A couple of days ago, Zero Hedge reported that a lot of student loans are delinquent:
As many as 27% of all student loan borrowers are more than 30 days past due. In other words at least $270 billion in student loans are no longer current (extrapolating the delinquency rate into the total loans outstanding). That this is happening with interest rates at record lows is quite stunning and a loud wake up call that it is not rates that determine affordability and sustainability: it is general economic conditions, deplorable as they may be, which have made the popping of the student loan bubble inevitable.
The reality of this — like the housing bubble before it — is that a lot of people who borrowed a lot of money can’t repay. That could be down to weak economic conditions. As I wrote yesterday, an unprecedented number of young people are unemployed and underemployed. These circumstances will lead to delinquencies.
But I think that there is a key difference. Unlike housing — which will probably never be made obsolete — it feels like education is undergoing a generational shift, much like agriculture did prior to the Great Depression, and much like manufacturing did prior to the Great Recession.
Venture capitalist Peter Thiel suggests:
Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.
But earnings for graduates are stagnant, while costs continue to rise:
However, all this really shows is the (quite obvious) reality that colleges — subsidised by Federal student loans guarantees that act as a price floor — can keep raising tuition fees even while in the real world the economy is contracting.
But education is suffering from a much bigger problem: a lot of what it does is gradually (or quickly) being made obsolete by technology.
While college degrees for vocational subjects like medicine, law, architecture and so forth are still critically important (not least because access to such professions is restricted to those who have jumped through the proper hoops), non-vocational subjects have been cracked completely open by the internet.
Why would anyone realistically choose to pay huge amounts of money to go to university to learn mathematics, or English literature, or computer science or economics when course materials — and much, much, much more including access to knowledgeable experts and professionals — is freely available online?
The answer is for a piece of paper to “qualify” the holder and “prove” their worth to prospective employers. But with earnings for degree holders at roughly 1997 levels, what’s the point? Plenty of people with good ideas, drive and perseverance are living fulfilling and successful lives without a college degree — including me. There are flashier examples like Zuckerberg, Jobs, and Gates, but that is just the tip of the iceberg.
A real estate agent trying to rent me a flat once said:
Why would people want to go to university? All it shows is that you are lazy, and can’t be bothered to find a proper job, and want to spend three or four years getting up late and getting drunk.
A useful (though not universally true) heuristic. “Education” has been turned inside out. To some employers, a degree (particularly one with a weak or mediocre grade) can in fact be a disadvantage. People without a degree can get ahead with three or four years of experience in industry.
So while we wait to see whether or not a student loan meltdown will lead to a wider financial meltdown (a la Lehman), I think we should consider that this industry may well be on the brink of a systemic meltdown itself. With severely decreased demand for education, a lot of schools and courses may be wiped off the map leaving behind a skeleton of only the most prestigious universities, and vocational and professional courses.
azizonomics 
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I was politely informed I was no longer welcome after a blazing row with a professor who insisted Sub Prime Mortgages were contained.
As you say, a degree is useful only in that it provides compliance with legal restrictions, or a good degree from a good university that still carries prestige.
Perhaps you should e-mail them, reminding them of their intellectual fallacy?
Aziz,
Actually, in the US, you do not need a college degree to be an Architect. You simply serve your time as the employee of a registered Architect for 8 years, then you’re eligible to take the licensing exams. That’s how I’m doing it. I just passed the 8 year threshold this year and will be sitting for my exams this year.
I told my kids, “There’s only four reasons to go to college – Doctor, Lawyer, Scientist or Engineer. If you don’t want to pursue any of those professions, then save your money!”
Mrs. Usonian and I have often mused that it would have been far wiser for a lot of folks we know to just take junior’s college fund and by them a home instead of throwing the money away on a useless MBA or ‘Basket Weaving’ degree. We’ve observed that many American parents are just paying a huge fee to get a four to six year vacation from their children. Trouble is, once the kids are finished with school, it’s Bam!…. Right back in the basement smoking weed and playing video games. What a waste.
Another great post, Aziz! Kudos from a fellow autodidact… And father of two more!
Good decision.
@azizonomics: “Being a maverick autodidact out in the intellectual wilds is quite masochistic. Too often you can be seen as a crank, or a narcissist, or a pseudo-intellectual, or worse. But if your lifeblood is honest thinking and learning, if that is what you hunger for, crave, desire, and dream about then in this anodyne, homogenised and conformist modernity, there is no real alternative.”
I knew you were a genius when I first read your posts! Don’t worry about a degree, unless of course you want to work for a big organisation or the government which requires a degree as a mandate. In time you will need to earn a living, and I for one won’t mind seeing ads on your site PROVIDED you don’t sell out like the MSM to your sponsors.
I used to get belted by my headmaster because I got fidgety in class and would challenge my Primary school teachers. They would say one thing and I had read another. I was reading before primary school thanks to a caring Grandmother who would read to me. When I look back at those Primary school teachers, most would be idiots for their age. One said I would be in jail by 30. That is the type of idiots teaching in Government schools. I will be home schooling my children (If I have them), and sending them to sporting and social clubs to get their social networks. I can afford to stay at home and teach them. In their final High years I will pay for them to go to Eton (They will have the grades) so their resume is “Fluffed”.
I could teach someone more about Accounting in 2 months than a University could teach in 3 years, then let that apprentice go off to read the Corporations Act, Accounting Standards etc , and learn a software program that suits the apprentices career aspirations. And a good solid grounding in Excel. Universities don’t teach the fundamentals and I have to spend time training all over again. I am sure this is the case in all professions and trades.
The Australian Government throws money at training programmes that yield no real skills, instead of encouraging business to take on apprentices to gain on the job training. It is all “arse about” so to speak in colloquial terms.
I will only put up ads if I can’t afford not to. I’m hopeful I can make a living writing/consulting for others, while keeping my personal website unpolluted.
Sound like a plan. Good luck.
If you change your mind and since the Federal Reserve is on a PR drive, they could pay your to put ther ads on your site.
That would be funny. I bet they would not get the joke.
Hey if they pay me enough I might even write one on “the importance of central banking”.
(I am kidding).
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Yes in this post you speak about something I am fascinated about, namely the education system and its problems. It fools some of the people who have gone through it that they are smart. In fact they are only smart in the organizations created by centrally planned economies. Real smarts would refuse to settle for a life of a salaried slave doing mostly useless work. Useless work is all the extra paper work and procedures which only exist in dysfunctionally large organizations to give a measure of central control, but which creates more complexity and loss of autonomy, or purpose. It is crazy, the psychopathic organization.
University is the apex of the education system the lower tiers in countries like the UK have only created generations of mental and economic slaves. Why did the British and German soldiers in WWI willingly slaughter themselves in their millions because their state told them to? Arguably it was their state education that prepared them for this. Their education only made them susceptible to central control, and they were not given the intellectual tools to resist the propaganda and control. This is not conspiracy, John Taylor Gatto has researched and elaborated on the actual words of the people who formed the education system in America, their goals were to create a malleable, easily controlled population.
Edward Bernays also pioneered the PR industry’s use of psychology and other social sciences to design its public persuasion campaigns:
“If we understand the mechanism and motives of the group mind, is it not possible to control and regiment the masses according to our will without their knowing about it? The recent practice of propaganda has proved that it is possible, at least up to a certain point and within certain limits.”
What is a “vocational subject”, and why do you include architecture there? I’m asking because I’m trying to draw a clear line between areas that require formal education and those that don’t. Other than that, Bill Bonner sees potential for disruption even in medicine for example: “You walk in. You don’t see a doctor. You see someone with a computer who has been trained for 6 months on how to use it. He listens. He gives you an exam. He asks questions. He reviews your symptoms. He feeds the data into a computer. The computer is programmed to draw upon the entire world’s medical experience and give you an answer. Or…to pass…and tell you to go see a real doctor.” – from http://dailyreckoning.com/everybody-hates-capitalism/
He put it best in another article: “College came to be seen as the ticket to the good life as opposed to something that people already destined for greater things might undertake to help get them there. As often happens, causation became confused with correlation.” – http://dailyreckoning.com/misguided-by-higher-education/
Vocational subjects are in plain English job training leading to a professional qualification.
By the way, I hope medicine never comes down to Watson. Medicine is an empirical field, and computers are not capable of empiricism; they are only capable of storing and retrieving ideas. It would reduce medicine to symptom matching.
“Vocational subjects are in plain English job training leading to a professional qualification.”
Yes, but in this way we could include all imaginable jobs here. But we could just drop this as I’m not that interested in this.
“computers are not capable of empiricism”
Actually, unless you have proof that humans are imbibed with some magic substance, computers are potentially (in the future) just as capable as humans in any field, whereas humans are just computers made out of biological matter.
But even if we consider the current state of technology w.r.t. computers, I believe they can be of great use in saving many lives today. I myself would never trust a single doctor with a diagnostic/treatment without doing research on my own using a computer. Bill Bonner’s suggestions would merely automate this research process (saving many lives that otherwise would have been lost due to mistaken diagnostics and confused and overloaded human medical doctors), but he doesn’t say the (current) computer will provide a definitive answer/diagnostic.
Computers may become capable of empiricism (as well as things like empathy), but many signs (read The Emperor’s New Mind by Roger Penrose) suggest that this may be far, far more difficult than we presently imagine it, because what see he in humans is actually very multi-dimensional. We haven’t even really achieved the first phase of simulating these presently biological traits. I don’t believe in the singularity, either. Kurzweil is a genius, but I think he’s a genius who followed his intellect to completely the wrong conclusions.
Even in raw processing power supercomputers are barely at the level of a mouse brain. We may match a human brain in processing power in the next few years, but even then we may be nowhere near generating true AI.
I do think that Doctors having access to things like Watson is useful, but it is really essential that those using the resources are experienced practitioners (i.e. Doctors) and not someone with a rudimentary training.
You’re right that today’s computers are far from human-level intelligence. I don’t care much about Kurzweil (I’m familiar with his ideas which makes me not want to read any of his books), Singularity (probably just a confused mix of hogwash) etc. As you’ve noticed, I tend to be pretty bare bones in conversations and try to get to the crux of the issues (complicated concepts usually only serve to confuse matters).
Yeah, I try for the same thing. Not always successfully.
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Entertaining blog – thank you. This is a really absorbing blog. Thanks!