WSJ: College costs and inter-student subsidization getting more and more bloated

posted at 7:01 pm on January 11, 2014 by Erika Johnsen

Whenever the Obama administration has periodically addressed the issue of the United States’ staggering and ever-mounting level of student-loan debt, it’s generally been with half-assed policy proposals that are meant to act as financial band-aids that do not attempt to substantively reform what is very clearly a broken system (and indeed, probably end up causing more harm than good in the long run). As the federal government continues to indiscriminately dish out inexpensive loans to any and all students, college costs have only continued to skyrocket — and the WSJ reports that the longstanding university financial setup in which more well-off students help to subsidize the costs of their less-wealthy classmates’ tuition is now metastasizing at an unsustainable rate and taking an increasingly big bite out of the middle class:

Well-off students at private schools have long subsidized poorer classmates. But as states grapple with the rising cost of higher education, middle-income students at public colleges in a dozen states now pay a growing share of their tuition to aid those lower on the economic ladder.

The student subsidies, which are distributed based on need, don’t show up on most tuition bills. But in eight years they have climbed 174% in real dollars at a dozen flagship state universities surveyed by The Wall Street Journal.

During the 2012-13 academic year, students at these schools transferred $512,401,435 to less well-off classmates, up from $186,960,962, in inflation-adjusted figures, in the 2005-06 school year. …

At the University of Washington for instance, a full-time student paying in-state tuition last year contributed about $2,200 in subsidies, up from $540 in 2006. …

But opaque college financing generally keeps this accounting hidden from public view, Ms. Finney said, largely to keep a lid on complaints from parents.

It’s yet another piece in the disastrous puzzle of our wildly federally-subsidized student loan system and its unintended consequences: Total student debt in the U.S. is now approaching $1.2 trillion, with this year’s college graduates owing a whopping $32,500 on average; add cash-strapped middle-class families and fresh graduates’ still-diminished job prospects, and it’s a recipe for a prohibitively burdensome financial situation that will plague their young-adult lives. Unfortunately, the biggest related Congressional plan in the works is coming from a group of Democratic senators (spearheaded by the likes of the “fairness”- and “inequality”-slinging Elizabeth Warren) that are looking to pump still more federal money into the system and “ensure struggling borrowers are better informed and treated fairly by loan servicers and colleges” — a.k.a., yet another progressive agenda item meant to treat the symptoms without curing the underlying disease.


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WSJ: College costs and inter-student subsidization getting more and more bloated

The Moochelle Syndrome…

Electrongod on January 11, 2014 at 7:12 PM

….not to worry…smart power will find a way to forgive that debt too?

KOOLAID2 on January 11, 2014 at 7:15 PM

KOOLAID2 on January 11, 2014 at 7:15 PM

I guess you and I are the only ones that care…..

:)

Electrongod on January 11, 2014 at 7:20 PM

Unintended consequences of the Federal student loan program.

College tuition went up BECAUSE students could borrow the money with the FEDERAL student loans.

slp on January 11, 2014 at 7:31 PM

I will be paying off my loans for the next 30+ years of my life…

nonpartisan on January 11, 2014 at 7:37 PM

I will be paying off my loans for the next 30+ years of my life…
nonpartisan on January 11, 2014 at 7:37 PM

If we’re lucky.

aryeung on January 11, 2014 at 7:41 PM

Warren is going to win the 2016 nomination by promising massive student loan debt forgiveness. The campaign will focus on the fact that the nation must de-commission its military budget and instead invest in its students, freeing those who have “made the right choices by going to college” are not crushing under debt. It will be framed as a new kind of FHA program. It will be passively popular because it will effect so many upwardly mobile young whites who are bitter that the baby boomers cut the very student aid programs that allowed that generation to go to college relatively debt free. Clinton will be blind sided by another Obama youth wave. All Warren has to do is reproduce the Obama coalition and with that proposal she will. Election over.

libfreeordie on January 11, 2014 at 7:41 PM

If we’re lucky.

aryeung on January 11, 2014 at 7:41 PM

no need to be snide about it, I intend to pay it off and have been making my minimum monthly payments

nonpartisan on January 11, 2014 at 7:44 PM

But as states grapple with the rising cost of higher education…

Education costs are the one of the biggest scams there are. Even the loan takeovers.

When I was in college and had loans.. it was all from one bank and each semester loan was added to the last one. They were all consolidated. Now.. they take each loan separate. It’s like you have 8-10 different little loans. Oh, you can consolidate them.. but it takes jumping through hoops 15 different ways.
They have taken what used to be controlled by one local bank.. and divided it up into 9 different agencies and offices.
I was talking to a co-worker a few months back who is currently in college too.. he was so confused by his loans it was sad.
When i told him how it used to be he couldn’t believe it.

This is one of the problems we face.. as the years roll by.. people are growing up into this system and have no idea how much has changed or how it used to be.

JellyToast on January 11, 2014 at 7:59 PM

This is more my version of gospel davidk

libfreeordie on January 11, 2014 at 8:00 PM

This is one of the problems we face.. as the years roll by.. people are growing up into this system and have no idea how much has changed or how it used to be.

JellyToast on January 11, 2014 at 7:59 PM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?

libfreeordie on January 11, 2014 at 8:02 PM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?

libfreeordie on January 11, 2014 at 8:02 PM

Gee, I don’t know, but I’m guessing it has to do with those people in government you love so much making tons of money off the backs of college students?

Student loans: Government looks to make $50B profit

Dr. ZhivBlago on January 11, 2014 at 8:23 PM

Warren is going to win the 2016 nomination by promising massive student loan debt forgiveness.

libfreeordie on January 11, 2014 at 7:41 PM

no need to be snide about it, I intend to pay it off and have been making my minimum monthly payments
nonpartisan on January 11, 2014 at 7:44 PM

Again. If we’re lucky.

aryeung on January 11, 2014 at 8:52 PM

I will be paying off my loans for the next 30+ years of my life…

noforeskin on January 11, 2014 at 7:37 PM

…you didn’t get anything for it!

KOOLAID2 on January 11, 2014 at 9:43 PM

Step 1 for any revision of the student loan program: tie the interest rate of the loan to the earning potential of the student given his or her grades and their field of study.

If you want to major in socio-economic transgender art historical study, pay for it yourself.

PackerBronco on January 11, 2014 at 9:49 PM

Warren is going to win the 2016 nomination by promising massive student loan debt forgiveness. The campaign will focus on the fact that the nation must de-commission its military budget and instead invest in its students, freeing those who have “made the right choices by going to college” are not crushing under debt. It will be framed as a new kind of FHA program. It will be passively popular because it will effect so many upwardly mobile young whites who are bitter that the baby boomers cut the very student aid programs that allowed that generation to go to college relatively debt free. Clinton will be blind sided by another Obama youth wave. All Warren has to do is reproduce the Obama coalition and with that proposal she will. Election over.

libfreeorgan on January 11, 2014 at 7:41 PM

…where do you get the shit you smoke?…I wanna get me some of that stuff!
…and its just “so many upwardly mobile young whites that are bitter?
…hmmmmmmmmmmm!

KOOLAID2 on January 11, 2014 at 9:51 PM

btw:

Phil Robertson Fired!
Do you agree?

tlynch001 on January 11, 2014 at 10:48 PM

At a prestigious and well-known university, the “average net price” paid by the student body is 59% of Full Tuition.

But that statistic is very misleading, because a closer look at the data reveals that the median price paid by the student body is 100% Full Tuition

About 55% of the student body is paying the full price, while 20% of the student body is paying no tuition, with the remaining 25% of the student body is paying something along the continuum in between $0 and Full Tuition.

This is just another avenue of “spread the wealth around”…

A majority of the student body is paying a very inflated price (and taking massive student loans that will take many years to pay off), so that 20% of the student body can go for free (and graduate debt-free, without the burden of student loans).

That is not “fairness” in my view. It’s just another example of Socialist thought-process at work in America.

ITguy on January 12, 2014 at 1:40 AM

IT guy nails it.

The middle class student is taking out massive student loans so that the lower class student can graduate debt free. I have yet to figure out why we, as a society, have agreed that giving Federal grants (again coming from middle class tax payers) and scholarship money to students makes any sense at all. Why should poorer students who should have similar earning potential coming out of college get off scot free when their peers have to carry debt for upwards of 20 years for the same product.

oconp88 on January 12, 2014 at 4:24 AM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?
 
libfreeordie on January 11, 2014 at 8:02 PM

 
Meaning subsidies distorted and ultimately increased the costs to individuals.
 
Thanks, professor.
 
Say, what’s a major component of Obamacare?

rogerb on January 12, 2014 at 6:43 AM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?

libfreeordie on January 11, 2014 at 8:02 PM

Why should I subsidize the privileged progressive degenerates who run these places? The greed heads hike tuition 7-8% ever year. They are ripping off the students, exploiting “student athletes” as well as the underpaid part time faculty. And besides making the privileged elite more wealthy sopping up ruinously borrowed money from middle class students, the primary function of these institutions appears to be leftist indoctrination.

More subsides for this scam? Get out of here.

forest on January 12, 2014 at 8:42 AM

No such thing as a free lunch. Amazing how so many socialist policies like taking over healthcare and the student loan industry are tied together in ObamaCare. You would almost think the Democrats were completely in charge for 2 years in DC.

txmomof6 on January 12, 2014 at 8:54 AM

Yes, IT guy nails it.

My daughter just graduated with $25,000 in student loans. One year she had three minority roommates. In talking about their finances, she found that all three were essentially attending for free, though two sets of parents made more money than my husband and I do! One mom was collecting disability but was actually working her own cash business. One father worked mostly overseas and his income was somehow not counted. One roommate, whose family was low income, did work some but had no loans to worry about and her parents paid her rent (which my husband and I couldn’t afford to do). My daughter had to take out loans and worked two jobs while her roommates spent their “extra” money on clothes and going out. Even with all the subsidies, two of the girls ended up dropping out after that year. It was a great lesson for my daughter about how in the name of making things “fair”, liberal policies really make things very unfair.

inmypajamas on January 12, 2014 at 11:29 AM

Hell, foreign student aid is how our great potus got through school….. and why he keeps his records secret. Beyond me why we can’t find out. After all he is, as liberals say, a puuuubliiiiiic figure.

ultracon on January 12, 2014 at 11:54 AM

I was talking to a co-worker a few months back who is currently in college too.. he was so confused by his loans it was sad.
When i told him how it used to be he couldn’t believe it.

This is one of the problems we face.. as the years roll by.. people are growing up into this system and have no idea how much has changed or how it used to be.

JellyToast on January 11, 2014 at 7:59 PM

And therein lies the biggest unexamined problem of our time: Oppression by Bureaucracy…

America is on a vector toward tyranny – but not of the sort most associate with the word (at least superficially), though the effects will be the same.

Bureaucracy.. stifling, suffocating ever-growing bureaucracy empowered by historically unprecedented technological surveillance and control capabilities are the tools of oppression wielded by the new breed of tyrant.

DrDeano on January 12, 2014 at 12:53 PM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?

libfreeordie on January 11, 2014 at 8:02 PM

Yeah, amazing how well the government machine works when there’s just no money to fund a pile of utopian dreams, isn’t it?

And the states don’t get to just conjure money like the feds, so their deficits are considerably more substantial and can’t be wished away.

The Schaef on January 13, 2014 at 9:41 AM

You mean “how it used to be” before massive cuts in public support for higher education on the state level forced greater and greater numbers of upwardly mobile Americans to pursue loans to pay for higher education?

libfreeordie on January 11, 2014 at 8:02 PM

Right, colleges are charging more than twice what they did when I went to college in inflation adjusted dollars because they’re not getting as much aid.

The private college I went to got $0.00 in state/federal aid (hence private college) when I went there… imagine how badly that was cut for this to make sense.

If you get $0.00 from an income source; what percentage of that is cut to cause you to double your required income to cover it? Oh, and don’t come crying to me when you realize your calculator can’t divide by zero.

This was your story of the only possible reason for the rate hikes… so there must be an answer. Please show both your answer and your work coming to your conclusion.

gekkobear on January 13, 2014 at 11:52 AM