Ted Rall rocks
One of my favorite political writers and cartoonists is Ted Rall - as he bills himself, "America's BS detector". His latest column on why college tuition has grown to be so outrageous is a great example of the quality of his work, and as usual he gets right to the heart of the matter with his no-nonsense reasoning. I'm reproducing this article below since I can't find a way to link directly to it:
Tuesday, May 13, 2008
THIS WEEK'S SYNDICATED COLUMN: THE SILVER LINING OF ECONOMIC COLLAPSE
Student Loans Crunch Starves Greedy Colleges
First
came school vouchers, subsidizing private schools with public money.
Now, as the economy contracts, the government faces mounting pressure
to pour increasing amounts of our tax dollars into private colleges and
universities as well.
The push comes from two fronts: a desire
to make sure that student loans keep flowing in spite of the credit
crunch, and to raise benefits for veterans returning from Iraq and
Afghanistan who are guaranteed an education under the GI Bill.
Student loans are a big segment of the banking industry, amounting to
about $85 billion last year. Until recently, they were also hugely
profitable. But the credit crunch has caused some lenders to pull out
of the federal program. As a result, the pool of money for college
loans available has fallen 13 percent.
Congress is considering
various ways to make sure students can continue to borrow the money
they need. The Ensuring Continued Access to Student Loans Act of 2008
(ECASLA) would increase the amount lent directly by the government.
Another Senate bill, supported by Bush, would let the government buy
student loans from banks to free up capital for additional loans.
Other
bills seek to make college more affordable for veterans, many of whom
say they are getting screwed. "They were rather good at saying, 'Join
the Marines and get an education; you'll have an opportunity to go to
college,'" recalls Kevin Grafeld, 23, a part-time student from Long
Island, New York. Despite serving five years in Iraq, he gets a mere
$875 per month--not even enough to pay for the community college he
attends as a part-time student. "I was 18 and a little naïve," Grafeld
told Newsday. A bill
sponsored by Jim Webb of Virginia, a Democrat, would pay for tuition up
to the cost of the most expensive public university in a veteran's home
state, plus room and board.
How much would these bills cost?
It's like Iraq: no one knows. Sponsors say the feds would actually come
out ahead on ECASLA, earning a cool $450 million a year in interest and
fees on the backs of college kids.
I have a better idea. Do nothing.
Student loans aren't a solution to skyrocketing tuition. They're its cause.
The
economy may suck, but the last thing the nation's colleges and
universities need is more money. There are exceptions, but most are
awash in cash.
It's easy to see why: since 1980, tuition at private
institutions has gone up at triple the rate of inflation, and twice the
rate of people's salaries. As Timothy Egan noted in The Times, "If the cost of milk had risen as fast as college since 1980…a gallon would be $15."
Private
schools, especially the elite, are getting an enviable return on their
misbegotten windfall profits. Seventy-six colleges hold endowments over
$1 billion. Harvard has $35 billion--more than the GDP of 100 of the
world's 179 nations.
Nationally, colleges got a 17.2 percent
return on their investments in 2007--while spending a mere 4.6 percent
of that tsunami of cash on their students.
Public schools are
nearly as greedy. Over the last five years, they've hiked tuition 31
percent faster than inflation. According to the AP, it's "the worst
record on college prices of any five-year period covered by the survey
dating back 30 years."
Why do colleges raise tuition so much faster than the inflation rate? Because they can.
Since
1981, when President Reagan got rid of a financial aid system mostly
based on grants (which don't have to be repaid), easy credit on student
loans has made it possible for any student to borrow as much as he or
she needs--or, to put it another way, however much a college decides to
charge. It's simple supply and demand; with no downward pressure on
tuition, the warlords of college have an overwhelming temptation to
gouge.
And gouge they do.
No one seems to question the
wisdom of lending tens of thousands of dollars at above-market compound
interest rates to children whose employment history amounts to, at
most, a year at Burger King. 17-year-old borrowers have no idea what
they're getting into; parents imagine (usually wrongly) that kids'
college degree will guarantee them high enough wages to pay it all off
and then some.
The average college graduate comes out owing
$24,200 in student loans. And that's an average. Many owe more--much
more--in a non-existent job market. Saddled with crushing monthly
payments as high as a home mortgage in some areas, millions of young
people are forced to move back home. According to a 2002 study for the
student lender Nellie Mae, student loan debt forced 38 percent of
college graduates to delay buying their first house, 14 percent to get
married later, and 21 percent to wait until they're older to have
children.
Bankruptcy rates among young adults in their 20s are
soaring, but default rates on student loans remain relatively low,
under five percent. (Laws have been changed so that bankruptcy doesn't
relieve your obligation to repay student loans).
Students and taxpayers get poorer. Colleges get richer.
But what if the worst fears of the credit crunch worrywarts came to pass? What if the student loan system collapsed entirely?
For
several years, few poor and middle-class kids would be able to afford
college. To be sure, it would be a painful transition. Millions of kids
would drop out, forced to defer their dreams. But it would be good in
the long run--for the country and even for them.
College CEOs
(let's not call the heads of these mega-for-profit vampire capitalism
firms mere "presidents"
who wanted their companies to survive would beforced to recognize the new market reality. They would streamline their
operations and reduce wasteful spending so they could cut tuition and
other expenses. As Harvard and other Ivy League schools have already
begun to do, they'd dip into the hundreds of billions of dollars
currently sitting idly and uselessly in endowment investment accounts.
And tuition would drop.
The collapse of the student loan
racket--banning them entirely would be ideal--could be one of the best
results of the recession. But only if we let it happen.
COPYRIGHT 2008 TED RALL