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Jul 26, 2012


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Bill Bush

I have read blogs (notoriously unreliable, I hear) discussing efforts afoot to get this money back into the hands of the banksters so that they can make more money for doing worse than nothing. Surely this cannot be happening (written with a distinct note of incredulity mixed with sarcasm). I do have to question borrowers, too. I heard a young woman on NPR who had borrowed $100,000 to do an MFA/art history degree. True! A stereotype, I know, but true! The panelists trying to suggest useful courses of action to her were dumbfounded. She was just found to be dumb, I think. A loan coming due in the present economy is not a good thing, but many of the loan recipients probably have relatively small loans, which would normally be easy to repay. I think they should now claim that they paid the loans off to BOA and its ilk and tell the government to look there for it. The banks always get a respectful hearing when explaining they don't know where the money went, so all will be well. I know, I have descended into rant. I'll stop now.


Equally troubling (though less nefarious) is the role of ill-informed consumer choice in the higher education market. College tuition has grown on average something like three times the rate of CPI growth, and today's high schoolers are facing a landscape that those of us who are older never had to contemplate.

When considering the choice of a college a few decades ago, a private school, with its $15,000 - $20,000 annual tuition, seemed more manageable for many who were considering using student loans to help finance a significant part of that four-year bill. Those same tuitions have now in many cases more than doubled, and there are few families who can afford to fully cover the costs of these schools for a single child even.

I know of a couple that will in a couple of years have over $500,000 in student loan debt (two four-year private undergrad stints, a private med school education, and a private law school education). This is ridiculous. That debt can never be discharged in bankruptcy, and it is far-fetched to claim that this is some sort of investment in an appreciating asset -- especially considering that for the attorney in the family, a mountainous 45% unemployment rate for new law school grads is the current state of affairs.

The banks are not your friend, even though they will give you basically whatever you want in terms of student loans. Parents and children need to become extremely vigilant about the choices they make. In this day and age, an appropriate ROI on tuition must take into account the concrete numbers comparing salary after graduation to loan debt obligations more so than any psychic value-add of the abstract benefits of a higher education. It is well time to measure things in real terms.


What is not original thought is the way you point to the private market when it is the federal government that distorts student loan market as much or more than it did and still does distort the housing market.

== One can not be absolved of student loan debt via bankruptcy. It is law. Where is the risk to creditors? Lack of risk is the surest cause of a bubble.

== Low interest rates via the Fed pump the bubble further...

== Tax credits from the Fed to those who take out student loan debt pump the bubble further...

== Fed Government lends directly to students pumping the bubble further...

The result of these subsidies in all their bubble blowing forms do nothing but double the cost of education for society as a whole while universities build competing temples of largess until it pops.


I heard bits of a radio piece yesterday about a guy who had managed to rack up $300,000 in student load debt. He did this a couple decades ago and was quick to point out that student debt was then considered good debt because it sent you on your way to a great job with lots of income. Or, so he says "they" said at the time.

In any case, student load debt is a symptom of another problem: College costs too much. We need to be thinking hard, even revolutionary, thoughts about changing our approach to higher education so we can get costs down while still turning out educated people. Otherwise, it's obvious that the prospect of huge debt burdens will, eventually, reduce those numbers and make higher education something for the rich.

That bankers want to leverage all this debt to make more money by creating more debt is to be expected, given what we've come to expect from bankers.

Mad Dog

If you want to see how much of that cost is associated with salaries in the classroom, do a public information request on any of our state universities. Better yet, look at their websites and see if they have a fact book. It usually lists the ranks and salaries of tenured faculty. The data may not be current, but you can bet it's not less that what the salaries are today. Don't forget, you are dealing with, in the majority of cases, 9 month salaries. They can work the summer months making an additional 33% doing research. I often wonder how one can justify a six figure 9 month salary for a professor who has grad students doing the mundane work for him and all he has to do is lecture and keep some office hours.


PS-I wonder what the salaries are at the private colleges & universities.


Translation: "I wonder how these salaries can be judtified given my faulty assumptions."

Mad Dog

Who says they are faulty, Roch? On what basis are they faulty?


Ed Cone

MD, do you have any data to support what seems to be your underlying thesis -- that faculty salaries are a major component of tuition inflation?

Any profs on the thread want to weigh in on those sweet summer revenue options?

Also, to whatever extent more and better-paid faculty do factor in, might some of that expense be going toward added value?

Back to the theme of student debt: If the schooling necessary to become a prof is extensive and expensive, what's a fair salary for those jobs?

Andrew Brod

Mad Dog's not entirely wrong. College professors can indeed get "summer money" via grants to augment their 9-month salaries.

However, not very many can swing that deal. The competition for federal grants is brutal, and grants from private foundations are drying up. Most professors work on their research without additional summer support. And with the increased bifurcation in college teaching between tenure/tenure-track professors and untenured adjuncts/instructors, the percentage who can get grants is, if anything, dropping.

Maybe Ribar has some numbers on that?

Oh, and some professors get summer support by teaching summer school. Perhaps that's less objectionable to Mad Dog.

Andrew Brod

For what it's worth, according to the Bureau of Labor Statistics occupational wage data, the only occupation in postsecondary education that averages a six-figure income is law professors. Engineering and "health specialties" teachers (which presumably includes med-school professors) come close, though.

And these are averages of what are generally highly skewed distributions, which means that the median incomes for these occupations are all even smaller.

These are obviously not low-wage jobs, but the notion that a six-figure income is typical in academia is far-fetched.

Andrew Brod

By the way, the above averages include teachers at community colleges, which means the numbers understate things a bit for four-year colleges and universities. But a quick look at a few individual occupations shows that by far and away, most of the jobs are at four-year colleges and universities. Combine that with my caveat about means vs. medians, and the data are probably about right as published for our current purposes.

Mad Dog

Andy-I'm not objecting to summer money or summer school. I only want to compare apples to apples when one talks of faculty salary. Annual salaries for 9 month faculty need to be annualized when comparing them to 12 month salaries, just like public school teachers. Some teachers complain about salaries but fail to mention it's for 10 months. So when we talk about a 9 month prof only making X amount of dollars, remember that is for 9 months of work, plus there is the opportunity to earn an additonal 33% in the summer.

Ed-I didn't say salaries were a major component of tuition inflation. I was responding to justcorbly's comment that "college costs too much." My observation is that a great deal of expenses in any business come from salary and benefits. That's no different in education. I guess it was catty about the prof and his/her grad students, but graduate teaching assistants do carry a lot of the load for a smaller portion of the salary pie.

As for what is a fair salary for a Phd? I don't know if there is a large gap in the costs of earning a Phd from discipline to discipline. I do know there is a large gap in the salaries of Phd's from discipline to discipline and I don't know if that is fair or not.


David Wharton

MD wrote, "plus there is the opportunity to earn an additonal 33% in the summer." Where do you get that 33% figure from? It's not a number I'm familiar with, and I've been in higher ed for 20+ years.

Ed Cone


I'm no expert on this subject. You raised the topic of (allegedly) high faculty salaries in the context of high education costs, so I asked for some data on that topic.

If you don't think faculty salaries are a major component of tuition inflation, why bring it up, and why introduce it with "If you want to see how much of that cost is associated with salaries in the classroom..."?

Mad Dog

David-9 month faculty can earn an extra 3 month salary above their 9 month salary in the summer from research. One third of 9 months is 33%. If I earn $45,000 in 9 months, that's $5,000 per month. 3 months is $15,000 which is one-third or 33% of $45,000. Thus, an extra 33% above my 9 month contract.

Ed-Maybe I'm not communicating too well. Justcorbly said "colleges costs too much." I meant salaries are a big portion of that cost. I brought up the salaries as a response to justcorbly's comment. I personally think that a lot of those 9 month salaries appear high when annualized. That's my opinion based on my exposure to and experience with college/university salaries compared to non-eduacational salaries. I won't argue semantics with you becasue I know I won't win. You are the journalist, not me. Just trying to have a little discussion here.


David Wharton

"David-9 month faculty can earn an extra 3 month salary above their 9 month salary in the summer from research. One third of 9 months is 33%. If I earn $45,000 in 9 months, that's $5,000 per month. 3 months is $15,000 which is one-third or 33% of $45,000. Thus, an extra 33% above my 9 month contract."

I suppose, but that "can" in "can earn an extra ..." makes it sound like all you have to do is volunteer. As Andy said, research grant money is very hard to come by, and depending on the kind of grant you apply for, you might get a third of your regular salary (though I don't know anybody who got this), or you might get $1,000, or more likely, you'll get nothing. You can't just say to your dean, hey I'm doing research this summer, please give me extra salary. Your dean will say to you, yes, you're expected to do your research no matter what; if you can get some grant money, that's great. Have you ever applied for a research grant? It typically takes about a full week's work just to write it up, and in my field only about 1 in 50 are awarded.

Ed Cone

So, faculty salaries are a major reason college costs are so high, but also not a major reason college costs are so high? Got it.

On that first point: Anyone got data? It might be true.

Andrew Brod

Occupational wage data can be hinky to work with, but I can find consistent data for postsecondary teachers employed by 4-year colleges and universities (in other words, college professors) going back to 2002. Here are the percent increases in various fields between 2002 and 2011:

Business: 39%
Math: 31%
Engineering: 27%
Biology: 29%
Sociology: 31%
English: 31%

If you include librarians and other education-related fields employed by 4-year colleges and universities, the overall percent increase since 2002 is 35%. So, some context. In that same period...

CPI - All items: 25%
CPI - College tuition and fees: 80%
Mean income, all occupations: 27%

So the growth in college salaries was a bit faster than for all occupations, but it's much smaller than the growth in college tuition. Salaries no doubt played a role in college-tuition inflation, but it appears that much larger roles were played by falling public support (i.e. taxpayer money) and rising healthcare costs.

Oh, wait, some more context. Here are the growth figures for a series of high-skill occupational groups that exist outside the ivory tower, also from 2002 to 2011:

Management: 36%
Business and financial: 29%
Computer and mathematical: 28%
Architecture and engineering: 33%
Life, physical, and social sciences: 29%

These are very broad groups, so it's not entirely apples to apples. But the numbers suggest that the growth in earnings of college professors (of which I am not one) has, at least in recent years, not been out of whack as compared to other high-skilled work.

David Wharton

"Average salaries of public two-year college faculty declined slightly in inflation-adjusted dollars between 1989-90 and 1999–2000, and again between 1999–2000 and 2009-10. Average salaries rose very slightly in public four-year institutions, and grew 8% and 6%, respectively, over the two decades in private nonprofit four-year institutions. Average tuition and fees grew fastest in public four-year institutions over these decades."


Andrew Brod

The higher inflation in public universities is consistent with the increasing pullback of public money.


MD, you asked, "On what basis are they faulty? "

This is faulty: "a professor who has grad students doing the mundane work for him and all he has to do is lecture and keep some office hours."

Your assumptions that "all" a professor does is "lecture and keep some office hours" is nonsense. I base that on decades of familial knowledge. I'm going to guess your assessment is based on an uniformed stereotype.

Andrew Brod

I like uniformed stereotypes. So much neater than the plain-clothed ones.

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