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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."
They scales won't tip, but I sure will.
Her name is Candy.... please welcome her to the main stage and show her that you care guys. She really IS trying to pay her way through college!
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.
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.
"They called me at work, sometimes two to three times a day, doing all the stuff they aren't supposed to do: threats, et cetera," says 41-year-old Shawn FitzGerald, who owes $300 a month and says he expects to be paying off education loans into his sixties. "They told the receptionist at my job that I was in legal trouble...."
"I have been told I made the wrong decision going to college, as well as being told I was a failure, an idiot and a mooch," says Larissa, a young woman from a blue-collar town outside Chicago. "I've had ex-boyfriends that I never even lived with contacted by collection agents, my childhood friend's distant relatives contacted by them, as well as distant relatives of my own...."
See here:
Fair Debt Collections Practices Act.
When a collector breaks the law, seek legal representation. Yes, people have sued collectors and won for this kind of abusive behavior.
I read about this all the time and wonder to myself, "Who is their right mind goes 100k in debt for school?".
Students need to take some responsibility here. You may:
* Have to go to community college for the first two years
* Have to live with mommy and daddy for a few years
* Have 6 roommates
* Have a job (yes I am aware that isn't as easy as it sounds)
* Wait a few years to attend college so you can save money
* Join the military so you can get the GI Bill
* GO TO A CHEAPER IN STATE SCHOOL!
Yes college is expensive but a lot of the time what I see is students wanting their cake and eat it too.
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Part of this has to do with the subsidies they add to tuition. I remember when I was in school, tuition was about $2000 per semester. One semester, they decided to jack up tuition by $400. Most of that $400 was earmarked for subsidies for lower-income students. I found out during a meeting where the chancellor announced the change that 40% of our overall tuition went to subsidies. 40%! At which point I asked:
"So you're increasing tuition to help students who can't afford tuition, because we keep raising tuition to help students who can't afford tuition?"
They just kind of shrugged that question off.
To be really happy, it should be" Educated in USA, Work in France and Wife from Japan".
Linux O Muerte!
Here's a reality check:
40 years ago you could reasonably go to school and pay for your tuition and fees by working a manual summer job. There are no jobs out there which pay a year's tuition in 3 months for untrained labor, or anything close to it today. Heck, the average starting ANNUAL salary is less than tuition/room/board for a year at practically any private university today.
Is it just my observation, or are there way too many stupid people in the world?
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! ~~
Now, that's for private, non-profit schools. Public schools it has jumped substantially, but not for any nefarious reason: it's what happens when the state legislature looks for easy cuts in the budget and axes higher ed first. When I went to William and Mary back in the mid-80s, 34.7% of the budget was covered by the state. It's 12.8% now, but they're still expected to offer everything they did before (and more) as well as give discounts to in-state students. That money can come only from two places: tuition and endowment.
Endowment is an entire 'nother subject. You might have noticed a serious drop in the stock market a few years back? We (and many other schools) run a three year trailing average on endowment draw, so that's still hurting badly. Oh, and you can't get bonds or other securities with yields higher than a percent or two these days.. Couple the two and your endowment income has cratered as well.
Can we cut budgets? Sure: I started here six years ago in IT and my budget is 20% less than was when I joined. Software vendors don't care: my SPSS licensing costs have tripled in those 3 years for example, and everyone else wants their 5% a year bump. And I'm at a healthy school: I've been at ones that aren't and it's worse.
The real abuse IMHO is the loan industry. We've somehow gotten this idea that it's ok to put yourself into debt for the rest of your life for a degree. (And that debt, unlike every other kind can't ever be vacated by bankruptcy) Nobody should take out $100k of debt for any degree, and the feds shouldn't back it, much like they shouldn't back flood insurance for people who want to live on barrier islands. That may mean you don't get your dream school. Maybe it means 2 years of community college before residential. There are plenty of ways to get an education- shop for them just like you would for an phone
"Seven Deadly Sins? I thought it was a to-do list!"
Most football programs lose money. The schools you are talking about are extreme outliers.
Even in schools where the football programs make money the athletics programs normally lose money.
http://collegefootballtalk.nbcsports.com/2010/08/25/ncaa-report-shows-many-college-programs-in-the-red/
http://www.forbes.com/sites/stevensalzberg/2011/11/26/football-is-corrupting-americas-universities-it-needs-to-go/
C'mon if you're going to bitch at least the get facts right.
Yep. Here in Sweden there is no tuition. Paid for through taxes. Like the health care.
Exorbitant taxes? Nope. Most people pay something like 30%. While this is more than most pay in USA, when you add tuitions and health insurance it turns out we pay less.
Why? Because there is no billionaire middle man taking his arbitrary cut.
Yeah, socialism stinks, right?
You're dating yourself with this comment. If you're paying full fair at most state universities, there's no way you can pay tuition and living expenses on a part-time job (even with full time in the summer). Perhaps this is possible at a community college if you work maximum hours (20/week), full-time in the summer, don't buy any new books/clothes/anything for 5.5 years.
For example - look at the University of California system, once considered the best public university system in the world, and one of the best bargains (not true anymore). They're estimating $30k / year for in-state students (including living expenses). Please tell me how you managed to make $30k/year working part time?
http://admission.universityofcalifornia.edu/paying-for-uc/cost/
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.
The only schools where athletics are self-funding with excess going to education are the big sports schools. Stanford, UCLA, UM, Ohio State, Florida State, and the other big sports names.
If a school isn't in the top 16, they aren't making their investment back in athletics. It's just a loss leader to stay relevant because their academics are irrelevant. And by staying relevant in athletics they're hoping they get applicants interested in attending there.
Really, though, it's really only indicative of warped USA priorities. Higher education is supposed to be about education, not school spirit, not meatheads throwing balls around, not ticket sales, not full-sail scholarships for those who will wind up contributing nothing to society except getting into professional sports and making a bunch of Gatoraide commercials.
It's a little bit like glorifying the British monarchy. Sure, castles and stuff bring tourism dollars, but at the expense of massive losses of waived inheritance tax by nobles.
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.
I read about this all the time and wonder to myself, "Who is their right mind goes 100k in debt for school?".
From Collegedata.com:
In its most recent survey of college pricing, the College Board reports that a "moderate" college budget for an in-state public college for the 2012–2013 academic year averaged $22,261. A moderate budget at a private college averaged $43,289.
OK. A little math here: A "moderate" cost for 4 years at a state school (not counting inflation, which makes this a joke really): $89,000. "Moderate" cost for 4 years at a private college: $173,000. So who goes into 100K kind of debt for school? It looks like pretty much everyone who doesn't have family resources to fall back on.
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.
If you are paying $25k a year in tuition and are making $40k a year, you will also end up with debt. Federal and state taxes will eat up 33% of that $40, so you're talking $26k left. Then you've got rent, and even a slumlord will charge $300/mo so you've got $22k left (and if you want to stay at a university dorm, that'd be $10K/yr). Then you've got food, and even an anorexic will have to pay $40/week for food, so that's another $2k a year gone and you've got $20k left. You better be walking to college because there's no way you've got money for a car, car insurance, or gasoline. So, living in a slum, walking to college, eating like an anorexic, not buying any new clothes or any new anything, and "making" a $40k salary, you've got $20k to pay off your $25k a year tuition. That still puts you in $5k debt a year. By contrast, if you took your $20k over four years ($80k) and invested it piss-poor bonds of 3% interest a year, you'd have $260 thousand dollars by the time you retire (40yrs from now) with that money alone. If you're actually smart, the kind of smart that lets you get into college to begin with, you can be making 10% growth a year and have $3.6 million in 40 years. That's just with the $80k.
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.
Why can't others do the same?
Long story short, because ceteris paribus is utter bullshit. There's a fair chance you got lucky, or live in a state that controls tuition better than others, or are leaving out part of the story (like any scholarships, grants, preferential treatment due to legacy/social/racial status, free credit hours due to employment, etc).
Point being, not all people/situations/opportunities are created equally.
Side note, your exceptional circumstances do not change the absolute fact that the tuition system is seriously gamed against most people.
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