Cost - Benefit of Higher Education
I was looking at btown819's blog about student loans.
I haven't followed student loans that closely except I know the 4 new teachers where I am have an average of about $50k of student loans each. I met a few American students last summer and I know they were running $100k of student loan debt. American universities are more expensive than Canadian universities. I also saw Sallie Mae offers loans up to $40k per year (choke.)
So, I decided to go with an example where a student borrows $25k/year for 4 years for $100/k of debt.
That much debt makes you eligible to pay it back over 30 years. Looking at 6% interest that would give payments of $600/month. A 15 year repayment scedule would be $844/month.
I always chose the highest tax bracket when I look at amount of income that has to be earned to pay an expense. The reason is that if you have an expense that some one else doesn't have, you have to earn more at the top tax bracket to be able to match disposible income. On average I'd expect a university graduate would pay 32% taxes between state and federal. To make that $600/month payment about $10,600 of gross wages/year are required. To pay it back in 15 years you need $14,900 of gross wages.
So, if you are a dedicated enough person to get through university, what kind of wages would you make the 4 years in school and how much would your earnings have increased? I found a report that says you'd make about $23k more.
But, how is that potentially changing with all the high paying job layoffs?
I think I went to school at a very bad time and came out to a very dead economy. When I went in friends who had graduated said employers lined up to hire you. Most had a job lined up before they finished university.
I remember getting shortlisted from over 100 applicants to write a 3 hour exam to measure some kind of qualification for a job. This job had been done for 2 years by university co-op students. There were 12 people with a B.Sc. like myself and the other 12 had master and doctor degrees. This job would bore anyone with ability and ambition to death for its repetition, do the same test on these 100 samples today and tomorrow there is another hundred samples waiting. The test was entirely higher chemistry theory. I didn't get an interview. They interviewed the top 7 scoring individuals and I came in 12th. They probably hired someone with Ph.D. wage expectations. Indeed, stories in the news around 92 were reporting that it was taking people with a Ph.D an average of 6 years to find an appropriate job after university.
I suspect business degrees are going to come back in line on the pay scale with other degrees because of the enormous layoffs in the financial sector. Many of those jobs truly were not generating any real foundation in the economy. They were taking people's hard earned money and givig it to people without a hope of being able to pay it back and taking a huge cut for this neglegence. They were doing these swap things with municipalities for another snake oil scam to put more money in their pockets and risk investors money and screw tax payers at the same time by putting municipal budgets in dire straights. An enormous part of the financial sector was just scams to rip people off and profit from raping people's dreams and future.
The financial sector became such a destructive parasite that it was killing hosts, and the rest are being forced into medical treatement. The medicine cabinet is stocked with parasite medication.
The parasite jobs aren't coming back.
So, long term what happens to wages in a sector that had the competition I described? I had another job interview around 2004 and the pay it was offering was less than I made in 91, about 12% less. Take a modest 3% increase in prices over 13 years, so essentially only 59% of my 91 wages. It was an lot of work lining up that interview as there still weren't many jobs, or at least jobs that provide an income reasonable for Vancouver.
The value of educations is very supply and demand. Demand is declining...
The spread in wages for higher education versus high school is likely to remain, however, all wages are likely to decline further in buying power. So, more likely new graduates will find the cost benefit working out poorly in terms of the wages they thought they could get in comparison to what they will likely get.