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Thursday, May 31, 2012

Not Worth The Debt

Student loans: the ugly truth

I’ve been writing for years about a bubble in higher education: too much demand, causing sky-high prices — all because of cheap government money, much like the housing bubble. Now those warnings have become conventional wisdom — so conventional that they’ve reached The New York Times and even 60 Minutes.

Pretty much everyone agrees that the increases in tuition (which have vastly outpaced consumer prices and family incomes) and the growth in student-loan debt (which now exceeds credit-card or auto-loan debt) are unsustainable. As economist Herb Stein famously said, something that can’t go on forever, won’t. So, how should we respond?

For students, piece of advice No. 1 is: Don’t go into debt. When I went to law school, back in the ’80s, I turned down free rides at a couple of excellent schools to go to Yale Law School, even though it meant taking on a lot of student-loan debt. I’m not sure I’d advise anyone to do the same thing today, even to go to Yale Law, the undisputed king of the law-school rankings — and I’m positive I wouldn’t make a similar tradeoff for many other places, even Harvard Law.

Debt is what gets people into trouble in bubbles: They borrow heavily because they think the value of what they’re buying, whether it’s a house or a tulip, will go up. When it stops going up, they’re sunk.

Today, the value of an education isn’t going up, but the price is. That’s a bad combination. So don’t borrow heavily.

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2 comments:

Anonymous said...

there is no redeeming value in this post.Perplexing questions that lack absolution come cheap.Truly intellectual solutions are priceless.

Anonymous said...

Today's youths know nothing of sacrifice. They can't take responsibility for their actions, either. They should HAVE TO PAY WHAT THEY BORROWED.
Wusses!