Here Comes Trouble: Stories from My Life

"Outstanding…Moore Triumphs! Publishers Weekly

Mike & Friends Blog

Dylan Ratigan

Dylan Ratigan hosts Morning Meeting with Dylan Ratigan on MSNBC and the Dylan Ratigan Show Sundays on WABC Radio

February 3rd, 2012 10:48 AM

Auction 2012: Greedy Bastards and Student Debt

Imagine a product so irresistible that most Americans thought they couldn't live without it.  Every President talked of its importance, and it was perceived of as the key to you or your child's future.  There was a limited supply, and prices kept going up.  The best business to be in would be lending to people so they can buy it.

I'm talking about higher education, and student loans.  In my new book Greedy Bastards, I'm letting you into the tricks used by those who run our culture to profit from misdirection.  Like banks and oil companies, those who run our universities push the hidden risk they incur to taxpayers.  It's not as obvious as what we saw with subprime home loans, but it is potentially as destructive.

In President Obama's first speech to a joint session of Congress, he said "education in no longer a pathway to opportunity, it is a prerequisite."  It's no wonder -- conventional wisdom says that those with college degrees earn roughly a million more dollars over their lives than those without them.  And there is a vast apparatus of lending institutions and Federal guarantees set up to help put people into college.  They do this not by keeping tuition free or low, as we did as a country after World War II, but by helping people get access to student loans.

This is the essence of what I've been calling The Very Bad Deal, where costs are deferred while benefits accrue upfront.  If you get a student loan, you get to attend college, and college is apparently the key to earning more over your lifetime, to "opportunity".  But student debt has some very nasty tricks and traps that most 18 year olds aren't aware of when they sign on the dotted line, and college may not be the opportunity gateway we've been assured it is.

The scale of the deal is vast and getting bigger -- two thirds of those who attend college do so with borrowed money.  In August of 2010, the Wall Street reported that student loan debt surpassed credit card debt for the first time in history.  This amount is now sitting at roughly a trillion dollars.  Higher education inflation is the higher than health care inflation, and two and a half times the rate of normal inflation.  Are students really learning two and a half times as much?

Of course not.  What is happening is that universities have pricing power, and the Greedy Bastard behavior encourages them to compete on facilities and brand-name faculties rather than price and quality.  The Chronicle of Higher Education has described "an arms race of expenditures triggered by the pursuit of prestige."  Student debt also distorts pricing.  If students had to pay the full freight in college, they might be more price-sensitive consumers.  But since the costs of the education they are receiving are hidden, they don't pressure universities to reign in costs.  Lavish living environments, pointlessly luxurious sports facilities, and high salaries for administrators are just symptoms of a system where costs have become irrelevant.

Of course, someone must eventually pay that cost, which is increasingly borne by the current and future generation.  While college is supposedly a great investment, those who graduated in the midst of the Great Recession from 2008-2010 could not find the good jobs a college diploma supposedly assured them.  Tamara Draut, an expert on educational debt, told me that we now "have a whole generation twenty-four thousand dollars in debt... they have graduated but nobody will hire them.  They're back at home in their childhood bedroom."  It gets worse - student debt is not dischargeable in bankruptcy, so it's lifelong.  And there's no guarantee college degrees will serve the same income-producing function they have for decades.

Nearly everyone I've spoken to thinks this system is fixable if we get rid of the incentives that lead to Greedy Bastard--style profit-taking.  Much university spending doesn't go to learning, so if we made that spending transparent we could take on cost structures.  We don't have to go to the universities that do prestige marketing, we don't have to hire from them, and we don't have to spend our dollars with them.  This would lead to innovations in education that could take advantage of technology to increase learning.  And we can make student lending more equitable and transparent, so 18 year olds aren't signing their financial lives away.

Click through to view full Infographic

 

You must log in to comment.

You must be logged in to leave a comment. Log in | Register

George W. Bush Debuts New Paintings Of Dogs, Friends, Ghost Of Iraqi Child That Follows Him... www.theonion.com President Bush has a new hobby -- painting! --...

Apr 17th
7:28 PM
Read More

Big new story from David Sirota and Pando on top Christie adviser and appearance of corruption at New Jersey's pension fund: REVEALED: Gov....

Apr 17th
12:41 PM
Read More

FBI Uncovers Al-Qaeda Plot To Just Sit Back And Enjoy Collapse Of United States www.theonion.com WASHINGTON—The FBI announced today that it has uncovered a...

Apr 15th
3:28 PM
Read More

Revealed: Rahm Emanuel's top donor bought stock in Marriott just before it was awarded huge contract pando.com As schools are closed and pensions cut,...

Apr 9th
2:00 PM
Read More

I'll be at First Time Fest today in New York City at the screening of my first film, Roger & Me. Loews Village 7 at 12:30 pm. Come see it on the big...

Apr 5th
9:48 AM
Read More

Revealed: Rahm Emanuel cuts public pensions, diverts money to benefit campaign donors pando.com If you've read the financial news out of Chicago the last...

Apr 4th
2:19 PM
Read More

Please take a moment today to think of Casey Austin Sheehan, son of Cindy and Patrick, who was murdered by U.S. foreign policy in Sadr City, Baghdad ten years...

Apr 4th
2:00 PM
Read More

ICYMI - I've joined this "thunderclap" to support the Connecticut legislators who voted yes on last year's Act Concerning Gun Violence...

Apr 3rd
7:38 PM
Read More

I've joined this "thunderclap" to support the Connecticut legislators who voted yes on last year's Act Concerning Gun Violence Prevention...

Apr 2nd
8:27 PM
Read More

I am opposed to the death penalty, but to every rule there is usually an exception, and in this case I hope the criminals at General Motors will be arrested...

Apr 1st
3:55 PM
Read More

How Long Some in the US Will Survive Under New Health Law ...by Donna Smith www.michaelmoore.com Those who must access care to live and can afford it are not...

Mar 31st
10:13 PM
Read More

Last night, The Good Wife on the East Coast started 40 minutes late due to the overrun of the NCAA basketball game. If you had your DVR set for the show, you...

Mar 24th
5:41 PM
Read More

Watching films today, looking for the ones I'm going to pick for my film festival this summer. I (and a whole bunch of others!) have this thing we put on...

Mar 23rd
4:48 PM
Read More

When the U.S. Health Care System Keeps Killing, Who Cares Enough to Fight? ...by Donna Smith www.michaelmoore.com We have largely forgotten that people are at...

Mar 21st
5:56 PM
Read More

Tell the White House not to give up on Dr. Vivek Murthy's nomination as Surgeon General despite the ferocious opposition from the NRA: Don't give...

Mar 21st
5:38 PM
Read More

This criminal would never see a jail cell, nor would his cronies. In fact, they'd later be rewarded with re-election: Presidential Address on War with...

Mar 19th
9:40 PM
Read More

The crime of the century -- our invasion & slaughter in Iraq -- started 11 years ago tonite in this 7pm (ET) hour, March 19th, 2003: CNN Coverage of...

Mar 19th
9:08 PM
Read More

Washington’s Back-to-the-Future Military Policies in Africa ...by Nick Turse www.michaelmoore.com Nick Turse is an award-winning journalist, historian,...

Mar 17th
4:59 PM
Read More

"I think democracy is the most revolutionary thing in the world." -- Tony Benn, 1925-2014 Tony Benn in 'Sicko'

Mar 14th
10:07 AM
Read More

RIP Tony Benn, one of the UK's greatest leaders: Tony Benn, veteran Labour politician, dies aged 88 www.theguardian.com Former cabinet minister died at...

Mar 14th
9:53 AM
Read More

Please read this important story from K. Ford K.: Am I the Face of the New American Middle Class? www.huffingtonpost.com I began to feel I had slipped so low...

Mar 13th
2:24 PM
Read More

Yesterday Dianne Feinstein revealed that the CIA has been spying on the Senate Intelligence Committee. This is all about the report the committee has produced...

Mar 12th
6:48 PM
Read More

Health Care for All Colorado has brought Mercy Killers, a show written and performed by Michael Milligan about our murderous for-profit healthcare system, to...

Mar 10th
1:08 PM
Read More

Health Care Dramas that Sting and Why We Have to Watch ...by Donna Smith www.michaelmoore.com The realities Milligan has written into the show cut deep into...

Mar 10th
1:02 PM
Read More

Did you know the Lehrer Newshour on PBS has been produced for 20 years by a company owned by conservative cable billionaire John Malone? Me neither. After...

Mar 7th
8:39 PM
Read More

Mr. Obama, if int’l law is so damn crucial . . . | RootsAction.org act.rootsaction.org The Russian intervention deserves criticism. But let’s be clear. The...

Mar 6th
1:21 PM
Read More

Enron billionaire John Arnold thinks everyone should believe him when he says we've got to cut pensions because he's so incredibly rich: John...

Mar 5th
4:20 PM
Read More

More in David Sirota's continuing series on the billionaire takeover of PBS: More PBS conflict woes as activists move to eject David Koch from board of...

Mar 3rd
12:35 PM
Read More

Ukraine: One ‘Regime Change’ Too Many? ...by Ray McGovern www.michaelmoore.com Is “regime change” in Ukraine the bridge too far for the neoconservative...

Mar 2nd
9:25 PM
Read More

Subscribe to Mike's Blog RSS

Click here to suggest an article

Mike's Blog

See More Blogs

Vew the archives

View older articles