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The College-Loan Scandal
Matt Taibbi writes in Rolling Stone about the economics behind college tuition. Interest rates get the headlines and the attention of politicians, but Taibbi says the real culprit is "appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008." He writes,
"For this story, I interviewed people who developed crippling mental and physical conditions, who considered suicide, who had to give up hope of having children, who were forced to leave the country, or who even entered a life of crime because of their student debts. ... Because the underlying cause of all that later-life distress and heartache – the reason they carry such crushing, life-alteringly huge college debt – is that our university-tuition system really is exploitative and unfair, designed primarily to benefit two major actors. First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency – low- and middle-income students – that has virtually no lobby in Washington. Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity. Why is this happening? The answer lies in a sociopathic marriage of private-sector greed and government force that will make you shake your head in wonder at the way modern America sucks blood out of its young."
Universities have no real incentive to lower prices. Why should they? They can foist costs onto a third party.
Also, their costs keep going up - healthcare, salaries, maintenance. Their cost structure is basically fixed. The only way they can cover those is by raising tuition.
This isn't a new problem. This is a structural problem that's been pointed out many times. Why is this news?
Any union shop has the same issues.
The more they try to make college "affordable" via loans, scholarships, etc. the more the colleges and universities will raise their prices until it is just barely affordable by all participants. They want to maximize their income -- as any business does. On the other hand, if we were to cut off student loans and scholarships you can bet that the prices would plummet and they'd stop building fancy buildings named after themselves. (Some universities have exercise areas that are reminiscent of spas and exclusive health resorts than a university.) It is amazing that our parents and grandparents were able to do things like send men to the moon without plush padded seating and nicely carpeted hallways at their universities. Even so, they could still afford to get an education.
Education in Japan, Work in USA, and wife from France. That's the formula for happy and well played life.
The states have been cutting funding to higher education for years. Costs for running a university are only getting higher. Either the university cuts programs and services or raise tuition.
Hey OPAMA, you wanna get the country out of it's slump? Forgive student loan debt. That'll do more to boost the economy than your silly bail-outs.
I've watched tuition at my local state university go from $150/credit hour to $350/credit hour in 8 years. I have friends graduating with engineering degrees that have 30k in debt from a STATE SCHOOL. This isn't an Ivy League school, but a state university. How does that compute? And the whole time, the school itself is hiring more Administration people and getting rid of, or driving off, many of the professors.
Tuition continues to skyrocket, yet they close more sections for classes every semester. How are you going to sit there and tell me that "tuition needs another hike this semester", and "oh by the way, we're only teaching Kinematics in the Spring now, so you'll have to wait till next year. Sorry."
For lack of a better way to put it, it's horseshit.
Its already tipping as defaults are at an all time high but thanks to the changes Bush passed in 06 you can't even get out of debt with bankruptcy and that REALLY needs to change. Living in a small college town I hear of at least a couple a year committing suicide because of student loans, last year one in my own building hanged himself because they wouldn't stop hounding him over it.
That said after the student loan bubble bursts they'll be one major bubble left to pop and that's the stock bubble and when that one pops colleges will be ghost towns as it'll make the depression look like a flash crash, VERY nasty and only a matter of time now, the bubble is too massive to slowly deflate.
ACs don't waste your time replying, your posts are never seen by me.
Cars don't cost that much. Teenagers don't buy houses. The decision-makers here are people who aren't even old (or mature) enough to drink - are completely impulsive - have no life-experience and less of a tangible "long-term" outlook - and they're actually *pressured* (by society, parents, high-school guidance counselors, etc) to go with the BEST school they can [at any cost].
What can possibly go wrong??
While I would have loved to receive an advanced education for free, I really don't understand what all the fuss is about. I worked my way through debt-free and received my "4 year" degree in 5.5 years by going to a state university and living a reduced lifestyle. Why can't others do the same? Why do they have to go into debt in the first place? This smells more like a problem with irresponsibility and poor life choices than some sort of systemic issue.
Meanwhile, unless I'm mistaken, kids in Europe go to college for free.
Nothing is free. Ever.
Not education. Not healthcare.
"Free" means you're making someone else pay for it.
Whether one agrees with it or not, call it what it is.
I mean, the football programs like where I went to school, MORE than pay for themselves, they prop up all the other non-revenue generating sports.
It isn't like student tuition is going to college athletics, in fact from the schools I know. the athletics are subsidizing the rest of the school...
I grew up in the south, I'm talking about schools like U of AL, LSU, the schools in MS...etc.
Is that not the way it is in other school conferences?
I'm not actually a huge sports fan myself, but c'mon if you're going to bitch, at least get the fact right on who is spending who's money where.
I agree it is atrocious what colleges are doing today...but let's be fair about the money accusations.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
What year was this?
They have debt because tuition costs more than the jobs they can get pay. If you are paying $25k a year in tuition and are making 17k a year you will end up with debt.
State universities are being increasingly defunded by states who are facing budget difficulties. State universities are a nice to have for states but you can bet they'll try to defund them any chance they get. Worst of all states can dictate how much tuition state universities charge if they want state money and put a strangle hold on their staff and abilitiy to hire good professors and services for the university. The push has been towards privatization and eventual elimination of state schools thanks to state budget problems.
~~ Behold the flying cow with a rail gun! ~~
Its already tipping as defaults are at an all time high but thanks to the changes Bush passed in 06 you can't even get out of debt with bankruptcy and that REALLY needs to change
This is always something that has really bugged me. Why exactly is it someone's right to borrow money and then not pay it back? If you borrowed it, you should have to pay it back. It doesn't make any sense to allow people out from under their debts that they made the conscious decision to borrow. If you don't understand the total costs, how the lending and repayment processes work, or if you don't have any solid plans for living with that debt, you shouldn't be borrowing it. Period. I don't care if it's a mortgage, a car loan, a school loan, or even your neighbor's tools. Your borrowing choices and the repayments from those choices should always be your own responsibility.
Get real. Just look at other nations and how they handle their education systems. It is precisely because there is so much profit motive involved that things are the worst anywhere in the [first] world. And the patterns are plain for all to see. It's not a "free market" compatible situation. What do I mean by that?
Simple. We talk about supply and demand as key factors in the free market. But in cases where there is unlimited demand there is massive exploitation by business unless regulation is present. Take power for example. Most states understand that power has unlimited demand and that utilities must be regulated. California and Texas went with deregulation ostensibly to increase competition and lower prices while increasing quality -- free market thought. What happened? The highest energy prices in the nation. And medical costs are another example. The system grew from a pay the provider system where multiple providers can compete for your business into one where consumers pay using "someone else's money." (The insurance system) Once medical insurance became a virtual requirement for having access to healthcare, competition all but disapepared and prices went crazy. And consumers didn't care because they paid seemingly reasonable monthy costs for something only a small percentage of people were using. (Paying for something they MIGHT need under terms which they don't understand instead of simply paying for something in exchange for something.)
The problem is that free market capitalism can never exist in its purest form because human corruption will always creep in with every form of bait and switch imaginable. They are actively redefining words, terms and expressions so people don't get what they think they are paying for. ("Unlimited"? Really?) And the same free-market people are lobbying and standing in line for their government subsidies all day long while complaining they want government out of their lives.
So you can go on trolling with your right-wing nonsense because it doesn't work any better than left-wing nonsense. Everything has practical limits in one direction or another and those limits should be defined at the point where peoples' worst natures are activated and massive exploitation begins to occur. And it's precisely the goal of preventing massive harm and exploitation which government should exist for. Obviously, this means business lobbies should be forbidden but that can't happen without a massive revolution so I wouldn't look for it to happen. But the next best thing is for people to wake up and start caring about what goes on in government at all levels. These days, most corruption is done in plain sight. People just have to look and care about it.
For Education, it's particularly unbalanced (depending on your tax structure), because taxing people who didn't go to college to pay for those who did it real economic unfairness.
I far prefer a system where your university gets some % of what you make in the first 10 years or so after you graduate, on some diminishing-over-time scale. Even better if it's a % of what you make beyond what the average person with no college degree makes. If a student doesn't earn more as a result of going to college, why should the college earn more?
Socialism: a lie told by totalitarians and believed by fools.
Having an educated society is not free, we all benefit from it.
It was 2002 to 2007. And as a young white American male also with no family money, I worked multiple jobs and figured it out. No loans at all, no scholarships either until my senior year when I managed to land a research scholarship that required 15 hours/week of research with a professor. I missed out on a lot as a consequence, all those "college experiences" that others talked about like parties and such. It was the lifestyle I couldn't afford, not the tuition.
In the case of student loans, it's because their first experience with debt wasn't an $800 credit card that caused them trouble but a $300,000 school loan that cost them $1.5M to pay off. They're young, naive, and ripe for the taking.
To put it into perspective: Legal college loans are morally equivalent to legalizing sex with anyone 10 years and older. Especially that sweet spot around 12-14 where they have none of the suspicion and all of the romanticism, and you can sweet talk them into anything--love 'em and leave 'em, give them tons of STDs, knock 'em up, pass them around to your friends to pay off your debts, the works. The whole while they're thinking, this is great. Until it isn't, then they're like, my life is horrible and I'm left with a broken vag and ass and fucking strange diseases and somebody's kid I don't know who....
That's basically what student loans do.
Regular bankruptcy is more an economics thing: there's no way this person is ever going to meaningfully pay this off, inflation is going to marginalize the damage his non-payment does, so it's less damaging to society to give him a pass and mark that he's an idiot and you don't want to let him borrow money ever.
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Yep, my daughter is avoiding student loans (and neither parent is about to borrow money for her tuition either). She spent the last year working while taking a few online classes to keep her student status. She may have do that again after this year.
Mind, on top of tuition she's got something like another $1000 is miscellaneous fees (lab fees, "technology" fees, etc, etc.) plus dorm and meal costs. Totals almost $10k for the semester, at a state university. Fortunately for her she's got about a year's worth of AP credits from high school so she'll probably do the 4 year degree in 4 years.
But the irresponsibility and poor life choices on the part of some (because of the easy availability of indentured servitude, er, student loans) lead to the systemic issues of schools raising tuition because they can. This hurts the people trying to work their way through college just as much as the ones taking loans.
(I did my share of weird jobs to pay my way too, including paid volunteer for experiments to running the AV equipment (slide projector) for the anatomy lecture class ... which dates me.)
He said pray at the alter of, like a a deity, it doesn't actually exist, and no lifestyle you live will be "free market" enough for the ardent moralizers. It's a broken mentality. There never were "true free markets".
I think your suggestions are good, but I think it's wrong-headed to blame the students for 'not taking responsibility.
This is a systemic problem. We have a bunch of 18 year-olds with relatively little life experience, and we keep telling them that going to a good college will make them rich someday. We give them the impression that taking out massive amounts of student loan is a wise move. This message comes from parents and teachers and politicians and the media, and you can't blame a bunch of kids for believing it.
We need to take a good hard look at how we're treating education. Is college a place where kids can receive a good general education, or are they vocational schools? Are we promoting education for the good of our society, or do we think it's a privilege for rich people that should be denied to the poor because they haven't earned it? Is the purpose of college to educate our young adults, or to entertain them with frat parties and amateur minor-league sports teams?
Yes, it's all tax money. The difference is that, in Europe, taxes pay for public education, healthcare, infrastructure, and so on. In the US&A, taxes pay for a bloated military and a massive espionage apparatus.
Circumcision is child abuse.
And since college-educated people earn more money and thus pay more taxes, you're entirely right: tax-funded education is not free, it's a net earner.
European countries are democratic. If their governments pay for college out of tax money it's because the citizens who pay said taxes are okay with it.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Ah -- the Law of Unintended Consequences strikes again!
This is exactly what classical, supply-and-demand economics would predict.
Most of us understand why the government can't just print more money. The price of everything would just go up.
This is exactly the same scenario. The only difference is that in this case, the government is printing a special kind of money -- money that can only be used for one thing. It is no surprise when then price of that thing just goes up accordingly.
Subsidies (i.e., cheap loans) increase demand. Increased demand causes the price to rise.
Consider:
* The US massively subsidizes education. The price of education rises far beyond the rate of inflation.
* The US massively subsidizes housing. The price of housing rises far beyond the rate of education.
* The US massively subsidizes health care. The price of health care rises far beyond the rate of inflation. (Except, of course, the kinds of health care -- like cosmetic surgery -- that do not typically get subsidized. Costs in these areas have plummeted.)
I don't pretend to have an answer to this dilemma. The only really clear thing is that the laws of supply and demand aren't *statutory* laws, that can just be altered with a pen and a lot of hand-waving. They are fundamental natural laws, and well-intentioned attempts to manipulate markets (from student loans to price-control regimes) almost always trigger equal and opposite consequences.
The real shame is that important issues like these are so easily demagogued. Even though the system is clearly broken, no politician in his right mind would ever propose changing it. "Look!" people would scream. "He hates education! And poor people!"
Everyone here does seem quick to say "Oh just do an ROI calculation on college and don't take it for granted you should go" without recalling that for decades now we've pretty much shoved the idea that "if you don't go to college you're a complete shit and failure of a human being (what are you gonna do, flip burgers? Because people who flip burgers are subhuman shit after all)" down everyone's throats, and most people don't want to be thought of as complete shit.
To be fair, the minimum wage back then was the equivalent of about $9 an hour today. Plus you didn't have to have a degree to get a much higher-paying white-collar job, like you do now. In the early 70's my parents bought a house while working part-time office jobs and putting themselves through full-time gradute school and taking care of a small child. Try that trick now.
Wait...I forget. Which economic injustice were we complaining about here?
I did something similar: worked 30 hours a week, lived in cheap housing, took 6 years to graduate, but did so debt free. Having said that, I have mixed feelings about it. Yes I worked hard and sacrificed to make it work. I was lucky too though and had opportunities other people don't necessarily have:
1) I had a good quality state school I could attend.
2) My parents let me live at home until I could find a good/cheap housing solution.
3) My parents helped me out with classes my first year until I got established.
4) I had good jobs in high school and was able to build a savings.
5) I managed to get a civil service position at the University that provided me with some free credits every semester.
It seems to me that in today's world it may not be enough to be responsible and diligent. I'm not sure I could have done it had I not had the opportunities I had.
What state, and what was the tuition? Here in NYS (SUNY) 10 years ago the state paid 75% of the tuition and you paid 25%, now it's the other way around. My wife is looking at upgrading from her associate's to her bachelor's and it's $14k/yr for nursing.
At min wage of $7.25 (minus 6.2% FICA and 1.34% Medicare) you would have to work 2090 hours/year (40.2 hrs/wk w/ no vacation, holidays or sick time) just to pay the tuition. Then there are books, either a place to live or a way to get back and forth to school, etc. Working your way through school ain't what it used to be.
Completely true. I don't really care so much about the choice between "low taxes, few services" and "high taxes, many services", but what we have now is "moderate taxes, low services, giant military". That's far worse than the other two.
"It's teh free marketz!!! herp!"
You show me a bubble growing by 5-8-10% a year and I'll show you a mass of government involvement; subsidies, tax breaks, guaranteed debt, etc.
Housing bubble? Fannie, Freddie, Ginnie Mae, Home Mortgage Interest Deductions, capital gains exclusion, etc. When the music stopped the GSE's held $0.5E12 of subprime, alt-a, no-doc, stated income garbage loans. Government was the Market Maker.
Healthcare bubble? Medicaid, Medicare, VHA, CHIP, TRICARE, untaxed employer health care benefits, etc. Obamacare is going to subsidize tens of millions of exchange policies. 46% of all US health care spending is via government and the costs are spiraling out of control.
Education bubble? Pell grants, Sallie Mae's government backed tuition debt, huge state subsidies to public universities, Student Loan Interest Deduction, etc.
There is nothing "free market" about any of this. It's all government policy and government money.
Maw! Fire up the karma burner!
Did you go in the 1960's or 1970's? What a bunch of freeloaders that generation was. Tuition was paltry, jobs plentiful.
I didn't realize that the 21st century definition of freeloader included people who studied and then got a job. If you believe that then you're suffering from Stockholm syndrome.
The problem is not that my generation were freeloaders, but that your generation is getting screwed. If my sympathies aren't sufficient, take heart in the fact that I'll also probably be getting screwed when my daughter goes to college. Actually before that - my wife needs to upgrade from her associate's to her bachelor's.
This is the only sensible system I've ever seen proposed and it's the one that's almost universally reviled by the majority of the those who'd have to implement it.
If you build it, nerds will come. Soylentnews.org
Exactly like the housing bubble. Then they gave out loans to people clearly unqualified, clearly unable to pay back the loan, low-documentation loans, no-documentation loans, interest only loans, negative amortization loans, etc etc.
And, exactly like the housing bubble, we seem to be blaming the schools and banks for the irresponsible behavior of the people taking out the loans.
Things are going to continue the shithole downward spiral in the US until people get out of this "its not their fault" mentality that arose in the last 15-20 years and start holding people responsible for their actions and poor decisions.
Which is in a different universe from where students are today.
Go back to school at 3x the cost and then spend a year sending out resumes before you presume to lecture today's grads. Why is there's always some dude who starts up with their "back in myyyyy day" crap when costs have exploded since they graduated when Clinton was still president.
25k is an expensive tuition. Most tech schools have programs for 3k/yr or less, and many states have perfectly acceptable schools with tuitions 6-10k/yr for instate. The whole "100k in student debt" story is completely ridiculous. Unless you now go by Dr, if you paid 100k for your education you got fleeced.
You show me a bubble growing by 5-8-10% a year and I'll show you a mass of government involvement; subsidies, tax breaks, guaranteed debt, etc.
Alright. Explain the Rhodium bubble of 2008, the Great Stock Market Crash of 1929, Australia's Poseidon bubble of 1970, the Florida Land Boom of the 1920s, and the .Com Bubble of 2000 as "all government policy and government money."
I'd also strongly dispute that the healthcare crisis is all government's fault. Even a 100% private healthcare system is not a free market due to the lack of voluntary participation in the system and general lack of price-competition. (No one chooses the "cheapest" over the "best" unless they are simply priced out of the best.)
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
If the US is doing such a bad job compared to all these countries, why are they still coming here to study and work?
I think you're asking the wrong question.
If the US is doing such a great job, why are so many of your colleagues not Americans?
The issue at hand is not the quality of education, but the outrageous, crippling expense of it.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Then who is going to put up the money to loan to students?
The government.
A loan agreement has to be mutually beneficial to both borrower and lender.
Government gives interest free loans, they get a highly educated populace who can afford to spend idiotic amounts of money, thus improving the economy and tax pool. The student gets a good education that leads to a better, healthier, happier life.
It's the definition of a win-win. Also, FWIW, the government isn't supposed to profit from doing it's job. That's kinda one major reason for the existence of government - to do the things that are not necessarily profitable, but must be done for the good of all.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
"Everyone here does seem quick to say "Oh just do an ROI calculation on college and don't take it for granted you should go" without recalling that for decades now we've pretty much shoved the idea that "if you don't go to college you're a complete shit and failure of a human being (what are you gonna do, flip burgers? Because people who flip burgers are subhuman shit after all)" down everyone's throats, and most people don't want to be thought of as complete shit."
Over simplify much?
Everyone SHOULD be quick to say "do a ROI calc" as well as decide if they should even go to college. A plumber doesn't need a degree and they generally get paid exceptionally well. Also part of that calculation should include expected income in their chosen field. If they can expect to make $20k-$30k, maybe they shouldn't be taking out $50k in loans. Or maybe they should go to a less expensive school. I'm sorry -- if the market is saturated with art history majors, you may end up flipping burgers to pay off your loans. Hell, the market is saturated with lawyers right now. I know a few who are working as paralegals and are happy to have the work.
I have little sympathy for someone who took out $100k in student loans they can't pay back because they can't find work. I have a ton of sympathy for someone who took out less than $20k in loans and are struggling.