Dear Class of ’13: You’ve been scammed - Brett Arends's ROI - MarketWatch:
Dear Class of ’13: You’ve been scammed
Commentary: How the College-Industrial Complex drove tuition so high
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By Brett Arends
Class of 2013,
No one else is going to tell you this, so I might as well.
You sit here today, $30,000 or $40,000 in debt, as the latest victims of what may well be the biggest conspiracy in U.S. history. It is a conspiracy so big and powerful that Dan Brown won’t even touch it. It’s a conspiracy so insidious that you will rarely hear its name.
MBAs still eschewing finance
The dean of the Tuck School of Business at Dartmouth College says his MBA graduates still aren’t heading into finance jobs in the numbers they did before the financial crisis.
Move over, Illuminati. Stand down, Wall Street. Area 51? Pah. It’s nothing.
The biggest conspiracy of all? The College-Industrial Complex.
Consider this: You have just paid about three times as much for your degree as did someone graduating 30 years ago. That’s in constant dollars — in other words, after accounting for inflation. There is no evidence that you have received a degree three times as good. Some would wonder if you have received a degree even one times as good.
According to the College Board, in 1983 a typical private American university managed to provide a bachelor’s-degree-level education to young people just like you for $11,000 a year in tuition and fees. That’s in 2012 dollars.
Instead, those of you at private colleges paid this year an average of $29,000.
And back then a public college charged in-state students just $2,200 a year in tuition and fees — in today’s dollars. You could get a full four-year degree for $8,800. Today that will get you one year’s tuition, or $8,700.
Notice, please, we are not even counting the cost of all the “extras,” like room and board. This is just the cost of the teaching.
It is, as a result, no surprise that total student loans are now approaching $1 trillion. They have easily overtaken credit-card debts and car loans. According to the Federal Reserve Bank of New York, total student loans have basically tripled since 2004. Fed researcher Lee Donghoon says that in the last eight years the number of borrowers has gone up by about 70%, and the average amount owed has also gone up about 70%.
Reuters
Donghoon calculates that about 17% of those with student loans are more than 90 days’ delinquent on their interest payments. Yet he also calculates that 44% haven’t even entered the repayment period at all.
If you turn to the pages of any newspaper, you will read a lot of hand-wringing about this. You will hear attacks on “predatory” student-loan companies and “predatory ... for-profit colleges.” You will hear about cutbacks in Pell Grants and federal aid and proposals to lower the interest rate on subsidized federal loans. But all of these comments ignore one basic problem.
It’s the cost, stupid.
U.S. colleges are a rip-off. Two decades ago I spent six years at Cambridge and Oxford universities, and it didn’t cost me a nickel. Admittedly, one reason was social policy: The taxpayers paid the bill (and a very good return they earned too, given the British taxes I paid once I graduated and started work). But the second reason was that these universities did not charge an arm, leg and other appendage for the act of teaching.
My undergraduate course at Cambridge largely consisted of one hour a week with a tutor, a weekly essay question and research list, and a library card. This teaching model hadn’t changed much, really, since the days of Aristotle. Student, teacher, discussion. See you same time next week.
How on earth do colleges today ramp up costs to $40,000 a year?
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