Our Next Dangerous Bubble: College Debt Grew by 170% in Ten Years


Student loan debt in the U.S. has grown by 170 percent in ten years, to a whopping $1.4 trillion — more than car loans, or credit card debt CNBC reported Monday.

Since 2008 we have basically swapped a housing debt bubble for a student loan bubble, CNBC reported. No wonder New York Federal Reserve president Bill Dudley fretted last week that high levels of student debt and default are a “headwind to economic activity.”

It’s not getting better any time soon.

Between 2016 and 2017 published tuition and fee prices rose by 9 percent at four-year state institutions, and 13 percent at posher private colleges.

CNBC writer Rana Foroohar wrote: A large chunk of the hike was due to schools hiring more administrators (who “brand build” and recruit wealthy donors) and building expensive facilities designed to lure wealthier, full-fee-paying students. This not only leads to excess borrowing on the part of universities — a number of them are caught up in dicey bond deals like the sort that sunk the city of Detroit — but higher tuition for students. The average debt load individual graduates carry is up 70 percent over the past decade, to about $34,000.

Remember when we went to school to be educated?

The colleges have been ruined by America’s own excesses. Is there any chance it can go back to what it was? If it doesn’t, it will only be for the rich and those who borrow money they will owe until the day they die or default on at the expense of taxpayers.

Out of 44 million borrowers, 7 million have defaulted. Families can INHERIT school debt if the loans are private, but if they are federal, which is what Obama finagled, the U.S. taxpayer is on the hook.

More than 60% of Americans die in debt and the largest of the debts is school debt. People are dying with school loans!

The problem with student debt lies primarily with the colleges. They rely on students taking on more and more debt to pay for their exorbitant tuitions. Their standards for student acceptance have been lowered in many colleges that now accept students who are in need of remedial education, not college, and often cannot finish a four-year program but are left with school loan debt.

Not everyone went to college in the past, it is a modern day phenomenon. Today, it is expected that, regardless of aptitude, everyone must go to college, often a boarding college, and the amenities are expected to equal the curricula.

The government easy money program has enabled colleges to simply raise tuition as costs increase instead of making the necessry cuts.

The U.S. Department of Education funded 88% of federal education loans in 2008-09 and 85% in 2009-10, 87% overall.

Add the states’ grants to the federal loans.

College costs are rising partly because of high salaries for reduced work loads. NPR cites time off for professors as a problem.

Faculty members are paid for their output in three areas; teaching, research and service (e.g. committee work and student advising). For many years, at schools where research was frequent and prolific, faculty members were granted reduced teaching loads in order to free up additional time for writing, lab work or creative endeavors. Over time, what was once a normal classroom load of three classes each semester was reduced for scholars to three and two, then two and two, then that became two and one. Soon this reduction became normal, regardless of the amount of research produced. “Good schools” had lower teaching loads than other lesser schools.

Colleges award lifetime contracts to Professors on the basis of their publications, and sometimes the published works are insignificant. Professors tend to stay too long with the benefits and short work days.

Craig Carnaroli of the University of Pennsylvania said that “Over 50% of our budget goes to the people that we employ.” College professors now make an average of well over $100,000 a year. Penn’s president makes over $1 million.

The number of salaries at colleges has multiplied as well. According to The Atlantic – staff salaries have increased because of the array of enrichment components that include head-counselors, cruise directors, personal physicians, trainers, tutors, student-life workers, alumni affairs, and so on.

A New York Times article reported that over the past 20 years, colleges have doubled their non-teaching staff, while enrollment has only increased by 40%. Jobs include monitoring environmental sustainability and a major part of their focus is on student “lifestyle.”

Economist Daniel Bennett, who studied the issue, says “Universities and colleges are catering more to students, trying to make college a lifestyle, not just people getting an education.”

There are more social programs, more athletics, more trainers, more sustainable environmental programs.” The student loan program made this possible.

Sports cost and not all big time sports are lucrative. Football, for instance, often brings in sufficient funds to cover the expenses, but 29% suffer a loss. Another problem is that many athletes cannot make the grade academically, but the NCAA now requires Division I universities to go through a selection process every ten years which makes universities more accountable for their players’ academic performance.

Spending on luxury dorms, gyms, swimming pools and other amenities has become a necessity to lure students. Freakonomics author Stephen Dubner said that the chancellor of his alma mater told him that  “[the gym] was a top priority because parents and prospective students increasingly think of themselves as customers, shopping for the most amenities for the best price, and the colleges that didn’t come to grips with this would soon see their customers going elsewhere.”

But gyms are nothing. At High Point University in North Carolina, students are treated to valet parking, live music in the cafeteria and Starbucks gift cards on their birthdays, according to NakedLaw.

Colleges generally operate on two 14-week semesters and summer school, which amounts to a 50% utilization rate. Classrooms, libraries, labs sit idle for the other 50%. There’s room for improvement here.

The colleges also spend billions to advertise, lobby and make campaign contributions. For example, the University of Phoenix, a for-profit college, has an exclusive partnership with GOOD magazine, sponsoring an education editor, and they have spent $9 million on lobbying and campaign contributions in 2010 alone. The for-profits are becoming the fastest growing sector in our college level programs.

For-profit colleges are encouraging homeless people to attend because student loans are so easy to acquire. They pay a $2000 stipend to the homeless and the college gets $20,000 a year, with their loans making up the difference. Often the students never graduate but they keep the debt.

We’ve lost our way and there is a price to pay at the end of this.



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