NIA – Video on the Education Bubble

The National Inflation Association has released a very interesting video on the topic of the Education Bubble. The video is available on YouTube and we provide our summary and thoughts below.

The NIA definitely knows how to put together a solid video.  They produced others in the past that are also worth checking outHowever, it is important to take videos like this with a grain of salt. This video doesn’t totally cross the line, but definitely suffers from the same kind of one-sidedness that makes Michael Moore films so infuriating.  The truth of the matter is that nothing is ever as black-and-white or as straightforward as potentially biased documentary-makers portray.  Regardless, the video makes several good points and is worth a watch.

Here is a quick summary of what we found interesting:

  • Student loan debt now stands at $830 Billion in the US
  • The average amount of student loan debt of US students is $24,000 – but there are many students with hundreds of thousands of dollars
  • Colleges spend on average $14B a year in construction and campus expansion, and tens to hundreds of millions on sports teams, staff, etc. – Little of which actually adds to the value of the education.
  • Going to college no longer makes you “special” – of the 2009 graduating high school class, 70.1% enrolled in college.
  • Since, 1992, the US BLS reports that 60% of all college graduates have gotten unskilled jobs, or other jobs that do not require or benefit from a college degree.
  • The video provides a very interesting breakdown of the true cost of a college education which includes:
    • Tuition
    • Supplies and books
    • Lost income
    • Interest on debt
  • Regarding total cost: Their example for a 6 years of school, suggests an average total cost of $460k:
    • 6 years at the average of $27,293 per year, increasing at the rate of 5.15% a year
    • $61,914 in interest on the loan debt
    • Lost income for 6 years at an average salary of $35,400 a year.
  • Law schools use misleading statistics like – 90% of our graduates find employment within one year.  While true, this statistic includes those that got jobs at Walmart and in other non-legal professions.

Where the video gets a little silly:

  • Suggests that a high school student with $30k saved up for college would be better off using it all to buy physical silver than go to college — because the value of that silver will be enough to buy a median priced house in 4 years.
  • Suggests the mainstream media (MSM) is colluding with colleges to spread myths and hoaxes that benefit colleges.
  • One of the people interviewed suggests we may not have running water or other basic services within 4 years.
  • On more than one occasion alludes to or suggests investing a reckless amount of money in  physical metals like silver and gold.

Regardless of where you stand on hyper-inflation and end of the world concerns, we would caution everyone about going crazy buying physical metal.  Personally, I have done a lot of reading on the topic and think it is prudent to own at least some physical metal and by some I would suggest between 2% and 5% of your total net worth.  Commodity prices can be very volatile (as we have seen in recent weeks with the price of silver going from 30 to 50 and back to 30 again). This means that if your net worth is $150k you should consider owning approximately $4,500 in precious metals.  Consider using dollar cost averaging to dampen the effects of price swings.   In this example, I would not buy 3oz of gold tomorrow, instead I would buy one today, one in 6 months and one this time next year.

Two services that I have personally used and recommend include: American Precious Metal Exchange and Bullion Vault.

Disclosure: We are affiliates of both APMEX and BullionVault.com.

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