Posted on 10/30/2011 1:32:44 PM PDT by Kaslin
One of the great things about America, President Barack Obama told students at the University of Colorado, is that no matter how humble your roots, you still have a shot at a great education. He also told students that his goal is to "make college more affordable." Alas, the president's prescription for making higher education affordable seems likely to yield the same results as his plan for curbing health care costs; that is, it is likely to drive prices higher than inflation.
The nation's next fiscal nightmare may well be a higher-education bubble.
Americans now owe more on student loans than on credit cards. As USA Today reported, America's student loan debt is expected to exceed $1 trillion this year. Rising costs have left many graduates in a deep hole. Many of last year's graduates walked away with a diploma and, on average, $24,000 in student loans. The default rate on student loans rose to 8.8 percent in 2009.
Occupy Wall Street activists have been calling for forgiveness of student loans. Congress already passed legislation proposed by Obama to cap some student loan payments at 15 percent of a graduate's discretionary income and to forgive the balance after 25 years. On Thursday, Obama pledged to lower the cap to 10 percent of discretionary income -- with forgiveness after 20 years.
What next, 5 percent and 15 years?
"And we can do it at no cost to the taxpayer," U.S. Secretary of Education Arne Duncan cooed in a statement.
"That is simply not true," responded Neal McCluskey of the libertarian-leaning Cato Institute. Taxpayers are on the hook for those loans.
Last week, McCluskey put out a paper that concluded that when government bestows more aid, institutions benefit far more than students. The College Board figured that real average tuition rose some $5,500 for public colleges and $17,800 at private institutions from 1980 to 2010, while total student aid increased comparably, by $8,165. The phenomenon predates this administration. The College Board reports that for the past decade, college tuition and fees have exceeded inflation by 5.6 percent a year. That's where McCluskey believes increased financial aid goes.
"There is no question," McCluskey wrote, "that colleges and universities have been raising their prices at a very brisk pace in recent decades, and that those increases have largely nullified aid increases."
Rush Limbaugh delights in blaming the rising price of higher education on "greedy academics." Look at the salaries that California's public universities pay administrators. The new Cal Poly, San Luis Obispo president is about to take home $50,000 more than the published maximum salary of $328,212. With federal and state student aid dollars feeding the beast, eggheads cash in.
The biggest losers are students who get sucked into colleges, because the federal loans look like free money, only to drop out of school. They get the debt but no degree. As McCluskey observed, "we give money regardless of their aptitude to do college work."
The other losers are graduates with six-figure debt and little income. The White House is working on a "Know Before You Owe" project to warn students about the cost of student loans.
As a beneficiary of a state university education and a repaid student loan, I don't want to end a program that helped me and can help others. But as with mortgages that fueled the housing bubble, there can be too much of a good thing.
The unintended consequences of the steep rise in government financial aid, McCluskey concluded, may well be "sky-high noncompletion rates and rampant tuition inflation."
In his 2005 Stanford University commencement address, Steve Jobs explained the economic factors that went into his decision to drop out of Reed College. "I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition."
He actually thought about the money; that sounds so quaint today. I am not suggesting that anyone drop out of the right school. I just want graduates to look back at their education and know in their hearts it was worth it.
sort of a poetic justice in student loan forgiveness: the “education” isn’t worth the paper the diploma’s printed on.
It certainly is a social nightmare - a generation of over-credentialed self-worshipping layabouts.
I would have agreed with you just a few months ago, but I've been talking to my students at our cheap community college. Virtually all of them are taking student loans even though the annual cost of attending college is around $5,000 per year. 40 hours @ $8 per hour, you only have to work 16 weeks to make enough to pay for college (not including living and transportation expenses ... just tuition books, and fees).
The money is too easy to obtain and too loosely controlled for most students to refuse. I don't blame them for grabbing what seems to be a good deal. I DO blame them for not figuring out the real cost ... and I make a point in my classes to ensure they know what those costs will be.
...prescription for making higher education affordable seems likely to yield the same results as his plan for curbing health care costs; that is, it is likely to drive prices higher than inflation.
You are probably one of very few that are informing your students about what their costs are going to be t pay back time.......
Actually, today’s college experience is like an extention of high school.
It is a terrible waste of time and money to live in a dorm or peer filled residence, partying with peers and attending classes with no engagement in the working adult world (experience and networking) while the student choses to go into debt. It is social and personal growth stunting for a young adult.
It is especially bad for young adults who don’t have connections for jobs when they get out of college and have nothing to offer but general college degrees and the socialization of a dorm rat. It is wrong to go to college and live on debt. But you really don’t find that out until you get out of college because reality is delayed.
Absent a rich daddy to pay for one’s college and upkeep, middle class students adopted a rich bank to loan them money with interest. They live the same as the spoiled rich kid - until they get out of college and are saddled with the debt to pay back and don’t have a rich daddy to help with job networks.
All this allows colleges to keep raising the costs and be unserious in education because student money appears to have no limit. If they were earning their own money, colleges would be pressured to keep costs and course offerings reasonable. If this college loan bubble bursts, daddy banksters should hold the bag for abetting a dysfunctional situation. Like giving mortgage loans to poor people...
It is interesting how much college tuition inflation resembles medical cost inflation. And both probably track perfectly with the federal government moving into the picture and subsidizing things.
Really suddenly, colleges will stop admitting students who are not college material, and will stop offering useless majors.
>>It is a terrible waste of time and money to live in a dorm or peer filled residence, partying with peers and attending classes with no engagement in the working adult world<<
That has been college forever. The difference is that today it can be extended next to forever and kids pursue diplomas in useless and sometimes harmful lefteral arts degrees like black womyns studies. That combined with the expectation that all of them are above average while performing below average is where the mess really is.
No, it was not the way it used to be. Most people had to work and get degrees. They still do - only they don’t know it until the debt bill comes due.
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