A Degree From a Tiny College Is Like A Thousand Dollar Car: Ain't Worth Nothing

 The Bottle Rockets, whose music has been compared to Woodie Guthrie's, sing a poignant tune about a thousand-dollar car:

A thousand dollar car, it ain't worth nothin' 

A thousand-dollar car, it ain't worth shit

Might as well take your thousand dollars
And set fire to it.

A thousand-dollar car ain't worth a dime
You lose your thousand dollars every time. 

Oh, why did I ever buy a thousand-dollar car?

If you are thinking about getting a liberal arts or humanities degree from a college with less than a thousand students, you should listen to the Bottle Rockets' Thousand-Dollar Car song.  Simply substitute "tiny college" for "thousand-dollar car." A degree from a school with less than a thousand students "ain't worth nothing. . . ain't worth shit."

Colleges with less than 1,000 students are in a precarious financial position, with many on the brink of closure. Nevertheless, the number of these schools is growing.

According to a recent Chronicle of Higher Education article, there were 395  "micro colleges" in 2010. In 2020, there were 435.

That's not because more tiny colleges are being founded; many small colleges are shrinking due to declining enrollments.

Indeed, many of these little colleges would have folded during the COVID pandemic if the federal government hadn't shoveled money into them. The feds sent $77 billion of helicopter money to colleges and universities through the Higher Education Emergency Relief Fund, and the micro colleges got a piece of that pie.

Federal money has propped up small private colleges for years, much like a terminal patient on life support. But isn't it time these schools shut down?

For example, Harvey Mudd College in California only had 854 students in 2020, and its annual cost of attendance is $84,000. Why would you want to study there?

Wesley College in Delaware has 917 students and saw a 50 percent drop in enrollment between 2010 and 2020.  The total cost of attendance for a four-year degree is $178,000 (including room and board).  That's a shocking price tag for a degree from a little-known school with a tiny student body.

I don't mean to disparage the small private colleges. Many have an honorable record of serving students in their communities, and many were founded by religious groups for a noble purpose. Many did a fine job teaching the liberal arts and the humanities--some for a hundred years or more.

Nevertheless, the era of the small private college is over. You would be nuts to take out student loans to attend a college with less than 1,000 students.

A liberal arts degree from an obscure, tiny college ain't worth nothing.

Like Manna From Heaven, Biden Administration Cancels Half a Trillion Dollars in Student Debt

Like manna raining down from heaven, President Biden will cancel a mountain of college debt. Student debtors making less than $125,000 will get ten grand in relief. People who got Pell grants while in college will get $20,000 shaved off their college-loan balances.

What will this cost the taxpayers? Who knows? Who the fuck cares?

The White House budget office says Biden's plan will cost $24 billion annually for the next ten years. Hey, that's nothing. The feds can find $24 billion under the seat cushions in the Congressional cafeteria. 

Indeed, Paul Krugman, a Nobel Prize-winning economist, assures us that Biden's giveaway is peanuts--no more than a "rounding error" in the government's $25 trillion budget. He also said that people criticizing Biden's loan-forgiveness plan are "comically out of touch." 

Maybe the coastal elites are giggling at people who are alarmed about President Biden's largesse, but people in Flyover Country aren't laughing.

On the contrary, the Baton Rouge Advocate, which is a liberal newspaper, criticized Biden's giveaway as bad policy and bad politics:

Bad policy because Biden undermines the notion that debt is an obligation. His move will create the expectation that there will be more debt forgiveness just around the bend, the next time the country faces a crisis.

In addition, the Advocate argued, "Schools will feel free to charge more and young people choosing a course of study will pay less attention to whether their degree will produce a job that enables them to pay back their loan."

The Advocate also says Biden's reckless generosity is bad politics. In the editors' view, "Biden is spitting in the face of voters who didn’t go to college, parents who worked extra jobs to keep their children debt free, and those who paid off their loans."

In my opinion, the Advocate's editorial represents the view of nearly everybody in Flyover Country who did not benefit from President Biden's latest giveaway. 

Indeed it is disingenuous for the media to suggest that the President's student-loan cancellation initiative will have little impact on taxpayers or that the cost is comparable to a rounding error in the federal budget.

The University of Pennsylvania's Wharton School, a reputable institution, estimates the cost of Biden's student-loan largesse at half a trillion dollars. When other details are considered--loan forbearance and behavioral changes--the total cost is over $1 trillion.

For those who live in Flyover Country, a trillion dollars seems like more than a rounding error. Then again, perhaps the people in the Heartland are just "comically out of touch."

Paul Krugman: Somebody's "comically out of touch."

Biden Administration Extends Pause on Student-Loan Payments Until End of This Year: Has The Government Created A Moral Hazard?

 Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. 

 The Economic Times

Christmas came early this year for student-loan debtors. First, the Biden administration is extending the pause on student-loan payments until the end of 2022, which means that college borrowers are getting a two-and-half-year holiday from making monthly loan payments. 

That's not all. President Biden will give every borrower under an income cap of $125,000 (or $250,000 for married couples) $10,000 in student-debt relief.

Borrowers who received Pell Grants in college will get $20,000 in debt relief.

That's big news--especially for borrowers who got Pell Grants while in school. If we add the Pell Grant money these student-borrowers obtained while in college, plus the $20,000 loan write-off, many of these people will have gotten a free education.

And there's more. The Biden administration will launch a more generous income-based repayment (IBR) plan that will lower income-based payments for undergraduate loans from 10 percent of discretionary income to just five percent. The Department of Education also intends to raise the amount of income considered nondiscretionary, meaning that undergraduate borrowers will pay less than five percent of their income on their student loans.

Still, Santa's sack of gifts is not empty. Under DOE's proposed rule, the government will cover the unpaid monthly interest for people in IBRs, meaning student debtors on income-based repayment plans won't see their loan balances go up due to negative amortization.

Party poopers like Larry Summers say that all this federal generosity will fuel more inflation, but who cares? Certainly not the student-loan debtors. In fact, rising inflation will be a bonanza for them because they will be paying back student loans with deflated dollars.

Grumps also argue that the Biden student-loan forgiveness scheme acts as a moral hazard, and I think this is true. If students know they will make loan payments based on their income, not the amount they borrowed, they have every incentive to borrow extravagantly.  

And Biden's munificent changes in income-based repayment plans will likely act as a moral hazard for the colleges as well. University leaders have no incentive to keep their costs in line when they know that students will cheerfully absorb tuition hikes because their loan-repayment plans are so generous that it won't matter whether their tuition bills get larger.

In defense of Biden's sweeping student-loan reforms,  I think everyone agrees that many students took out loans to get a college education that wasn't worth much and was too expensive. 

Millions of students were scammed by for-profit colleges or private nonprofit universities that cranked out overpriced, worthless graduate degrees. Surely the victims of the higher education racket deserve some relief. 

Nevertheless, the federal government is headed for catastrophe if it rolls out student-loan repayment plans that are overly generous while doing nothing to rein in the higher-education racket.

Unfortunately, the feds are doing nothing to stop students from being scammed. Instead, federal money is propping up the colleges--both profit and nonprofit, which allows them to raise tuition prices yearly. 

At the same time, the hucksters who run the colleges offer students educational experiences that don't help them get jobs after they graduate. As a consolation, I suppose, the government is making it very easy for ripped-off students to manage their college debt.

The cold war Russian economy, it was said, ran on the principle that the government pretended to pay the workers and the workers pretended to work.

Something like that is going on in American higher education. The colleges are pretending to educate their students, and the students are pretending to pay for it.

This will end badly for everyone--students, colleges, and taxpayers.  

Merry Christmas!

Who Profits From the For-Profit College Industry? Let's Take a Look at Adtalem Global Education

Higher Education in the United States was once considered a civic activity intended to improve people's lives and benefit society. 

Then some people realized they could make money in the education racket, and the for-profit-college industry was born. 

Who makes money from for-profit colleges? Mostly hedge funds, equity funds, and institutional stockholders. 

Let's look at Adtalem Global Education (AGTE), a for-profit education company that owns Walden University, two Caribbean medical schools, and a Caribbean veterinary school. It's trading on the NASDAQ for about $39 a share--near its 52-week high.

Virtually all of Adtalem is owned by institutions, mostly hedge funds and financial companies. 

Which funds own the stock? You would recognize some of them: Blackrock, Berkshire Hathaway, Goldman Sachs, Morgan Stanley, JP Moran Chase, Soros Management, and the California Teachers Retirement System.

Some analysts are bullish on Adtalem and are predicting a higher share price. Certainly, the big financial players think Adtalem is a money maker.

Without a doubt, Adtalelm's educational institutions have been busy little bees. According to the Chronicle of Higher Education Almanac, Adalem's Walden University produced 867 doctoral degrees in 2020--more than Harvard, Yale, or Columbia. It logged 124 doctoral degrees in education and 357 doctorates in psychology and social sciences. That should make investors happy.

Adtalem gets most of its revenues from federal student aid money. Tuition costs are high. Tuition at Adtalem's American University of the Caribbean Medical School is about $25,000 a semester.

My guess is that most of the graduates of Adtalem's medical schools sign up for income-based repayment (IBR) plans that stretch out payments for 20 or 25 years.  

That keeps monthly loan payments down, but often IBR loans are negatively amortizing. In other words, student borrowers in IBRs see their loan balances go up with each passing month because their loan payments aren't large enough to cover accruing interest.

Indirectly, then, taxpayers are subsidizing the for-profit college industry, including Adtalem, because so many of their students will never pay off their student loans.

Is that a good deal for the American people? No, but it's a good deal for the hedge funds, and that's why the federal government will keep propping up the for-profit college industry.

The hedge funds love the for-profit college industry.

University Foundation Accounts Are Basically Slush Funds for University Big Wigs

 As a professor at the University of Louisiana at Lafayette, I was often assigned to teach courses off campus. 

Would the university reimburse me for my mileage when I traveled to teach a course? Sorta. I had to fill out paperwork for every off-campus trip.

And such paperwork! I had to file a triplicate form for every journey to teach away from campus. Every time I filled out the form, I had to verify that I had auto insurance, list my driver's license number, and certify that I had taken the university's stupid online driver safety course within the previous two years.

That form had to be signed by seven people!

Do you think the big muckety mucks at Louisiana's public universities fill out all that paperwork when they travel off campus? 

Hell no. They have credit cards on university foundation accounts.  Their expenses are not subject to state travel rules or to public scrutiny.

That's what we see from the recent public uproar about LSU Health Chancellor Larry Hollier's Foundation expense account.

Hollier used his Foundation credit card to fly first class with his wife, stay at expensive hotels, and eat at expensive restaurants.

Any problem with that?  Apparently not. The LSU Foundation defends the expenditures, saying all the charges followed the Foundation's policies and procedures.

But that can't be right because all charges of more than $1,000 must be reported quarterly to the LSU Board of Supervisors or its designee. According to the Baton Rouge Advocate, Hollier made more than 20 charges of more than $1,000, and there are no quarterly reports. 

This episode is just another example of the arrogance and lavish lifestyles of senior university administrators. They make a hell of a lot of money and then get special perks like foundation account credit cards, housing allowances, and other stuff that lowly professors don't get.

According to a recent Chronicle of Higher Education report, fifty presidents at public universities make more than $700,000 a year. Hollier, the LSU Health Chancellor, raked in $1.1 million.

For many of those presidents, some of their pay is not taxable: health insurance, for example, and deferred compensation.

And, as the Larry Hollier scandal illustrates, not all executive administrative expenses are subject to public scrutiny because they are paid for through foundation accounts.

LSU recently signed a 10-year, $95 million contract with its new football coach. And the new guy gets an interest-free loan of $1.2 million to buy a house, two cars, and 50 hours of private travel on LSU's airplanes.

Where do you suppose that football money comes from? Foundation accounts, most likely.

Americans need to wake up to the fact that our nation's public universities are not citadels of culture and learning. They are rackets run by people who play by different rules than the lowly students and professors.

And these racketeers have the gall to hike tuition prices every year--confident that the rubes will take out student loans to pay for these empires of corruption, greed, and arrogance. 

As for Larry Hollier, he is back on the LSU Health Center faculty and only makes $750,000 a year. And you know what? I'll bet he and his wife still fly first class.

Larry Hollier all duded up

Thinking about getting a master's degree from a posh private college? Don't do it, buddy!

 Are you one of those poor schmucks who borrowed a lot of money to get a college degree that didn't pay off? 

Perhaps you attended the New England Conservatory of Music, where only 57 percent of students earned more than a high school graduate six years after enrolling.  Or maybe you attended Grambling State University, an HBCU in North Louisiana, where only 43 percent of students earned more than a high school graduate six years after they enrolled.

How will you pay off those student loans if your college degree didn't increase your income? 

Perhaps you think that a master's degree from a posh private school will get you out of the financial hole you dug for yourself when you took out student loans to earn a bachelor's degree.

So you apply to one of those private universities and are surprised and flattered when you get an admission letter. Will a master's degree from a private college get you into a higher income bracket?

Maybe. Maybe not.

Jason Delisle and Jason Cohn, researchers at the Urban Institute, published a report last month that examined master's programs where students acquired high debt levels but made low salaries.  The schools with the highest debt-to-earnings (DTE) ratio had average student-loan debt of $77,000 and an average income of only $43,000 two years after graduating.

Delisle and Cohn found that private nonprofit colleges are most likely to have high-debt-to-earning ratios. Here is what they reported:

Programs in the high-DTE group are heavily concentrated at private nonprofit universities. Although these institutions offer 44 percent of all master's degree programs, they account for 75 percent of high-DTE programs. 

Delisle and Cohn also found that master's degree programs in the high DTE category were often in the social-sciences field:

By looking at specific program types, we see that three types of master's degrees account for a large share of borrowers in the high-DTE category: social work (17 percent); clinical, counseling, and applied psychology degrees (15 percent); and mental and social services (12 percent). 

The Urban Institute's research did not focus on MBA degrees or graduate degrees in fields outside the social sciences.  Nevertheless, other soft-sciences master's programs are also too expensive based on the salaries of their graduates. 

A one-year master's degree in journalism at Columbia University cost an average of $147,000 five years ago when the starting salary for journalists was only $40,000. And as the Wall Street Journal reported last year, a graduate degree from Columbia in film costs an average of $181,000, and graduates had average salaries of $30,000 two years after graduating. 

So, here are three takeaways:

First, as Jason Delise and Jason Cohn pointed out, graduate degrees in social sciences are much cheaper at public institutions. If you are thinking about getting a master's degree in social work or counseling, you will get better value if you attend your state university rather than a private college.

Second, private colleges have promoted graduate-degree programs to generate revenue.  Under the Grad PLUS program, graduate students can take out federal loans to finance their studies up to the cost of attendance--no matter how expensive a program is. Thus, we can thank the federal government's Grad PLUS program for the inflated price of graduate studies and the mindless proliferation of graduate programs.

Finally, many master's degree programs are simply not worth the cost, and this is true not only for the social sciences but MBA programs and graduate degrees in education.

The bottom line is this: If you are already burdened by student loans to get your bachelor's degree, you could wind up deeper in debt by obtaining a master's degree from a private college without getting a job that pays enough to service your student debt. 

Did Cool Hand Luke get his master's degree from Columbia University?

A House Divided: Unless We Become Kinder and More Tolerant, America Will Collapse

 Years ago, I read The Coming Fury, Bruce Catton's classic study of the United States on the brink of civil war. In the months preceding the shelling of Fort Sumter, Catton explained, extremists in both the North and The South wanted a war. 

And war they got. When it was over, 600,00 men were dead, and thousands of veterans spent the rest of their lives without their arms or legs.

America was a house divided in 1860, and America is a house divided today. Last night's Republican primary in Wyoming illustrates my point. Liz Cheney, the Republican congresswoman who voted to impeach Donald Trump, was swept out of office by a landslide.

Curiously, Cheney carried two regions of the state: Teton County, where wealthy Democrats reside around Jackson Hole, and the region around the state capitol of Cheyenne--where most  of Wyoming's liberal-leaning government bureaucrats dwell.

As predicted, Democrats "crossed over" in Wyoming's Republican primary--not to support Liz Cheny but to register their contempt for Republicans and Donald Trump, the Republican's tarnished standard bearer.

We similar signs of division everywhere. Dana Milbank, the Washington Post's chief loon, wrote a column a few weeks ago expressing the desire for Texas and Oklahoma to leave the Union. 

In Texas, Governor Greg Abbott is busing illegal migrants to New York City and Washington DC. Both towns are self-proclaimed sanctuary cities, but the mayor of DC wants to call out the National Guard to help control the people the District of Columbia claims to welcome.

In California, the state's government forbids travel by California employees to more than 20 states. Why? The reasons are varied, but they include disapproval of states that don't want youngsters with testicles to compete in girls' athletic contests.

Do you want another example? A poll of likely Texas voters found that a strong majority  want to leave the United States! That will make the Washington Post  and the liberal elites happy, but do they really want the nation's leading exporter, energy producer, and cattle raiser to head out on its own? I would think not.

Today the United States is very much like it was just before the guns began to play in 1861.  We need to step back and reflect a bit. Does it make sense for our political leaders to sow disharmony and denigrate the people who live in states where traditional values still prevail?

I do not think it does.