Why Students Get in Too Much Debt

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Don't believe everything you read in the papers about student debt and bankrupcty.

Most states have fine schools which don't cost much. In NYC, the City University system has tuition of $5k or $7k depending on which college you attend, and most students get that all covered thru scholarships and Pell Grants. In 2013's graduating class, more than 80 percent of students got a 4 year degree with zero debt.

Students choose to go to colleges with hotel style accommodations, health clubs, and giant swimming pool palaces. So the colleges are responding to the demand and passing along the costs via increased tuition.

Professor salaries are bifurcated. Associate profs get paid poorly, but the tenured profs get big bucks. My favorite is at UC Berkeley, where professors studying income inequality are getting paid over $300,000 per year plus a benefits package to die for. Then there is the Univ of North Carolina law professor who teaches one class in which he chastises Republicans for making war on the poor--- he gets paid over $200k for teaching that single class.

And nobody actually pays their student loans anymore.

There are forbearance and deferment programs. When you actually do have to start paying (by which time you can be well into your 40s) you can enter into income-based programs. If you take a government job (no matter how highly paying) the debt can be discharged in as little as 10 years and all you have to pay is a percentage of income for that time.

Also bear in mind that much of what is called "student loan debt" is actually money that went to scams which are "schools" in name only.

A lot of the problem is with fraud in the for-profit sector. That has recently come under scrutiny and the taxpayers are footing the bill for hundreds of millions of dollars in the Corinthian debacle. The Democrats have made this an issue in the current election, but what has been almost entirely ignored by the media is that the Clintons got large amounts of money (both directly and thru the Clinton Foundation) from Laureate, which is a for-profit scam which began as a franchise (Sylvan) and expanded into "college" because the money was better.

One of the best ways to immigrate to the US is to enter on a student visa; once you arrive you simply get a job and stay here. For that reason it became more difficult to get student visas, especially if you are a for-profit college. In Libya almost no student visas were being granted to for-profit attendees, but then Laureate gave a lot of money to Bill Clinton and the Clinton Foundation. After that the State Department (under Hillary Clinton) passed out student visas like candy to all comers.

The latest is that the granddaddy of all student loan scams-- the University of Phoenix-- has just been bought by a friend of Bill Clinton. The "University" got most of its money from the federal government (Dept of Defense) but when DoD started cutting off access to "information sessions" (i.e., sales pitches) on military bases and DoD started discouraging service members from enrolling in Phoenix, the stock plummeted.

Now that Hillary is going to be President, there is an expectation that she is going to restore the flow of money to University of Phoenix just as the State Department did favors for Laureate after Bill Clinton got paid. (US politics is very depressing if you think corruption should not be rewarded).

The media narrative over student loan debt in the US is very misleading due to the fact that the whole issue has become political. Nobody wants to address the fact that students arrive on campus lacking basic math and reading skills, and have never written an essay.

Even law school administrators will tell you privately that student quality is declining, and if you deal with recently-admitted lawyers the quality of pleadings is shockingly low.

Ultimately the US is moving towards socializing student debt, but the manner in which it is doing so makes it unlikely that costs will even come down to pace the inflation rate. Rather like the healthcare overhaul, the US will address the problem by shifting the expense to the government but there is no political will to address runaway costs.

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This page contains a single entry by Paul Steinberg published on July 7, 2016 10:48 AM.

Qualities that Most Franchisors with Meaningful and Sustainable Values Have in Common was the previous entry in this blog.

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