Let's Make College Great Again

We live in a world, where an 18 year old out of high school, with no job experience, no credit history or savings, to go along with below-average intelligence, can get a six figure loan to go to college, and spend 4 years getting intoxicated while “earning” a special piece of paper.  What’s wrong with this picture?

I'm going to argue that this is happening because the federal government, not the private entities, are backing the majority of these loans.  They are removing the risk and hazards of the situation, and in the process enabling a domino effect that has rippled through the decades.

Let’s imagine for a moment that this process wasn’t occurring.  Who in their right mind would lend that kind of money to an 18 year old kid and not protect their risk exposure with a much, much higher interest rate?  I’d hazard a guess that no one would.  What would happen as a result?  Would the schools go out of business?  Would 18 year old wannabe students flood the streets and beg for our help?

The schools would have no choice but to cut their costs, and reduce their waste.  Oh no, the horror!  The students would then need to be serious about their college experience.  When you are getting a loan at a higher interest rate, due to your associated risk, the choice to go to school becomes a commitment to bettering yourself, rather than a chance for an extended vacation.

Less people would end up going to college, but is this a bad thing?  Have you been to a big college, or seen the majority of college students?  How many of them are really taking advantage of their opportunity to grow as a human being and prepare for the real world?  I know lots of them that actually have, and are now incredibly productive people, but I also know a lot that scraped by between hangovers and probably didn’t gain any productive skills or traits from the experience.  Meanwhile, they were stuck with an insanely large loan that will take them many more years to pay off, and working in a job that doesn't care about their piece of paper.

This all may sound like it makes sense, but where are the stats to backup my view of this situation?  Let’s start by looking at the biggest college in my state of New Hampshire, UNH:

http://www.collegedata.com/cs/data/college/college_pg03_tmpl.jhtml?schoolId=433

I certainly could be biased, so let’s look at UVM, Vermont’s biggest school:

http://www.collegedata.com/cs/data/college/college_pg03_tmpl.jhtml?schoolId=183

There are certainly private scholarships and support alongside federal student aid, but when the government is footing the risk on the majority of these loans, and not a private entity that could go insolvent from the risk exposure, it also enables the schools to do a dastardly thing. 

They can continually raise their costs.

Every single year, tuition, fees, and room and board all go up.  They go up, because the students won’t be denied loans, as they would if the risks were to rise for a private entity.  Little by little they have risen to the point, where it now costs an incoming freshman about $250,000 to go to UVM for 4 years, if they live out of state.  This obviously doesn’t include the additional costs of, you know, living.

How can the kid going to UVM with a 1.6 GPA succeed (on average) when they get to the real world with over a quarter million dollars in debt strapped to their back?  Well, the government is gracious enough to keep the interest rates of these loans relatively low.  They tend to average around 5%.  That's still quite the hit on a massive loan, making it hard for graduates to hit the principal of their loan when they make payments.

But, Derek, Derek!  They don’t get loans for the whole thing.  Scholarships, grants, help from their family, etc. all help push this number down significantly.

You're absolutely right!  So let’s look at what college graduates are actually dealing with currently:

https://studentloanhero.com/student-loan-debt-statistics-2016/

You can tell these loans are really effective when the delinquency rate is 11.6% (/s).  Paying tons of money back on loans you didn’t utilize is bad enough, but harming your credit in the process is even more damaging.

43 million borrowers?  Almost 15% of the US population?  6% higher than last year?!  Ouch.

My Solution

This situation will only improve when we remove the government from the equation.  Costs to go to college would drop over time, as students couldn’t afford loans from private entities at the previously high costs.  Fat would need to be trimmed from schools in order to cater to students who have less to spend.  Maybe instead of building a massive stadium next to the perfectly fine old stadium, they use common sense and spend less on wasteful projects.  Colleges that don’t adapt would go out of business.  

Oh no!  This school that was trying to charge me waaaay too much for an inferior quality service is closing its doors!  I'll now have to go to a more affordable school that better utilizes its resources to give me the best experience!  I’ll also have to decide that I really want to further my education as my interest rates are higher.  This means I can’t just go and party?!?  Mommy?  MOMMY??!

That’s right!  Let’s make college great again! :D

-@derekareith