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Whether or not you should attend college is a controversial subject these days. This is
because the mantra of higher education we’re exposed to, says that attending college will
make you a better and more successful person. This notion has been so ingrained in society
that people who question it may be treated as outcasts. High school students are taught
that in order to have a successful career, and thus success in life, they have to start
with a college education. It is true that some students who did not pursue higher education
later wish that they had, but yet, there are other people who went to college that look
back, and see their time in college as wasted years of their life. They either dropped out
early or obtained a degree for which they have no use for in their current career.
If you don’t think this is a big problem, then you will be shocked as we prove to you
that College Attendance is in
a Bubble. “I think, in today’s society you can’t
be successful without college.” “I feel like I need a college degree in
order to get a job, because it’s hard to get a job with just a high school diploma.”
“My dad’s really set on the idea of college…and I also want to go in order to get a good career
and…”
Newscast: “Rebecca Bradley planned to go to college to become a teacher.”
Rebecca: “Just in Pennsylvania for state schools, a lot of them were 20 to $23,000…I’m
doing the math myself and I don’t know how I’d do this on a teacher’s salary…I
have no idea how any of this would work.” Newscast: “So Bradley abandoned her dream
of a college degree and enrolled in beauty school”
Andy Kessler: “There’s a huge disconnect between what colleges are teaching and what
companies want in future hires. Half of college graduates under the age of 25 don’t have
jobs or are underemployed. That’s half..that’s a million and a half kids who can’t get
jobs…” The perception of the need to attend college
has been drastically increasing in recent decades. Today’s generation of young adults
see the value of a degree differently than their grandparents did at the same age. Half
a century ago college was not everyone’s realistic aspiration. In 1970, according to
the U.S. Census, over 60% of heads of households had no college education. Back then there
were many jobs that were available to get right out of high school. Only 26 percent
of middle-class workers actually had a higher education. Today 60% of jobs require a post-secondary
education. In 1945 only 15 to 20 percent of high school
students went to college. This number increased to 40 percent by 1960. Under President Lyndon
Johnson the most comprehensive national legislation concerning higher education was enacted; the
Higher Education Act of 1965. It gave broad federal assistance to both public and private
colleges and individual students. Later in 1979 we saw the establishment of the Department
of Education. As government increased involvement over the
years, we ended up in the situation today where the average cost for a public university,
when adjusted for inflation, has more than doubled. Even though cost is up dramatically,
now a majority of high school graduates enroll in college. In fact, according to the National
Center for Education Statistics, over two thirds of high school graduates are starting
college immediately after high school. For fiscal year 2013, one third of the Department
of Education’s $65.7 Billion budget was appropriated for Pell Grants for college students.
This figure is eight and a half times the original Pell grant allocation in 1980 of
$2.6 Billion. The climate of the college arena has definitely
changed from decades past. We have both a massive increase in students and a massive
increase in government grants and loan funding. Both these statistics translate into increased
costs, and the increasing cost to attend an America University is massively outpacing
the benefits of actually attending. Studies are showing that by this year, half
of college graduates have jobs that require less than a bachelor’s degree. According
to the Bureau of Labor Statistics, the number of college students working minimum wage jobs
has doubled in just the last five years. It’s probably safe to say that these young adults
didn’t go to college in order to advance their career with Walmart or McDonalds. However,
these and similar jobs are the ones that have lowered the unemployment rate in recent years;
giving the government something to tout as a pickup in the economy. Add to this the reality
that the average student is graduating with $35,200 of total debt, according to CNN last
year, and we have a definite recipe for unsustainability in college attendance.
It was very common in the 1960s and 70s for men and women to pay their way through college
on a part time salary while renting a small apartment. They even graduated debt free.
They got the full benefits of a college degree without 10 years or more of loan payment debt
hanging over their head. Today is obviously a different story. Today we have students
borrowing tens of thousands of dollars to go to school, and living with their parents
while they study and remain there even after as they pay off this loan debt.
In 1970, a University of Utah student spent about $390 a year on tuition. By 2014 this
number has ballooned to $6,700. Even when adjusted for inflation, this means the cost
of tuition has almost tripled. If the price of college remained the same
as the inflation rate, tuition per semester would only be $2,300.
The average private school costs is 32,000 per year in 2013.
According to the College Board’s Annual Survey of Colleges, over the past 10 years,
public in-state tuition for a 2-year college is up 57%; a 4-year is up 73% and similarly,
private in-state tuition for a 4-year college is up by 55%.
This increase in college tuition is outpacing income by 365% for public in-state tuition.
Household income has only increased 20% over the past 10 years according to the U.S. Census
Bureau. Knowing these facts, we expect something in
the mechanisms of today’s institutions to break.
During the Financial Disaster in 2008, college tuition still rose 5.7% across the board.
In a free market this would not make sense; tuition would not rise when there is an absolute
collapse in financial capital inside of the economy.
In the same way the government caused the Housing Bubble and resulting crash, it has
fueled and will be the cause of the upcoming great college bubble and crash. Nearly 15%
of students are already defaulting on their loans. The official fiscal year 2010 three-year
cohort default rate is 14.7 percent, and we can only except that to be higher for the
following years. No one but the government would guarantee
a loan for anyone to go to college, for any curriculum, with little regards for the likelihood
of an individual to repay the loan. The government gladly invests taxpayer dollars
into student grants and loans. This is what has been driving the increase in cost for
college tuition, bringing it above and beyond the affordability of the average student and
family. For teenagers, the propaganda is so potent,
that high school students in many cases have blind optimism that they will land their dream
career after college and have the income to easily pay off any student loan balances they
incurred along the way. Some graduates are left with over $100,000 in debt and can barely
find any job, let alone the one they pictured themselves getting into four years ago.
As a result of Federal Loan programs, in the current environment, Colleges can raise prices
and no matter how rapid the increase is, the public will not feel the cost directly. They
will however feel it indirectly as their tax dollars go to fund the Federal Loan programs.
There is no incentive stopping government from paying more than a free market price…until
the people become overwhelmingly against the current student loan paradigm. The most probable
outcome, as prices continue to increase, will be that government raises student loan spending
in the name of helping the disadvantaged, further compounding the problem.
Like any other bubble though, college tuition cannot rise indefinitely. Eventually, something
will cause the great college bubble to pop. Outstanding student loan debt is over $1.2
Trillion. This is nearly 50% higher than outstanding credit card debt.
The longer the status quo is kept, the bigger the bubble is going to get and thus the larger
the crash will be. If tuitions continue to increase around 5%
a year, in the coming years student loan payments would get so high that it will be unmanageable;
even for the students that get the dream job that they were told their degree would award
them. Massive defaults will occur and colleges will soon be worse off. Prices will need to
be readjusted to maintain the maximum income when attendance levels crash. Professors will
face pay cuts or layoffs along with administration, maintenance, construction and anyone else
working for or at a college or university. For decades now, students are sacrificing
their standard of living to go to college just to get burdened with ever increasing
debt. This burden is felt in the whole of society as students live at home longer, get
married later, and have less children than prior generations.
Like what happened after the Federal Housing Administration was created, where standard
mortgage terms went from five to 30 years, we expect the next step for colleges and government
to be to extend the student loan length of terms. A typical college loan is now 10 years.
Expect future loans for students to be increasing to 15, 20, and even 30 year terms for a 4-year
education. And remember, college loan debt is already one of the toughest to be forgiven
in a bankruptcy. The cost of going to college will soon outweigh
the benefits for the average American. The good news is that demand for cheaper, non-government
subsidized education sources will spring up. They’ll come from local communities and
from the internet, which in itself is a great example of how the free market creates solutions.
You can pick any field and the internet can begin educating a person in just seconds;
essentially free. Conventional thinking disregards the cost
and alternatives to mainstream college education and continues to encourage students to take
on horrendous amounts of college loan debt to get any degree. They think that having
a piece of paper will ensure that you will be successful when, as many recent graduates
are finding out, it does not. Students are graduating without the skills
needed to get a well-paying job and hence can’t afford their student loan payments.
The cost of this government fuelled bubble will be felt for decades to come. Government
is holding the bag for an estimated $1 trillion in student loans.
Default rates for 2-year federal student loans by 2013 have already increased six years in
a row. Since just 2004, the amount of dollars of
student loans has quadrupled. With the default rate at around 12%, there is over $100 Billion
in student loans in default. Due to numerous exemptions, delays and forbearances
for all types of student loans, it’s estimated that we’ve just begun to see the day of
reckoning for the ’08 and ’09 graduating classes.
We hope you have learned a lot from our video today. It’s vitally important for you to
seek alternative forms of education to educate yourself today. Don’t follow the mainstream
wisdom that has led millions of Americans into debt slavery. Instead signup for free
at CrushTheStreet.com/college to get our exclusive report for which we lay out 10 ways for you
to make extra income in this changing economy.