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No Income? No Problem! How the Gov’t Is Saddling Parents with College Loans They Can’t Afford

As college costs continue to climb, families are turning to federal Parent Plus loans to fill the gap. But with no checks on their ability to repay, many parents are left overburdened, and others set up for failure.

Steve Lance put both his sons through college by taking out federal Parent Plus loans. Like many parents, he's now deeply in debt. (Mark Abramson for The Chronicle)

This story was co-published with The Chronicle of Higher Education.

More than a decade after Aurora Almendral first set foot on her dream college campus, she and her mother still shoulder the cost of that choice.

Almendral had been accepted to New York University in 1998, but even after adding up scholarships, grants, and the max she could take out in federal student loans, the private university — among nation's costliest — still seemed out of reach. One program filled the gap: Aurora's mother, Gemma Nemenzo, was eligible for a different federal loan meant to help parents finance their children's college costs. Despite her mother's modest income at the time — about $25,000 a year as a freelance writer, she estimates — the government quickly approved her for the loan. There was a simple credit check, but no check of income or whether Nemenzo, a single mom, could afford to repay the loans.

Nemenzo took out $17,000 in federal parent loans for the first two years her daughter attended NYU. But the burden soon became too much. With financial strains mounting, Almendral — who had promised to repay the loans herself —withdrew after her sophomore year. She later finished her degree at the far less expensive Hunter College, part of the public City University of New York, and went on to earn a Fulbright scholarship.

Today, a dozen years on, Nemenzo's debt not only remains, it's also nearly doubled with fees and interest to $33,000. Though Almendral is paying on the loans herself, her mother continues to pay the price for loans she couldn't afford: Falling into delinquency on the loans had damaged her credit, making her ineligible to borrow more when it came time for Aurora's sister to go to college.

Total Disbursements in Millions of Plus Loans

While the number of parents taking out Plus loans has nearly doubled since 2000, loan volume has grown much faster. All values are adjusted for inflation.

Source: U.S. Education Department

Source: U.S. Department of Education

Nemenzo is not alone. As the cost of college has spiraled ever upward and median family income has fallen, the loan program, called Parent Plus, has become indispensable for increasing numbers of parents desperate to make their children's college plans work. Last year the government disbursed $10.6 billion in Parent Plus loans to just under a million families. Even adjusted for inflation, that's $6.3 billion more than it disbursed back in 2000, and to nearly twice as many borrowers.

A joint examination by ProPublica and The Chronicle of Higher Education has found that Plus loans can sometimes hurt the very families they are intended to help: The loans are both remarkably easy to get and nearly impossible to get out from under for families who've overreached. When a parent applies for a Plus loan, the government checks credit history, but it doesn't assess whether the borrower has the ability to repay the loan. It doesn't check income. It doesn't check employment status. It doesn't check how much other debt — like a mortgage, or other student-loan debt — the borrower is already on the hook for.

"Right now, the government runs the program by the seat of its pants," says Mark Kantrowitz, publisher of two authoritative financial-aid websites. "You do have some parents who are borrowing $100,000 or more for their children's college education who are getting in completely over their heads. Those parents are going to default, and their lives are going to be ruined, because they were allowed to borrow far more than is rational."

Much attention has been focused on students burdened with loans throughout their lives. The recent growth in the Plus program highlights another way the societal burden of paying for college has shifted to families. It means some parents are now saddled with children's college debt even as they approach retirement.

Unlike other federal student loans, Plus loans don't have a set cap on borrowing. Parents can take out as much as they need to cover the gap between other financial aid and the full cost of attendance. Colleges, eager to boost enrollment and help families find financing, often steer parents toward the loans, recommending that they take out thousands of dollars with no consideration to whether they can afford it.

When it comes to paying the money back, the government takes a hard line. Plus loans, like all student loans, are all-but-impossible to discharge in bankruptcy. If a borrower is in default, the government can seize tax refunds and garnish wages or Social Security. What is more, repayment options are actually more limited for Parent Plus borrowers compared with other federal loans. Struggling borrowers can put their loans in deferment or forbearance, but except under certain conditions Parent Plus loans aren't eligible for either of the two main income-based repayment programs to help borrowers with federal loans get more affordable monthly payments.

The U.S. Department of Education doesn't know how many parents have defaulted on the loans. It doesn't analyze or publish default rates for the Plus program with the same detail that it does for other federal education loans. It doesn't calculate, for instance, what percentage of borrowers defaulted in the first few years of their repayment period — a figure that the department analyzes for other federal student loans. (Schools with high default rates over time can be penalized and become ineligible for federal aid.) For parent loans, the department has projections only for budgetary — and not accountability — purposes: It estimates that of all Parent Plus loans originated in the 2011 fiscal year, about 9.4 percent will default over the next 20 years.

But according to an outside analysis of federal survey data, many low-income borrowers appear to be overburdening themselves.

Total Recipients of Plus Loans

The number of parents taking out Plus loans has nearly doubled since 2000.

Source: U.S. Education Department

Source: U.S. Department of Education

The analysis, by financial-aid expert Kantrowitz, uses survey data from 2007-08, the latest year for which information is available. Among Parent Plus borrowers in the bottom 10th of income, monthly payments made up 38 percent of their monthly income, on average. (By way of contrast, a federal program aimed at helping struggling graduates keeps monthly payments much lower, to a small share of discretionary income.) The survey data does not reflect the full Plus loan debt for parents who borrowed through the program for more than one child, as many do.

The data also show that one in five Parent Plus borrowers took out a loan for a student who received a federal Pell Grant — need-based aid that typically corresponds to a household income of $50,000 or less.

When Victoria Stillman's son got in to Berklee College of Music, she couldn't believe how simple the loan process was. Within minutes of completing an application online, she was approved. "The fact that the Plus loan program is willing to provide me with $50,000 a year is nuts," says Stillman, an accountant. "It was the least-involved loan paperwork I ever filled out and required no attachments or proof."

She decided against taking the loan, partly because of the 7.9-percent interest rate. Although it was a fixed rate, she found it too high.

Of course, Parent Plus can be an important financial lifeline — especially for those who can't qualify for loans in the private market. An iffy credit score, high debt-to-income ratio, or lack of a credit history won't necessarily disqualify anyone for a Plus loan. Applicants are approved so long as they don't have an "adverse credit history," such as a recent foreclosure, defaulted loan, or bankruptcy discharge. (As of last fall, the government also began disqualifying prospective borrowers with unpaid debts that were sent to collection agencies or charged off in the last five years.)

The Education Department says its priority is making sure college choice isn't just for the wealthy. Families have to make tough decisions about their own finances, says Justin Hamilton, a spokesman for the department. We "want folks to have access to capital to allow them to make smart investments and improve their lives," Hamilton says. In the years after the credit crisis, department officials point out, other means of financing college — such as home-equity loans and private student loans — have become harder for families to get.

The department says it's trying to pressure colleges to contain costs, and working to inform students and families of their financing options. "Our focus is transparency," says Hamilton. "We want to make sure we're arming folks with all the information they need."

Colleges' Tricky Role

Colleges rarely advise families on how much is too much. After a student's own federal borrowing is maxed out, financial-aid offices often recommend large Plus loans for parents.

Using Education Department data, The Chronicle and ProPublica took a closer look at colleges where borrowers took out the highest average Plus loan amounts per year. (See a breakdown of the top schools.) NYU ranked 11th, with an average annual loan of $27,305. The university generally gives students less financial aid than many of its peers. Last year, parents of NYU students borrowed more than $116 million through the Plus program, the second-largest sum taken on for a single university, trailing only Penn State University's $160 million.

"Our first suggestion is the Plus loan," says Randall Deike, vice president for enrollment management at NYU. Yet he has misgivings about the program. "Getting a Plus loan shouldn't be so easy," he says.

David Palmer (Mark Abramson for The Chronicle)

David Palmer is chief executive at the for-profit New York Conservatory for Dramatic Arts, where parents who borrowed through the Plus program took out an average of $27,432 in loans last year. (Mark Abramson for The Chronicle)

Among the top 25 institutions with the largest average Plus loans, more than a third focus on the arts. Tenth on the list is New York Conservatory for Dramatic Arts, a for-profit acting school. The school's sticker price for the current year adds up to nearly $53,000 for a year's worth of tuition, fees, room, board, and other expenses. Without an endowment, says David Palmer, the conservatory's chief executive, the school can't provide much financial aid — so families are often left to make difficult decisions about how borrowing is too much. Ideally, families would have saved for college, according to Palmer, but often tuition payments come in the form of Plus loans.

"It doesn't make me feel great, truthfully," Palmer says. "But then again, what can I do? We have to pay our bills."

Last year, 150 parents borrowed for their children to attend the institution of 330 undergraduate students. Palmer knows that sometimes families borrow too much, and students have to drop out. "It makes me sick to my stomach," he says. "Because they've got half an education and a mountain of debt."

Still, he says, "I don't know that it's the institution's responsibility to say we'll take a glimpse of what your individual situation is and say maybe this isn't a good idea."

To the dismay of consumer advocates, some universities lay out offers of tens of thousands of dollars in Parent Plus loans directly in the financial-aid packages of prospective students — often in the exact amount needed to cover the gap between other aid and the full cost of attendance. That can make it look like a family won't have to pay anything at all for college, at least until they read the fine print. The offers are often included in financial-aid packages even for families who clearly can't afford it.

"It is deceptive," says Greg Johnson, chief executive of Bottom Line, a college access program in Boston and New York. His organization's counselors have seen firsthand how students and families can get confused: When Agostinha Depina first got her financial aid award letter from New York's St. John's University, her first choice, she was excited. But upon taking a closer look at the package with her counselor at Bottom Line, she realized that a $32,000 gap was being covered by a Parent Plus loan that her parents would struggle to afford.

"It made it seem like they gave me a lot of money," says Depina. In reality, "it was more loans in the financial-aid package than scholarship money." Depina, 19, opted to go to Clark University, where she had a smaller gap that she covered with a one-year outside scholarship. A spokeswoman for St. John's did not respond to requests for comment.

There's considerable debate among financial-aid officials about whether and how to include Plus loans in students' financial-aid award letters. Some universities opt not to package in a loan that families might not qualify for or be able to afford. Instead, they simply provide families with information about the program.

"We inform them about the different options they have, but we wouldn't go in and package in a credit-based loan for any family," says Frank Mullen, director of financial aid at Berklee College of Music. "To put a loan as part of someone's package without knowing whether they'd be approved? I just wouldn't feel comfortable with it."

Others say it isn't so simple. "This is one of those knives that cuts both ways," says Craig Munier, director of scholarships and financial aid at the University of Nebraska at Lincoln.

"If we leave a huge gap in the financial-aid package, families could reach the wrong conclusion that they cannot afford to send their children to this institution," says Munier, who is also chair-elect of the National Association of Student Financial Aid Administrators. "The other side," he says, "is we package in a loan they can't afford, and they make a bad judgment and put themselves into debt they can't manage. You can second-guess either decision."

For parents in exceptional circumstances, colleges have some discretion to bypass the Plus application process and give a student the additional amount of federal student loans that would be available in the case of a Plus denial — up to $5,000. Those are judgment calls, says Justin Draeger, president of the aid administrators' group. Cases of a parent who is incarcerated or whose only income is public assistance are more straightforward, but the prospect of evaluating a parent's ability to pay is fraught. Deciding to tell them what they can afford "leaves the schools in sort of a moral dilemma," Draeger says.

But encouraging Plus loans for parents who would struggle to repay them lets colleges shirk their own responsibility to help families with limited means, says Simon Moore, executive director of College Visions, a college-access program based in Rhode Island. "Colleges can say, 'We want to enroll more low-income students,' but don't really need to step up and offer students good aid packages," he says. Plus loans "offer colleges an easy way to opt out."

The Middle Class Struggles to Repay

Some parents who have borrowed through Plus have found themselves working when they could be retired, and contemplating whether to pay off the debt by raiding their retirement nest eggs.

Galen Walter, a pharmacist, has put three sons through college. All told, the family racked up roughly $150,000 in loans, about $70,000, he estimates, in the Parent Plus program.

Average Plus Loan Amount

Even when inflation is taken into account, the average Plus loan has increased by roughly a third, to almost $12,000. All values are adjusted for inflation.

Source: U.S. Education Department

Source: U.S. Department of Education

Walter is 65. His wife is already collecting Social Security. "I could have retired a couple years ago," he says, "but with these loans, I can't afford to stop." His sons want to help with the Plus payments, but none are in the position to do so: One son is making only $24,000. Another is unemployed. The youngest is considering grad school.

Before the downturn, Walter says, he might have been able to sell his house and use the profit to pay off the loans. But given what his house is worth now, selling it wouldn't cover the loan. With his sons in a challenging job market, he thinks he may be repaying the loans for at least a decade.

Many parents are more than willing to take on the burden. Steve Lance, 58, is determined to pay for the education of his two sons, whose time at private universities has left him saddled with $133,000 in Parent Plus loans. (He also says he's committed to paying for his sons' federal and private student loans, which bring the total to $317,000 in debt.)

"The best thing I thought I can do as a parent is support them in having their dreams come true," says Lance, a creative director who writes and speaks on advertising and marketing. "There's no price tag on that." Out of necessity, he has put some loans in deferment.

Often, students and families set their hearts on a specific college and will do whatever it takes to make it work, betting that the rewards will outweigh the financial strain.

That's what happened with J.C., who asked that her name not be used. J.C. took out about $41,000 to help her daughter, an aspiring actress, attend NYU. A high-school valedictorian, her daughter could have gone to a public university in their home state of Texas debt-free, J.C. says. But the opportunities in theater wouldn't have been the same. It had to be NYU.

"The night she got there she said: Mom, this is the air I was meant to breathe," J.C. says of her daughter.

J.C., 58, is divorced and makes about $50,000 a year. She anticipates Plus loan payments between $400 and $500 a month, which she says she can handle. "I'll never retire. I'll work forever, that's OK," she says. Still, the hope is that her daughter makes it to the big time in her acting career: "If she's really, really successful I'll retire sooner rather than later," J.C. says.

Recent Changes to Parent Plus, and Uncertain Results

The Education Department's recent change in how it defines adverse credit history — adding unpaid collections accounts or charged-off debt as grounds for denial — is meant to "prevent people from taking on debt they may not be able to afford while protecting taxpayer dollars," Hamilton, the department spokesman, wrote in an email message.

The change may result in significantly more Parent Plus loan denials, according to Kantrowitz — and some financial-aid officers' recent observations seem to bear that out. But new denials may actually target the wrong people. After all, the tightened underwriting still examines aspects of credit history, not ability to repay.

"It's not going to make much of a difference for people who overborrow. It's not going to prevent people from overborrowing," Kantrowitz says. Instead, the new policy may preclude borrowers who once fell behind on a debt, he says, but now pose little credit risk.

Borrowers who are denied can appeal the decision and still get the loans if they convince the Education Department that they have extenuating circumstances. Or they can reapply with somebody cosigning on the loan.

It's not yet clear how much the change to the credit check will alter the scope of the Parent Plus program. Early tallies for the 2011-12 year show a modest dip in borrowing over the previous year, but the data is incomplete and won't be fully updated for months.

For now, the Parent Plus program is part of a stopgap solution to the complex problem of college affordability. And the factors that drive parents to borrow too much won't be changing anytime soon.

Kantrowitz believes that the student-loan system is in need of much broader solutions. The current federal loan limits for undergraduates are arbitrary, he says, and not based on the type of program or a student's estimated future earnings. More grant money could also help alleviate overborrowing, especially for low-income families.

"We need a complete overhaul of the student-loan system so there's a more rational set of limits" to curb the debt problem, says Kantrowitz. The government can't keep "magically sweeping it under the parent rug."

Sub-prime student loans crisis?

The cynic in me always relates student loans to the manorial serf system.  A free man, in a time of need, goes to the lord of the local manor for protection.  In exchange, he’s bound as a servant to repay the debt.  On paper, he’s free, and he’s allowed to have his own income, but paying rent (to the manor) and interest not only makes the servile state permanent, but creates a debt that’s inherited by the children.

Here, we have a (social) demand on parents that drives them to banks to deal with skyrocketing costs, in order to “get an education” for their children that doesn’t get them near any jobs.

Ideally, I’m just being paranoid, but keep in mind that the foreclosure binge left a lot of former homeowners as permanent tenants, with one of the big plans to turn foreclosed homes into rental properties.

Anyway, there are two things really worth briefly mentioning, in this context.

First, as high as the price rises, remember that the instructors are generally getting paid one student’s fee for the class.  The rest of that money?  In a well-run school (anyplace we’ve all heard of), it doesn’t go to operations.  You run a school off of donations and grants, not tuition.  In all the years associated with my school, I haven’t the foggiest idea of where my students’ tuition goes.  It’s not to me and not to keeping the lights on, though, which tells me you could probably safely lop a zero off the end of the price and nobody would notice the difference.

Second, I won’t say that the end of formal college is over, but I will point out that there are only two things a college can give you, and neither is “an education.”  A college can offer you motivation, by putting you in groups of highly-motivated, competitive students and deadlines to keep you on track.  A college can also offer you personal and professional networking opportunities, by putting you in classrooms with your future coworkers and putting (ideally) experienced professionals up at the board.

But “an education”?  In almost every field, that’s free.  There’s very little a professor can tell you that can’t be found and read more easily at a library, especially at big schools with formal curricula.  There are very few laboratory experiences that you can’t replicate at home, today, from chemistry to manufacturing.  Advice from professionals?  If you meet some professionals and show an interest in their field, they’ll spill.  Or find them ranting on the Internet, because they’re on YouTube, blogs, and Twitter.

What horrifies me about colleges is that, as they see competition—free competition, like Khan Academy and other complete, curated online courses—their reaction is NOT to enhance what they’re good at (networking and motivation), it’s…to offer free online courses.  Competing on price with free is a good way to lose business, so it’s going to lead to an increase in tuition to the paying customers.

The upshot is that prices are climbing for less and less, with fewer job prospects and more noses in your business who want you to sign away your life.  I wouldn’t change my college experience, but I can’t say I’d recommend it to anybody today.

It’s a shame, and the government using taxpayer money to enable this is a serious problem.

I have to say I see this as a non-system issue. This has to do with someone who makes $25k a year taking out a $17k loan. I grew up not poor, but at the lower end of middle class. My father worked in construction, which provided a good income, but not steady work. Therefore, you budgeted, first come necessities, then savings, then splurges.

Should the program have a cap on borrowing, yes, but I think that should be a combination of current income, and projected income based upon the education being sought. If you are poor, and are studying to become a doctor you should have a higher cap available to you than someone from the same circumstances studying business management.

I think in this situation, if she could not afford to go to NYU, then either she or her mother should have made the adult decision to enroll in CUNY from the start. Everyone should have the opportunity to get a higher education, not everyone needs to go to Yale.

This is the same situation as the recent housing bubble, where people earning $50k a year took out loans and bought houses for $600k+. Purchasing decisions should be made with a firm grasp of reality, not based on wants.

And if you want to know, I put myself through school earning a degree from State University of New York (SUNY).

Joe, things have changed since when we passed through (I’m guessing it’s been a few years for you).  The high schools push the kids into thinking that nothing but a “name-brand” school is worthwhile.  They feel horrible that they can “only” manage to get into a school like Stonybrook (which, y’know, has Nobel laureates on the faculty and a research hospital on campus—worthless place, right?).

I don’t know where that comes from, but it’s there.  My coworkers tell me their kids are going through it, and I hear the same from the teenaged supermarket clerks and restaurant staff.  And the parents get the same pressure, that sending their kids to (gasp!) community college is condemning them to a life of mediocrity, somehow.

It’s easy to say “just make better decisions,” but there’s substantial pressure upstream to deal with.  And that’s probably not very surprising, considering how much money is at stake to fleece the families of.  Who wants a few thousand dollars to go to the state coffers when ten times that could go to a private corporation, right…?

To me, the solution is obvious:  It’s cheap to teach people (you need chairs and an instructor), and there’s a clear need for cheaper colleges to bleed the high end dry.  It’s one of my many pipe dreams to make that happen, one day, since—as I said—the first student enrolled pays for the professor.

HENRY A. TURNER, ATTORNEY AT LAW

Oct. 5, 2012, 11:58 a.m.

Notwithstanding the Department of Education making those loans without proper underwriting, the Parents signing up for these misguided loan programs so the Children can get a degree in Music or Art is outrageous. Once they graduate there are no jobs available. These folks need to go to 2 year Technical Colleges where there are good jobs available upon graduation.

I’m drawn to this statement:

“If we leave a huge gap in the financial-aid package, families could reach the wrong conclusion that they cannot afford to send their children to this institution,” says Munier, who is also chair-elect of the National Association of Student Financial Aid Administrators. “The other side,” he says, “is we package in a loan they can’t afford, and they make a bad judgment and put themselves into debt they can’t manage. You can second-guess either decision.”

How is it both the “wrong conclusion” that a family can’t afford a particular school AND a “bad judgment” to borrow the money to fill the gap? That kind of doubletalk adds to the confusion.

Any decision you make about your kids is inherently an emotional decision, and it seems to me that schools are taking advantage of both the high levels of emotion and the ease of the Parent Plus borrowing. I would be interested in knowing if the increased parent borrowing since 2000 is corresponded by a decrease in actual real aid like grants (I like to call them “tuition discounts”) from the schools. Using a car-buying analogy, why wouldn’t the schools charge sticker price for their education if all the prospective buyers can afford to pay it, thanks to the easy financing?

I looked back over our records and in every case for 3 children at not only the 3 schools they wound up attending, but also for the initial package offered by their 1st year prospect schools, ALL the loans were packaged as part of “financial aid.” And that’s all since 2000.

I don’t blame the folks who wind up borrowing Parent Plus money they can’t afford anymore than I blame those who wound up with ARM mortgages they couldn’t pay. Both situations involve emotional decisions, complicated forms and contracts, and very little objective counseling. Here’s the thing you want more than anything and here’s this expert (your government in both cases) saying “YES” you can have it…it’s easy to see how folks are misled.

Mr. Munier et al, you need to leave the “huge gap” on your offers of financial aid, or else lose the word “aid.”

Henry Turner, are you suggesting that this country is too poor to allow for careers in the arts, but technical careers are OK? In the richest nation on earth, we should demand that our future artists and musicians become technicians because there is no funding for arts jobs? What a grim future awaits us with no music and no art!

Walter D. Shutter, Jr.

Oct. 5, 2012, 12:32 p.m.

I was wondering whether anyone (other than myself, of course) has noticed a similarity between the financing of our current health care system and the financing of post highschool education.  No one really cares about the costs because, in the case of health care, a third party pays the bulk of the costs while, in the case of higher education, loans are readily available and the payment thereof is effectively kicked down the road.
In the end, providers of goods and services will always charge what the market will bear. Subsidies are not the answer.

HENRY A. TURNER, ATTORNEY AT LAW

Oct. 5, 2012, 12:43 p.m.

TO: Mr. David Yale. Thanks for the response. All that I’m stating is the reality of our Free Market Capitalist Economy (particularly in these days of multi-trillion dollar government debt) that public funding of artists and musicians has effectively vanished. Further, even in the best of times only the the top few per cent could actually make a living in these fields. To add to that getting sold a bill of goods on these Student Loans is outrageous.

Sallie Mae proudly compares their loan offerings with this federal program. https://www.salliemae.com/student-loans/smart-option-student-loan/parent-plus-loan-comparison/

Sallie Mae benefits from ALEC supporter Lumina Foundation.
http://www.sourcewatch.org/index.php?title=Lumina_Foundation_for_Education

Chartered in 1972, Sallie Mae was a public-private partnership that became fully privatized in 1995. Lumina is a “conversion foundation” seeded by Sallie Mae stock that boomed after the dot-com bubble burst.

At the April 2012 annual meeting of the American Educational Research Organization, Cassie Hall and Scott L Thomas argued that Gates and Lumina “have taken up a set of methods—strategic grant-making, public policy advocacy, the funding of intermediaries, and collaboration with government—that illustrate their direct and unapologetic desire to influence policy and practice in numerous higher education arenas.”
http://www.insidehighered.com/news/2012/04/13/study-assesses-how-megafoundations-have-changed-role-higher-ed-philanthropy

So how does the government “compete”?

With another equally crummy product, engineered by the “free market.” All “consumer driven,” of course.

And the funny thing is that a plumber makes more money than these lib arts grads. And has better job security to boot.

To David Yale:

I believe we need to get throw the “the richest nation on earth” saying into the dumpster as it implies that the USA can afford to do “something” but the median American household hardly views themselves as wealthy.

At the median net worth level, the median American family is not worth much, the median net worth of all households fell to $77,300 from $126,400 in 2007. see http://www.nytimes.com/2012/06/12/business/economy/family-net-worth-drops-to-level-of-early-90s-fed-says.html

Note this is at the household level, not at the individual level and it includes home equity, personal property value and financial assets.

It is no wonder that the median level household struggles with student debt.

The “must go to an expensive college to succeed in American life” accepted wisdom could be as financially damaging as is the “can’t go wrong by buying a house” due to the non-dischargeability of student loans.

We all know successful college dropouts such as Jobs, Wozniak and Bill Gates, that seized the opportunities they saw rather than finish their degrees.

Perhaps America lacks suitable opportunities for the young and encouraging more students to get expensive degrees isn’t going to help with this.

Maybe we need to downsize the college degree industry, along with the military and financial industries to move America to a better economy?

The whole education system has bastardized the English language and have a new paradigm that they follow that would not be accepted anywhere except in these institutions. Let me explain. First, these colleges have basterdise the term “non-profit” when Ishould be very hard pressed to name companies that are sitting on 15-25 billion dollar surpluses, oops, endowments, in the private industry. Also, their definition, as an example, of financial aid is odd to say the least. They actually state that they are providing aid if you take a loan. Next time they call for a donation say “borrow the money and credit me with the donation” I am sure they would object. Also, how can a corporation run these ways. As an example assume the professor to student ratio is 10:1 ( this is very optimistic) and tuition, no room and board books etc. only tuition. assume tuition is $40,000 ( highly optimistic). Three tuitions are equal to $120,000 enough to pay professor. What are the universities doing with the other nine ($360,000) tuitions? If the institutions have a 75% overhead they are not managing their business correctly.

Stephanie Palmer

Oct. 5, 2012, 1:55 p.m.

These student loans situations are not hard to understand. Parents and their kids need to understand the reason for the community colleges. They make a college education affordable for all.  Now I would have liked to send my kids to Harvard or Stanford, but my kids and I realized that there was no way that we could afford it.  State schools are a lot cheaper than any of the private colleges. Parents need to make their kids understand that you just can’t have everything you want. That’s the bottom line.  All these parents are doing is setting themselves and their kids up for a big fall. Maybe this reasoning doesn’t do anything for these people now, but maybe it will help someone in the future.

When computers and robotic arms can better do most of both kinds of refined jobs -mental and physical, then, who’s going to pay the costs of for needless certification programs?
Able body-labor is as important in this century as is minimum & basic education!
Any government can no longer afford to pay for presently not viable bad investment on a outdated concept of a educational system.

Stephanie, let me reframe the problem for you:  We spend our lives taught that “you get what you pay for,” and brands earn their reputations.

Now, you’re faced with a decision that may literally change your (or your child’s) entire life.  Do you go with the Ivy League college that’s going to cost you fifty thousand dollars (yeesh!) a year, or do you risk that paying only a tenth of that (SUNY tuition is less than six thousand, for example) is “good enough”?  Keep in mind that we have example after example of Yale graduates who change the world, and little to no examples of the leader who graduated from community college.

I’m not saying that the value IS proportional to the price, just that it’s suspicious to a lot of people.  I doubt you’d buy a new BMW if some government bureaucrat offered to sell it to you for three thousand bucks.  Would you risk letting your children drive it…?  A lot of families see picking a “discount” college as equally bad.

Also, don’t forget that, for some career paths that involve networking with powerful people, there’s a huge advantage to be had at a big-name school.  How many NFL pros or Presidents or Bank CEOs graduated from a state school?  You don’t run into many useful contacts, there, so not many doors stay open for you.  It’s not an excuse for the price, but it is a consideration for some families.  Increasing the chances of starting out with a higher-paying job might be worth the tradeoff of high tuition.

Again, you can read a textbook anywhere for free, but meeting someone who’ll take you on as a mentor doesn’t happen much when the faculty is paid peanuts.

As long as we believe everyone is entitled to a college education, the standards will continue to drop, the graduate will feel short changed because he can’t get a job, and somebody has to pay.

Yet some more information is from the original study (and updated in 2011) by Alan Krueger and Stacy Dale that concluded that students, who were accepted into elite schools, but went to less selective institutions, earned salaries just as high as the selective school grads.

The latest update of this study is from Feb 16, 2011 in which they conclude that applicants, who shared similar high SAT scores with Ivy League applicants, but may have been rejected by the Ivy schools,  enjoyed similar average salaries as the graduates from elite schools.

You can read the abstract at “http://www.nber.org/papers/w17159.pdf”

There is one exception to the no excess financial return to attending Ivy League observation, If the student is black or Hispanic, the financial return of attending a selective college is “large”.

The early Kreuger/Dale paper is “Estimating the payoff to attending a more selective college: an application of selection on observables and unobservables” August 1999.

One strange result is their finding in the earlier paper:
“The characteristics of schools that influence students’ subsequent income appear to be better captured by average tuition costs than by the school’s average SAT score.  Indeed, we find that students who attend colleges with higher average tuition costs tend to earn higher income years later.” (August 1999 paper, page 30)

This leads to a conclusion that a college could justify raising its tuition to high levels as benefiting its graduates in their future years..

But one must not confuse correlation with causation.

Hugh,
You make a valid point regarding the degradation of a system of entitlement but that’s not the issue.  The educational system is in a bubble.  Costs are well out of line with ability to pay.  This is because society has not seen wage growth in thirty years.  Instead the corporate state is keeping those wages in the form of a profit bubble and lending those wages back to people as usury and economic slavery.  Additionally, corporate capitalism is denying people jobs that pay a living wage without a college degree by rigging the rules to the game.  So, people are essentially forced into college if they want a living wage.  And, then the system preys upon them through looting. 

I would suggest people read University in Chains.  It is the corporate takeover of our university system that helps define these dynamics.

The title - How the Gov’t Is Saddling Parents - is a bit misleading.

Reminds me of Fannie and Freddie in that banking (as usual) and, in this case, higher education (for-profits, most notably) are using government programs to enslave the American people.  A pursuit that is only possible, once again, because the American people have a lever they can be manipulated with:  Their desire for “the American Dream”.

The American people must learn that the banks/those who have wealth really are “out to get them”; it isn’t paranoia to think that.

See, what the Republicans and neoliberals have done to America’s economy, government, and tax structure is like a taking a great big game of Milton Bradley’s Monopoly and giving one person in your town or city control of all properties except Mediterranean, Baltic, Connecticut, Vermont, and Oriental Avenues. 

Everybody else in your town or city - to include you - gets to split up the rents from those five properties.

The Fed has been printing more money to fill up the bank…good thing, too, ‘cuz everybody in your town is always landing on that fat cat’s properties or having to ride his transportation or buy his water or energy, or send their kids to his schools, or get school loans from his banks, or…

Heard a rumor he wants to turn off the Fed, now, though..and heard Romney works for him.

Good bye college next gen. Hello learning Chinese. Start with this one: Good Morning my Chinese Overlords.  How are we this fine day?

Harper B Masterson

Oct. 5, 2012, 8:34 p.m.

Amazing read. To think this could happen again—just in a different arena and one that is about learning—is ironic and tragic indeed. When will we learn? As one man once told me at a festival in Pennsylvania: ” Sometimes I think we’re all out of our gourds!”

Using a number of entirely legal means, usually employed only by our corporate masters, but really available to all who would study how to use them, I sequestered enough income to educate three children who are starting their lives debt-free. 
That said, this regime values ignorance and religious faith much more than solid intellectual achievement. The whole idea is to restrict education to the the upper classes; we do not need large numbers of people asking awkward questions.
Our American leaders are the worst in the world since Nazi Germany or Stalinist Russia, and if they do not like how I describe them they can kiss my 70-year old a$$.
.

This is a case of misplaced anger - why is college so expensive when teachers everywhere are being marginalized?  The simple fact is that colleges and universities now exist for the sole purposes of winning research grant money and attracting the best tenured talent.  It’s not unusual for a student to attend 3-4 years without seeing a single tenured professor - because they’re all doing research, which is where the real money is.

The simple fact is (and it rankles my Keynsian side to say it…) traditional colleges and universities are a monopoly that eliminate choice and create a caste system among students.

We have a friend who just got a job at a big company that you will all know if I mentioned it. He has a bachelor’s degree from USC and he is a programmer with about 5 years experience. His signing bonus was $120,000. We dared not ask his salary but suspect it is also very good. It is okay to take on big debt if you go to a good school, major in a valuable major and are talented.

clarence swinney

Oct. 6, 2012, 7:20 a.m.

President Obama executive order has federal student loan payment cap at 10% of income.

VOTE FOR THIS—created by democrats
Social Security
Medicare
Medicaid
Americans With Disability Act
TVA
GI bill
Veterans Administration
Permanent School Lunch Program
Aid to Dependent Children
Schip
SBA
Voting Rights Act
Head Start
Dream Act
Permanent Food Stamp Program
Freedom of Information Act
Clean Water Act
Clean Air Act
Family Medical Leave Act
Minimum Wage Act
Trade Union Schools(now Community colleges)
Earned Income Tax Credit
Fair Labor Standards Act
Peace Corps
Ameri-Corps
Worker Retirement Pensions
Peace on earth-1980-2009 three Republicans got us involved in 10 foreign conflocts
Just A few of 89 name 10 by Republicans

High school guidance counselors are the conduit through which most college decisions are made, and even at the high school level, the “prestige” in sending students to expensive schools often plays a stronger role than directing students towards more sensible or affordable upper education choices. Also too often lacking among those who “guide” is a real understanding of the reality of the myriad loan systems available - it really requires up-to-date information and a lawyer/accountant to work through all of the fine print. Counselors are charged with working with troubled students, working with class schedules, and when they have time, they squeeze in helping students make college choices.

John accurately pointed out the primary benefits of a college education: increased motivation - taking ownership through adapting to a rigorous curriculum and networking with people who share your interests and possibly your future.

The school one graduates FROM is the one that shows up on the resume. If students attend junior colleges, transfer to state colleges, and then (if desired) transfer to more prestigious private colleges, the financial toll is much less - and allows for more experimentation/flexibility in the directions (majors) students finally choose.

The current reality of being able to pay back expensive loans for career paths to art or music is obvious. My career was in art. In our left-brained linear, free enterprise based existence, art and music taught in schools are always the first to get the ax, thus they’ve been severely wounded since 2009.

clarence swinney

Oct. 6, 2012, 2:53 p.m.

HOW CONSERVATIVES RUINED A GREAT DEMOCRACY
A NEW CORPOCRACY

Ruined our great Savings and Loan Institution
Closed Fairness Doctrine that has Limbaugh types on our public airwaves
Closed Revenue Sharing
Since 1980, initiated our involvement in 10 foreign conflicts
Repealed Glass Steagall—took deposits in over 7000 banks and put 50% in 5 (Too Big To Fail)
and 80% in 10 (Too Big To Fail) Banks.
Modernization of Commodity Markets—from investment to Casino Derivative Of America
2 very dumb invasions of two of most unarmed and destitute nations.
Ruined our International reputation as a Do Good Christian nation to Big Bully Devil
Stood by as freak marketeers ruined our housing industry
Stood by as Casino Derivative Of America ruined the world financial industry
Impeached a great president for petty political gains that created a long term animosity between the parties
Attempted to destroy the safety nets that make a great middle class
Implemented Tax Codes that permitted a redistribution of Wealth to top (10%) who now own (73% )of Net Wealth and (83%) of Financial Wealth and take (50%)of all individual income
They have taken America to a rank of (#2) as Least Taxed in OECD nations; (#2) as least taxed corporations; and sadly to (# 4) on Inequality.
Since 1980, their Spend & Borrow policies, mainly, were responsible for adding 14,000 billion to our 1000B Debt when they started in 1981.
Fought the Great GI Bill.
Fought the WWII Draft
Installed strict laws which have loaded our prisons with non-violent offenders which make us world leader in prison population

CONCLUSION-WANT TO VIEW END OF AN EMPIRE THEN YIELDED TOTAL CONTROLOF GOVERNMENT TO REPUBLICAN CONSERVATIVES AS WAS DONE IN 2001-2002-2003-2004=2005-2006- WHICH WILL BE JUDGED AS, OUTSIDE OF THEIR GREAT DEPRESSION, THE SIX WORST YEARS IN OUR HISTORY

IMAGINE THEM IN CONTROL FOR 12 YEARS????

Students should be on the hook for their own college loans, not their parents.  Being personally accountable is the incentive to pursue a career or work hard enough that will enable them to pay it back.  Parents can still help, but the burden should be on the student.  If the burden is on someone else = no incentive to work or excel.

Rob R.: I agree, with you to a point, but if we’re going to do that then the “Expected Parental Contribution” line from the FAFSA needs to go. I’m $25,000 in debt (graduated last year) now, because the dept. of ed. assumed my parents would be giving me around $15000 a year, thus disqualifying me from most scholarships. Sure, we were a comfortable household, but I never saw a penny - I paid my own tuition, mostly with non-subsidized loans. Fortunately I “saw the light” and dropped out of the 10K-a-year state school and went to a technical college for my last two years - otherwise I’d be much deeper.

Anyway, this doesn’t really pertain to the matter at hand but I figured I’d point it out.

On the college loan/college education debate, there has been some research done by Alan Krueger and Stacy Dale with papers in August 1999 and a follow-up paper in June 2011.

I hope I am summarizing the findings correctly:

1. Getting accepted by an elite university and choosing to go to a less selective school doesn’t change lifetime earnings.
2. The one exception to this is for Hispanic and Black students and for students that come from less-educated families, they did see an earnings enhancement by going to an elite school.

The later study found that students that applied to elite schools and were rejected also did about as well income wise, this was evidence of their aspiration level, which is a factor in their future earnings..

The papers are http://www.nber.org/papers/w7322 (1999), which anyone can download

and at http://www.nber.org/papers/w17159 (2011), this is $5.00 to download.

The earlier 1999 paper may have provided the justification for ALL colleges to increase their tuition levels as on page 30, they found “Indeed, we find that students who attend colleges with higher average tuition costs tend to earn higher income years later.”

Was this sentence significant in furthering the college tuition inflation over the last decade as colleges raised their tuition levels to help the college’s current and the student’s future bottom line?

But one must be careful to not confuse causation with correlation.

They also need to tie the ability to get out from under student loans to the eagerness with which Corporate America is offshoring jobs, banks are financing offshore factories, and the government’s unwillingness to address trade inequities such as rigged currency exchange rates and tariffs that handicap American competitiveness.

I.e., if the system is rigged to ensure that students will graduate with massive debt and then cannot get jobs…well, that’s not an economic system - that is a criminal racket.

The bottom line is government policy increasingly prioritizes the greed of the 1% before “Justice, [...] domestic Tranquility, [...] the common defence, [...] the general Welfare, [...] the Blessings of Liberty” in all things.

To include the education of our kids, which affects all categories mentioned above.

It cannot continue.

It sounds like the first responsible thing to do was not apply for these loans in the first place.

The second responsible thing would have been to attend a school you can afford, rather than go to an overpriced, over-rated college.

The third responsible thing would have been not to have children you can’t afford.

I only blame the irresponsible parents and their progeny for falling into this circumstance.

Harper B Masterson

Oct. 7, 2012, 12:39 p.m.

Dr Fun: True that we are all responsible for our choices. But part of the responsibility surely falls upon institutions that ought to fully seek to educate parents who still embrace the American Dream: providing a better life for their children. Often, we rely on those who understand The System better than we do. Perhaps you see this as a Buyer Beware circumstance. But perhaps that’s partly why stories such as this one are so important: They shed light and educate parents when the school and the government have not.

For Dr. Fun, who emoted “The third responsible thing would have been not to have children you can’t afford.”

lolll…I always admire comments such as yours, Dr. Fun, which suggest that eugenics is a quite rational scientific and economic tool when the filter applied is wealth possessed.

An attitude that is becoming increasingly common among the second- and third-generation wealth that makes up America’s so-called “conservatives”, particularly among those portions of our medical community where the Visa and Mastercard symbols have replaced the rod of Aesculapius upon their medical degrees and, of course, their Hippocratic Oaths.

I hasten to add that wealth is a lousy criteria for eugenics; I can find no scientific evidence suggesting that wealth can be linked to either an increase in either positive physical or intellectual attributes.  They’ve got a tendency to marry based upon the ability to control and dominate their spouses and then interbreed based upon the consolidation of wealth and power rather than mental and physical characteristics; thus, they breed weakness into their genetic pool at an unusually accelerated rate.

Like moths to a flame, the look pretty for a moment, and then Poof!

I agree with the Dr.

clarence swinney

Oct. 8, 2012, 10:36 a.m.

JOBS—ONE OF BEST
THE BETRAYAL OF AMERICA’S MIDDLE CLASS WAS A CHOICE, NOT AN ACCIDENT
BARTLETT-STEELE TRUTH-OUT.ORG
These two have been writing it since 1992 Book—”America-What went Wrong”
How have things changed since then for the middle class? They say “straight downhill-
Thanks to the few ruling class which is having its way.”
Wages stagnating and going down, benefits jeopardized or disappearing, and our country being divided into a nation of have-mores and have-lesses. Public policy gave incentive to corporations to outsource. They say high wages excuse is malarkey. They say main reason is incentives provided by foreign governments and, then, when companies bring their product back there is essentially no tariff on it. Trade deficits=lost jobs. The ones remaining should be saying”Look, we are really working for the best interest of American workers here and we need some help”.
“The problem is, you have the mindset in Washington, in Congress and basically with every administration, that trade should be unrestricted.”
Recent Example: Hanesbrands—biggest hosiery -men’ underwear—Winston Salem NC-
In 2010, Chinese government built them huge modern plant. All US plants closed.
Check the current retail price look for much lower price. Ha Ha Ha
The four page article tells us so much about what happened and tough choices to recapture/keep our jobs. Bartlett-Steele are Icons on Jobs. Bless them.
Tariff on imports.

To follow on from what Carolyn said about college-hopping (which I actually don’t recommend due to the crapshoot of transferring credits, but isn’t a terrible plan if you lay out your plan ahead of time), another thing I can recommend is that, if you can’t manage a big name, manage your early career in a way that minimizes the impact.

What I mean is to track down companies led by alumni of your school, and try to connect with them at interviews.  It’s not an unknown school to someone else who went there, and it gives your interviewer a point of reference.

For the same reason, you should be a member of the local chapters of relevant professional societies, if they exist, to get to know the people in the industry.  A hundred or so bucks a year sounds like a lot, but you just spent at least fifty times that for school, so suck it up (or write them explaining financial hardship—quite a few will waive the fee up to a couple of years).  And go to the meetings and keep in contact with the people you meet (just about every professional I know appreciates when someone sends them an interesting article in their field with a “in case you haven’t seen this” note attached) so they understand your position.  (And continue contact even when you’re employed, jerk who’s thinking this is too much work…)

On the same theme, keep up to date on the literature.  Don’t be snotty about it, but a well-placed “Bill Ford was just writing about that in last month’s Economist; I can send you the article, if you didn’t catch it” shows an interviewer you’re not just relying on textbooks, if you can talk on the topic.  If you’re more academic, free online journals like PLoS make it a lot easier to get up to speed in quite a few fields.

On top of that, start working with or WITHOUT a job.  With retention committees reducing the weight of programs to keep kids from dropping out (misguided, if you ask me, but not my call) and so much content available on the Internet, there’s almost no excuse beyond a sick family member to not be working on your own projects to hone your skills against reality instead of theory.

Here’s the thing:  For less than a thousand dollars (a lot to a college student, but maybe not a club, local interest group, or a bunch of friends), you can build a robot to explore local waterways (OpenROV) and analyze the water with a home-made spectrometer (Public Laboratory’s design).  The Nand2Tetris online course will have you build a computer from scratch (chips to software).  It’s basically free to open up a blog and write or report or publish, depending on your goals.  Write and film your dream movie with your cellphone camera.  If you’ve been working on your own, that blows away almost anybody’s college experience, because it shows your skills and passion better than a GPA and gives the interviewer something to ask about.  Poke around, and there’s something for almost any major.

(This approach used to be resolved by getting an internship, but fewer companies will take interns and fewer give them real work experience.)

I’d also suggest starting a business.  Ideally, you want something where you can show that you understand the decisions management needs to make, can make hard decisions without a manager looking over your shoulder, and think in business terms.  If you can’t swing that (because you can’t hire employees, say, or you aspire to be a chemical engineer, where the only viable home businesses are generally felonies—no cooking meth, kids…), even summers mowing lawns as a business put you a step ahead.

Lastly, I shudder to recommend this, but make sure this work is visible and visibly active on the Internet.  After receiving your resume and as soon as you leave the interview, your name is absolutely getting searched on Google, no exceptions.  Your professional interests and results should show up before the Facebook profile picture of you playing beer pong (which, ideally, shouldn’t exist—it doesn’t exactly make you seem trustworthy).

(Basically, pitch yourself as essentially being in the industry.  And after each job, your college makes less of a difference.  Well, sometimes it makes a difference, but that’s usually a sign that it’s going to be a horrible job that you don’t want.  Same goes if you’re trying to switch careers—get into the new career whether or not you can find the jobs.)

I’d have to check data, myself, but I think that the results John (Wright) cites are going to be for the general case of a graduate who only has his college, clubs, and maybe a part-time job on his resume.  As I said before, the biggest advantage you get from a big-name school is networking.  If you’re networking on your own, though, you can skew those numbers.

@John Wright:  I wonder how those studies would have worked out had they narrowly focused on specific families associated with hereditary wealth who are alumni of specific Ivy League schools?

That is, a history of attending specific schools, and belonging to specific clubs within those schools, and then following specific career paths after graduating from those schools?

Families whose children are forever “grandfathered” into admittance into those same schools and elite private, restricted-admittance clubs?

From what I have been able to discern, in those cases their academic performance both prior to entering those Ivy League schools and while in those Ivy League schools is entirely moot; it has no bearing whatsoever upon subsequent success in either private or public life.

It does, however, go far to explain the decay in the quality of American corporate and political leadership.

The 2005 report, “Recession, Retrenchment and Recovery” funded by Lumina (“conversion foundation” of Sallie Mae) occurred when Gates, et. al. turned the tide of NCLB failures. http://centereducationpolicy.illinoisstate.edu/initiatives/recession/literaturereview.pdf

My summary: There’s too much entitlement/public services and not enough taxation from mere mortals—which of course leads to disinvestment in higher education and new innovations (i.e. privatization) to fund it.

2005 was the year that Bill Gates began the Data Quality Campaign—which has expanded to the “Early Childhood Data Collaborative.”
http://www.dataqualitycampaign.org

October 2012 Harvard Business Review: Getting Control of BIG DATA.
p. 76 “Data scientists today are akin to the Wall Street ‘quants’ of the 1980’s and 1990’s”

Ummm… That has played out very well for the .1%ers with the boom-bust “jobless recoveries” of the last three decades.

Indeed NCHEMS and CLASP have put together “data dashboards” that demonstrate “The Return on Investment to Increasing Postsecondary Credential Attainment.”
http://www.clasp.org/resources_and_publications/publication?id=1466&list=publications_states

Liar loans.

Gates has teamed up with The Annie E. Casey Foundation, the Lumina Foundation for Education and The William and Flora Hewlett Foundation as Partners for “The New Commission on the Skills of the American Workforce.” http://www.skillscommission.org/?page_id=133

One of the papers listed on that website, is a 1990 article “America’s Choice: High Skills or Low Wages!” http://www.skillscommission.org/?page_id=296

Try downloading it. Blank page!

Try it through ERIC (Education Resources Information Center). And this is the message you get:
“Dear ERIC Community,
In early August we discovered that sensitive personally identifiable information appeared in some full text documents contained in the ERIC collection. Specifically, social security numbers and other highly sensitive information were found in multiple documents and in a way that could not easily be isolated. For that reason, we had to temporarily disable access to many full text documents.”

Hmmm….

“Recession, Retrenchment and Recovery” refers to Don Boyd’s (2002) report “State Spending for Higher “Education in the Coming Decade,” who suggested that:
“[E]ven if state and local governments close their current budget gaps
with entirely recurring actions, rather than gimmicks that provide
only temporary relief, most states will face continuing difficulty
financing current services with existing revenue structures, and will
not have resources for real increases in spending. Given that state
and local governments have increased real per-capita spending
significantly in each of the last five decades, this suggests citizens
will have to either scale back their appetite for government services
or support changes in revenue structures to finance new growth…”

Wellman advised that these are short run solutions when long-term resource management strategies are needed. A five step process was recommended that included:

*“Refocusing the institutional mission to take advantage of opportunities
budget crises sometimes bring. In an era of deregulation and accountability (performance oriented budgeting) boards can gain control by “replacing rigid line-item budgets with block funds…and carryover budget authority…..”

*“Assessing and integrating the institution’s tuition, aid and outreach strategies.”

John Wiley (2004), in “Higher Education at the Crossroads” wrote: “State officials have been pushing public school education into the private model, specifically, the “high tuition/high aid” version of the private model. But private schools that operate successfully under this model usually have large endowments. The University of Wisconsin-Madison could privatize if it had an endowment of $8 billion and raised tuition to more than $20,000 per year.”

The cover of the Harvard Business Review lists highlights this article: “What Ever Happened to Accountability?”

The quants are cooking the books!

clarence swinney

Oct. 8, 2012, 2:01 p.m.

TAX FINANCE
The Tea Party is saying that taxes on land and financial assets punish the “Job Creators”.
The wealthy claim they need to be pampered with tax preferences to invest and employ labor, while the 90% need to be kicked and prodded to work harder and get paid lower wages.
These falsehoods are seen easily as false by looking at 1945-1980 when individual and corporate taxes were highest in history yet we had highest growth in history.
Reagan started the transfer upward of income and wealth with his 60% tax cut for the top rate plus his spend/borrow fiscal policies. He spent more in 8 than prior 50 years. He increased debt by 189%.
  How can the rich justify the Fed printing $13Trillion to bail our bankers and scream were it to do the same for federal-grants-in aid to states and cities to vitalize our economy by creating millions of jobs
Think about helping 90% not the top 10%.
  Our cities and states need revenue. Reagan axed Revenue Sharing which would be vital today.
Bush II tried to outdo Reagan on Spend/Borrow with 92% increase in Spending and 112% increase in Debt giving us a Great Recession and 2,700,000 jobs outsourced to just China. Plus destroying our Housing Industry. Plus created two awful unneeded wars. Invade two unarmed, destitute nations.
Shame on us is what history will read. Clarence disgusted swinney

Parents DO NOT OWE their children a college education which costs so much that it will put the entire household in jeopardy.  We all must first remember that colleges are businesses and they are in the business of selling their product to those who think they need to buy it.  They get their money up front and they do not care how the student, the student’s parents or the student’s entire family repays the debt to the lender.  These schools do not have to disclose the joblessness rates for their graduates and they don’t have to disclose their student loan default rates, either.  This is truly a buyer beware situation and a degree from certain institutions will always hold more prestige than from another, but putting a whole household in jeopardy for a college degree with no job propsect for repayment is ludicrous.

clarence swinney

Oct. 8, 2012, 4:08 p.m.

PAST 50 YEARS OF GOVERNMENT TO 2010
———————————————-R———-D
Years in Presidency———28——-22
Total jobs created————24m—-42m
stock market return——-109%—992%
return per annum————2.7%—-11%
gdp growth per annum—2.7%—-4.1%
Income Growth annum-0.6%——-2.2%
Sources-
Dept of Labor
Bloomberg

The whole inequitable free trade/destroy the manufacturing sector/we’ll become a service economy! scam was just that:  A scam.

That scam depends upon one of two things:  A uniform, college- educated population wherein everybody attains the American Dream because there are not only jobs required skills attained through affordable college educations available to all but also everybody in the American population desires that kind of a job.

Or, that scam necessitates a veneer of college-educated workers and a great mass of “disposables”:  Literally tens of millions of Americans whom we step over and around - and shoot down, as they periodically rise up in revolt due to hunger and desperation - because we have destroyed all of the manufacturing and low-level service jobs they once could and would have filled.

We must have a diversified economy that includes a broad range of manufacturing and service jobs; an economy that makes a place for those who do not have college degrees and still provides a comfortable income for them in order to provide “a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity”.

Anybody that says otherwise is a liar at best and a Stalinist at worst.

Our neoliberals are the former; our so-called “conservatives” are the latter.

@ibsteve2u

re: the habits of the elite, “That is, a history of attending specific schools, and belonging to specific clubs within those schools, and then following specific career paths after graduating from those schools?”

This is part of the East Coast power structure, as Kurt Vonnegut pointed out, the Bush-Kerry election was a choice between “two C students from Yale, both members of Skull and Bones”.

The emphasis on the attending the “correct” University seems more pronounced on the East Coast than the West in my experience.  The West Coast has seen some very successful college dropouts as I’ve mentioned before, and Oracle’s Larry Ellison should be added to my previous list.

I see the current emphasis on college at all costs possibly producing some desparate workers that will be angry at the “college always worth it” bill of goods sold to them.

In some cases, the capital expended on college could have been better used investing in a business startup, or in public infrastructure and certainly having a lower debt gives a graduating student more job options as they are not financially desperate

I believe the educated East Coast elite naturally steered the government financial rescue package to the East Coast financial institutions for the most part.  The midwest based GM and Chrysler automakers were not as favored.  This rescue package really resulted in a transfer of wealth from the other regions to the East Coast, under the guise of “saving the (FIRE = Finance, Insurance, Real Estate) economy”.

But maybe that explains why some parents are so obsessed at getting their children into the “right schools” so they can be part of the group that takes care of their own.

The Kreuger/Dale papers seem to indicate the typical student doesn’t achieve an excess benefit from an high prestige school.

But, as you suggest,  for a member of the elite class, attending these schools might help preserve their power and influence in the USA.

Mary Emmetts

Oct. 8, 2012, 10 p.m.

College and universities have become corrupt in the current education system.  They have no incentive to control costs, to make sure loans are affordable, and to emphasize graduation rates—they take their money up front.

Of course once again our corrupt Congress is at the heart of the problem, making college loans non-dischargeable in bankruptcy—in sharp contrast to businesses which can escape every obligation, including pensions, in the bankruptcy process.

It’s all part of our rapid devolution into a world of Dickensian poverty for most Americans.

@John Wright:  Unfortunately, the evidence to support your suppositions extends beyond the hypothetical:

http://www.salon.com/2004/09/16/tsurumi/

This article is part of an ongoing investigation:
College Debt

College Debt

Total outstanding college debt is estimated at $1 trillion dollars – and with costs still soaring, the burden on students and their families shows no signs of abating. We're examining how the complicated system of college debt is putting the squeeze on families.

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