I am in a writing mood tonight. I am not sure why, but here it goes.
Before we continue, let me set the stage for this post. The two ramifications of distance education: Large amounts of debt incurred by the students, and the job market being flooded over time with newly-degreed people looking for better jobs.
I have been doing some thinking recently about the home mortgage “crisis”, and it made me think about distance education. Somewhere in the middle of my thought process, I correlated the two into possible scenarios based on shared characteristics of the funding mechanisms of both education and housing. I quickly began to wonder if the education market could turn out like the housing market.
If you look at the housing market, we’re in this problem that was caused by bankers, lenders, speculators, and others pushing property on people who could not afford it. The customer base was filled with people who had eyes and dreams bigger than their wallet. People understood that their rate would fluctuate, but they figured they’d just “deal with it” when the time came.
A few years ago, almost regardless of your qualifications, people could get a home mortgage, get into a big house, reap the benefits of it for a couple of years, then risk losing it because they could not pay for it.
Let’s compare that to distance education. All you have to do is put the words “distance education” into Google to see how much this beast is growing. To achieve and sustain or increase the current rate of growth, education has to be made available to lots of people. Accomplished. It has to be easy, streamlined, and marketed as such. Accomplished. People have to have access to lots of money (loans) to pay for it. Check.
The cost of distance education is very high in a lot of cases, and the students won’t even start paying for those loans until they get done with school. Is it feasible that $30k – $60k in debt is being absorbed by people who won’t really consider the impact until it’s time to pay up? You bet!
Look at my situation. Even if I stopped going to school when I graduated from Kaplan, I would be able to pay the $40k bill I racked up, but not everyone can. I was fortunate enough to have a very well paying job before I started school. I didn’t have dreams of earning $50k a year after graduation. I was well over that along time ago. I was lucky.
How did I get the $40k? I told someone I wanted it. I filled out some paperwork, and poof! It was done. In the four years at Kaplan, I paid less that $1k out of my pocket. It could not have been any easier. I got $40k in debt and didn’t have to lift a finger.
I suspect that a percentage of the thousands of working professionals, stay-at-home moms, and other people who are honestly trying to do well for themselves will end up tanking when they get the final bill. Some people may have the best of intentions, but in reality, they are dreaming when they think their newly-minted degree is going to bring them riches.
They will get the final bill and will be unable capitalize on better pay and other things that they had counted on, because the job market is being flooded with online degree students. The how many of these loans will default? I am willing to bet that the number of defaults is going to rise in the next 5-10 years. I don’t know if it will be labeled a “crisis”, but you see where I am going with this.
Addendum: WOW! A few hours after I posted this, I found this article from US News and World Reports. Looks like I was on to something.
"Bond-rating agencies last week noted a troubling uptick in defaults on
private educational loans, and the U.S. Department of Education
reported that almost 12 percent of all federal loans that came due in
2001 are already in default."