How colleges discourage Americans from saving

  • Article by: Richard Vedder
  • Updated: July 11, 2013 - 6:29 PM

How American colleges encourage families to spend, not save.

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pumiceJul. 11, 13 7:22 PM

From the article: "In the period encompassing mostly the 1960s and 1970s, the savings rate was in the 9 percent to 10 percent range. From 2003 to 2012, by contrast, the average savings rate was a paltry 3.8 percent." Richard Vedder's guess as to the reason Americans are saving less is because they're overtaxed, because they're double taxed at the corporate and individual level, and because of antisavings policies associated with earning a college degree--so they consume instead of saving. My guess is that Americans are saving less because they're under-earning--working class income has stagnated for decades. Another guess (based like Vedder's on considerable anecdotal evidence) is that it's not only the ~30% of Americans who have college degrees who are saving less. I'm guessing that the other 70% of the middle/working class have a paltry savings rate as well. Housing prices rose faster than families--most of whom earn far less than Vedder's "moderately prosperous" $125,000/year--could save for a down payment. Defined benefit pensions are a thing of the past for non-unionized workers. Cheap credit encouraged the spending tendency. Since the housing/credit bubble burst, few working class people see much benefit in saving. Even the magic of compounding loses its razzle-dazzle when interest rates are less than 1%.

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bwikJul. 11, 13 8:04 PM

Very true. This is well worth thinking about. But really frugal people do not pay sucker's prices for $50k institutions. You won't get rich by being a sucker your whole life. Costs matter. There are great colleges and universities at 1/5 of that cost. The idea an 18-year old can outclass a university like say, Wisconsin is ludicrous. No 18-year old like that ever lived. Some parents believe in the tooth fairy...

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la55122Jul. 11, 13 8:09 PM

Just further documentation of the destruction of the American middle class. We are all just wage slaves and conspicuous consumers of everything including education. All the for-profit diploma mills and even most public colleges and universities are contributing to the demise of what they purport to believe in. Indeed, why save when savings evaporate due to inflation, fees, and outright thievery.

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brotherkennyJul. 11, 13 9:09 PM

Stay at home, attend an accredited junior college, transfer to a state university or reasonable private school, get your four year degree, pick a degree that colleges offer teaching and research stipend for in their graduate programs (and tuition waivers), do your research and get a masters or doctorate. Oh hey, if you send your kid to college and their pulling down a C average, think about a time out. Personally I think most kids would benefit from a couple of years of work before college. It's amazing how motivational working a number of crappy jobs is. Stop pretending like a college career needs to be done in four years. And don't think for one minute that a stumble or stall in the educational process is the final verdict. This is the land of opportunity, there is no point in which you can't learn something new, if you want to work for it. So, find that thing that you will work for.

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spicebearJul. 11, 13 9:23 PM

I'll take some issue with the author's assertion that a college degree is the "new norm." We have been pushing academic post-secondary HARD for nearly 50 years but in Minnesota the % of people who hold at least a bachelor's degree has remained fairly steady at just over 30%... In the US it is about 28%. I know from experience as a college advisor that only about half of students who START college of any level in Minnesota actually FINISH. I think its time we re-examine our assumptions about post-secondary ed...

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briechersJul. 11, 13 9:26 PM

We tend to think of colleges and government institutions as non-profit. I think that is a mistake becaue it presupposes a dozen bad assumptions about incentives and costs. Clearly, they are working at making a profit for everyone who is employed by these institutions...their own personal profit. Many non-profit corporations are advantaged with this same mistaken perception. Some are doing outstanding work and are supported by people truly giving their time and resources for the cause, but none of these folks gets the benefit of the doubt from me anymore.

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pumiceJul. 11, 1310:13 PM

Re: "I think its time we re-examine our assumptions about post-secondary ed..." All right, spicebear, I'll start: Let's broaden our definition of postsecondary ed beyond four-year and five-year academic degrees. Let's start thinking about one-year and two-year programs at community colleges and technical colleges as well.

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pumiceJul. 11, 1310:22 PM

We also need to decide how we're going to make sure that every young adult has the opportunity to pursue whatever license or certificate or degree or advanced degree s/he has the ambition and the ability and the desire to pursue. We cannot permit postsecondary education to become an opportunity to which only the "moderately prosperous" and well-connected are entitled.

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brownsbayJul. 11, 1310:54 PM

"We cannot permit postsecondary education to become an opportunity to which only the "moderately prosperous" and well-connected are entitled." - Exactly, Mary. That's why we need govt. to stay out of the student loan business. The free market always works fine until libs get involved and muck up the system.

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brownsbayJul. 11, 1310:58 PM

"I know from experience as a college advisor that only about half of students who START college of any level in Minnesota actually FINISH. I think its time we re-examine our assumptions about post-secondary ed..." - Good point. It is all about making a buck, not educating kids.

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