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Taibbi writes: "Flash-forward through a few months of brinkmanship and name-calling, and not only is nobody talking about the IRS anymore, but the Republicans and Democrats are snuggled in bed together on the student-loan thing."

Matt Taibbi. (photo: Current TV)
Matt Taibbi. (photo: Current TV)

Ripping Off Young America: The College-Loan Scandal

By Matt Taibbi, Rolling Stone

16 August 13


The federal government has made it easier than ever to borrow money for higher education - saddling a generation with crushing debts and inflating a bubble that could bring down the economy

n May 31st, president Barack Obama strolled into the bright sunlight of the Rose Garden, covered from head to toe in the slime and ooze of the Benghazi and IRS scandals. In a Karl Rove-ian masterstroke, he simply pretended they weren't there and changed the subject.

The topic? Student loans. Unless Congress took action soon, he warned, the relatively low 3.4 percent interest rates on key federal student loans would double. Obama knew the Republicans would make a scene over extending the subsidized loan program, and that he could corner them into looking like obstructionist meanies out to snatch the lollipop of higher education from America's youth. "We cannot price the middle class or folks who are willing to work hard to get into the middle class," he said sternly, "out of a college education."

Flash-forward through a few months of brinkmanship and name-calling, and not only is nobody talking about the IRS anymore, but the Republicans and Democrats are snuggled in bed together on the student-loan thing, having hatched a quick-fix plan on July 31st to peg interest rates to Treasury rates, ensuring the rate for undergrads would only rise to 3.86 percent for the coming year.

Though this was just the thinnest of temporary solutions - Congressional Budget Office projections predicted interest rates on undergraduate loans under the new plan would still rise as high as 7.25 percent within five years, while graduate loans could reach an even more ridiculous 8.8 percent - the jobholders on Capitol Hill couldn't stop congratulating themselves for their "rare" "feat" of bipartisan cooperation. "This proves Washington can work," clucked House Republican Luke Messer of Indiana, in a typically autoerotic assessment of the work done by Beltway pols like himself who were now freed up for their August vacations.

Not only had the president succeeded in moving the goal posts on his spring scandals, he'd teamed up with the Republicans to perpetuate a long-standing deception about the education issue: that the student-loan controversy is now entirely about interest rates and/or access to school loans.

Obama had already set himself up as a great champion of student rights by taking on banks and greedy lenders like Sallie Mae. Three years earlier, he'd scored what at the time looked like a major victory over the Republicans with a transformative plan to revamp the student-loan industry. The 2010 bill mostly eliminated private banks and lenders from the federal student-loan business. Henceforth, the government would lend college money directly to students, with no middlemen taking a cut. The president insisted the plan would eliminate waste and promised to pass the savings along to students in the form of more college and university loans, including $36 billion in new Pell grants over 10 years for low-income students. Republican senator and former Secretary of Education Lamar Alexander bashed the move as "another Washington takeover."

The thing is, none of it - not last month's deal, not Obama's 2010 reforms - mattered that much. No doubt, seeing rates double permanently would genuinely have sucked for many students, so it was nice to avoid that. And yes, it was theoretically beneficial when Obama took banks and middlemen out of the federal student-loan game. But the dirty secret of American higher education is that student-loan interest rates are almost irrelevant. It's not the cost of the loan that's the problem, it's the principal - the appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008.

How is this happening? It's complicated. But throw off the mystery and what you'll uncover is a shameful and oppressive outrage that for years now has been systematically perpetrated against a generation of young adults. For this story, I interviewed people who developed crippling mental and physical conditions, who considered suicide, who had to give up hope of having children, who were forced to leave the country, or who even entered a life of crime because of their student debts.

They all take responsibility for their own mistakes. They know they didn't arrive at gorgeous campuses for four golden years of boozing, balling and bong hits by way of anybody's cattle car. But they're angry, too, and they should be. Because the underlying cause of all that later-life distress and heartache - the reason they carry such crushing, life-alteringly huge college debt - is that our university-tuition system really is exploitative and unfair, designed primarily to benefit two major actors.

First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency - low- and middle-income students - that has virtually no lobby in Washington.

Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity. Why is this happening? The answer lies in a sociopathic marriage of private-sector greed and government force that will make you shake your head in wonder at the way modern America sucks blood out of its young.

In the early 2000s, a thirtysomething scientist named Alan Collinge seemed to be going places. He had graduated from USC in 1999 with a degree in aerospace engineering and landed a research job at Caltech. Then he made a mistake: He asked for a raise, didn't get it, lost his job and soon found himself underemployed and with no way to repay the roughly $38,000 in loans he'd taken out to get his degree.

Collinge's creditor, Sallie Mae, which originally had been a quasi-public institution but, in the late Nineties, had begun transforming into a wholly private lender, didn't answer his requests for a forbearance or a restructuring. So in 2001, he went into default. Soon enough, his original $38,000 loan had ballooned to more than $100,000 in debt, thanks to fees, penalties and accrued interest. He had a job as a military contractor, but he lost it when his employer ran a credit check on him. His whole life was now about his student debt.

Collinge became so upset that, while sitting on a buddy's couch in Tacoma, Washington, one night in 2005 and nursing a bottle of Jack Daniel's, he swore that he'd see Sallie Mae on 60 Minutes if it was the last thing he did. In what has to be a first in the history of drunken bullshitting, it actually happened. "Lo and behold, I ended up being featured on 60 Minutes within about a year," he says. In 2006, he got to tell his debt story to Lesley Stahl for a piece on Sallie Mae's draconian lending tactics that, curiously enough, Sallie Mae itself refused to be interviewed for.

From that point forward, Collinge - who founded the website - became what he calls "a complaint box for the industry." He heard thousands of horror stories from people like himself, and over the course of many years began to wonder more and more about one particular recurring theme, what he calls "the really significant thing - the sticker price." Why was college so expensive?

Tuition costs at public and private colleges were, are and have been rising faster than just about anything in American society - health care, energy, even housing. Between 1950 and 1970, sending a kid to a public university cost about four percent of an American family's annual income. Forty years later, in 2010, it accounted for 11 percent. Moody's released statistics showing tuition and fees rising 300 percent versus the Consumer Price Index between 1990 and 2011.

After the mortgage crash of 2008, for instance, many states pushed through deep cuts to their higher-education systems, but all that did was motivate schools to raise tuition prices and seek to recoup lost state subsidies in the form of more federal-loan money. The one thing they didn't do was cut costs. "College spending has been going up at the same time as prices have been going up," says Kevin Carey of the nonpartisan New America Foundation.

This is why the issue of student-loan interest rates pales in comparison with the larger problem of how anyone can repay such a huge debt - the average student now leaves school owing $27,000 - by entering an economy sluggishly jogging uphill at a fraction of the speed of climbing education costs. "It's the unending, gratuitous, punitive increase in prices that is driving all of this," says Carey.

As Collinge worked to figure out the cause of those cost increases, he became focused on several highly disturbing, little-discussed quirks in the student-lending industry. For instance: A 2005 Wall Street Journal story by John Hechinger showed that the Department of Education was projecting it would actually make money on students who defaulted on loans, and would collect on average 100 percent of the principal, plus an additional 20 percent in fees and payments.

Hechinger's reporting would continue over the years to be borne out in official documents. In 2010, for instance, the Obama White House projected the default recovery rate for all forms of federal Stafford loans (one of the most common federally backed loans for undergraduates and graduates) to be above 122 percent. The most recent White House projection was slightly less aggressive, predicting a recovery rate of between 104 percent and 109 percent for Stafford loans.

When Rolling Stone reached out to the DOE to ask for an explanation of those numbers, we got no answer. In the past, however, the federal government has responded to such criticisms by insisting that it doesn't make a profit on defaults, arguing that the government incurs costs farming out negligent accounts to collectors, and also loses even more thanks to the opportunity cost of lost time. For instance, the government claimed its projected recovery rate for one type of defaulted Stafford loans in 2013 to be 109.8 percent, but after factoring in collection costs, that number drops to 95.7 percent. Factor in the additional cost of lost time, and the "net" projected recovery rate for these Stafford loans is 81.8 percent.

Still, those recovery numbers are extremely high, compared with, say, credit-card debt, where recovery rates of 15 percent are not uncommon. Whether the recovery rate is 110 percent or 80 percent, it seems doubtful that losses from defaults come close to impacting the government's bottom line, since the state continues to project massive earnings from its student-loan program. After the latest compromise, the 10-year revenue projection for the DOE's lending programs is $184,715,000,000, or $715 million higher than the old projection - underscoring the fact that the latest deal, while perhaps rescuing students this coming year from high rates, still expects to ding them hard down the road.

But the main question is, how is the idea that the government might make profits on defaulted loans even up for debate? The answer lies in the uniquely blood-draining legal framework in which federal student loans are issued. First of all, a high percentage of student borrowers enter into their loans having no idea that they're signing up for a relationship as unbreakable as herpes. Not only has Congress almost completely stripped students of their right to disgorge their debts through bankruptcy (amazing, when one considers that even gamblers can declare bankruptcy!), it has also restricted the students' ability to refinance loans. Even Truth in Lending Act requirements - which normally require lenders to fully disclose future costs to would-be customers - don't cover certain student loans. That student lenders can escape from such requirements is especially pernicious, given that their pool of borrowers are typically one step removed from being children, but the law goes further than that and tacitly permits lenders to deceive their teenage clients.

Not all student borrowers have access to the same information. A 2008 federal education law forced private lenders to disclose the Annual Percentage Rate (APR) to prospective borrowers; APR is a more complex number that often includes fees and other charges. But lenders of federally backed student loans do not have to make the same disclosures.

"Only a small minority of those who've been to college have been told very simple things, like what their interest rate was," says Collinge. "A lot of straight-up lies have been foisted on students."

Talk to any of the 38 million Americans who have outstanding student-loan debt, and he or she is likely to tell you a story about how a single moment in a financial-aid office at the age of 18 or 19 - an age when most people can barely do a load of laundry without help - ended up ruining his or her life. "I was 19 years old," says 24-year-old Lyndsay Green, a graduate of the University of Alabama, in a typical story. "I didn't understand what was going on, but my mother was there. She had signed, and now it was my turn. So I did." Six years later, she says, "I am nearly $45,000 in debt....If I had known what I was doing, I would never have gone to college."

"Nobody sits down and explains to you what it all means," says 24-year-old Andrew Geliebter, who took out loans to get what he calls "a degree in bullshit"; he entered a public-relations program at Temple University. His loan payments are now 50 percent of his gross income, leaving only about $100 a week for groceries for his family of four.

Another debtor, a 38-year-old attorney who suffered a pulmonary embolism and went into default as a result, is now more than $100,000 in debt. Bedridden and fully disabled, he accepts he will likely be in debt until his death. He asked that his name be withheld because he doesn't want to incur the wrath of the government by disclosing the awful punch line to his story: After he qualified for federal disability payments in 2009, the Department of Education quickly began garnishing $170 a month from his disability check.

"Student-loan debt collectors have power that would make a mobster envious" is how Sen. Elizabeth Warren put it. Collectors can garnish everything from wages to tax returns to Social Security payments to, yes, disability checks. Debtors can also be barred from the military, lose professional licenses and suffer other consequences no private lender could possibly throw at a borrower.

The upshot of all this is that the government can essentially lend without fear, because its strong-arm collection powers dictate that one way or another, the money will come back. Even a very high default rate may not dissuade the government from continuing to make mountains of credit available to naive young people.

"If the DOE had any skin in the game," says Collinge, "if they actually saw significant loss from defaulted loans, they would years ago have said, 'Whoa, we need to freeze lending,' or, 'We need to kick 100 schools out of the lending program.'"

Turning down the credit spigot would force schools to compete by bringing prices down. It would help to weed out crappy schools that hawked worthless "degrees in bullshit." It would also force prospective students to meet higher standards - not just anyone would get student loans, which is maybe the way it should be.

But that's not how it is. For one thing, the check on crappy schools and sleazy "diploma mill" institutions is essentially broken thanks to a corrupt dynamic similar to the way credit-rating agencies have failed in the finance world. Schools must be accredited institutions to receive tuition via federal student loans, but the accrediting agencies are nongovernmental captives of the education industry. "The government has outsourced its responsibilities for ensuring quality to weak, nonprofit organizations that are essentially owned and run by existing colleges," says Carey.

Fly-by-night, for-profit schools can be some of the most aggressive in lobbying for the raising of federal-loan limits. The reason is simple - some of them subsist almost entirely on federal loans. There's actually a law prohibiting these schools from having more than 90 percent of their tuition income come from federally backed loans. It would seem to amaze that any school would come even close to depending that much on taxpayers, but Carey notes with disdain that some schools use loopholes to go beyond the limit (for instance, loans to servicemen are technically issued through the Department of Defense, so they don't count toward the 90 percent figure).

Bottomless credit equals inflated prices equals more money for colleges and universities, more hidden taxes for the government to collect and, perhaps most important, a bigger and more dangerous debt bomb on the backs of the adult working population.

The stats on the latter are now undeniable. Having passed credit cards to became the largest pile of owed money in America outside of the real-estate market, outstanding student debt topped $1 trillion by the end of 2011. Last November, the New York Fed reported an amazing statistic: During just the third quarter of 2012, non-real-estate household debt rose nationally by 2.3 percent, or a staggering $62 billion. And an equally staggering $42 billion of that was student-loan debt.

The exploding-debt scenario is such a conspicuous problem that the Federal Advisory Council - a group of bankers who advise the Federal Reserve Board of Governors - has compared it to the mortgage crash, warning that "recent growth in student-loan debt...has parallels to the housing crisis." Agreeing with activists like Collinge, it cited a "significant growth of subsidized lending" as a major factor in the student-debt mess.

One final, eerie similarity to the mortgage crisis is that while analysts on both the left and the right agree that the ballooning student-debt mess can be blamed on too much easy credit, there is sharp disagreement about the reason for the existence of that easy credit. Many finance-sector analysts see the problem as being founded in ill-considered social engineering, an unrealistic desire to put as many kids into college as possible that mirrors the state's home-ownership goals that many conservatives still believe fueled the mortgage crisis. "These problems are the result of government officials pushing a social good - i.e., broader college attendance" is how libertarian writer Steven Greenhut put it.

Others, however, view the easy money as the massive subsidy for an education industry, which spent between $88 million and $110 million lobbying government in each of the past six years, and historically has spent recklessly no matter who happened to be footing the bill - parents, states, the federal government, young people, whomever.

Carey talks about how colleges spend a lot of energy on what he calls "gilding" - pouring money into superficial symbols of prestige, everything from new buildings to celebrity professors, as part of a "never-ending race for positional status."

"What you see is that spending on education hasn't really gone up all that much," he says. "It's spending on things like buildings and administration....Lots and lots of people getting paid $200,000, $300,000 a year to do...something."

Once upon a time, when the economy was healthier, it was parents who paid for these excesses. "But eventually those people ran out of money," Carey says, "so they had to start borrowing."

If federal loan programs aren't being swallowed up by greedy schools for expensive and useless gilding, they're being manipulated by the federal government itself. The massive earnings the government gets on student-loan programs amount to a crude backdoor tax increase disguised by cynical legislators (who hesitate to ask constituents with more powerful lobbies to help cut the deficit) as an investment in America's youth.

"It's basically a $185 billion tax hike on middle-income and low-income citizens and their families," says Warren Gunnels, senior policy adviser for Vermont's Sen. Bernie Sanders, one of the few legislators critical of the recent congressional student-loan compromise.

Gunnels notes with irony that a few years ago, when Obama moved to eliminate private-lender middlemen from the servicing of federally backed loans, much hay was made out of the enormous profits private industry had long earned on the backs of students. The Congressional Budget Office issued a report estimating that Obama's program would save $86.8 billion over a 10-year period by eliminating private profits from the system. Obama said taxpayers were "paying banks a premium to act as middlemen," adding that it was a "premium we cannot afford."

The outrage over profits, however, was short-lived.

"It was wrong when banks were making an $86 billion profit on students, but somehow it's OK when the government makes a $185 billion profit on them," says Gunnels.

One of the reasons the money has kept flying out the government's door over the years is that data about student-loan-default rates has been carefully concealed from the public and from Congress. For years, when it reported statistics about student defaults, the DOE relied upon a preposterous arbitrary calculation called the "cohort default rate," which essentially measured the rate of default only within the first two years of graduation. In 2008, Congress passed a law forcing the DOE to switch to a theoretically more accurate three-year measurement, which it sent to Congress for the first time last year. Overnight, the picture looked a good bit grimmer. The 2009 number, based on the old two-year 2009 "cohort" rate, was 8.8 percent. When the new three-year number came out, the rate had jumped to 13.4 percent.

The Department of Education refuses to release more accurate default numbers. But outsiders think the DOE is lowballing it. The Chronicle of Higher Education charges that the government "vastly undercounts defaults." In 2010, it estimated that one in five had defaulted on their loans since 1995, that 31 percent of community-college students default and that an astonishing 40 percent of students attending for-profit schools end up defaulting. A report by the Inspector General of the Department of Education has come to similar conclusions about the reliability of the absurd and arbitrary "cohort" figure.

However high that default number really is, what's clear is that the state is still able to turn billions in profit on its lending, and expects to continue to do so for the next 10 years. The reason for that, again, lies in something everyone who has a student loan understands implicitly - the state and its collectors are not squeamish collecting the money they're owed. The government is in the pain business, and business is good.

"They called me at work, sometimes two to three times a day, doing all the stuff they aren't supposed to do: threats, et cetera," says 41-year-old Shawn FitzGerald, who owes $300 a month and says he expects to be paying off education loans into his sixties. "They told the receptionist at my job that I was in legal trouble...."

"Sallie Mae has started sending letters to my deceased mother," says Thomas Daggett of Chesterfield, Massachusetts, who left school in the Nineties and owes $35,000.

"I have been told I made the wrong decision going to college, as well as being told I was a failure, an idiot and a mooch," says Larissa, a young woman from a blue-collar town outside Chicago. "I've had ex-boyfriends that I never even lived with contacted by collection agents, my childhood friend's distant relatives contacted by them, as well as distant relatives of my own...."

"I try not to look at the balances because the prospect of paying them off with my shit salary is so goddamn depressing it makes me want to chug vodka until I pass out," says Robert Boardman, a proud but underemployed owner of a doctorate from the University of Michigan.

There's a particularly dark twist to the education story, which is tied to the collapse of the middle class and the overall shittening of our economic landscape: College degrees are actually considered to be more essential than ever. The New York Times did a story earlier this year declaring the college degree to be the "new high school diploma," describing it as essentially a minimum job requirement. They found an Atlanta law firm that requires even clerks, secretaries and runners to have four-year degrees and cited research that everyone from hygienists to cargo agents needs to have graduated from college to get hired.

You can look at this development in one of two ways. One way is to see a college degree as a better investment than ever, which was the conclusion of the Organization for Economic Cooperation and Development, which noted that the difference in earnings between the poorly and well-educated has risen in recent years with the worsening economy.

But another way to look at this new truth is that, because of the poor job market, young people may have less of a chance than ever to actually get a good job commensurate with their education. If they don't have the degree, then they have no chance at all. So if they even want a clerking job, they must dive face-first into the debt muck and take their chances that they won't end up watching the federal government take bites out of disability checks while their law degree gathers dust downstairs somewhere. So, yes, a college education is a great thing, and you probably need one now more than ever - the problem is that it may very well be mandatory, may have less of a chance of ever getting you a job, and you may still be paying for it on your deathbed no matter what.

There are powerful reasons for both the left and the right to be willfully blind to the root problem. Democrats - who, incidentally, receive at least twice as much money from the education lobby as Republicans - like to see the raging river of free-flowing student loans as a triumph of educational access. Any suggestion that saddling befuddled youngsters with tens of thousands of dollars in school debts is somehow harmful or counterproductive to society is often swiftly shot down by politicians or industry insiders as an anti-student position. The idea that limitless government credit might be at least enabling high education costs tends to be derisively described as the "Bennett hypothesis," since right-wing moralist and notorious gambler/dick/hypocrite Bill Bennett once touted the same idea.

"It is wrong to suggest that student aid is a cause for growing college costs, in any sector," David Warren, president of the National Association of Independent Colleges and Universities, wrote in The Washington Post last year, bemoaning the "re-emergence" of the Bennett theory. "To argue so is counterproductive to the goal of making higher education accessible and affordable."

Conservatives, meanwhile, with their usual "Fuck everybody who complains about anything unless it's us" mentality, tend to portray the student-loan "problem" as a bunch of spoiled, irresponsible losers who are simply whining about having to pay back money they borrowed with their eyes wide open. When Yale and Penn recently began suing students who were defaulting on their federal Perkins loans, a Cato Institute analyst named Neal McCluskey pretty much summed up the conservative take. "You could take a job at Subway or wherever to pay the bills," he said. "It seems like basic responsibility to me."

But conservatives most of all should hate the current system for any number of reasons - for being a massive hidden tax, for being a market-defying subsidy artificially keeping ineffective and poor-performing institutions in business, and for being an example of arbitrary government power seizing not just money borrowed plus interest, but billions in additional fees and penalties from ordinary people.

Progressives should hate the predatory tactics of lenders and the sleazy way universities rely upon loan-shark collection methods to keep themselves in fancy new waterfalls, swimming pools and tenure-track jobs.

But nobody hates it enough, except for the people actually trying to pay the bills with increasingly worthless degrees. Instead, the credit keeps flowing and the debt bubble keeps expanding, thanks to leaders like John Boehner (whose daughter reportedly works at Sallie Mae's student-collections firm, General Revenue Corp.) and Dianne Feinstein (who introduced legislation to increase limits on Pell grants while her husband was heavily invested in for-profit colleges).

In a way, America itself is violating the Truth in Lending Act. It's cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn't a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo.

We're doing the worst thing people can do: lying to our young. Nobody, not even this president, who was swept to victory in large part by the raw enthusiasm of college kids, has the stones to tell the truth: that a lot of them will end up being pawns in a predatory con game designed to extract the equivalent of home-mortgage commitment from 17-year-olds dreaming of impossible careers as nautical archaeologists or orchestra conductors. One former law student I contacted for this story had a nervous breakdown while struggling to pay off six-figure debt. It wasn't until he tapped into one of the few growth industries open to young Americans that his outlook brightened. "I got my life back on track by working for a marijuana delivery service in Manhattan," he says. "I've had to compromise who I am...because I started down a path that I couldn't turn away from. Student loans aren't hope. They're despair." your social media marketing partner


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+27 # Rain17 2013-08-16 15:11
Tell me about it. I went to a private liberal arts college that now costs around $60K per year--it was around $30K in the late 1990s when I was there--and graduate school. Even though I got generous financial aid, grants, and scholarships, I had to borrow extensively; and I will be paying well into my 50s.

I have to believe that, much like the and real estate industries, student loan debt is the next bubble to blow. The rising costs are just unsustainable; and, at some point, even wealthy families are going to balk at the cost of college tuition. I mean, at some point, the system is just going to buckle because the cost is just too high and the payments will be too large.

I do think they should change the laws to make it possible for those who suffer disabilities to discharge their debt. I would also change the law to provide opportunities for distressed borrowers to get more forbearance or payment holidays.
+10 # 666 2013-08-17 17:33
just discharge it all. with all the money the govt (our money) is giving the bankster crooks and the militants (and other countries), they really ought to just discharge it all. Sorry! it's on us!
+1 # mdhome 2013-08-21 08:45
Yes, The increased income of college degrees (if they get employed), will yield enough taxes (from increased income) to pay for the cost of college. The government should pick up the tab because they will get it all back in taxes and the graduates will have a healthier mental health, especially if their job does not open up for them.
+1 # RLF 2013-08-20 05:32
You hit on what I think is the big reason for tuition inflation...tha t is the overwhelming numbers of right wing administrators who have been getting tuition higher and higher to keep students in areas that PAY. The problem for the right is that people who study the liberal arts tend to be much more left wing. I saw this happening at CU in Boulder,Co. in the late 70's early 80's. They want students to do what they are told and not do any silly thinking.
+15 # Rain17 2013-08-16 15:14
I do also want to correct one thing. It is technically possible to eliminate student loan in bankrputcy. Courts have adopted the Brunner Test or the Totality of Circumstance Test.


But it is very hard, if not impossible, to meet all the burdens of these debts. And courts have rarely discharged student loan debt.
+23 # langdonsilver 2013-08-16 17:16
Reading this I was hoping to get some understanding of WHY higher ed costs have gone skyrocketing. I don't think that the cost of professor salaries has gone up 300% and I doubt that alumni contributions have fallen off a whole lot (some, yes) and so forth. Got ideas anyone?
+21 # Emmanuel Goldstein 2013-08-16 22:06
As a professor at a flagship state university, my salary has gone up only about 5% since the beginning of the Great Recession. But meanwhile, I've witnessed more and more administrative positions being created, more buildings going up, new athletic facilities, etc. That's where the money's going.
+10 # Regina 2013-08-17 11:54
Mr. Goldstein is correct -- I recall the "progress" on my campus from a retiring president to a new one, years ago. The older president had two vice presidents in his administration. The new one installed six. The deanships also multiplied. An increase in buildings is usually justified on the basis of increased enrollment and advances in various subject fields, but the athletics machines and coaches' salaries are a big business totally removed from education.
-3 # 666 2013-08-17 17:45
do you specialize in the study of "oligarchical collectivism"??
0 # BLBreck 2013-08-19 17:01
I agree. I saw it and heard about it from a friend who is a tenured professor. With the crash, all professors about to gain tenure were let go (really screwed them!) No one was hired in their place, however tons of new, well paid administrators and, more important, recruiters, were hired. The tenured profs were furloughed and therefore lost income.

At the state university, were I got my now rather useless Masters, students now have a hard time getting core classes for graduation as there are not enough sections being offered and are forced to stay in school for another year or more, adding to their debt, or to quit school.
+13 # Vegan_Girl 2013-08-17 05:20
Look at the size of administrations , and also at their salaries while you are at it.
+14 # xflowers 2013-08-17 05:57
The article points to those reasons, and I think it's correct. It's the gilding Taibbi writes about. Huge unnecessary expenditures on fancy new buildings and most of all, huge expenditures on more and more high paid administrators, who get paid a lot more than the professors. Certainly a lot more than I was paid to actually teach. But then I was a "lecturer," which made me part of the exploited class.
-3 # Charles3000 2013-08-17 06:11
I suggest you look at the level of non-academic staffing plus other overhead costs at colleges. And I believe you will see a significant part of it in academic salaries too.
+11 # Mitzi 2013-08-17 08:05
Because THEY CAN. Matt Taibbi is clear, if succint,on that. That's Capitalism, baby.
+8 # Nominae 2013-08-17 20:04
Quoting Mitzi:
Because THEY CAN. Matt Taibbi is clear, if succint,on that. That's Capitalism, baby.

Well, that's certainly *Unregulated* Capitalism, baby !

And, as you point out above, the lack of regulation in this Capitalism is the exact *reason* that THEY CAN.

Not only is the government making no effort to stop them,
the Government is literally skimming the profits.

I am personally uncomfortable with even defining the present system of legalized extortion, robo-signing, and blind foreclosures as *ANY* kind of "Capitalism".

It is nothing more than Mob Operations writ large.
0 # BLBreck 2013-08-19 17:30
Yes! And universities are now working on the corporate business model, which is about finding more customers, not about the quality of the "product."

And just like the current corporate business model, I wonder what will happen when they have impoverished so many that no one can afford their product. It's called "killing the goose that laid the golden egg." But they are so myopic they can only see their quarterly bottom line. Not exactly the way to create a sustainable business, a sustainable society or a sustainable ecology. I really do believe their lust for money and power has made them insane.
+16 # She Cee 2013-08-16 21:56
Think of a world where only the children of the very wealthy, those who already control the country, can afford the cost of an education.

It's very frightening!

I wonder if any of our wealthy liberals will step forward and start some institutions of higher learning where people without the ability to pay will have a place to go to get higher education.

Wouldn't that be loverly?
+13 # Trath Mutters 2013-08-16 23:14
I think that Matt alluded to major reasons for the rise in higher education costs. Bloated Administrations with even more Bloated Salaries also infra structure.
I've gone back to Happy Valley after 40+ years and am amazed by the proliferation of elaborate buildings, athletic facilities etc. and the same is happening at our local UAA. I suspect there is some good old graft in there as well for the 0.01%
+17 # Vegan_Girl 2013-08-17 05:31
"Students who acquire large debts putting themselves through school are unlikely to think about changing society, Chomsky suggested. “When you trap people in a system of debt . they can’t afford the time to think.” Tuition fee increases are a “disciplinary technique,” and, by the time students graduate, they are not only loaded with debt, but have also internalized the “disciplinarian culture.” This makes them efficient components of the consumer economy."

"My feeling is that student fees are instituted, basically as a technique of indoctrination and control. I don’t think there’s an economic basis for them. And it’s interesting that, you look at the timing — like when I went to college, I went to an Ivy League university, The University of Pennsylvania. Tuition was only $100 and you could easily get a scholarship.

Students today are over $1 trillion in debt. That’s more than credit card debt. That’s a burden on people coming out of college. It’s got them trapped. It (tuition) is a technique of control, and it surely isn’t an economic necessity in the richest country in the world.

Look at the ratio of administrators to faculty: it’s gone way up the last couple of decades … not for educational purposes, but for more techniques of control.

It’s a way to make sure that children aren’t free, independent or inquisitive, exploring."
+1 # cordleycoit 2013-08-17 05:50
Isn't peachy; the government become the shy is taking the vig from the young and stupid. they use tactics that make the Outfit look like light weights.
+3 # Susan1989 2013-08-17 06:08
Cost of a college education has skyrocked due to all of the following: 1. Lavish facilities built by colleges to attract an increasing number of students. 2. An increased demand for financial aid and scholarships. 3. Higher salaries for faculty who work limited hours...and hand their teaching over to adjuncts. 4. Free rides for athletes. 5. The added and ever-increasing cost of technology for all areas of education and campus life. 6. The increasing need for securityb on campuses. 7. The inability to terminate incompetent faculty and other employees due to union contracts. 8. Employees and administrators required to fulfill complaince requirements... something that did not exist 20 years go. 9. And an ever increasing number of administrators to deal with the increased complexity of running a college. 11. The increased ned for colleges to increase networking opportunities for students and graduates to increase employment percentages after graduation. 12. Forgot to mention...the increased emphasis on endowment building! Colleges and universities have mimicked society in their cultural complexity....a nd possibly the incompetence of may of their employees...mea ning that possibly more employees are necessary to cover for lack of efficiency.
0 # 666 2013-08-17 17:51
athletic scholarships are tightly restricted by the ncaa; with the exception of a few Star faculty making 6 figures, the majority of faculty toll at less or near subsistence level wages. You've been drinking too much koolaid. the increasing security tab for campuses and paralleled the militarization of the police nationally and I suspect much of that is subsidized by states and the fed (separate from education budgets). faculty typically lack the ability to terminate incompetent & overpaid admins. if a building is an "endowment" building - that's endowment funds, not budget/state funds.
+1 # rertel 2013-08-18 08:40
Going to quibble about points 3 & 7. Three appears to suggest that a good % of faculty hand their work to adjuncts & head off to the beach. Dependence on poorly paid adjuncts is a problem, but it's not largely due to lazy, overpaid FT faculty. Ohio passed a law a few years ago making it illegal for faculty to collectively bargain over workload. The stated goal was to force full-time faculty to teach more undergrad classes(real goal to bust unions). My faculty union took this to court only to lose when Oh appealed to the SCUS. In the process, we established that there is a positive relationship between bargaining & teaching load & the main reason full-time faculty are not more engaged in teaching is because they are engaged in research, which they have been encouraged/forc ed to do as state-support for colleges has been systematically reduced. I will also note that this research leads to all sorts of scientific advances which we probably don't want to chide these faculty for producing. Further, a 2006 study reveals that faculty do not have higher salaries as compared to non-faculty professionals. As for pt. 7, union contracts always provide ways to fire poorly performing faculty; the fact that administrations don't perform the due diligence to exercise dismissal actions isn't the fault of the unions. During a stint as an administrator, I led a successful dismissal action, no thanks to the poor documentation left to me by prior administrators. Pts. 1,2,5,&8 are good ones.
+9 # michelle 2013-08-17 08:26
What is it with "athletic facilities?" Colleges build palatial complexes for the football team and for "student recreation." Cities use public money to build outrageous stadiums and arenas (Detroit, for god's sake) for the benefit of privately owned sports franchises. No recessions in this segment of American society. Cut the bread, keep the circuses!
+8 # kalpal 2013-08-17 08:40
When I first attended college the state legislature picked up 75% of the costs. This was 44 years ago. Today it barely picks up 10%. My first quarter cost less than $500 inclusive of tuition, room and board, insurance, books and supplies. A friend who will soon be 90 years old told me that each quarter cost her $15 in the early 1940s. I understand inflation. I fail to grasp why Republican politicians in this state determined that supporting higher education is nothing they wish to do. They keep trying to fight against brain drain but rdecline to support anything other than collegiate sports.
+3 # LibrisFidelis 2013-08-17 09:51
When I went to Golden West College in Huntington Beach, California in the early 1990s, my class registration was $45 per-class and my books were around $30 per book. When I TRIED to enroll at University of Iowa in Iowa City in 2006 I was awarded a Pell Grant of $2900, but UofI would only allow me a Pell Grant of $200 per semester when each class was $300 and the books were from $150 to $300 EACH. This is the reality.
+9 # jwb110 2013-08-17 10:17
The Democrats, the Republicans and the monetary Elite are the enemies of the American people. El Qaeda is a piker by comparison.
This is a scam to keep education for the wealthy so that congenital idiots like Geo. Bush Jr. can gain the Presidency.

This is the stuff that great revolutions are made of and no military has ever won against a revolution in the long haul.
+4 # Polar Bear 2013-08-17 10:20
T Boone Pickens owns Oklahoma State University..the geology department is guaranteed to turn out geologists that are happy to frack away for oil/gas interests..So why would costs be so high when donors for big pharma,industri al agriculture are benefiting so much for these "educated" people
+9 # laurele 2013-08-17 10:26
This is why I have chosen not to have children, and why many other people have made the same choice, as can be seen from Time magazine's cover story dated August 12, 2013. We need to bring back the grants that enabled young people from low income backgrounds to attend college back in the 1970s. Reagan set us down this dark path, as he was the first to change these grants into loans. That man makes me wish there were a hell for him to burn in.
+4 # Billsy 2013-08-17 11:29
While a diploma mill like DeVry U. gets a pass, the independent accreditation commission threatens City College of San Francisco with loss of accreditation insuring it loses bundles of students (over fears they will lose transfer credits) while being saddled with draconian administrative requirements. A significant loss to thousands of low income full and part time students trying to acquire vocational certification or credits to transfer to a major university. The system is indeed corrupt. In europe, your higher education is free (if you pass state entrance exams) and your vocation is your education, not a part time job to pay for trendy clothes or gas up your car.
+4 # Malcolm 2013-08-17 18:07
In 1966-8 I paid $50 per SEMESTER at Texas Tech.

I then went to Humboldt State in California. Tuition was FREE (Tech was actually cheaper; fees at HSU were more than fees AND tuition) Student loans? Whatever for?

WTF happened?

Now get this: our impoverished neighbor to the south has, (or had? I hear they may now be charging a NOMINAL tuition, like 2¢ per quarter, but I'm not sure) free education at their public university system.

This is a renowned university, folks! Read the following:

Incidentally my ER doctor friend (an American) got his medical degree in Mexico FOR FREE, in exchange for promising to practice medicine in an underserved Mexican town for one year!

Whyever does the uber wealthy USA not AT LEAST provide for its citizens' education as well as Mexico does?
+1 # xflowers 2013-08-18 09:21
WTF happened?

I've also been thinking a lot about this question you raise since I've read this article and since I'm actively involved in trying to help my daughter pay off huge college debt when I too had gone to school on college loans that used to be affordable and were designed to help not harm students. This is what I've concluded. It goes back to income inequality again, but the issue is even more complicated than what most of us think. There is too much money in too few hands and the people with the money are always looking to make more so everything has become for them a potential for profit scheme. Thus most things having to do with borrowing money have morphed into yesterdays's loan shark schemes, which has totally distorted the mechanism by which schools can only ask the price the market will bear. As long as these rich guys stand to make an easy buck and the government backs their risky loans, students will be asked to bear much more than reasonably should be expected of them by signing their name on the dotted line. Which tells you something more. This country believes in capitalism far more than education at this point in our history.
+2 # Malcolm 2013-08-18 10:57
Sounds reasonable, xflowers, unfortunately, tho I assume there are other reasons, as well.

As to believing in capitalism more than education, that may be at least partly explained by the fact that the uber rich don't want, and actually FEAR, having too many educated people, especially when society has rendered them obsolete (in terms of being part of "the economy"). So much of the economy is now focused on mass production, not ideas, and of course much of the work that used to be done by humans has been taken over by robots and computers.

So, it's "better" to have ignorant consumers than college education.
+3 # M4inDebt 2013-08-17 20:27
I am a 4th year medical student at a private institution in a metropolitan area. I had completed 3.5 years of the 4 years of med school and was forced to take time off to address issues of depression, anxiety, and med school burnout. 2 years later with interest I was $200,000 in debt. During my time off I fell further and further into a depressive self-loathing dark place. I began popping pain pills to lift myself out of some pretty dangerously low places. A few months later I was a heroin addict. All of this was the result of med school being a poor fit for my personality and the incredible large debt that could only be managed by returning and finishing my MD degree. This bleak outlook led to two suicide attempts(both were aborted by phone calls to family members and a rush to the ER). The sad thing is I actually like myself and have always been optimistic and happy. I just felt i was going to work the next 30 years in a great IT job i landed barely begin able to make payments towards my 6.8% interest federal loans from when I started school. I have gotten a handle on my substance abuse issue and plan to restart school in the next month. The pressure I feel is over the top. I am 2 years cold on the material and clinical skills but only have 4 rotations remaining. I know that if i end up dropping out I will go right back to drugs with the intent to once again end my life via heroine overdose. Med loans make dropping out late in the game financial suicide...
+3 # xflowers 2013-08-18 09:05

I'm glad you've pulled yourself together but am sad you feel it's so tenuous. Debt is debt and life is life, the first pales in value compared to the latter. They can't throw you into debtors prison so screw the debt if you have to and find what makes you happy and live for life.
+4 # Malcolm 2013-08-18 11:06
I agree, xflowers! I certainly wouldn't RECOMMEND this (it's illegal, after all), but some people in situations not dissimilar to that of m4indebt have been known to close all bank accounts and become part of the cash only society. The MACHINE cant garnish your wages if you are paid in cash.

At one point, three of my for renter families paid me in cash, although I can only guess why that is.

I realize that being part of the "underground economy" is not always our preference, but sometimes it's the best thing we can do. It's possible to really thrive in that situation.

Who knows-maybe a person could save enough that way to eventually pay off those damn student loans!
0 # Renter1 2013-08-19 00:03
[quote name="Malcolm"]
I realize that being part of the "underground economy" is not always our preference, but sometimes it's the best thing we can do. It's possible to really thrive in that situation.

I don't know (never lived there) but have heard that even in the Soviet Union there were a lot of people living off the radar. Wouldn't be my choice, but that might be where we a lot of us are headed, like it or not.
+2 # OpportunityForAll 2013-08-18 02:24
“Few men have virtue to withstand the highest bidder.”
- George Washington
We must end the influence of money in government entirely. Sign up at and join the revolution!
+2 # Malcolm 2013-08-18 11:14
I have been trying to get movetoamend to quit wasting their time and risking OUR burnout, by trying to get CONGRESS to rein in CONGRESS. I'm fairly certain it ain't gonna happen that way. Movetoamend should be focusing on part TWO of the Article V amendment process, which circumvents the greedy pig CONGRESS.

For whatever reason, this advice is hitting a brick wall. Has movetoamend been taken over by congressional interests, deliberately wasting years and huge amounts of energy on a doomed effort, all to wear us all out so we won't have the energy afterwards to approach our state legislators to start the ball rolling for a constitutional convention?

Just wondering...
0 # amye 2013-08-19 19:35
Oh boy! I want to say I'm liberal, but I apparently have the perspective of a right winger on this issue! I went to a college I didn't even want to go to because it was cheap! I had to pay for it ALL myself as a poor student! I was in debt to Sallie Mae for 10+ years! I graduated in a bad economy in the mid 80's which no one seems to remember! I did get a good government job by luck and worked hard to pay all my student debt off. I think these kids today are so spoiled! They go to fancy colleges that they and their parents can never pay for! Why? Is it really the college you go to? Or is it that you actually went to college and graduated at all? The stats bear out that its still only 3 people out of 10 that are college graduates in our society! That means the other 7 people are still only high school grads or worse... a high school drop out! Think of Bill Gates, etc! I still don't think its the expensive college as much as it is that you graduated at all from any college!

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