We baby boomers born in the days of Truman and Eisenhower had the best deal going. The infrastructure was untouched from the war, we had money to lend to Europe for rebuilding, poverty decreased in all levels of society, and the dream of a college education became more than just a dream.
The tuition rates were on par with the student’s ability to pay based on what he could earn during the summer months living at home. As for myself I started college with a savings account that had grown at 2 ¼% that had been under-funded mostly with earnings from mowing grass and birthday money. My parents received a small inheritance right after I graduated from high school that enabled our combined efforts to pay for that first year. After that, for me, summer jobs fulfilled the tuition and room and board requirements for almost any Texas state institution.
What has happened to that ratio of income to tuition? Why do college students graduate with enormous debt? Why is the national student loan debt $1.2 trillion?
The answer – government meddling.
In the same way government passed and pushed the CRA, Community Reinvestment Act, forcing banks to loan mortgage money to people who were most likely to be unable to pay it back. The banks protested and the government then told them they’d back up the loans. After that the ceiling was the limit. Why vet borrowers at all if the government backs all the loans? As we all know, that whole meltdown led to the collapse in 2008, where people had invested heavily in derivatives (simply put: mortgages of all quality rolled into investment opportunities). Fanny Mae and Freddy Mac, quasi-government institutions, fed the growing beast as did the banks when the law was changed that separated banks from investment entities, allowing the two purposes to be combined in one institution. Greed was the primary motivator as you may surmise from Gretchen Morgenson’s book “Reckless Endangerment,” a very deep delving into the mortgage lending crisis. Many retirement savings lost 30 -50 % and most of those who thought they were ready to retire had to postpone those ambitions. I have read that the government divisions most responsible for this collapse still insist that the real criminality was “predatory lending” and have never admitted their responsibility.
In much the same way as the government meddled in mortgage loans, they have abetted the massive rise in college tuition. Making grants and loans available to nearly anyone they have given the universities the ability to ask not what they can do for the students but what can they do for themselves – giving rise to an education industry. On that subject a publication, “The Week,” a few years ago in an article titled “The $180,000 Education,” printed a comment from a regent on the board for Boston University. He said, when in the meeting to discuss tuition rates, the board’s concerns were not for what the college needed but what they could get away with. With the massive amounts of money available and the enrollment demands increasing, many universities built country club student unions thinking that today’s students have higher standard of living expectations than their parents or grandparents had. As the tuition rates climbed the government loaned more money. As more money flooded the wallets of students, the higher the tuition rates went. Now the politicians are promising free college and forgiveness of college loan debt. But what do they do to reduce the rise in rates? Reducing the money available is going to be like heroin withdrawn from an addict. No doubt the colleges have their lobbyists and they will be screaming, “Foul!”
Another government mess trying to fix something that wasn’t broken.
Ray Wolbrecht is retired from his dental practice in Kyle. He owns up to his own views and writes his column without the help of any newspaper staff. He likes to jab at different ideas and welcomes discussions.