College is a scam

A college education used to be a pretty rare thing in the United States.  As shown below, in 1940 only about 5% of the population had been awarded a bachelor’s degree.  The number of bachelor’s degrees earned has quintupled since the 1940s:

Educational_Attainment_in_the_United_States_2009The big reason for the increase in bachelors degrees awarded in the late 1940s and the 1950s was the G.I. Bill that was passed by Congress in 1944.  This bill

provided a range of benefits for returning World War II veterans (commonly referred to as G.I.s). Benefits included low-cost mortgages, low-interest loans to start a business, cash payments of tuition and living expenses to attend college, high school or vocational education, as well as one year of unemployment compensation. It was available to every veteran who had been on active duty during the war years for at least ninety days and had not been dishonorably discharged; combat was not required.[1] By the end of the program in 1956, roughly 2.2 million veterans had used the G.I. Bill education benefits in order to attend colleges or universities, and an additional 6.6 million used these benefits for some kind of training program.[2]

It was during the late 1960s and early 1970s that students began enrolling in college in order to avoid going to Vietnam.  College students were exempt from the draft:

The large cohort of Baby Boomers who became eligible for military service during the Vietnam War was responsible for a steep increase in the number of exemptions and deferments, especially for college students.

And as stated by Ohio State cornerback Damon Moore in 2002, “Not everyone goes to college to be in college.”  For many modern college students, college is a place to avoid growing up, drink and do drugs, and hook up with members of the opposite sex.  Others are continuing their education by enrolling in graduate school because they can’t find a job due to the Great Recession.

But the party may be coming to an end.  Here are a few reasons why.

1.  Tuition costs have skyrocketed.

From BusinessInsider.com:

As you read this, there are over 18 million students enrolled at the nearly 5,000 colleges and universities currently in operation across the United States.  Many of these institutions of higher learning are now charging $20,000, $30,000 or even $40,000 a year for tuition and fees.  That does not even count living expenses. Today it is 400% more expensive to go to college in the United States than it was just 30 years ago.

The increase in the cost of attending college has outstripped even the housing bubble that popped in 2008:

College TuitionAnd what are the colleges and universities doing with the increase in revenue due to this tuition increase?  Raising the salaries of their best teachers professors?  Funding scholarships for future students?  Building new classrooms?

Why no, they are paying their administrators and presidents record salaries!

Penn State’s Graham Spanier was the top earner last year at the time he was fired over the Jerry Sandusky scandal, according to the study by the Chronicle of Higher Education, though his compensation was inflated by $2.4 million in severance pay and deferred compensation.

The median total compensation for the public university presidents in fiscal year 2011-2012 was $441,392, the study found. Four of the presidents earned more than $1 million, and the median base pay jumped 2 percent to $373,800.

Spanier received total compensation of $2.9 million, the same fiscal year that he was fired for his handling of the Sandusky child sex abuse scandal.

Jay Gogue of Auburn University in Alabama, E. Gordon Gee of Ohio State University, and Alan Merten of George Mason University in Ohio, who has since left his position, also received more than $1 million in the 2011-2012 fiscal year. Gee had the highest base pay, at $830,439, which accounted for 44 percent of his total compensation.

I can tell you right now, not one of these people is worth $1 million per year.  Quick, what does a college president do?  I have no idea either.  But I have heard from a very credible source that Dr. Gogue throws a heckuva party in the president’s mansion every Friday ($5,000 of university funds every week).

Schools are also ‘investing’ in palatial dorms and student recreation centers. And for any parents out there who are paying for their child’s college education, here’s a small sampling of what you may be paying for:

20 Ridiculous College Courses

Harry Potter, sex and chocolate, Lady GaGa.  Coming soon to a campus near you: the cultural impact of Justin Bieber and Miley Cyrus.  Who knew that you needed to pay $20,000 or more per year to study these things?  I guess TMZ is on too late for parents and students to stay up watching it.  And no, the link is not to the TMZ website.  As the sorority girls say, “Eww…”

2.  Students are taking on record levels of debt to pay for college.

Outstanding student debt topped $1 trillion in the third quarter of 2013.  And the prime pusher of this financial drug is the Department of Education:

U.S. Secretary of Education Arne Duncan visited students at T.C. Williams High School in Alexandria, Virginia and encouraged them to load up on college loans:

“Please apply for our financial aid.  We want to give you money.  There’s lots of money out there for you.”

I wonder if Arne told them that they would be expected to pay that money back.  From Bloomberg.com:

The share of 25-year-old Americans with student debt increased to 43 percent in 2012 from 25 percent in 2003, while the average loan balance rose 91 percent, to $20,326 from $10,649, New York Fed data show.

Just like an addictive drug, student loans can ruin your life because they are not dischargable in bankruptcy.  Student loan debt is the financial equivalent of herpes:

What young high school students are never told is that not even bankruptcy can get you out of student loan debt.  It will stay with you forever until you finally pay it off.

And Rolling Stone columnist and journalist Matt Taibbi exposes how student loans are ruining students’ lives:

In the early 2000s, a thirty-something scientist named Alan Collinge seemed to be going places. He had graduated from USC in 1999 with a degree in aerospace engineering and landed a research job at Cal Tech. Then he made a mistake: He asked for a raise, didn’t get it, lost his job and soon found himself underemployed and with no way to repay the roughly $38,000 in loans he’d taken out to get his degree.

Collinge’s creditor, Sallie Mae, which originally had been a quasi-public institution but, in the late Nineties, had begun transforming into a wholly private lender, didn’t answer his requests for a forbearance or a restructuring. So in 2001, he went into default. Soon enough, his original $38,000 loan had ballooned to more than $100,000 in debt, thanks to fees, penalties and accrued interest. He had a job as a military contractor, but he lost it when his employer ran a credit check on him. His whole life was now about his student debt.

Read those paragraphs again.  This guy is an engineer, one of the professions that are supposedly in high-paying and in demand.  Too bad that Mr. Collinge was probably replaced by someone from India or China who has an H-1B visa and is willing to work for peanuts in order to avoid going back to their crappy country.

Who gains from the issuance of student loans?  The colleges and universities, the federal government, and Sallie Mae.  And the government and Sallie Mae aren’t playing around:

Over the years, nearly all standard consumer protections have been removed from student loans. Concurrently, draconian (as well as lucrative) collection powers were given to the lending side of the system. Today, we are faced with a structurally predatory lending system where most of the players- including the federal government- have been making more money from defaults than loans which remain in good stead. Any western economist will agree that this is a defining characteristic of a predatory lending system. This has caused numerous related problems to cascade throughout the system. First, it has led to an environment where the Department of Education, institutionally, has lost the will to provide meaningful oversight of the lenders or the schools, and has also, clearly, abandoned its reporting duties to the public, and also to Congress.

In this environment, the schools have been given the green light by Congress, which sets the federal loan limits, to raise their prices at double, or even triple the rate of inflation year after year. The schools and lenders both have grossly misled the students about the value of the institutions, and also the real risk that the loans posed. Clearly, this would never have happened had the government, at least, had significant “skin in the game” on the side of the borrowers, rather than against them. This is what happens when bankruptcy and other protections are removed, and defaults become a preferred outcome for a lending system. And in the case of federal student loans (since the federal government guarantees (and now makes the loans), it is the worst sort of “big-government” one might imagine.

Plus, Sallie Mae gets to double-dip when a former student defaults on a loan.  The image below illustrates what happens after a default.

student-loan-scam

Schools are double-dipping as well, because their endowment funds are investing in Sallie Mae stock.  The only ones involved in the student loan/education scam system who aren’t benefiting financially are the students.  The very same students who are supposed to benefit from going to college.

3. The degrees most students are ‘earning’ are completely worthless.

Not only are students taking worthless courses on Harry Potter and Lady Gaga, many of them are graduating with degrees in fields in the Liberal Arts and/or (insert your favorite minority group here) Studies.  These degrees are pretty much worthless as there are no jobs in those fields.  And the jobs that are there don’t pay very much.  In fact, half of all college graduates are working in jobs that don’t require a college degree:

Nearly half of employed college graduates currently work in jobs that don’t require a college degree, reports The Wall Street Journal, and the problem doesn’t seem to be temporary, according to a paper released by the National Bureau of Economic Research.

Add to that the fact that more than half of recent college graduates are either unemployed or underemployed:

About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41 percent, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields.

Out of the 1.5 million who languished in the job market, about half were underemployed, an increase from the previous year.

Even the highly-regarded STEM fields are not immune from this problem.  Perhaps this is why recent college graduates regret going to college.

A new study by Wells Fargo found that one in three Millennials regret attending college and would have instead preferred to work instead of rack up debt they will be paying off for decades to come.

The Millennials have a point.  But all is not lost.  We just need to get young people to stop believing the lies that they are being told about going to college:

  • You need to go to college to get a good job.  The jobs aren’t there anymore.
  • You will make more money if you go to college.  Hard to do if you can’t get a job or have to pay off student loans in perpetuity.  In fact, once the repayment costs are factored in, you may be making yourself worse off if you take out loans to go to college instead of getting a job instead.
  • College is the best time of your life.  Ok, I can’t say that it won’t be (if you consider drinking until you black out and having sex with people you barely know the ‘best time of your life’).  But the whole point of going to college is to earn a degree that will allow you to improve your economic prospects for the future.  A college degree is no longer providing that benefit.

So what should young people do to improve their future economic prospects?  Working may be an option, if they are able to find a job.  The type of job doesn’t really matter as long as they are earning money and gaining skills instead of going into debt.  Here is a short list of jobs with the highest demand.  The jobs aren’t very glamorous, but many of them don’t require much education, if any.  And the degrees that are required for those jobs can be earned in 2 years or less from a community college, which is a less expensive option than spending 4 years at a college or university.

College isn’t for everybody.  And you don’t have to attend college to get an education.  Listen to Mike Rowe before you sign up for that worthless, expensive 4-year degree program.



Categories: All is well!!!, Bad News Everyone!, Bastards, Borrowing, Debt, Economics, Unemployment

Tags: , ,

1 reply

  1. Very true! I’ve written on this topic as well. Thanks for alerting the next generation of the con game that has grown to unprecedented proportions!

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