The Next Trillion Dollar Bubble

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One of the oldest economic maxims, “if you subsidize something, you get more of it” has created the next trillion dollar-plus bubble for which American taxpayers will be on the hook. The National Center for Public Policy and Higher Education discovered that published college tuition and fees increased 439 percent from 1982 to 2007, while median family income rose 147 percent. What is driving those costs? The idea that every high school graduate should attend college, and that government–meaning taxpayers–will guarantee loans made to those students.

The bill gets larger each year. Federal assistance to college students has risen 60 percent in the last three years from $97.7 billion in 2008 to $156.1 billion this year. This reflects a steady trend in making ever more money available to students who need financial aid in order to afford college. Back in the mid-1980s, there was a $2500 annual cap on the amount of federal student loans one could access to attend college. Thus, the maximum amount of federal debt one could amass in the process of getting a four-year degree was $10,000.

That amount has more than tripled. For most students, $31,000 is now available and, unsurprisingly, student debt has skyrocketed. The current average debt load for student borrowers is a record $25,250, even as those who attend high-tuition colleges are averaging double that, at over $55,000 per student. And as college tuition continues to rise, so do the number of borrowers. According to the College Board, more than 50 percent of all full-time undergrads at public colleges and universities are now full-time borrowers. At private nonprofit schools, two-thirds of students have outstanding loans.

As indicated above, more money available for borrowing by students has led directly to massive increases in tuition. Those increases substantially exceed the actual costs of the education itself. The Cato Institute reveals that it costs roughly $8,000 to educate an undergraduate at an average residential college, even as a private four-year university averages $37,000 to attend and a public equivalent averages $16,000. The resulting profits allow colleges to expand their facilities, their bureaucracies and their amenities, leading to higher tuition charges.

Hence, a vicious cycle: as college tuition costs increase, the government makes more funding available to students to pay for them. The more funding available–guaranteed by the taxpayers, so that colleges never face the possibility of a loan default–the more they can raise their tuition costs without ever having to worry about getting stiffed.

The American taxpayer, on the other hand, is getting stiffed with increasing regularity. According to the American Department of Education, student default rates rose sharply in 2009, the last year for which statistics are available. 15 percent of borrowers at for-profit colleges and 7 percent of borrowers at public colleges defaulted in the first two years of repayment. This represents increases of 11.6 percent and 7 percent, respectively. Of the 3.6 million borrowers whose first loan payments came due between Oct. 1, 2008, and Sept. 30, 2009, as many as 320,000 walked away from their obligations.

This too creates a vicious cycle. Since student loans are not dischargeable, even through bankruptcy, borrowers face long-term consequences that impinge on their ability to lead the kind of life one expects a college diploma to provide. It can become impossible to borrow money to buy a house or a car, wages can be garnished, tax returns can be seized, and in the ultimate irony, one can have difficulty finding a job in an era where employers are increasingly checking a prospective employee’s credit status.

Unfortunately, it’s not just defaults that burden the taxpayer. In March 2010, a Democratically-controlled Congress instituted a government takeover of the student loan program as part of Obamacare. Slated to begin in July 2014, those owing student loans would see their payments reduced to 10 percent of their disposable income, down from the current 15 percent. Those who keep up their payments will have their loans forgiven after 20 years, instead of 25. Yet on October 25, in a transparent pander to the youth vote, the president, by executive order, moved the timetable up to 2012.

Both of these moves virtually guarantee that once again “profit,” aka a college education, will be privatized, while losses, resulting from the failure to pay one’s freely undertaken obligation–either in the form of outright default, or the “forgiveness,” of a loan before it is completely paid off–will be socialized.

Yet for those more fully suffused with the American entitlement mentality, even this arrangement is insufficient. In what proponents are laughably characterizing as an economic stimulus, Rep. Hansen Clarke (D-MI) is proposing HR 365, part of which advocates forgiveness of student debt. Why? Government bailed out “rich” bankers, why not “poor” college students?

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  • StephenD

    In a recent brew-ha here in Florida over the Governor's insistence for Welfare Recipients to pass a drug test before being given aid, a young man sued. As it happens he is a veteran and has a 4 yr. old daughter and was attending college FULL TIME. I don't get it. When I came out of the military I lived in a basement Apt. for 3 yrs., had a wife and a small child. I worked full time AND a part time job AND went to school nights part time to make a better life for my family. The idea of welfare never entered my mind let alone having someone pay for my schooling.
    Why bother even going to school at this point? Since the Government will hand you a check, you don't need schooling at all. Hey, free health care, food and shelter. Why, soon they may hand out vacation vouchers. After all, it's tough yelling "give me more" you probably need a break. You…DESERVE it.
    Can you say "Hell in a Hand Basket?"

  • Amused

    I see FPM's still displaying it's aversion to the truth . What happened to my post ,which your "admin " had to approve ? It was totally innocuous , but because it put blame where your ideology doesnt want to see it , and btw precisely where it belonged .
    Look it's your ball and if you ewnt to run home with it , that's your righ. But PLEASE stop accusing others of being Marxist and communist , when you exhibit marxist and communist behavior yourslves .

  • Amused

    Another "trillion dollar bubble "is indeed just around the corner . Wall Street [ the casino ] is up to the same old tricks that got us here to begin with .The small invester [ the 99% you like to deride so much ] are no less at the mercy of Wall Street avarice now , than they were at the 2006 BUST .And the politicians OF SALL STRIPES are still sitting in their gilded cages waiting with bated breath fot Wall Streets Lobbyists to come knocking on their doors with fistsfulls of dollars .

  • Amused

    And you've just done it again FPM , I doubt this one will be approved either .

  • Amused

    The 99% , the people you deride , the small investors , are STILL at the mercy of Wall Street AVARICE. Another BUBBLE is indeed around the corner.

  • Amused

    Derivitives and short selling are Still the order of the day , and with no meaningfull regulation or safeguards . Wall Street's Lobbyists STILL get their bang for their bucks in favorable legislation.

  • Amused

    …and there's no shortage of imbeciles like StephenD with his little parrot memes, ,who'll play sycophant to all of it …..mindless man , mindless . oh did I leave you out Arnold ?

  • Amused

    So let's all keep that Wall Street Casino open , America's WORKING class DESERVES to be screwed again after they think their investing in their economy and country .
    Damn right , huh Stephen D , those s.o.b.s bloody well deserve it . Imagine the nerve of those low-lifes!!!!!! ….demanding a level and fair playing field . How dare they question skewed Conservative [up the arss of buisiness ] values !

  • Amused

    How dare those low-lfes demand a fair playing field ? The desrve wahat they get huh Stepen D ? Imagine that ! Questioning conservative values ! How dare they ?

    • StephenD

      Amused, WTF are you ranting on about? The guy I spoke of was on the dole while getting all his needs met off other peoples money. You're telling me that is fair? THAT is your idea of a level playing field?
      All I am saying is that you should do for you and yours and I for me and mine. We all should kick in for those that CANNOT do for themselves. For those that WILL NOT do for themselves I say F**k em, let them starve.
      If you have as problem with that…you have a problem.

  • Amused

    Bloody 99% , screw them all !

  • LindaRivera

    Most people are not aware of government raids made on small-medium sized farms. Raw, organic dairy farms have had their healthy dairy products seized and thrown out. At least one farmer has been taken away in handcuffs! Many people in a desperate struggle to regain their health (or not lose their health) know how IMPORTANT raw, organic dairy is in the battle for health.

    Businesses and jobs must be PROTECTED! The WAR against small-medium sized businesses must stop!

  • LindaRivera

    The new Animal Identification rule will act like a tax on every livestock animal that crosses state lines – something that happens THOUSANDS of times a day in the United States! This is incredibly hard on small-medium sized farms WHO CANNOT AFFORD THIS!

    Family farmers and ranchers cannot afford additional paperwork and unnecessary expenses to please the industrial agribusiness lobby. We must stand up for our rights and the rights of farms! Farm and Ranch Freedom Alliance is standing up for family farms and backyard livestock growers!

    This is their internet address:


  • LindaRivera

    Americans must not be denied the human right to have jobs and businesses!

    Is Fed Raid on Gibson Guitar​ Company Enforcing Policy . . . or a Push to Target ‘Made in the USA’?
    September 07, 2011

    They are among the most sought-after musical instruments in the world.
    Gibson is also a company that is proud to put the “Made in the USA” label on its instruments. While the company has lower-end lines that are made overseas, every guitar that bears the “Gibson” label is made in the U.S. by American workers.

    Related Stories
    Attacking U.S. Companies Is No Way to Create Jobs
    Gibson: Feds Want Guitar Woodwork Done by Foreign Labor

    Related Video

    Gibson Guitar CEO: Don’t Know Why We Were Targeted

    On August 24, armed agents from the U.S. Fish and Wildlife Service and Homeland Security raided the corporate headquarters and two factories of the Gibson Guitar company. The agencies took away 24 pallets of Indian rosewood and ebony, as well as a number of guitars and computer files.

    “I think they’re taking the position that we should be shifting these jobs overseas,” says Bruce Mitchell, the chief legal counsel for Gibson.

  • LindaRivera

    An inferior health care plan that no one wants and CANNOT afford to pay. The threat to jail and/or fine those who don’t purchase the government enforced plan.

    Massive spending as if there is no tomorrow. Fighting wars we have no money for. Massive borrowing.

    The Massive​ giving away of Billions of dollars every year to other countries, including the oil-wealthy Middle East, Hamas-controlled Gaza and the Palestinian Authority organization who fill their war chests, build mansions and laugh all the way to the bank with FREE infidel money. Whilst in America, homeless shelters are filled to capacity; tent cities have sprung up all over the U.S. filled with desperate, jobless, homeless, neglected Americans.

    Massive debt. The massive printing of paper money out of thin air to DELIBERATELY create out-of-control inflation. There is no question that the total DESTRUCTION of America’s economy is planned. The results will be horrifying. In the once wealthy and great nation of America, millions of Americans will become destitute, hungry and homeless with no money or resources to help them.

  • LindaRivera

    Organic, non-GMO avocado, fruit and nut trees and berries must be planted in all of our nation’s cities’ and towns’ parks to help the many millions of Americans who will soon be in a desperate struggle to survive because of the frightening, highly destructive economic policies of our government.

    Watch it. And weep for our great nation and people:

    FALL Of The Republic – The Presidency Of Barack H Obama – The Full Movie HQ

  • sod

    The more subsidized students, the more government dependent students and therefore the bigger government. Education institutes are just tools for the lefts to achieve their self-destructing goals.

    Higher education cost should be carefully scrutinized, as the greedier the educators become, the greedier the students they will bring about. Who should be blamed for those greedy CEO's and bankers and officials and congress people?

  • B-dubs

    One thing missing here is that no one has mentioned Griggs v. Duke Power. This Supreme Court decision means that IQ and other testing by employers can be discriminatory, as blacks and Hispanics, on average, score lower than whites and Asians. So, companies can no longer use them in hiring. Instead, so many companies require a college degree as a proxy for an IQ test. Generally speaking, someone who manages to get a bachelor's degree has a modicum of smarts, motivation, and social skills (though not so much anymore).

    Overturning this decision will mean that companies can be legally safer when implement testing for hiring and make decisions based on test results rather than degrees.

  • johnnywoods

    It is interesting to me that the more a degree from collage costs the less it seems to be worth. Why are the tax payers getting screwed for this?

  • findalis

    Someone explain this to me:

    Why does the football coach and/or the basketball coach make over $1 million a year from the university/college? In some cases it is way more. No professor makes that much. Neither does the head of the school.

    Could it be that the cost of these programs are driving up the true costs of a College Education.

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