TheMeliorist said:nycll said:Hmm, how come the average salary for people whose highest degree is college is 50K per year and the same thing for those whose highest degree is HS is only 20K? By success I meant financially. Maybe you are talking spiritually? Correlation not causation. I bet people without HS diplomas make even less than $20k on average but that doesn't mean that diploma really bestows economic value. The wage disparities are primarily caused by discrimination, where HR departments never give consideration to those without degrees. This (created disparity) in turn motivates the vast majority of Americans to get a degree, even though their career need not make use of it. So what you have left are mostly those with either no motivation or no ability, which reinforces HR policy not to consider them; it's a feedback loop that's caused significant damage to our society/economy.

The aerospace company I work for wouldn't let us hire a phenominal test engineer whom we'd been working with because he didn't have an engineering degree (though he did have a degree). Most of my coworkers have CS degrees but were almost worthless when they came in the door; they cut their teeth here. If anything, their CS education has harmed their ability, as java laziness is unacceptable in real time and hard to unlearn. In my avionics group it's good to have an EE, a control systems guy, and a guy from a top CS program (with an emphasis on embedded apps) to have as references, but the other twenty "engineers" might as well be recruited straight from HS (or from the field for their experience in EW, communications, test/QA, etc). Just make sure to aim for smart ones and those that have worked before (less chance of entitlement, ego, and better work ethic). Technical writers can also be recruited from HS and trained on the job, but it would be nice if they took a couple specialized courses first.Again, just like the discussion about inflation in wages, I was just describing the phenomenon, and you want to explain it, and change it.

Be my guest in fighting for the HS graduates in the work place. Until you achieve something, it is still true that a college education is worth far more than its cost (on average).

greling said:
B.S. You must work for Sallie Mae to say this. Every "competitor" at my school was either a subsidy owned by or was Sallie Mae. Nelnet, Nellie Mae, Wells Fargo, Bank of America... All of these companies outsources their loan programs to Sallie Mae. You had a choice between like seven different lenders who all serviced through Sallie Mae. You didn't hear about direct loans unless you pressed for it and asked for them. Financial aid officers were being eagerly pressed to offer you expensive private loans instead.

You do not seem to understand what Sallie Mae is, or how it functions.

Sallie Mae is to student loans what Fannie Mae is to mortgages. Who knew?

Sallie Mae was chartered by the government to securitize and service student loans. This makes credit more available, because banks with low origination volumes do not have to hold these loans on their balance sheets, nor do they have to service them. Loan servicing is subject to significant cost savings as economies of scale increase.

If your local bank had to hold student loans on its books for 20 years, and worry about pursuing deadbeats who take their education and run, your local bank would be much less likely to make these loans. Even the large lenders such as Bank of America and Wells Fargo benefit from Sallie Mae, as it handles all of the work of securitizing these loans and selling them on the open market, which replenishes capital available for further lending.

This is no different than how the vast majority of first lien mortgages work, with the exception that Fannie Mae and Freddie Mac let banks service those loans, since those banks demand to do so to reinforce their brand and relationship with the customers that use them.

Your complaint that all those loans ended up with Sallie Mae is without merit. They did so because the securitized student loans offer the best rates. They are, in effect, the prime student loans, just like Fannie Mae and Freddie Mac originate prime mortgages (CRA nonsense excluded). When a student borrows from a lender who is not selling loans to Sallie Mae, that lender's rates are generally much higher, since they have to cover their overhead and cost of borrowing, which are both higher than Sallie Mae's.

Wonder where those awful LIBOR + 8% loans come from? Those are private loans, held on the balance sheets of banks. Those loans are loans of last resort.

Sallie Mae has done for middle class education what Fannie Mae and Freddie Mac have done for middle class home ownership.

Of course, the irresponsible deadbeats like to rage against anything and everything associated with their loan when they fail to make good on the promises they made.

TheMeliorist said: Correlation not causation. I bet people without HS diplomas make even less than $20k on average but that doesn't mean that diploma really bestows economic value. The wage disparities are primarily caused by discrimination, where HR departments never give consideration to those without degrees. This (created disparity) in turn motivates the vast majority of Americans to get a degree, even though their career need not make use of it. So what you have left are mostly those with either no motivation or no ability, which reinforces HR policy not to consider them; it's a feedback loop that's caused significant damage to our society/economy.

The aerospace company I work for wouldn't let us hire a phenominal test engineer whom we'd been working with because he didn't have an engineering degree (though he did have a degree). Most of my coworkers have CS degrees but were almost worthless when they came in the door; they cut their teeth here. If anything, their CS education has harmed their ability, as java laziness is unacceptable in real time and hard to unlearn. In my avionics group it's good to have an EE, a control systems guy, and a guy from a top CS program (with an emphasis on embedded apps) to have as references, but the other twenty "engineers" might as well be recruited straight from HS (or from the field for their experience in EW, communications, test/QA, etc). Just make sure to aim for smart ones and those that have worked before (less chance of entitlement, ego, and better work ethic). Technical writers can also be recruited from HS and trained on the job, but it would be nice if they took a couple specialized courses first.
That still doesn't nullify his point.

HS diplomas have become devalued, thanks in large part to:

1. Rotten public school systems, which don't educate the students they serve, being run into the ground by bureaucrats and self-serving unions.
2. The political stigma against establishing more vocational education programs.

Problem one is rather simple. Public schools systems are flush with administrative waste, and are being controlled by self-serving unions. Although this thread isn't about unions, I will say that any organization which fights so hard against merit pay for teachers who deliver outstanding quality education is an organization not in the best interest of students. When good teachers are paid the same as bad teachers, and those bad teachers retain their jobs, it makes it extraordinarily difficult to hire and retain quality teachers who truly care about education.

Problem two is a political problem. Politicians are too busy promoting college for everyone (in terms of attendance, not opportunity), because that is what the voters want to hear. Voters do not want to hear that a certain percentage of students simply aren't cut out for college, and are better off taking two year vocational programs. Not everybody can be a doctor or lawyer; our country needs tradesmen as well. If politicians weren't so hesitant to admit this, a HS diploma could be revalued by providing vocational opportunities either in school or through outreach programs, in which case the diploma would confer some degree of understanding that the student is becoming proficient in a useful trade, rather than the student met attendance criteria set by the state.

nycll said:notfree said:nycll said:
Let's think for a moment if you don't have student loans, how do you finance college education. Option 1, we make high education free, like France, Germany, UK, China, etc. This will raise everyone's tax, and may lower US universities quality since they are among the top of the world,


Just an FYI, but higher education is definitely not free in China. In fact as a percentage of per capita GDP, I would suspect it is significantly more expensive in China than the US.Source?If you do a search in Chinese of any of the well known universities over there, you'll get some idea of what their costs are. Most state schools have a "public funded" and "private funded" split. Say a particular school admits 100 students, the first 50 of which will be "public funded" with tuition provided by the gobment, students ony pay room and board. For the second 50, students must pay tuition money. The amount varies by university and by degree but are typically 5000 yuan at the very least. The public/private funded ratio also differs by school, degree, and year. Some schools want more lattitude in appropriating public tuition funding and so are doing away with the public funded method and instead shifting towards a merit/need based scholarship model.

Per-capita income for China is hard to estimate, especially given the large divide between rich and poor. Here's an interesting bit from the state newspaper:

http://www2.chinadaily.com.cn/bizchina/2008-07/26/content_687946...

So disposable income for six months is 8000 Yuan for 6 months, or about 16,000 yuan for the year. This is urban, rural areas would be *much* *much* lower. Here's a news story about rural areas:

http://www.asia.xorte.com/0,5,China-Per-Capita-Cash-Income-of-Ru...

So even for urban areas, the ratio is about 1/3 of cost-to-income. Rural areas are essentially unable to afford college unless they get public funding based on test scores.

http://www.bea.gov/briefrm/percapin.htm

The US per capita disposable income is about $28000. According to the college board, the average 4-year public school tuition is $6,585 per year, or about 1/4th the disposable income.

^^Thanks Max. Let's pretend I was referring to the free part of the 2 tier system.

staci86 said:nycll said:It was but it has long been a pure private company with no government backing, even implicitly.

The government backing in student loans is purely at the loans level--it guarantees 97% of the loan to all qualfied lenders under the FFELP program.
Fannie Mae and Freddie Mac were also GSEs later privatized.

The loan level backing is important, however I did read a study which suggested that the market saw Sallie Mae as having an implicit guarantee, due to the lower than expected yields on its debt, similar to how Fannie Mae and Freddie Mac debt always yielded less than the market would expect it to, prior to them being bailed out.

I tend to believe that. Sallie Mae is simply too important to the US economy for our current leaders, of either party, to allow it to fail. I won't call it as important as Fannie, Freddie, GM, Citi, or BoA, but it certainly places above some of these smaller banks who received TARP funds. Sallie Mae fits the profile of what bailed out businesses look like. Whether bailouts are good or not is beside the point.No, your paper is wrong. Sallie Mae posts no systemic risk to the economy. The only crucial function it serves is to service the loans. The Obama adminitration will move all the federal loans to direct loans. If Sallie becomes insolvent, it will go to bankruptcy. The bond holders will take the haircut. The servicing operation will continue as it is self sufficient.

nycll said:greling said:Bankgeek said:Greling said: 91.8% of 2009 college grads living at home and 80% of 2008 grads jobless.
The government keeps saying that if you have a college degree you're less likely to be unemployed.

The catch is that you can never be counted as "unemployed" in government numbers until you actually landed a first job to lose, so there are literally millions of young people unemployed-in-fact but not "unemployed" in government numbers who are slipping underneath the radar.Not true. If you are looking for a job you are counted as unemployed. But if you are backpacking in Europe or bartending in Thailand, you are not.

Good luck filing for unemployment without ever having had a job. I highly doubt they'll hand you a check just because you're "looking for work".

nycll said:No, your paper is wrong. Sallie Mae posts no systemic risk to the economy.
I didn't say it posed a systemic risk. Many of the bailed out banks and insurance companies didn't pose systemic risks either.

nycll said:
The only crucial function it serves is to service the loans. The Obama adminitration will move all the federal loans to direct loans. If Sallie becomes insolvent, it will go to bankruptcy. The bond holders will take the haircut. The servicing operation will continue as it is self sufficient.
That doesn't fit the profile of the bailouts so far, nor is it a particularly efficient or politically palatable way of doing things. Winding down Sallie Mae and transferring many of its functions to the DOE is a massive bureaucratic and administrative nightmare that will take many months, and cause serious problems. The administration then has to deal with the fallout from "shutting down" a student lender and "forcing" everyone to use "the government." That doesn't make much sense, but the American people generally don't understand how these things work. To them, it is just another government takeover.

A bailout which wipes out the common equity holders and results in de facto nationalization makes much more sense, on all fronts, and fits the pattern of the bailouts thus far.

nycll said:greling said:nycll said:greling said:Bankgeek said:Greling said: 91.8% of 2009 college grads living at home and 80% of 2008 grads jobless.
The government keeps saying that if you have a college degree you're less likely to be unemployed.

The catch is that you can never be counted as "unemployed" in government numbers until you actually landed a first job to lose, so there are literally millions of young people unemployed-in-fact but not "unemployed" in government numbers who are slipping underneath the radar.Not true. If you are looking for a job you are counted as unemployed. But if you are backpacking in Europe or bartending in Thailand, you are not.Good luck filing for unemployment without ever having had a job. I highly doubt they'll hand you a check just because you're "looking for work".Unemployment insurance benefit is for people who lost their jobs. Unemployment rate and job loss numbers published by BLS is what I was talking about, since you criticized the government numbers.

Explain to me how recent grads out of work are counted on the unemployment rolls. Do they have a device that can read minds?

oopsz said:I think easy loans inflate the cost of an education. I think private schools are significantly above-market in terms of tuition rates, and I think some state schools are slightly above-market, because there's no downward pressure on tuition, because students have access to easy credit.

I think you are exactly correct. There is no market force holding tuition down. Easy loan money makes the costs inflate without consequence.