“The Student Loan Bubble: Gambling with America’s Future” by Addison Quale, published by the Peter Schiff organization, provides some statistics on student loans in the United States.
Totaling more than $ 1.2 trillion, student loans now exceed credit card debt and are about 15% as much as mortgage debt. Between 2005 and 2013, student loans grew more than 300%.
With 23% of these loans non-performing, the expected current loan loss to taxpayers is about $250 billion. Projections of trends provides an estimate of $750 billion lost over the next 10 years.
While this is one significant factor in the financial instability of the United States, it is far more important in the lives and success of young Americans. Why do students have this debt?
Fifty years ago, a position as a college professor was recognized as a relatively easy life. Tenure provided job security, and the work itself in teaching and research (in the more prominent schools) was sort of a sinecure — a relatively easy and enjoyable pursuit.
For this reason, college professors were paid ordinary middle class wages, substantially below those paid to comparably educated and knowledgeable workers in the rough-and-tumble of where the work was more stressful and the future of the worker less certain. Even most of the more famous college professors were financially comfortable, but not especially affluent.
Colleges and universities were similarly frugal, with a minimum of administrative costs. Many part-time administrative tasks were done by the professors themselves. When I was a faculty member at the University of California at San Diego and needed a reagent, I called suppliers, negotiated a price, and purchased it by telephone using my university account number, which was then used by UCSD to pay the bill. Earlier, carrying out research as an undergraduate at Caltech, the procedure was similarly simplified. Only large items needed help from a department of “purchasing.”
Student personal help at Caltech was provided by friendly faculty members. There were no professional campus counselors. Now this 800-student body has several full-time psychologists and dozens of purchasing agents.
Moreover, those non-faculty administrators who were necessary were paid in parallel with a middle-class faculty. By contrast, recently a dean at a state university with which we are familiar who acted badly was demoted to a far less important job at the university — but his $250,000 salary went with him to the new job.
In summary, the emphasis in American universities was once on providing very high quality education at minimum cost. In this environment, students without other financial support could work their way through even a highly rated college, while studying full time. Our colleges had been this way for many generations.
Things are surely different now. Whereas tuition, room, and board at a very good school cost about $2,000 in the late 1950s, today the cost is on the order of $60,000. There has not been a 30-fold increase in general prices since then.
College and university costs are out of control. Moreover, more and more colleges are now fiscal branches of the U.S. government.
In the 1950s and 1960s, almost all professors in the hard sciences were politically conservative. Now, a large fraction of them are politically liberal. In professional governmental support, their research work has been on tax-financed welfare for half a century.
So, what of the students in this education industry in which the academic suppliers are winking at each other as they raise prices sky high in order to feather their own nests? Of course, there is great , sympathy for the students’ plight. The money to pay these inflated costs is readily “loaned” to them. At present, most of these loans cannot even be discharged in bankruptcy, although pandering politicians are increasingly busy buying votes by saying they will create various loan forgiveness programs with taxpayer money.
In times past, the hardworking student emerged from college — degree in hand — into a society that did not encourage debt. If he married, he and his wife saved part of his earnings until they could afford to buy a modest small home without debt. As the years passed, they could afford a debt-free larger home.
They were free. They were not enslaved by debt.
Debt is now a substitute for saving. Suppose today a young husband were to suggest that he and his wife save for a home until they can buy one debt free. His wife might reply that their friends have all gotten mortgages.
The idea of hard work, frugality, and saving for that home is passé. For those who might avoid debt slavery after graduation, however, the colleges and universities now offer a debt trap even before graduation. The universities are living so high that their lifestyle cannot be afforded unless they snare graduating students in debt for many years after graduation.
As Julian Simon taught us, people, on average, always produce more than they consume — if they are free to do so. Enslavement by taxes and regulations is already making it very difficult for Americans to produce more than they consume. The added burden of enslavement to debt is making this even more difficult.
American college students no longer need to wait until after college to make the mistake of becoming enslaved to debt. The colleges and universities are providing this scourge even before graduation.
How do we rekindle American exceptionalism? How do we rebuild liberty and opportunity in our nation? How do we overcome the economic stumbling blocks that stand in the way of our men and women of excellence?
One important way to is see that universities teach courses of value to their students, and, through institutional economy, stop ensnaring the students in personal dependence on debt.
After the civil war, Booker T. Washington taught his students at Tuskegee University skills they needed to be productive. The students at Tuskegee even built the actual buildings of the University with their own hands. They took no courses whatever in debt.
– a free sample article from the June 2015 issue of Access to Energy