Someone needs to pay a steep price for ruining public education in this country.

Karl Denninger has a post up about the scam that is the current educational system in our country.  As a parent of three kids either in college, or about to go, I can tell you that I have seen several of these games up close and personal.

Back when I got my education, I could and did pay for most of it by working like a dog during the school year and over the summer, but those days are long gone.

Who ever it was that changed policy to cause this situation should have their citizenship revoked, their assets confiscated, and be expelled from the country and denied the right ever to return, extended three generations at least.

Some trenchant points:


   "In the 1970s and early 80s you could spin pizzas or wash cars and put yourself through school, and many people did.  Today that is nearly impossible, and a big part of the reason is that schools have gotten predatory and treat young adults not as a mission but as a revenue source to be extracted from to the maximum possible extent.

I look at balance sheets literally all day long.  Guess what: So do colleges, and the balance sheets they're looking at are yours, having essentiallyforced your disclosure through the FAFSA.
Simply put colleges know on-aggregate what their degree is "worth" in discounted cash flow over a period of time, say, 10 years (the typical student loan repayment period.)  Over the last two decades they have increasingly ratcheted up their price to approach as nearly as possible that delta in value and in many cases exceed it, with full knowledge that they're doing so.

What this means to you is that the marginal value of such an education, that is the delta in earnings power less the price of obtaining it, has trended toward zeroand for many fields is deeply negative."

This is a predatory approach to their business of education, and you and your kid are the prey.

   "Colleges are notorious for setting scheduling up such that it's nearly impossible to get a gatekeeping class (one that's required to progress in your major) at the point in time where it would usually fall.  This forces the student to take an extra semester worth of work (at an additional cost of another semester's tuition, room and board!) and the problem only becomes more-acute if there is any interruption in progress (such as a class you fail or have to withdraw from for any reason.)

By the way, if you think the tony private and very exclusive institutions are particularly better in this regard you're wrong.  Private, non-profit colleges (those nice expensive highly-credentialed ones) still have a one third failure rate after six years, or just marginally better than the 59% completion rate overall.

Guess what the numbers are for 4-year completion?  Less than four in ten.

At a four-year public institution?  32% or about one third.  Non-profit?  52%, better, but still nearly half do not finish "on-plan" and therefore on cost.  For-profit?  36%, or about one third.

This, folks, is very, very important because all of your pricing data is predicated on you finishing within four years.  You're off by half if it takes you six and if you don't complete at all it's a sunk cost!"

The local state college near where I live is notorious among parents for playing this scheduling trick, which requires at least one additional semester, with all it's costs, and all it's delay in getting out and actually working in your profession. 

And the financial exposure?  Severe:

  "Remember that there is no discharge in bankruptcy for student loan debt.  Period.

The damage is not just to the kids either; schools press hard to get parents to blow all their money as well, including reaching into intended retirement funds.  That's an outrage, especially when the odds are taken into account of not finishing at all, but it happens every single day.

Further, as a parent if you co-sign they will come after you and sue you to beyond the orbit of Mars to force payment, even if it means losing your house -- and everything else you own. To emphasize the point: Student loan debt is not dischargable in bankruptcy -- period.

Now let me add one final piece of frosting on the cake for you, which is also not clearly disclosed up front.  If you default on a student loan there arestatutory penalties, retroactive interest and fees that get added to the balance since these are all federally-guaranteed, and those penalties and fees frequently run to 50% of the balance.  That's right; if you default on $50,000 of student loan debt you now instantly and irrevocably owe $75,000 instead of $50,000, and you can't discharge any of it in bankruptcy."

To my way of thinking, this borders on the criminal.  Who would pervert a system set up to educate future citizens at an affordable cost into one which exists purely to lavishly fund the educational system itself but at the cost of decades of financial misery, both for the next generation as well as the last? This ends up crippling the national economy and severely impeding society's goal of developing a thriving middle class, and for what end? How many otherwise deserving young people must strive not to build a family, buy homes, etc, but rather to escape the smothering debt incurred to earn a meaningless degree? 

I cannot but think and hope that there will be a rising political call to bring these locusts to the justice that they deserve.  I'll be the first one there with a sturdy rope when that day comes.