The college tuition bubble: Another case of ‘extend and pretend’

Charlie Harper of the Dublin Courier Journal has a smart take on the tuition loan bubble that both President Barack Obama and presumptive GOP nominee Mitt Romney have now endorsed.

Two paragraphs, via PeachPundit, to whet the appetite:

The amount of total student loans outstanding is estimated between $870 billion and $1 trillion according to the Associated Press, an amount that has doubled in the last five years. To put that in perspective, total credit card debt held by Americans is estimated at $693 billion and total auto loans outstanding are about $730 billion according to the Bank of New York. The amount of student loan debt and its role in our economy is not inconsequential.

Instead of extending and pretending, we must have an honest policy discussion with regards to deflating this bubble. Why are degrees in philosophy and art history subsidized at the same level as math and science fields? Why are borrowers allowed to receive loans without demonstrating they have conducted an analysis of how they expect to pay the loan back? Surely they should be able to complete a simple pro-forma of the average income for a graduate in their field and then deduct the expenses for the cost of living in their chosen city plus the debt payments they will have to make. Why is this not part of the application process?

- By Jim Galloway, Political Insider

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30 comments Add your comment

Shar

April 25th, 2012
1:33 pm

As a history/religion major, I am sorry to say that Mr. Harper is quite right.

It is also past time to rescind tax-exempt status, as well as eligibility for federal grants and student loans, for all institutions that raise the total cost of attendance more than 10% over the rate of inflation, and to force academic institutions to abide by the corporate tax-exempt requirement that a minimum of 5% of their endowments be returned to primary beneficiaries annually.

There is nothing else that will stop the appalling, usurous inflation in the college market.

Nikki

April 25th, 2012
1:37 pm

Yes, why not we make it harder for students to get loans. The problem surely isn’t that there aren’t enough jobs, it’s that these students can’t pay their loans and should required to show evidence that they can do it before they even enter a job search. Yes, that’s perfectly logical.

The decline of the humanities in our culture is a serious problem. Math and science professionals are desperately needed, but so are individuals who can preserve history and languages.

Cassie

April 25th, 2012
1:46 pm

As an anthropology major who now works with big data, I would have to respectfully disagree. My liberal arts education did not teach me statistics, true – but it taught me how to be a lifelong learner, and because of that I was able to teach statistics to myself. Now, I know more about statistical analysis than some people with master’s degrees.
The REAL problem is the writing skills of many college graduates these days. If a person cannot use an apostrophe correctly, I cannot hire them. Someone who paid $80,000 for a college education really should be able to use basic grammar. My current research assistant came to the United States from mainland China a few years ago – when she was already in her twenties – and she knows the difference between it’s and its.
Liberal arts are are in many ways the best thing that Western Civilization has to offer non-Western peoples. Let’s not get rid of them.

Charlie H

April 25th, 2012
2:06 pm

Thanks for the post Jim. And for the nice words Shar.

As for Cassie’s assertion, it’s interesting that you argue for the value of liberal arts making qualitative assessments, yet you translate a question of whether subsidies of different fields should be equal to “get(ting) rid of” liberal arts majors. No where is that argued or implied, big data or otherwise.

CNBC did a documentary on student loan issues a while back where a girl who wanted to become a missionary accumulated well over $100,000 in debt before graduating and entering her chosen field. Do you think at some point she would have benefitted from seeing a simple worksheet showing her projected starting salary of $18,000 per year, her expected after tax paycheck, her estimated loan payment, and how much would be left for living expenses?

The loan could have still been hers just as easily, but hopefully she and others would at least ask the question if they needed to borrow six figures as the best path to get that job.

What is the sound of one Mouth Flapping

April 25th, 2012
2:09 pm

Why do we allow CEO’s who give no value added to receive 800 times the salary of their lowest level worker when they do not produce an 8000% ROI on the corporate stock?

Cassie

April 25th, 2012
2:21 pm

Charlie: yes, I agree with you that students would benefit from being walked through that kind of cost-benefit analysis not just once but every year when they sign for that year’s round of loans. A spreadsheet showing what people with different majors tend to make when they graduate would be helpful as well. It was twenty years ago, so maybe things are different today, but I remember the process of getting and signing my student loans was extremely rushed. The administrators were just like, “Okay sign here bye.” Paying those loans off, however, took me over a decade…..

Charlie H

April 25th, 2012
2:38 pm

And Cassie, that is exactly my point in the full article. The government makes an unlimited amout of money available. Colleges can charge what they want because students go through a process as you describe. They’re then told to spend a lot of time, 5-6 years if necessary, to “find themselves”. then, when they eventually graduate, they’re handed a payment book that they’ll have for 10-20 years and told “good luck”. Colleges are happy, the government guarantees the money so the lenders are happy. And the graduates get to foot the bill whether they can find a job or not – and can’t even bankrupt on it if they can’t ever pay.

It’s not meant as a war on the liberal arts. It’s a warning that we need to educate students to be better consumers before they sign up to a lifetime of payments.

ATLDawg, Ya Dig?

April 25th, 2012
2:55 pm

Universities are organizations run by liberals. So, like government bureaucracies, they have suffered from an explosion in expensive, useless college administrators. Like law firms, they have engaged in destructive, “competitive salary” wars for retaining “top talent’ that is completely detached from the reality. To teach courses like….Swarthmore College’s “Nonviolent Responses to Terrorism” course “deconstruct[s] terrorism” and “build[s] on promising nonviolent procedures to combat today’s terrorism,” using the struggle blacks pursued in the 1960s as a mode for tackling today’s terrorism….or….UPENN, which is teaching “works about “adultery,” watch “several adultery films,” and apply “various critical approaches in order to place adultery into its aesthetic, social and cultural context, including: sociological descriptions of modernity, Marxist examinations of family as a social and economic institution” and “feminist work on the construction of gender.” (See http://www.humanevents.com/article.php?id=18926)

And, the coup de grace for every liberal in power in an organization that is not subject to market forces – they are spending someone else’s money, with no internal reality checks.

At private schools, students and their families get stuck holding the bag. In Georgia, with Hope, the taxpayer does. Every time I go back for a Georgia game, I see some new, gargantuan construction project on campus. Who’s money paid for that? On what alternate universe can some bureaucrat approve a third student center in the middle of a recession?

I left a private law school with over $120,000 dollars in debt. Now fortunately, I earn enought to pay this back – to the tune of $1200 a month (to achieve my goal of paying off my student loan debt before my own kids are in school). So I would have passed Mr. Harper’s threshold test. Regardless, my law school professors still drove to school in bmw convertibles and lived in mansions in the countryside. It is an enormous sham.

Shar

April 25th, 2012
3:07 pm

@Cassie, I understand and sympathize with your concern for the humanities, but it is (or should I write ‘it’s’?) sadly true that many people who read your assistant’s work will not be able to tell the difference the apostrophe makes and would not thank you to point it out (I learned that the hard way when I foolishly corrected a senior client who repeatedly used “mute” for “moot”. Ouch).

I don’t think Mr. Harper is saying that students who want to go into the humanities should not receive loans, but they should not receive taxpayer-funded loans which will obligate them to greater payments than they can reasonably afford to make. Upperclassmen in high school are seduced by climbing walls and party nights, and they just don’t look at the bottom line of cost and what that inexorably means to their lives post-college.

My elder daughter opted out of her expensive research university in favor of a community college that allowed her to experiment with classes as diverse as ceramics, auto mechanics and marine anthropology as she took the slow road to finishing her pre-reqs for nursing school. She wanted to explore and knew that was unaffordable in the high tuition environment. My younger daughter loves her classes for her English and economics majors but her dad and I have told her that she must also pick up a STEM major in order to be employable once out of school and to keep her options open for graduate studies.

They do not have the option I took of majoring only in what drew them. We are doing our best to finance their education so they can avoid graduating with debt, but to do so they don’t get their choice of schools and they don’t get to take only their favorite courses.

honested

April 25th, 2012
3:09 pm

Atl.Dawg…..

Wow do you really miss the point of education as well as civilization.

That said, nobody has hit the nail on the head where the real ‘tuition’ problem is (although several expose’s have). That would be FOR PROFIT AND ONLINE SCHOOLS THAT HAVE ACCESS TO FEDERAL STUDENT LOAN DOLLARS.

As long as people with no pre-requisite training for college can find a bogus trade school on TV and access Federal loans to get a non-degree with little or no eventual earning power, this problem will continue and grow. These ‘institutions’ have default rates far beyond standard higher learning Institutions.

Half-hearted attempts to remove them from the Federal teat have been blocked by the imaginary free-market teaklanners. This brings the real problem into clear relief.

Blaming a liberal arts education for this problem (like many other problems that conserrrrrvatives want to blame on liberal arts) is a false argument.
Fix the real problem first, then lean on the real schools to put their endowments to work or close their doors.

Shar

April 25th, 2012
3:12 pm

If the schools themselves were held accountable for these ruinous cost increases, instead of being able to raise prices as soon as more federal money is directed to Pell and other grants, the costs would immediately – even instantly – be contained. Threaten their access to grants and to tax exempt status and you would see a rapid about-face.

We can continue to make loans available to students, but they should not get to attend universities that are undermining our budget and the ability of young people to invest in homes and families through selfish, ill-advised spending on the government dime. Those institutions are not of benefit to taxpayers, and should not receive tax-funded benefits.

Hide-n-seek

April 25th, 2012
3:25 pm

@Shar: Did you learn manners? It’s just rude to correct others, unless you are their teacher. I am sure that a Senior, who is also YOUR client, would find it more offensive. I guess that there are some things that a college education does not cover.

Shar

April 25th, 2012
3:38 pm

Hide-n-seek: You are so right. It just slipped out, after weeks and weeks of my client using the wrong word with a smug, I-have-a-big-vocabulary air on top of it. I was also a lot younger then. The incident aged me quickly.

atlmom

April 25th, 2012
3:50 pm

Shar, and others:

A year or two (or three?) ago when there was supposedly a ‘crisis’ in the student loan area – i.e., ‘we can’t let it fail – the banks have to make the loans!’ I was thinking: hey, let it fail. Let’s see what happens.
Will the schools *really* have fall semester with no students? Really? Or will they figure out a way to have students on campus? Because without the federal loans/subsidies, the schools can’t work. So wouldn’t it be nice for them to have some sort of incentive to make it all work?

As it is – when one goes to a campus these days – we can all see where the money is going. It’s not going to faculty and supplies, it’s going towards microwaves and fridges in dorms, to nicer dorms, nicer workout facilities and nicer student unions. In NO WAY are these universities educating students BETTER than they were for those inflated prices.
It’s a real problem. Talk to someone trying to get a position as a professor. Universities are hiring ‘visiting’ professors, treating profs basically like research assistants.
While -shock- the administrators are making A LOT of money.

And really – why *should* govt just subsidize EVERYONE’S education? If we see the need for more engineers/science/math majors, then maybe we should say: hey, we’ll give you money if you do this?
I mean, the armed forces pay for a lot of degrees – how many do you think are in english? They want science/math/engineering majors.
Why not a limit on the number of humanities majors that the govt will subsidize? If we’re paying for it, we should have a say. if we want more people in STEM majors – maybe we should do something rather than just say something.

Ole Guy

April 25th, 2012
3:59 pm

These damn people, steeped within the poisonous atmosphere of total disregard for consequence, sign these loan documents with the same forsight they have demonstrated all their lives…”If I foul it up, somebody will bail me out”. The very structure of the public school systems, where mediocrity and minimum expectations are the norm, have not prepared these kids to assume much in the way of viability within an unforgiving economy…much less read AND understand loan contracts.

Older Guy

April 25th, 2012
4:24 pm

Privatized Profits with Public Risks does a healthy corporation make.

Individual responsibility is for the young.

Charles of Luxemburg

April 25th, 2012
4:26 pm

You know if we let students, the supposed clients, have a true say in the governance of the curriculum, perhaps these increases might be stopped.

At the least, one could allow Alumnus such a say rather than say…the administrators and the faculty.

The only other comparable institution are legislatures and we can see how well those are working out.

Bring back the Monarchy I say.

Mike

April 25th, 2012
4:45 pm

I recently read that a good rule of thumb for student loans was that the total at graduation shouldn’t equal more than one year of the salary you should expect to make that first year.

When one submits a financial aid form, they calculate two numbers – what the total cost is for attending school that year, and how much you are reasonably expected to contribute based on your income and assets.

Problem is, they’ll loan you up to the total cost. I know two people who worked full time in professional jobs while borrowing as much as they were allowed. Now one has three masters’ degrees – the company paid tuition while he maxed out loans, and kept getting new degrees to stay in in-school deferment. The other has a law degree and a student loan debt bigger than my mortgage (and I live in Buckhead).

Jason

April 25th, 2012
4:55 pm

When will the students of GSU demand that the football team be eliminated? They voted to increase their own fees by hundreds of dollars and then turn around and complain that college is too expensive? Pretty sure you can learn and earn a degree without a football team. Compare the physical environment of the campus and typical student housing to what existed a couple of decades ago and you’ll see that it’s like comparing New York.to Port-au-Prince. Everyone likes to mindlessly blame “administrators” because it’s a faceless group and requires no hard proof. But take a good long hard look at what is required to provide an effective teaching environment versus the MTV ‘Real World’ lifestyle many of these colleges provide and you’ll see how to make education affordable again.

Kate

April 25th, 2012
5:06 pm

School types, majors…I think those are just red herrings. Bottom line is that costs inevitably rise whenever people are spending OPM (Other People’s Money).

Create a perceived practically unlimited value to a college education. Add students and parents subsidized with ever-larger loans, universities subsidized with ever-rising government and student tuition funds, lenders subsidized by the government and/or with no risk of default. Sound familiar? Sure enough, this is brought to you by the same dynamics that created the real estate bubble. And when the music stops and there’s a chair short, things will get ugly.

ba

April 25th, 2012
5:22 pm

I have a degree in history with a minor in classics. I now work in IT and have paid off my 30k in students loans (it took me 15 years to do that). I’m just sayin’.

BigDawg

April 25th, 2012
5:28 pm

When I went to college, early eighties, most students didn’t get loans, they worked a lot during the school year and during summers. Of course, we wouldn’t want to ask that of students now!

Big Hat

April 25th, 2012
5:31 pm

Only liberals go to college, and only liberals come out. Reason enough to make a college education as hard to get as possible.

zeke

April 25th, 2012
5:38 pm

yea bigdawg there are plenty of jobs today……you must have gotten in when it was easy

acm89

April 25th, 2012
6:16 pm

I used to work in the University System. The problem is the huge bureaucracy of unnecessary support positions. Universities don’t need an Office of Sustainability or an Office of Diversity….to name a few. The way it works is the more positions your department has, the more important you are. Deans might move and rename positions but they won’t eliminate and downsize. It’s a game of continual growth and if cuts come, the university presidents will whine and claim the school will be irreparably damaged.

Don’t believe it. There is plenty of fat to cut. Presidents and Deans will cut part-time faculty so that classes will be overcrowded, students complain, and the university can score some political points over the Governor and Legislature. Our universities can run just as effectively on a lot less money.

Rollo Tamasi

April 25th, 2012
6:18 pm

Here is an idea. Stop making students take stupid courses such as healthy living, or adjusting to college life. How about having students take courses that are, I don’t know, necessary?! I am not sure what it is like now, but back in the early 90’s when I was in school, I had to take a ton of “electives” that nothing to do with my major and 2 classes in “Arts and Letters.” Really? Now I hear kids today are required to take PE in college? Here is an idea and if I remember correctly this is how it was back when I was in school. First 2 years was the “core classes” – history, sciences, math, English, humanities, and a foreign language (if you were an BA major). The next two years are Major courses – the curriculum that is in place for you area of study (Psychology) and whatever other thing you decide to minor in (theater: don’t hate). Stop making students pay for courses they do not need to take and if they fail, kick them out of school. Just my two cents. (same thing for graduate school as well)

S.Hoxx

April 25th, 2012
8:24 pm

I see comments on here about for profit schools and I couldn’t help but think, “it is not just state funded schools that have issues”. In terms of front line exposure I couldn’t be closer. Daily I work with students that come to the university, who are looking for a number of things from college, including financial aid money. I really love helping the students who are genuine and want to improve their situation, but I also see a side that fills me with guilt.

I work for a non-profit who just wants as many students through the door as possible. You don’t know what a web browser is? YOU’RE IN! You’re reading skills are at the 3rd grade level? YOU’RE IN! You can’t fill out an online application by yourself? YOU’RE IN! On top of this I have to help the student do these things knowing they will be unsuccessful in his/her classes and guess what? The professor passes them. So when they show up with a full set of gold teeth, tattoos covering their cleavage and they ask for an emergency loan check (which we’ll give them thanks to you). This is right after they just finished a french hot orange manicure and have gold rings on each finger and carry a Louis Vuitton. I can’t help but think, “this just can’t last”.

I know it can’t last because, I hate to say it, they are not employable. I will honestly say from the students I speak with almost 80% are their for the financial aid and loans. Most can’t communicate on a level that is needed for a business professional to be successful. I had a student today explain to another student how easy it was to get “free” money and to just sign here and here. No worries when to pay it back and if I asked her the interest rate I doubt she’d have a clue. These people need community centers and computer literacy classes, not full on degrees.

Once again, the middle class will be paying for this when we shell out for the defaulted loans. I’m all for equal educational rights but man, this “experiment”, has gone too far.

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Michael Scorn

April 25th, 2012
9:41 pm

“Why are degrees in philosophy and art history subsidized at the same level as math and science fields?”

Well, as the New York Times recently reported, the percentage of art history majors, as well as philosophy majors, in the top one percent of income earners is greater than the percentage of microbiology, physics, math, accounting, and computer science majors, just to name a few. But don’t let the facts stand in the way of your wild generalizations, bubba.

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