tag:blogger.com,1999:blog-20828941716306232822024-03-05T08:41:43.708-08:00The Xenophon CommentsThe Xenophon Comments is a project started to comment on various social, economic and similar issues dealing with chiefly the higher education market.Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-2082894171630623282.post-58357003255106672102016-01-31T23:03:00.000-08:002016-01-31T23:03:51.629-08:00Debt to Income Ratios<div class="MsoNormal">
<span style="font-size: large;">As we all know lenders love to see low debt to income
ratios. It helps them to determine the likelihood that the debt will be paid
off.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">In a recent Bloomberg article by Sarah Grant posted on Yahoo
Finance certain college majors have lower income to debt ratios for undergrad
degrees (please note that the group making the calculations did not factor in
certain cost of living realities)(1).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Sounds great assuming that one is able to get into those
programs, but that aside below is a chart from the article showing the various
majors and DTIs.<o:p></o:p></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIHYQlWuLIYI0vBZzI_sI2AHRnTcusP6w2KmNAn6kaogKJkw69ZxkPzXlo8D-Wu-nxtZYAFzQoOPRCG8mRUmHoHN63oo1tS63edjK6VuGMCFM47j0PdITFyeVudFmNpluIIkpU9-G66aOm/s1600/9c11e700-c52c-11e5-9484-e32291d9e26b_-1x-1.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="353" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIHYQlWuLIYI0vBZzI_sI2AHRnTcusP6w2KmNAn6kaogKJkw69ZxkPzXlo8D-Wu-nxtZYAFzQoOPRCG8mRUmHoHN63oo1tS63edjK6VuGMCFM47j0PdITFyeVudFmNpluIIkpU9-G66aOm/s640/9c11e700-c52c-11e5-9484-e32291d9e26b_-1x-1.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="text-align: start;"><span style="font-size: x-small;">From (1) The College Majors That Won’t Leave You Drowning in Debt. Bloomberg.</span></span></td></tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Obviously medicine tops the list as the lowest with what
looks like less than 15%, whereas those going into Psychology have the worst at
nearly 40% with Education a close second (1).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Here is the rub will all this talk about DTI—Bankers giving
out housing loans use the same criteria to determine if an individual(s) can
repay a housing loan. Typically they are looking for rates less than 36% (2). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">So here you are just graduated with the Bank of ED loans,
and let us say you marry that sweet heart you met in College (who also has Bank
of ED loans). Now combined your DTI is somewhere around 30% let us say with
both Bank of ED loans. So now you plan to leave the rat-hole of an apartment to
get a used condo. This would mean you have combined DTI difference of about 6%
to get something. Okay that is not enough to get anything really except maybe a
cardboard box in an alley (unless your incomes are like that of Donald Trump
and then that 6% is something significant). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">And people wonder why the Millennials are not buying houses
as fast as they should be… maybe the </span><span style="font-size: large;">problem is the DTI is too high as soon as
they walk out of college? Of course in order to lower this reality a few things
will need to occur- 1. Those with College Education Loans need to automatically
earn the highest wages possible (as if they had been working at a place for the
last 30 years), 2. College Debt needs to be forgiven in masse, and/or 3. Prices
of Houses need to drop significantly more.</span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">Okay I think #1 is nearly impossible without some major
shift in either the minimum wage to be based on educational attainment or
social understanding of what college education is worth. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">#2 is possible legislatively for Bank of ED loans under
certain leadership assuming said leadership is willing to take the budget hit
for writing off that much owed debt. Of course it could cause greater potential
for credit default by the U.S. Treasury lowering the overall credit rating of T
Notes to possible near junk without some serious raising of tax revenues or
serious cut backs on spending.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;"> #3 could happen as
the Baby Boomer age and are moved into some form of assisted living creating a
major oversupply of available housing. This assumes that many are not taking
out Reverse Mortgages which require them to live in place until they die. It
also means that Millennials will have to settle for some seriously used homes
from their parents which may require them to borrow even more so to just fix up
the place.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-size: large;">At any rate, college debt clearly has skewed the economy of
things in the U.S. probably for a long time.<o:p></o:p></span></div>
<div class="MsoNormal">
<u><span style="font-size: large;"><br /></span></u></div>
<div class="MsoNormal">
<u><span style="font-size: large;">Citations<o:p></o:p></span></u></div>
<div class="MsoNormal">
<span style="font-size: large;">(1) Grant, Sarah (Jan. 27, 2016). The College Majors That
Won’t Leave You Drowning in Debt. Bloomberg. Retrieved From <a href="http://finance.yahoo.com/news/college-majors-wont-leave-drowning-181421870.html?soc_src=copy">http://finance.yahoo.com/news/college-majors-wont-leave-drowning-181421870.html?soc_src=copy</a><o:p></o:p></span></div>
<span style="font-family: Calibri, sans-serif; line-height: 107%;"><span style="font-size: large;"><br /></span></span>
<span style="font-size: large;"><span style="font-family: Calibri, sans-serif; line-height: 107%;">(</span><span style="line-height: 107%;"><span style="font-family: Times, Times New Roman, serif;">2) Bankrate (2016). Debt-to-income ratio
calculator. Retrieved from <a href="http://www.bankrate.com/calculators/mortgages/ratio-debt-calculator.aspx">http://www.bankrate.com/calculators/mortgages/ratio-debt-calculator.aspx</a></span></span></span>Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-63980838674368049252015-12-24T01:42:00.001-08:002015-12-24T01:42:48.459-08:00Over Price Education, Getting a Job and Wages<div class="MsoNormal">
On December 21<sup>st</sup>, Yahoo Finance had an article from
Business Insider by Abby Jackson where a 35-year-old was suing his law school
for his inability to get a job (1). The legal notion is that the school falsely
advertised the resultants of what a college education will provide in income.
In short its advertising created the illusion that he would get a great job
earning a bunch of money upon graduation. Okay the article goes on to say he
couldn’t pass the bar exam. A legal degree without passing the bar is sort of
useless which makes one really question not the degree but the process of
getting into the law field overall. Sort of begs the question, why even have a
degree when the key thing is just passing the bar exam?<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Meanwhile, back in 2011 a paper was published by Fastweb.com
and FinAid.org that talked about the need for greater consumer protections
where Private Education Loans are concerned through the new powers granted to
the Consumer Financial Protection Bureau under Dodd-Frank (2). The paper suggests
a series of to do lists most of which deal with providing loan education to
students and families, but also the notion of restoring bankruptcy protections
for borrowers of private loans (a really good idea and something that would probably
help our law student) (2).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Okay the ideas in the 2011 paper are great, but this doesn’t
help those who have went to the Bank of Ed (i.e. education loans provided by
the Federal Government). These loans are basically what the Street would call
junk bonds or penny stocks. They have no collateral under writing them and
there is nothing ensuring that they can be paid except the premise that people
with college education get more money. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
While I do not disagree with the statistical fact that
higher education has historically provided greater income then lower amounts of
education these facts are based on observations mostly of the 20<sup>th</sup>
Century where the bulk of our populace shifted from lower amounts of education
to higher amounts as society and technology shifted to the modern era. In my
opinion most of what accounts for the higher incomes is the social wage
construct that the work associated with higher education should earn more.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
When we started the 20<sup>th</sup> Century society we pretty
much had a three tiered system of wages. The base wage which pretty much
everyone got, the middle wage for managers and the like, and the top wage which
was given to owners of businesses and socially elite. But once the minimum wage
was legally created this created a new fourth and bottom tier. Since that point
educational attainment has been imprinted greater on to these four tiers. The
minimum wage tier is for the non-educated which has shifted to include now high
school diploma holding individuals, the next tier is for bachelor degree
holding people, the next tier is for masters and doctoral degree individuals,
the highest tier is reserved pretty much for the socially elite or 1% as they
have come to be known.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
With our law student, he complains about being in the
minimum wage tier and inability to support his college loans, which is a big
duh since in the social construct of wage distribution he should be at least in
the next tier up but he isn’t. Here we have the inherent problem of socially
constructed wage distributions -- they are not guaranteed except for the lowest
tier currently. There is nothing in the law to automatically provide for
support of college loans based on educational attainment.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Currently there is a great focus and talk about raising the
minimum wage, and no doubt some of it would be coming from those 20 and 30
somethings saddled with college debt and no way out. A lot of the talk these
days is focused on how raising the minimum wage will kill jobs (3). While I do
not doubt that on a micro-economic level raising the minimum wage will impact
certain localities and particular businesses, overall all in the macro-economic
sense this impact doesn’t seem to be as big. Below is chart I created from
ALFRED showing two major industries typically where minimum wage work is found
and the change in the Federal Minimum wage over the last 75 years or so (4-6).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZE5QUC1ypQ9u8RQlWdG0HZ5s5CQLJTroMie4_i4mcb5mvPi8GUizZiAmhRYhOfzZLTLrx5gr-xnLV26AbPJCGuOJP7JL8QiKxYI9ggoWmhuGcc8YCMtbBUYheoUG6EQYDlrclxEWPAcxR/s1600/alfredgraph+%25281%2529.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="424" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZE5QUC1ypQ9u8RQlWdG0HZ5s5CQLJTroMie4_i4mcb5mvPi8GUizZiAmhRYhOfzZLTLrx5gr-xnLV26AbPJCGuOJP7JL8QiKxYI9ggoWmhuGcc8YCMtbBUYheoUG6EQYDlrclxEWPAcxR/s640/alfredgraph+%25281%2529.jpg" width="640" /></a></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
What you will really note is the fact most declines in
employment with these two industries appears to be more related to the up and
downs of business cycles than increases in the minimum wage. If the Federal
Minimum Wage was linked to a COLA adjustment then we might see a greater macro
influence on these employment numbers, but it seems to me the raise in the
minimum wage is more impacted by political pressure during tougher times
economically. In fact, during periods of business expansion one tends to see the
cost of goods and services rise since usually during these expansion periods
inflation can occur eroding the value of income. This could explain some of the
political pressure during certain periods of time. There also appears to be
politically the idea of raising the minimum wage during declining business
cycles will somehow improve the economy overall (note the changes during recession
periods marked in grey). Although I think this is more politicians catering to
a voting public than actual economic policy.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
My point is we may be forced to raise the minimum wage
politically to ensure the Federal Government is not saddled with a large amount
of unpaid student debt. The minimum wage is the only tool the Federal
Government has to ensure there is enough income to pay these loans off when the
labor pool for higher education work is over crowded with too much supply. This
is what one gets for years of promoting higher education will lead to economic
prosperity, not unlike that early 20<sup>th</sup> Century idea that owning a
home will do the same thing and look where that got us in 2008.<o:p></o:p></div>
<div class="MsoNormal">
<u><br /></u></div>
<div class="MsoNormal">
<u>Citations<o:p></o:p></u></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(1) Jackson, Abby. (Dec. 21, 2015). A guy with $170,000 in
student loans who can’t find a job in the legal profession is suing his law
school and working full time for Uber. By Business Insider published on
YahooFinance. Retrieved from <a href="http://finance.yahoo.com/news/guy-170-000-law-school-204811509.html?soc_src=copy">http://finance.yahoo.com/news/guy-170-000-law-school-204811509.html?soc_src=copy</a><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(2) Kantrowitz, Mark. (2011). Education Lending Suggestions
for the Consumer Financial Protection Bureau (CFPB). Published by Fastweb.com
and FinAid.Org.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(3) Soergel, Andrew. (Dec. 22, 2015). Fight for $15 Not All
It’s Cracked Up to Be- Research suggests a higher minimum wage could increase
costs for consumers and weigh on job growth. U.S. News & World Report.
Retrieved from <a href="http://www.usnews.com/news/articles/2015-12-22/minimum-wage-increase-comes-with-cadre-of-potential-complications">http://www.usnews.com/news/articles/2015-12-22/minimum-wage-increase-comes-with-cadre-of-potential-complications</a><o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(4) US. Bureau of Labor Statistics, All Employees:
Service-Providing Industries [SRVPRD], retrieved from FRED, Federal Reserve
Bank of St. Louis <a href="https://alfred.stlouisfed.org/fred2/series/SRVPRD/">https://alfred.stlouisfed.org/fred2/series/SRVPRD/</a>, December
24, 2015.<o:p></o:p></div>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(5) US. Bureau of Labor Statistics, All Employees: Retail
Trade [USTRADE], retrieved from FRED, Federal Reserve Bank of St. Louis
<a href="https://alfred.stlouisfed.org/fred2/series/USTRADE/">https://alfred.stlouisfed.org/fred2/series/USTRADE/</a>, December 24, 2015.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
(6) US. Department of Labor, Federal Minimum Hourly Wage for
Nonfarm Workers for the United States [FEDMINNFRWG], retrieved from FRED,
Federal Reserve Bank of St. Louis
<a href="https://alfred.stlouisfed.org/fred2/series/FEDMINNFRWG/">https://alfred.stlouisfed.org/fred2/series/FEDMINNFRWG/</a>, December 24, 2015.<o:p></o:p></div>
Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-91655670333999897442015-12-22T00:16:00.001-08:002015-12-22T22:09:31.292-08:00Ashley Fleming’s Story<div class="MsoNormal">
Okay below is a link to video of 24-year-old (Ashley Fleming) up to her
eyeballs in debt (1). It is a pretty sad story if you think about it, and no doubt
also one that is more than likely common with those of her generation.<o:p></o:p></div>
<br />
<a href="https://screen.yahoo.com/100k-debt-1-semester-left-193814146.html">https://screen.yahoo.com/100k-debt-1-semester-left-193814146.html</a><o:p></o:p>
<br />
<br />
What is sadder I think is the in the December 18<sup>th</sup>
Yahoo article by Vanessa Sanchez, “financial aid expert Mark Kantrowitz” said “if
your total student debt is going to be more than your income once you graduate,
you should probably look into another school.” (1).<o:p></o:p>
<br />
<br />
How do you even know what your income will be once you
graduate? Okay you might have a rough idea, but it is not like the college is
going to guarantee the degree will automatically yield enough to pay for the
loan. Let us take Ashley’s situation…she is attending a college with a $43,000
a year tuition. <o:p></o:p>
<br />
<br />
Okay let us assume for a moment the following- <o:p></o:p>
<br />
<br />
1. Ashley doesn’t’ start paying the loan until she graduates.<o:p></o:p>
<br />
<br />
2. She actually just went four years straight (unlike the
actual story).<o:p></o:p>
<br />
<br />
3. The current loan rate is 4.29%.<o:p></o:p>
<br />
<br />
4. The term of the loan is 10 years.<o:p></o:p>
<br />
<br />
5. The present value of all debt owed is $172,000 (4 years at
$43,000 a year).<o:p></o:p>
<br />
<br />
This would mean for each of the ten years her annual payment
is $21,513.29. <o:p></o:p>
Let us assume for a moment that the debt to income ratio
should be similar to that of a mortgage which most say is around 28% to 36% (2).<o:p></o:p>
<br />
<br />
This would mean right of the gate Ashley would need to be
earning an annual income of $59.7K to $76.8K. <o:p></o:p>
<br />
<br />
Could be possible but it is not guaranteed in our U.S.
society. In fact, the only legally guaranteed wage is that of the minimum wage.<o:p></o:p>
<br />
<br />
All the talk we hear of college graduates making $X more dollars
than non-college graduates is primarily the resultant of a social construct
from the 20<sup>th</sup> Century. During the 20<sup>th</sup> Century our U.S. population
shifted in educational attainment from basically grade school to high school to
then college. In doing so the accepted social construct of higher wages for
greater educational attainment pretty much stayed the same (i.e. grade school
got you X, high school got you X+1, college got you X+2). But now with pretty
much everyone going to college we have leveled the workforce to a common
reality which in time will cause everyone’s wages to be basically the same (standard
supply/demand economics) if not fall to the lowest common denominator (i.e.
minimum wage).<o:p></o:p>
<br />
<br />
The solution proposed to this economic reality will no doubt
be just adding more education to the equation. If people, simply keep getting
higher and higher degrees (i.e. more education) we can keep the income growth
curve from collapsing. Although how higher can one go than Post-Doc degrees?<br />
And exactly how much debt will all this cost our economy? And exactly how much
sales would be required for a business to support all these highly educated
Americans? Wow I hope the Chinese are willing to pay a lot for our highly
educated workforce.<o:p></o:p>
<br />
<br />
Now don’t get me wrong. Education is a good thing, but when
tied to certain economic realities such as income and debt there becomes a
distortion where the haves and haves not become increasingly obvious (as with
Ashley’s story).<o:p></o:p>
<u><br /></u>
<u><br /></u><br />
<u>Citations</u><br />
<br />
<u><o:p></o:p></u>(1) Sanchez, Vanessa. Dec. 18, 2015. $100K in debt, 1 semester
left and no cosigner in sight. Yahoo Finance. Retrieved from <a href="http://finance.yahoo.com/news/-100k-in-debt--1-semester-left-and-no-cosigner-in-sight-190859531.html?soc_src=copy">http://finance.yahoo.com/news/-100k-in-debt--1-semester-left-and-no-cosigner-in-sight-190859531.html?soc_src=copy</a><o:p></o:p>
<br />
<br />
(2) da Costa, Polyana. (2011) Why debt to income matters in
mortgages. <span lang="DE">Bankrate. </span>Retrieved
from <a href="http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx">http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx</a><o:p></o:p>
Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-10446716218769042912015-12-18T05:54:00.000-08:002015-12-22T22:10:14.542-08:00Occupational Handbook<br />
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">The BLS is just released its updated version of the
Occupational Handbook. I will admit that this is by far one of the best tools
out there concerning defining occupations and can be a great help to those
trying figure out what they need to obtain certain kinds of work.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">But I have a real problem with the post “<a href="http://beta.bls.gov/labs/blogs/2015/12/17/how-people-use-the-occupational-outlook-handbook-to-search-for-careers/" target="_blank">How People Use the Occupational Outlook Handbook to Search for Careers</a>” by the BLS Commissioner (2).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">This post suggests that 1. Not all young students should use
it for college planning, and 2. It is better to use this tool so as to avoid
changing majors (and increasing your loan costs) while in college (2).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">Here is my rub with this posting—the idea of career. The
word career comes from a root that means course or path (1). The word presumes that
one’s work has a beginning and an end point. The truth is in today’s economy
people change employers so frequently that a career has become a twisted path
with dead ends and side tracks (not unlike switching majors while in college). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">Yes, people should use the Occupational Handbook for
planning purposes, but I think in today’s economy one needs to have more than
one degree in their pocket (or at least plan to get second degree later in
life). The goal here is to try to avoid adding more debt to the equation. This
means you will need to plan to work and pay for education as you go.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">A person today needs to be a basic jack-of-all-trades when
it comes to education.<o:p></o:p></span></div>
<div class="MsoNormal">
<u><span style="font-family: Times, Times New Roman, serif;"><br /></span></u></div>
<div class="MsoNormal">
<u><span style="font-family: Times, Times New Roman, serif;">Citations<o:p></o:p></span></u></div>
<div class="MsoNormal">
<u><span style="font-family: Times, Times New Roman, serif;"><br /></span></u></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">(1) Harper, Douglas. (2014). Online Etymology Dictionary.
Retrieved from <a href="http://etymonline.com/index.php?allowed_in_frame=0&search=career">http://etymonline.com/index.php?allowed_in_frame=0&search=career</a>.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;">(2) BLS Commissioner. (2015). <i>How People Use the Occupational Outlook
Handbook to Search for Careers.</i> Blog. Retrieved from <a href="http://beta.bls.gov/labs/blogs/2015/12/17/how-people-use-the-occupational-outlook-handbook-to-search-for-careers/">http://beta.bls.gov/labs/blogs/2015/12/17/how-people-use-the-occupational-outlook-handbook-to-search-for-careers/</a>.</span><o:p></o:p></div>
Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-76413888006027778892015-12-12T00:06:00.000-08:002015-12-22T22:09:56.092-08:00Comments on the BLS release of Jobs from 2014-2024<div class="MsoNormal">
Take some time to watch this video from the BLS about the
near term future of jobs in the US (1).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<iframe allowfullscreen="" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/LIvxuRb47y4/0.jpg" frameborder="0" height="266" src="https://www.youtube.com/embed/LIvxuRb47y4?feature=player_embedded" width="320"></iframe></div>
<br />
<br />
<div class="MsoNormal">
You will notice in the video that most appear to be jobs
that are medically related. Which makes some sense when you think of the fact
that the Boomers are aging and with age comes medical needs. But also there are
Wind Turbine Technicians. Really Wind Turbines are going to become a big
industry with oil being so cheap now? I guess the BLS knows something we do not
know.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So here is the dilemma…<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
You are just getting out of high school, and are planning to
go to college but what should you study? Obviously something in the health
field right now because for the next twenty years it will have the most jobs
and pay the most on average.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
But medical school is not cheap. So you will borrow to get
the education, but what happens if everyone else is thinking the same? What
will happen if a whole generation of students go for the same career only to
find themselves not employed due to an overcrowded market.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Right now oil is down because of an economic principle of
supply and demand, and this same principal applies to labor as well (both
physically in total numbers but also micro-wise in specific fields). So as the
supply of graduating students increases in a specific job field, in theory the entry
wages of that job field should decline due to oversupply. Going forward since
the entry wages are depressed, the future wages will also become depressed
since wages tend to increase as a percentage of past wages. Long term resultant
is an increase possibility of lower incomes for those who now are up to their
eyeballs in educational debt.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now I am not saying this observation is absolutely true or
not, but it seems to me that it does economically make sense. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This is something to ponder as we come closer to the
Presidential Election in the U.S. We all should be asking ourselves “What is
the plan for dealing with College Debt and ensuring that college graduates can
get the income needed to pay that debt off in a timely fashion without jeopardizing
the health of the economic overall”.<o:p></o:p></div>
<div class="MsoNormal">
<u><br /></u></div>
<div class="MsoNormal">
<u>Citation<o:p></o:p></u></div>
<br />
<br />
<div class="MsoNormal">
(1) BLS (2015). Fastest Growing Occupations 2014-24. YouTube Video.
Retrieved from https://youtu.be/LIvxuRb47y4.<o:p></o:p></div>
Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-11941869181925889202014-06-10T01:03:00.000-07:002014-06-10T01:04:24.336-07:00Is the recent Presidential Memo a good idea?President Obama has issued as of 6/9/14 a memo directing the Department of Education to develop regulations concerning to limit the student repayments of loans to a maximum of 10% of the borrower’s income (1).<br />
<br />
While on the surface this seems a like a good idea, but right off the bat it seems to me that this is form flat 10% income tax to those who borrower for education from the Bank of Ed. Let us see how the math stacks up.<br />
<br />
Using some calculations from a previous posting<a href="http://xenophoncomments.blogspot.com/2014/05/will-you-make-more-money-with-college.html" target="_blank"> “<em>Will you make more money with a college degree?”</em></a> let us assume the loan is capped at 10% of gross income, and is completely forgiven in 20 years (1, 2). I will use the same income and expenses used from my previous post (2).<br />
<br />
<span style="color: black;">
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</span><span style="color: black;">
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</span><span style="color: black;">
</span><br />
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableLightList" style="border-collapse: collapse; border: currentColor; mso-border-alt: solid black 1.0pt; mso-border-themecolor: text1; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 657px;">
<tbody>
<tr style="height: 12.75pt; mso-yfti-firstrow: yes; mso-yfti-irow: -1;">
<td colspan="6" nowrap="" style="background: black; border-color: black black rgb(0, 0, 0); border-style: solid solid none; border-width: 1pt 1pt 0px; height: 12.75pt; mso-background-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 492.6pt;" valign="top" width="657"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 5; text-align: center;">
<b><span style="color: white; mso-themecolor: background1;"><span style="mso-spacerun: yes;"><span style="font-family: Calibri;"> </span></span></span></b><b><span style="color: white; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman"; mso-themecolor: background1;">Total Net Income (20 years, 2013
dollars)<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 0;">
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0) black black; border-style: solid none solid solid; border-width: 1pt 0px 1pt 1pt; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 146.95pt;" valign="top" width="196"></td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 67.55pt;" valign="top" width="90"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">Less<br />
than<br />
high<br />
school<br />
graduate<o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">High<br />
school<br />
graduate<o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">High<br />
school<br />
graduate<br />
with<br />
some<br />
college<o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">Associate's<br />
degree<o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black black black rgb(0, 0, 0); border-style: solid solid solid none; border-width: 1pt 1pt 1pt 0px; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 78.75pt;" valign="top" width="105"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">Bachelor's<br />
degree<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 1;">
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none none solid; border-width: 0px 0px 0px 1pt; height: 12.75pt; mso-border-left-themecolor: text1; padding: 0in 5.4pt; width: 146.95pt;" valign="top" width="196"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 4;">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">10% income College Loan<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 67.55pt;" valign="top" width="90"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="color: red; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">($53,878.91)</span><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$2,931.01</span> <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="color: red; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">($9,771.92)</span><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$107,709.59 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) black rgb(0, 0, 0) rgb(0, 0, 0); border-style: none solid none none; border-width: 0px 1pt 0px 0px; height: 12.75pt; mso-border-right-themecolor: text1; padding: 0in 5.4pt; width: 78.75pt;" valign="top" width="105"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$294,173.35</span> <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 2;">
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0) black black; border-style: solid none solid solid; border-width: 1pt 0px 1pt 1pt; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 146.95pt;" valign="top" width="196"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 68;">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">w/o College Loan<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 67.55pt;" valign="top" width="90"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$2,931.01 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$114,601.57 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$127,057.65 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$285,922.26 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black black black rgb(0, 0, 0); border-style: solid solid solid none; border-width: 1pt 1pt 1pt 0px; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 78.75pt;" valign="top" width="105"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$537,625.79</span> <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 3;">
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none none solid; border-width: 0px 0px 0px 1pt; height: 12.75pt; mso-border-left-themecolor: text1; padding: 0in 5.4pt; width: 146.95pt;" valign="top" width="196"></td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 67.55pt;" valign="top" width="90"></td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"></td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"></td>
<td nowrap="" style="background-color: white; border: 0px rgb(0, 0, 0); height: 12.75pt; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"></td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) black rgb(0, 0, 0) rgb(0, 0, 0); border-style: none solid none none; border-width: 0px 1pt 0px 0px; height: 12.75pt; mso-border-right-themecolor: text1; padding: 0in 5.4pt; width: 78.75pt;" valign="top" width="105"></td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 4; mso-yfti-lastrow: yes;">
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0) black black; border-style: solid none solid solid; border-width: 1pt 0px 1pt 1pt; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 146.95pt;" valign="top" width="196"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 68;">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">Total Loan Amount Paid over 20
Years<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 67.55pt;" valign="top" width="90"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$71,385.51 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$111,670.56 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$136,829.56 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.75pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 66.45pt;" valign="top" width="89"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$178,212.68 <o:p></o:p></span></span></div>
</td><td nowrap="" style="background-color: white; border-color: black black black rgb(0, 0, 0); border-style: solid solid solid none; border-width: 1pt 1pt 1pt 0px; height: 12.75pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 78.75pt;" valign="top" width="105"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><span style="color: black;">$243,452.44</span> <o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<br />
Still clearly you will come ahead not taking the loan, but what is interesting is what happens if you end up with a job that makes the median income typically associated with lower educational attainment. <br />
<br />
So this would be you go to college, take out one of these 10% of income loans, and then end up working for a job that requires less than high school education because this all you could get and you get stuck in it for 20 years. Well then you will have really cost yourself more money than had you landed that median Bachelor’s degree job. Bottom line is it appears this loan process will punish those who are unable to obtain that median college income job.<br />
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Clearly then it is better to go to a more prestigious university or college, where the debt load will be higher due to more expensive tuition, and hopefully provide you with better opportunity to land that well-paying median job through the extensive alumni network.<br />
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Of course what this means politically is that the federal government must now ensure some macroeconomic mechanism that will encourage the growth of these well paying higher educational jobs to keep up with college graduation rates. After all it has a vested interest to do so as the more people who don’t end up with these higher paying jobs will in the increase the costs of national debt since educational loans are nothing but a budget offset.<br />
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Hmmm… the idea of a minimum wage based on educational attainment is sounding better and better.<br />
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<strong><u>Citations</u></strong><br />
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(1) Office of the President, White House (2014). FACTSHEET: Making Student Loans More Affordable. Retrieved on 6-10-14 from <a href="http://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordable/" target="_blank">http://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordable/</a><br />
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(1) Office of the Press Secretary, White House (2014). Presidential Memorandum -- Federal Student Loan Repayments. Retrieved on 6-10-14 from <a href="http://www.whitehouse.gov/the-press-office/2014/06/09/presidential-memorandum-federal-student-loan-repayments" target="_blank">http://www.whitehouse.gov/the-press-office/2014/06/09/presidential-memorandum-federal-student-loan-repayments</a><br />
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(2) Bureau of Labor Statistics (2014). Consumer Price Index- All Urban Consumers. Series ID: CUSR0000SA0. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917400. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917500. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252918900. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). ((unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
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(2) Bureau of Labor Statistics (2013). Table 2010- Highest education level of any member: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2012. Consumer Expenditure Survey. Combined Expenditure, Share, and Standard Error Tables. Retrieved on 5-10-14 from <a href="http://www.bls.gov/cex/csxcombined.htm" target="_blank">http://www.bls.gov/cex/csxcombined.htm</a> .<br />
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<br />Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-57923291813375422952014-06-01T00:16:00.001-07:002014-06-01T00:16:49.946-07:00How is student debt a macro-economic tool?Student debt is an excellent macro-economic tool just as much as housing debt is one as well. This is why it is considered by many as a good debt (1 & 2). Although, housing debt is subject to possible speculation and thus causing greater delta in prices, which is why student debt is more preferred as tool because a college degree is non-transferrable to another person and it really doesn’t appreciate or depreciate in value over time. It simply is a cost which is amortized over the life of loan. <br /><br />From a macro-economic perspective debt like student loans simple eat up potential consumption and savings of individuals and unlike housing doesn’t create an initial increase in consumption caused by the first produced house, nor a potential asset bubble (2). Further it acts like a government tax since currently this debt is controlled by the Federal Government through the direct loan process of the Bank of Ed, or could be considered a form of transfer payment. So despite the interest reducing individuals’ personal income tax, the actual loan is not currently counted as either a tax or income to the person but inherently acts like such a thing and better than that it counts as a revenue offset to government net expenditures in effect lowering the governments expenditures overall (2 & 3). Any boost to the economy would show up through the expansion of the higher education markets which don’t impact the overall economy too much but would increase some amount of GDP through employment and any investment done by the employees and university/college. It is a great way of expanding the money supply without ever having to increase the national debt or print more cash through the Federal Reserve System and it’s only inflationary to the higher education market vs. the rest of the economy. It is just a perfect macro-economic mechanism. <br /><br />The big problem with student debt as macro-economic tool is the interest rate which currently is controlled by Congress. But even this element is flexible since if the student debt is causing a problem economically Congress can simply add some debt forgiveness or lower the rate as means to free up cash in the macro-economy. Although I think it would be better if these rates were controlled more by the Federal Reserve than Congress. <br /><br />Long term though this tool may prove to be difficult to manage because it is inherently dependent (like housing loans) on the future income of the individual which is unpredictable in nature (4). What is somewhat predictable is the number of jobs requiring a college education which the Bureau of Labor Statistics periodically produces (5). The current projections for 2022 show an increase mostly in work not requiring college education which presents an interesting problem with the current growth rate of college graduates (5). At the current growth rates there will be a major short fall by 2022 requiring those graduating at that time to have to wait 21 years for a bachelor degree job slot to be freed up through attrition (5 & 6). Basically there will be so many possible people with a 4 year degree older than them that any potential new slot will take longer to open up since the older generations are more than like not going to retire anytime soon depending upon their debt load, and retirement needs. <br /><br />This problem of overcrowding the college job market with degreed individuals will continue to cause a crowding out of those jobs requiring less education pushing down the overall income potential of a college graduate bringing into question the whole issue of general value if current job creation trends continue as noted in a previous post concerning student loans and accepting lower income jobs. And no doubt as the crowding out continues there is even greater risk of default, which has been mitigated in part by current laws preventing bankruptcy and allowances of garnishments. <br /><br />What is worse is the fact that as more students apply for college, and seek more loans for college, this causes a runaway flooding of cash into the higher educational system causing localized market inflation or possible hyperinflation depending upon levels. This flood of cash is only limited by the size of the federal deficit since student loans are budgetary offset for the federal government (3). <br /><br />So while as an excellent macro tool to control consumption once graduated, the problem is controlling the inflationary effects of the front end in since it would seem to require increased government loaning and thus inflationary pressures on micro market of post-secondary education. <br /><br />These facts seem to be sort of counter-productive to the original purpose of the Higher Educational Act of 1965 (7). The idea was to allow for a greater number of people to achieve a higher education with the goal of building a better society overall. But it seems to me that with the use of student debt it is building instead a culture of a basic educational tax to obtain that society, with no guarantees of having a secured future. The reason is the job market is not keeping in pace with the production of an educated workforce, and it seems that no one really cares about this fact. <br /><br />Since a majority of U.S. higher education degrees continue to be in business vs. any other possible field by little over 4 to 1, very clearly we need to increase work opportunities in the business markets overall (8). Or we need to encourage that entrepreneurial spirit of America through increased small business loans to allow all that education to mature (maybe a bit of a debt swap—educational loan folded into a small business loan). <br /><br />So overall college debt is a great macro-economic tool and is very versatile, provided you don’t mind the fact the future supporting income is unknown and not guaranteed currently, and there is the potential of hyperinflation with the costs of college overall requiring a spiraling need for more cash to flow into the system as more people pile into the system. <br /><br /><strong><u>Citations</u></strong> <br /><br />(1) Supiano, Beckie (2012). What Does $1-Trillion in Student Debt Really Mean? Maybe Not That Much. The Chronicle of Higher Education. Retrieved on 5/27/14 from <a href="http://chronicle.com/article/What-Does-1-Trillion-Mean-/131900/" target="_blank">http://chronicle.com/article/What-Does-1-Trillion-Mean-/131900/</a> <br /><br />(1)Wolber, Thomas K. (2012). Student-Loan Debt is Real Threat to Economy. Letters to the Editor. The Chronicle of Higher Education. Retrieved on 5/27/14 from <a href="http://chronicle.com/article/Student-Loan-Debt-Is-Real/132655" target="_blank">http://chronicle.com/article/Student-Loan-Debt-Is-Real/132655</a> <br /><br />(2) Bureau of Economic Analysis (u.d.). A Guide to NIPAs. PDF. Retrieved on 5/27/14 from <a href="http://www.bea.gov/national/pdf/nipaguid.pdf" target="_blank">http://www.bea.gov/national/pdf/nipaguid.pdf</a> <br /><br />(3) Bureau of the Fiscal Service (2013). Combined Statement of Receipts, Outlays, and Balances- Current Report. Retrieved on 4/29/14 from <a href="http://fms.treas.gov/annualreport/cs2013/sc1.pdf%20on%204/29/14" target="_blank">http://fms.treas.gov/annualreport/cs2013/sc1.pdf%20on%204/29/14</a> <br /><br />(3) U.S. Government Accountability Office (u.d.). Capital Assets. Retrieved on 4/29/14 from <a href="http://www.gao.gov/fiscal_outlook/measuring_the_federal_deficit/interactive_graphic/capital_assets" target="_blank">http://www.gao.gov/fiscal_outlook/measuring_the_federal_deficit/interactive_graphic/capital_assets</a><br /><br />(4) Executive Summary (2006). Dealing With Debt: 1992-93 Bachelor's Degree Recipients 10 Years Later, 1. NCES 2006156. Retrieved on 5/27/14 from <a href="http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2006156" target="_blank">http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2006156</a> <br /><br />(5) Bureau of Labor (2013). Employment Projections: 2012-2022 Summary. Retrieved on 5/27/14 from <a href="http://www.bls.gov/news.release/ecopro.nr0.htm" target="_blank">http://www.bls.gov/news.release/ecopro.nr0.htm</a> <br /><br />(6) United States Census Bureau, Population Division (2012). PEPSYASEXN-Geography-United States: Annual Estimates of the Resident Population by Single Year of Age and Sex for the United States: April 1, 2010 to July 1, 2012. Data. Retrieved on 5/27/14 from <a href="http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk" target="_blank">http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk</a> <br /><br />(7) Cervantes, A., Creusere, M., McMillion, R., McQueen, C., Short, M., Steiner, M., & ... Texas Guaranteed Student Loan, C. (2005). Opening the Doors to Higher Education: Perspectives on the Higher Education Act 40 Years Later. TG (Texas Guaranteed Student Loan Corporation). <br />
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(8) U.S. Department of Education, National Center for Education Statistics, Higher Education General Information Survey (HEGIS) (2012). "Degrees and Other Formal Awards Conferred" surveys, 1970-71 through 1985-86; Integrated Postsecondary Education Data System (IPEDS), "Completions Survey" (IPEDS-C:91-99); and IPEDS Fall 2000 through Fall 2011, Completions component. Retrieved on 5/27/14 from <a href="http://nces.ed.gov/programs/digest/d12/tables/dt12_313.asp" target="_blank">http://nces.ed.gov/programs/digest/d12/tables/dt12_313.asp</a><span style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span>Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-79858424047171571882014-05-25T06:42:00.000-07:002014-05-25T06:42:33.372-07:00Is a College Degree worth all the trouble of a loan?<div class="separator" style="clear: both; text-align: left;">
The problem with this question is one of definitions and how we measure the value of things. A college degree is inherently something good in nature as such it should hold some significant value to both the individual holding the degree and the society at large. In theory, the knowledge gained from a college degree should allow the individual to obtain work associated with said knowledge, but in our capitalistic market system this is not guaranteed. Further, it is a mere social convention of recent times that those with college education should be paid more than those with say a high school education. There are no laws compelling businesses to pay according to this norm, except the minimum wage which is currently set at $7.25 an hour as the federal minimum (some states can have higher). To help illustrate this point I have included two graphs from the 1940 on educational attainment vs. wages paid.</div>
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As the Chart 1 shows when the 1940 census data is charted as the percentage of the total population per income bracket by educational attainment it becomes very clear that having a college degree should earn you more money. Those with such degrees clearly occupy a much greater percentage of the highest income bracket at that time, and thus supporting the current thesis that college education gets you more income.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_r2xF83VXrAvdqG6NUXNdwAzJIepCO9kO17MmD453ZX8e5Y4YP_yHRE_uLqjKg_zilS4YUGTQArpBghyphenhyphenoQB2erxX_mT967vK9E56tvhQ6XQWZ9HajllknLmcT_GXYLAChRivjt7vC18tQ/s1600/1940+Percentage+of+total+pop.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_r2xF83VXrAvdqG6NUXNdwAzJIepCO9kO17MmD453ZX8e5Y4YP_yHRE_uLqjKg_zilS4YUGTQArpBghyphenhyphenoQB2erxX_mT967vK9E56tvhQ6XQWZ9HajllknLmcT_GXYLAChRivjt7vC18tQ/s1600/1940+Percentage+of+total+pop.jpg" /></a></div>
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Chart 1- Source: U.S. Census (1) & Bureau of Labor Statistics for dollar conversion (2). </div>
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But when you chart this same data (see Chart 2) so as to see the distribution of income with in the society as whole by educational attainment you come up with a different picture. You quickly realize that majority of people in 1940 were making $8,500 to $17,000 2013 Dollars per year. In fact a careful examination of the data reveals that those with college education seem to be split into two groups. One group making the normal wage that most of the populace is making and then a group making a lot more. </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgsQpxOb7t8MeqjHeYQCy2diWHLbPGOCi57J_u1kRikdl-0AspO9ZL6_4d8nT49b8mSdzcP4Us8U3Fy_VVqY5q4W4BsQ-smtA6OAcJJM2GjL-TjybGgN1um6TTheb0U69PSsw5Y-W5k7blh/s1600/1940+Ed+Attain.jpg"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgsQpxOb7t8MeqjHeYQCy2diWHLbPGOCi57J_u1kRikdl-0AspO9ZL6_4d8nT49b8mSdzcP4Us8U3Fy_VVqY5q4W4BsQ-smtA6OAcJJM2GjL-TjybGgN1um6TTheb0U69PSsw5Y-W5k7blh/s1600/1940+Ed+Attain.jpg" /></a></div>
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Chart 2- Source: U.S. Census (1) & Bureau of Labor Statistics for dollar conversion (2). </div>
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The problem is trying to do this kind of analysis with current data is not truly possible because the information is typically arranged in a statistical bell-curve pattern using median values. As such to tease out the data represented in Chart 2 is much more difficult, if not nearly impossible.</div>
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What can be done is comparing ranges and medians of the groups (see Chart 3). As such can see some overlay of income brackets, but since the median value represents the 50% mark it is hard to tell if there are truly more people in the higher end or lower end since it is nice smoothed bell-curve. What can be told is there does appear to be some overlap between the two educational degrees suggesting that it is possible that for someone with a bachelor degree to earn just as much as the median income of a high school degree. I suspect if the true population values were known per income groupings that we would no doubt see more of a curve similar to that of 1940.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjduG7jllbzMILFWrhykjCpJeMbIj9G4Z6zx43CbmXgGgjZ4GEh2iaoOP46Lowja9i3jSu6thxbycQtz0B8JwXnZxZDodlU6kOPPxK1BK6ZXAxObDlPYTfaq-wwC_10kkHkT75JFk7u85-G/s1600/2013+weekly+income+range.jpg"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjduG7jllbzMILFWrhykjCpJeMbIj9G4Z6zx43CbmXgGgjZ4GEh2iaoOP46Lowja9i3jSu6thxbycQtz0B8JwXnZxZDodlU6kOPPxK1BK6ZXAxObDlPYTfaq-wwC_10kkHkT75JFk7u85-G/s1600/2013+weekly+income+range.jpg" /></a></div>
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Chart 3- Source: Bureau of Labor Statistics (2 & 3).</div>
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If anything what this information is more suggestive is that there are two major groups of people living and working in the U.S. currently. One group which is an overwhelming majority of the people earning pretty much the same wage regardless of educational attainment, and another group earning vastly much more and having higher education overall in comparison to the rest of the populace.</div>
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So does it mean is a college loan is worth all the trouble? I have to answer that I don’t think so, not really because of the possibility of not earning the median or higher wage amounts, but chiefly because of reasons mentioned in this and previous post concerning this type of loan. This is a loan that you can only get out of through death should something go wrong with the ability to pay. You cannot even try to “re-sell” the object you bought with the loan because it is just for you alone. That kind of loan is not worth any hope of better life, because you in the end become a slave to such a debt and such a life will be fraught with potential hardship.</div>
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It is far better to try one’s best to pay as you go, using any free money one can get (i.e. grants, grandparent’s paying for tuition, etc.). Sure this method may take you longer, but in the end you will have more freedom than one chained to debt.</div>
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<strong><u>Citations</u></strong></div>
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(1) U.S. Census (1940). Table 2 - Wage or Salary Income in 1939, For Native White Males 25 To 64 Years Old Without Other Income, By Years of School Completed and Age, For The United States, Urban and Rural-Nonfarm: 1940. CPS Data on Educational Attainment: Educational Attainment. Data. Retrieved on 5-10-14 from <a href="http://www.census.gov/hhes/socdemo/education/data/cps/1946/p46-5/tables.html">http://www.census.gov/hhes/socdemo/education/data/cps/1946/p46-5/tables.html</a></div>
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(2) Bureau of Labor Statistics (2014). Consumer Price Index- All Urban Consumers. Series ID: CUSR0000SA0. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
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(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
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(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
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(3) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
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<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917400. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917500. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252918900. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). ((unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/">http://www.bls.gov/data/</a> </div>
<div style="text-align: left;">
<br /></div>
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<br />
With that said, many believe there is a lot of free money out there but the sad truth these days is that many financial aid packages are nothing more than loan schemes (1). There have been some Ivy League universities who have used zero-loan policies for low income students to eliminate the use of college loans (2). This is primarily accomplished through the maximization of grants, scholarships and similar free moneys (2).<br />
<br />
While the results of such policies have truly encouraged the lower income, and hence higher minority, attendance and retention it is not without its draw backs (2 & 3). Evidently, with zero-loan policy produces potential workers who are willing to accept lower paying public careers or jobs vs. those with loans who are forced due to expense to choose academic pathways which lead to higher paying fields of work (2). Although from an alumni donation perspective college loans will reduce the amount of gifting from those student loans recipients vs. the zero-loan students (3).<br />
<br />
In 1992, Finland went off the student loan idea for college (4). Now I know Finland and the U.S. are totally different in many ways, but Finland’s experience is an interesting one. In Finland, evidently those entering college have to join a student union which would be akin to a professional organization in the U.S. and said membership includes health care (4). Ironically the switch to pure state support for college didn’t really change the average expenses students would incur (such as housing, food, and clothing) nor did it dramatically increase as the state expenditures (4). Further after going to this method student and parental financial support for higher education actually increased with an estimated 42% of students working during college career in 1995 (4). Students at that time in Finland were averaging 3 credits per month which is about a class month in U.S. terms (4). Current statistics on Finland indicate that 46.2% of people 25 to 34 hold a bachelor degree or higher as of 2010 in comparison to the U.S which has 32.8% or nations like Germany at 18.9% or Japan at 33% (5). As a percentage of GDP in 2010, Finland is paying about 6.3% to support its system currently, whereas the U.S. is at 5.3%, Germany was at 4.5% and Japan was at a mere 3.6% (5). Surprisingly in Finland in 2012 63.6% of their populace aged 25 to 34 did not hold a college degree, and even so their labor force participation rate for this age set for 2013 was 20% (6 & 7). This statistic is similar to the U.S. where the same age set had a 20.6% labor force participation rate for 2013 (8). In comparison the U.S. and Finland labor statistics appear to be similar to that of each with the exception of inactivity. The U.S. seems to have currently a slightly higher level of inactive working population overall (see Chart 1 and Chart 2).<br />
<br />
<br />
<br />
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin: auto auto auto 4.65pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 619px;">
<tbody>
<tr style="height: 15pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td colspan="5" nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 464.1pt;" valign="bottom" width="619"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">% of 2013 Population by
labor force status and age (Finland)<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 1;">
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Age<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Labor Force Participation<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Employment rate, %<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Unemployment rate, %<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Inactive<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 2;">
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">25-34<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">20.0%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">18.4%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.6%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">4.1%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 3;">
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">35-44<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">20.3%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">19.1%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.2%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">2.7%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 4;">
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">45-54<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">23.2%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">21.8%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.4%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">2.9%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">55-64<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">16.8%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">15.6%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.2%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">9.9%<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<br />
<strong>Chart 1- Source: Statistics Finland</strong> (7)<br />
<br />
<br />
<br />
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin: auto auto auto 4.65pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 619px;">
<tbody>
<tr style="height: 15pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td colspan="5" nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 464.1pt;" valign="bottom" width="619"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">% of 2013 Population by
labor force status and age (U.S.)<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 1;">
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Age<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Labor Force Participation<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Employment rate, %<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Unemployment rate, %<o:p></o:p></span></span></b></div>
</td>
<td nowrap="" style="background-color: white; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 15pt; mso-border-bottom-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<b><span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">Inactive<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 2;">
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">25-34<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">20.6%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">19.1%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.5%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">4.8%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 3;">
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">35-44<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">19.9%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">18.8%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.2%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">4.3%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 4;">
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">45-54<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">21.1%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">19.9%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">1.2%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background: rgb(217, 217, 217); border: rgb(0, 0, 0); height: 15pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">5.4%<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15pt; mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 41.25pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">55-64<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 129.95pt;" valign="bottom" width="173"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">15.4%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 114.9pt;" valign="bottom" width="153"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">14.5%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 131.05pt;" valign="bottom" width="175"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">0.8%<o:p></o:p></span></span></div>
</td>
<td nowrap="" style="background-color: white; border-color: rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none solid; border-width: 0px 0px 1pt; height: 15pt; mso-border-bottom-alt: solid black .5pt; padding: 0in 5.4pt; width: 46.95pt;" valign="bottom" width="63"><div align="center" class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: center;">
<span style="color: black; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;"><span style="font-family: Calibri;">8.5%<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<br />
<strong>Chart 2- Source: Bureau of Labor Statistics</strong> (8)<br />
<br />
In the U.S. the general claim to obtain a secondary education degree is for more money, better job security, and lower unemployment. While this may be true in some statistical sense for certain population groups, clearly Finland’s choice of having no loans has helped greater numbers achieve higher education overall, but labor wise it doesn’t seem to be translating into lower unemployment overall. It is clear that Finland has different work values than that of the U.S. since it has allowed culturally a greater diversity of work to flourish which includes work for those who for whatever reason have not pursued higher education. The real stark difference between the U.S. and Finland is the fact that those between 25 and 34 seem to be starting homes and are actually taking on housing debt more so in Finland than in the U.S. (9). In contrast nearly 60% of this populace was renting in the U.S. (10). Clearly the U.S. student loan method is having an impact on such things as 1st time housing starts, while in Finland those with less education are still able to find work to support a housing loan despite the burden.<br />
<br />
The problem is with student loans is not necessarily the fact they exist but the fact that such a loan structure can be used for abuse economically. I do think overall it is better for education as a whole not to be fettered to loans because it can bring into question a whole host of problems and moral dilemmas. But America is not Finland, and as such we must allow the idea of educational loans to still exist but clearly one that must be seriously regulated so as to protect the inherent goodness of higher education. Such regulations should not be totally based on the free market ideologies or totally in control of the political machine of government, but something more or less in between.<br />
<br />
It seems more important than eliminating student loans would be the job market itself being able to provide all peoples with the opportunity of work that supports the worker and their family needs regardless of educational attainment. While I fully believe that education is inherently good in nature, not all peoples will be gifted enough to maximize that potential for whatever reason. This puts a care burden on those who have obtained higher education to care for those of lower educational status socially and not to laud or rule over them with their higher status. It seems to me that these fundamental thoughts have been lost in the conversation of work in U.S. as we exit the Great Recession.<br />
<br />
<strong><u>Citations</u></strong><br />
(1) Woodruff, M. (2014). When parents pay for college, student debt becomes a family affair. Yahoo Finance. Retrieved on 5/25/14 from <a href="http://finance.yahoo.com/news/student-debt-nearly-destroyed-this-family-s-finances-150749696.html?soc_src=copy">http://finance.yahoo.com/news/student-debt-nearly-destroyed-this-family-s-finances-150749696.html?soc_src=copy</a> <span style="background-color: white; color: black;"></span><br />
<span style="background-color: white; color: black;"><br /></span><br />
(2) Hillman, N. W. (2013). Economic Diversity in Elite Higher Education: Do No-Loan Programs Impact Pell Enrollments?. Journal Of Higher Education, 84(6), 806-831.<br />
<br />
(3) Rothstein, J., & Rouse, C. (2011). Constrained after college: Student loans and early-career occupational choices. Journal Of Public Economics, 95(1/2), 149-163. doi:10.1016/j.jpubeco.2010.09.015<br />
<br />
(4) Kivinen, O., & Hedman, J. (2000). From a Loan-Based to a Grant-Based Student Support System: the Finnish experience. European Journal Of Education, 35(1), 97.<br />
<br />
(5) Snyder, Thomas D., Sally A. Dillow, and (ED) National Center for Education Statistics. "Digest Of Education Statistics, 2012. NCES 2014-015." National Center For Education Statistics (2014): ERIC. Web. 21 May 2014<br />
<br />
(6) Statistics Finland (2013). Last year persons aged between 35 and 39 had the highest level of education. Data. Retrieved on 5/25/14 from<span style="color: black;"> </span><a href="http://www.stat.fi/til/vkour/2012/vkour_2012_2013-12-04_tie_001_en.html">http://www.stat.fi/til/vkour/2012/vkour_2012_2013-12-04_tie_001_en.html</a><br />
<span style="color: black;"></span><br />
(7) Statistics Finland (2014). Labour force survey. Data. Retrieved on 5/24/14 from <a href="http://www.stat.fi/til/tyti/index_en.html">http://www.stat.fi/til/tyti/index_en.html</a><br />
<br />
(8) Bureau of Labor Statistics (2014). Employment status of the civilian noninstitutional population by age, sex, and race. Data. Labor Force Statistics from Current Population Survey. Retrieved on 5/25/2014 from <a href="http://www.bls.gov/cps/cpsaat03.htm">http://www.bls.gov/cps/cpsaat03.htm</a> <br />
<br />
(9) Statistics Finland (2009). Young adults the most indebted. Data. Retrieved on 5/25/14 from <a href="http://www.stat.fi/til/vtutk/2009/vtutk_2009_2011-12-21_kat_004_en.html">http://www.stat.fi/til/vtutk/2009/vtutk_2009_2011-12-21_kat_004_en.html</a><br />
<br />
(9) Statistics Finland (2011). Households’ assets. Data. Retrieved on 5/24/14 from <a href="http://www.stat.fi/til/vtutk/index_en.html">http://www.stat.fi/til/vtutk/index_en.html</a><br />
<br />
(10) Bureau of Labor Statistics (2012). Current combined expenditure, share, and standard error tables- Age of reference person . Data. Labor Force Statistics from Current Population Survey. Retrieved on 5/25/2014 from <a href="http://www.bls.gov/cex/">http://www.bls.gov/cex/</a><br />
<br />
<br />Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-46891162950016012572014-05-21T01:15:00.001-07:002014-05-25T06:40:20.358-07:00Will you make more money with a college degree?<div class="separator" style="clear: both; text-align: left;">
This is hard to tell because with every story of financial success shown, one can show financial failure as well. What I can tell you is that 2013 & 1940 medians appear to be higher for those with a college degree vs. a high school degree. But that difference currently is only 1.7 times for 2013 and 1.5 times for 1940 (1, 2, 3). Clearly there has been some growth between the two points over time, but still not much suggesting the population spread may be similar to each other.</div>
<br />
The problem becomes with how to measure bottom-line concerning such an “investment” (and I use this term very loosely) because there are lots of ways to look at this problem. Many governments and other organizations tend to look at the over-all costs of the education vs. the long term total income output associated with the degree, but I have trouble with such a view. Since the medians for a college degree is typically higher logically the outcome would be that the long term income output will be higher as well. But this view doesn’t take into account the fact that the median income represents the 50% point, as such 50% of the people are not making the median but less than the median. So does it really pay off then for those people? Maybe and maybe not.<br />
<br />
I honestly think the better approach is to look at things from more of an accounting perspective on this one (4). A college degree clearly is a non-transferrable intangible personal asset which actually does have a useful life span. That life span is only as relevant as the knowledge the degree contained is relevant and as such over time that knowledge will become obsolete in nature (case in point at one point many thought the sun circled the earth, but this was proven otherwise over time with careful observations). In general the life span of college degree is about 10 years (5). After this point the information the degree contains will be considered obsolete in nature and will require updating.<br />
<br />
This means the cost of the college education can be amortized over the first 10 years after graduation against the first 10 years of annual income earned less the other annual living expenses (or net income). Since we don’t know exactly what the person’s income will be once graduated since it is possible to obtain work that does not require a college degree or through whatever means a person could obtain a very high paying job let us then proceed to look at the financial outcomes for various income levels to see the effects.<br />
<br />
I will be making the following assumptions for these calculations- 1. The observed current growth rate of the wages for Bachelor degrees appears to be at a -1% rate (3), 2. The current observed inflation rate is at 2% making for a net resultant of -3% (-1%-2%) for overall income growth (2), 3. The annual expenditures assumptions will be based on Bureau of Labor Statistics data for consumer spending by educational attainment adjust to 2013 values and I am going to assume that even if you have a college degree that your living style is more dictated by your income than by the fact you have a degree(6). 4. Annual loan payment will be based on 6% APR over a 10 year period with the initial loan amount is based on current trends noted by the New York Federal Reserve Bank estimation on student loan amounts (7). Note- Any variation in the size of the loan, APR, and period will change the results of these calculations.<br />
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<table border="1" cellpadding="0" cellspacing="0" class="MsoTableLightList" style="border-collapse: collapse; border: currentColor; mso-border-alt: solid black 1.0pt; mso-border-themecolor: text1; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 615px;">
<tbody>
<tr style="height: 12.65pt; mso-yfti-firstrow: yes; mso-yfti-irow: -1;">
<td nowrap="" style="background: black; border-color: black rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: solid none none solid; border-width: 1pt 0px 0px 1pt; height: 12.65pt; mso-background-themecolor: text1; mso-border-left-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 90.65pt;" valign="top" width="121"></td>
<td colspan="4" nowrap="" style="background: black; border-color: black rgb(0, 0, 0) rgb(0, 0, 0); border-style: solid none none; border-width: 1pt 0px 0px; height: 12.65pt; mso-background-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 294.05pt;" valign="top" width="392"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 1;">
<b><span style="color: white; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman"; mso-themecolor: background1;">Total
Net Income (10 years summed, 2013 dollars)<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="background: black; border-color: black black rgb(0, 0, 0) rgb(0, 0, 0); border-style: solid solid none none; border-width: 1pt 1pt 0px 0px; height: 12.65pt; mso-background-themecolor: text1; mso-border-right-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"></td>
</tr>
<tr style="height: 12.65pt; mso-yfti-irow: 0;">
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0) black black; border-style: solid none solid solid; border-width: 1pt 0px 1pt 1pt; height: 12.65pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 90.65pt;" valign="top" width="121"></td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 77.7pt;" valign="top" width="104"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">Less<br />
than<br />
high<br />
school<br />
graduate<o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">High<br />
school<br />
graduate<o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">High<br />
school<br />
graduate<br />
with<br />
some<br />
college<o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">Associate's<br />
degree<o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black black black rgb(0, 0, 0); border-style: solid solid solid none; border-width: 1pt 1pt 1pt 0px; height: 12.65pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">Bachelor's<br />
degree<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 12.65pt; mso-yfti-irow: 1;">
<td nowrap="" style="background-color: transparent; border-color: rgb(0, 0, 0) rgb(0, 0, 0) rgb(0, 0, 0) black; border-style: none none none solid; border-width: 0px 0px 0px 1pt; height: 12.65pt; mso-border-left-themecolor: text1; padding: 0in 5.4pt; width: 90.65pt;" valign="top" width="121"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 4;">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">College Loan<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="background-color: transparent; border: 0px rgb(0, 0, 0); height: 12.65pt; padding: 0in 5.4pt; width: 77.7pt;" valign="top" width="104"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="color: red; font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">($33,148.22)</span><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border: 0px rgb(0, 0, 0); height: 12.65pt; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$8,062.31 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border: 0px rgb(0, 0, 0); height: 12.65pt; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$13,349.11 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border: 0px rgb(0, 0, 0); height: 12.65pt; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$80,776.86 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: rgb(0, 0, 0) black rgb(0, 0, 0) rgb(0, 0, 0); border-style: none solid none none; border-width: 0px 1pt 0px 0px; height: 12.65pt; mso-border-right-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$187,608.72 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 12.65pt; mso-yfti-irow: 2; mso-yfti-lastrow: yes;">
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0) black black; border-style: solid none solid solid; border-width: 1pt 0px 1pt 1pt; height: 12.65pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 90.65pt;" valign="top" width="121"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 68;">
<b><span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">w/o College Loan<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 77.7pt;" valign="top" width="104"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$8,062.31 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$48,640.95 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 70pt;" valign="top" width="93"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$53,927.75 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black rgb(0, 0, 0); border-style: solid none; border-width: 1pt 0px; height: 12.65pt; mso-border-bottom-themecolor: text1; mso-border-top-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$121,355.50 <o:p></o:p></span></div>
</td>
<td nowrap="" style="background-color: transparent; border-color: black black black rgb(0, 0, 0); border-style: solid solid solid none; border-width: 1pt 1pt 1pt 0px; height: 12.65pt; mso-border-themecolor: text1; padding: 0in 5.4pt; width: 76.4pt;" valign="top" width="102"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; mso-yfti-cnfc: 64;">
<span style="font-family: "Arial","sans-serif"; font-size: 10pt; mso-fareast-font-family: "Times New Roman";">$228,187.36 <o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
As one can tell by the table above it is clear that if one takes a college loan out that the potential total net income earned is significantly reduced than if you had not taken a college loan. In fact if you happen to take out a loan and end up working a job that is typically paid the amount of money associated with a person who has less than a high school degree (i.e. say a minimum wage job), you will be basically bankrupt (without the ability to bankrupt against the loan). <br />
<br />
When trying to determine if you will make more money with a college degree, the question really is about what kind of pay you will make once you get out. This fact tends to be very variable depending upon current market conditions associated with how many jobs are open for your degree when you graduate, the current unemployment rate for your degree, and the total number of possible college graduates in your degree (larger volumes of those with a similar degree can cause a supply demand issue with the labor if there is few jobs available for large numbers). When calculating such risks it helps to understand that in the first ten years of one’s post graduate state, that there is the possibility of having to work jobs which will not earn enough to pay for a loan. So knowing the loan specifics (like APR, and size of the loan) can dramatically affect the outcome of these possibilities. <br />
<br />
In general though, what these numbers are indicating is that when a taking out a student loan you must have already lined up a good outcome with regards to future work (i.e. you need to know where and how much you will be earning at the end of your studies), and if not then it is best not to take the loan.<br />
<br />
Thus you will no doubt make more money with a college degree provided you land a job that has income associated with a college degree and you will make even more money without the student loan.<br />
<br />
But with all things considered, one must remember and take into account that we have no laws that guarantee the current typical income associated with a college degree and as such through market actions it is possible that current social pay norm associated with a college degree can become over time the same as the minimum wage law requirements.<br />
<br />
<strong><u>Citations</u></strong> <br />
<br />
(1) U.S. Census (1940). Table 2 - Wage or Salary Income in 1939, For Native White Males 25 To 64 Years Old Without Other Income, By Years of School Completed and Age, For The United States, Urban and Rural-Nonfarm: 1940. CPS Data on Educational Attainment: Educational Attainment. Data. Retrieved on 5-10-14 from <a href="http://www.census.gov/hhes/socdemo/education/data/cps/1946/p46-5/tables.html" target="_blank">http://www.census.gov/hhes/socdemo/education/data/cps/1946/p46-5/tables.html</a><br />
<br />
(2) Bureau of Labor Statistics (2014). Consumer Price Index- All Urban Consumers. Series ID: CUSR0000SA0. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917400. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, High school graduates, no college, 25 years and over. Series ID: LEU0252917500. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252918900. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). ((unadj)- Median usual weekly earnings (second quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919000. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a><br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (first quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over Series ID: LEU0252919100. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (third quartile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919200. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(3) Bureau of Labor Statistics (2014). (unadj)- Usual weekly earnings (ninth decile), Employed full time, Wage and salary workers, Bachelor's degree only, 25 years and over. Series ID: LEU0252919300. Databases, Tables & Calculators by Subject. Data. Retrieved on 5-10-14 from <a href="http://www.bls.gov/data/" target="_blank">http://www.bls.gov/data/</a> <br />
<br />
(4) FASB (2012). Intangibles—Goodwill and Other (Topic 350). Financial Accounting Series, Accounting Series Update, No. 2012-02, July 2012. Retrieved on 5-10-14 from <a href="http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175824275038&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs" target="_blank">http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175824275038&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs</a> .<br />
(5) U.S. Department of Education (2013). Repayment Plans. Retrieved on 5-10-14 from <a href="http://www.direct.ed.gov/RepayCalc/dlindex2.html" target="_blank">http://www.direct.ed.gov/RepayCalc/dlindex2.html</a> .<br />
<br />
(5)Central New Mexico Community College (2012). Updating Certificate or Degree. Retrieved on 5-10-14 from <a href="http://www.cnm.edu/student-resources/academicrecords/indexed/updatingcertordegree.html" target="_blank">http://www.cnm.edu/student-resources/academicrecords/indexed/updatingcertordegree.html</a> .<br />
<br />
(6) Bureau of Labor Statistics (2013). Table 2010- Highest education level of any member: Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2012. Consumer Expenditure Survey. Combined Expenditure, Share, and Standard Error Tables. Retrieved on 5-10-14 from <a href="http://www.bls.gov/cex/csxcombined.htm" target="_blank">http://www.bls.gov/cex/csxcombined.htm</a> .<br />
<br />
(7) Federal Reserve Bank of New York (2013). Student Debt by Age Group. Retrieved on 5/12/14 from <a href="http://www.newyorkfed.org/studentloandebt/" target="_blank">http://www.newyorkfed.org/studentloandebt/</a>.<br />
<br />Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-29984059905218873282014-05-16T00:32:00.001-07:002014-05-25T06:41:35.424-07:00Will College Debt pop like Housing in 2007?By pop I assume you are talking about a sudden collapse in prices. Well as noted in my previous post, college debt is run by the Bank of Ed right now, and considering the ease at which one can obtain such a loan (usually the simple click of a mouse button) it is pretty clear that it’s a sub-prime market. <br />
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As such the Federal Government is engaging in a form of economic stimulation that will do nothing but cause inflation, at least where colleges are concerned. This could in part explain the reason why the prices of college keep going up the way they have in recent times. It is just pure inflation due to the free Federal dollars flowing into the system.<br />
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Unlike the housing market, the asset that results from a college loans is intangible in nature. In fact, I am uncertain you could truly assign a market value to a college degree like that of a house because by its nature it is non-transferrable to another person. As such there appears to be no way for the value of college degrees to recreate the conditions like housing where one could end up “under water” with the loan simply due to market trade conditions or to cause Wall Street to collapse unless these loans were repackaged into some sort of security instrument.<br />
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But according to Michael Wenisch writing in the Catholic Social Science Review, “With the exception of a handful of extremely wealthy universities, institutions of higher learning are for the most part substantially dependent on student tuitions, and thus also on student loans, in order to operate. Without the continuing growth of the student loan bubble, it is foreseeable that many colleges and universities will be forced to declare bankruptcy and cease operations over the next ten years.” (1)<br />
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And according to Andrew Ross writing in the New Labor Forum, the “transfer of fiscal responsibility from the state to the individual … has been steady for more than three decades, but the rate of transfer has quickened in recent years, driving up tuition costs in all sectors (they have risen by 500 percent since 1985), but in state universities in particular. Last year, overall state funding was cut by 7.6 percent, the largest decline in more than half a century.”(2)<br />
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So it is clear that without the student loans the higher education market could not maintain itself at its current pace, as such there are some who have looked at this market and believe that it could collapse simply by two things- <br />
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1. The sudden withdrawal of Federal funding of the loans.<br />
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2. The sudden withdrawal of students obtaining loans or attending college.<br />
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Either of these two conditions would cause the college market environment to experience a sudden contraction event, but unlike the housing boom this contraction event will not be so wide spread in economic effect. The flow of cash into the college market is simply too isolated from the rest of the economy to impact such things as Wall Street. As such a sudden collapse would only at best cause a smaller labor pool of college graduates doing nothing more than raising the wages for college level work which in effect would again attract more people back to college.<br />
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Personally I don’t think the 1st event is even possible because the Federal funding of college loans is a budget deficit offset (as in it is a negative budget element), so Congress really doesn’t have an incentive to stop the loaning while other spending continues. In fact, college loaning makes a great tool to balance the budget, or at least get closer to that goal. At least it is helping the States supporting colleges to make cut backs allowing them to balance their budgets based on Ross’ observations (2).<br />
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What is more likely to occur than either of the two conditions above is greater amounts of default on college loans which does nothing but raise the budget deficit. This point was noted in the Economy online section of BloombergBusinessweek by Caroline Salas Gage and Janet Lorin article entitled Student Loans, the Next Big Threat to the U.S. Economy? , in which they reported that in the 3rd Quarter of 2013 “student loans outstanding more than 90 days shot up 11.8 percent” (3). Further the New York, Kansas City, St. Louis and San Francisco Federal Reserve Banks (FRB) have been monitoring this situation as well (4). <br />
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Although recently the Board of Governors of the Federal Reserve System noted in a Feb. 19, 2014 posting of the FEDS Notes that there was a recent “deceleration in student loan debt” mostly attributed to “a flattening out in the volume of student loan originations and college enrollment, along with increasing repayment rates on existing loans”, but they did note “we also anticipate sizable originations of student loans in coming years, reflecting persistently elevated levels of college enrollment and further rises in the costs of higher education.”(5)<br />
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Even so since the Bank of Ed is basically running a sub-prime market which is in reality dependent upon wages to pay them back (just like the mortgage sub-prime market), if there is a collapse in college level work wages then there is a greater risk of default. This is the way that college loans can become “underwater” through the inability to obtain work paying enough wages to support the loan. This issue is basically a structural problem with labor market and job creation versus any cyclical nature that might be occurring.<br />
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The only way to prevent this collapse is to socially build into the system some form of guaranteed wages. Currently the only guaranteed wage is minimum wage, so obviously this needs to be raised to higher levels to support the current debt load, or at least re-created so as to guarantee wage amounts for college degreed individuals. <br />
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The only other idea is to allow re-financing of the loans to longer terms and thus lowering the impacts of the loans and ensure a lower default risk. This is what some U.S. Senators want to do currently base on a Yahoo Finance news report where they want to allow student loans to be refinanced to 3.86% (6). <br />
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In the end I don’t think the college debt load will pop like the housing deals, but I do think the amount of debt can cause problems for the Federal deficit should the conditions which are supporting the loaning suddenly change which in turn could cause greater national debt to occur causing less government spending, higher taxes, the potential raising of the minimum wage, and/or the encouragement of greater student debt for college with refinance options to deal with the situation.<br />
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<strong><u>Citations</u></strong><br />
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(1) Wenisch, M. (2012). The Student Loan Crisis and the Future of Higher Education. Catholic Social Science Review, 17345-350.<br />
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(2) Ross, A. (2013). Mortgaging the Future: Student Debt in the Age of Austerity. New Labor Forum (Sage Publications Inc.), 22(1), 23-28. doi:10.1177/1095796012471638<br />
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(3) Gage, C. S. & Lorin, J. (2014) Student Loans, the Next Big Threat to the U.S. Economy? BloombergBusinessweek, Economy online section. Retrieved on 5/12/2014 from <a href="http://www.businessweek.com/articles/2014-01-16/student-loans-the-next-big-threat-to-the-u-dot-s-dot-economy">http://www.businessweek.com/articles/2014-01-16/student-loans-the-next-big-threat-to-the-u-dot-s-dot-economy</a> .<br />
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(4) Choi, Laura (2011). Student Debt and Default in the 12th District. Federal Reserve Bank of San Francisco, Community Development Research Brief. Retrieved on 5/12/14 from <a href="http://www.frbsf.org/community-development/files/student-debt-default-bay-area.pdf">http://www.frbsf.org/community-development/files/student-debt-default-bay-area.pdf</a> .<br />
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(4) Dai, Emily (2013). Student Loan Delinquencies Surge. Federal Reserve Bank of St. Louis, Inside the Vault, Spring 2013. Retrieved on 5/12/2014 from <a href="https://www.stlouisfed.org/publications/itv/articles/?id=2348">https://www.stlouisfed.org/publications/itv/articles/?id=2348</a> .<br />
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(4) Edmiston, K. D., Brooks, L., and Shelpelwich, S. (2012). Student Loans: Overview and Issues (Update). Revised 2013. Federal Reserve Bank of Kansas City, Research Working Papers. Retrieved on 5/12/14 from <a href="https://www.kansascityfed.org/publicat/reswkpap/pdf/rwp%2012-05.pdf">https://www.kansascityfed.org/publicat/reswkpap/pdf/rwp%2012-05.pdf</a> .<br />
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(4) Federal Reserve Bank of New York (2013). Student Debt by Age Group. Retrieved on 5/12/14 from <a href="http://www.newyorkfed.org/studentloandebt/">http://www.newyorkfed.org/studentloandebt/</a> .<br />
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(5) Hannon, S. and Mezza, A. (2014). A Few Thoughts on Recent Deceleration of Student Loan Debt. Board of Governors of the Federal Reserve System, FEDS Notes. Retrieved on 5/12/14 from <a href="http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/a-few-thoughts-on-the-recent-deceleration-of-student-loan-debt-20140219.html">http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/a-few-thoughts-on-the-recent-deceleration-of-student-loan-debt-20140219.html</a> .<br />
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(6) DiGangi, C. (2014). The New Proposal to Cut Student Loan Payments. Yahoo Finance: credit.com. Retrieved on 5/12/14 from <a href="http://finance.yahoo.com/news/proposal-cut-student-loan-payments-123055504.html">http://finance.yahoo.com/news/proposal-cut-student-loan-payments-123055504.html</a> .Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0tag:blogger.com,1999:blog-2082894171630623282.post-72274196321602066992014-05-12T05:14:00.000-07:002014-05-25T06:41:02.209-07:00Is College Debt bad for the Economy?<br />
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<span style="font-family: Calibri;">Well according to the New York Federal Reserve Bank student
loan debt amounted to a mere $966 Billion by the end of the fourth quarter of
2012 (1). This would represent about 6.22% of the real GDP for the 4<sup><span style="font-size: x-small;">th</span></sup>
Quarter of 2012 in comparison to the 67.23% of personal consumption and 18.91%
of government consumption and investment (2). <o:p></o:p></span></div>
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<span style="font-family: Calibri;">Further the St. Louis Federal Reserve Bank did comment that
student loans do appear to be impacting the economy in the short term, but
refused to comment on the long term stating <em>“<span style="font-size: 12pt; line-height: 115%;">However, this topic is complex and more research is needed
before suggesting policy prescriptions.</span></em></span><span style="font-family: "Verdana","sans-serif"; font-size: 9pt; line-height: 115%;"><em>”</em> (3)<o:p></o:p></span></div>
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<span style="font-family: Calibri;">Logically it would seem that having student debt would lower
the amount of available income during the time of the loan thus decreasing
abilities to both purchase items and save. But this all depends upon the ratio
of the income to debt being paid. The worse this ratio is the worse the problem
will be for the economy.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">If anything student loan debt simply slows down the economy
by sucking away potential consumption spending or savings.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">The same could be said of housing to a lesser extent but
only for existing housing vs. new housing. Economically the constant reselling
of existing housing and the associated loans do nothing more than eat up potential
income for a time and thus personal consumption and savings.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">Both housing and student loans could be seen as excellent
tools for dealing with inflation since if there is greater interest charged
this could dampen any potential inflation caused by larger amounts of currency
present. All one needs to do is simply make occasional adjustments to these key
rates and viola you can make macro-adjustments as needed to the currency
supply.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">So in the end student loans are not really that bad for the
economy since they now provide the Federal Government an excellent policy tool
to deal with the economy (especially since the Bank of Ed opened its doors back
in 2010), morally though I think one can make a strong argument that this is
not a good idea linking higher education to such a debt mechanism. <o:p></o:p></span></div>
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<span style="font-family: Calibri;">Unlike a house, higher education debt is permanent in nature
(you can only get out of it through death) and does not have a product that can
be resold to at least recover from some of the debt (housing loans get you a
house—higher education gets you a piece of paper with your name on it saying
you completed a bunch of courses). <o:p></o:p></span></div>
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<span style="font-family: Calibri;">If given a choice between housing debt and college debt, I
would take the housing debt because it offers better terms in general despite
the potential economic bubble problems of the late 1990s.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><u><span style="font-family: Calibri;">Citations<o:p></o:p></span></u></b></div>
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<span style="font-family: Calibri;">(1) Federal Reserve Bank of New York (2013). Student Debt by
Age Group. Retrieved on 5/12/14 from <a href="http://www.newyorkfed.org/studentloandebt/">http://www.newyorkfed.org/studentloandebt/</a> .</span></div>
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<span style="font-family: Calibri;"><span style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">(2)
Federal Reserve Bank of St. Louis (2014). Economic Research. Data. Retrieved on
5/12/14 from </span><a href="http://research.stlouisfed.org/fred2/" target="_blank">http://research.stlouisfed.org/fred2/</a> .</span></div>
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<span style="font-family: Calibri;">(3) Elliott, William and Nam, Ilsung (2013). Is Student Debt
Jeopardizing the Short-Term Financial Health of U.S. Households? Federal
Reserve Bank of St. Louis Review. Sept/October 2013, Vol. 95, No. 5, pp
405-424. Retrieved on 5/12/14 from <a href="http://research.stlouisfed.org/publications/review/article/9963">http://research.stlouisfed.org/publications/review/article/9963</a> .</span></div>
Xenophon the Commentatorhttp://www.blogger.com/profile/09902474044828213999noreply@blogger.com0