Friday, December 5, 2014

Tuition Hikes and Ripping Off College Students, Parents and Taxpayers in California with Government Subsidized Loans and Grants

Too often government charges citizens for services rendered which are based on a 'cost plus' mentality or the 'whatever the traffic will bear' principle. There is no connection to any perceived or real value with value defined simply as price related to benefits received. It's simply a case of charging a lot for a little.

And that's why so much of the government 'help' we receive is unaffordable. It costs too much or doesn't provide sufficient value in relation to the government offering. With 'value' firmly in mind, let's look at education and what's happening in California's public colleges currently. We'll then be able to see exactly who, other than the students and their families, will end up paying for the huge tuition hikes during the next five years. {HINT: It won't be either college officials or politicians. The final bill will be mostly paid by the taxpayers.}

Higher Ed Economics tells a story about government's conspiratorial role with college officials regarding high costs and the scheduled tuition increases in 'Taxifornia:'

"Last week the University of California’s regents voted—amid protests from state politicians and students—to raise tuition by up to 5% annually for the next five years. Here is a textbook example of how government subsidies fuel price increases.

The regents claimed they had no choice but to raise tuition because state lawmakers had shorted spending on higher education. General-fund spending on the UC system is $300 million—or about 10%—lower than in 2007. Even so, the UC’s “core” budget has since doubled to nearly $7 billion thanks to a 70% tuition increase.             

Since 2007 federal student loan debt has also doubled. Not surprisingly, universities have raised their prices to soak in more government loans. . . . Gov. Jerry Brown observed that (with) student loans . . . the money is almost infinite . . . .

California politicians have also done their part to promote tuition inflation by boosting the state’s Cal Grant program, which this year will provide $1.8 billion in aid—nearly four times as much as in 2003—to roughly 400,000 California students. Cal Grants are in part pegged to tuition costs, so universities can rake in more money from the state by increasing their prices.

And this year the state inaugurated a Middle Class Scholarship program targeting students from families with incomes between $80,000 and $150,000, which make up about a quarter of UC students. The program, to be phased in over three years, will cover up to 40% of tuition and fees for such “middle-class” families. Like the Cal Grant, the value of the middle-class scholarship is pegged to the cost of education.

So by raising tuition, the regents can extract more money from the state . . . . The academics have once again outsmarted state politicians who will now give them more money to offset the tuition increase."

Summing Up 

The taxpayer financed money pot for higher education is alive and well in 'Taxifornia.'

The formula to soak the taxpayers is simple --- raise tuition and have the students pay for that increased tuition by taking out government guaranteed loans.

Then raise tuition some more and get additional subsidies directly from the state.

Then repeat the drill continuously --- forever or until the 'stupid' students, parents and taxpayers finally wise up, whichever first occurs.

That's my take.

Thanks. Bob.

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