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."
The College-Loan Scandal
by C.J. Westerberg
In his words, "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." This idea, among others,
is at the heart of his piece yet what even what the original title doesn't allude to (below) is that Taibbi's riff is as much about the other elephant in the room: Where is the college-level job? Why do we require a degree for those jobs that don't pay enough?
When boomers went to college, college costs were nowhere near the level as now even counting for inflation; one knew that a good job or a stepping stone job toward a better one
was waiting after the degree. Taibbi asks why do we keep playing this song when the context has changed?
Let us know what you think --- my first thoughts centered on how important entrepreneurial dispositions are for our young in this new world which are often counter to what is expected in many schools, how important the maker movement can be in the way we view education, the importance of internships and apprenticeships in high school, and the value of portfolio work realized not just with grades and test scores but the actual making, doing, building, creating things, and cultivating the entrepreneurial learner.
Taibbi is one of the most vocal and high-profile journalists and is mainly known as one of the first to call out the manipulations by Goldman Sachs and other banking firms/people shortly after the crash followed by little or no jail time, significant retribution or sanctions. We are expecting more from Taibbi in the education realm since there is such a direct and clear link to this story and our personal pocketbooks.
Excerpts via Rolling Stone:
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.
On 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 auto-erotic 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. . . (snip)
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.
Taibbi then attacks the "university-tuition system" as "exploitative and unfair, designed primarily to benefit two major actors": colleges and universities on one hand for building "these little regional economic empires" through a "massive and ongoing government subsidy" that are essentially paid for lower and middle-class students' federally backed Payday Loans lenders UK. And who is actor #2?
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.
Taibbi further paints a picture offering up sobering stats with a deep dive into details how exactly rates will rise after this initial low interest offering, how the government stands to gain even through defaults:
Taibbi offers a solution but points to an problem in education which is similar to that of the career inbreeding we witness such as the revolving door from Congress to lobbyist, from government financial policy-maker to financial institution and vice versa: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. (snip)
There are two crescendos in this article. The first is the social-engineering aspect: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. (snip)
The second wow-claim is where Taibbi points to how government data about loan default has been "carefully concealed from the public and from Congress" and what was revealed as 8.8 percent increased substantially to 13.4 percent by including the rate after three years instead of two. In fact, Taibbi cites The Chronicle of Higher Education as quoting that the government "vastly undercounts defaults."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."
Taibbi supplies us with specific short narratives of students who owe $300 a month or another who owes $35,000 still from a loan in the 90s where collection agents call their deceased mother, casual boyfriends, calling workplaces and name-calling in the vein of mooch and the like.
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. . . (snip)
Back to the social engineering aspect - where the college is better than not message - is put to the test:
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.
Taibbi then explains in a must-read analysis the rationale of this thinking beyond the money from each wing and angle of the political spectrum leaving no side undamaged.
Finally, Taibbi wraps it up with the bleakest of conclusions:
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. . .
Read full article HERE.
Related: David Brooks Wonders Why Men Can't Find Jobs; Comedy Ensues by Matt Taibbi
Moving Beyond the College for All vs. Career Education: Moving Beyond a False Debate via Hechinger Report