A student-debt solution that’s so obvious, it’ll never happen

A Republican mulling a 2016 presidential run would be smart to rip off this idea from Mark Cuban for addressing “the real bubble” in the current economy — the student loan bubble (via Inc.com):

“‘It’s easy for the colleges to ask for more, because then the potential students just take out bigger loans,’ Cuban said at Inc.’s GrowCo conference, adding that rising tuition costs have resulted in more than $1 trillion in student loan debt. 

“‘That’s the same money that, when you graduated, you used to move out of the house or you went out and spent money that improved the economy and helped companies grow. It created more revenue and spending power. Instead, it’s going to build a better fitness center at your school.’

“So what’s Cuban’s plan to stem this problem?

“‘If Mark Cuban is running the economy, I’d go and say, “Sallie Mae, the maximum amount that you’re allowed to guarantee for any student in a year is $10,000, period, end of story,”‘ he said.”

I would say a Republican or a Democrat should rip off the idea, except that this kind of idea runs counter to everything the contemporary Democratic Party stands for. Namely, recognizing that when government intervenes in a market, it generally pushes prices up, which in turn raises calls for more intervention, which throws the market still further out of whack. Rinse and repeat, from health care to housing to higher education.

If something cannot go on forever, it will stop. And there is no way the sky-rocketing cost of tuition can go on forever at its current pace. That’s all the more true and obvious given that, as Cuban said, much of the money doesn’t even go toward improving education or access to education. It goes for ever nicer dormitories and fitness centers, and ever more layers of administrators to run the institutions.

The first rule of bubbles, as Thomas Friedman might say, is to stop inflating. You might quibble with how to do that, and how quickly, but you can’t rationally argue against it. Will there be people who come out worse at first from an idea like Cuban’s? Sure. Worse than continuing to rack up student-loan debt they can’t pay off — or waiting for the bubble to burst on its own and let the damage spread as it may? That seems unlikely.

Reader Comments 0

72 comments
Starik
Starik

Why not limit the money spent on political TV spots by diverting part - or most - of the money collected to scholarships or tuition-reduction programs?

JohnnyReb
JohnnyReb

The best thing that could happen to student loans is to get government out.

Obama went the other way with no doubt, absolutely no doubt, believing and wanting at some point the massive debt will have to be forgiven only to be paid by taxpayers.

When that happens, and it will, who will be ones who carry the burden?

It will be all taxpayers because of assuming the debt, but those who paid their student loans will get a double whammy.

A gift from the Democrats for doing the right thing.

How can anybody be a Democrat?  It defies logic, common sense, and any moral you wish to judge against.

ThulsaDoom
ThulsaDoom

There's already been a few books written on this and yet no one seems to be heeding the warnings. True enough. The more the gubment subsidizes education the more expensive it becomes. Will the progs ever learn?

King Tut 0603
King Tut 0603

Again Kyle you find a way to paint a false picture and point toward the Democrats.  The real issue is state's have been cutting their higher ed budgets year after year.  To make up the shortfall, the University Systems hike up tution and colleges keep giving raises to faculty for no good reason.  The rise in tution far outpaces inflation and it is a shame.  Whenever the market knows you need something, they take full advantage in charging you as much as they can to the point of exploiting the situation.

Kyle_Wingfield
Kyle_Wingfield moderator

@Tony_King Better go back and check the trajectory of tuition increases. It long predates the budget cuts of recent years.

Trefusis
Trefusis

@Tony_King  Sorry but not true.  Rather they increase their budgets because they deal almost solely with the professional administrators who are the principal culprits.  The agreement ever is to keep the administrators whole by taking it out of the hides of the students, which is a hidden tax and a very safe political play.  We're really talking about the share that federal taxpayers must pay for tuition and "fees" at state colleges together with massive "over-overhead" paid by non-profits, the Feds and foreign governments.  No postgraduate at GA Tech, for example, pays personal costs not overmatched almost 3:1 by the other paying entities, and the Feds want to be the big elephant so that they can call the shots, especially on content.  That's the game.  Republicans play it too, just not so well.  Personally I prefer the for-profit sector because their motives more often are clear and natural.  Usually they want the scientific wherewithal with which to drive a newly invented, profitable technology.  What governments seek is sheer power lust, the might of social engineering.  And as they mostly are dolts I dislike this on ideological grounds. That is why I don't vote for Democrats.  Y'all just can't give up the social engineering schtick.   

Trefusis
Trefusis

@Kyle_Wingfield @Tony_King  Gentlemen, Higher Ed policy is my former line of work and I don't see the student debt crisis as partisan.  I was a Conservative ever employed by Democrats, who after all largely have run the ed system for decades.  The explosion of student debt was as predictable as Demographics.  I welcome this endorsement of Mark Cuban's (I suspect, half-serious) approach because the runaway cost of American college and university really were caused by government policy and planning, from the days of the first G.I. Bill, which was a splendid piece of American Socialism but which imposed a growth imperative our couldn't sustain forever. 


Even Woodrow Wilson taught courses whilst he administered Princeton, but after the Second World War the nation saw a new creature, the full-time school administrator, and the growth in administration and administrative costs became unsustainable over the past 40 years especially.  For 70 years federal subsidies literally were taken straight to the bank, as vouchers with which to secure guaranteed loans for the burgeoning of classroom floor space, living quarters, laboratory equipment, library holdings and the rest of what in the trade we call status factors.  When especially the state economies contracted as the result of irresponsible legislative spending, the costs were extracted retrospectively from students in the form of fees and tuition that rose far faster than the rate of inflation.


Mr. Wingfield your UGA was an exemplar of this trend in both the positive and the negative senses.  So here's my final point, which recoil's on Cuban's.  UGA was one of the first land grant universities, a product of a public/private partnership model hatched in part by President Lincoln.  Basically it amounted to a federal matching grant challenge from D.C., and among other things it's why UGA to this day is required to teach e.g. Agricultural Science, and Veterinary Medicine.  The point is that the policy's initial formula, in the Morrill Act, was more or less a 50/50 deal, fed vs. state, and that the feds gradually turned it into something more like 75/25.  (Much as they are trying to do with K-12).


It's a bit scarier and more complex than this but my figures I think are roughly fair.  A Ten Grand limit per annum on federal student loans would among other things shrink the proportion of Americans who do the full sis-boom-bah, and that's not necessarily a bad thing depending upon how it affects fairness of inclusion, meaning socioeconomic diversity.  As I say, such policies have the advantage of the unusual predictability of Demographics, and there are econometrists out there capable of gaming and modeling this to stipulation to a high degree of reliability, even to 25 years out or more. 


The last thing I have to say about this is the hardest.  Because people get older, most of us naturally buy the line from the college and university systems that K-12 determines the tenor and trends and depth of Higher Ed, but in fact those all are political systems that work top-down, not bottom-up.  Were we all to put Higher Ed on a strict allowance we'd begin to have to accomplish much more, in far shorter time, than presently we fail to do in thirteen years of compulsory schooling.  It would transform secondary schooling and therefore the primary grades.  Probably even preschool.  We'd have to be a very daring lot of taxpayers to go that route, so that is why it'll never happen.  Because we all are schooled, and the virtue and mock permanence of schooling is schooling's very first and most stubborn lesson.  We are too schooled up to be smart now. 


And sorry, Tony, but that's every Democrat's ultimate ace-in-the-hole, governmental manipulation of very flawed plans, usurping other people's children by force of law.  That's why ours is the most expensively bad system of cooperative child rearing the World's ever seen, and why U.S. taxpayers now spend about as much on postgraduate students from abroad as we do on American collegians who remain here to upbuild the Nation.  I wish your fellow partisan Senator Moynihan were yet alive because he foresaw all of this.  Certainly nothing of it originates with me.  Heck, even Congressman Powell (D-Harlem) worried about it as early as 1967.

LilBarryBailout
LilBarryBailout

@Tony_King

The real issue is state budget cuts?  If that were true, then why are private college tuitions also rising?

ThulsaDoom
ThulsaDoom

@Tony_King


Do you know how many colleges and universities now have rock climbing walls? Its over 600 now. The money isn't going to instruction. Its going to nicer and nicer amenities to allow universities to compete with each other for students who will pay ever more for tuition- knowing that the govt loans will help pick up the tab. 

IReportYouWhine
IReportYouWhine

You should also mention that the interest rates on student loans are currently 8 1/2% or something exorbitant like that. Not only are you piling on the debt, it also grows over time. And of course, this is in the fine print.


All the same arguments^^ that the libs had with the credit card companies that brought on the dodd frank legislation.

AtlantaMom
AtlantaMom

While a $10,000 a year limit may sound good here in Georgia, where most of our students have at least one year of semi-free tuition, that is not the norm in most states. 

$10,000 about covers room, board, books, fees (not the fees in Georgia, because they are hidden tuition costs) and living expenses.  That means tuition needs to be covered by other means.  At most state universities this can range between $8,000 and $15,000 for in state tuition.  

So this plan will greatly limit the number of students who can attend college.  Maybe that's the plan.

ThulsaDoom
ThulsaDoom

@AtlantaMom


Or it may have the intended effect and get colleges and universities to cut out some of the fat and actually lower costs- or at least hold the line on rising tuition. 

FIGMO2
FIGMO2

Will there be people who come out worse at first from an idea like Cuban’s? Sure.

Imagine what the world would look like if mothers never weaned their babies.

schnirt 

FIGMO2
FIGMO2

Cuban chose Kelley School of Business UI because it had the lowest tuition within the top ten. I guess he's good to his word.  

crankyoldman
crankyoldman

Meh.It can be done.But tuition isn’t even the whole story.My two oldest kids are currently attending Georgia Southern.My son is a senior and my daughter is a sophomore.They both had 4.0 GPAs through high school, and have maintained at least 3.7 in college, so their tuition is completely covered.And my daughter got an additional scholarship which covered her dorm room for the first year.And it still cost us $3,000 per semester last year for the mandatory $1,600 meal plan (GSU apparently just did a very expensive renovation to their cafeteria that needs to be paid for) plus books and fees.Fortunately, the meal plan is only mandatory for freshmen, and my girl is cooking her own meals this year for about $100 per month.So when my next daughter graduates high school this year, she’ll probably live at home and go to GRU for the first year, and then transfer in to GSU as a sophomore, and not have to worry about mandatory dorms and meal plans.I guess I can’t really complain though, because I know I’m getting off cheap.Especially since my son joined the National Guard, and has been pretty much self-sufficient for the past year or so, since he gets a GI Bill stipend plus monthly drill pay.

Kyle_Wingfield
Kyle_Wingfield moderator

@crankyoldman There's no doubt the price of college, and not just tuition, is very high and getting higher. The question is, how do we begin to rein it in?

crankyoldman
crankyoldman

Well, part of the problem is that states, Georgia included, have cut subsidies to state schools in recent years.Part of that shortfall is being passed on to students in the form of higher tuition and fees.I don’t see politicians biting the bullet and raising taxes any time soon to restore funding, but if they did, there needs to be more oversight of how the money is spent.Rock-climbing walls and dorms with hot tubs are not essential to education.Neither are 7-figure salaries for administrators.That’s a start.

And Mark Cuban’s idea has some merit also.I grew up in the military, and spent 8 years on active duty myself.I can tell you every landlord near a military base keeps a close eye on what the military housing allowance is for each pay grade.And they set the rent at right around whatever the rate is for whichever pay grades they are trying to attract as customers. Or at least they used to.It’s been a while, and I’ve heard that the military got smart and started splitting the difference with the soldiers.So, if the housing allowance is, say, $1,000 per month, and the soldier rents an apartment for $600 per month, he gets to keep $200 for himself, and the government saves $200.I don’t know if they are still doing that, or if it was just an idea that was batted around.

Trefusis
Trefusis

@crankyoldman  This probably is exactly how we've got to start playing around with the formula.  The U.S. used to have Treasury secretaries who employed staffs to mess with stuff along these lines, because our numbers are so great that it does add up soon, but nowadays it seems that Bloat is considered enshrined and very much in favor of the Machine over the Young, who don't vote enough.  That's clearly been the unprincipled thinking of every politician for whom I ever worked.  And that was a lot of them, and most are now in Congress thanks to shortsighted term-limits laws in individual states.  No place else for an inexperienced idiot to go, but Congress, or the classroom. 

Trefusis
Trefusis

@crankyoldman  But crankyoldman, our State is pretty sophisticated about such things.  As you know there are 49 other states.  What's at issue is the expenditure of subsidies for which every seamstress and billionaire in every place must pay or else face fine, forfeiture or prison.  This is the lingo of Libertarians, and yet I'm not one, but it's true.  I respect how you and your children have figured a balance of national service with the cost-affordability of good collegiate instruction.  Obviously you're aware that this can't happen in every case.  We must have a more sound policy.  Don't ask me what it is, but at least Kyle is thinking to ask.

Astropig
Astropig

@crankyoldman 

You've hit upon the answer. Transferring in as an upperclassman allows you to sidestep a lot of rip off fees and charges (like mandatory on campus residency for freshmen). My son did it (Also GaSo) and graduated with $0 - Zero-student loan debt. He secured a job three months before graduation and the future is really bright. It can be done. You just have to be focused and keep the goal in sight.

Kyle_Wingfield
Kyle_Wingfield moderator

No, MarkVV, it's not "censorship" to say I'm not going to publish your comment in which you twist my words to make your points.

Did I stop the piece at "Sure"? No, I sure as heck did not: I said there were other people who would be harmed absent any action. But you didn't bother to take issue with what came after "Sure," which would be perfectly legitimate, but rather used that omission to take a shot at my character.

And you just happened to leave out the "much of" part of my comment about how the money is spent, presumably because otherwise your silly point about my being "simplistic and condescending" would appear even sillier.

I don't publish context-free, word-twisting comments like yours so that I don't have to spend 5 minutes pointing out what you omitted. And I wouldn't have spent those 5 minutes this time either, except to make an example of you to others.

Don't Tread
Don't Tread

@Kyle_Wingfield Those of us who don't want to wade through miles of the "facts" regurgitated on demand and the usual personal attacks to find the nuggets of wisdom appreciate that.

Kyle_Wingfield
Kyle_Wingfield moderator

There are no fewer than 10 four-year colleges in Georgia where tuition, fees, room and board come to $16K or less a year. If a person is too poor to cover the other $6K a year, there's a good chance he's eligible for a Pell or other grant that would make up all or most of the difference. If she has and keeps HOPE, that would more than make up the difference even now.

If a person can't make up the difference one of those ways, maybe two years at a community college to save the housing costs (and get down below $10K a year) would be a good idea.

Not to mention that Cuban's off-the-cuff comment doesn't mean there's anything magical about the $10K figure. The point is that, with easy credit, we are encouraging kids to take out loans that are so large as to inhibit their future economic potential in spite of their college degrees (all the more so if they don't graduate). And until there's some rationalization of college prices, that's going to ensnare more and more people. See this recent survey by Pew that shows even half of kids from high-income families have student-loan debt these days: http://www.pewsocialtrends.org/2014/10/07/the-changing-profile-of-student-borrowers/

That simply isn't sustainable.

AtlantaMom
AtlantaMom

@Kyle_Wingfield

In Georgia there may be 10 four year colleges that cost $16,000. To be clear, none of them is a research institution.

Kyle_Wingfield
Kyle_Wingfield moderator

@AtlantaMom That's true, they aren't research institutions. I was looking for the least-expensive four-year degrees in our state.

Trefusis
Trefusis

@Kyle_Wingfield  Don't know whether this fits in, but about six years ago a friend from Marietta gave an invited, guest lecture at Southern Poly and came back saying that he'd not seen such dedicated and capable students at Harvard or MIT, from which he held dual appointments. 


He was so in earnest.  I recommended that GA eschew both the SAT and the ACT and develop its own assessments of applicants for admission.  Georgia salaries some very fine assessment minds at UGA, Georgia Tech and elsewhere.  I'm speaking of persons in Experimental Psychology who specialize in such things.  You know what the problem is?  They're all on retainer to the preexisting testing service up North.  The Governor, the General Assembly or the Board of Governors could order a different line of behavior, however, and do you see why?  Because each of them, by condition of contract, swore also a codicil pledging alliance to this state.  It would be best to dragoon also some Emory hotshots who are immune, but I bet they'd do it just on the dare.  It's not hard, just a bit of force majeure.  All these candidates who claim to care about GA ed I think are empty suits.

Kyle_Wingfield
Kyle_Wingfield moderator

When your entire argument is predicated on snipping context out of my words to weaken my point, you don't have much of an argument. Or a comment that I'm going to get published.

Jefferson1776
Jefferson1776

I agree with Cuban and I will add the Hope did a lot to raise tuition as it was money left on the table.  Working thru college,  though time consuming is the best way to go.  You do nobody a favor by loaning them money they can't pay back, and they will take the money if given a chance.  Loans are not bad, but too much is debt is not help.  To much I want it and I want it now is todays attitude, both rich and poor alike.


Some issues are not R or D,  just common sense. Toadies will try to blame a party.

87GaDawg
87GaDawg

Anyone getting a student loan needs a head exam.  There's just no need.  I worked my way through UGA back in the 80's.  Then, when I couldn't afford it any more, I moved in with others and went to Ga. State while I worked.  Where there's a will there's a way.  Stop getting loans.

Yes_Jesus_Can
Yes_Jesus_Can

@87GaDawg 

UGA or any Georgia school is still a very very good deal for in-state students.  Loans aren't that big a deal. 

Out-of-state or other private schools, say Emory, are much much higher in cost than in the 80's. 

RichardKPE
RichardKPE

@87GaDawg Your proposal is fantastic assuming students today are attending school in the 1980's.  Unfortunately, that's not the case anymore.


Take Georgia Tech, in-state, ungergraduate tuition and fees which totals $5700 per semester.  Let's assume $1000/month room/board and any other expenses.  That's $21,400 for the year (more if they're in school during summer which would end up at around $28,000).


"So just work your way through like I did!"  OK.  Let's assume a $9 hourly salary which becomes about $7/hour after taxes.  If a kid worked 40 weeks out of the year (the in-school months), at $7/hour, in order to hit that $21,400 mark, they would have to average SEVENTY-SEVEN FRIGGIN HOURS A WEEK at work, not including their school work!!!!!


Get a clue.




Mercury123
Mercury123

While it is noble in theory, the idea is very short sighted. The people most impacted with be poorer and lower middle class citizens. Upper class kids will still attend school thanks to their parents. So once again a policy would be set in place that would create a large income divide and help erode the middle working class. Businesses would be lacking their predominant workforce.

Yes_Jesus_Can
Yes_Jesus_Can

@Mercury123 

Wrong.  If any kids stop going to elite schools that will be a loss in demand, and prices will therefore go down. 

If that happens schools will adjust price. 

With the fed teat there for them, there is no reason colleges need to pay any heed to cost. 

LilBarryBailout
LilBarryBailout

The student loan nationalization is just another Democrat handout program, with loans that don't have to be repaid and liberal academicians getting rich and the productive class getting stuck with the bill (as usual).

Bhorsoft
Bhorsoft

@LilBarryBailout Oh, the loans have to be repaid, one way or another.  The gov't will take the money out of tax returns, "stimulus money", and any other gov't check you may be eligible for, like social security.  Not to mention wrecking your credit history. 

Lee_CPA2
Lee_CPA2

The increasing student loan debt load is simply the symptom of a much larger problem - out of control tuition hikes by the schools.

Looking at the out of state tuition for state schools, which should reflect the fully loaded, unsubsidized cost, you will see that tuition has been increasing at a multiple of four to five times the rate of inflation. Easy money such as student loans and the HOPE Scholarship directly feed into this increase.

Here's a bit of reality - the student finance department at the school is not your friend. They will encourage you to load up on student debt, ANYTHING, to keep you in school and keep the money rolling in. They do not care if you burden yourself with crippling debt.

Reality #2: All degree programs are not the same. From a financial prespective, many degrees are not worth the parchment they are printed on.

Maybe schools should look at the degree program with respect to the expected annual salary. High potential degree programs such as Engineering would qualify for a higher student loan debt burden than say, Women's Studies.

ernestangelie
ernestangelie

@Moderate_line  The idea of helping a qualified student get through college and become a productive citizen is great. Unfortunately, the world is full of greedy people and suckers. If you try to pass some laws that might regulate the industry to keep the greedy people from taking the suckers' money, you're accused of being a socialist, anti-business pinko. 

ernestangelie
ernestangelie

It's not a terrible idea. The main problem is the shady schools that rip off students (and the government, through generating bad loans AND having students get those  sweet, refundable tax credits). We've hammered into everyone's head that they need college, but, if you can't get into a local community college, then, sorry, you should look for something that doesn't require college. You are wasting your money if you think going to a for profit school is going to help you  become a medical assistant, chef, fashion designer, recording engineer, massage therapist, etc. The only people who are going to make big bucks are the stockholders in the schools.

mga
mga

Let's also talk about endowments.  Harvard announced its endowment was over $36.4 BILLION as of June 30, 2014, and earning at a rate of over 14% a year.  There is no way anyone at that school schould be getting federal loans- a Harvard education should be entirely funded by the school.  Some may say that punishes a good school for having a large endowment- I think it may be a way to provide some cushion while we really overhaul college funding.  Their alumni are extremely competative about fundraising for their endowment- that won't stop.

AtlantaMom
AtlantaMom

@mga

What makes you think they are getting federal loans?  Anyone at Harvard, eligible for a federal loan would be getting 100% scholarship.

IReportYouWhine
IReportYouWhine

They'll just blame it on Republicans when it crashes the economy.

Bhorsoft
Bhorsoft

Not sure student loan money is the entire problem.  Sure it has helped fuel the rise of "for-profit" schools.  The other elephant in the room is lottery money.  Georgia isn't the only state with lottery funded "scholarships."  As long as boatloads of easy money are available to schools, tuition and fees will increase faster than the rate of inflation year after year.


Here's a different idea:  Have the schools guarantee the student loans.