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Burdening Students With Debt Feels Good

From Issue: Volume XXI - Number 6

By Taylor Ramsey

Great Deal! How about I sell you a car? Nevermind that the price of automobiles has risen 73 pecent since your last purchase back in 1999. Don’t worry. There is a new program. The government will give you a very low-cost loan to cover the price of the car so that there is absolutely nothing to lose sleep over.

Drive it home today. The price does not matter because the loan is painless to obtain and you can make those very low payments later. You need the car to get to work? Here, take the keys; it’s an offer you can’t refuse!

Sound ridiculous? It is. However, our president, elected representatives and education administrators are offering the scam to students every day. Oh yeah wait … it feels good and feel good legislation is A-OK no matter the consequences.

Government sponsored student loans are another example of our legislators trying to improve programs or take care of perceived needs while unnecessarily raising costs. The intentions are noble, but it is not thought through. In my opinion, these programs actually hurt those our elected representatives are intending to assist.

According to The Christian Science Monitor, the cost of public four-year colleges from 1999 - 2009 rose 73 percent on average and tuition at private non-profit colleges increased 34 percent.

Yes, universities have fixed costs such as maintaining large campuses, even during the months students are away, along with improving facilities, insurance and accommodating the increase in salaries. I can understand increases based on inflation and taking care of the school in general, but why the drastic rise? Maybe the huge cost hikes coincide with easy to acquire loans.

I recently read an Associated Press story documenting that roughly 3,500 colleges and universities raised $31 billion in 2012. Stanford University raised the most at $1.035 billion and the 10th highest amount raised was the Massachusetts Institute of Technology at $379 million!

The basic cost of a year at Stanford can exceed $50,000 and they have approximately 15,000+ students when you figure in their undergraduate and graduate programs. When you add tuition along with housing fees and gifts received from the public, the money received on an annual basis is astronomical.

Public colleges and universities are in need of funds because of budget cuts and therefore, tuition must increase. However, again, no worries, because the government (whoops, I mean taxpayer) will provide low-cost loans to cover what the student can’t pay up front.

What does that represent? It means our elected state officials know that no matter how they spend taxpayer dollars, they can cut money for higher education and use it for other projects such as the Bullet-Train-Money-Pit, knowing full well there are government low interest rate loans out there for students to commit to. In fact, schools have staff on board that do nothing but assist young adults in accumulating tremendous debt.

What a deal. I, the business owner, can provide a product or service devoid of any market influence because I know my customer will be able to easily secure a loan from the taxpayer for the price I feel like charging. I can use the profit for making my business look beautiful, pay higher than market wages or simply put the customer’s government sponsored borrowed money in my bank account. I love this racket!

Schools receiving large amounts of gifts can afford to attract the high in-demand professors, administrators and fund raisers. In doing so, they can also command very high tuition. Students who are drawn to those schools will be able to proceed into debt in amounts of up to $200,000 with ease. No price competition here.

Imagine if a student was not able to obtain those easy-to-get loans in such high amounts from you and me. The student may want to attend a college, but if the tuition is too high, they may elect to pass on a college degree. In that case, the school’s football team has no student section cheering for them … or the college can lower the price of tuition to what the market will bear and fill the stands with hard working students.

As it stands, universities and colleges would be nuts to lower tuition as long as the taxpayer is providing all the money the student needs to pay the tuition demanded. To hell with the student’s debt burden after graduation. Helping others feels good!