Stop the Insanity! Please!

By Watson Scott SwailPresident & Senior Research Scholar, Educational Policy Institute

Remember Susan Powter? That punk-looking fitness/nutritional guru back in the 1990s? Yes, she’s the one who lost 130 lbs and then ran around America shouting “Stop the Insanity!” Well, that’s what came to mind this week after reading several articles on student loans, Marion Jones, US torture, et al.

I read an AP article yesterday titled High-Priced Student Loans Spell Trouble. The article does a nice job outlining the problematic conditions that some students are facing in the private loan arena. The article quotes Kristin Cole, who has $150k in public and private loans: “I could never buy a house. I can’t travel; I can’t do anything. I feel like prisoner.”

I don’t like it when people are burdened with too much loan debt and have to squeak through life. But this isn’t a commentary that begs for tears. Cole received her law degree from Michigan State University and currently serves as a legal aid worker. I have one question: who counseled her into taking on $150k in student loans from a public university?

Paul-Henry Zottola, a periodontist in Connecticut, has $300k in student loans, according to the article (although it isn’t clear whether some of those are for his wife, a school administrator). Still, who counseled Paul-Henry to take on that level of debt to get his degree? There is now one periodontist in the country that I never want to go to.

I also remember a bright, pretty African-American girl I met when touring Tuskegee University in Alabama a few years back on a site visit. She was graduating that year and going into teaching: with $80k in student loans. Who counseled her? Who sat down with her and perhaps suggested that she shouldn’t take on that level of debt for a $26,000/year starting job? There are other avenues that can be taken to get to the same end point.

It makes me a little mad, in this article in particular, when students are painted as victims when they should have done a little “education” on their own. I understand how this may sound a bit right wing, a bit unfeeling. But come on. When do we “stop the insanity?” We live in a culture where nothing is our fault, and we’re always on the lookout for a bailout. It’s akin to the mortgage crisis in the US, where homes are foreclosing at record rates and people are urging Congress to provide a safety net for those who lost their homes. I have little sympathy. They signed the mortgage and they should have read the fine print. Balloon loans can be surprising if you aren’t careful. We can’t protect stupidity.

So who’s responsible? The government? Or the student or homeowner? At what point in one’s life do we hand over the key and say, “our work is done, here. Enjoy the ride.” This is a different point that focusing public policy on welfare and the poor. Those are systemic issues and typically issues beyond individual control. But a $300k student loan, let alone $150k or $80k; these are individual situations that could have been averted with proper counseling or perspective.

A friend of mine graduated from medical school 10 years or so ago with $125k in student loans. His starting job was $125k/year. I didn’t feel bad for him, and neither did he. He knew it was part of the price and he could handle it.

The article tries to play private loans as bad things. The only bad thing is that public student loans still, even under the reauthorization, do not provide enough support for students, forcing them to private forms of lending with higher interest rates. The private market is the private market, and I don’t think we can or should do much to regulate it. What we need to do is to “fix” the public loan market. We still have arbitrarily low loan ceilings, and have now authorized lower student loan rates, although I will argue that lower loan rates should not have been the legislative priority.

I certainly worry about people coming out of public four-year institutions with $50-$80k loans. With the average cost of attendance approaching $17k/year at most public institutions, the potential for our future social workers to have considerable loan burden is high. These are the people I worry about: the regular folk with regular jobs; not the high private schools with professional jobs.

Part of the problem is what we have come to expect. We have built such an expensive system in the US. First, as I’ve argued before, we simply have too many institutions: 1,500 four-year privates; 500 four-year publics; over 2,200 two-year institutions, and 1,700 less-than two-year proprietary institutions. That’s almost 6,000 right there, with plenty more of various types. Over 11,000 institutions come up in IPEDS.

Second, as in our medical system, higher education offers the best and the finest, which comes at a huge price. Many institutions have awesome dorm facilities on most campuses (but certainly not all), with unbelievable academic and social centers on campus. I’m not saying I want these to go away, but we all have to understand that someone has to pay for it. Remember the cardinal rule of higher education? Live like a student now or live like a student later. I think many students are choosing the later, and those are the people that the AP writes about. Not students who have scraped to get to college and are working full-time and attending full-time and scraping by to finish college. Those are the heroes in this story.

I’ve argued that we have a serious problem with the escalating prices in higher education. And as economists will tell you, that won’t disappear. Higher education as a commodity will always outpace inflation. Even though this may be true, it doesn’t negate the immense difficulty this is causing us now and will cause in the future. The prices will only get higher, even after adjusting for inflation (which will also likely increase with the continuing decline of the US dollar). Somehow, someone is going to have to pay the costs of these increases, and government will certainly pay part of it, but more and more of it will continue to fall on the consumer.

Barmak Nassirian of AACRAO says that student loans are “literally a new form of indenture…something that every American parent should be scared of.” But unless we find ways to cut costs at institutions, something that isn’t even remotely being offered as an issue, parents will be more and more scared.

So to Paul-Henry and Kristin and the girl from Tuskegee: I wish you the best. But you’ve made these decisions, perhaps not with the best advice, but you own them as well as the debt.

And Marion Jones? She’s a local hero here (she went to Norfolk State University a few miles from our headquarters) who just announced steroid use yesterday. She knew it before she won 5 medals in Sydney in 2000. Where is your responsibility, Marion? All those years of saying “I didn’t do it!” and everyone knew you did. All those endorsement deals brokered on lies. Marion, you looked too much like Ben Johnson, the man who broke Canadian’s hearts back in 1988, to be telling the truth.

Don’t worry; I won’t touch the torture thing… although I really, really want to.

PS. By the way, Susan Powter has long hair now.

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