So, does this look predation to you?
It looks like predation to me.
Here’s the thing, in the bankruptcy bill, Joe Biden, among others, made it impossible to default on student loans.
This is bad. It is bad capitalism. In capitalism, people who lend money are supposed to bear the risk of lending money. If someone can’t pay them back, they should lose the money they loaned. The function of lenders, in capitalism, is to allocate money to those who will make enough to pay it back. That is the justification for letting people have lots of money–that they are good at allocating it.
When you remove the risk, by having the government both back the loans AND make it so they can’t be discharged in bankruptcy, you make it so the virtues of capitalism (such as they are) don’t work.
In truth, education should be mostly free and paid for by the government. There’s an ethical argument for that, but it’s not the one I’m making.
If education actually increases earnings or welfare (someone who is healthier will cost the government less, someone who is happier is better for other people), then that’s good. The problem with it is that it’s hard to capture. Not everyone gets a lot of benefit from education, but some people do.
Government, if it has high enough progressive taxation, doesn’t need quantify who will win from educating their citizens. They only need to know that enough people will and that whoever wins, they’ll get their share of it. This isn’t just about income or happiness or health: A lot of the greatest inventors, for example, didn’t make much money. Someone else did.
No problem. Government still taxes whoever that is.
This is government’s great advantage, and why there are a lot of things government should do.
But because the recapture rate is basically the progressive taxation rate + the rate of taxation of corporate profits, if you have low taxation it doesn’t work.
Note, also, that what private investors have done, by making default impossible, and having the government guarantee loans, is to make the government give them something close to government returns. “Now we don’t need to know who wins, because we always win.”
But since they bear only the upside and not the downside, unlike a good government, they don’t have an incentive to actually make education good.
Education costs are out of control. So are education loans. This is the rich and, generally speaking, the older, taking returns from the young and poor.
It’s evil. It’s economically stupid. It’s not capitalism.
Let’s hope it ends soon, and for a bonus, let’s hope that government makes default possible again and refuses to make “investors” whole.
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Tom
Like I said in another thread, education needs an overhaul.
It should be more a trade school system starting in High School at Grade 10 when most students are 16 ad got drivers licenses. Liberal Arts degrees have to go and so do their requirements. They serve no purpose and just jack up the costs of education.
It should not take 12 years to train a Surgeon, he should start out as an EMT, work the streets for a year and a half while taking a Paramedic Course, work 3 years on the streets and in the trenches as a Paramedic, while going to advanced training so that when he becomes a Surgeon, he has had a minimum of 7 years on the streets seeing first hand the acute medical crisis afflicting his community and has his entire mindset attuned to helping them and not lining Big Pharma’s pockets and being corrupted by the network of Liberal Arts Education putting him in the social circles of the rich.
A Physician likewise should start out as a CNA, work that field while getting a Nursing Degree and work up to full Physician while being in the front lines of the community’s chronic health crisis and not being corrupted by the same league of parasites hooking onto Surgeons.
By going this route, we ensure the people who provide health services are highly trained, committed to the community and more importantly, act like human beings with humbleness. They will also be debt free.
The current system encourages people to go into massive debt, network with the rich and famous, and when they graduate as Physicians, they are in such debt that they need to prostitute for Big Pharma and keep in the graces of the Rich or they are fucked economically.
Being a Paramedic myself, I’m lucky that I’m not in debt, and in 3 years I will have enough to pay for Medical School in cash. Our Medical Director was the same way, he started as an EMT and worked his way up through the same company I work for and is outspoken against Big Pharma as he isn’t in debt.
As for Lawyers, return to the old system where anyone can sit the bar exam and if they pass, they get a license to practice law. Our best Attorneys and US Supreme Court Justices never went to Law School, but were still the best Attorneys in their fields. Take Abe Lincoln for example, never went to college, passed the bar exam, and in a trial, whipped out an Almanac to show a witness lied about seeing a murder due to the full moon by pointing out the date in question was a New Moon.
Russ
All that\’s true, but it\’s also been well known for a long time now: The banks, government, universities and media have engaged in a monumental con job to induce suckers into taking out these predatory, indenturing loans.
In the same way it\’s well known that by now for most college is just an extremely expensive raffle ticket for grinders and status quo-mongers who support the very system exploiting them this way and desperately want nothing than to be one of the \”winners\”.
So, college: Continuing the Mammon indoctrination, a training ground for aspiring corporate technocratic cadres, and known ahead of time by its victims to be a massive debt scam, but they can\’t stop themselves because of their religious commitment to an ecocidal-genocidal cultural-economic system.
Can\’t say I any longer have any sympathy for them, since they no longer have any excuse of \”innocence\”, and haven\’t for a long time.
Everyone knows the US educational system is just part of the organized crime network.
Bill Hicks
Might as well ask for a rainbow colored unicorn while you\’re at it. The Democrats are doing everything they can try and save Biden from his me-too problem, so I highly doubt they would take him to task over his disgraceful sellout of college kids. The fact is the Dems\’ buddies in the university system love the wallet-fattening status quo, which won\’t end until the \”everything bubble\” finally pops. And then there won\’t be much need to go to college anymore.
Bill H
I’ll add my voice to the direction that Tom and Russ are taking, that the problem is not so much the loans themselves as the emphasis on and cost of advanced education. It has been a con job imposed on the emerging generation of astounding proportion, that college is the “ticket to jobs of the future” and that advanced education is vital to survival in the modern world, all of which has allowed institutions of higher learning to jack costs to astronomical levels.
As to the acts of congress, they were to some degree necessary, which does not mean they were moral or right. Yes it is incumbent upon the lender to bear the risk of making the loan, which means that student loans could not and should not ever be made.
These are loans to people with no history of financial responsibility or repaying debt, no current income at all from which to repay the loan, and for whom the liklyhood of ever having a job with an income sufficient to repay the loan is speculative at best, and poor for most. If the loan could be discharged in bankruptcy, the chance of the loan being repaid would be something very close to zero and no lender would ever make such a loan.
Again, that fact that such a loan is needed is obscene, but given that it became needed, something had to be done to make it feasible.
Anon
I’m three years into the Public Service Loan Forgiveness program. It is the only program that allows young people with massive loans to have them forgiven at the end of ten years, and that isn’t without its flaws. Many people working for non-profits are discovering that they never qualified for the program. Luckily, I found a public interest job with the government and will continue to work for the government for at least the next seven years. I’m one of the lucky ones. There is no way I’m getting out of this program. It would be impossible to pay off my loans otherwise. I feel badly for anyone who ended up not qualifying for PSLF as well as for the next generation of students if PSLF is eliminated, which is what Betsy DeVos has proposed to do.
NR
Tom:
The idea that liberal arts programs are responsible for the high cost of college these days is so far from being true that it’s actually comical. Look at the budget for any public university (these budgets are a matter of public record so anyone can see them) and you’ll see that liberal arts programs are the least expensive departments at most universities, often by a large margin.
The main things driving the skyrocketing costs of education is an explosion in administrative costs and rampant physical expansion of campuses. Liberal arts is barely even a blip on the radar.
ponderer
The debt is a real problem, but what keeps it around is the fees. As long as banks / wall street makes money on the trades the system is inflationary, well beyond reality. Adjusting it means cutting off the spick et to the economy so then recession and worse. Its another game of chicken with Wallstreet on one side and the middle class on the other.
Mark Pontin
Of course, it looks like predation. The US a kleptocracy
It’s good to rub folks’ noses in the details of the looting here and there, Ian. But that looting will continue till at least some of the klepts – the sociopath class — are in real fear for their lives. That’s just reality.
T.J.
It seems to me that a good way to solve the problem would be for the government to get out of the student loan business altogether and to forgive all outstanding student loans. If the government believes in a market economy the universities and other educational institutions should have to compete on the value of the education they provide along with being able to provide it for what people can afford. Is it any wonder that tuition prices have risen in tandem with the amounts of loan money available while at the same time schools have cut back on tenure professors, classes, made massive use of adjunct professors, given pay raises to administrators, and put money into all kinds of new construction on their campuses.
Being unburdened from student loan debt would give debtors more money to spend thereby stimulating the economy. People should also vote politicians out of office that do not subscribe to providing free education. Their seems to always be enough to spend trillions on weapons of war yet for the small price of approximately $80 billion a year we could provide all students willing to meet certain conditions, including graduate students, with a free education. The U.S. has rapidly become a failing State more closely resembling the despotic and corrupt State it is.
Joan
When I was in college in the late 2000s, there were a lot of rural working class kids there, on loans, because they didn’t have any other options. Their grandparents had had manufacturing jobs, but now their parents were hanging on to part-time work at the casinos for dear life. These students saw the writing on the wall that they literally had no employment prospects for the future, and so, in that desperate moment, they attempted upward social movement, since there was nowhere else to go.
I often witnessed two worlds colliding. The ivy-educated professors complained of students badgering them for As, but in class when students asked questions, it was always “Tell us exactly what you want, so we can give it to you.” One professor had a paper posted on his door about grade inflation, saying something like “If you do everything in the syllabus, read every assignment, etc., that’s not an A, that’s a pass, a 70.” A student had scribbled over the document: “What do you want, magic?”
Tom
@NR
You miss the point, which is Liberal Arts have no place in College Courses. I don’t need to know the difference between artists or who Columbus is or anything of that nature. What I need to know is the hard sciences relevant to my career field. If I want to know about Columbus, I’ll research him on my own.
Liberal Arts should be a past time pursued in leisure hours, not a course of study for degrees. If I’m a plant manager, do I hire the Liberal Arts degree or the Engineering Degree Student? No brainer, I hire the Engineering Degree and make him/her a foreperson and if I hire the LAD Student at all, it is at the lowest rung and lowest pay as said person lacks the mechanical knowledge to do most jobs in the plant.
Liberal Arts are useless and the people with those degrees got us into the 2008 Financial Crisis.
We need to make education practical and to teach practical applied skills in an apprenticeship program with the Master who have 30 years experience doing the research in new methods having had decades of seeing things work on the street level.
Experience is far more important than raw talent, because with experience comes wisdom, while raw talent breeds arrogance and disregard for others if not tempered by more experienced and wiser mentors reigning in those worse impulses.
Troy
> Tom: Liberal Arts are useless and the people with those degrees got us into the 2008 Financial Crisis.
> NR: The idea that liberal arts programs are responsible for the
2008 Financial Crisis
> NR: is so far from being true that it’s actually comical
There’s not a whole lot of information out there on what executives of the boards of many of these companies had in terms of degrees, but I’d assume it was a majority of MBAs, which aren’t liberal arts.
> Tom: If I want to know about Columbus, I’ll research him on my own.
The study of history in university isn’t actually about studying history from textbooks. Historians tend to have to work out “in the field” actually finding history. It takes a special kind of passion for people to be bothered to do that, and I doubt most people seeking engineering degrees have that sort of patience to ferret out information from documents found in people’s basements and attics, and then spend months if not years building an opinion of “what happened, why it happened, and this is what I think of it” (to paraphrase my history lecturer). If engineering students had the passion to discover and then write about history, then they’d probably be history students.
> Tom: If I’m a plant manager, do I hire the Liberal Arts degree or the Engineering Degree Student? No brainer, I hire the Engineering Degree and make him/her a foreperson and if I hire the LAD Student at all, it is at the lowest rung and lowest pay as said person lacks the mechanical knowledge to do most jobs in the plant.
What kind of fallacy is this? What are you even arguing here? What Liberal Arts students are applying for jobs on factory floors? I’m sure there’s a handful out there, but I’m fairly certain a majority of liberal arts students are seeking jobs in fields they’re comfortable applying for.
Apply some critical thought to the following page: https://students.arts.ubc.ca/specializations/list-of-specializations/
What jobs are those sorts of students going to apply for? I’m guessing in fields with lots of writing. Fields that demand policy. Critical thought. Research skills. Teaching. Presentation skills. Argumentative skills. But you seem confident these students would be applying for factory jobs? Yeah, no.
A liberal arts degree is specialized, but you don’t seem to understand this.
someofparts
Interesting to me that I think our lords and masters care quite a bit about making sure they are well-grounded in the liberal arts.
Hard to run the world’s biggest and most pernicious propaganda system without a solid grasp of psychology.
To know which lies to tell to keep the public passive, they need to understand our real history, so they know which truths they are hiding from us.
Also, want to have a good handle on economics, so they know how to kneecap prosperity with fake economics.
And of course, they value literacy, because they need that to control the public narrative.
Citizens who only know engineering are in training to become pawns of our rulers. And trust me, once they reduce enough people to the status of starving beggars, engineering won’t be the well-paid work it is today. Don’t think they won’t do that just because what engineers do is vitally important. Raising children is just as important, and they have never paid for that.
scruff
Seems to me that the argument that liberal arts are useless is effectively an argument that being able to think clearly and articulate those thoughts is useless. Even in the pure sciences people need to understand the philosophy of science or they become shallow thinkers who are easily led by trends and ideology. The point of putting those “leisure time” activities into a curriculum is to deliberately invest in reflective thought that attempts (at least) to push the boundaries of what is understood in ways that simple computation cannot. To remove this reflection is to doom the population.
Steve Ruis
When I was younger I remember studies showing the amounts of taxes paid by average holders of various education credentials (no high school diploma, high school diploma, BA, MA, etc.) and those statistics showed that the government makes back any support given to those being educated many, many times over.
We decided quite some time ago that governments should provide for the education of the young (K-6 and then K-12). We hashed out why childless people ought to pay (everyone benefits), etc. etc. Those decisions were made when “higher” education was in its infancy and now times have changed. I suggest that students be given an essentially free education at state schools (as I acquired back in the 1960’s) and if they want to go to an elite or private school they pay for that, just as is the case (or was?) with public and private schools now.
nihil obstet
College/university used to have as a primary purpose the training of society’s leaders. This meant meaningful exposure to the history and culture of the society and to the other main disciplines that contributed to the society, math and science and social studies. A student should also develop mental flexibility. When the nation seemed to be suffering as a result of the lack of technical professionals in engineering and agriculture, the land grant colleges were established, but even there it was assumed that graduates would become leaders and would need to have more than narrow technical knowledge.
Neoliberalism was the triumph of the idea that only money matters. So universities were transformed into industrial enterprises. They brand themselves through attracting very highly paid celebrity professors. They shift most of the actual work onto poorly paid adjuncts. They provide cheap control over research for corporations (one of Reagan’s great achievements was to take government-funded research out of the public domain), selling patent rights for a fraction of their cost. They act as gatekeepers for hiring managers. All of this and more is done with the approval of people who think that only money matters, so only direct job training has value. Society needs no leaders with broad vision; “meritocracy” means that the rich rule.
I think that simply making college free is not enough. We need to work out what kind of society we want and then work towards what best encourages the kind of people who will make that society. What should school do? Do we want to keep people in school until they’re in their 20s, and then assume that they’re well enough trained? I think not. I’m all for free college. Giving young people time to think about their lives is a good thing, and some of them do develop the broadness of vision that we need. College isn’t the only place to do that, but it is one. However, believing that if every hardworking, deserving young person goes to college we’ll have a good society is just silly.
Tom
“Sigh”
Liberal Arts (More specifically the trivium) doesn’t teach anything. You either have good ethics or you don’t. You either have an inquisitive mind or you don’t. You don’t need pointless credit hours on Liberal Arts to develop those, you either have them or not.
As for MBAs, its junk science made possible by the trivium of Liberal Arts. All holders of MBAs have good backgrounds in the trivium, didn’t stop them from crashing the economy and getting away with it by having a crony network embedded in the government. So much for the trivium teaching them ethics.
Artes Mechanicae is the basis of a free society, and having a secure trade skill gained without debt is the key to economic freedom without which you don’t have shit really.
NR
Tom:
Yeah, I’m gonna need to see some citations here. You’re making a lot of pretty wild claims, so how about backing them up? Let’s start with your claim that “people with liberal arts degrees were responsible for the 2008 financial crisis.” Where’s your evidence for that?
And while you’re at it, let’s have a citation for your claim that liberal arts programs are full of rich people, because that doesn’t track with the reality of any liberal arts program I’m familiar with.
At least it seems like you’re backing away from your claim that liberal arts programs are the reason the cost of college is high these days. So that’s good, at least.
Willy
When I compare the tuition differences between public 2 and 4 year colleges in my area I find a factor of 4 to 5 times the cost. But does the differing quality and status of the facilities and teachers warrant the far greater costs?
There was once a Kingdome that hosted Seattle’s local pro baseball, football, and soccer teams. It was a bit ugly but worked well enough. After a brief life it was replaced by separate baseball and football-soccer stadiums at a cost of between 4 to 5 times that of the dome, adjusted for inflation. Practicality was replaced by glamour. The same has happened to local higher education.
Maybe those changes reflected Seattle’s transition from practical working class town to glamorous tech hub, where there have been no practical educational solutions to fill voids as state universities moved towards upscale glamour. But this trend appears to be happening nationwide, whether it’s a tech hub or not.
Seems yet another unintended consequence of our disastrous neoliberalism culture. If you can’t afford a place anymore then move your ass to some place you can afford. If you can’t get afford an education anymore then get your ass educated at a place you can afford. And free market capitalism will provide practical solutions to this! But where are these places? …in line with tuition costs the boomers enjoyed back in the 70s and 80s?
I tell every young person that if our neoliberalism culture continues they’ll be seeing Safeco Field used for cockfights the way the once glamorous Coliseum was after the empire fell.
Hugh
Universities are not glorified trade schools. The primary mission of all large state universities in the US is research. Education is secondary. I would like to think education in general is both about enriching the quality of one’s life and creating an informed citizenry. A liberal arts education is there to expand your horizons, give you a better idea of the world you live in and came from. It does not guarantee but increases the odds that you actually may learn to think.
I wish Tom well but think he may be in for a rude awakening. EMTing, nursing, and doctoring are in a lot of ways trades. EMTing and nursing are closer together because both are about doing things. Understanding disease process is not a big focus. In doctoring, it is. Physicians are the ones who need to work out what is going on and what to do about it. Of the doctors I have known I would say most are of moderate intelligence, driven and not in a god way, and awkward emotionally in communicating with patients and family in critical situations. They never can have too much control or too little responsibility. They are haunted by medicolegal issues which often impairs their care. And most would do something else in a second if they found a job that paid as much.
Gaianne
Ian–
This, and “The US–a Failing State” go right to the point.
–Gaianne
StewartM
Have to disagree, Ian. Investor control of the economy, and minimizing their risk, IS the very heart of capitalism. Not just now, recently, but even under the previous more-constrained versions of capitalism. As for influence on government, it’s just the “rational” response (lobbying the government for favorable policies has a greater return-on-investment than just about any other thing a firm can do).
Labor risks more than capital. I’ll try to dig up a link, but I recall that in every downturn, despite the rich doubtlessly losing money in absolute terms, the relative wealth of the rich *increases*. That’s because companies (because they are controlled by investors) always react to downturns by sticking it to the working class to minimize the pain on investors. Despite all the bruhaha about investors deserving all that moola because of ‘risk’, the fact is that many if not most workers risk far more of their total wealth than investors, especially those who picked up, and moved to a new locale to find work.
If you truly want an economy that where investors really risk money, you’d have to move to a kind of ‘socialism’ where the leadership of firms is accountable to the workers, and not to investors. That way, as long as the company is breaking even or better, workers wouldn’t be likely to see pay/benefit cuts and it would be the investors that take the hit (which they should). Now even if a firm becomes oh-so-less profitable, it now responds by cost cutting to make sure the investors don’t lose.
StewartM
Ian, just letting you I found an article on income inequality (though not wealth) during the Great Depression. Income inequality increased with the depression, as indicated by what few statistics that have been generated (many of our Great Depression stats were estimations generated by Stanley Lebergott, post-WWII, as you probably know):
https://www.nber.org/chapters/c5308.pdf
You can see the increase in inequality in the Lorentz curves that are shown. As I said, in the economic articles I read about the Great Recession, it was noted that income/wealth inequality increases with downturns, though probably not to the same degree. I think my mechanism I propose–that the leadership of firms are investors themselves, as well as being elected by the stockholders in corporate America, and they will sacrifice the interests of their workers in order to preserve their wealth and income, so in downturns after non-labor costs are cut, then labor is next and the workers get hit–is reasonable.
If, by contrast, we moved to an economy where instead of corporations, we had cooperatives, where the leadership is elected by and can be fired by the firm’s workers, I believe this dynamic would likely reverse. Let’s take the case of my own company; this year, we’re still making money, but our profits went down 25 %. Now we’re engaged in a host of cuts and freezes on buying capital, including some voluntary labor separation incentives (which often loses the most experienced and knowledgeable workers).
But what if the workers controlled things? I’d say, is that our attitude would be “we’re still making gobs of money”, we easily can fund everything, and it would be “stay the course” and we’d continue to fund everything as-planned. The investors would simply get less, as part of the risk they make when they invested. If our tax structure was set up to punish large corporations by not only raising the individual tax rates to something like 90-95 %, but also making these rates applicable to corporate “people” too, then it would be in the interests of investors to transform corporations to cooperatives if the latter had an advantageous tax rate (which I would propose). They’d get a lower tax rate by doing so (and I’d be OK with this), but then they would cede their direct control over firms to the workers, who are the people who have the greatest long-term interest in the firm’s success. As Micheal Moore says, any auto factory worker could have told you in the 70s and 80s how stupid the investor-driven strategy of US auto firms were at the time, and I have little doubt that if the workers had been in-charge, the industry would be in better shape today.
There would still be a role for corporations in such an economy, but only for small firms, for limiting legal liability. Once they got large, the tax structure would force a change to a cooperative (or force the corporation to voluntarily spend almost all its earnings and hardly give anything to investors, which would also be a positive result). The dual combination of more risk to investors and less reliable income would drive down the numbers of people living on investment income alone, and these people would have to find work instead of sitting on their butt all day trading stocks imaging themselves as the ‘creators’. As I agree with Lincoln that it’s work, not capital, that is the primary driver of wealth creation, this too is a positive contribution and more people doing economically useful work is actually anti-inflationary, and we could actually go back to considering 3 % unemployment or less ‘full employment’ again with little inflation risk.
In short, I’d like to drown the large investor class (as well as the surveillance state, the prison-industrial complex, the medical-industrial complex, plus more economically useless things) in Grover Norquist’s bathtub.