Is College Worth It? ... Government Doing Harm ... Third Party Payers and Student Loans

College is expensive. It's also the way to acquiring the "credentials" to get a good paying job. At least that's why most of us attend college.

However, today it's also a way to get into debt and unable to get out of debt anytime soon, even after getting "credentialed."

In plain words, it's become a rigged game in a monopolistic government subsidized phony environment where the value proposition, aka the combination of cost and quality, is largely ignored.

As a result, college costs are out-of-control and its administrators have no vested interest or need to keep costs in line and the quality of the college education high. Meanwhile, the government knows best gang keeps on upping the ante and throwing more and more taxpayer money at the problem. As a result, a vicious cycle has developed in which the cost of college attendance rises rapidly and the quality of the product suffers rapidly.

It's the Hippocratic Oath being honored in the breach once again as government in fact does great and lasting harm to those it's trying to help. And it starts in K-12 government controlled and subsidized schools where graduates learn how to enter college unprepared.

The book review A Refuge for Charlatans is subtitled 'The median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million per year:'

"Despite the growing evidence that colleges and universities cost too much, deliver too little and push too many young people into a lifetime of debt, the idea of going to college remains a key part of the American Dream. Now William Bennett, a former secretary of education . . . takes on a question that parents and teens are starting to ask: Is college worth the ever-increasing price tag? The authors' answer is a hesitant "yes," but with plenty of provisos and warnings about bigger problems ahead.

Since 1990 the cost of attending a four-year college or university has risen four times the rate of inflation. . . . the average price of attending an American public college—to judge by current trends—will have doubled, by 2016, in just 15 years.

At the same time, the average pay for college grads in America has fallen 5% since 2007-08. Almost half of all four-year college graduates now work at jobs that don't require a college degree . . . . never have so many charged so much for so little.

What's gone wrong? In the authors' view, the chief culprit has been the federal government. . . . College tuitions will rise as long as federal subsidies do. To those who like to point out that both federal and state aid to higher education has fallen in the past decade, Messrs. Bennett and Wilezol answer that the real driver of debt has been federal student loans. Those have ballooned by 60% in the past five years alone to more than $900 million, while grants-in-aid, like Pell grants, have tripled in value over the past decade. It's a classic example of the perils of a third-party payer system, with students, parents and institutions caught in a vicious cycle of rising costs and declining quality.

Knowing that Washington is going to pump in money to make college more "affordable" only encourages colleges and universities to raise their tuitions and fees and ignore cost inefficiencies, including administrative and bureaucratic bloat. (From 1993 to 2007, per-student administrative costs leapt more than 61%. Last week, the Chronicle of Higher Education reported that the median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million a year.) The search for loan-subsidized customers encourages schools to lower academic standards, inflate grades (today A grades account on average for 43% of all college letter grades), and offer more "pop" courses and trendy majors so that students can glide along and earn an easy degree.

Meanwhile, those who have dined on such lighter-than-air academic fare wind up saddled with debt and increasingly unable to find a job that can pay it off.

Who gets hurt most in this unsustainable cycle? First, young people who find that the "college experience" has turned them into debt peons. In 2011, two-thirds of the students getting bachelor degrees needed some kind of loan to finish college. In 1991, one in 10 American households owed some form of student-loan debt; today it's one in five, with a bigger proportion than ever owing $100,000 or more.

The second harmed group, Messrs. Bennett and Wilezol note, are those at the bottom of the economic scale, for whom college used to be a ticket out of poverty but who increasingly can't afford it even with the explosion of federal help. In 1970, 12% of recent college graduates came from the bottom quarter of the income distribution; today it's barely 7%. Then there are taxpayers who have to pay for defaulting loans (more than one in four in 2012) and get a poor return on the nation's investment in higher education. Last but not least, there are the institutions of higher learning themselves, whose value and prestige in the public's eye have steadily moved downward as costs move upward. In 2008, 81% of Americans thought college education was worth it; today it's 57%.

The authors propose various solutions to the problem: reforming K-12 education to make it better at equipping students who decide not to go to college and might more profitably attend a vocational school . . . and, most important, shifting more of the higher-education curriculum over to online courses, which will lower costs both to schools and to students.

Still, no one should expect sweeping changes any time soon—not with the federal government still supplying the dollars and millions of families still signing on to the myth that "everyone should go to college." Like the Roman Catholic Church on the eve of the Reformation, the American university, one of this country's great institutions, has become a refuge for timeservers and charlatans and lost sight of its core principles."

Summing Up

The problems associated with a third party payer system don't just apply to America's broken health care industry.

The government controlled system is alive and doing great harm to students and colleges all across America as well.

And as with government programs generally, the most harm is being done to those who can least afford it --- low income families and the students who come from those families.

And in the classroom, the fact that 43% of the grades will be an "A" shouldn't be cause for celebration either. An "A" means average today. 

But at least the student will get loaded with lots of debt that will follow him throughout adulthood, or into bankruptcy, as the case may be.

This crap has to change. We have to stop screwing our young people and start helping them instead.

And we can best do that by getting  We the People more involved and the government knows best gang of do-gooders less involved.

That's my take.

Thanks. Bob.