Today was one of those convergence days. First Peter over at Bayou Renaissance Man did a piece on "The student loan time bomb," then later in the day, the Foundation for Economic Education (FEE) daily email brought a story on how taxpayers end up paying off the insane debts of graduate programs at elite universities. It was clear student loans were going to be the topic.
When I say typical government mess, what I mean is that the government creates the problem, makes the problem worse regularly for years, and then eventually creates an even bigger mess by "solving" the problem.
It's arguable that the root cause of the spiraling tuition rates isn't exclusively the Fed.gov's fault. The Fed.gov has definitely enabled the problem and made it worse by providing virtually unlimited loans. The reason I say it's not all on them is because if there was no market to sell those student loans to, tuition wouldn't be perpetually going up about 3x the regular cost of living. I've done many deep dives on this issue over the years, and a good, recent piece (2019) is here.
The aspect that's rarely talked about is that making student loans go away is by far going to be giving more money to graduate schools and therefore professional schools than the middle-class kids getting a useful bachelor's degrees. The average student loan balance for bachelor's degree holders is $37,000. That pales in comparison to the things the FEE article talks about. They begin by citing an article in the Wall Street Journal and excerpted at Tax Prof Blog.
Columbia and other wealthy universities steer master's students to federal loans that can exceed $250,000. After graduation, many learn the debt is well beyond their means," notes the Wall Street Journal.
The Journal reports on Columbia University's Master of Fine Arts Film program, one of the worst examples, in an article titled "Financially Hobbled for Life: The Elite Master's Degrees That Don't Pay Off":
The article focuses on the Master of Fine Arts in film from Columbia university. The median debt of the students who took out federal student loans for this program was found to be $181,000. The median income of those students two years after graduation was $30,000/year. The taxes from everyone; the people who never took a day of college, the veteran going on GI benefits, and those bachelor's degree holders with $37,000 in debt will be going to pay the debt of these MFA holders with $181,000 in debt. Sound fair? Equitable?
Meet James Stoteraux. Mr. Stoteraux is one of those Columbia MFA students but with two things about him that make him stand out from the crowd. The first is that he didn't complete his MFA; he's two credits short. The second thing is that the reason he didn't graduate is that he actually got a job in the film industry. I'll quote him here:
"There were 55 students in my incoming class at Columbia’s MFA Film program. Only 4 of us ever managed to make a career out of it. And of those 4, one guy dropped out the first semester. Funny enough he’s the most successful one having co-directed Avengers Endgame."
While Stoteraux's story is interesting, the point of this article is how "to err is human but to really screw things up requires government."
But as Ian Lamont of Lean Media observes, "a graduate financing program enabled by Congress ~15 years ago basically lets Columbia charge whatever it wants and get paid up front. Students are on the hook for hundreds of thousands; if they can't pay it off taxpayers are on the hook."
Even students who can find jobs after graduating often dump much of their massive student-loan debt on taxpayers. Once out of school, the students enroll in an income-based repayment program, in which the federal government forgives all loans after 10 or 20 years. This “Pay as You Earn” program allows eligible student-loan borrowers to cap monthly payments at 10 percent of their discretionary income, and have their remaining federal student loans forgiven after 20 years — or just 10 years, if they go to work for the government.
First of all, note that students are only required to pay 10% of their "discretionary income." How much is that? If those MFA holders from Columbia with a median $181,000 in debt and $30,000 income are maxed out on all their other expenses, what's their discretionary income? I can't imagine it being as much as a full 10% of their income or $3,000 per year, but it's clear that if they paid that much for 10 years, they don't get within a light year of paying off that debt (don't forget that loan will accumulate interest charges as they're trying to pay it off).
That last part about the federal student loans being forgiven after 10 or 20 years means a few things. First off, everyone knows there is no government money; there's only taxpayer money. That means you and I, those already-mentioned bachelor's degree holders who are paying their own $37,000 in debt, and those student loan holders who already diligently paid off their own loans, will pay for those absurd graduate degree loans.
Second, it means these graduate programs are an absolute gold mine for the colleges. Their programs are in demand, they can charge whatever they want, get the tuition right now and don't even have to care that eventually the loans get paid off to whatever institution is loaning the money. Which means those programs aren't going away any time soon.
The library of Columbia University - from the FEE article
By now our economy is so lopsided and fake, it's hard to get incensed about any particular spending. Useful people who do useful things that other people will pay them for willingly work hard for their money. And then get outbid by people who can bring to bear infinite dollars raining from the government: For houses, for equipment, for food, for anything real. We basically have a palace economy where the government decides where the real wealth of the nation goes.
ReplyDeleteMadRocketSci
By now the government's spending is so ludicrously in advance of tax revenue that taxation at all seems like some cruel rubbing of salt in the wounds: It's clearly not "needed". Of course, taxpayers pay for the inflation too (specifically people with dollar valued savings pay for it, in proportion to their savings.)
ReplyDeleteWe've never needed some alternative to the dollar more than we do now. Perhaps we should hope that it all goes Weimar and explodes, before the crazed "granting" of government money and loans to aristocrats and cronies drives the American worker into slavery.
All that student debt is being carried on the fed books as an ASSET. So double the amount, as it's transformed from an asset to a liability.
ReplyDeleteUniversity education and the attendant programs are nothing but another gigantic scam created for the express purpose of enriching a handful of people at the expense of everyone else.....which is pretty much the raison de'etre for ALL goverment programs.
ReplyDeleteUsed to be, useless degree holders were children of rich families. So, well, useless degree holders...
ReplyDeleteOf course, the basis of useless degrees used to be a solid education in science, math, the classics, logic, thought and all those high-brow things that don't seem to matter in today's useless degree programs.
Here's a thought... Don't get a degree that won't allow you to pay off your student loan.
And.. even more... go back to requiring real science and math (up to, at least, Advanced Trig and maybe Intro to Calculus) and logic and classical thought and stuff. Bring back the General Degree that leaves one well-rounded and useful.
And punish the schools, hard, for pushing useless degrees.
And and start at the 'public school' level. Seriously, nobody needs an Arts Magnet school or two in every district. For what? To push out more well-edumacated and spoken waiters and waitresses? At least the Culinary Magnet schools pump out a potentially useful student.
Bring back trade schools and trade programs.
Used to be, the local comm colleges had various trade programs. Now? Most of those community colleges have morphed into 4 year schools because the traditional 4 year schools have morphed into mostly grad level programs.
Fix the system by letting it collapse and salt the earth. Then start over, and require anyone entering into a useless degree program put up a bond either from themselves, their families or a sponsor, to cover the whole cost of the useless degree, with, of course, the knowledge that the useless degree is... USELESS.
Thomas Edison once observed that a government that "goes into business" -- and is not the providing of loans a business? -- can always shift its losses to "the taxpayers." Even he, as foresighted as he was, did not foresee that government would learn to shift its losses (and all its other expenses) to taxpayers not yet born.
ReplyDeleteWhat we did to Charles Ponzi is mild compared to what we ought to do to Congress.
All notions of fairness, obligation, and fiscal responsibility aside, one truly alarming aspect of the student loan mess remains: there are millions of young people in the U.S. today with a degree of Marxist indoctrination and mountains of unpayable, undischargeable debt. They have no way out so long as the current socioeconomic order stands, which gives them every incentive to topple it.
ReplyDeleteNow, the question is do we drive them into radicalism by insisting that they pay back the unpayable, or do we offer them a viable way out? In many ways this is analogous to the the choice of the Treaty of Versailles with its unpayable reparations vs. the Marshall Plan, which largely averted Communism from taking root in western Europe.
Either path will be expensive, and some people will unfairly get stuck with part of the bill (ask any WWII veteran). Defusing a developing violent outcome however is generally the better way, even if it means having the Fed print up $1.7T and hand it to the undeserving.
Two words about film school, and the necessity of: Robert Rodriguez.
ReplyDeleteI'm 60% certain that when I retire, per se, I'm going to the local film schools, and I'm going to explain to one and all how, for about half the price of one semester of their film school tuition, I can guarantee them good-paying jobs in the film industry for life, and they'll graduate my program, in any summer break from actual film school, with a feature film credit reel, a built-in network of industry people, actual practical motion picture experience, a motion picture industry union card, a piece of the gross on an actual feature film, and a genuine shot at becoming the next Spielberg, Scorsese, or DeNiro. Some of them will make it to that pinnacle, all of them will have a job that pays better than most people, and 70-90% will either happily drop out of film school, or if they do stay, graduate with between 1/10th to zero student loan debt.
And, purely based on random chance, at least every third or fourth class will likely become rich beyond their wildest dreams.
And better than even odds, I can prybar open the door, and start jamming rock-solid conservatives into the industry, at every level top to bottom, every year until I die, and there won't be a damned thing Hollyweird can do about it to stop me.
Excellent stuff, Aesop!
DeleteFor those of you who are like me and don't immediately know the name Robert Rodriguez, here's a line from his Wikipedia entry: "Rodriguez directed the 1992 action film El Mariachi, which was a commercial success after grossing $2.6 million against a budget of $7,000."
Spending $7,000 to earn $2,600,000 is a success in anybody's book.
A quick link to IMDB shows him to be very active with almost continuous productions since then as well as writing and many other credits.
Read his autobiographical Rebel Without A Crew.
Delete1) Film school drop-out.
2) Did voluntary 30 days as a locked-in medical trials guinea pig to get the $7K.
3) Spent the money on raw film stock, borrowed a camera, got an old reel-to-reel recorder, recorded the dialogue after every take separately, because the camera made too much noise to shoot synched sound.
4) Shot it in Mexico, and got a local village to be the cast, for free. The local cops even provided the guns and bad guys.
5) Cut it together in his garage.
6) Shopped it in L.A. to Univision, Telemundo, etc., because he was just trying to do a Mexican action flick better than the schlock they were showing.
7) Somewhere in the process, someone he showed his VHS cut to duped it, and passed it around Hollywood. It started making the rounds at Fox, Disney, Paramount, Warner bros., etc., and a bidding war took place. He didn't even have an agent, at that point.
8) After it appeared at Sundance, IIRC, without his OK, he was suddenly shaking hands with people like Robert Redford, DeNiro, Scorsese, etc. telling him how fresh and great it was.
9) Ended up getting hired to edit and rewrite his own film, for over $150K (scale), to make his schlock Mexivision homemade 16mm print suitable for a 35mm actual film release, and got a three-picture deal. That's a >1500% profit before he even hit theaters.
10) Then it was released, and grossed over $2M domestically.
11) Followed up with Desperado, 1/4 of Tarantino's Four Rooms, The Faculty, the Dusk Till Dawn series, and the Spy Kids series.
In his first 10 years.
He cuts and scores his movies in his freaking garage.
And he's published and made video how-tos on why film school is a complete waste of time and money, then lives it every day.
Hollywood is a paper tiger, and 100 people could loot it and gut it with a couple of pushes on the door, and end up owning it.
When I started college at a state school, tuition was 212 and change per semester, full load. Fall 1981
ReplyDeleteMy return to state college in Fall 1984 was 1300. Enter the Pell Grant and student loans. How much of a Pell Grant? Why, 1100 per semester.
.gov fouls every lake they enter.
Another place this responsibility falls - especially that of not getting degrees that translate into jobs -are parents. We have been very clear with all of our children that they needed to get a degree they could get a job in. If they loved something, that was fine - they need to double major in that case and have a degree that equates into a job field. Allowing children to think that just by going to college and getting a degree in anything they are guaranteed a job is no better than allowing them to engage in any other kind of fantasy thinking.
ReplyDeleteIncentives. The school has an incentive to soak up every dollar the Feds will pony up, regardless of the degree. Make the loans private and able to be discharged in bankruptcy. Then the problem will cease.
ReplyDeleteAny professional carrying student debt they cannot pay off isnt worth the degree they bought because they are too stupid to know their self worth.
ReplyDeleteI dont feel sorry for any of them. And If government acts to pay off the loans of idiots, a great many very smart people will make January 6 look like a quilting convention.