Ah college, the opening
premise to almost all of the
pornography I consume.
"Smart ladies in STEM fields courted
by gentlemen who appreciate
personality."
Americans are swimming in
student loan debt to the tune of at
least $1.6 trillion.
That's almost enough money to
"liberate" Iraq all over
again, this time just for kicks.
That whopping debt is held by some
45 million Americans and it's
virtually impossible to discharge
like normal debt via bankruptcy
or by faking your own death.
Hello, car monger?
Yeah. I can't pay back that car loan
on account of I am dead.
Uh huh.
Murder suicide.
Yeah. I'll be missed.
Thanks so much. Okay.
This led President Joe Biden to
issue a legally questionable
executive order for giving up to
$20,000 to those who make less
than 125,000 per year,
even though that disproportionately
benefits wealthy households over
lower income households.
Senators Warren and Schumer say the
government is still being too
stingy and it ought to forgive up to
$50,000.
Bernie Sanders says cancel
all student loan debt.
And outlaw greed, humidity,
diabetes, storm the bastile, and so
forth. The narrative goes something
like this: student loan
debt sucks.
Paying student loan debt sucks, and
it makes life very difficult.
Like trying to get out from under a
mountain of wet carpet.
So why doesn't the government
help the many people chafing under
it? Everybody needs a college degree
to participate in a modern economy.
What with the robots and the Netflix
and the polio vaccines.
So the government ought to forgive
those loans unfairly burdening
graduates.
Now, far be it from me
to try to dissuade anybody from
solving a problem by throwing money
at it. But I do have some concerns.
First, Biden's plan is
projected to cost the federal
government $400 billion.
And at first I was fine with that.
But then I learned that taxpayers
fund the federal government.
Then I kind of got distracted.
I learned about narwhals for a
while.
Then I scored some Adderall. And I
went back to learning about
taxpayers.
Under Biden's student
loan forgiveness plan.
The average taxpayer will be on the
hook for over $2,000.
Then it turned out it wasn't
actually Adderall, it was just an
antihistamine, so I went back to
learning about narwhals,
which are not eligible for Biden's
student loan plan.
Before we try to solve the student
loan crisis by smothering
it in money from people who mostly
didn't go to college, we ought to
ask ourselves, why
is college tuition so expensive?
Normally, sorts of friends I have
who wear Che Guevara t-shirts and
engage in recreational protesting
are apt to explain higher prices
as a function of greed.
I.e.
corporations are lusty characters in
a Dickens novel, and so they drive
up prices in order to buy more
cigars.
Ergo, college tuition
is increasing because of greed.
But 90%
of student loan debt is owned by the
federal government. To cover tuition
at universities.
Who are more likely to be Che
Guevara fans than coal companies or
guys who own blimps.
Vague notion of greed can't really
account for that pricing.
Another explanation is that states
have defunded higher education,
forcing students to take up
the slack.
And that's partly true.
When state revenue dried up in the
2008 recession, so did
educational funding, and
universities responded by spiking
tuition to cover the difference.
But there are some big caveats
to this argument.
First, discussions of state funding
for higher-ed focus on per-student
spending.
If the budget stays the same,
but there are more students than
per student spending declines, and
that's definitely happened.
In 1940, less than 5%
of the population had a college
degree.
And from what I can tell, 80%
of those people were ridiculous
leather football helmets to protect
themselves from cigarets.
Back then, states could easily
subsidize most of the costs of
classes and leather football helmets
for that fractional percentage of
the population.
Whereas today, 13%
of Americans have a graduate degree.
About a third of the population has
a four year college degree and
schools have been pushing the "you
must have a college degree"
narrative for 30 years.
The more people go to college, the
more state resources are spread
thin.
Even so, declining per student
spending doesn't cover the increase
in college degrees.
Tuition at public universities has
gone up by between 30 and 37%
between 2008 and 2018.
But in 2018, per student,
funding was only 13% lower
than it had been in 2008.
Even if stingy, stupid
state governments stupidly
don't understand the benefits of
everyone in America having a college
degree, stupidly, there's
still a 20% rise in
tuition prices to account for.
Most of the price increase is
arising from some additional cause
beyond greed or state governments.
And if inadequate public funding is
the reason college is so expensive,
why is private tuition also going
up? Private universities don't get
subsidized by the state.
They are private, but they've also
increase tuition.
So some other factor is accounting
for the steep increase in the price
of higher education.
And I know what you're thinking;
Ghosts!
But no, it's not ghosts.
It's the fact that we keep throwing
money at education.
More specifically, when Uncle Sam
increases the amount of money
available to prospective students
via student loans, colleges
compete for that potential money.
Schools add perks, which didn't
exist in the 1940s when education
referred only to actual classes.
Things like dormitories, cafeterias,
study abroad programs, student life
activities, pools, therapy dolphins,
and new and exotic breeds of
administrators.
Then, once that college has built
a new pool and dormitory, secured
a castle to do study abroad programs
in and clone some new hot
administrators, it increases
its tuition to pay for it.
Eventually, Congress sees that
tuition has gone up and says, "Whoa,
that's too high. That's not fair!"
And it authorizes more funding
for student loans which go to
castles and clones.
The Federal Reserve Board of New
York recently conducted a study
which found that for every new
dollar of federal direct subsidized
loans, tuition rises by 65 cents.
For every dollar
of federal Pell Grants, tuition
rises by 50 cents.
In 2017, University of Vanderbilt
economist Leslie J.
Turner analyzed need based Pell
Grants and estimated that between 11
and 20% of Pell Grant aid
is passed through to schools,
meaning that the schools find a
way to capture it without charging
students less.
For out of pocket expenses.
So if we wanted to help out student
loan borrowers and narwhals
without accidentally jacking up
tuition prices, how would
we go about doing that?
I'm glad you asked.
To start, allow student
loans to be discharged through
bankruptcy.
For decades, it's been notoriously
difficult to get a student loan
discharged through bankruptcy.
Because in 1976,
congress extended eligibility for
federal student loans to applicants
who had not completed high school.
The logic being, high school
dropouts are struggling, so making
them eligible for student loans to
get into vo-techs or training
schools ought to help improve their
situation.
Private loan companies and state
guarantee agencies were wary
of giving loans to high school
dropouts. So Congress
eventually stepped in and said,
"Hey, no problem.
We, the federal government,
will guarantee their loans.
If somebody defaults, we'll cover
the bill." Great system!
Attending a for profit college now.
Tell loan companies there's no risk
of giving the loans out because if
they default, Uncle Sam will have
your back. If I were a loan company
and man, I wish I was because
I am so tired of being
Andrew Heaton.
Have you ever seen Newhart?
As a loan company, I knew that I had
no risks whatsoever in taking on
such clients. It's either upshot or
refund.
I'd pass out loans like narwhal
candy. If they pay back the interest
great, if they don't, also,
not a problem can't make a wrong
move. As a loan company, I
no longer remotely care whether or
not this person will default or not,
or about the gaping
hole in my heart that
no amount of praise
bourbon or chocolate seems to fill.
Anyway, that's exactly what
happened. With predictable results.
By the late 1980s and early 1990s,
there was a flood of loan defaults
from people who the government
altruistically set up for failure
to the tune of $1,000,000,000. To
compensate, the government gradually
restricted more and more situations
in loans from dis-chargeability
through bankruptcy until more or
less outlawing it altogether
entirely in 2005.
If you've ever wondered why you
can't just declare bankruptcy to get
rid of your student loans, that's
why.
The government outlawed it after
precipitating the problem it
outlawed.
Recently, Associate
Attorney General Vanita Gupta
announced changes to the bankruptcy
guidelines she says will "Allow for
a better, fairer, more transparent
process." It's too early
to know if the changes will help
more of those in need, but it's good
to see some in Washington
acknowledging the mess they've
created.
Next. If you actually want to drive
down college tuition,
put schools on the hook.
Whenever somebody defaults on their
student loan, make their college
eat half of it.
If colleges realized they only got
paid, if their graduates could
actually pay them back.
It would collapse predatory for
profit schools and compel
public universities to reconsider
how many degrees they pass out with
the word "studies" at the end.
Right now, Universities
understandably allocate seats and
majors based on popularity,
not on how useful the degree
is in the real world. Because they
get paid by selling degrees to
students, not by how useful those
degrees actually are.
Whereas if a university knows that
my degree is in one of
these obscure ridiculous categories
and it probably will never
result in me paying them back,
they'd probably cap how many spots
are in that program and instead
push prospective students towards a
field where the degree might
actually result in economic
investment, probably involving
some kind of math.
If our leaders want to handle
student loans by throwing other
people's money at them, they should
at least pair those wads of
cash with structural reforms that
will reduce the cost of tuition.
So far, they're trying to put out a
grease fire by hosing it down
with a grease pump.