A reader writes concerning tuition-related debt:
Student debt comes from a couple of sources. One is the plethora of students who go to college for degrees that do not have enough fiscal payback to compensate for the cost of the degree. Another is the inability to delay gratification by failing to spread out the time to degree by adding in work time to earn the cost of said education. But the main one is the federal student loan program itself. When colleges know that students will get loans that guarantee the colleges will get their money, they have no real incentive to be competitive in their student costs. They know they’ll still get students, and that they’ll get their money from the government no matter how badly the student crashes and burns, or how little they make with their “gender studies” degree after graduation. Thus they crank costs for undergrads to pay for grad students, research programs, and other programs that are more related to how they’re viewed from an academic status perspective, rather than how well and efficiently they educate their undergrad populations. IMHO. YMMV.
Regarding the negative impact of scholarships and easily obtainable loans on tuition, I agree and have made that argument in years prior, although probably not on UMB.
I see it as a simple model of financial inflation. Much like the Wiemar Republic’s printing money to satisfy Versailles Treaty requirements and domestic items to buy, the money supply, in this case funneled into the higher ed “financial system” via scholarships and loans, increases at a rate greater than the increase in available positions in higher education, so the suppliers of those positions increase the prices because, well, they can.
This hurts those who cannot win scholarships nor wish to get loans, although they are forced to get them, because generally they haven’t the capacity to increase their incomes at the same rate, and, as students, they rarely have any excess capacity as it is. As my reader notes, there is no squeeze on the sellers; in fact, it’s a seller’s market, and functions like a seller’s market in real estate, when there are many out there looking to buy, but not so many interested in selling. Bidding wars erupt. Well, not in higher ed – they just push tuition higher.
Scholarship money can be considered free money; loans are discounted, as they are paid back over time.
It’s be interesting – fascinating – to ban such scholarships and loans for a decade, just to see what happens to tuition in the absence of all that free and discounted money. My guess is that, after a couple of years, tuitions would drop. There’d be an awful lot of empty slots that would need to be filled – or campuses would be closing, and no educational administrator wants to have that on their c.v., eh? Suddenly, they’d have to compete to put butts in those seats.
