The college bubble is bound to bust.
In the past decade, the price of college tuition has risen faster than ever before; the amount of Federal financial aid doled out has risen at the same rate. According to a recent report from NPR, the amount of money available to students in the form of grants, scholarships and other money that does not have to be paid back has doubled in the past 10 years. Students receiving aid now get about $7,000 per student per year.
The Federal government is the primary provider of student financial aid. And, as with most things the Federal government takes a lead role in, there are negative side effects for American higher education.
Like the insolvency of Social Security, financial aid is a politically untouchable topic. Financial aid is a good thing, if it is administered in a sensible manner. Presently, however, Federal bureaucrats are doing two things to destroy the value of American higher education with financial aid largess.
First, the overabundance of Federal financial aid is driving the cost of college through the roof, as students who may have no business being in college and no willingness to attend do so simply because there is free money on the table.
Unfortunately, this means classrooms are rapidly filling up with underachievers, and college professors are being forced to lower standards to accommodate. College administrators are increasingly cracking down on professors who fail more than a few students during a semester. This is not a matter of compassion toward the students, but an economic decision. Think of each financial aid student as a bag of money handed to a university by the Federal government; essentially, the students are Federal subsidies. The only condition to continue to receive the government money is keeping the students in the classroom.
Second, overabundant financial aid is creating inflation in the white-collar job market. That is, a college degree that was once more difficult to obtain — one either had to come from a wealthy family or work very hard to cover tuition with a job or merit-based scholarship — has now been handed to masses of people for no reason other than their family’s financial standing. This means that degree-holding people have flooded the job market. Like fiat money, more easily attainable degrees means less value is placed on the degrees. It is simple inflation.
Not everyone, however, is eligible for Federal financial aid. The social welfare program shuns students from well-to-do families without question as to whether a student’s parents are willing to pay for his schooling. Those students who must pay for their own school and are unable to receive financial aid because of their parents’ financial situation have limited options. Told by society that college is a must and realizing that a vast majority of jobseekers hold degrees (and that not having one may put them at a disadvantage), many of these students make the financially devastating decision to assume massive amounts of student loan debt.
The Wall Street Journal notes:
According to … analysis of recently released Federal Reserve data, households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010, the latest figures available. That group also saw a sharp climb in the amount of debt owed on average.
According to some estimates, the amount of student loan debt taken on by students attending public universities each year grows by about 12 percent. Americans are already in the hole to the tune of about $1 trillion in student loan debt.
Federal government in its unwavering benevolence has set out to destroy higher education by completely eliminating its value. Simultaneously, well-meaning students brainwashed by bureaucratic handlers in high schools throughout the Nation are putting themselves on the line for thousands of dollars in unforgivable debts to purchase worthless degrees.