Sunday, March 27, 2016

Student Debt 2030: 17 Trillion!




By Professor Doom

      Projections of the future are always fun. My own crystal ball is pretty cloudy, and I don’t dare put dates on what predictions I make…I can figure out the inevitable, but I’ve no skill at determining the imminent.

Faculty: “How is this course accredited?”

--I heard so many faculty say something like this, that I took it upon myself to look at accreditation in detail. Despite what even people working in higher education for decades might think, accreditation has nothing to do with education. They just collect fees and look the other way…

     The student scam contributed to the bloating of our higher education system to insane proportions, to the point that, I suspect, every citizen of this country could enroll into an “institutions” of higher education, with no risk of the country running out of capacity…certainly the loan money would be available, but I must put “institution” in quotes as so many of these places that enroll students, particularly the online places (but not by any means restricted to such) really aren’t legitimate enough for such a word. All the loan money on the table, combined with the blind regulation of accreditation, means these self-called schools can spring up overnight.

     When I first started this blog, the total student loan debt was not quite $1 trillion…I remember not too long ago when we freaked out when the national debt reach $1 trillion, and now such a number doesn’t even represent the debt we’ve given to our children for their education.

     Under a trillion bucks a few years ago, and now it’s something past $1.2 trillion. Granted, the student base is larger as well, but tuition costs have skyrocketed, so that average student is now graduating with $35,000 of debt. It’s hard to believe that kind of money could buy a house outright when I was younger…and now it barely buys a diploma, a mere piece of paper that all too often represents nothing at all, even if it’s from a “real” school, whatever that qualifier means anymore.

     The student loan debt is going up, up, up, up over 500% in the last 16 years. I know such a thing cannot go on forever, but a recent chart estimates what this debt will look like in another 15 years or so: $17 trillion dollars.



     Source.

     I want to highlight a few features of that chart.

     First, the rate of growth of debt is 17%, well past the “current rate of inflation.” Because of the Fed, inflation is a fact of life in America (and much of the world), so, yes, it’s important when making these types of calculations, to consider inflation. Of course, I find our government’s estimation of inflation as laughable to the point of making me hoarse from laughter. Our government claims it’s 2% or so the last few years? Har de har har. Except for gas (thanks to a short term squeeze, discussion of which is beyond the scope of this blog), every expense I have has trivially gone up more than 2% compounded annually, and I encourage the gentle reader to track his own finances with a pocket calculator and see the numbers with his own eyes.

     All that said, even if tuition is currently tracking with inflation…it’s still far too much. I mean, if accredited universities can offer 4 year degrees practically tuition free ($1,000 a year or less), why do so many schools charge $30,000 or more a year…provided the student will take on debt for it?

     Anyway, that 17% growth rate is stunning; it means that the debt will break 17 trillion by 2030, a truly awesome number, more than the national debt today (admittedly, anyone who believes that government’s numbers regarding the debt are any more accurate than government inflation numbers is, well, a fool…).

     This prediction is interesting, and I have no doubt that if things were to continue as they have been, it would come true. Unfortunately, things will not continue, at risk of asking too much of my crystal ball.

      There are three sources of this student loan debt: for-profit, public, and (private) non-profit schools. Where can this debt come from?

      As for our for-profit schools, it’s clear people are catching on. No matter how shrill the advertisements to sign up for these money-pits, there just aren’t enough suckers left to drive the debt much further. Behemoth University of Phoenix lost 50% of its student base last year, hundreds of thousands of students gone…at last, and no thanks to our pompous leaders of higher education, our kids are realizing that going ridiculously deep into debt for any ol’ degree is foolishness.  If semi-legitimate UoPhoenix can’t suck in students, other for-profits are unlikely to succeed either.

     Private schools are closing down, incapable of withstanding the plundering of the administrative caste, plundering which accreditation doesn’t care about any more than it cares about education. Century-old schools are being looted, crashing and burning while administration floats away on golden parachutes. That 17 trillion won’t come from here.

     How about them public schools? Community colleges are all too often ripoffs, but mostly they steal Pell Grant money…that’s a grant, not loan, the new debt can’t come from there. Our public universities have overspent themselves to the point that they can hardly afford to be open when there are no students (too much maintenance on the buildings, too much salary to spend on a massive administrative caste). Campuses are loaded down with boondoggles and incompetent political appointees. On some campuses, students need to walk through whole subdivisions of administrative and sportsball palaces before they can even see an actual academic building. How much more of this will the state citizens take? 

      I don’t know, maybe all that debt can come from an even more grandiose growth of our public institutions, but my crystal ball says that higher education in 2030 will be a very different beast than today. Earlier I mentioned a free university, and it seems likely more of those will pop up, not less. What happens when such things become common knowledge? I suspect taxpayers will say “We refuse to pay taxes to support $1,000,000 a year Poo Bahs and hundreds of $150,000 a year Diversity Commissars when we’ll just send our kids to the $1,000 a year school!”

     Ok, that’s asking for a lot of common sense on the part of the taxpayer…but I still just don’t see higher education maintaining that 17% growth rate for another 15 years.