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HIGHER EDUCATION BUBBLE UPDATE: NY Times: Student Loan Forgiveness Program Approval Letters May Be Invalid. “The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said. The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts. …”

It’s as if you can’t trust the government.

HIGHER EDUCATION BUBBLE UPDATE: WSJ: 100 Colleges Offer Loan Repayment Assistance To Graduates, As Do 100 Law Schools. But it’s the graphic of total student loan debt that’s scary. If only there had been some sort of warning.

HIGHER EDUCATION BUBBLE UPDATE: The Federal Government’s Student-Loan Fraud. “President Obama had a great idea back in 2010: nationalize the student loan program, and its problems would soon go away. It didn’t happen. Instead, more people are refusing to pay their student loans than ever before. . . . By taking over the student loan program, Obama in essence politicized it. Last year on the campaign hustings, both Hillary Clinton and Bernie Sanders repeatedly talked about making college ‘free.’ That is, they want to socialize the costs, but privatize the benefits, of a college education. Still surprised people aren’t paying their loans?”

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Defaults Skyrocket.

HIGHER EDUCATION BUBBLE UPDATE: Pew: How Governments Support Higher Education Through The Tax Code. “The federal government and the states each invested more than $70 billion in higher education-related spending programs, excluding loans, in academic year 2014, the latest year for which data are available. But that figure, as substantial as it is, does not paint a full picture of federal and state investments in higher education. It excludes the billions of dollars that the federal government and the 41 states plus the District of Columbia that levy personal income taxes provide to students and their families through tax expenditures—such as credits for tuition and college savings incentives—to help offset postsecondary costs.”

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: The Crisis At Charlotte Law School. Takeaway quote: “It would require an income of over $122,000 to be able to afford just the interest on a student loan of that size. Most North Carolina lawyers don’t earn that much.”

Plus: “A recent review of the 205 accredited law schools, by the nonprofit Law School Transparency, found that 51, including Charlotte Law, were in the ‘extreme risk’ or ‘very high risk’ category for graduate success. Still, the A.B.A. has been reluctant to clamp down on schools. On Monday, its delegates defeated a measure that would have required law schools to shorten the period that graduates have to pass the bar.”

If only someone had issued a warning, years ago.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: Charlotte Law School Launches Food Drive For Students. “Cut off from millions of dollars in federal loans because of their school’s chronic failings, students at Charlotte School of Law still don’t know how they’ll pay tuition, rent and utilities. Now they are apparently running out of food. In response, one of their professors announced Friday that some faculty and other law school employees have started a food drive to make sure students of the reeling school have enough to eat.”

The education apocalypse has struck, and struck hard. If only someone had offered a warning.

HIGHER EDUCATION BUBBLE UPDATE: Obama’s Student-Loan Fiasco: A ‘coding error’ helped justify a punitive new education regulation.

President Trump has promised to restore trust and accountability in government. How about auditing the Education Department? During its final days the Obama Administration slipped the news that its College Scorecard repayment rates were inflated, and on closer inspection the mistake doesn’t look innocent or innocuous.

In early January the department disclosed that it had discovered a “coding error” that incorrectly computed College Scorecard repayment rates—that is, the percentage of borrowers who haven’t defaulted and have repaid at least one dollar of their loan principal. The department says the error “led to the undercounting of some borrowers who had not reduced their loan balances by at least one dollar.”

The department played down the mistake, but the new average three-year repayment rate has declined by 20 percentage points to 46%. This is huge. It means that fewer than half of undergraduate borrowers at the average college are paying down their debt.

The rest have either defaulted, sought forbearance or enrolled in income-based repayment plans, which are causing many borrowers who are only making minimum payments to owe more debt due to accrued interest. These income-based repayment plans allow borrowers to reduce their loan payments to 10% of their discretionary income and discharge their remaining debt after 20 years (10 if they work for government or a nonprofit). . . .

The other scandal is that the Obama Administration used the inflated Scorecard repayment data as a pretext to single out for-profit colleges for punitive regulation. The punishment was tucked into a rule finalized in October allowing borrowers who claim their college defrauded them to discharge their debt. It requires for-profits in which 50% or fewer borrowers are paying down their principal to post the equivalent of a surgeon general’s warning in all promotional materials.

When proposing the regulation, the department claimed that its analysis of Scorecard data showed that a large number of for-profits have repayment rates below 50% while very few public or nonprofit schools do. The department said it would not be fair to “burden” public and nonprofit colleges with a regulation that would apply to so few. Yet based on the updated data, 60% of two-year public colleges and nearly all historically black institutions have repayment rates below 50%.

Traditional higher-ed is a major source — perhaps the single biggest source — of donations and footsoldiers for the Democrats. Hence, special treatment.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: Charleston, Florida Coastal Law Schools Fail ‘Gainful Employment’ Test, Will Lose Federal Student Loans If They Fail Again Next Year; Three Other Law Schools In Danger Zone.

All is proceeding as I have foreseen.

HIGHER EDUCATION BUBBLE UPDATE, COST-HIDING EDITION: How University Costs Keep Rising Despite Tuition Freezes: Ballooning fees are leaving some students feeling nickel-and-dimed.

At a time when public anger is laser-focused on tuition charges that are rising three times faster than inflation, something less well understood has actually been largely responsible for pushing up the cost of college: fees.

Think tuition is high? Now add fees for student activities, fees for athletics, fees for building maintenance, fees for libraries—even fees for graduation, the bills for which often arrive just as students and their families thought they were finally done paying for their higher education.

All are frustratingly piled on top of a long list of expenses beyond tuition that many people never plan for or expect, or that can’t be covered by financial aid—sometimes forcing them to take out more and more loans, or quit college altogether.

“It was, like, what is this?” Ann Roach remembered thinking as she kept getting billed for fees when her oldest son went to the University of Dayton. “It’s like buying a car. You think you have a price, and then they tell you, ‘Here’s a conveyance fee, or here’s a fee for $200 to put the license plates on.’ Nobody told us about these.”

Fees nationwide continue to increase even faster than tuition—often covering the same things but letting institutions claim tuition hikes are slowing. Now, however, in response to anger from parents and students, and pressure from legislatures, or for marketing reasons in a time when they’re struggling to attract applicants, a few universities and colleges are pledging to make them more predictable or even drop them altogether. And the resulting decline in borrowing and dropout rates on those campuses suggest the significant toll that fees were taking on their students.

They are a lot like car salesmen, when you get right down to it. Well, except that cars have gotten steadily better over the past several decades, whereas the quality of higher education has actually declined.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: Charlotte Law School Cancels Classes And Works On Transfer Plan With Florida Coastal As Rumors And Lawsuits Swirl After Feds Cut Off Student Loans.

HIGHER EDUCATION BUBBLE UPDATE: A Plan To Make Students Great Again: Replace Loans With Income Shares, Force Colleges To Spend 5% Of Their Endowments Each Year.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: More On The Department Of Education’s Decision To Cut Off Federal Student Loans For Charlotte Law School.

HIGHER EDUCATION BUBBLE UPDATE, $39 EDUCATION EDITION: A Complete Computer Science Education—Minus the Student Loans. All in a $39 course. “This eight-course training touches upon all the fundamentals you need for a coding career. It isn’t haphazardly assembled by amateurs. Rather, it’s led by a team of former Google developers drawing upon their tech expertise to break down technical subjects into easy-to-digest terms.”

HIGHER EDUCATION BUBBLE UPDATE: Student loan defaults are down. Here’s why that’s a bad thing. I’m not sure I agree that students who quit without graduating shouldn’t be counted in the default rate.

HIGHER EDUCATION BUBBLE UPDATE: Amazon Prime’s latest perk is discounted student loans.

HIGHER EDUCATION BUBBLE UPDATE: “I feel I kind of ruined my life by going to college.”

HIGHER EDUCATION BUBBLE UPDATE: Mom Still Paying Off Murdered Son’s Student Loans.

HIGHER EDUCATION BUBBLE UPDATE: 2 extra years in college could cost you almost $300,000.

Taking an extra year or two to complete a bachelor’s degree is common these days, but that additional time could cost a student nearly $300,000, according to a new study by NerdWallet.

NerdWallet examined how much one or two “victory laps,” as extra years are sometimes jokingly called, would cost students by factoring in:

Real costs: Out-of-pocket tuition plus interest paid on student loans over a 10-year standard repayment period.

Opportunity costs: Lost entry-level income and forgone retirement savings.

Just more evidence of how higher education, often sold as promoting economic mobility and equality, can do just the opposite.

HIGHER EDUCATION BUBBLE UPDATE: Colleges Need Skin In The Game.

Republicans and Democrats have offered two distinct approaches to the student loan crisis. GOP lawmakers have proposed introducing more competition in the higher education sector by breaking the federal monopoly on college accreditation, with the idea that this could shake up the market and lower costs. Democrats have focused on expanding federal subsidies, either by forgiving and refinancing loans, or, in the case of Bernie Sanders, by eliminating tuition altogether.

We generally think the GOP approach is closer to the mark. Colleges really are saddled with regulatory costs, and the cartel-like accreditation process blocks innovative new higher education models from emerging. Meanwhile, further greasing the student loan spigot is likely to drive up tuition even further, and give more relief to upper-middle class students than to poor ones.

But Democrats and Republicans alike ought to be able to agree on a third approach to reducing student loan default rates: Forcing colleges to take on some of the risk associated with their students’ borrowing. . . .

To be sure, a number of specifics need to be hammered out—most importantly, the share of student loan debt colleges would be accountable for. But it’s easy to see how a version of this proposal could win backers on both sides of the aisle. For Democrats, the policy gives debt relief to students in default. For Republicans, it would help slow the growth of tuition without draining federal coffers. . . .

Thanks to misguided federal loan and accreditation policies, low-quality colleges have increasingly been able to get fat at the federal government’s expense without giving students the skills they need to make their education worth it. Time to force colleges to put some of their own money down on this risky operation.

Couldn’t have said it better myself.

HIGHER EDUCATION BUBBLE UPDATE: Student Loans Increasingly Backfire, Leaving Borrowers Worse Off For Going To School.

If only there had been some sort of warning.

HIGHER EDUCATION BUBBLE UPDATE: College Loan Glut Worries Policymakers. “The government financed a large share of these educations through grants, low-interest loans and loan guarantees. Total outstanding student debt—almost all guaranteed or made directly by the federal government—has quadrupled since 2000 to $1.2 trillion today. The government also spent tens of billions of dollars in grants and tax credits for students. New research shows a significant chunk of that investment backfired, with millions of students worse off for having gone to school. Many never learned new skills because they dropped out—and now carry debt they are unwilling or unable to repay.”

If only someone had foreseen or foretold this, and could have warned them.

HIGHER EDUCATION BUBBLE UPDATE: NYU’s New President Plans to Major in Cost Control. I don’t think student loans whose repayment is contingent on student income are a good idea; they’re basically a subsidy for uneconomic courses of study.

HIGHER EDUCATION BUBBLE UPDATE: College Isn’t Always Worth It:

Across the Anglosphere, the elite conventional wisdom holds that a college degree is the only ticket to a middle-class career. But a new study suggests that for some students, at least in the UK, the the much-hyped ‘higher-education premium’ may be inflated or nonexistent. The Sunday Times reports . . . .

There are of course differences between the UK and U.S. higher education systems, and (to our knowledge) no identical study has been conducted here. But the economist Allison Schrager has crunched comparable numbers on American students and found that, “for every degree short of a graduate degree, there’s a decent chance that a good high school graduate will out-earn you.” In other words, it’s not unlikely that marginal students in marginal programs—in the U.S. as well as the UK—would do better to avoid student loans, avoid the opportunity cost, and seek technical or vocational training. The idea that everybody needs four or even two years of academic instruction after high school is madness. When so many students leave high school with something much less than an adequate proficiency in key subjects, it makes much more sense to fix the fundamentals of the system than to tack on more and more years at the end.

Academics and professionals who loved school and did well in it have a hard time understanding that not everybody wants, needs or enjoys drawn-out academic instruction—and that these people can and do make worthwhile contributions to the common good. An education system that made more room for vocational programs in areas like carpentry, plumbing, med tech, and practical nursing would waste less time trying to pound round pegs into square holes.

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: More Than 40% of Student Borrowers Aren’t Making Payments.

More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on more than $200 billion owed, raising worries that millions of them may never repay.

The new figures represent the fallout of a decadelong borrowing boom as record numbers of students enrolled in trade schools, universities and graduate schools.

While most have since left school and entered the labor force, 43% of the roughly 22 million Americans with federal student loans weren’t making payments as of Jan. 1, according to a quarterly snapshot of the Education Department’s $1.2 trillion student-loan portfolio.

About 1 in 6 borrowers, or 3.6 million, were in default on $56 billion in student debt, meaning they had gone at least a year without making a payment. Three million more owing roughly $66 billion were at least a month behind.

All is proceeding as I foretold.

IT’S PROBABLY NOTHING:

Shot: Why The Auto Loan Bubble Is As Important As The Student Loan Bubble.

Chaser: Obama administration pushes banks to make home loans to people with weaker credit.

Hangover: It’s not here yet, but it will likely be a doozy.

 

HIGHER EDUCATION BUBBLE UPDATE: $176M In Wages Garnished For Unpaid Federal Student Loans In Just Three Months.

HIGHER EDUCATION BUBBLE UPDATE: 31% of U.S. Govt Assets Are Student Loans.

HIGHER EDUCATION BUBBLE UPDATE: Academia Is Losing Its Mind.

It’s not just right-wing populists who are worried that some academic humanities and social science fields are veering into irrelevance. The latest issue of the left-of-center magazine American Prospect has a depressing report by the leftist Occidental professor Peter Dreier on his experience submitting a bogus paper to a humanities conference and getting it accepted. . . .

Here’s one representative sentence: “Self-delusion and self-discipline inhibits the reflective self, the postmodern membrane, the ecclesiastical impulse forbidden by truth-seeking and sun worship, problematizing the inchoate structures of both reason and darkness, allowing knowledge, half-knowledge, and knowledgelessness to undermine and yet simultaneously overcome the self-loathing that overwhelms the Gnostic challenge facing Biblical scribes, folksingers, and hip-hop rappers alike.” He also includes examples of the type of real humanities work that led him to undertake this experiment (he saw sentences elsewhere like: “Given the attitudes generated by our sense of a place, critical perspectives that only target overt structures within city systems are incomplete” and “Theoretical, conceptual and methodological choices must be framed in relation to concrete explanatory and interpretive dilemmas, not ontological foundations.”)

To make matters worse, most of this “postmodern” analysis is taking place within the context of a hermetically sealed political bubble. As our friends at Heterodox Academy have pointed out, just four percent of American academics in the humanities identify as conservative. This total homogeneity may be one reason that so much work in the humanities has become utterly disconnected from what the general public might consider to be valuable scholarly exploration.

There is a good amount of anti-intellectualism and old-fashioned score-settling involved in attacks on the academy by right-wing pundits and populist politicians. But that reaction didn’t come out of nowhere. At a time when tuition and student debt are reaching crisis levels, the public is right to demand that the work it is funding (both directly, at public universities, and indirectly, at private universities, by subsidizing student loans) has some bearing on reality and some benefit to the rest of society.

Indeed.

HIGHER EDUCATION BUBBLE UPDATE: Blue Model Blues: Adjuncts Rising, Rising, Rising.

Preston Cooper of Economics 21 points us to a new NBER paper that confirms and quantifies in detail what higher education watchers have been saying for some time: Colleges can’t afford to hire enough full-time faculty to educate their growing student populations, and are increasingly turning to low paid, disposable adjuncts to make up for it. . . .

Cooper suggests one reason for the adjunct explosion is the free-flowing federal student loan spigot, which is pushing more students into the university system and therefore incentivizing schools to increase their teaching capacity at the lowest possible cost. We would also add that the tenure-for-life model demanded by the professors’ guild probably limits the ability of universities to move resources around and slows down turnover among the professoriate. The federal monopoly on college accreditation props up this system by stifling competition, even as the proliferation of obscure fields of study (especially in the social sciences) creates a constant supply of newly minted PhD’s desperate for academic jobs.

The ultimate result of all of this is inequality and exploitation: Administrator salaries go up, adjuncts face increasingly alarming economic insecurity, and the quality of education at lower-tier schools continues to be undermined even as the top colleges have access to almost unlimited resources. In other words, even the most leftwing institutions in the country can’t afford to put egalitarian, blue-model ideals into practice. Like all decaying blue institutions, the university still serves insiders (college presidents, professors with tenure, students at Yale) quite well, even as outsiders (adjunct faculty, students who took out loans to go to lower-tiered schools) struggle.

What’s causing this higher education crisis is not evil conservatives. It’s the fact that the blue model of higher education, complete with regulation, subsidies, and professional guilds, is simply no longer workable or affordable.

But don’t expect the insiders to change until they’re forced.

HIGHER EDUCATION BUBBLE UPDATE, COVERUP EDITION: “In August and October, the department denied Freedom of Information Act requests by Bloomberg News seeking parent default and deferment numbers by college, saying it ‘has yet to complete its analysis’ by institution. The agency provides default data annually, broken out by school, for most student borrowers. Those rates help determine which schools can continue to access the loan program.”

HIGHER EDUCATION BUBBLE UPDATE: Lessons In College Costs For Clinton & Sanders.

But even if we assume that higher education really is too expensive, we face a second conceptual difficulty: Subsidies may not make college significantly cheaper. Although the relationship between the level of aid available to students and the level of tuition has been controversial, this study released in July by economists at the New York Fed is persuasive. The authors found fairly robust effects, with an increase of 60 to 70 cents in tuition for each dollar increase of subsidized student loans. The effect was stronger at private colleges than at public schools, and, among private colleges, was least pronounced at those accepting the smallest proportion of applicants. As these tend to be the schools with the largest endowments, the effect is not entirely surprising.

The Clinton and Sanders plans are aimed principally at public colleges, where out-of-state tuition already rises with the size of Pell grants. One reason in-state tuition doesn’t capture the subsidies is political pressure from residents. So maybe the flood of new federal money would have no effect. On the other hand, given the growing need to compete with the wealthier schools in the educational “arms race of spending” — for example, to hire or retain top faculty — there’s a fair chance that we’d see some significant increases.

Of course it’s possible (some would say likely) that the web of regulations accompanying the grants under both programs would include implicit price controls. I’m no fan of this idea, but lots of smart people think I should be.

Finally there’s the Scottish experience. In 2001, Scotland began the process of abolishing tuition, a goal essentially accomplished in 2008. In a recent Vox article, Libby Nelson pointed to research showing, among other things, that although the change led to an increase in applications, the children of the poor still attend college at relatively low rates. In other words, what has been holding them back might not be the cost.

Read the whole thing.

HIGHER EDUCATION BUBBLE UPDATE: The High Cost Of Room And Board.

If I recommended that people take out loans to pay for several years of food and rent expenses that they otherwise couldn’t afford, you’d probably think I was being foolish.

And yet that is exactly what students — and their parents — are encouraged to do when they borrow for room and board in order to have the “full college experience.” Many colleges and universities require freshmen to live on campus, knowing that many will have to borrow to do so.

It’s like they aren’t concerned about students’ future financial wellbeing.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: American Lawyer: Congressional Showdown Over Law Student Loans Is Inevitable, With Law Schools The Likely Losers. “The Post’s editorial cites with approval a law reintroduced by Senator Lamar Alexander (R-Tenn.), dubbed the Financial Aid Simplification and Transparency (FAST) Act, which would drastically rein in federal lending to college and graduate students. The law would fix annual lending to undergraduates to $8,000 per year with a $37,500 aggregate limit, but graduate and professional students would only receive $30,000 per year in total, with a lifetime cap of $150,000. As of now, graduate students can borrow as much as their schools charge them, on top of $20,500 per year in unsubsidized Stafford loans.”

This will be a big blow to legal education, though it will probably be unevenly felt. The University of Tennessee College of Law, for example, is one of the ten schools where students graduate with the least debt already, so I imagine borrowing limits, etc., would hurt us less than schools at the other end of the list. They might even help.

HIGHER EDUCATION BUBBLE UPDATE: The Regulatory Goose Chase Degrading America.

American colleges are diverting more and more money away from serving students and instead using their funds to develop a massive D.C. lobbying force. . . .

Federal mandates impose huge costs on colleges, just as they do on other industries, and federal subsidies (student loan programs as well as direct funding for colleges) are a crucial source of colleges’ incomes. It’s small wonder then that as the federal government becomes increasingly vital to their financial health, colleges devote an growing portion of their resources toward influencing federal officials. The result, of course, is the kind of regulatory capture we see in so many federal programs, where industries organize to ensure that the regulators serve their interests rather than the needs of the public.
And, of course, regulatory capture exists side-by-side with expensive regulatory compliance, which colleges can’t avoid. Despite the lobbying by higher ed institutions, there are many ways that federal involvement in higher education forces colleges to divert attention from what ought to be their core mission and apply it instead to regulatory compliance. According to one study, colleges spend $27 billion dollars annually complying with a whole range of regulations, including those issued by thought-policing Title IX bureaucracies and all the other well-paid bureaucrats (whose numbers continue to grow).

And all of that in turn makes the colleges even more dependent on federal subsidies than ever, so they hire more lobbyists to get more power over legislation and implementation. In industry after industry, this kind of wild goose chase consumes more and more of America’s energy, attention, and money every year—leeching the vitality out of our system, degrading the performance of key institutions, and making government less effective even as it keeps getting bigger.

How long it will continue and how much more damage it will do is anybody’s guess. But ultimately U.S. policy is going to have to undertake a serious change of direction, or the country will slowly strangle itself.

The higher ed sector is hugely dysfunctional, and heading for a reset. Be warned.

MY SECRET PLAN TO END THE HIGHER EDUCATION BUBBLE BY USING INSIDERS TO MAKE HIGHER EDUCATION LOOK RIDICULOUS CONTINUES TO ADVANCE: Tim Wolfe Resigns as Missouri President Amid Protests, Boycott by Football Team.

UPDATE: University of Missouri President Just Resigned: What It Means for the Campus Speech Wars; No competent educator can give students the false sense of security they desire.

What were these racist incidents? Someone shouted a slur at the campus’s black student government president. Someone smeared feces in the shape of a swastika on the wall of a residence hall. (In a letter announcing his hunger strike, student Jonathan Butler also cited “graduate students being robbed of their health insurance, and Planned Parenthood services being stripped from campus” among the reasons for Wolfe to resign, although these concerns don’t really strike me as being tied to race.)

I can understand why students were upset about these things. And if they want to call on Wolfe to do more, they are well within their rights. Maybe Wolfe was doing a bad job, although it’s difficult to say what he should have done differently; is there any policy a university could adopt that would prevent idiots from occasionally yelling immature, insulting things at people on the street?

This controversy, as with the current upheaval at Yale, suggests aggrieved students most desperately want administrators to acknowledge their pain and tell them they have a right to live free of emotional turmoil. But no competent administrator can provide them with this false sense of security, since the proper role of a university education is to help students overcome (rather than sidestep) challenges.

In any case, Wolfe’s resignation also means that hyper-offended students are not as powerless as skeptics of the campus speech wars claim they are. I’m often told by these skeptics that the actions of outraged students are harmless because they never amount to anything, but this development at Missori is a significant contrary example.

I would be disheartened, but not at all surprised, to see more professors and administrators driven from campus for the crime of failing to erect suitable safe spaces.

Just making it easier for President Cruz to abolish student loans. And if you don’t think that this will hurt Mizzou at budget time with the legislature, well . . .

Plus, online education seems like a big winner out of this. “In the fall of 2012, the most recent semester with complete data in the U.S., four million undergraduates took at least one course online, out of sixteen million total, with growth up since then. Those numbers mean that more students now take a class online than attend a college with varsity football. More than twice as many now take a class online as live on campus.”

Given that many college students seem to belong at home with Mommy, this trend is likely to accelerate.

HIGHER EDUCATION BUBBLE UPDATE: What We’re Buying With $1 Trillion+ in Student Loans:

You know what they say about doing the same thing over and over again and expecting a different result. This is certifiable. College is too expensive, so have the government make it easier to finance — then keep shifting more and more of the cost burden to the government, without doing anything about the underlying cost inflation that is making it necessary for government to get into the finance business.

Obviously, this can’t go on indefinitely. The income-based-repayment programs are relatively new, so the government hasn’t yet been handed the bill for the loan forgiveness that will be necessary as we give people payment rates that are often less than the interest on the loan. But when the government gets that bill, people are going to notice that this is a costly business.

Over decades, the government has restructured the educational system to make it look more like the health-care system, with the costs paid by third parties while the service is consumed by individuals who have no incentive to think about price. The effects are predictable for both. . . .

Does college actually make people much more economically productive? Yes, yes, I know: People who go to college earn substantially more than people who don’t, and that earnings premium has been increasing in recent decades. But what, exactly, do they learn in college that makes them so much more productive? In certain technical professions, the answer is obvious; engineers and nurses do need to master the rudiments of their trade before they are unleashed on an unsuspecting public.

But that doesn’t describe the whole higher educational system. It doesn’t even seem to describe the majority of college degrees. Administrators defending the value of degrees in “business” or liberal arts rely on nebulous claims that they are teaching students “how to think.” However, they provide little objective evidence that these programs impart thinking skills worth tens of thousands of dollars.

There’s at least some evidence that a lot of the benefit of a college degree comes not from what you learn in college, but from signaling to employers that you are the kind of conscientious, hardworking student who can get into college and stick with it long enough to get a degree. In other words, much of what we do in school is not learn anything in particular, but obtain a credential that certifies us as good potential employees.

Do tell. If you understand the federal student aid system as a means for transferring money from taxpayers to an industry that’s basically a wholly-owned subsidiary of the Democratic Party, it makes more sense.

HIGHER EDUCATION BUBBLE UPDATE: Every Job Is A Public Service.

Two students borrow to earn nursing degrees. The one who works at a public hospital can pay an “affordable” percentage of his income for 10 years, then erase the rest of the debt under the Public Service Loan Forgiveness program (PSLF). The other works as a nurse at a private hospital. That’s not considered public service, so the debt has to be repaid in full. Every job is a public service, argues Alexander Holt on EdCentral. Under PSLF, anyone who works for a government agency or non-profit — payroll supervisor, computer tech, accountant — is a public service worker. About a quarter of the workforce qualifies. Nobody who works for a for-profit company — no matter what they do — can get the same debt forgiveness deal.

It’s as if it’s just a subsidy for groups of people who overwhelmingly vote Democrat or something.

HIGHER EDUCATION BUBBLE UPDATE: Missouri sues Hollywood actress over SLU student loan debt of $77,000. “Emuge declined to comment via email Thursday, writing: ‘You can email the soulless people sueing (sic) me.'” Not an English major, I guess.

HIGHER EDUCATION BUBBLE UPDATE: Bill Henderson: Is there a right way to respond to the “Law School Debt Crisis” Editorial?

Frank Pasquale: Bootleggers and Baptists in the Student Loan Debate.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: New York Times: A Majority Of Law Schools Are Scamming Students And Taxpayers.

If this sounds like a scam, that’s because it is. Florida Coastal, in Jacksonville, is one of six for-profit law schools in the country that have been vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults.

Yet for-profit schools are not the only offenders. A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education.

Why? The most significant explanation is also the simplest — free money.

In 2006, Congress extended the federal Direct PLUS Loan program to allow a graduate or professional student to borrow the full amount of tuition, no matter how high, and living expenses. The idea was to give more people access to higher education and thus, in theory, higher lifetime earnings. But broader access doesn’t mean much if degrees lead not to well-paying jobs but to heavy debt burdens. That is all too often the result with PLUS loans.

The consequences of this free flow of federal loans have been entirely predictable: Law schools jacked up tuition and accepted more students, even after the legal job market stalled and shrank in the wake of the recession. For years, law schools were able to obscure the poor market by refusing to publish meaningful employment information about their graduates. But in response to pressure from skeptical lawmakers and unhappy graduates, the schools began sharing the data — and it wasn’t a pretty picture. Forty-three percent of all 2013 law school graduates did not have long-term full-time legal jobs nine months after graduation, and the numbers are only getting worse. In 2012, the average law graduate’s debt was $140,000, 59 percent higher than eight years earlier.

When you subsidize something, the price goes up. This is true for all of higher education, not just law schools.

HIGHER EDUCATION BUBBLE UPDATE: Senior Citizens Getting Their Social Security Garnished for Student Loan Debt:

Compared to student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29 percent carry home mortgage debt and 27 percent carry credit card debt. Still, student debt among older American households has grown in recent years. The percentage of households headed by those aged 65 to 74 having student debt grew from about 1 percent in 2004 to about 4 percent in 2010. While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013. . . .

Available data indicate that borrowers 65 and older hold defaulted federal student loans at a much higher rate, which can leave some retirees with income below the poverty threshold. Although federal student loans can remain unpaid for more than a year before the Department of Education takes aggressive action to recover the funds, once initiated, the actions can have serious consequences. For example, a portion of the borrower’s Social Security disability, retirement, or survivor benefits can be claimed to pay off the loan. From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student loan debt increased about five-fold from about 31,000 to 155,000. Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase. In 1998, additional limits on the amount that monthly benefits can be offset were implemented, but since that time the value of the amount protected and retained by the borrower has fallen below the poverty threshold.

Remember, the colleges got their money up front.

HIGHER EDUCATION BUBBLE UPDATE: Student Debt Is Worse Than You Think.

The loan crisis hits hardest at colleges enrolling large numbers of students from low-income backgrounds. These undergraduates have to borrow for college, then often have difficulty finding well-paying jobs after graduation — if they graduate at all.

As a result, they struggle to repay their loans. The colleges with the lowest student-loan repayment rates include many for-profit colleges, but also some public and private nonprofit colleges, including a substantial number of historically black institutions. Even some wealthier, more selective colleges turn out to have a bigger student loan problem than previously realized.

Along with recent research finding that student loan defaults are heavily concentrated among the most economically marginalized students, the new data suggests that debt is a major financial obstacle for people who already face barriers to opportunity.

Funny, higher ed is sold as the great equalizer, but the effect seems to be the opposite. If only someone had offered a warning.

SET YOUR DVR: I’ll be on John Stossel’s show tonight on Fox Business at 8pm Eastern, talking about student loans and the higher education bubble.

HIGHER EDUCATION BUBBLE UPDATE: The Devastating, Lifelong Consequences of Student Debt: It’s threatening fundamentally American ways of life.

We see this with other lifetime measures, such as how entrepreneurial people are. A recent study by Brent W. Ambrose of Pennsylvania State University, and Larry Cordell and Shuwei Ma of the Federal Reserve Bank of Philadelphia, found “a significant and economically meaningful negative correlation between changes in student loan debt and net business formation for the smallest group of small businesses.” This makes sense. You can keep your high student loan burdens low if you stay with an established employer. But if you strike out on your own, you’ll have less and more volatile income when you start. This is harder to manage with student loans, which also impacts your credit rating. Again, we can see the short-term student loan burdens staying the same, even though lifetime choices are much more limited as a result.

The lifetime framework also puts front and center something the Brookings study largely hand-waves: the rapid increase in how long people are paying off their student debt. Though the percentage of income that student-loan debtors pay stays the same, the length they are paying those loans is up 80 percent. What was once an average length of 7.4 years in repayment in 1992 is now 13.4 years. All things equal, a large increase in the length you will be paying student loans means you will dedicate a larger portion of your lifetime income to student loans. This burden goes missing by narrowly looking at a month-to-month basis.

This has major consequences for people’s ability to build wealth. Indeed, much of the current energy in analyzing student loan burdens are looking at this longer dynamic, and how it interplays with the ability for people to amass savings. As Richard Fry of Pew found, using the same data set as Brookings, “households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700).” Fry also finds that those who took out loans are less satisfied with their financial situation compared to people without loans. Similar results have been investigated and found by the Federal Reserve Bank of St. Louis.

This, in turn, has major consequences for how young people will ultimately transition into adulthood. According to Dora Gicheva of the University of North Carolina at Greensboro, student debt decreases the long-term probability of marriage by a significant amount.

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: College Debt Burdens Students, Economy; Elite Schools Lobby Against Proposal To Cap Graduate School Loans. Of course they do.

HIGHER EDUCATION BUBBLE UPDATE: I brushed my student loans under the rug when I graduated from college, and I’ll never be that naive again.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: Too Many Law Students, Too Few Legal Jobs:

Ten months after graduation, only 60 percent of the law school class of 2014 had found full-time long-term jobs that required them to pass the bar exam.

Even that improvement over the class of 2013 (a 57 percent employment rate) came with three asterisks: Last year, the American Bar Association changed the job-reporting rules to give law schools an extra month for the class of 2014 to find jobs; graduates employed in law-school-funded positions count in the employment rate; and the number of jobs that require bar passage fell from 2013 to 2014.

Amazingly (and perversely), law schools have been able to continue to raise tuition while producing nearly twice as many graduates as the job market has been able to absorb. How is this possible? Why hasn’t the market corrected itself? The answer is that, for a given school, the availability of federal loans for law students has no connection to their poor post-graduation employment outcomes.

Students now amass law school loans averaging $127,000 for private schools and $88,000 for public ones. Since 2006 alone, law student debt has surged at inflation-adjusted rates of 25 percent for private schools and 34 percent for public schools.

The rule of thumb is that you shouldn’t owe more than your first year’s salary. Few legal jobs start at $88,000, fewer still at $127,000.

HIGHER EDUCATION BUBBLE UPDATE: Rising UNC Student Loan Default Rates Indicate Fundamental Problems.

HIGHER EDUCATION BUBBLE UPDATE: Millions A Year Behind On Student Loans.

Nearly 7 million Americans have gone at least a year without making a payment on their federal student loans, a high level of default that suggests a widening swath of households are unable or unwilling to pay back their school debt. As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this past week. That was up 6%, or 400,000 borrowers, from a year earlier.

That translates into about 17% of all borrowers with federal loans being severely delinquent, a share that would be even higher if borrowers currently in school who aren’t yet required to repay were excluded. Millions of other borrowers are months behind but haven’t hit the 360-day threshold that the government defines as a default.

Severe delinquencies are rising despite the sharp drop in unemployment over the past year and a big push by the Obama administration to enroll borrowers in programs that lower their monthly payments.

Plus: “The education mess is a lot like the health care mess: the combination of federally mandated costs and controls, runaway cost inflation driven by insiders who keep jacking up the price, perverse market incentives in a warped marketplace, dysfunctional mandates, guild controls and crony regulations, all have produced a system in which costs are increasingly out of line with true value—and with society’s ability to pay.”

Who could have seen this coming?

HIGHER EDUCATION BUBBLE UPDATE: Who Could Have Seen This Coming? “The Education Department has grown into one of the biggest money lenders in the country, overseeing a $1.2 trillion portfolio of student debt rivaling the entire loan business of JPMorgan Chase with a staff roughly the size of the National Weather Service. But instead of fulfilling a presidential mission of remaking and simplifying a confusing and corrupt system that enriched financial firms at the expense of taxpayers — and ultimately the nation’s college students — serious problems have emerged.”

HIGHER EDUCATION BUBBLE UPDATE: Here’s why student loan delinquencies are so high.

Related: Use of special student loan repayment plans jumps 56 percent.

HIGHER EDUCATION BUBBLE UPDATE: If traditional colleges think this won’t affect them, they’re crazy. Obama administration plans to overhaul rules on student debt forgiveness.

The Obama administration said Wednesday it will overhaul the loan forgiveness process for students who believe they have been defrauded by their colleges, in light of the collapse of controversial for-profit Corinthian Colleges.

Students can apply to have their federal loans discharged if they can prove a school used illegal or deceptive tactics in violation of state law to persuade them to borrow money for college. But critics say the process, known as a “defense to repayment claim,” is complicated and difficult to navigate. And the demise of Corinthian, with thousands of former students muddling their way through the claims process, has shown that the system needs fixing.

Starting next month, the Education Department will begin holding field hearings and convene an advisory panel to develop regulations to streamline the loan forgiveness process. The department also wants to strengthen provisions to hold colleges accountable for the discharged loans, limiting the cost to taxpayers.

All is proceeding as I have foreseen.

HIGHER EDUCATION BUBBLE UPDATE: 3 Grads Reveal What It’s Really Like To Default On Student Loans.

HIGHER EDUCATION BUBBLE UPDATE: Study: Yes, Student Loans Are Making College More Expensive. “We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent.”

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: In Love And In Debt: How Student Loans Put Pressure On Young Couples.

Disproportionate student debt can make that already-challenging conversation all the more complicated. A survey by the National Foundation for Credit Counseling found that 57 percent of respondents had reservations about being in a relationship with someone with a large amount of debt, with 37 percent saying that they’d wait to get married until the debts were repaid, and slightly more—46 percent—saying they’d be open to getting married and jointly paying off the debt.

Those reservations result in real—and documented—difficulties for people with large amounts of debt when it comes to getting married. Dora Gicheva, an assistant professor in economics at the University of North Carolina, studies how debt affects education and relationships. She recently published a study on how people with large debt burdens fare when trying to settle down.

“There are a couple of previous economic studies that find student loans to affect other areas of graduates’ lives, for example their career choices, so it seemed reasonable to expect marriage decisions to be affected as well,” says Gicheva. Her research found a negative relationship: $10,000 of student-loan debt decreased the probability of marriage by 3 to 4 percent, with the effect diminishing with age for women but not men.

While there’s little legal ramification of marrying someone with a massive amount of student-loan debt (debt incurred before marriage is not joint debt), Karen Carr, a certified financial planner who teaches and advises at the Society of Grownups, says that differing amounts of loans can be stressful for couples—particularly if the amounts are extreme.

Indeed.

HIGHER EDUCATION BUBBLE UPDATE: Pols’ High Anxiety Over Higher Ed.

College, once a sure ticket to the middle class, is causing a lot of anxiety these days. People are concerned about its cost, about low graduation rates and about the poor employment prospects of some graduates.

Hillary Clinton complained about the burden of student debt in a speech in New York last month. Senator Marco Rubio devoted much of a speech on economic opportunity this week to his own ideas for reforming higher education. We’re beginning to see the outlines of two rival approaches to addressing these problems. Democratic solutions center on increased federal spending and regulation, and Republican ones on increased competition. As a result, the next election could matter more than most for the future of higher education.

In particular, progressives want to use increased federal funding as leverage to get schools to act the way federal policymakers want them to. Thus President Barack Obama’s proposal to spend $60 billion to eliminate tuition at community colleges that “adopt promising and evidence-based institutional reforms to improve student outcomes.” A related idea is to have the government publish ratings for colleges, the better to make them responsive to the desires of Washington. The progressive approach exposes newer players, such as for-profit schools, to special scrutiny.

Conservatives, on the other hand, increasingly favor policies that provide new options for students: new educational institutions, new financing methods and new information for evaluating them. Rubio wants to liberalize accreditation rules to break up what he calls the higher-education “cartel.” He wants to make it easier for private institutions to extend student loans in return for a share of students’ future income. He thinks vocational education should get a greater share of federal funds. He thinks prospective students should have access to data about how well graduates of specific college programs fare at getting jobs. And he wants higher-education institutions, whether new or old, for-profit or not, to be accountable to customers rather than to the government.

If they’re accountable to customers rather than to the government, though, that reduces politicians’ leverage.

HIGHER EDUCATION BUBBLE UPDATE: Study: Federal student loans increase tuition, not enrollment.

A report from the Federal Reserve Bank of New York suggests that federal student aid programs are doing more harm than good. When subsidized federal loans have the effect of “relaxing students’ funding constraints,” universities respond by raising tuition to collect the newly available cash.

The resultant tuition hikes can be substantial: The researchers found that each additional dollar of Pell Grant or subsidized student loan money translates to a tuition jump of 55 or 65 cents, respectively. Of course, the higher tuition also applies to students who don’t receive federal aid, making college less affordable across the board.

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: Obama Administration Opens Door For More Student-Debt Forgiveness, Including Law School Loans. “The forgiveness push, though, would reach far beyond Corinthian and even the for-profit school sector. Officials said that under the emerging plan, the government will consider forgiving any loans made directly by the government—those held by the majority of the 43 million Americans with student debt—so long as the borrower can document a school persuaded him or her to take out the loan under conditions that would violate state laws.”

Related: The Parable Of The Tulip Subsidy.

I’m afraid that Sanders’ plan is a lot like the tulip subsidy idea that started off this post. It would subsidize the continuation of a useless tradition that has turned into a speculation bubble, prevent the bubble from ever popping, and disincentivize people from figuring out a way to route around the problem, eg replacing the tulips with daffodils. . . .

If I were Sanders, I’d propose a different strategy. Make “college degree” a protected characteristic, like race and religion and sexuality. If you’re not allowed to ask a job candidate whether they’re gay, you’re not allowed to ask them whether they’re a college graduate or not. You can give them all sorts of examinations, you can ask them their high school grades and SAT scores, you can ask their work history, but if you ask them if they have a degree then that’s illegal class-based discrimination and you’re going to jail. I realize this is a blatant violation of my usual semi-libertarian principles, but at this point I don’t care.

Read the whole thing.

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: The ‘Tax Bomb’ Facing Lawyers Who Enroll In Income-Based Student Loan Repayment Plans.

HIGHER EDUCATION BUBBLE UPDATE: Millennials Weighed Down By Student Loan Debt.

U.S. Census Bureau data shows that the number of 25- to 34-year-olds living in their parents’ homes jumped 17.5% from 2007-2010. This is similar to Pew Research, which found that 57% of 18- to 24-year-olds lived with their parents in 2012. By way of comparison, in 1960, three out of four women and two out of three men had finished school, left home, were financially independent, had married and had children by age 30.

Meanwhile, the number of 30-year-olds who own their own homes is now roughly equal to those who live with their parents–a sharp contrast to 2003, when a 30-year-old American was twice as likely to own a home as he or she was to live with parents, according to the New York Federal Reserve (24). There’s also a clear correlation between growth in student debt and the rate at which adult offspring live with their parents. For every $10,000 increase in a state’s student debt per graduate, there’s a corresponding 2.9 percentage-point rise in 25-year-olds living with parents (25).

All of this comes as the dollar amount of student loans outstanding in the U.S. has tripled in the past decade, reaching a record $1.2 trillion last year. (See “Growing U.S. Student Debt Could Have Long-Term Credit Implications,” published Aug. 26, 2014.) In fact, student debt was the only type of household borrowing that continued to grow during the recent recession and recovery.

Ouch.

HIGHER EDUCATION BUBBLE UPDATE: I could be paying my student loans until I’m 77.

Related: Half of college graduates expect to be supported by their families.

HIGHER EDUCATION BUBBLE UPDATE: Ohio State Law Grad Has $328,000 Of Student Loan Debt. Actually, I had a student graduate with more debt than that, though the vast majority of it had been run up in a very expensive undergraduate and graduate program before ever coming to law school.

HIGHER EDUCATION BUBBLE UPDATE: Marco Rubio: You Deserve The Facts Before Taking Out Student Loans. “Students and their families need to be equipped with the information necessary to make well-informed decisions about which majors at which institutions are likely to yield the best return on investment. This is why Marco has authored and championed the ‘Student Right to Know Before You Go Act,’ which aims to give students reliable data on how much they can expect to make versus how much they can expect to owe.”

HIGHER EDUCATION BUBBLE UPDATE: The Student-Loan Problem Is Even Worse Than Official Figures Indicate. “Nearly one in three Americans who are now having to pay down their student debt–or a staggering 31.5%–are at least a month behind on their payments, new research from the Federal Reserve Bank of St. Louis suggests. That figure is far higher than official delinquency measures reported by the Education Department and the New York Fed. And it’s also likely the most accurate.”

HIGHER EDUCATION BUBBLE UPDATE:  President Obama’s labor-dominated NLRB agrees to hear a petition by Columbia grad students who seek the right to unionize.  The grad students want to join the United Auto Workers (that’s not a typo) because they claim they’re being treated like serfs by universities who understand that there is a glut of Ph.D.s and that most grad students will never score permanent, tenure-track positions.According to today’s Wall Street Journal editorial:

The universities argue that unionization would make the nature of their relationship with students adversarial. They too have a case. Most of America’s top universities aren’t unionized. So the schools have valid concern about elevating union interests over academic merit. Meanwhile, NYU is a rare private university that has voluntarily recognized a grad-student union.

But none of this lets academe off the hook. For one thing, the universities contribute to a glut of Ph.D.s by admitting students who take out loans (some 40% of the $1 trillion in student debt is for graduate school) even when they know few will ever work as full professors. By admitting them into graduate programs, the schools in effect are producing for themselves a low-paid work force.

“To put it crudely, they are hiring their own serfs,” says Richard Vedder, an Ohio University economist who runs the Center for College Affordability and Productivity. He says it’s “as much a moral issue as an economic one.” A university truly devoted to the well-being of its students would be more honest to grad students about the dismal job prospects for Ph.D.s—and more candid to undergrads about their actual instructors.

Unionization isn’t the best solution for grad students or universities. Mr. Vedder has a better idea when he suggests that universities accept some responsibility for defaults on student loans or pick up some of the tab for students who can’t find jobs after graduation.

Of course the real solution is to shut down the bulk of these duplicative, unneeded Ph.D. programs, eliminate the supply glut, and let these students put their talents to work in another field.  Unionizing grad students only kicks the can down the road, giving them more money while they’re in school, with no improvement in their prospects for long-term employment.  More importantly, unionization will further raise the cost of tuition for everyone.

I BLAME HEAVY STUDENT-LOAN DEBT: The Demise of the Starter Home: Eight reasons why that cornerstone of the American Dream, the entry-level house, is going the way of the dodo. They don’t mention that one, but I think it’s a major factor. So maybe I should’ve tagged this “higher education bubble update.”

HIGHER EDUCATION BUBBLE UPDATE: Stop Giving Everyone A Student Loan:

People get taken by scams every day, often with the help of government money. Should Fannie Mae forgive the mortgages of people if the buyer misrepresented the condition of the house? Should the Small Business Administration forgive the debt of some guy who pledged his house to back a no-hope franchise operation? For that matter, what about people who go to a big, public party school and major in sports marketing or tourism? The taxpayer cannot be made responsible for every unwise decision every individual makes, even if the government finances it.

That’s not to say these students shouldn’t get relief. They should. Happily, we already have a system for dealing with people who are burdened with excess debt: the bankruptcy system. The government should change the law to make it easier to bankrupt student loans.

But at the same time, this case points to an issue that I’ve highlighted before: the need for better underwriting in student loans. Simply allowing students to borrow large amounts of money and then bankrupt it is a recipe for big government losses. We should allow people to bankrupt student loans, but the corollary to that is that we need to be more careful about the loans we make in the first place.

Right now the system indiscriminately lends to any marginally well-equipped institution that can claim to be teaching anyone any skill, even if that skill isn’t going to increase a student’s ability to repay their loan. It’s no wonder that institutions are setting up lots of useless programs to collect those tuition checks; the real wonder is that there aren’t more stories like these.

The best thing we could do to bring educational costs under control would be to eliminate, or at least cap, student loans.

HIGHER EDUCATION BUBBLE UPDATE: One-Third Of Federal Student Loan Borrowers Are Delinquent.

HIGHER EDUCATION BUBBLE UPDATE: The Economist: More and more money is being spent on higher education. Too little is known about whether it is worth it.

The modern research university, a marriage of the Oxbridge college and the German research institute, was invented in America, and has become the gold standard for the world. Mass higher education started in America in the 19th century, spread to Europe and East Asia in the 20th and is now happening pretty much everywhere except sub-Saharan Africa. The global tertiary-enrolment ratio—the share of the student-age population at university—went up from 14% to 32% in the two decades to 2012; in that time, the number of countries with a ratio of more than half rose from five to 54. University enrolment is growing faster even than demand for that ultimate consumer good, the car. The hunger for degrees is understandable: these days they are a requirement for a decent job and an entry ticket to the middle class. . . .

If America were getting its money’s worth from higher education, that would be fine. On the research side, it probably is. In 2014, 19 of the 20 universities in the world that produced the most highly cited research papers were American. But on the educational side, the picture is less clear. American graduates score poorly in international numeracy and literacy rankings, and are slipping. In a recent study of academic achievement, 45% of American students made no gains in their first two years of university. Meanwhile, tuition fees have nearly doubled, in real terms, in 20 years. Student debt, at nearly $1.2 trillion, has surpassed credit-card debt and car loans.

None of this means that going to university is a bad investment for a student. A bachelor’s degree in America still yields, on average, a 15% return. But it is less clear whether the growing investment in tertiary education makes sense for society as a whole. If graduates earn more than non-graduates because their studies have made them more productive, then university education will boost economic growth and society should want more of it. Yet poor student scores suggest otherwise. So, too, does the testimony of employers. A recent study of recruitment by professional-services firms found that they took graduates from the most prestigious universities not because of what the candidates might have learned but because of those institutions’ tough selection procedures. In short, students could be paying vast sums merely to go through a very elaborate sorting mechanism.

If America’s universities are indeed poor value for money, why might that be? The main reason is that the market for higher education, like that for health care, does not work well. The government rewards universities for research, so that is what professors concentrate on. Students are looking for a degree from an institution that will impress employers; employers are interested primarily in the selectivity of the institution a candidate has attended. Since the value of a degree from a selective institution depends on its scarcity, good universities have little incentive to produce more graduates. And, in the absence of a clear measure of educational output, price becomes a proxy for quality. By charging more, good universities gain both revenue and prestige.

But value for students and society? “America’s market-based system of well-funded, highly differentiated universities can be of huge benefit to society if students learn the right stuff. If not, a great deal of money will be wasted.”

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: A revolt is growing as more people refuse to pay back student loans.

All is proceeding as I have foreseen. Make them dischargeable in bankruptcy after five or ten years, but charge a portion back to the recipient universities. And if any traditional university folks think that this sort of pressure will be limited to for-profit schools, they’re kidding themselves.

HIGHER EDUCATION BUBBLE UPDATE: MOOCs Could Save the World.

America’s higher education system is an example to the world—and that’s not necessarily all to the good. In a lead article as well as a special feature, the Economist argues that America’s higher ed system is increasingly spreading across the globe, with more and more people going to universities that resemble America’s colleges. However, as the Economist notes, America’s education system is good at delivering excellence but become increasingly dysfunctional—and very expensive. One of the main reasons is that some colleges have become credential mills, where earning a degree is more important than learning. . . .

Another reason why higher ed’s bang-to-buck ratio is lower these days, ironically, is that generous federal student loans have helped subsidize an expensive system and even perhaps made it pricier. The Economist’s special report argues that technology, especially MOOCs and online courses, could help in this regard by lowering costs. But many colleges—and college faculty members—resist them because they have a lot invested in the status quo.

In fact, the adoption of MOOCs may be a case in which the U.S. can learn from the rest of the world. Unmentioned by the Economist is that MOOCs (though offered by companies of American origin) are popular in other countries like India and Trinidad and Tobago. The rest of the world might surpass us, in other words, in embracing and legitimizing educational tech—particularly if it permits people who wouldn’t ordinarily have access to a traditional, brick-and-mortar college to start attending classes online. If that’s true, American colleges should start taking a page out of foreign colleges’ playbook.

But they won’t because the foreign colleges’ playbook offers insufficient remuneration for administrators.

HIGHER EDUCATION BUBBLE UPDATE, LIQUIDATION EDITION: Sweet Briar College to Close; Who Gets the $80 Million Endowment? “Because most colleges that close have run out of all of their cash, there is no endowment to divide up. But within hours of Sweet Briar’s announcement Tuesday, alumnae and higher education observers started posting comments to social media asking who would get the leftover funds.”

Related: Mark Cuban: This Is Just The Start Of The College Implosion. “A few years ago, Cuban bought the domain ‘collegedebt.com,’ which publishes a live update of how much college loan debt is held by students. The current total is just over $1.3 trillion.”

All is proceeding as I have foreseen.

HIGHER EDUCATION BUBBLE UPDATE: New York Fed: The Growing Student Loan Crisis.

HIGHER EDUCATION BUBBLE UPDATE: Student-Loan Delinquencies Rise in U.S. “Student-loan delinquencies increased at the end of 2014, a troubling sign that Americans are failing to keep up with payments as education debt climbs, according to the Federal Reserve Bank of New York. Data from the New York Fed released Tuesday showed 11.3 percent of student loans were delinquent in the final three months of 2014, up from 11.1 percent in the prior quarter.”

HIGHER EDUCATION BUBBLE UPDATE: Politico: The College Loan Bombshell Hidden in the Budget: Obama’s new repayment program comes with a record $22 billion shortfall. “In obscure data tables buried deep in its 2016 budget proposal, the Obama administration revealed this week that its student loan program had a $21.8 billion shortfall last year, apparently the largest ever recorded for any government credit program.” This is why I advise students not to count on Income-Based Repayment or similar programs being around when they graduate.

HIGHER EDUCATION BUBBLE UPDATE: Washington Post: Why college isn’t always worth it: A new study suggests the economic return on a college degree may be a lot more modest than you think.

“‘Ticket’ implies a college degree is something you can just cash in,” said Alan Benson, assistant business professor at the University of Minnesota. “But it doesn’t work that way. A college degree is more of a stepping stone, one ingredient to consider when you’re cooking up your career. … It’s not always the best investment for everyone.”

Benson, along with M.I.T.’s Frank Levy and business analyst Raimundo Esteva, co-authored a new paper, released this week, examining the value of public university options in California. Factors like how long it takes to complete a degree — often longer than four years — and whether students make it to graduation, he learned, can significantly diminish the value of pursuing higher education. . . .

“The return to a college degree in 2010,” researchers wrote, “could be less than the interest on unsubsidized Stafford loans.”

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: Belt Tightening 101: Mitch Daniels has helped Purdue keep costs down for students.

Prior to his arrival in 2012, tuition at Purdue had gone up every year for 36 years, with annual hikes averaging close to 6 percent in the previous decade. Daniels has frozen tuition for three straight years and slashed room and board costs by 10 percent. “Instead of asking our students and their families to accommodate their budgets to our spending,” he says, “let’s see if we can’t adjust our spending to their budgets.” Purdue’s class of 2016 may graduate without ever having seen a tuition hike.

Erica Smith, a recent communications graduate from Michigan City, says that the tuition freeze was long overdue. She financed her education with loans she’ll be repaying for at least 25 years. “I feel hopeless almost,” she says. “But most of my friends have as much debt as I do. We joke about paying it till we die.” Smith says that cost hikes while she was a student added between $4,000 and $6,000 to her overall debt. “If tuition continues to rise, Purdue will be out of reach for middle-class people, like my niece,” whom she hopes will one day follow her to West Lafayette.

Daniels achieved the tuition freeze in part by postponing raises for some administrators, and some faculty members volunteered to forgo raises as well. Information-technology consolidation, bulk purchasing, eliminating off-campus storage, disposing of surplus property, and improving cash management also contributed—all techniques from Daniels’s playbook as governor. The former Indiana governor’s efforts to control costs have attracted national attention.

As they should. There’s a lot of low-hanging fruit, because universities haven’t really tried much to control costs. That will have to change.

HIGHER EDUCATION BUBBLE UPDATE: Sometimes grad school flunks the cost-benefit test.

You know the $1 trillion in student loan borrowing that is of concern to many of us? About 40 percent comes from loans to finance graduate and professional degrees, according to the report.

In looking at data from the Department of Education, Delisle found that the median level of indebtedness for a borrower with a master of arts was $59,000 in 2012, up from $38,000 in 2004. And that’s after adjusting for inflation. There were similar trends for other master’s degrees, such as in science or education. . . .

There are plenty of studies that show that people with advanced degrees have higher earning potential. But lost in this optimistic message are the people who get a degree and the debt but not a significant pay increase. Or the debt takes up such a high percentage of any net salary bumps that it is years before the degree-holder sees a return.

Here’s a key observation from Delisle’s report: Students pursuing a master’s or professional degree already have an undergraduate degree, and therefore they “should be far more informed consumers.”

Yet often they are not.

Yes, if they were, they higher education bubble would be bursting a lot faster.

HIGHER EDUCATION BUBBLE UPDATE: The Real Student Debt Problem No One is Talking About. “Graduate students make up just 14% of university enrollment, but account for nearly 40% of student debt.”

BILL MCMORRIS: How The Supreme Court Created The Student Loan Bubble: It all starts with Griggs v. Duke Power Co.

The lie that props up our Big Education regime is that the GI Bill, which paid for World War II veterans to attend college, produced the upward mobility and economic boom of the postwar period. It’s a heartwarming story, the veteran who would have been a dust farmer but for the grace of government generosity. But it just isn’t true. Only one out of every eight returning veterans attended college. The rest, the vast majority, benefited from something even more egalitarian: aptitude testing. The format favors raw talent above all else, allowing companies to hire high-potential candidates from any background and groom them to fit the company’s needs.

These tactics came to commerce from a familiar source.The armed services were forced to process hundreds of thousands of recruits during the war, and in order to filter and assign soldiers, the government developed aptitude tests. Businesses witnessed the U.S. defeat the two most efficient peoples known to man, thought there must be something to this whole testing thing, and followed suit. The chief hiring metric in the postwar era was not whether someone had a degree, but whether he had the aptitude that would enable him to succeed. Every industry from blue-blooded high finance to immigrant-heavy manufacturing employed testing to determine who would rise through the ranks, regardless of lineage, heritage, or education. Testing enabled men who set out to be blue-collar workers to ascend based solely on their ability. . . .

Two years ago I interviewed Den Black, a former automotive engineer at GM supplier Delphi whose pension was slashed to speed up the auto bailout. His backstory interested me nearly as much as his grievance with the Obama administration. A few years before the Supreme Court issued the Griggs decision, he set out to join his brother as a line-worker at General Motors. He hadn’t been the best student, didn’t care much for school, but submitted to the hiring exam. The test revealed that he had an advanced understanding of physics and mathematics. Within a few years, he was given the opportunity to take the entrance exam to General Motors University. After two years at GMU, where he combined shiftwork with education, he emerged an engineer in management. It’s no bachelor’s degree, but judging by the patents he helped generate, it was a worthy investment.

The Griggs decision has made that organic rise through the ranks impossible, as disparate impact left businesses liable for those who failed to pass hiring tests.

“Most legitimate job selection practices, including those that predict productivity better than alternatives, will routinely trigger liability under the current rule,” Wax wrote in a 2011 paper titled “Disparate Impact Realism.”

The solution for businesses post-Griggs was obvious: outsource screening to colleges, which are allowed to weed out poor candidates based on test scores. The bachelor’s degree, previously reserved for academics, doctors, and lawyers, became the de facto credential required for any white-collar job.

Read the whole thing.

MARK CUBAN: Fix Higher Ed Bubble By Limiting Student Loans.

Couldn’t have said it better myself.

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debt Crowding Out Mortgages For Young People.

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debt Increasingly Burdening The Elderly. “A]n estimated two million Americans age 60 and older … are in debt from unpaid student loans, according to data from the Federal Reserve Bank of New York. Its August Household Debt and Credit Report said the number of aging Americans with outstanding student loans had almost tripled from about 700,000 in 2005, whether from long-ago loans for their own educations or more recent borrowing to pay for college degrees for family members. . . . While older debtors account for a small fraction of student loan borrowers, who have accumulated nearly $1 trillion in such debt, the effect of owing a constantly ballooning amount of debt but having a fixed income can be onerous, said Senator Bill Nelson, Democrat of Florida, chairman of the Senate Special Committee on Aging.”

It kind of sucks to have your Social Security check garnished for student loan debt.

HIGHER EDUCATION BUBBLE UPDATE: Overqualified and Underemployed: The Job Market Waiting for Graduates.

There’s a word for someone who has a job that does not require the degree they hold: “underemployed.” In 2008, over 35% of college graduates were underemployed; by June of last year, the Federal Reserve Bank of New York reported that a whopping 44% of graduates were underemployed. And it’s not just because of the recession: the number’s been rising since 2001.

The more education a person has, the worse the numbers get. In 2008 22% of people with PhDs or professional degrees and jobs were underemployed. That number rises all the way to 59% for people with master’s degrees.

When you think about the financial situation most students are in, it’s not hard to see why this happens. Higher levels of education do not merely add to your job prospects—it forces you to shift them upward. This means some higher-paid positions become feasible, but some lower-paid ones suddenly aren’t, either because the graduate refuses to take a job below their education level, or (more commonly) because the extra student loans make it financially difficult to do so. And over qualification (and with it, turnover) is a real concern for employers filling low-level jobs. . . .

Degrees, of course, are not worthless. Part of the argument in their favor is that even the underemployed are getting better jobs than those without degrees. But the advantage is smaller than graduates expect, and shrinking, to boot. The average college student overestimates how much they’ll earn after they graduate by a massive 45%. And from 2000 to 2007—which is measuring a period of significant economic growth before the recession, mind you—the earnings for college graduates between the ages of 25 and 54 dropped 8.5%. And these were jobs that weren’t especially high-paying to begin with.

The most sobering numbers, however, aren’t about salaries, but about how debt can put people’s lives on hold. Almost 45% of recent college graduates put off buying a house because of their debt, and 55% delayed saving for retirement because of it. 14% of recent graduates put off marriage on account of their debt, and 28% put off having children.

The effects of a graduate’s debt ripple throughout every aspect of their lives, both personal and professional.

Indeed they do.

PAUL CAMPOS ON LAW SCHOOLS AND THE HIGHER EDUCATION BUBBLE:

There are only a small number of for-profit law schools nationwide. But a close look at them reveals that the perverse financial incentives under which they operate are merely extreme versions of those that afflict contemporary American higher education in general. And these broader systemic dysfunctions have potentially devastating consequences for a vast number of young people—and for higher education as a whole. . . .

These investments were made around the same time that a set of changes in federal loan programs for financing graduate and professional education made for-profit law schools tempting opportunities. Perhaps the most important such change was an extension, in 2006, of the Federal Direct PLUS Loan program, which allowed any graduate student admitted to an accredited program to borrow the full cost of attendance—tuition plus living expenses, less any other aid—directly from the federal government. The most striking feature of the Direct PLUS Loan program is that it limits neither the amount that a school can charge for attendance nor the amount that can be borrowed in federal loans. Moreover, there is little oversight on the part of the lender—in effect, federal taxpayers—regarding whether the students taking out these loans have any reasonable prospect of ever paying them back.

This is, for a private-equity firm, a remarkably attractive arrangement: the investors get their money up front, in the form of the tuition paid for by student loans. Meanwhile, any subsequent default on those loans is somebody else’s problem—in this case, the federal government’s. The arrangement bears a notable resemblance to the subprime-mortgage-lending industry of a decade ago, with private equity playing the role of the investment banks, underqualified law students serving as the equivalent of overleveraged home buyers, and the American Bar Association standing in for the feckless ratings agencies. But there is a crucial difference. When the subprime market collapsed, legislation dedicating hundreds of billions of taxpayer dollars to bailing out the banks had to be passed. In this case, no such action will be necessary: the private investors have, as it were, been bailed out before the fact by our federal educational-loan system. This situation, from the perspective of Sterling Partners and other investors in higher education, comes remarkably close to the capitalist dream of privatizing profits while socializing losses.

From the perspective of graduates who can’t pay back their loans, however, this dream is very much a nightmare. Indeed, it’s easy to make the case that these students wind up in far worse shape than defaulting homeowners do, thanks to two other differences between subprime mortgages and educational loans. First, educational debt, unlike mortgages, can almost never be discharged in bankruptcy, and will continue to follow borrowers throughout their adult lives. And second, mortgages are collateralized by an asset—that is, a house—that usually retains significant value. By contrast, anecdotal evidence suggests that many law degrees that do not lead to legal careers have a negative value, because most employers outside the legal profession don’t like to hire failed lawyers. . . . It would be comforting to think that the crisis is confined to for-profit schools—and indeed this idea is floated regularly by defenders of higher education’s status quo. But it would be more accurate to say that for-profit schools, with their unabashed pursuit of money at the expense of their students’ long-term futures, merely throw this crisis into particularly sharp relief. . . . The only real difference between for-profit and nonprofit schools is that while for-profits are run for the benefit of their owners, nonprofits are run for the benefit of the most-powerful stakeholders within those institutions.

Well, it’s not as if this hasn’t been pointed out before, but it bears repeating.

HIGHER EDUCATION BUBBLE UPDATE: Families Depending Less On Student Loans.

Amid growing recognition that easy college loans all too often turn into a lifetime debt burden, the tide may be turning. Families aren’t borrowing as quite as much to pay for their kids’ college education, reports the WSJ.

But that’s not necessarily good news for schools:

Many colleges are upping the numbers of grants and scholarships because enrollment is in decline. For private schools, that means the sticker price is often nothing like the price that students actually pay, and the schools earn much less from tuition than you might assume. Meanwhile, public schools will soon have to rely more on tuition than on state funding.

Even with all those sweeteners and discounts, students still aren’t flocking to pricy schools as readily as before. . . .

And who among us thinks it’s the Ivy League that’s getting squeezed? Of course not—it’s almost certainly mid-tier private universities and liberal arts colleges that are seeing their enrollment numbers fall as more students content themselves with cheaper public or private schools.

All is proceeding as I have foreseen. But the Ivy League isn’t immune to the trend. And my advice is, don’t be afraid to dicker. You may get a better deal.

HIGHER EDUCATION BUBBLE UPDATE: Many Parents Have to Pay Off Dead Kids’ Student Loans.

PROPOSING “SOLUTIONS” THAT WILL COMPOUND THE PROBLEM: Student Debt On The Campaign Trail. From the comments: “Student loan money goes into the general fund, which subsidizes excessive administrative spending and athletics. Put a cap on administration expenses that can be subsidized and pop the athletic bubble, then loans over a four-year period will be reduced by several thousand dollars.” Indeed.

HIGHER EDUCATION BUBBLE UPDATE:

I think of student loans as the cockroaches of debt. The loans are hard to get rid of because for so long, people were told this was good and necessary debt and so it wasn’t a bad thing to have it hang around for decades.

When people ask me about what they should do about their student loans, I ask: What are you willing to do to get rid of them as fast as you can?

And here’s my suggestion: Live for as long as you can with your parents, relatives or anyone who will allow you to stay rent-free or charge you a super-low rent.

Related item here. And here.

HIGHER EDUCATION BUBBLE UPDATE: Students Face Debt By 1,000 Fees.

That $4 is not a large fee. Even the poorest student can probably afford it. On the other hand, collectively, UCLA’s student fees are significant: more than $3,500, or about a quarter of the mandatory cost of attending UCLA for a year.

Those fees are made up of many items, each trivial individually. Only collectively do they become a major source of costs for students and their families and potentially a barrier to college access for students who don’t have an extra $3,500 lying around. . . .

Colleges seem to be subject to this budget problem in spades, because until very recently, passing on all the costs to the consumer was very easy. Highly motivated coalitions get together to demand something, and eventually the byzantine, quasi-democratic institutional governance often delivers that thing, along with the associated cost. Each of these new demands — a better gym, a new student center for underrepresented groups, fancy new buildings for alumni to put their names on (but not pay to maintain) — generates a small individual cost per student. Over time, however, those little individual costs aggregate into college bills that grow much faster than inflation year after year, decade after decade.

If UCLA had had to treat this as a budget problem — in other words, if they’d had to take money from something else in order to fund the concerts — then they probably would have decided that “more famous concert headliners” are not a core part of delivering a UCLA education. But instead, they made it part of someone else’s budget problem. Someone who is probably just going to sigh and increase the student loan a bit.

Or not, if they’re reasonably well-informed.

HIGHER EDUCATION BUBBLE UPDATE: A Startling Number Of Millennials Are Overqualified For Their Jobs. ” A college degree used to be a near guarantee you’d be able to secure a good-paying job that made use of your education. No longer. The after effects of the recession and mounting student loan debt, in addition to longer-term changes in the labor market, have forced many of today’s graduates to take the first decent offer they receive — even if they’re overqualified for the position.”

Who could have seen this coming?

HIGHER EDUCATION BUBBLE UPDATE: Student loans: Taking away the free ride for colleges.

HIGHER EDUCATION BUBBLE UPDATE: Abby Schachter: Your Bedroom Instead Of A Dorm Room.

President Obama gets points for properly assessing the problem with student loan debt. He acknowledges that too many students earning a bachelor’s degree (71 percent) graduate with debt that is so burdensome (averaging $29,400) that many delay important milestones such as starting a family, buying a home, beginning a business or saving for retirement.

But when Mr. Obama said that as “the glow” of college graduation fades students confront the reality of their student loan burden, he missed the opportunity to suggest a creative solution. Instead of arguing for easing graduates’ debt burden, it would be better if there were less or even no loans to repay.

One way to do that would be for students to stay home. Not staying out of college, mind you. Just opting for your bedroom at home rather than getting a dorm room on campus. Living at home will lower your debt burden. . . . Better to stay home until you graduate than go off to college and have to slink back home four years later when you have huge debt and are looking for your first job.

Colleges really gouge people for room and board. But they’re already addressing this phenomenon by making even commuter students purchase meal plans.

J.D. TUCCILLE: Expect Soaring College Costs From the President’s Price-Subsidizing Student Loan Scheme. “Students who resist the temptation of ‘help’ with college costs will be in a much better position when the higher education bubble bursts.”

HIGHER EDUCATION BUBBLE UPDATE, WEALTH REDISTRIBUTION EDITION: The surprising winners of Obama’s student-loan program.

Students who took out big loans for graduate school and those with higher incomes stand the most to gain financially under President Obama’s expansion of the federal government’s loan forgiveness program.

Lawyers, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts.

So basically it’s a subsidy program for Gentry Liberals.

HIGHER EDUCATION BUBBLE UPDATE: Megan McArdle On Student Loan Bailouts:

How could I be against helping these students, groaning as they are under the weight of student loans? I’m so glad you asked.

Before we go any further, however, let me establish my bona fides on huge student loans. I am familiar with the problem. Intimately familiar. Almost-six-figures-worth-of-student-loan-debt-on-a-$40,000-a-year-salary familiar. Which is to say, I lived in a subterranean 435-square-foot apartment for years, eating ramen and Cheez Doodles and heartily regretting my decisions regarding education loans. Oh, and I was 30, not 22. This is what happens if you get an MBA expecting to use it to do something lucrative, such as management consulting, and instead use it to do something fun, such as journalism. I am now happily debt-free, but every check written to clear those loans is seared — seared! — into my memory. . . .

It’s not that the horror stories about people with low earnings and huge debts are imaginary — I have not only read those stories, but have also been one of them. However, that group is relatively small. And in order to give them an extra break on their payments, the president and Elizabeth Warren are proposing that we should also give a whole lot of money to folks who don’t really need it. That’s bad public policy; moreover, it’s not particularly progressive public policy.

That said, I do think we should do something to help people who are genuinely stuck with debt that they will never realistically be able to pay. We should end the exemption of student loans from bankruptcy so that anyone who is overwhelmed by debt can go to court and get a genuinely fresh start. The special treatment of student loans is an outrageous bit of self-dealing by the government, which appears to be fine with debt slavery as long as Uncle Sam gets to be the master. It should stop.

Yes, and schools should be on the hook for some of the discharged debt.

HIGHER EDUCATION BUBBLE UPDATE: Young and in Debt in New York City: Student Loans Make it Hard to Rent or Buy a Home.

HIGHER EDUCATION BUBBLE UPDATE: Colleges Rattled As Obama Presses Rating System. They thought stuff like this would only be for their for-profit competitors, I guess. But:

Mr. Obama and his aides say colleges and universities that receive a total of $150 billion each year in federal loans and grants must prove they are worth it. The problem is acute, they insist: At too many schools, tuition is going up, graduation rates are going down, and students are leaving with enormous debt and little hope of high-paying jobs.

Obama, you magnificent bastard, you read my book.