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Tuesday, December 04, 2012 10:29 PM

Student Debt "Lotto" Reality

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In response to Trends in College Tuition vs. Bachelor’s Degree Wages; Interesting Demographics of Student Loan Debt History I received an interesting email from "JMM" who writes ...

I realize you are projecting what you believe will happen in the future, and that geometric growth in student debt is unsustainable, but your argument on student debt should be tempered by the current economic reality. Those who finish a degree are better off not only in income, but in reduced unemployment. Employers making hiring decisions place an emphasis on college. That is the bottom line. That trend is not going to change for a long, long time. I have known some very intelligent people that never went to school. They were disadvantaged because of it. Yes, some geniuses and talents make it without education (Steve Jobs and NBA players for example), and some people win the lottery. That doesn't make the lottery an investment strategy. Thanks for your time, JMM
Thank JMM

I happen to like your analogy to the lottery, except in reverse.

Take for example the last mega-lottery with a payout to a single winner of nearly a half-billion dollars. I bought lottery tickets because for the first time in a long time.

The odds favored entry (in terms of expected payout - assuming a single winner) yet nearly everyone was a loser. I did not win either.

The school "lotto" is not as bad, but it is very bad. Some do very well, many break even, and a large percentage lose. Earnings of those who do very well, may (on average) exceed those who don't, yet the number of people benefiting  minus the number who don't may very well be negative.

Regardless, the sheer number of students getting totally wiped out by going into debt to attend college is staggering, and unsustainable.

Here is the simple math: What's unsustainable by definition cannot last. Trends in college costs are unsustainable.

Reader Emails

By the way, I received many interesting emails regarding student loans and will publish some shortly. Thanks to all who responded.

Mike "Mish" Shedlock

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