US, 2005–2018 — Recent Graduates

The drop in the _Unemployment_ rate for “All Young Workers” since 2011 however
is staggering.

IMO a non-dischargable loan should have a correspondingly extremely low
interest rate, but I think there has to be a bright line drawn at forgiving
principal except in the case of fraud on the part of the educator or the loan
servicer.

~~~
throwaway2048
Why should the principle not be discharged? Why is lending a virtually risk
free position (which induces a massive moral hazard)

~~~
zaroth
It’s non-dischargeable so that it can be offered to people with no collateral
and who are otherwise entirely un-creditworthy.

Not surprisingly, this results in high delinquency rates!

The alternative is most people wouldn’t qualify for this level of debt, you
would more highly subsidize cheaper _public_ education, and private
universities would have to rely entirely on endowments to provide financial
aid to people who otherwise wouldn’t be able to afford to go.

At some point a $50k private undergraduate education (forget about $100k+!) is
not for everyone, even if there are banks willing to write the check and put
you into that kind of debt.

But think of the outcry if you were to limit the amount of educational debt
someone could take on — for example by only making the first $20k non-
dischargeable. It would fix the delinquency problem, drastically lower the
total annual student loan rate, and cause private tuition prices overall to
decline, but it would be called institutional racism.

I think we already went through this cycle with housing, when ~15 years ago
politicians started saying that owning a home was a _right_ and everyone
should own one, regardless of ability to pay. Zero down, no income
verification, guaranteed issue mortgages caused the housing bubble, and we see
something nearly the same in education today saddling kids with debt way over
their heads, except this time you can’t even walk away from it in exchange for
a 7 year credit score hit.

~~~
yardie
> if you were to limit the amount of educational debt someone could take on —
> for example by only making the first $20k non-dischargeable. It would fix
> the delinquency problem, drastically lower the total annual student loan
> rate, and cause private tuition prices overall to decline, but it would be
> called institutional racism.

The solution to structural racism is more scholarship money, not more debt.
Pell and Social Security supplement grants have gotten really meager since
when I went to school.

> I think we already went through this cycle with housing, when ~15 years ago
> politicians started saying that owning a home was a right and everyone
> should own one, regardless of ability to pay.

Ahh yes, this old card. Blame the poors for financial crisis. Buddy most of
the defaults weren't from poor people buying homes. People with good credit
scores leveraged that score to speculate, over 85% of the defaults were for
investment properties. Most of the mortgage defaults were done by your
doctors, lawyers, realtors, general contractors, and business owners who
watched one too many episodes of home flipping shows and thought they could
get in on a good deal.

~~~
itronitron
>> The solution to structural racism is more scholarship money, not more debt

I completely agree, scholarships and grants should be greater than the loan
debt that a student takes on, and the maximum financial aid for a student
should be capped annually in some way. There are simply too many student loans
being made available to students that don't need them. I have a colleague that
got a full ride through undergrad but managed to graduate with over two
hundred thousand dollars in student loan debt. It is predatory lending to loan
students more money than they need to cover their cost of education and cost
of living (for a student).

------
solidasparagus
I would like to see these graphs next to graphs of for-profit university
attendance. Looking at wikipedia, for-profit grew rapidly until enrollment
started dropping around 2009.

For-profit schools are "13 percent of the nation's college enrollment, but
account for about 47 percent of the defaults on loans. About 96 percent of
students at for-profit schools take out loans, compared with about 13 percent
at community colleges and 48 percent at four-year public universities."\- 2012
report [1]

[1] [https://www.nytimes.com/2012/07/30/education/harkin-
report-c...](https://www.nytimes.com/2012/07/30/education/harkin-report-
condemns-for-profit-colleges.html?pagewanted=all&_r=0)

~~~
tracker1
I've also heard that the pricing of for-profit schools is to maximize backed
loans out before a student drops out (since most drop around the end of their
second year). I know a lot of people who couldn't get funding for their final
year of study.

------
nercht12
If companies didn't require "higher education" degrees for entry, then schools
would be forced to start appealing more to the masses. In an information age
such as we live in, we can access virtually all the info we could get from
universities for a mere fraction of the cost (just the books + supplemental
material if we need it).

There's no need for government subsidized education or broadening the job
market. There's need of ditching bureaucrats and "Because we've-always-done-
it-this-way" morons. Reward people for studying on their own, building their
own businesses, networking, etc. rather than following the stupid system just
to get two letters next to their name.

------
anovikov
A little bit unrelated question: why are HE revolving loans so cheap, having
negative CAGR? Some piece of economics i totally fail to understand.

~~~
lotsofpulp
They are guaranteed by taxpayers.

>Lots of student loans are also owned by pseudo government agencies or private
companies with beneficial relationships with the Department of Education, such
as NelNet Inc. (NYSE: NNI) and Sallie Mae (NYSE: SLM). Sallie Mae holds a lot
of the loans made under the Federal Family Education Loan Program (FFELP),
which was replaced by the federal government.

[https://www.investopedia.com/articles/personal-
finance/08121...](https://www.investopedia.com/articles/personal-
finance/081216/who-actually-owns-student-loan-debt.asp)

~~~
drak0n1c
Exactly. To the tune of $120 Billion per year. That's a lot of people being
artificially willing and able to pay higher and higher tuitions. The federal
taxpayer guarantee on these loans is one of the strongest forces behind the
dramatic rise in tuitions - if people can pay and pick the pricier
institution, then universities will happily charge and spend more.

[https://www2.ed.gov/about/reports/annual/2017report/fsa-
repo...](https://www2.ed.gov/about/reports/annual/2017report/fsa-report.pdf)

------
matt-attack
Re the escalating price of universities, why do we treat the issue like it’s
totally a mystery? Aren’t the budgets and costs of large public universities
(E.g. the UC system here in CA) public? Weren't these choices based on
specific choices by specific individuals who are public employees? Can’t we
pinpoint precisely who raised prices and why? What should cost substantially
more today than 25 years ago (after inflation)? And why don’t we just demand
that a system like UC just go back to the precise budgets of, say, 1995 (again
inflation adjusted)? It seemed to be working ok then.

------
test6554
Didn't they have a medical loss ratio requirement with obamacare that required
85% of premiums to go toward actual health care?

Could a similar requirement be imposed which specifically required some
substantial percentage of the money to go toward teaching payroll,
specifically excluding administrator payroll, leisure activities, athletics,
and building construction?

Or rather than that, just require schools to publish the percentage of tuition
spent on actual teacher/T.A. payroll by department?

~~~
rebuilder
What would happen if subsidized loans were simply capped at a much lower
maximum? You'd expect enrollment to drop at first, but would universities
adapt by lowering tuition? Or would the enrollment rates just stay low? Or
would students take more expensive loans?

------
ddingus
No.

While more and better employment would help with the student debt, the fact is
starting out in life saddled with what is essentially a home mortgage takes a
huge bite out of the potential value of education.

And it carries a very high opportunity cost in that increasing numbers are
avoiding school and or seeking options that do not put them in profound debt
so early in life.

------
acollins1331
Schools charging the same amount to each student is an issue. Why should
someone getting taught in an expensive engineering program pay the same as a
British lit kid?

People want to do away with all the "useless" majors, which seems like a
mistake to me. Colleges weren't about finding jobs until recently when
companies decided to outsource training workers to these places. For our
entire history colleges were places where people can learn about the world and
different things. Suddenly shaming them for teaching literature when they have
been doing it for hundreds of years is dumb. The answer is to just charge
tuition relative to the cost of the particular education.

------
exabrial
It's a crisis of handing too much money to people that have no chance of
repaying it. We have people that took at $100k in loans for a music education
degree. A very noble cause, but you're unlikely to pay that back within 15
years given the salary prospects.

The root of the problem like many other macro problems [housing crisis, income
disparity, etc] is well-intentioned but misplaced government subsidies.

------
jonathankoren
It’s fairly obvious about what is going on with tuition costs. The burden has
shifted from the tax payers to students, due to budget cuts. If you simply put
the funding levels back to 90s a lot of this would go away.

[https://www.cbpp.org/research/state-budget-and-tax/a-lost-
de...](https://www.cbpp.org/research/state-budget-and-tax/a-lost-decade-in-
higher-education-funding)

------
carboy
I’m still trying to figure out why every major costs the same. Most non-STEM
majors are using the same methods, and devices that were used 50, a hundred
years ago.

$50K per year for an English degree vs $50k per year for a Mechanical
Engineering degree, the English majors are getting jobbed. Think about all the
majors that don’t require the underpinnings of constant technology upgrades,
or need the latest and greatest technology.

------
acd
Why should banks be allowed to inflate credit bubbles that people cannot pay
back? Why do we keep saving the banks?

~~~
x2f10
That's how the economy keeps moving....

Too pessimistic?

~~~
swagasaurus-rex
That's how you collapse economies.

To keep them moving, allow defaulting on loans, make the banks take the loss.
They will stop issuing glaringly risky loans to the unqualified, preventing a
2008 style subprime loan crisis.

------
djaouen
The problem with college is that going to college won't make you an expert in
your field. Even if you're an A+ student, the amount of knowledge required to
be an expert vastly outpaces the knowledge gained by going to college.

------
sunstone
That's part of it but mostly it's due to rent seeking on the part of degree
granting institutions.

------
jmpman
H1B compete with the newly graduated college students. Before people say that
there’s no problem with STEM graduates finding a job, I’ll counter that many
of my coworkers 20 years ago didn’t have STEM degrees, and were previously
English majors, business majors, etc. They were people with technical aptitude
who realized they had picked a field of study that didn’t quite suit their
financial aspirations. They were able to get an entry level IT job and move
up. Now those jobs are filled by H1B.

~~~
joelbluminator
Why can't a 28 American with an English major do a coding bootcamp and find an
entry level job? I'm sure if he's reasonable intelligent and ambitious he can.
There aren't that many h1b's around competing with him, most American jobs
aren't h1b jobs.

~~~
lemcoe9
Why is "do a coding bootcamp" the common refrain from tech workers trying to
help non-tech people?

~~~
hobofan
Because the barrier to entry is still quite low. While maybe not "Anyone who
could spell HTML could get a job" low, as said in another comment here, it's
still so low that I'd wager a decently clever person with a good 3 month
bootcamp can get a _entry-level_ job.

~~~
leakybit
I would say the entry level market for devs is very saturated.

~~~
mcguire
If they're making more than any other job you can get with 3-6 mos. of
training, the market is not saturated.

~~~
fzeroracer
That's a fallacious argument though, because at the lower end tech jobs pay
more than other careers but result in you being exploited by corporations
looking to drive wages down.

When I graduated, there were companies offering me 30-40k a year in cities
like Seattle. I have friends that could tell you the same story, some who took
the opportunity because of the entry level market being saturated.

Bootcamp graduates are often placed in incredibly exploitative contracting
environments (often in companies that also underpay, abuse and threaten H1Bs)
which are farmed out to larger companies looking to get work done cheap.
Though this has just been my personal experience and that of my friends. They
leverage desperation.

