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College Debt: Don’t Even Think of Asking Me to Pay
Since everyone, including Presidential candidates, seem to be discussing canceling college debt, I was moved to offer some thoughts on the subject, none of which include canceling college debt, but some of which have been bandied about by grander conservative voices.
Now, my philosophy regarding this issue is simple: You made the deal, not the hardworking taxpayers who would be strapped with your “canceled” debt. Learn that lesson now; pay your own way.
That being said, there are other avenues to enter a productive, adult, working life, without incurring debt resembling the GNP of Bulgaria. Here goes:
- The obvious solution to extraordinary college debt is to reduce those pesky highly inflated tuition costs; no university is worth $250K. Period. But, since that won’t happen overnight, it may mean that you will have to elect not to attend that ridiculously overpriced edifice of higher education. So be it. Think how much smarter you are, already. That should be of comfort to you.
- A second radical approach to the college debt problem is to attend a local community college with reasonable and affordable tuition. Many students start their college career there, and either continue on, or become employed with a two-year degree. And, should you opt to secure employment during your education, there are companies that will actually pay for college. Look into it.
- A third option is … wait for it … not to attend college. Professional trades are stepping stones to entrepreneurial success and, thanks to President Trump, small businesses are booming. Even if you don’t choose to start your own trade business, no one I know isn’t grateful for a good electrician, plumber, or carpenter. Our lives depend on professionals in these and many other areas. Since one person cannot be an expert in every field, go be an expert in your field.
- A fourth possibility, and a heck of a good career choice for many, is to enter the US military. I cannot begin to enumerate the myriad benefits of military service, and while I recognize that it may not be for everyone, most employers I know think highly of an applicant who has served his/her country. Generally speaking, your pedigree is your honorable service.
- The fifth, parents, is for you. Stop buying the nonsense overpriced universities are marketing to you. And stop encouraging/pressuring your progeny to espouse it, too. Instill in your children, should they plan to work after college, that developing relationships and skill sets with businesses, for example, in the form of internships prior to The Job Hunt after college, will educe many benefits, some of which may lead to the hiring of said progeny. Dole out good, solid advice, not dough.
American youth: What you decide to do with your life is entirely your choice. But, why approach it with massive debt, or bind your parents to it? You have options. Don’t let those indulgent universities make their profits from you. Be wise, not foolish.
Lessons learned.
Published in General
Many conservatives and moderates believe that we are only now being asked to pay (through debt cancellation). They are opposed to the public footing the bill for someone’s tuition.
In fact, the public were already paying the day the loan program began.
If only those voters knew that at the time!
It is one more example of the painful consequences of economic ignorance. We are slouching to socialism because we don’t recognize the inevitable consequences of each interventionist step. State-supported student loans are simply one more case of interventionism: policies intended to increase production by attacking markets. By violating property rights and responsibilities rather than by protecting them. It just doesn’t work.
Once you accept the moral and economic idea of interventionism, there is no stopping point short of total state economic ownership of the citizens. Too many conservatives are combatively dedicated to their know-nothing philosophical dogma, that economic laws (ideas) can be violated without consequences.
If you think that abstract ideas have no consequences, then you think that ideas have no consequences. All ideas about cause and effect are equally abstract, even the idea that your car will start if you turn the key.
Then remove the government subsidy and make the loans bankruptable.
That would solve the problem, so no lender in their right minds would then issue such loans.
I have an easy solution: have the people writing the loans be the same people recruiting the students. :-)
I mean that most sincerely. There is a huge gap in working methods between the admissions department and the financial aid office. Many students will say that the second-year loans and grants are much harder to navigate and obtain because at that point, the students and their parents are dealing strictly with the financial aid office.
Colleges are ranked by how many applicants they get in relation to how many students they actually accept. They are also ranked by the grade point averages (GPAs) of the students who apply and the students they accept. This means that the admissions department representatives have to be good salespeople. And they are good! Too good.
I also think that the students’ advisers in the colleges and universities are next to useless in terms of helping the students achieve their dreams.
There’s one other thing I would do that I know would inject some accountability into colleges and universities: write off financially any course a student flunks and remove it from the student’s final grades.
I realize that’s controversial, but hear me out. College courses move very fast. Because of the cost of overhead, colleges have shrunk the length of quarters and semesters, and the courses move at high speed through the content. The students have to, as they say, hit the ground running.
The professors should assume some responsibility here. One day 3, they should give a pass-fail quiz that consists of content the students have to know in order to understand the rest of the course. In chemistry, for example, it would be some basic understanding of the difference in mass and weight between water as a gas, a liquid, and a solid.
The kids who don’t pass are told that they need a prerequisite course. It’s not necessarily an intelligence issue, just a content absorption issue.
This would put the students’ success on the school.
Too many students are paying for classes they failed and that will do them absolutely no good in any way in their life except cause them problems later.
The schools need to accept some responsibility here. They have the knowledge of these courses and what their requirements are, and what the world requires of their graduates. The students don’t know this stuff. That’s why they are there. Nor can the students advocate for themselves. The power in the relationship is with the schools, not the students. Basically we’ve got immature consumers managing $60,000 a year. The students are also nice unassertive people who take their failures on themselves rather than putting some of them on the professors and the schools.
When he started out, Ralph Nader (someone I don’t agree with 90 percent of the time) made a point that resonated with me and millions of other people. Paraphrasing, caveat emptor certainly. On the other hand, I shouldn’t need an engineering degree to know whether my car brakes will work. There have to be some protections for consumers. And that’s good for business–ask the Better Business Bureau. :-)
The cost of living in a specialized-knowledge society is that we have to depend on others for nearly everything. I trust that my lettuce from the grocery store isn’t poisoned, that everyone along the way did what they were supposed to do and I can eat it without worry. If it’s rotten inside, I can take it back to the store. Not that I ever would except under extreme circumstances, but I could do it. They will stand behind their product.
There is none of this type of naturally occurring accountability in colleges. That has to change.
If it doesn’t, more colleges are going be closing their doors forever.
Yes, and eliminate the loan guarantee. In other words, halt the entire program–there is no other way to prevent further harm.
We cannot be paid back for what we already gave up when the loans were first written many years ago. Even if we could calculate the reimbursement that would make us whole, the loan recipients would have to pay, as a group, more value than we gave them: the wealth was permanently destroyed by the existence of the loan guarantees. You can’t go back in time and make up for lost production.
Doesn’t matter how you feel. The Democrats need to buy votes to get elected and this will get the youth on their side for a while.
Colleges are burdened with entire departments whose sole purpose is to let others know that they exist. The amount of useless bureaucracy in the universities would even put the federal government to shame. Cutting these clowns out and bringing some efficiency back would be a good start.
Or maybe people could stop “dreaming” and do some rational analysis of cost/benefit.
What Is Moral Hazard?
Should we be surprised that Generation Snowflake wants someone else to pay for their mistakes?
My preferred variant on the desires expressed by @marcin to have college accountability is to require the college to repay the loan if the former student defaults.
The current system has total non-alignment of financial risks and rewards. The college gets the money (from the lender) upfront, and so has incentive to get as much as possible. But the college bears no responsibility for the repayment of the money it has received, or even the usefulness of its expenditure of the money.
But . . . I worked with a guy who took out loans in his own name (notwithstanding approaching retirement age, and in addition to loans the kids took out in their own names) so that his kids could attend what at the time were literally the two most expensive colleges in the country because my coworker was convinced that at those colleges the kids would make the people connections that would guarantee future success. It didn’t quite work out that way, as he ended up financially subsidizing post-college life for both kids. Eventually one of the kids worked her way into his idea of elevated society, but I don’t think it was due to her college connections.
My point – some parents are convinced that the right overpriced university will make all the difference in the world in the connections the kid will make.
My alternate point – Some people are stupid.
And you’ll find a lot of those really stupid people attending colleges. Expensive colleges.
Exactly. I agree completely.
The place where these conversations about future income and future debt needs to happen is in the high schools because those are the students who need to hear the entire list of their options. Thank goodness there are many today. As long as the kids have a place to live (and many don’t because of the divorce and foster care laws–they are effectively homeless at 18, and they need a different kind of help than we are giving them), they can go far on very little money.
If you are selling an investment to people, you are supposed to make some attempt to disclose the risks. Both the 10-K (for existing corporations) and the S-1 (for IPOs) contain “risks” sections.
But a college education–with or without student loan debt–is one of the largest investments many people will make in their lives. And there is no serious attempt to disclose the risks and alternatives, just hype.
There is probably no viable way to do clawbacks against universities for their misrepresentations in past student costs and loans, but going forward, they should certainly be required to have skin in the game.
Lots of good points here.
One additional reason why college tuition and student loans are not operating according to market forces is that colleges charge the same price for every class, and the loans are offered at a standard rate to students without consideration of which classes the students are taking.
The loans should have higher interest rates for students in fields with lower expected post-graduation pay, and vice versa. Interest is supposed to reflect risk, and not all college degree programs carry equal risk of default. This, there might actually be hope for in the real world (as long as colleges didn’t game the system too much). Engineering students should get loans at lower rates than students majoring in Queer Studies with a Focus on Somalian Dance Routines. People respond to price signals.
An added bonus to this is that the schools could then fill the class up with wait-listed people (who could also pass the test). The school would still get their money, the failed students could leave, older, wiser, and not in debt.
If they could do that, they wouldn’t need college.
All the points of this post are valid, except . . .
If your goal in life is just to be fed and happy, then your advice is sound. If you desire to be in an influential part of society, or want your children to be so, then the bigger name college is going to be important.
I don’t think knowledge alone is the reason for college. I wish it were. I wish we could study at home, take a test to prove mastery of a topic and have all the advantages of the big name university. Perhaps that day will come, but it hasn’t come yet.
A university degree’s value is not the knowledge that you gain, it’s the status you attain. It’s sad but true. Therefore, the advice to go to community college is poor advice. You earn no status at a community college, and so it is valueless to attend at any price above free.
The big shame is that people who have no business for a college degree are trying to attain that status even though they are mediocre students. These are the students that go to community college, rack up some debt there, and then continue on to a regular college incurring even more debt, all while getting a degree that results in a job at Starbucks. Their investment is worthless.
I’m against cancelling student loans (tax relief is another question) and I’m also against bailing out social security with general revenue. We’ll see where all the responsibility talk goes when the shoe is on the other foot.
Counter-point: this will only exacerbate the grade-inflation in the universities. Professors will just pass everyone. I mean, they pretty much already are (I read somewhere that the median grade at Harvard is an A-), but think how much worse it would be if the school lost money because a student failed a course.
Yale law school doesn’t even give grades. Everyone graduates.
I would add another value: The people you meet. I have been working in the (mostly sacred) music world for 40+ years. To this day, I have business contacts whom I met and befriended in college. We were a self-selecting group: kids seeking specific knowledge & skills that would aid us in a professional pursuit of music.
A dedicated music trade school (ex. Berklee College of Music) would have done the same thing. But they tend to be even more expensive than universities.
I did not know that!
Gaius,
The claim that changing the (deceptive) internal accounting and reporting on Social Security finances would be a “bailout” is purely fraudulent.
Any such change would have zero impact on anyone. The first dollar that is reported as “coming from general revenue” will simply be the first dollar of Social Security distributions to be honestly accounted for by the US Government.
I won’t take the time to explain now, but I would be happy to if you or any other readers are interested. After trying to understand SS funding and reporting for decades, my conclusion is that it is, by original design, a complex and subtle fraud, one that exploits common, fundamental misunderstandings about debt, savings, investments, and money.
The popular belief about SS funding that was explicitly intended by FDR–that American workers are merely justifiably getting what they worked and saved for, as would be the case if they had invested part of their income for retirement–is very deeply and passionately held.
If I do try, but cannot change this almost universal conviction among Ricocheteers, I hope that my colleagues won’t allow our disagreement about the facts to affect our bonds of mutual trust and respect.
This is all true for many fields, but in those fields that are less competitive than law or medicine or the arts, you can start with an online or community college degree and get pretty far up the ladder of life’s success. :-)
I think they decided grades were demeaning to their lofty status as Yale Law students.
Much like the fraud and misrepresentation which have lead younger college students to believe that their education would necessarily be a worthwhile investment. My point is that no generation has a monopoly on being taken and attempting to leave others with the tab. Both Millennials and Boomers have in effect sought to manipulate public policy to achieve their conception of the good life at the expense of those with less demographic heft (Gen. X and the silent generation both have a right to complain but it’s the unborn inheritors of our debt who are the most voiceless of all). For the former that means fancy degrees, for the latter home-ownership and guaranteed retirement.
The simple phrase you’re looking for that explains it clearly and accurately is “Ponzi scheme”.