Showing posts with label borrow. Show all posts
Showing posts with label borrow. Show all posts

Tuesday, July 2, 2013

Same Old. . .

. . . song?

(from Dylan Ratigan
Host, MSNBC's 'The Dylan Ratigan Show'; Author, 'Greedy Bastards'; Founder, Get Money Out Foundation
Auction 2012: Greedy Bastards and Student Debt)

". . . In President Obama's first speech to a joint session of Congress, he said "education in no longer a pathway to opportunity, it is a prerequisite."  It's no wonder - conventional wisdom says that those with college degrees earn roughly a million more dollars over their lives than those without them.  And there is a vast apparatus of lending institutions and Federal guarantees set up to help put people into college.  They do this not by keeping tuition free or low, as we did as a country after World War II, but by helping people get access to student loans.

This is the essence of what I've been calling The Very Bad Deal, where costs are deferred while benefits accrue upfront.  If you get a student loan, you get to attend college, and college is apparently the key to earning more over your lifetime, to "opportunity".  But student debt has some very nasty tricks and traps that most 18 year olds aren't aware of when they sign on the dotted line, and college may not be the opportunity gateway we've been assured it is.

The scale of the deal is vast and getting bigger - two thirds of those who attend college do so with borrowed money.  In August of 2010, the Wall Street reported that student loan debt surpassed credit card debt for the first time in history.  This amount is now sitting at roughly a trillion dollars.  Higher education inflation is the higher than health care inflation, and two and a half times the rate of normal inflation.  Are students really learning two and a half times as much?

Of course not.  What is happening is that universities have pricing power, and the Greedy Bastard behavior encourages them to compete on facilities and brand-name faculties rather than price and quality.  The Chronicle of Higher Education has described "an arms race of expenditures triggered by the pursuit of prestige."  Student debt also distorts pricing.  If students had to pay the full freight in college, they might be more price-sensitive consumers.  But since the costs of the education they are receiving are hidden, they don't pressure universities to reign in costs.  Lavish living environments, pointlessly luxurious sports facilities, and high salaries for administrators are just symptoms of a system where costs have become irrelevant. . ."






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