Showing posts with label highered. Show all posts
Showing posts with label highered. Show all posts

Tuesday, July 24, 2012

Link Between Student Loan Burden and Slow Housing Recovery

Rising student loan debt may be related to the slow recovery of the US housing market, according to a new article on Bloomberg.com.

Chief economist for Credit Suisse, Neal Soss, says:

“We are trying to migrate towards a much safer underwriting standard, with let’s say 20 percent down payments required. It takes a certain amount of time for people to save that up, and the more they’re burdened with student loans the less possible it is for them to accumulate that chunk of liquid capital that allows them to make that.”

The key point is that students laden with college loan debt and flat salaries will have more difficulty meeting this 20% standard. The Bloomberg article furnishes fresh numbers on total student loan debt ($904B) and the average debt per student ($25,250); these numbers show that the student loan debt crisis is far from abating.

Soss notes that it's not clear how strong the link is.  But what is clear is that a greater debt burden placed on our young people, early in their careers, can have dire consequences for their financial position much later in life.  We now see very attractive mortgage rates tied to extremely low bond yields depressed by short-term Eurozone instability; for many Americans, right now is a great opportunity to secure an attractive home loan. It's a shame that so many young people will miss out on the opportunity to invest in what promises to be a robust housing recovery, due to other debt obligations.

Here is a link to the Bloomberg article:



America's Two-Lane Higher Education

For the many financial and structural ailments of American higher education, many diagnoses and prescriptions have been offered. My own conviction is that there is a dire need for more thought and policy concentrated on the role of pre-college, preparatory work, which sets the stage for the financial and resource problems in our headlines.


First, a brief disclaimer: I am very strong proponent of true liberal arts.  As a former student in diverse school systems in several countries on three continents, I am strongly convinced that America's emphasis on interdisciplinary cross-fertilization is a special feature that should be kept intact and even expanded. However, this successful American ideal has, for many students, become reduced to remedial high / middle school material. To add financial insult to intellectual injury, this is taking place in the expensive college classroom, taught by the far more expensive college instructor, and quite often in a stadium-like environment. Many schools are discovering that it is far too expensive to conduct remedial coursework in the traditional classroom environment; hence, vast structural changes are forced upon us.
Central to many of the financial challenges that we now see in American higher education is the “prep problem” which delivers students to our campuses for remedial high school coursework. It astounds me that some consider introductory Algebra, History, or English etc, taken in college, to constitute a liberal arts education. Hardly. A course in the historical and cultural development of algebra… that is a better example of the inspiring, synthetic material that an in-person college education should deliver.
Because of the prep problem, a “two-lane” structure is clearly emerging in American higher education. In the fast lane are students who arrive with the benefits of more diligent preparation.  These students typically arrive with substantial advanced placement credit and can bypass the large introductory courses.  These fast-lane students quickly complete core material and have enough time to pursue double or even triple majors.  (When I double-majored in physics and German literature and philosophy, it was rather exotic, but this is no longer the case) The fast-lane students reach smaller classes quite early in their college careers and thus benefit the most from direct faculty interaction. Because of this, the fast-lane students will have the ability to pursue true liberal arts material and benefit from all of what college can offer.  They will also receive the most substantial boost upon graduation, because they will have distinguishing advanced coursework and are more likely to have recommendation letters filled with prose about their unique contributions.  It is no surprise that these students typically find better placement after college.
Meanwhile, underprepared students languish in the slow lane... expending considerable time and investment on remedial material, thereby increasing costs to college as well as the student.  Unfortunately, the introductory curriculum designed to serve these students is often a tedious insult to the world-class faculty called upon to teach it. Naturally, there is much dispute among the faculty regarding who will be “stuck” with these courses.  In other words, there is not a tremendous amount of enthusiasm associated with them- not on the student side, nor the faculty side. Hence the underprepared students are those most likely to experience "stadium courses"- and now perhaps online curriculum.  Underprepared students will typically spend the full four years completing a basic degree with no additional distinguishing features such as research or study abroad.

On the whole, underprepared students receive a college education that is ultimately worth far less than that of their fast-lane peers. I hope that more immediate attention will be given to the prep problem and the wide divergence in outcomes that it has brought to the American campus.  Many of America's students lack the preparation that would enable them to get the most out of a college education.