Billion Dollar Endowments Inspire Universities To Raise Tuition
The Associated Press has finally reported the fact that many American colleges and universities enjoy billion-dollar endowments, even as they continue to raise tuition costs. Student loans that poor and middle-class students rely on to cover these skyrocketing tuition costs is a leading cause of debtors imprisonment among young people who are just beginning their responsible adulthoods. But the Associated Press did not bother to mention that aspect.
Regarding his school's own billion-dollar endowment, Boston College president, the Rev. Willaim Leahy, said “I don’t think you can ever overinvest in higher education”. At Boston College, this investment in "higher education" includes a recently renovated science center (with extravagant Gothic exterior), a new $41 million office building with coffee bar, manicured grounds, and a dorm that features suites with high-speed internet access.
Unfortunately, tuition is not free at Boston College, the students must pay to live in those dorm suites, and it's a fair bet you must pay for the coffee also. Plato's Academy it ain't.
Student loans are one of the major causes of debtors imprisonment today, in part because tens of thousands of dollars are routinely loaned to individuals who, by definition of their student status have no college degree, no job, no meaningful work experience, virtually no experience living as a truly independent adult, and no guarantee whatsoever that they will obtain a job with a salary suitable for repaying such gargantuan debts if and when they finally graduate.
An objective observer would accuse a lender of being utterly irresponsible, who routinely lends tens of thousands of dollars to people who are the very definition of a "bad credit risk". But in the topsy-turvey world of the American Debtors Prison, it is actually regarded as good business. Here's why.
Two institutions approve "guaranteed" student loans: the U.S. government, and the universities that receive the lions share of loan funds. That's right--the two parties that decide whether or not student loans will be granted are the institutions that benefit most from granting student loans, not the banks that actually lend (and could potentially lose) the money. In the case of universities, every loan they approve sends funds straight into their own coffers, while the poor student who gets stuck with that university's mediocre American education is obligated to repay the entire loan plus interest whether they get a good job after college or not. The "check and balance" against university abuse of this power, ostensibly, is the U.S. government, which has the ultimate say in whether student loans will be granted based upon perceived financial need.
However, those students whom the U.S. government perceives as being least able to pay their own tuition are also, consequently, the least able to repay student loans. Politically, this is brilliant, because it creates the impression that the U.S. government is ensuring that all American citizens have the opportunity for a higher education regardless of their poverty. The catch is that this easy flow of money only encourages universities to raise their tuition for no good reason.
Back when the credit card industry began flooding our economy with billions of dollars in phanton money under the euphemism of "credit", a predictable thing occurred: the price of everything rose (inflation), because there was suddenly more "money" available. Inflation is a natural consequence of supply and demand--when the supply of money (even phantom money or "credit") increases, so does the demand for more money (i.e., prices rise).
The same is true with student loans. As the U.S. government began to "guarantee" more and more student loans for political reasons, more money became available, and the universities raised their tuitions to grab that extra money for themselves. After decades of this game, however, we now find that tuition has artificially inflated to the point where most students are utterly dependent on student loans if they are to attend college at all.
This does not mean that American universities are increasing the quality of their educations, however. Indeed, the opposite appears to be true. For example, when I was a graduate teaching assistant at a major U.S. university, some of my students were functionally illiterate. They should never have graduated high school, let alone been allowed to attend an institution of higher education. Neither does the rise in tuition costs mean that universities need the extra money. Forty Seven of them now have billion-dollar endowments. Harvard University alone has a $22 billion dollar endowment--and they still charge tuition.
American colleges and universities can hoard money through endowments precisely because the real money for tuition is coming from another source--the U.S. governement, which "guarantees" student loans.
It is important to note that a "guaranteed" student loan does not guarantee anything except the potential for a hard-working student to spend their life in debtors prison. "Guaranteed" means that if the student defaults, the U.S. government will pay the banks, and it is for this reason that the banks agree to loan money to such terrible credit risks in the first place. The problem is, when a student defaults and the government pays the bank, the U.S. government becomes the student's debt collector. This puts student loans into an entirely different class of financial obligation--one that resembles unpaid taxes more than late credit card payments. The only difference is that the government's collection agent for defaulted student loans is not as fair and pleasant as the IRS. Instead, it utilizes a shadowy quasi-governmental company known as the Student Loan Marketing Association (aka Sallie Mae), which is about as nasty a collection agent as the world has seen since the Middle Ages.
No one really explains this to students when they sign for their student loans, however. That would be cause bad publicity for the government, and might eventually lead to a public expose of how awful American higher education really is.
Sallie Mae is a truly nasty organization to deal with because it holds almost unlimited power to terrorize debtors, to garnish wages without going to court, and in essence, to charge whatever it wants in arbitrary "fees" and "costs" without justification. If you've heard of students borrowing $10,000, having their wages garnished for 10 years, and still owing $20,000, then you know the kind of business Sallie Mae is in.
Sallie Mae gets away with these abominations because no one really understands who runs Sallie Mae, or how it is organized. The U.S. President appoints the board of directors. But beyond that, unlike consumer debt collectors, there is no meaningful regulation of this collection agency. Indeed, of all the U.S. Congress and Department of Education representatives I have spoken with on the subject, precisely zero of them could explain to me how Sallie Mae is run, or how it is regulated. Other countries that do not regulate debt collections are characterized by the use of baseball bats, death threats, and beatings as collections tactics. This analogy provides a hint of what Sallie Mae is technically capable of doing, without legal restriction.
In practice, however, Sallie Mae typically utilizes only terrorism and wage garnisment as its main weapons against defaulted student loans. Terrorism is useful because it prevents debtors from making meaningful headway toward repaying their debts, since it is virtually impossible to take constructive steps toward repaying huge debts under the pressure of psychological and emotional torture. And when a debtor cannot repay, Sallie Mae simply doubles or triples the amount owed with arbitrary, unexplained "fees" and "collection costs", and begins to garnish the poor debtors meager wages to the maximum extent allowed by law--until the end of the debtor's life, if necessary.
Why would Sallie Mae do this, rather than helping the debtor repay their loan in full? Because that is how it generates cash flow from people who live in poverty. Generating cash flow is what prevents Congress from abolishing this barbaric, medieval institution. If Amtrak made money, the government would never even consider abolishing it either.
So behind this AP report of billion-dollar university endowments lies a much darker reality for young Americans who are guilty of nothing more than obeying outdated conventional wisdom that says a college education is necessary for success. The truth, however, is that a college education is necessary for only one reason: to keep the money flowing through the "higher education" industry. And one division of this higher education industry is none other than the American Debtors Prison itself.
All the best,
Paul
Regarding his school's own billion-dollar endowment, Boston College president, the Rev. Willaim Leahy, said “I don’t think you can ever overinvest in higher education”. At Boston College, this investment in "higher education" includes a recently renovated science center (with extravagant Gothic exterior), a new $41 million office building with coffee bar, manicured grounds, and a dorm that features suites with high-speed internet access.
Unfortunately, tuition is not free at Boston College, the students must pay to live in those dorm suites, and it's a fair bet you must pay for the coffee also. Plato's Academy it ain't.
Student loans are one of the major causes of debtors imprisonment today, in part because tens of thousands of dollars are routinely loaned to individuals who, by definition of their student status have no college degree, no job, no meaningful work experience, virtually no experience living as a truly independent adult, and no guarantee whatsoever that they will obtain a job with a salary suitable for repaying such gargantuan debts if and when they finally graduate.
An objective observer would accuse a lender of being utterly irresponsible, who routinely lends tens of thousands of dollars to people who are the very definition of a "bad credit risk". But in the topsy-turvey world of the American Debtors Prison, it is actually regarded as good business. Here's why.
Two institutions approve "guaranteed" student loans: the U.S. government, and the universities that receive the lions share of loan funds. That's right--the two parties that decide whether or not student loans will be granted are the institutions that benefit most from granting student loans, not the banks that actually lend (and could potentially lose) the money. In the case of universities, every loan they approve sends funds straight into their own coffers, while the poor student who gets stuck with that university's mediocre American education is obligated to repay the entire loan plus interest whether they get a good job after college or not. The "check and balance" against university abuse of this power, ostensibly, is the U.S. government, which has the ultimate say in whether student loans will be granted based upon perceived financial need.
However, those students whom the U.S. government perceives as being least able to pay their own tuition are also, consequently, the least able to repay student loans. Politically, this is brilliant, because it creates the impression that the U.S. government is ensuring that all American citizens have the opportunity for a higher education regardless of their poverty. The catch is that this easy flow of money only encourages universities to raise their tuition for no good reason.
Back when the credit card industry began flooding our economy with billions of dollars in phanton money under the euphemism of "credit", a predictable thing occurred: the price of everything rose (inflation), because there was suddenly more "money" available. Inflation is a natural consequence of supply and demand--when the supply of money (even phantom money or "credit") increases, so does the demand for more money (i.e., prices rise).
The same is true with student loans. As the U.S. government began to "guarantee" more and more student loans for political reasons, more money became available, and the universities raised their tuitions to grab that extra money for themselves. After decades of this game, however, we now find that tuition has artificially inflated to the point where most students are utterly dependent on student loans if they are to attend college at all.
This does not mean that American universities are increasing the quality of their educations, however. Indeed, the opposite appears to be true. For example, when I was a graduate teaching assistant at a major U.S. university, some of my students were functionally illiterate. They should never have graduated high school, let alone been allowed to attend an institution of higher education. Neither does the rise in tuition costs mean that universities need the extra money. Forty Seven of them now have billion-dollar endowments. Harvard University alone has a $22 billion dollar endowment--and they still charge tuition.
American colleges and universities can hoard money through endowments precisely because the real money for tuition is coming from another source--the U.S. governement, which "guarantees" student loans.
It is important to note that a "guaranteed" student loan does not guarantee anything except the potential for a hard-working student to spend their life in debtors prison. "Guaranteed" means that if the student defaults, the U.S. government will pay the banks, and it is for this reason that the banks agree to loan money to such terrible credit risks in the first place. The problem is, when a student defaults and the government pays the bank, the U.S. government becomes the student's debt collector. This puts student loans into an entirely different class of financial obligation--one that resembles unpaid taxes more than late credit card payments. The only difference is that the government's collection agent for defaulted student loans is not as fair and pleasant as the IRS. Instead, it utilizes a shadowy quasi-governmental company known as the Student Loan Marketing Association (aka Sallie Mae), which is about as nasty a collection agent as the world has seen since the Middle Ages.
No one really explains this to students when they sign for their student loans, however. That would be cause bad publicity for the government, and might eventually lead to a public expose of how awful American higher education really is.
Sallie Mae is a truly nasty organization to deal with because it holds almost unlimited power to terrorize debtors, to garnish wages without going to court, and in essence, to charge whatever it wants in arbitrary "fees" and "costs" without justification. If you've heard of students borrowing $10,000, having their wages garnished for 10 years, and still owing $20,000, then you know the kind of business Sallie Mae is in.
Sallie Mae gets away with these abominations because no one really understands who runs Sallie Mae, or how it is organized. The U.S. President appoints the board of directors. But beyond that, unlike consumer debt collectors, there is no meaningful regulation of this collection agency. Indeed, of all the U.S. Congress and Department of Education representatives I have spoken with on the subject, precisely zero of them could explain to me how Sallie Mae is run, or how it is regulated. Other countries that do not regulate debt collections are characterized by the use of baseball bats, death threats, and beatings as collections tactics. This analogy provides a hint of what Sallie Mae is technically capable of doing, without legal restriction.
In practice, however, Sallie Mae typically utilizes only terrorism and wage garnisment as its main weapons against defaulted student loans. Terrorism is useful because it prevents debtors from making meaningful headway toward repaying their debts, since it is virtually impossible to take constructive steps toward repaying huge debts under the pressure of psychological and emotional torture. And when a debtor cannot repay, Sallie Mae simply doubles or triples the amount owed with arbitrary, unexplained "fees" and "collection costs", and begins to garnish the poor debtors meager wages to the maximum extent allowed by law--until the end of the debtor's life, if necessary.
Why would Sallie Mae do this, rather than helping the debtor repay their loan in full? Because that is how it generates cash flow from people who live in poverty. Generating cash flow is what prevents Congress from abolishing this barbaric, medieval institution. If Amtrak made money, the government would never even consider abolishing it either.
So behind this AP report of billion-dollar university endowments lies a much darker reality for young Americans who are guilty of nothing more than obeying outdated conventional wisdom that says a college education is necessary for success. The truth, however, is that a college education is necessary for only one reason: to keep the money flowing through the "higher education" industry. And one division of this higher education industry is none other than the American Debtors Prison itself.
All the best,
Paul
posted by Paul at 2:50 AM
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