

Students are cash cows, and schools the predators - saadmalik01
http://www.salon.com/2014/10/01/college_is_ripping_you_off_students_are_cash_cows_and_schools_the_predators/?

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geebee
Good article, I suggest reading it. There are a lot of factors in the downfall
of the university, and this article covers some interesting angles.

That said, of all these factors, I put a lot more emphasis on the availability
of toxic loans than this article does [1]. Here's what I think happened.

People across the political spectrum decided that college is important, and
were concerned that students couldn't afford it. But rather than focusing on
the availability of affordable college, they instead focused on widely
available credit, with very high limits and relatively low interest rates.
They congratulated themselves on a job well done.

Here's the problem - now that students had access to massive amounts of
credit, colleges raised their tuitions to reflect the purchasing power of
these new students. Ranking systems like US News, which reward spending money
but don't reward low tuition, provided an extra incentive to set a high
tuition.

This is bad enough, but it comes with one extra twist that makes it really
tragic. The student loans aren't dischargeable through ordinary bankruptcy,
and they're guaranteed by the federal government. So while the loans may carry
relatively low interest rates, they can be massive, and it's nearly impossible
to get out from under them.

So take a look at what this did to a student. Colleges that might have made an
attempt to be affordable in the absence of all this cheap (to them) credit now
raised their tuitions. The more affordable path never emerged, or at least
didn't to the extend it would have. Without these loans, many colleges simply
wouldn't be able to exist, they would be unaffordable, because nobody in their
right mind would privately loan $100K+ to an 18 year old who _might_ finish a
BA in art history at an unknown college. But in the absence of these huge
loans, perhaps a more efficient market might have emerged.

The huge loser here is the student, who now has massive debt that can't be
discharged through bankruptcy. The next big loser is the taxpayer and federal
government, who are stuck holding the loans (they'll bleed these debtors in a
way that a private lender never could have, but even then, can we really
extract 150K with interest from a college dropout?) Society and the economy at
large will also suffer, as debt-laden young adults aren't able to buy houses
or start families.

The big winners are the colleges that were able to benefit from this bubble of
free money. They benefit from the easy credit, and get the money, but leave
others holding the bag.

The part that really rankles me is the sanctimoniousness. Some of these
universities really do try to act like they're doing some kind of charity work
for humanity by giving young people a BA in art history in exchange for 100k.

I do have to say one thing here: all this while, it was possible (out here in
California, at least, but my guess is that something similar exists in most
states) to go to community college, transfer to a CSU or UC school, major in
something with good employment prospects, and graduate with a very positive
earnings to debt ratio. Ignore the rankings, look at quality, outcomes and
cost, and make wise decisions.

Even so, that's a tall order for someone who is 17 plus a day. The government
did set a trap for young people, all while singing the praises of higher
education and acting like they were doing young people a favor.

[1] The article does mention this: "Student loan debt should be universally
refinanced to carry little or no interest and should be dischargeable in
bankruptcy, like any other form of debt.").

