It’s been a while
since I discussed the core issue which has done so much harm to higher
education: the student loan scam (so long, in fact, that a reader asked me to
explain what I meant by it, and so here we are).
When I first
started this blog about 5 years ago, the total amount of student loans was
under a trillion dollars, but now it’s around $1.5 trillion. I could be off a
bit, but with numbers this large, it’s not worth tracking another 100 billion
here or there. Amounts this size cannot be legitimately paid back, and we now
have far more people with student loans than we have students in our higher
education system.
Some say the
reason for these unpayable loans is the economy, and while there’s some truth
to such a claim, there are underlying issues which would give us over a
trillion dollars in loans regardless of how booming the economy might be.
So let’s go over
what happened in some detail.
First, a few decades ago the government
noticed that people with college degrees made more money than people without
such things, and so determined that degrees meant more money. This is, of
course, flawed thinking, and it’s difficult to believe the people running our
government could be this stupid and not know what they were really doing. For
example, it’s a simple matter to determine people who wear more than an ounce
of gold jewelry have more money than people who do not, but I’ve seen no push
by the government to give gold jewelry to everyone…if our government were
really run by morons, they’d be handing out gold jewelry, because the reasoning
would be the same, right?
In any event,
based on this observation, the government decided to back loans which paid for
tuition. Naturally, Federal money has Federal strings attached to it, and the
strings here involved the following: the loans could only go to students
seeking degrees, and the loan money could only go to legitimate schools. “Legitimate”
was determined by the government, which (foolishly) decided that only the
regional accrediting bodies which were already in place could properly
determine the legitimacy of a school.
Since the Federal
government backed the loans, they had sufficient force to see to it that these
loans would be paid back; you cannot escape these loans through bankruptcy, and
even if the loan money was fraudulently granted, you still have to pay it back.
This was the first
step of the scam: opening up the Federal loan money cash spigot to certain
college students, namely those who wanted a degree.
Me,
complaining to admin: “Many of my students are obviously frauds. Isn’t there a
way you can keep them from even registering for my course?”
Admin: “We
can’t keep them from checking the box.”
---“the
box” refers to the box on the registration form certifying the student wants a
degree.
Now, the “student
seeking a degree” string was easily avoided. All a student need do is check a
box saying he wants a degree, and it’s solved. In times past, when higher
education was cheap (even
Harvard’s tuition could be paid via a minimum wage job decades ago), it was
fine to take just a few college courses…but now everyone must pursue a degree.
It’s just a box to click off, and there’s no penalty for lying.
The second string
attached leads to the next piece of the student loan scam.
This issue is
accreditation. Accreditation is a 19th century concept, and it
formed then because schools in the United States wanted to become better at what
they do. The old
rules for accreditation were simple, and about education. Old
accreditation is riddled with good faith assumptions, because it was completely
voluntary, and was never intended to be about money, certainly not money
measured by the hundreds of billions of dollars. Today’s accreditation,
responsible for today’s victims of higher education, cares nothing about
education, and simply is a rubber stamp to allow the student money to flow.
Schools systematically violate even the fairly limp rules of accreditation
today and it doesn’t matter: accreditation is only removed for schools which
don’t pay their accreditation fees (and this is the only violation I’ve ever
seen of the many accreditation rules—any claim that our leaders in higher
education are simply incompetent must address why they never, never, violate
this rule).
These two issues
explain much of what happened. If accreditation was legitimate, or the Federal
government wasn’t backing the student loans so anyone can get them, we wouldn’t
have $1.5 trillion in debt for college tuition. Past this point, it’s all
details, but I’ll address some of them as well.
The tuition loan
money available, for example, is based on the cost of tuition. Thus we have a
vicious cycle: the school raises tuition to whatever it can, and the loan is automatically
and commensurately raised to cover it. So the school may as well raise tuition
some more, and so tuition goes up some more.
This
relationship is well known, well documented…but the Federal government
won’t stop it because they keep trusting accreditation to be legitimate.
Suckers.
There’s absolutely
no penalty to the school if it takes the loan money under fraudulent
circumstances. Ok, yes, if the
school literally steals billions, the Federal government will shut it down (even as
accreditation says “they’re legit because they paid us to say they’re legit!”).
This means your typical “leader” in higher education is just there to plunder,
and my blog has many examples of these pirates irresponsibly looting a school
(my own favorite is the Poo Bah who
used the school to build his personal 4 star restaurant, though usually the
money is stolen through real estate deals).
The sheer size of
the fraud cannot be underestimated. It isn’t simply that we have schools with
wide swaths of fraudulent coursework, or submitting
fraudulent paperwork asserting the courses are legitimate knowing
full well accreditation doesn’t even care. We also have schools which use
student information to sign them up for classes (and huge loans) the student
doesn’t even know about. Years later, when the student gets the bill…they’re
still on the hook and there’s no recourse.
If the student
loan money weren’t backed by the government, it’d be backed by private banks
who would take a look at the school to see if a legitimate education was really
happening there. Instead, we have schools with ridiculously low graduation
rates, even 0.6%
is considered pretty good…because all that matters is sucking in students and
extracting that money, nothing else.
In any event, this
is the basic structure of the student loan scam: a clueless government loans
infinite money to any person willing a to check a box, to any school willing
pay the money to an accreditor, which will allow it to accept student loan
money.
After a
generation of this plundering, kids see their parents were harmed greatly by
higher education and are starting to shy away from going to college, thank
goodness. After decades of amazing growth, college enrollments are dropping.
Our higher
education system has responded to this in three primary ways, all
embarrassingly short-sighted:
Some schools are
putting up climbing walls and otherwise turning their campuses into resorts for
the students. I don’t see this working out in the long run, and even the short
run is unlikely.
Some schools are
expanding their graduate programs, utterly destroying the lives of the students
whose lives were already being destroyed by the loans for their undergraduate
degrees. Again, this is a short term solution, though for a few more years I
reckon the plundering can continue as before.
Finally, some
schools are working with the public school system to simply “guide” students to
college right out of high school, with a goal of 100% high-school-to-college
“success.” They’re focusing in particular on students from families where nobody
went to college—in other words, they’re focusing on the ignorant and most
vulnerable. While vile and pure evil to exploit kids like this, this tactic
should also work for a little while…but I suspect it won’t take a generation
before this scheme, too, falls apart, and it can’t possibly last for longer
than a generation.
A long term plan
for success, namely restoring integrity to higher education in general,
possibly through re-legitimizing accreditation, is not being discussed…the
money is still too easy to get through the student loan scam, after all.
Perhaps later
I’ll discuss some more how we can fix higher education so it won’t be such a
creator of victims and exploiter of the young. For now, though, anyone who
reads this blog now knows the basic idea how the student loan scam works. Every
college and university in this country, from Harvard to the lowliest community
college, engages in this scam to some extent, so please warn your children thinking
about taking out a loan for college tuition.