The college debt bubble has gotten everyone a little mad and crazed up. So if the government, the largest lender of college loans were to exit college loans what would happen?

This might cause less people to attend college and make paying for college harder on the ones continuing to attend. This would lead to some compounding effects such as; less people enrolling into 4-year universities;  an increase in enrollment of technical/trade schooling,; lowered tuition prices … which doesn’t sound too bad considering the 1.2 trillion dollars of college loan debt and the $30,000 average debt of college graduates.

Making the decision to go to trade school seems easier now considering that economists describe nurses and teachers as having the most economically sound and guaranteed post-secondary educational investment.

Without government loans I would not be attending a 4-year university. If everyone in my situation were to drop out of school, there would be a severe decline in number of students and future enrollment. With less people attending 4-year universities, schools would not make enough profit to finance their institutional payments (paying teachers, programs, faculty ). This could be a big problem for schools if all of a sudden they were only making half of what they made last year. Even wealthy schools like USC could be hurt considering that if they wanted to keep me and everyone in my boat, they would have to loan each of us  $40,000 a year.

Even if USC had the amount of capital to fund every student’s tuition, it wouldn’t happen without USC programs, teachers and its financial sector taking a hard hit. So maybe USC might give higher grants or just as equally effective, lower their tuition price so to retain as much students as possible. If this were to happen we could  all go back to class with a smile while USC survives the event with a cut in their tuition-based income.

But, what would it mean for students that are entering college next year? Well, there will be less students making the decision to pursue private education over a cheaper tuition. Public schools would get overcrowded and the Department of Education would have to provide greater funds. Which sort of sounds OK. Considering that in 2013 alone the Department of Education made $41 billion dollars from college loans which is enough to pay for 3 million students to attend the public schools that have an average public university tuition price of $13,000. Regardless of that rather pointless hypothetical, there is still no doubt that this would cause private schools like USC to lower their tuition. Then UCLA would have to lower their tuition in order to remain equally as financially attractive as before.

… which might get me thinking about going to school again.

If such an event were to occur, an economist might describe this as a free(er)-market of institutions that are dealing with a shorter number of demand (lower number of enrolled students) and therefore dealing with an abundance of universities that are competing to be the cheaper university. Of course, rankings and brand name universities would allow certain schools to retain some leverage.

Did I just solve the answer to college debt? Nope, probably just my debt. But damn when you are facing $75,000 in debt by graduation you’ll be looking at any solution as the right solution.

… Which brings me to my next thought.

What if the government were to bail out all of our debt just like they did for Wall St.? I should end it here but NO.

The department of education would still have their $41 billion profit from 2013 and Sallie Mae would still have its $900 million. No student would be in debt and could begin to afford buying houses. The public would spend more allowing more circulation of money. This would raise interest rates, but that would make going to college more risky. Maybe colleges might lower tuition to even out the risk. Or…

 

From bartop to supermarket aisle, the familiar bottles of Heineken, Budweiser, and Tsingtao are no longer alone. These recognisable brands, hailed by purists for their age-old recipes and whose advertisements reach everywhere from the Super Bowl and to frat parties, now rub shoulders with a whole slew of new beers. From hipster, moustache-sporting micro brewers to unfamiliar liquor-instilled brews, the beer industry is undergoing an unprecedented change.  Faced with a stagnant global economy and shrinking market share, global brewers like Anheuser-Busch InBev, SABMiller, and HEINEKEN International are stepping up efforts to find viable alternatives to beer and recapture the changing palette of their drinkers.

“Historically, beer has not been an innovative industry,” says at HEINEKEN’s Director of Innovation Xavier Mahot in an interview for Bloomberg. “But this is changing, and the new generation of drinkers that is coming are looking into other categories.”

Millennials make up  a rising figure of more than 26% of drinkers and 35% of beer drinkers, according to Nielsen. Recapturing this consumer segment has become a major priority for brewers across the board. As Mahot points out however, the changing tastes, lifestyles, and demands of millennials demand that the mainstream and historically traditional brewers change their tune.

In response to this, many brewers have begun introducing their own varieties of beer mixed with other flavours, alcohols, or spirits. In the U.S. AB InBev put $35 million behind the launch of its new lime-flavoured Bud Lime product. Its Bud Light Lime-A-Rita variations have shown “strong growth” and are “key drivers” of the company’s beer-only segment, according to the its Q3 2013 earnings report. At the same time, the brewer’s Shock Top brand is the highest performing ‘craft’ beer in the country commanding 16% of the craft beer market share.

Across the pond, HEINEKEN International’s Desperados brand, which blends French beer and Mexican tequila to appeal to young-adult drinkers, grew by 26% in 2011 compared to just 5.4% volume growth in the Heineken brand. In addition, HEINEKEN debuted the Radler brand – a lemon soda and beer mix – to 19 markets around Europe last summer. Though the brand’s financial results remain unclear, HEINEKEN touts it numerous times in its 2013 annual report citing it as the “cornerstone” in its strategy to get 6% of sales a year from new products.

In the U.S. market HEINEKEN plans to launch several new brands including Amstel Radler, Dos-A-Rita, Dos Equis Azul, and two ciders similar to Strongbow. In Asia, HEINEKEN’s Indonesian arm called Bintang is planning to move into the soda market in response to increasing alcohol bans.

Across the board, the global brewers are adapting to meet the demands of a new generation of drinkers. As more and more millennials peer into drinks menus for the first time, the question remains whether the traditional taste of beer will succeed in beating out its stronger and more sophisticated counterparts in the spirit and wine industries.

While their advertisements continually convince me that the world is at peace and everyone loves drinking Coke, the truth is always revealed in the numbers: the company’s stock may have rose 3 percent last week and overall revenue increased, but heavy marketing costs and increased health concerns over the fizzy drinks of yesteryear may signal a downswing in the carbonated drink industry as we know it, calling for Coke to adapt its business.

Globally speaking, Coke’s actual soda sales dropped in their last quarter for the first time in fifteen years. American health advocates cheered, as not only less Coca-Cola was sold in the U.S., but Europe and Mexico. In the latter, historically the biggest market for Coca-Cola, a recently imposed soda-tax probably did most of the damage, and may lead the way for similar taxes in other countries.

“Healthier” alternatives like Diet Coke have not proved sustaining either, as claims against the beverage’s use of potentially dangerous artificial sweeteners have sunk sales.

So where does this revenue bump come from? Coke’s ‘still drinks’, like Powerade, Dasani, and Minute Maid, provide reliable backup, generating over $1 billion for the company every year. In the previous quarter, sales rose 8 percent for the company’s still drink brands. Also, while soda sales have fallen in big markets like Mexico, Eastern markets like China and Japan are starting to carry the foreign carbonated burden, and 80 percent of the company’s volume is still overseas.

Coca-Cola CEO Muhtar Kent plans to focus on the balance between the still and carbonated brands under their flagship, while also massively increasing marketing spending, adding $400 million to already billion dollar costs. Competition like Pepsi Co. are doing the same. That said, increased marketing may not offset the health side of the equation in the long run. The time could come where Coca-Cola’s name brand product will have to take a back seat to the less-carbonated brands. #DasaniIsBeautiful just doesn’t have the same ring, does it?

Wells Fargo’s first-quarter earnings brought into light a driving force of America’s economic recovery. Its 14-percent hike in profit was fueled in part by a surge in auto lending. The financial giant may have found the next recipe of profitable subprime lending.

The San Francisco-based company originated $7.8 billion in auto loans during the first quarter, a 15-percent upswing from the same period last year. Nationwide, auto loan debt per borrower has seen jumps for a consecutive of 11 quarters, according to report complied by TransUnion. Overall outstanding car loans have ballooned by a quarter from $700 billion in 2010 while mortgages and credit-card debt moved downward.

It was new auto sales that have boosted consumer spending during the past four years, says Professor Mian, of Princeton University, and Professor Sufi, of The University of Chicago. Their study shows spending on new autos increased by 40 percent in nominal terms from 2009 to 2013, twice the growth in other spending categories. When they take autos off the list, growth in nominal retail spending last year turns out smaller than that of a year earlier. See chart below for new auto sales and all other retail spending:

The professors, however, dubbed the surge in auto purchase “another debt-fueled spending spree” because the rise is not justified by growth in income. Taking out a car loan could be an action prompted by greater confidence in the U.S. economy, but the fact that other lending sectors remain weak defies this assumption.

Another possibility is banks are tapping just another hefty market to beef up profit. Even though Wells Fargo lowered its minimum credit score requirements on loan from 640 to 600 as an encouragement for first-time and low-income home buyers, its mortgage originations dropped nearly 67 percent from the first quarter a year ago. Meanwhile, the company has been active in originating subprime loans to used car buyers. These loans generate higher returns but are granted to borrowers with low credit scores.

Last year, credit bureau Experian Automotive reported 27 percent of those who took out loans for new vehicles were borrowers with spotty credit, a record proportion since 2007. The figure was only 18 percent in 2009.

Fortunately for now, overall delinquency rate for U.S. auto loans has remained quite stable at about 1.14 percent during the past few years. But the subprime delinquency rate hiked to 6.12 percent in the fourth quarter of 2013, up from 5.73 percent a year earlier, according to TransUnion’s report.

Fewer African Americans are playing in Major League Baseball today than 20 years ago.  In 1995, 20 percent of Major League Opening Day rosters were black. But by 2014, that number had declined to eight percent. It’s no secret that inner cities have faced a tough battle promoting the game of baseball to African Americans with fewer African-American baseball heroes to look up to. Major League Baseball continues to work hard to revive baseball in inner cities, but with declining viewership in all demographics, and a game fundamentally opposite of the fast-paced digitally disrupted media landscape, reaching African-American boys in inner cities might be more important than ever.

Let’s put the decline of African-American baseball players in context: If eight percent of Major League baseball players are black, that means about 70 started on Opening Day rosters in 2014. (856 players: 30 teams of 25 active players plus about 100 players who started on the disabled list). Now, take the handful of African-American players who are All-Stars and you’ll better understand how it’s hard for black boys in inner cities to see signs of success in the Major Leagues. Less interest in baseball from African Americans leads to lower television ratings, more empty seats at the ballpark and less advertising revenue.

But Major League Baseball has setup a taskforce to increase interest. This taskforce has three initiatives: expand Major League Baseball’s existing urban leagues and academies; improve and modernize coaching; and market African-American baseball players more aggressively.

“As a social institution, Major League Baseball has an enormous social responsibility to provide equal opportunities for all people, both on and off the field,” said Major League Baseball Commissioner Bud Selig.

Yet, the problem might be bigger than Major League Baseball and any effort by the league to stem the tide, might be futile. Young athletes from low-income families make a financial decision when choosing which sport to pursue. Since Division I college baseball only offers 11.7 scholarships, which are divided among more than 30 players, it’s an easy and sound economic decision to choose basketball or football, which offers full scholarships.

“Take me, for example,” said New York Yankees’ pitcher C.C. Sabathia. “If I had a choice, I would have to go to college to play football, because my mom couldn’t afford to pay whatever the percent was of my baseball scholarship. So if I hadn’t been a first round pick, I would have gone to college to play football, because I had a full-ride.”

Thus, athletes from low-income families in inner cities aren’t choosing to play baseball for a variety of reasons. Yes, Major League Baseball isn’t doing a good enough job marketing its best African-American baseball players, such as Andrew McCutchen and Matt Kemp. But going to college on a partial scholarship is impossible for many inner city athletes and add to that the growing number of inner city baseball fields that are being bulldozed over and its no wonder the number of African American baseball players has steadily declined over the past 20 years.

But Sabathia brought up another reason beyond the philosophical and practical issues that Major League Baseball will confront when trying to revive the sport in inner cities; an issue that might be beyond their reach.

“Baseball is a sport where you learn how to play catch with your dad,” Sabathia said. “There’s a lot of single-parent homes in the inner city, so it’s hard to get kids to play.”

Sources: NY Times, Business Insider, MLB

Comparing my college experience in the 2010’s with my father’s in the early 1980’s I was shocked that it seemed that the value society places on education and its sanctity has eroded over the years. Then again, much has changed: skyrocketing tuition rates, the explosion of college sports, the national resurgence of Greek life, the decrease of funding for public university systems. Which of these are simply corollaries rather than indicators of the perception that the sanctity of education has become devalued? This past week an article appeared in Slate that drew attention to the staggering contrast between the percentage salary growth of college sports coaches and college professors.

A Chart About College Coach Salaries That Will Make Academics Weep

In economics “prices” communicate value. Salaries are a form of prices that communicate the value of individuals, in this case, at a university. The word “university” comes from a Latin word meaning “the whole.” There is no doubt that the university experience as a whole should encompass educational, social, and athletic elements. I think however there is a problem when the resource allocation does not reflect a balanced whole. Often I’ve heard the complaints that few are the students who go to college for the purpose of learning for the sake of learning. That students prioritize socializing and attending athletic events over academic pursuits. While this indicator alone doesn’t substantiate those complaints it does make me wonder why I often hear people excited about the next party and the next game but almost never about going to their next class. I wonder if a university professor was paid a seven figure salary how amazing their class would be.