The colleges' role in the student loan crisis

"Here is how the education industrial complex works.

 The universities spent $130 million lobbying to get this loan forgiveness done. The university needs money to pay for the vast overhead created by all the costs of the DEI staffs and the high operating overhead of all the amenities they now offer. 

So, they raise tuition, and then convince students to take out loans to cover the tuition which is really to cover their inflated operating budget. The student wants to attend, so they borrow, not understanding the economics of what they are doing. 

The government makes the loan with no assessment of ability to repay, or if the course of study is one that will provide a job paying enough to cover repayment. The school gets its operating costs covered by getting the students to borrow the needed working capital to operate the school. They then can put donations from rich guys who want their kid admitted, into their huge endowment which is just a giant investment portfolio. 

So now the university has gotten the student and the government to cover their operating costs, with zero liability to the university for the borrowed funds. It is magic. It is a total scam.

Meantime they have courses like gender studies, or others that have nil value to the student or employers when they graduate. So now the kid has no way to earn enough to pay the loan that financed the university operating budget. That is the reality of student loans. Universities are a corrupt cabal now destroying a whole generation with nonsense courses, and no free thought allowed. This will harm the nation for many years. This is one more example of why we are fighting the Amy Wax war. Between teachers’ unions and university corruption and ideology, we are in real trouble educationally."

(The Ross Rant, 8/27/22)

Comments on Amy Wax mentioned above: "On Dec. 20, Wax in an interview with Glenn Loury, a professor at Brown University, said that since “most” Asian Americans support the Democratic Party, “the United States is better off with fewer Asians and less Asian immigration.”

After backlash to those remarks, the University of Pennsylvania Carey Law School’s Dean Ted Ruger announced on Jan. 14 that he had initiated a faculty review process that could result in sanctions imposed on Wax." (Daily Princetonian, Jan. 27, 2022)

He thinks the federal government is a college student’s friend—an e-mail exchange

Really?  Your source?  Did you know the government and its own predatory loans, grants, scholarships, etc. is the main reason the bubble of student loans is bigger than the housing bubble of 2007?  When I entered Manchester College (private) in 1957, a college education was about $1,000 a year with tuition, fees, housing, food and transportation. My sophomore year at the University of Illinois (public) was about the same. 

If you use a calculator for 1957-58 dollars and convert to 2018 dollars, 60 years later, you’ll see what throwing money at colleges does to the costs.  College costs have soared far higher and at a faster rate than medical costs, even though medicine has gone through far greater changes and technological and pharmaceutical improvements. Our lives have been extended by the medical improvements.  A college education has been cheapened; a BA or BS is today not worth a lot except to go on to graduate school and leave with $70,000 in debt.  Colleges have made few changes except to shift most of the faculty to the left of center, add programs in “area studies,” remove Shakespeare and American history, and deny conservatives their right to a bias-free education. The more money government provides to students, the more the universities and colleges raise their tuition and fees. Funny how the “market” works, isn’t it?

According to the Bureau of Labor Statistics consumer price index, prices in 2018 are 772.10% higher than prices in 1958. The dollar experienced an average inflation rate of 3.68% per year during this period.  In other words, $1,000 in 1958 is equivalent in purchasing power to $8,721.04 in 2018, a difference of $7,721.04 over 60 years.

Do you know any college/university where a student can attend for $8,721 a year? All costs, not just tuition and fees. Administrative costs have soared as more and more non-faculty are added, especially in the huge departments of equality, diversity, disability that may have 50 or so employees (at OSU) as well as those assigned to the individual departments, courses are watered down or expanded so it now takes 5-6 years to finish rather than 4, young men and women are encouraged to remain adolescents longer and remain in parents’ care until late 20s, very odd courses are required for students, staff and faculty like “hate speech” or “appropriate non-sexist dating behavior” which chew up many hours that could be  useful for studying and which make the old “in loco parentis” of my era look like wild freedom.

No one can reverse this overbearing, interfering federal meddling in higher education except the Department of Education, and since even Republicans don’t like to give up power, I think not much will come of this except more money being thrown at the problem, and a bigger bureaucracy to make sure the tax payers get screwed again.

Was he just feeling the Bern?

In the January 2015 the SOTU speech President Obama proposed a zero tuition plan for community colleges, at $60B over 10 years and a $7.3B over 5 years loan repayment for college loan burdens. These programs always end up being more costly than the plan. Since our soaring education costs (aka bubble) have been caused by the federal government flooding campuses with money which causes them to raise tuition, I’m curious if these proposals went anywhere, and do they carry over to the next administration?  Was it a bone to the left wing of the party?

From the National Taxpayers Union website.  Lots of graphs and analyses. 

Binghampton University of New York hates white people

Residential Assistants at Binghamton University in New York are undergoing a new kind of training for the 2016 school year. The program is called #StopWhitePeople2k16.

Now why would universities want to depict minorities as victims? Follow the money. There are enormous grants available from practically every department in the federal government for academic slush funded departments in gender studies, black studies, women studies, disabled and differently abled studies. Grants for minority library students, grants for black women, grants for foreign students of color, grants for Asian graduate students, grants for residents of Appalachia, grants for specific tribes of American Indians, grants for victims of crime, grants from the USDA, EPA, NIH, HHS, DoJ, BLS, DoEd, so on. Federal money is floating state education. If they were to lose their victims, they wouldn't be able to have 3 vice presidents in charge of victimhood. The main cost of price increases in higher education has been at the administrative level, and for that, federal money is needed to supplement tuition increases.

This story was reported by a Columbus radio station, and when I checked, the story has been pulled from the original link. Gee, I wonder why? Maybe Binghamton's alumni association, mostly white, said, OK, I guess you don't need our donations?  So I can't give you the original link.  It's probably out there on other news sources.

How to get out of college debt free

This young man’s father doesn’t make $6 million a year like the Mizzou hunger striker.

Obama drops plan to tax families of college bound

Although President Obama says he wants to help middle class families he proposed in the State of the Union speech taking away (i.e. taxing them more) their incentive to build their own account to save for college--make them even more dependent on the federal government. After loud protests, even from his own party (who seem to be catching on), he has stopped eyeing the hard earned/saved college money. The 529 plan has become very popular and about 12 million American families rely on the accounts to help with college costs. Not to worry, I'm sure he'll start lusting for our IRAs and 401-k's since it's just not fair that some of us regularly saved and invested for our retirement years when others only have Social Security or food stamps.

Q. What is a 529 plan? (IRS.gov)

Answer. A plan operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild.

Q. What is the main advantage of a typical 529 plan?

A. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible.

http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php

http://www.collegeadvantage.com/

http://www.washingtonpost.com/business/economy/obama-drops-proposal-to-cut-tax-benefits-of-529-college-savings-plans/2015/01/27/5f3f429a-a675-11e4-a2b2-776095f393b2_story.html

The President’s hope to tax 529 plans for college tuition

“The President wants to allow the Internal Revenue Service to begin taxing distributions from so-called 529 plans, even if they are used as intended to fund legitimate educational expenses such as college tuition. The Obama plan is to treat withdrawn earnings from these savings plans—which are funded with money that’s already been taxed—as regular income to the beneficiary. Therefore this money will be taxed again before it can be used to pay for higher education.

But the President’s plan would only apply the new taxes to withdrawn earnings on money contributed to these accounts in the future. All past contributions to 529 plans would continue to grow and then be withdrawn tax-free to pay for school.  . .“ 

Nice for families like the Obamas who have daughters heading for college soon.  His plan won’t affect his family (assuming he has a 529—don’t know if millionaires use them). Wall Street Journal

Article 1, Section 8 of the Constitution says it is Congress who is supposed to be proposing taxes and collecting taxes.  The President only gets 6 assignments, and 5 of those deal with security and protecting the nation.  Oh well . . .he certainly isn’t the first. He’s got a lot of company on this one.

The cost of education

Mark Perry of the University of Michigan has calculated, tuition for all universities, public and private, increased from 1978 to 2011 at an annual rate of 7.45%. By comparison, health-care costs increased by only 5.8%, and housing, notwithstanding the bubble, increased at 4.3%. Family incomes, on the other hand, barely kept up with the consumer-price index, which grew at an annual rate of 3.8%.

http://online.wsj.com/news/articles/SB10001424052702303870704579298302637802002

“Most of the growth in higher education costs, according to a 2010 study by the Goldwater Institute, a libertarian think tank, comes from administrative bloat, with administrative staff growing at more than twice the rate of instructional staff. At the University of Michigan, for example, there are 53% more administrators than faculty, and similar ratios can be found at other institutions.”

The new student loan bail out

Today I was watching a program on college student debt, graduates living with their parents, and Obama to step in with yet another government solution. This is so counter productive. 1) Grow the economy and get them employed; 2) stop funneling money for loans so colleges won't continue to raise tuition and fees at the feed trough. Also, I don't know a single recent graduate (who chose a smart degree field) that isn't employed and whittling down his debt without my help.

http://money.cnn.com/2014/06/08/pf/college/obama-student-loans/

I don't expect the government to "create" the jobs that would help the college students pay down their debt, move out of mom's basement, get married, buy a home, etc. But I do expect the federal government to stop making it so difficult for investors to help the entrepreneurs, to stop adding burdens with new EPA regulations and health care taxes that discourage expansion, and stop making it easier for the underemployed to stay that way through transfer payments.

What’s happening to college tuition rates of increase?

I don't think who is in the White House should affect college tuition, but this is odd--huge increases in the last 5 years.
•The 14% real increase in average published tuition and fees at private nonprofit four-year institutions from 2008‑09 to 2013‑14 was larger than the 9% increase over the previous five years.
•Average published tuition and fees at public two-year colleges increased by just 4% in inflation-adjusted dollars, from $2,425 (in 2013 dollars) in 2003-04 to $2,530 in 2008-09, but by 29%, to $3,264 in 2013-14.

And now the federal government has control of the loans? Looks like we're headed for another bubble ready to burst just like housing in 2007.

https://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fee-and-room-and-board-charges-over-time-1973-74-through-2013-14-selected-years

http://www.brookings.edu/research/papers/2014/04/14-income-based-repayment-akers-chingos

The cost of college today compared to “my-day”

2013-14 Tuition, Fees, and Housing Costs for Manchester University (college) where I attended in 1957-58 for about $1,000.  

Tuition: $27,000; Fees: $920; Room: $5,500; Board: $3,750 (Full meal plan);  Total Direct Costs: $37,170 (about $39,000 if a different dorm and food plan is selected); add books, travel, personal items.

So why is college over 4x (adjusted for inflation) more than when I went?

• there were no government loans and few scholarships in 1957
• there were minimal amenities in 1957--no natatorium, no rec center, no plush dormitories--our entire dorm shared one phone
• there are many more regulations and mandates from the government in 2013 to add to costs
•   there are more costly scientific and technology equipment affecting everything from library to ordering food to tracking admissions in 2013
• there were stiffer entrance requirements in 1957 and many students in 2013 shouldn’t be in college.

http://online.wsj.com/news/articles/SB10001424127887324549004579068992834736138

http://www.becker-posner-blog.com/2013/10/why-does-college-cost-so-much-posner.html

“The curved glass wall of Haist Commons, a dining room and gathering space, is the most prominent addition to the building. Large open areas, balcony overlooks, and extensive use of exterior and interior glass walls help create bright, inviting spaces, connecting activity areas visually and providing views of the campus. The renovation brought the campus bookstore back into the union, allowing for combined staffing with the mailroom. The bookstore also shares a double sided fireplace with The Oaks Lounge.”

This student union was built in 1963; there wasn’t one in 1957. Even small church schools have to be competitive with amenities.

Monday memories—no college debt

An article in today’s WSJ reports the average student graduates with $30,000 indebtedness.  I'm surprised the  debt is "only" $30,000. I got married before I finished college, so I had to "borrow" my senior year's tuition from my dad and pay it back, which I did. He was sort of old fashioned and figured once married I was a responsible adult, possibly my husband’s responsibility. Costs at a state university were about $1000/year, so let's say it was $4000 for 4 years in 1961. That's $31,250 in 2013 for inflation.

So why were so many people graduating then without debt? No student loans or grants, and very few scholarships would be my guess. The more money available, the higher the tuition and fees charged by academe.

 http://blogs.wsj.com/economics/2013/05/18/number-of-the-week-class-of-2013-most-indebted-ever/?mod=e2tw

             

1958 Father’s Day, University of Illinois at McKinley Hall (I still have that dress in my “archives.”)

When voting to increase your property taxes. . .

[Politifact.com] “We first checked with the Romney campaign, which said the figure came from the College Board, which produces an annual study of college costs. The College Board found that for the school-year 2008-2009, the average published tuition and fees for in-state students at public four-year colleges and universities was $6,585. By the 2011-2012 school year, it stood at $8,244. That’s an increase of slightly over 25 percent. So the claim has a grain of statistical truth.  “

Then Politifact goes on to do a different statistic—all costs—and claims since that cost is around 20%, the add is mostly false!  Also it was working with a Spanish language ad and didn’t like the translation.

Why put this in a campaign? It's about state supported colleges. Well, states are struggling to support our state institutions because they have all those mandates from the feds--and Obamacare will only increase that as more get bumped from employer insurance to Medicaid. That said, when I stroll across the campus at OSU, I can't believe the plush, lush, extravagant buildings and perks students of the 21st century have. College tuition and fees today are 559% of their cost in 1985. Makes medical costs look like a bargain.

What to do with degrees like these?

“In 2010, the New York Times reported on Cortney Munna, then 26, a New York University graduate with almost $100,000 in debt. If her repayments were not then being deferred because she was enrolled in night school, she would have been paying $700 monthly from her $2,300 monthly after-tax income as a photographer’s assistant. She says she is toiling “to pay for an education I got for four years and would happily give back.” Her degree is in religious and women’s studies.”

http://www.washingtonpost.com/opinions/george-will-subprime-college-educations/2012/06/08/gJQA4fGiOV_story.html

But what are all those tuition and fee increases going for?  In part, narcissism.  Bloat. Says George Will.  And I’ve blogged about it when I see it at Ohio State which has an Office of Diversity and Inclusion; Faculty of Color Caucus of the Department of History; the Race, Ethnicity, and Nation Constellation of the Department of History; and DISCO, Diversity and Identity Studies Collective . Courses like “Gender and race in contemporary architecture.”

UCSD found money to create a vice chancellorship for equity, diversity and inclusion. UC Davis has a Diversity Trainers Institute under an administrator of diversity education, who presumably coordinates with the Cross-Cultural Center. It also has: a Lesbian, Gay, Bisexual, Transgender Resource Center; a Sexual Harassment Education Program; a diversity program coordinator; an early resolution discrimination coordinator; a Diversity Education Series that awards Understanding Diversity Certificates in “Unpacking Oppression”; and Cross-Cultural Competency Certificates in “Understanding Diversity and Social Justice.” California’s budget crisis has not prevented UC San Francisco from creating a new vice chancellor for diversity and outreach to supplement its Office of Affirmative Action, Equal Opportunity and Diversity, and the Diversity Learning Center (which teaches how to become “a Diversity Change Agent”), and the Center for LGBT Health and Equity, and the Office of Sexual Harassment Prevention & Resolution, and the Chancellor’s Advisory Committees on Diversity, and on Gay, Lesbian, Bisexual and Transgender Issues, and on the Status of Women.

What goes into “best school” in . . . ?

It doesn’t say anywhere in the Wall Street Journal listing of Best Schools by major that the graduates have jobs, but in business and economics Ohio State and Rutgers outrank Harvard.  So looking through the comments about these rankings, I see:

Rod Schultz asks:  “Would anyone in the right state of mind really pick Ohio State or Rutgers over Harvard to study business and economics?”

Rick Joseph responds:  “Certainly! Subsequent to a comprehensive evaluation of the tuition costs at each institution, the debt incurred after graduation, the relative ranking of the universities under consideration, etc. Ohio State and Rutgers, as well as Florida, Texas, Virginia would be preferable over Harvard.

Not surprisingly there have been several recent studies (like "Estimating the Return to College Selectivity Over the Career Using Administrative Earnings Data," Stacy Dale and Alan B. Krueger, NBER Working Paper (June 2011), and those that show employers prefer State University Grads over Ivy League, http://online.wsj.com/article/SB10001424052748704358904575477643369663352.html?mod=WSJ_PathToProfessions_TopLEADNewsCollection) that have doused cold water on the traditional Ivy League fetish when considering an undergraduate degree. Since the 1950s these institutions are not what they once were, they are considerably overpriced, and most flagship public universities have become exceptional institutions on par or better. Ask most high school students in states like Ohio, Texas, Virginia, and Florida where they would prefer to attend and very few would pick the Ivy League institutions over their flagship state universities.

 
Today, the fetish for the "Ivies" is limited mainly to the Northeast.”

Well said.

5th Global University Summit

I looked through the program web page and could find nothing substantive, certainly nothing about escalating student tuition in conjunction with increased government loans, which I think should be on the agenda. But at least it is honest about how heavily higher education depends on government support.

University presidents from around the world will gather in Chicago, Illinois, from April 29 to May 1, 2012, for the 5th Global University Summit.This Summit brings together leadership of major research universities and industry from across the world to deliberate upon critical issues facing higher education globally in the 21^st Century. The theme for 2012 is “Developing Talent to Drive Innovation in a Global Society.”  OSU Today

“Higher education depends heavily on government support in every country. Therefore, Global University Summits are always held in conjunction with the G8 Summit to draw the attention of world leaders to the needs of higher education and its vital role in helping us deal with the challenges of the present and the future. The 2012 G8 Summit will take place at Camp David from May 20 to May 21, 2012.”  “About” Summit web site

The cost of government workers

It is now known that government workers earn higher wages and have better benefits than private sector workers in the same or similar position. Therefore, I think it's time to start looking at some of the perks the private sector workers don't get, but have to pay for, or else Ohio will end up on the California/Illinois trophy head-on-the-wall award for bad fiscal management. Like this one for Ohio State University faculty and staff employees, for instance.

"If your dependent will be taking classes during summer term and you have an eligible regular appointment of at least 50 percent full-time equivalency, your family members can enjoy the benefits of higher education at a lower cost."

It's been awhile since I looked, but I think "family" has a rather broad definition in this case. Like the foster child of your same sex partner (not sure about opposite sex partner's foster child). And there is a "cap" on the benefits, but it's over $8,000 $6,000 per semester/quarter (in the process of changing from quarter to semester system).

Everyone Shouldn’t Go To College

About four years ago I blogged about the cost of a college education, private vs. public, and whether some college bound young people might be financially better off not to attend college. I followed up that link today looking at a 2008 update of the information. It contained information not in that first report (if you invest the money you would have spent on a child's education, the life time (40 years) average of earnings is higher than attending college, and a public school education is a better deal in life time earnings that a private school).

REEF » Everyone Shouldn’t Go To College

What the recession has done to this mix, I have no idea. The REEF website doesn't appear to be current.

Update: I found Michael Robertson who authored REEF material at another website. Robertson knows a bit about education and making money--he invented the MP3 player.

U of I students protest tuition hikes

Sorry guys. The state legislature owes the pension funds. Unions have a lot more clout than students. This is not a pretty picture. Terry Savage of the Sun Times reports:

"Under Gov. Blagojevich the state borrowed $10 billion to make required pension contributions, with some of the borrowings to be invested in the stock market. The belief was that stock market investment returns would beat the 5 percent cost of interest on the bonds, helping to fill the gap between promises and reality. Unfortunately, the stock market didn't cooperate.

Then in January 2009, this column highlighted the growing budget deficits and late payments to state providers, such as nursing homes, pharmacies, day care centers and other providers. We called it the "Coming Pension Wars" -- as the state and municipalities are forced to raise taxes or cut services to pay the promised pensions, along with current bills. In just the last year, the situation has become even more dire.

In November 2009, the state's Pension Modernization Task Force sent its recommendations to Gov. Quinn. The Task Force concluded that Illinois' unfunded pension liability exceeds $61 BILLION! And that number is growing exponentially."

So it's students against the unions. What to do? What to do!

Emperor has no clothes: Pensions are short cash :: CHICAGO SUN-TIMES :: Terry Savage

Illinois is broke

Illinois Airs Plan on Deficit - WSJ.com

Students and Workers Unite?

California college students are protesting a tuition hike of 32% brought about by the compensation packages won from the state by the public employees unions. Apparently the 1999 California Democrat-controlled legislature thought the Dow would forever go up, sort of like the housing prices, and it made promises to unions it now can't keep without stealing from the young. In one decade pension costs went up 2000% and revenue 24%. What incentive is this for students to go to college if they can get huge pensions doing maintenance for the state? And what evidence is there that members of the California legislature ever went to college if their math skills and understanding of economics are so poor?

UC Tuition Hikes and Public Employee Pensions - WSJ.com