All the Whining about Colleges Is Getting Old

Mount Ida College is the latest college to close.  It was like throwing gasoline on a fire. The whining has grown in intensity. The articles are flying off the presses (or blogs). Enough already!

You’d think the closure of a college was the end of the world. I recall what it was like when the board of Sweet Briar College voted to close the college. People blew their top. Which is fine. Personally, I don’t care how exercised anyone gets when their beloved alma mater fails, or how much money they want to toss at a failing enterprise. But it’s all the whining and refusal to accept reality that gets old. (Yes, I realize I’m whining about the whining. But there’s a larger point.) Continue reading

Student Debt

I wonder if there will ever be a pause in all the stories about student debt, particularly the antidotes about someone incurring a huge amount of debt that’s now serving as an anchor around their ankles.

It struck me that anyone who has a huge amount of debt from attending a college chose the wrong college. Sometimes (usually), the simplest explanation is the best one.

What Do I Understand Now That I Wish I’d Understood Then?

What do I understand (or at least think I understand) now that I wish I had understood when I had began my journey through adulthood? It’s of no consequence to me, of course: it’s impossible to turn back the clock. But it might be of some help to you, Vera.

In looking back I’m struck by how naïve I was when I came out of high school and, four years later, college. I had little appreciation for what the world was really like. Growing up in a working-class family in homogenous rural south-central Pennsylvania hadn’t exposed me to much. My world was very small.

More than four decades of career experiences in law, business (CEO), government (special agent for DOD and, later, cabinet secretary), and higher ed (college president) changed that. To a degree. There is still much about life I don’t understand or, perhaps more accurately, refuse to accept. I’m still learning and always will be. Nonetheless, life has imparted a few lessons along the way.

Some of the lessons were easy to learn; some were hard. Some were moments of euphoria and left fond memories; some were painful and left scars. Others were learned merely by reading or observing. (It’s always preferable to learn from other people’s wisdom or mistakes.) I decided to compose a list of what I consider to have been some of the most important lessons.

What the list isn’t, however, is a list of rules to live by. I’m not fond of rules and would never suggest life is so easily mastered. Moreover, as I’ve mentioned before, I have absolutely no desire to tell you how to live your life, Vera. Rather, I’m simply sharing some of the things I wish I had better understood when I was young, starting out.

Some of the lessons are practical; some are of the existential variety. The list is neither complete nor final. After all, I’m still learning.

Please don’t infer an order of priority, for none is intended. “You” and “your,” below, refer to me; it is as if life is speaking to me. Occasional personal comments follow parenthetically. Continue reading

Daniels Is Proving Just How Bad Colleges (and People) Are at Controlling Costs

Mitch Daniels took over the presidency of Purdue University in 2013. They have yet to have a tuition increase on his watch. That, quite frankly, is remarkable in the world of higher ed and, perhaps, even unimaginable in a world in which annual tuition increases are a given. For more details, I refer you to this Inside Higher Ed story.

I’m particularly fond of the Daniels story because he’s proving me right. And everyone likes to be proved right.

Since becoming intimately familiar with the world of higher ed, when preparing for and then occupying the presidency of a college, I’ve contended that annual increases in the cost of a college education were not inevitable, as many claim, but were, in part, the product of gross mismanagement, namely, the pathetic inability of college trustees, administrators, and faculty to control their costs. Stated differently, higher ed is smothering in waste, inefficiencies, and extravagant spending.

They get away with it because students and their parents are willing to pay the ever-rising prices, in tuition, fees, and room and board, and are willing to go into debt to finance these purchases. Moreover, thanks in part to the cartel called the accreditation system, the competition isn’t there to constrain price increases, as it is in many other industries. But that doesn’t make it right or without consequences.

One of the consequences is student-loan debt, which is now in the neighborhood of $4 trillion. Not that most college trustees, administrators, and faculty care. They don’t. If they did, Daniels would have more company in his campaign against out-of-control spending. And Purdue wouldn’t be alone in holding the line on tuition increases for seven straight years.

Colleges and universities mismanage resources on so many levels. But, of course, they’re not alone. Their bad habits are shared by other nonprofits and governmental agencies — organizations that are not accountable to investors. But it’s not that all for-profit organizations excel in this regard. They don’t. Many of them do a poor job of controlling expenses, too. But, overall, they do a far superior job than their nonprofit relatives.

It will be harder for other colleges and universities to peddle their excuses now that Daniels and Purdue have shined the spotlight on them. Yet I don’t expect much to change for most institutions. They’ll continue to increase prices every year.

There’s only one thing that will bring about change, and that’s competition and consumer awareness. If and when students stop enrolling because there are better values to be had elsewhere, then and only then will boards of trustees hire administrators with the skills and guts to act in the best interests of the students.

But there’s a bigger lesson to be learned here, Vera, for what we see in the world of higher ed and organizations generally, we also see play out in the world of household finances. Continue reading

Student-Loan Debt Is Following Americans into Retirement

I can’t imagine carrying student-loan debt when I was 40 years old. Or 50. Or, for heavens’ sake, 60 or older. But that’s what happening in America according to the New York Fed.

Of course, some of this debt will never be repaid. The U.S. taxpayer, who holds most of the debt via its federal government, will have to absorb the losses. The winners in such a system are the colleges, who received most of the loan proceeds.

When I was a college president, I was shocked by the willingness of some students to incur ridiculous amounts of debt for a college degree with little economic value. There just didn’t seem to be any concern over the relationship between the debt and that which was being purchased with the proceeds, or about the impact of the debt on their lives in the years ahead. I believed then and believe now that we need:

  • to do a much better job of educating our kids about personal finance; and
  • to revamp a seriously flawed student-loan program.

Unfortunately, none of this seems to be a priority, either with our local school boards or our national government. So nothing has changed. Except the loan balance, that is. The total amount of student debt has grown to about $1.5 trillion. And it’s continuing to rise.

Students Use Your Money to Invest in Cryptocurrencies

I have issues with our federal student loan program. But this wasn’t one of them. Until now that is.

From Investopedia:

According to a study by The Student Loan Report, over one-fifth of current university students with student loan debt indicated that they used their student loan money to invest in digital currency such as bitcoin.

The student loan news and information website found that 21.2% of the 1,000 students they surveyed indicated that they used their borrowed cash to gamble on the highly volatile digital currency market. While school administrators may look down upon the practice of using borrowed funds for non-school expenses, Student Loan Report indicates that there are currently no rules against it. College students are able to use loans for “living expenses,” a flexible category that covers a wide range of potential necessities.

I wonder if any of these risk takers will be unable to complete their studies because of their investment losses. Probably, but we may never know.

All of these student loans are funded by money borrowed by your federal government. In other words, you, the taxpayers, are on the hook to repay those borrowed funds if the student-borrowers fail to repay their student-loans. Not surprisingly, student-loans have a high default rate, meaning the lender (the U.S. Government) has to absorb the losses. It appears those losses may be increasing due, in part, from the risky investments made by the students in cryptocurrencies.

It will be interesting what effect, if any, stories like this one have on the student loan program. The main beneficiary of the program is the colleges, who would be compelled, without the program, to run more efficient operations and keep tuition low. In other words, the student-loan program is an indirect subsidy of the colleges.

There are better ways to assist needy students with a college education. Yet, at this time, I haven’t seen any political support for pursuing any of them. So it looks like taxpayer money will continue to be used for dubious purposes.

Why Do Students Receive Special Treatment? The Bad Kind, That Is.

Student debt is not dischargeable in bankruptcy. Other debt is. Frankly, it seems patently unfair to me that Donald Trump can declare bankruptcy four times, run a university into the ground while creating a $25 million liability, while students are stuck for life with debt they incurred when they weren’t even old enough to drink. But I suppose it’s easy to understand: students don’t have lobbyists.

We now have about $1.5 trillion of student debt and the outstanding balance is rising. As is the default rate. The debt is serving as a drag on the economy and will impact lives adversely for decades to come.

I was heartened today, however, to hear the new chairman of the Federal Reserve Bank address the issue. When asked why student debt isn’t dischargeable in bankruptcy, Mr. Powell said, “I’d be at a loss to explain why that should be the case.” Clearly, it’s an issue that deserves attention in Mr. Powell’s opinion.

Colleges and universities are particularly culpable. They benefit immensely from the current system. And they don’t bat an eyelash while students submerge themselves in oceans of debt. But others are to blame too, including politicians who make it easy for students to borrow more than is prudent, as well as parents and schools who have failed miserably in educating our kids about financial matters.

But we’re way beyond the point of ascribing blame. It’s time to address this problem.

 

It’s a New World (i.e., I’m a Dinosaur)

The internet has dramatically changed — and will continue to change — the world. At times, it makes me feel like a dinosaur. I’m not alone, but that doesn’t make it any better.

Two systems that are replete with dinosaurs are health care and education, although the former is well ahead of the latter in catching up to the 21st century (mainly because there is more money to be made in health care).

If you want to get a flavor for what I’m talking about, take a half hour and watch this presentation on internet trends by Mary Meeker.

Keeping up or, in my case, catching up, seems like an impossible task. My generation didn’t grow up with the internet. Yours will, Vera. Your parents’ generation was the trailblazing generation. I expect much more to come from that generation. I don’t have such high expectations from mine. I can’t begin to imagine what yours may deliver.

One disservice my generation and the Xers provide to younger folks is interpreting the world, and guiding kids, with a 20th-century mindset based on 20th-century experiences. In short, many of us fail to appreciate how the world has changed and is changing. Consequently, we’re preparing many of our children and grandchildren for a world that no longer exists. Fortunately, it’s hard to keep young people down. Many see what’s happening and are responding.

I came to believe that I’m not technologically savvy enough to do my students justice in the classroom. Few professors and teachers are. But that will change as the dinosaurs retire or expire. Until then, most of our schools and colleges will remain behind the curve. This is one of the most critical reasons no millennial should outsource his or her education to our formal education system.

Enough said! Watch Mary’s presentation and, if you’re really enticed, read her slides.

Don’t Waste Your Time Taking History Courses

Don’t waste your time taking history courses, Vera.

That’s not to suggest you should remain ignorant of history. You shouldn’t. As George Santayana wrote, “Those who cannot remember the past are condemned to repeat it.” It’s just that there are a lot of better ways of learning the lessons of history than sitting in most high school or college lectures. Continue reading