Don’t worry. Keep borrowing

President Obama’s plan to rate colleges is “yet another mistaken attempt . . . to alleviate some of the symptoms of a problem without actually addressing the underlying disease,” writes Erika Johnsen. The other part of the plan — promoting income-based repayment — will make the disease worse.

The “easy, cheap and indiscriminate availability of student loans ” juices demand and helps universities raise their prices, writes Johnsen. The Obama administration keeps sending out “signals about how ‘easy’ it will be to repay these huge loans after you graduate with a little help from Your Friend, The Federal Government.”

College debt hits $1.2 trillion

College debt has hit $1.2 trillion. Two-thirds of college students take out loans; the average borrower will graduate $26,600 in the red. One in 10 graduates owe more than $40,000.

Obama: Link student aid to college value

President Obama proposes rating colleges on tuition, student loan debt, graduation rates and graduates’ earnings so students can shop for the best value. Eventually, Congress will be asked to reward higher-performing colleges with larger Pell Grants and lower-cost loans for their students.

College costs will continue to rise, predicts an economist.

Why we say ‘please’ and ‘thank you’

Why do we say “please” and “thank you”? On Brain Pickings, Maria Popova cites anthropologist David Graeber’s “illuminating” Debt: The First 5,000 Years.

Consider the custom, in American society, of constantly saying “please” and “thank you.” To do so is often treated as basic morality: we are constantly chiding children for forgetting to do it, just as the moral guardians of our society — teachers and ministers, for instance — do to everybody else. We often assume that the habit is universal, but … it is not. Like so many of our everyday courtesies, it is a kind of democratization of what was once a habit of feudal deference: the insistence on treating absolutely everyone the way that one used only to have to treat a lord or similar hierarchical superior.

The habit of always saying “please” and “thank you” began to take hold among the middle classes during the commercial revolution of the 16th and 17th centuries, writes Graeber.

It is the language of bureaus, shops, and offices, and over the course of the last five hundred years it has spread across the world along with them. It is also merely one token of a much larger philosophy, a set of assumptions of what humans are and what they owe one another, that have by now become so deeply ingrained that we cannot see them.

“Please” comes from “if you please,” as in “if it pleases you to do this,” writes Graeber. “Thank you” derives from “think,” as in “I will remember what you did for me.”

When my daughter was young, I’d pretend that I couldn’t hear any request not prefaced by “please.” She’d say, “Please pass the milk, mommy dearest, best mother in the world.” (I’d made the mistake of telling her about Mommy Dearest, though I’m pleased to say she has not yet written a tell-all memoir of her childhood.) I’d say, “Why, certainly. It’s a pleasure to pass the milk to a courteous daughter.”

How the elite college students eat

Steve the hasher was serving our table in the college dorm dining hall.”Hey, Steve,” said one of my table mates. “You’ve got your thumb in the mashed potatoes.”

Steve said, loudly, “I’m the only guy here who will admit he masturbates.” Then he plopped the bowl on the table.

I skipped the mashed potatoes that evening.

Dining at Stanford has gone upscale, according to How Students Eat Now in Stanford Magazine.

During the past decade, Stanford has built one dining commons and renovated older ones, replacing “cook and park” steam tables with stations where items are made to order. They’ve recruited chefs with a flair for vegetarian and ethnic cuisines, as well as experts in food safety, nutrition and allergen-free cooking.

At one dining area, students can watch their meals being prepared through a glass wall, then go upstairs to browse “an expansive salad bar topped with white ceramic bowls of organic oranges.”

On the back wall, a pizza oven blazes. Whole chickens, rubbed with pungent fresh oregano, twirl slowly on the rotisserie.

The executive chef, David Iott, worked at Ritz-Carlton hotels before coming to Stanford.

There are no plastic cafeteria trays, except upon request. Instead, diners stroll around holding china plates, as they would at a hotel buffet. Hormone-free skim milk, fair-trade Starbucks coffee and Crysalli Artisan Water are on tap. A Pepsi machine is tucked away in a corner. “We have to have that,” Iott says, a bit sadly. Then he brightens as he points out roasted organic carrots and an array of miniature decorated cheesecakes.

An elite university needs high-quality food service, says Eric Montell, executive director of Stanford Dining. The magazine adds, “From New Haven to Berkeley, American universities are pouring hundreds of millions of dollars into environmentally sustainable residences and dining facilities.”

I thought universities were trying to control costs so college will be financially sustainable for students and their parents. All that overpriced organic food and Artisan Water will turn into student debt.

Stanford undergrads pay $1,700 to $2,000 per quarter — up to $6,000 a year — for their miniature cheesecakes and Starbucks coffee. That doesn’t cover the full cost. Of course, most students receive financial aid to defray the cost of tuition, room and board, but fancy eats means the aid won’t go quite as far.

The greatest food in human history is the McDouble cheeseburger, writes Kyle Smith in the New York Post, quoting a Freakonomics commenter. McDonald’s McDouble is nutritious (390 calories, half a daily serving of protein) and usually sells for $1.

44% underemployment for new grads is OK

44% of Young College Grads Are Underemployed (and That’s Good News), writes Jordan Weissmann in The Atlantic.  In a weak economy, many new graduates have to take jobs that don’t require a college degree, argues Weissmann. It’s worse now “because the economy got fed through a wood chipper during the recession and we still haven’t picked up all the pieces,” not because a bachelor’s degree has lost value.

The unemployment rate among recent college graduates tends to move “in step with unemployment among all working age adults,” he writes. New graduates are having problems because everybody is.
NYFed_College_Grad_Unemployment.jpg

College graduates during the 80s and early 90s were as likely to be overqualified for their jobs as young graduates today, according to New York Fed President William Dudley. Most graduates then eventually found professional jobs.

The obvious difference between higher education today and in 1990 is the cost of a degree, and the amount of debt students take on to finance it. So while failing to land a college-level job straight out of school might have been tolerable in the past, today it might mean severe financial hardship, especially if students aren’t savvy about how to handle their student debt (three words: Income. Based. Repayment).

There’s evidence that young people who graduate into a recession and start lower on the job ladder never recover completely.

I’d like to see a good survey asking whether collegebound students understand their likely future earnings and loan payments. Do they know the risks? If they did, second- and third-tier private colleges would have to slash tuition or go out of business.

Be deeply suspicious of promises that a bachelor’s degree will raise earnings significantly, warns Tim Donovan on Salon. If the “higher interest rate convinces even a few 18-year-olds not to take on huge debt for that Musical Theater degree, maybe it’s not so bad,” he writes.

No compromise on student loans

Interest rates on federally subsidized student loans double today from 3.4 percent to 6.8 percent. The Democratic Senate leadership blew it by rejecting a sensible bipartisan compromise, writes Matthew Chingos of the Brookings Institution.

The new proposal, from a group of senators including three Republicans, two Democrats, and one Independent, offers a permanent fix to the now-annual problem of Congressional meddling with interest rates by instead tying rates to the market.

The bipartisan compromise would fix the interest rate for the life of the loan, so there’d be no surprises for borrowers. It also cuts rates on unsubsidized loans used by students from middle-class families. “By charging higher rates to graduate students and on the PLUS loan program for parents, the overall plan is close to budget-neutral according to the Congressional Budget Office,” Chingos writes.

Massachusetts Sen. Elizabeth Warren has proposed letting students pay 0.75 percent interest,  ”the same ultra-low rate that banks currently get on short-term loans from the Federal Reserve,” notes Glenn Harlan Reynolds in the Wall Street Journal. Linking interest rates to the market rate is “immoral,” Warren said, rejecting an earlier Republican proposal. What’s Really ‘Immoral’ About Student Loans is not “the still historically low interest rates, but in the principal of the thing,” writes Reynolds, a University of Tennessee law professor who blogs as Instapundit.

Student debt, which recently surpassed the trillion-dollar level in the U.S., is now a major burden on graduates, a burden that is often not offset by increased earnings from a college degree in say, race and gender issues, rather than engineering.

According to an extensive 2012 analysis by the Associated Press of college graduates 25 and younger, 50% are either unemployed or in jobs that don’t require a college degree. Then there are the large numbers who don’t graduate at all. According to the National Student Clearinghouse Research Center, more than 40% of full-time students at four-year institutions fail to graduate within six years.

. . . According to a recent study by the New York Federal Reserve, “the share of twenty-five-year-olds with student debt has increased from just 25 percent in 2003 to 43 percent in 2012″ and “student loan delinquencies have also been growing.”

Colleges have continued to raise tuition — and add administrators — because subsidized student loans have made it possible to get away with it, writes Reynolds, author of The Higher Education Bubble. They can accept students with little chance of earning a degree or finding “gainful employment” and collect the loan money up front. “If students are unable to pay the loans back, the burden falls on taxpayers (if the loan was “guaranteed” by the federal government), and the students themselves, while the schools get off scot-free.”

A serious student-loan fix would change this incentive. First, federal aid could be capped, perhaps at a national average, or simply indexed to the consumer-price index, making it harder for schools to raise tuition willy-nilly. Second, schools that receive subsidized loan money could be left on the hook for a percentage of the loan balance if students default. I would favor allowing students who can’t pay to discharge their loan balances in bankruptcy after a reasonable time—say, five to seven years, maybe even 10—with the institutions that got the money being liable to the guarantors (i.e., the taxpayers) for, say, 10% or 20% of the balance.

“Universities would be much more careful about encouraging students to take on significant debt unless they are fully committed first to graduating, and second to a realistic career path that would enable them to service that debt over time,” Reynolds predicts.

But this goes against federal policy, which calls for all students — including those with little chance of earning a degree — to try college.

Rocket scientist or plumber?

If you’re not a “rocket scientist,” skip college and become a plumber, advises New York City Mayor Michael Bloomberg. “It’s hard to farm that out … and it’s hard to automate that,” said the mayor. Plumbers make more than some college graduates, he added.

“College is a good investment” for most students, responded Mark Kantrowitz, a student aid specialist.  “The only schools that cost $40,000 or $50,000 like the mayor said are elite schools,” he said. Students who aren’t rocket scientists typically go to less expensive colleges.

Men at work

The U.S. Education Department’s annual Condition of Education report is out.

Educational attainment correlates with employment and women are more likely to earn college degrees. However, men are more likely to be employed at every age and education level.

Employment to population ratios, by age group, educational attainment, and sex: 2012

Figure 2. Employment to population ratios, by age group, educational attainment, and sex: 2012

Outstanding student loan debt more than tripled in nine years from $304 million in 2003 to $956 million in 2012.

You can live in the basement without college debt

It’s better in to live in your mother’s basement, drink beer and play video games all day than to major in English or sociology, go into debt and then live in the basement, says Aaron Clarey, author of  Worthless: The Young Person’s Indispensable Guide to Choosing the Right Major.