Flutterby™! : End student loans 2012-06-19 23:05:56.204601+00

End student loans

2012-06-19 23:05:56.204601+00 by Dan Lyke 4 comments

Via Slashdot, an editorial by Richard Vedder, director of the Center for College Affordability and Productivity and teacher of economics at Ohio University, calling for the abolition of student loans. It's fairly clear to me that student loans have simply resulted in colleges fleecing even more out of their students, and driving those students further into indentured servitude.

We can make an argument that college should be subsidized, that there is a public good from having more educated people (although I think we need to start finding some metrics to apply here, because I also think that higher education has become a huge circle jerk that far too often trades critical thinking for regurgitating canon), but if that's true then we're really better off recouping those benefits via, say, income taxes, and paying for the education up-front.

At least if we really believe in that educational system. Whence my opinion that we also need some metrics...

I've felt its a matter of trying to shift the way public colleges and universities are supported. It used to be that the University of Colorado received most of its funding through the State. Last I heard, less than 4% of the University budget came from the State. The rest is from a mix of tuition, indirects on research grants, and private donations.

Since the Federal Government has been squeezing the NSF and more states have been pushing research universities to suck from that tit, grants are ever more competitive. Private funds are also hard to come by. This is why the University of Colorado, well before UVa, is presided over by a President who was selected on his fund raising abilities and not his academic credentials.

That leaves tuition as the only source of income Universities have any direct control over. The Federal Government recognizes the squeeze and provides indirect support through loan programs.

Unfortunately, the burden is cast on people trying to better themselves. Education, like a mortgage, was traditionally one of the "good" kinds of debt. What many young people don't realize is that you incur the debt even if you don't finish the degree. And even if you do finish, there is no guarantee of better earning potential.

Yeah, and they are making the same mistakes in handing out student loans as they did with mortgages right before the bust. People get the loans who don't have the ability to succeed in college. We see what that got us in the housing market.

The difference is that there is no asset to foreclose on when a student loan goes into default. If everyone stopped paying on their student loans, the banks would have nothing. At least with mortgages, they had a house they could sell to recoup some of the losses.

Education, as it has been perverted today, does not provide a private asset commensurate with the private debt responsibility. This is why education needs to be publicly funded. There is a measure of public good that comes with education that the public should fund.

Anything beyond that level of education, schools should be financially responsible for their students success. What I mean is that schools should be able to guarantee that spending $X will result in $Y increase in income (or increase in employability). Failing that, schools should not expect to be paid.

Maybe schools need to work off a commission basis. A BS costs 10% of your inflation-adjusted salary increase over the next 10 years. A PhD costs 25% of your inflation-adjusted salary increase over the next 10 years. No increase, no money for the school.

If we eliminate 3rd party education loans, then the colleges will be forced to provide their own loans. The colleges would be much more careful to train those who will succeed, at least enough to pay back the loan.

This is much like the grants based on need and alumni giving system that works today. They give grants based on need in hopes that those students will give back when they are able.

The down side is that I've known excellent college students who came out of high school with a very average or even below average history. It will be harder for these guys to get the funding.