Monday, January 2, 2012

Student's College Education

The student loan market relentlessly makes it way to and past the $1 trillion mark, having outstripped credit card debt, estimated at around $850 billion. According to the U.S. Department of Education, the national student loan cohort default rate increased from 7.0 percent in the fiscal year 2008 to 8.8 percent in 2009-the rate for for-profit institutions was up to 15 percent from 11.6 percent. Tuition costs as compared to other general, healthcare, and even housing indices have also been on a steady rise, up 23% since 2000, while real earnings for post-graduates-namely, the lucky few who are able to find jobs to remunerate the debt incurred while learning non-marketable skills in higher education institutions-have declined.
From dot.coms to mortgages, it would appear that student loans are the flavor of the week as for-profit schools have created a subprime education market by luring Americans into a system which provides little economic gain for students while aggrandizing and enriching the companies on Wall Street. In fact, three of the top ten holders of FFELP loans are Citibank/Student Loan Corporation, Wells Fargo/Wachovia, and JPMorgan Chase Bank, the same players responsible for the toxic mortgage lending that received trillions in taxpayer dollars as bailouts. Education has become another discredited commodity, marketed as a necessity, and gambled upon by the government and Wall Street.
Private institutions are likewise responsible for strapping students with large amounts of debt. At the University of Southern California, total tuition and fees including room and board have increased by nearly 40% in the last ten years. 
 College officials claim that increases in tuition are being offset by increases in financial aid offers though the average paid percentage of fees only went up from 67 to 68 percent. At any rate, it makes little sense to pay for or invest in anything that is not seeing a growing rate of return. A recent article in the Huffington Post recounts that last spring, PayPal founder and investor Peter Thiel awarded $100,000 each to two young entrepreneurs to not attend college, supplementing his belief in a definite student loan bubble. The vast majority of young Americans will not be so lucky, however. Minimum wage paying jobs will await those who do graduate and default rates will continue to soar until this bubble, like all the rest before, eventually pops. We can more likely expect a slow deflate in this case, as a student education bubble poses much less of a threat to the overall economy than housing debt, but individual borrowers will doubtless face difficulties. So it would seem, invariably, that Peter Thiel has the right of it.
The education system is flawed in itself as financial education is not taught in schools. Many graduates come out of college brain washed, thinking they are entitled to a job just because they received their degree. To their disbelief they are getting a rude awakening finding that the real world job market does not have a place for inexperienced graduates within cash strapped businesses in the current economy. Companies would rather skip the initial investment of training a recent college grad versus finding someone that already has been trained for the same wage. This is even more of a reason to start thinking like an Entrepreneur and start to take control of your own financial future. There are over a million ways to make money being self-employed. If you learn the skillset of how to make money on your own without a J.O.B. (Just Over Broke), you will forever be financially stable.

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