Quote of the Day: College Students Welcome to Screw U University
Our political Quote of the Day comes from an op-ed column in the New York Post by law prof Glenn Reynolds, aka InstaPundit, who says the government is to blame for the college loan bubble but Obama’s recent announcement of a fix will do little to fix it. Keep in mind when you read this must-read-in-full column that Reynolds works in the college community, so this is more than just an impersonal analysis:
It’s officially a crisis. Student loan debt has hit the $1 trillion mark, exceeding Americans’ total credit card indebtedness. Unemployed graduates with huge loan balances are camping out in “Occupy” camps — the Hoovervilles of our age — around the nation. And President Obama, perhaps afraid those camps will be dubbed “Obamavilles,” as indeed they have already been by some, has unveiled a new proposal that promises to help graduates who are drowning in debt.
Unfortunately, “promises” is the correct word. Though unveiled with much fanfare, the Obama proposal doesn’t really do much. First, as the Chronicle of Higher Education pointed out in an article characterizing it as mostly political, “The benefit is available only to current students. Those jobless college graduates who are protesting on Wall Street and at similar events elsewhere won’t qualify.”
Second, even for those who do qualify, the benefit doesn’t amount to much. Daniel Indiviglio of The Atlantic Monthly calculated that the president’s plan will save the average grad less than $10 a month. (Even those with $100K in debt will save only $28.50 a month). You can make that sound like more — and the White House tried — by touting total savings over the life of the loan, but this isn’t going to rescue anyone who’s financially underwater. It’s a beer and a slice a month, more or less.
At best, it’s a band-aid solution. The real problem is that we’ve been running a higher education bubble, one that — like the real-estate bubble — has been pumped up by cheap government money. Since 1999, student loan debt has increased by 511%, while disposable income has increased by only 73%.
That’s because when the government subsidizes something, producers respond by raising prices to soak up as much of the subsidy as they can. College is no exception. Tuition has been increasing much faster than disposable income, and families — believing that a college education is a can’t-lose investment, much as they used to think houses were — have been making up the difference with debt. After all, we’re told, student loan debt is “good debt,” because a college degree guarantees more earnings.
Tell it to the Occupy Wall Street protesters, many of whom note that they’re deep in debt for fancy degrees that didn’t get them jobs.
The problem is, “college” isn’t an undifferentiated product. Companies can’t hire enough mechanical engineers, but there’s no bidding war for majors in Fine Arts or Women’s Studies, degrees that cost just as much, but deliver a lot less in terms of employment. In an economically rational market, it would be harder to borrow money to finance fields of study that were unlikely to produce enough income to pay back the loans. But since the federal government subsidizes everything — and makes student loans un-dischargeable in bankruptcy — there’s no incentive for lenders to care, and even less incentive for colleges and universities to care. They get their money up front, after all — just like the people who wrote the subprime loans that fueled the housing crisis.
For serious student-loan reform, we’re going to have to look well beyond the Obama proposal. We need something that aligns incentives with reality. Here’s my proposal:
13 Responses to “Quote of the Day: College Students Welcome to Screw U University”
More importantly, why is the federal government intruding into the student loan (as with many an educational) issue? Obama’s stunts are just campaign tricks for the dumb animals that respond positively to them, but more broadly, why has the federal government issued educational (“student”) loans at all, or any other such direct association with the citizens. It’s the opposite of federalism, not to mention answering the question the wrong way how much should government be doing versus the private sector.
LOL Sentry
Government backed student loans are over 40 years old (at least). Did you have a problem with the loans during Reagan or Nixon administrations?
Student loans were created in 1957 in response to Sputnik. So the Space Race was won with the help of student loans OVER 50 years ago. GSL started in 1965.
http://www.thehistoryof.net/history-of-student-loans.html
There is no problem with student loans per se, but as Reynolds points out, there is definitely a problem with student loans for people who end up with no marketable skills. Not saying there is no value to a sociology degree, but there certainly is not enough value to justify $100,000 or more of debt. If the schools were at risk for these loans, they would have an incentive to make sure their students can earn their way out of them.
I think we’ve reached the point where there needs to be more concentration on nontraditional college education. There needs to be more emphasis on skilled trades (like there used to be – and still is some places) and less emphasis on the old belief that a BA or BS is going to automatically translate into useful benefit to a society already awash in unemployed degree holders.
http://www.policymic.com/articles/2186/student-loans-are-a-toxic-debt
Common guys the universities are not for everyone these days, it is very costly just accept, only alternative now is something called “High Speed Univ” where you pay much much less but get degree faster
I’m sure the folks that go to trade and non-college schools will appreciate the lower loan interest rates and the other adjustments.
There are a host of big problems in education-the loans are just the tip of the iceberg, because what does that increase in tuition costs reflect?
Is a student who reads at an 8th (or less) grade level really college material? is a student who needs remedial math suitable for University? Common sense would say ‘no’, yet Universities are offering (and getting LOTS of hits) courses in basic english and math skills for non-immigrant students.
That stuff has to be PAID FOR somehow.
Kids are graduating from K-12 education in a fundamental state of being uneducated, these students then go forth, to Universities based on GPA that don’t reflect actual education. The proof of this is in your course-listings, four-year and higher institutions having to offer remedial reading, math, and science classes because the 101 levels (what used to be the ‘bonehead’ level) classes are too difficult for the students who’ve got these very-expensive student loans and are attending.
How did this happen? Consider that per demographics, the bottom 20% of university graduates includes most of the people who’re competing for public schools jobs-that K-12 education I mentioned before, is administered by the bottom percentile of college graduates on average (yes there ARE exceptions, but rare…)
add in the Mothers of America (as an old SFC I worked for once fumed), who turn their little darlings over to the School districts to raise, then howl in indignation when it turns out Johnny and Jenny might’ve had their ‘self esteem’ harmed by being graded objectively, or by being punished for misbehaviour during those formative years that establish study habits, conduct, etc. etc.
Yes, folks, I went there-it’s at least Partly the PARENTS at fault-from the very beginning. Insisting that their uneducated lump of flesh is college material when he/she/they can’t even manage to divide two digit fractions without assistance from a calculator and a peek at the answer sheet beforehand.
It’s not even a secret that the best, most successful products of our higher education system don’t come from the United States.
Yes, CS, and the schools call them “inventory units”.
Just because Reynolds is in the college environment it doesn’t mean his views aren’t colored by his ideology. I used to read some of his stuff but then he drifted further and further to the right like many Republicans and I couldn’t find enough useful non-partisan, though conservative, posts by him any more. The loan system is a problem, government or not. Conservatives blame the government. Big surprise. The truth is that government involvement or not, if you are constantly informed that college is the only way to decent employment the demand is going to be huge for a college education. Combine that with the cost of a very labor intensive “product” and not nearly enough full rides for those who need them given that cost then you get a loan system that will stick students with large amounts of debt. Do you think you can pay that debt with a school teacher’s salary or any other jobs that need the education but don’t pay enough to service that debt? Look at the current mini-scandal about law schools. More lawyers than we need and far too many students still don’t know what their job search will really be like.
The man has a point. You can say what you want, but obviously college education is going up much faster than inflation, and has been for decades. Rudi’s point that it didn’t explode immediately is consistent with most all long term bubbles — they build up over time, like competition in reverse.
The problem, as he points out, is that the loan isn’t based on the value of the education (the increase in salary that comes with the degree), but the tuition charged. It’s really stupid incentive for the educational institutions to raise their prices. It’s making for beautiful campuses, but not for better education.
Changing the formula so that it was based on expected salaries instead of the tuition rates would immediately change that incentive, without having to change the amount being spent. In fact, it would allow more people to get an education as there would be fewer defaults. Other than the shock to the educational institutions themselves, I see no down side.
Here’s an idea: scrap the federal college loan program entirely.
College is ridiculously and shamefully expensive, and the quality of graduates is down. Fed-backed loans are skewing the price curve. Drop the loan program and colleges will have to lower tuition to get students. They can also figure out how to budget properly and run their schools :gasp: like a business.
As far as getting poorer students the education they need, they need to do it the way I did it. My parents had no money, I went to community college, working nights & weekends, to fund it. Then I got out, got a real job, and took night classes to get my Bachelor’s, paying as I went or, at most, covering gaps with credit cards. Yes, it took me about 8 years that way, but virtually no college debt and, frankly, the experience I got at work was far more useful than anything I learned in college.
In this case, I’m with the right: the government doesn’t need to get involved in everything. When they do, they skew the price curve, and that’s rarely, if ever, good.
There should have been a comma after “College Students” in the title.
Barky is correct about federal financial aid affecting the costs of attending college. Readers ought to try to think for a moment and ask themselves if this might not be a general principle about all kinds of government (all government) assistance. Think about it.
An additional and more important point is to think and ask why the federal government should have any business doing anything with college education, or other education, or so many other things. The related point is to ask if any government should be doing these things, but with the federal government it really is out of place. (Not that many don’t care and want it this way. They’re part of the problem.
We all know about the corruption and huge money with major sports (the name for them) in college athletics, and what coaches get paid. (Under the radar are assistants and staff members — nobody seems to think ever about that.) Well, don’t forget the scandalous cases we’ve encountered about university presidents. Now also think for a moment about various professors, especially those of note for being politically active and even celebrities.
Finally, think about administrations. Also, pensions. There’s a lot to “have” to pay, and it shouldn’t be surprising the prices charged are correspondingly high.
Now, think about austerity that Greece is facing, and other nations like the UK, and what states as well as the feds (and local governments) will have to sometime here in the States, too. In the UK, tuitions roughly have been trebled. (Note that many here will find the original level or the new level also low or nothing unusually high.) The “cap” was lifted from about $5,200 to about $14, 200. Students have protested; a “human rights” lawsuit is being pursued on behalf of two high-school children currently.
What if the same thing happened at state universities here in the USA? What if states felt they needed to treble state university tuitions or other university charges (including housing on campus)?
(We don’t need or want the most ridiculous lawsuits, too.)
It’s certainly possible if states face bankruptcy or are in bad shape.
Cannonshop’s observations make clear that any “free” university education for citizens here really needs to be on the meritocratic concept, free of defects sought for political reasons or purposes.
Frankly, I’m not sure we can afford “free” or greatly subsidized educations for our citizens, anyway, not currently with the way our economy is, and later, when entitlements will suck into them all money that can be considered to be “available.” I’m unsure we can afford to make any subsidy for education, or for that matter, for anything else, not now, not later.