Saturday, June 3, 2017

18 Straight Years of Increasing Student Debt

By Professor Doom

     It’s so funny to hear the leaders of higher ed bleat about how hard they’re working to keep tuition down. It’s even funnier to watch them get a 6 digit signing bonus, and, for the Poo Bahs, a 7 digit parachute when they leave, and constant raises and luxurious benefits while they work.

       Then the leaders shrug as they increase faculty workloads and cut pay: no money in the system, you see, too bad, but we’re working hard to keep tuition down. Maybe next year, after the automatic administrative pay raises (“Those are policy, we can’t change those…”), there’ll be something left over.

      One of the many strange reasons justifying their insane pay and bonuses is that they work so hard. Even though in every other industry, the economy of scale that comes with growth usually makes it easier to keep prices down, our leaders in higher ed have perpetually failed to do what any mediocre manager in private enterprise can do.

       How badly have our leaders failed?

     Tuition is tracked carefully, so administrators play a bit a shell game to keep tuition down, by raising all sorts of other costs and adding fees to the tuition bill. All this money is paid for by the student loan scam. No matter how you shuffle the fees around, the total fees still end up being paid by student loan debt. You can ignore whatever they say tuition is, and just focus on student debt to get an idea how well our leaders are working to keep education cheap.

      Bottom line, if student debts are increasing for 18 years in a row, it’s because the cost of higher ed has been increasing for 18 years in a row…our leaders in higher ed have failed, and failed spectacularly. The rational thing to do would be to flush these losers away and/or end the failed student loan scam.

      We probably should have done something about this years ago (hey, I would have, if given the power), but we just let the loans stack up, as though “debts don’t matter” (seems to work for the Federal government, I admit…though I do suspect it will work perfectly right up to the point where it doesn’t work at all).

     Anyway, the article cites an important clue that things are amiss:

As of the end of 2016, 11.2 percent of student loans were more than three months delinquent.

      Like most everything else in higher ed, the above fact is misleading once you look more closely. There are a host of options for students to put off making payments, without going into delinquency. The most common example is a student  taking just one cheap night course every year—you don’t have to make payments on the loan when you’re in school, you see, so by dragging things out you can avoid being declared delinquent. It’s almost impossible to believe but more than 40% of student borrowers aren’t making payments. That’s quite a bit more than 11.2%, and way worse than any other legitimate loan repayment. Seriously, compare the 40% defaults of student loans to the roughly 2.5% defaults of credit card or other loans.

     Rather than do the obvious and shut down a system that’s obviously failing spectacularly, the article I quoted from above appeals to Trump for help. Trump actually has a plan, but it’s just another shell game, shuffling things around while not addressing the real problem:

Trump’s proposal allows for borrowers to pay 12.5 percent of annual income to earn loan forgiveness after 15 years; REPAYE has borrowers pay 10 percent of their income over 20 to 25 years before qualifying for forgiveness. A CNBC analysis found that, under Trump’s plan, borrowers would pay down their student loan debt far faster than under REPAYE, even though they’ll end up paying more each month to do so. Under Trump’s loan repayment plan, you’re paying more to escape the crushing cycle of debt repayment faster than normally.

      I’m not a forgiving person by nature, but I feel the vast majority of student loans should be written off, rather than just write and re-write repayment schemes. The bottom line, most of these loans were fraudulently given, most of the money went to the failed plunderers who rule higher ed.

      Don’t create a new repayment scheme, while pouring more easy student loan money on the table to create a new generation of high school graduates to be taken advantage of by the vicious crocodiles who run our schools…fix the problem:

     Shut down the student loan scam, cancel the degrees of the students who paid so much for them (and, any student who thinks the degree is worth the money will get the option to keep the loan and the degree), and then claw back the money from the schools/administrators who took it.

       Even if the last part of my plan isn’t feasible, it still makes far more sense than just ripping off more kids. The mainstream media generally presents any Trump plan in the worst possible way, but it turns out he’s actually considering (finally!) trying to fix the student loan scam:

But in changing the current parameters of loan forgiveness, Trump has also favored reforming the student loan business in the first place — reforms that may cause long-term problems. In a May interview with Inside Higher Ed, Trump campaign co-chair and policy director Sam Clovis floated the idea of getting the Department of Education out of the student loan market and allowing private banks to issue loans, a system the Obama administration abandoned in 2010…

     Absolutely, get the Federal government (and taxpayer) out of the student loan scam business…if private lenders want to assume the risk, they can do so, that’s at least a start to reducing all the hot money pouring into higher education. Naturally, this can only work if the Feds can stop giving so many protections to the lending banks, and instead protect the kids who will otherwise still be victimized by this system.

      Oh wait, the article mentions “long term problems.” What might those be?

…would likely exacerbate existing socioeconomic and racial disparities in the student debt crisis.

     But…this is what we have now. It’s no secret that the biggest ripoffs and scams are for-profit and community colleges, and likewise it’s no secret that these vicious predators target the low-income and minority markets. The system is already hurting the most vulnerable, and we need to stop that.

      Ultimately, the simple fact is student loans have been rising for 18 consecutive years, and that means 18 consecutive years of failure. All the tweaking of the system we can possibly do won’t alter that established track record of failure, a track record that in a sane world would lead to only one conclusion:

      Shut the student loan scheme down completely.

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