Nov 20, 2008 -- Unexpected benefits from student loan market freeze?
There are so many stories right now filled with doom and gloom for those seeking loans for college. In fact, Clark believes there's a gross overreaction to the situation and wants to set the record straight.
Here are the facts. First, the private lending market for college is frozen. Second, many colleges are finding themselves pinched because their endowments have not done well in the stock market. Third, state universities depend on tax dollars for at least half of their costs and that money is shrinking.
So what's the good news?
Well, Clark believes the student loan market freeze may reverse the runaway tuition hikes that had become so common. Borrowing for college became way too easy and it created deep debt for too many people. The loans were based on a false economics and made it possible for colleges to increase tuition at 3 times the rate of inflation. There was no marketplace resistance; people just borrowed more money as tuitions rose.
Meanwhile, the federal government has moved in to fill the vacuum of the private loan market. According to FinAid.org, the feds now provide $4 out of every $10 -- and that's likely to rise.
However, some changes may be in order on your part. Clark advises people to look at doing a few years at inexpensive commuter colleges before transferring to pricey 4-year schools.
For example, California is now routing freshman and sophomores into their network of junior colleges -- where the cost for core curriculum is much lower than in their state university system. Only after you complete 2 years at a junior college can you enter a state university.
Also there are bright people in every occupation. Not everyone wants to sit in a classroom for 4-5 years while borrowing money or could afford to do it. A good mechanic or repair person is worth their weight in gold.
Today the bachelors degree is the new high school diploma. Take a look at Professor Walter Williams column on grade inflation and the number of college who know almost nothing. Most of the college degrees are a complete waste of money.
If your degree doesn't create any kind of product or specific needed service like health care, engineering, or anything applied than you are wasting your money. The only thing an art, history, or liberal arts degree provide is the job to teach others to get the same worthless degree. They will work at Walmart wondering what happened to all the promises of a good paying job that college and high school counselors promised.
I am an electrical engineer and noticed that engineers who got their degrees in the 1950's, 1960's and early 1970's know a lot more then the current college graduates. By the way I got my bachelors in electrical engineering in 2002 and starting my masters in fall 2009. I have to get a Masters degree just to compete with engineers from other countries due to our poor educational system.
I wish the USA educational system the best of luck but we need big changes to compete with the other countries. We finish behind 3rd world countries in math and science on the Third International Mathematics and Science tests.