Gov’t/Academy Collusion Department: Student debt CAUSES college tuition increases, “with students merely the pass-through vehicles”

I live in community with young people, many of whose futures are crippled by the spectre of apparently lifelong student debt; however, I did not recognize the mechanism that feeds this double bubble until I read the following report.

(No wonder Indiana University can afford to build so many gigantic, glamorous, limestone-faced buildings.)

BTW: Did you know that the student loans and student tuition both started exploding with the 2008 financial crisis?



Fed Finally Figures Out Soaring Student Debt Is Reason For Exploding College Costs

August 3, 2015

by Tyler Durden


Back in May 2014, in one of its patented utterly worthless “analyses” (that cost taxpayers several tens of thousands of dollars) the San Francisco Fed, home of such titans of central planning thought as Janet Yellen, asked “is it still worth going to college.” Not surprisingly, its answer was yes after some contrived mathematics that completely forgot to include just one thing:debt.

At the time, we had the following comment:

Oddly enough, having perused the paper several times, and having done a word search for both “loan” and “debt” (both of which return no hits), we find zero mention of one particular hockeystick. This one:



Perhaps for the San Fran Fed to be taken seriously one of these
years, it will actually do an analysis that covers all sides of a given problem, instead of just the one it was goalseeked to “conclude” before any “research” was even attempted.

An analysis, even a painfully simple one, such as the one we put together less than a month later:

It is common knowledge that in the hierarchy of bubbles, not even the stock market comes close to the student loan bubble. If it isn’t, one glance at the chart below which shows the exponential surge in Federal student debt starting just after the great financial crisis, should put the problem in its context.



And while we have previously reported that a shocking amount of the loan proceeds are used to fund anything but tuition payments, a major portion of the funding does manage to find itself to its intended recipient: paying the college tuition bill.


Which means that with student debt being so easily accessible anyone can use (and abuse), it gives colleges ample room to hike tuition as much as they see fit: after all students are merely a pass-through vehicle (even if one which for the most part represents non-dischargeable “collateral”) designed to get funding from point A, the Federal Government to point B, the college treasury account.


It should thus come as no surprise that in a world in which colleges can hike tuition by any amount they choose, and promptly be paid courtesy of the federal government, and with endless amounts of propaganda whispering every day in the ears of impressionable potential students the only way they can get a well-paying job is to have a college diploma (see San Francisco Fed’s latest paper confirming just this) there is no shortage of applicants willing to take on any amount of debt to make sure this cycle continues, that soaring tuition costs are one of the few items not even the BLS can hedonically adjust to appear disinflationary.


End result: tutitions have literally expoded across the country in both public and private colleges.


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4 Responses to Gov’t/Academy Collusion Department: Student debt CAUSES college tuition increases, “with students merely the pass-through vehicles”

  1. CindyW says:

    and pretty sure you know about the Debt Collective (same group as Rolling Jubilee), who are working on debt issue – not yet at state land-grant (irony/snark – read Wendell Berry for description of the betrayal by these institutions of their historic reason for existence) universities like IU, but they’re working on it

  2. CindyW says:

    If memory serves, he wrote a lot about land grant universities’ service to the multinational corporations in his book Home Economics (1987). But also from the website Permaculture Project: “Why have they [land-grant colleges] watched in silence the destruction of the markets of the small producers of poultry, eggs, butter, cream, and milk—once the mainstays of the small-farm economy?”

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