Colleges suing students?

Wow, alright, I am drowning in a pile of unfinished blog drafts over here. I have a total of 14 unfinished posts  in my queue just from the last week, so I'm just gonna go ahead and post a few of them, rapid-fire style, just to get some of this stuff out there. You might get a little less of my ranting and raving in these posts than you'd usually expect, but maybe that's a good thing. And hey, it's better than another link dump, right?

First up, I'll consider this post to be an update on the burgeoning student loan crisis about which I've written numerous times. Per Bloomberg,

Needy U.S. borrowers are defaulting on almost $1 billion in federal student loans earmarked for the poor, leaving schools such as Yale University and the University of Pennsylvania with little choice except to sue their graduates. 

The record defaults on federal Perkins loans may jeopardize the prospects of current students since they are part of a revolving fund that colleges give to students who show extraordinary financial hardship. 

Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show. Unlike most student loans -- distributed and collected by the federal government -- Perkins loans are administered by colleges, which use repayment money to lend to other poor students. 

The increase in the amount of defaulted loans among poor students comes as President Barack Obama says he wants to expand access to college for working-class families and increase funding for the Perkins program. Under his proposal, the pot for Perkins loans would increase to $8.5 billion from about $1 billion. The Education Department would service the loans instead of colleges.

Oh, this is gonna be fun... leave it to Yale, right? As is mentioned later in the article, student loan debt has soared in the last several years (total debt outstanding now exceeds $1 trillion, more than our nation's aggregate credit card debt), as tuition costs have gone nowhere but up in a world flush with government-guaranteed debt.

As Karl Denninger writes (okay, rants),

Let's cut the crap -- colleges market themselves to young men and women on the premise that their educational services will provide you a means to get a better job than you would otherwise obtain.  That's the entire purpose of a career-focused education and the only justification for the outrageous tuition charges they assess. 

Well, as it turns out if you fail to benefit from the alleged "education" that these people sold you, and in the process you borrowed money using Perkins loans, the college is very likely to come after you, including in court! 

Oh, and lest you think they'll just sue to the principal and accrued interest, nope. 

As I've pointed out to a number of High Schoolers contemplating going to college and taking out loans, there are statutory penalties that apply if you default.  In the case of Perkins loans these amount to an additional 30% of the principal, increasing to 40% on a second collection attempt and another 40% on top of that if they sue. 

That basically doubles the amount you owe. 

Of course colleges don't talk about this before you matriculate.  After all, "education" as offered in these edifices is only partial, and the representations, both expressed and implied are many -- but the warranties few.

Yikes. The implications of the student loan crisis could well be far-reaching, and it's a dynamic that we'll need to keep our eye on over the next few years, because a lot of these institutions are proving to be ruthless when it comes time to collect payment.

In the meantime, I'm hoping we see some guts from the students who are being sued—let's see a countersuit from the unemployed (or underemployed) college graduates against their colleges and universities, alleging fraudulent marketing and failure to deliver on the promises made. The suits may have little merit, but I think it's the lender's (and not the borrower's) responsibility to determine the creditworthiness of the borrower. If they made bad loans to bad students, they should be forced to pay the price. That's how loans are supposed to work, period.

[Bloomberg]
[Market Ticker]

The credentialization of America

Last week, I wrote a post about government policies gone bad in Chicago, and how those policies are getting in the way of innovation and economic growth. I wrote:

The fact of the matter is that most politicians don't have a clue about what it actually takes to promote economic growth, even while they recognize that it's the absolute only way out of our current budgetary morass, given those same politicians' utter unwillingness to do anything meaningful to address it. 

As I've written here before, if we really want sustainable economic growth, then we need to be incentivizing innovation and entrepreneurship, not stifling it with overly onerous regulations that turn a simple task like starting a food truck business into a Sisyphean struggle. But, of course, we seem to be consistently doing the opposite, just about everywhere we look. 

We pass regulations on top of regulations from coast to coast, and we issue overly broad patents that protect the large companies at the expense of the small and innovative start-ups. We pass bizarre "taxpayer relief" bills without reading them, rubber-stamping a plethora of corporate kickbacks and subsidies in the process when nobody's looking. And we require that ever more trivial jobs require credentials and continuing education, increasing the cost of pursuing just about any career path we may choose (I'll have more on that topic next week).

Well, here it is, next week, and I am a man of my word. I happen to follow the Bureau of Labor Statistics on Twitter, largely because it's amusing to do so. Last week, they posted a status talking all about certificates, and how they were the "fast track" to careers. They linked to this strange little marketing pamphlet, which talks all about how awesome these certificates are. In it, they wrote:

The U.S. Bureau of Labor Statistics (BLS) has identified 33 occupations as typically requiring a certificate or other postsecondary nondegree award for people entering those occupations. In 2010–11, according to NCES, the most popular disciplines for certificate programs were healthcare, personal and culinary services, and mechanic and repair technologies and technicians. But people also earned certificates in a wide range of other occupational areas, such as computer and information sciences and protective services.

This includes jobs like hairdressers, nannies, fitness trainers, all the way down to computer programmers and web administrators. Strangely enough, most accountants, preschool teachers, and paralegals reported that they didn't need any special sort of certificate, which is honestly a little bit bizarre.

Now, in many of these cases, the tendency toward requiring certificates provides a very valuable protection for consumers—they can be assured that they're getting at least a minimum level of competence from the people they hire, and that's usually a good thing. But as these credentials and certificates creep their way down into even the most "unskilled" of occupations, I have to wonder what the point of it all is.

Is all of this just making it harder for everyone to meet basic job requirements? And is that a good thing for the economy at large? Or are these requirements just destined to get in the way of economic growth, like the licensing requirements for food trucks in Chicago in my earlier post? I'm all for safeguarding certain professions and making sure that the people who are in high-risk or high-impact positions don't blow up the world, but I think we've gotten way beyond that now.

I've been through a few of these types of training courses on my own over the years (TIPS training was a personal favorite), and I can tell you first-hand: they're not all exactly academically rigorous. Generally speaking, I'm not any more or less likely to do the right thing as a bartender or a financial advisor or a manicurist or whatever else just because I forked over a few hundred bucks and took a couple of classes with some common-sense tests attached to the back of them. Ultimately, there's a big difference between knowing the right thing to do, and then actually doing the right thing. Shocking, I know.

As consumers, we can't be so willing to outsource our due diligence to these certificate-granting institutions, whichever they may be. Many times, we in fact allow ourselves to become more vulnerable as a result, because it's incredibly easy for a scam artist to get himself a license or certificate and then hide behind his "credentials". And in the process, we may actually have made it more difficult for an honest and hard-working man to get that same job. That's bad.

Maybe none of this matters, and I'm just howling at the moon a bit, but I don't think this world needs any more licenses and certificates and credentials than it already has. What it does need is more common sense, more personal accountability, and more innovation and entrepreneurship. Unfortunately, again, we seem to be headed in the wrong direction.

[Bureau of Labor Statistics]

The NCAA and unintended consequences

Earlier today, my attention was drawn to a tweet from John Infante, a former NCAA compliance officer who writes the Bylaw Blog for Athnet. I've written a fair amount about the NCAA and its relationship with "student-athletes" before, so I thought this latest tidbit was worth sharing. In an article teased in his own tweet, Infante writes:

In the wake of last summer’s highly publicized transfer battles (Ed. Note: like these), the news that the NCAA was looking at changing the transfer rules was refreshing. What appeared to be an inconsistent standard for waivers along with student-athletes needed permission to contact other schools lead to a popular backlash against the NCAA’s transfer regulations, a sentiment that was echoed by NCAA President Mark Emmert... 

There is no formal proposal yet, but the Leadership Council published a set of principles for updated transfer rules that make it easy to see what those specific rules might be.

One of those principles is the topic of this post (and of Infante's tweet), the principle regarding a GPA contingency:

AM RT: NCAA considering transfer model that would allow all athletes with a 2.6 GPA to play immediately: athleticscholarships.net/2013/01/03/new…
— John Infante (@John_Infante) January 4, 2013

In general, I think this principle is a clear step in the right direction, as it restores some rights to student-athletes who, through no fault of their own, are left in a situation that is dramatically different from the one they entered (like a coach leaving for the NFL, or dying, or a program being put on probation for violations that occurred before the player arrived, etc.). It also hypothetically provides these student-athletes with an incentive to actually go to class, which is definitely a positive for everyone involved.

However, as usual, it wouldn't be a policy if there weren't some unintended consequences to consider. In this case, I see a great problem with setting a GPA threshold that doesn't (and can't) vary based on the quality of the institution. Are we to pretend that a 2.6 GPA is as easily attainable at Stanford or Notre Dame as it is at San Jose State or Arizona? Since we know that it isn't, doesn't this proposal effectively penalize those students who choose to go to schools with rigorous academics? And by extension, isn't it also penalizing those schools for not watering down their academic programs to benefit the student-athletes? If so, is that really what we want our NCAA policies to be doing?

As I wrote in a Twitter response to this news, encouraging schools to downgrade the rigor of their academic programs is a poor long-term strategy. Unfortunately, that's arguably what this policy would do, simply because of the incentives that it creates for student-athletes when they are considering schools. If an athlete with a 2.6 GPA has more rights than an athlete without one, then every kid should do everything in his power to make sure that he can attain a 2.6 GPA.

In an ideal world, that would mean that the athletes in question would all buckle down and work harder in school, and we'd end up with a world full of student-athletes with sparkling collegiate transcripts. But over here in the real world, all it does is encourage the kids to go to schools where they can get a 2.6 just by showing up, thereby immediately receiving more rights as an athlete.

Is that really what we want? Do we actually want to steer athletes away from the top academic schools, simply because they're likely to have more rights at the lower-tier ones? I don't think so, and I hardly think that's the idea at the core of this proposal. But unintended consequences are consequences nonetheless, and they require careful consideration by policy-makers at all levels of governance.

This winter, we have seen several top-rated schools play in meaningful football games—from Northwestern gaining its first bowl win since 1949 to Stanford winning the Rose Bowl for the first time in 40 years to Notre Dame playing for the national title for the first time in what seems like forever. Hell, even Vanderbilt won itself a bowl game, in a bowl season where most SEC teams can't seem to get out of their own way.

Against all odds, teams are finding a way to excel both in athletics and in academics, and yet the NCAA wants to pass a rule that would take us in the opposite direction, even if unintentionally. That would be a terrible shame, and I encourage the NCAA to reconsider this proposal, which has good intentions but potentially dire consequences.

[Athnet]

Top posts of 2012

Since it's that time of the year where everybody takes stock of things and mocks the Mayans and makes predictions for the next year and does whatever else it is that people like to do while nursing their egg nog hangovers, I thought I'd take a look back at The Year That Was here at the Crimson Cavalier, starting with a rundown of my most popular posts of the past 12 months.

So here are my Top 10 most-read pieces from 2012, which are, naturally, all over the map. None of these posts was anywhere close to becoming my most-read post of all time (that honor belongs to this post on globalization, followed closely by this George Carlin-inspired post and this post on discrimination), but a few of them definitely registered a bit of a rumble on the ol' Crimson Cavalier pageview seismometer.

Enjoy re-reading some of your favorites, and I'll do my best in the future to reproduce more of the good stuff you all like... whatever that is.

#1: Remembering the Dream Team (June 14)

It probably shouldn't be surprising that my most-read post of the year had to do with the (tape-delayed) Olympics, which dominated the news cycle for a few weeks back in the summer. On the 20th anniversary of the Dream Team, I shared some of my own memories while excerpting a GQ oral history of the squad.

#2: The changing business of education (May 9)

The runner-up post (with about half the pageviews of the champion, which means it's a distant second, but so be it) involved one of my favorite topics, education. Inspired by a very cool new program at Virginia Tech called the "Math Emporium", I shared some of my thoughts on the future of higher education in America.

#3: Eat More Chikin (at Wendy's?) (July 30)

I'm sure you all remember the flap surrounding Chik-Fil-A this summer, way back when Mitt Romney's Presidential campaign was just shifting from "suck" to "blow". I thought the controversy was incredibly overdone, and I thought that many people were far too self-congratulatory with respect to their boycotts of the fast food also-ran. I said so, in a pretty standard Crimson Cavalier rant.

#4: I'm too busy to write a blog post (July 16)

I'm too busy to write a blurb about this blog post. Just read it, alright? Or don't, if you're too busy. Either way, kudos to the Harvard Business Review for a well-written article, one that I briefly reviewed in this post.

#5: The carbon footprint of flowers (WTF??) (May 4)

With Mother's Day approaching, I decided to take a minute to make everybody think twice about sending flowers to their mothers. Why? Because I'm a jerk, obviously. Also, because it turns out that almost all of the flowers we buy in this country are shipped here from Latin America, and that therefore the flower industry has an incredibly large carbon footprint. How's THAT for irony? "Green" economics, indeed.

#6: Is it the weekend yet? (June 6)

I wrote this post on a Wednesday, so no, it most definitely was not the weekend. I might have had a drink that night anyway. Possibly.

#7: Bernanke's Terror Alert Scale (September 14)

I wrote this post in the immediate aftermath of the Fed's announcement of infinite "quantitative easing", a program that has had incredibly underwhelming results so far. That's about what I predicted on that day, and so I'm going to take a second here to pat myself on the back. While we're at it, keep your eye on this dynamic in 2013—I have a feeling it's going to have some serious economic relevance in the not-too-distant future.

#8: When hypocrisy is good business: "The Lorax" (March 2)

"The Lorax" could have been a cute little Dr. Seuss movie with a nice message about conservation, but instead it became a symbol of all that I hate about corporate hypocrisy. I borrowed from a delightfully vicious review of the movie by NY Times critic A.O. Scott, and I shared my own thoughts about the odd intersection (or clash) between morals and business.

#9: Clip of the Week (April 6)

I'd like to thank John O'Hurley (J. Peterman) for providing me with my most popular Clip of the Week ever—a promotional video for "Rangé" golf balls. Good stuff.

#10: The tail is still wagging the dog at UF (April 24)

Yes, another post on education, which makes two in my top 10. This one also involved collegiate athletics, another common topic here on the blog. The University of Florida made the incredibly bizarre decision to drop its ENTIRE computer science department, an area of education that should be expanding if anything. At the same time, they increased their athletics budget by more than $2 million, an increase that was greater than the entire C.S. department budget. Well played, UF. Well played. But next time, beat Georgia.

On prohibition (of guns)

Whenever I come across a politically charged issue like the one on gun control that has sprung up in the wake of the events in Newtown, I tend to take some time to properly synthesize my thoughts, so as to avoid speaking off the cuff and saying something un-careful that adds to the chorus of stupidity that typically surrounds these types of events and issues. Having now taken an appropriate amount of time to have done so, I'll now share my thoughts, hopefully in a manner that is both sensible and organized (rather than a rambling brain-dump).

Obviously (and mostly correctly), the tragedy in Newtown has sparked a significant wave of support for new gun control laws, or at least for a re-introduction of past gun laws that have since lapsed. When I try to assess the likely impact of such proposed laws, I think that it's always best to rely on the predictive power of analogies. In the case of guns, I think it's impossible to talk about any sorts of limitation or prohibition without first considering our nation's experience with the prohibition of alcohol, marijuana, and abortion—all things for which there is/was an intense societal desire, but also a significant social or moral concern. Suffice it to say, the experience of such prohibitions has been mixed at best. Unintended consequences have a tendency to crop up in strange and undesirable ways, much like in the case of bans on texting while driving.

The last thing we need is to institute a counterproductive law that ironically makes our problem worse, not better. History has shown that when people have an intense desire to possess or to do something, they typically will find a way. People and corporations are incredibly resourceful when they need to be, which of course is why we now have corn in our Coca-Cola.

But what concerns me more about the response to the Newtown incident isn't my suspicion that gun control laws would fail, but more that we are focusing on largely the wrong issues. While we can't know entirely what was going through Adam Lanza's head on the day that he decided to become a national pariah, we owe it to ourselves (and to the slain children) to try our best to understand, rather than to simply blame his tools and be done with it.

Ultimately, the laser focus on guns and gun control in the past few weeks has all the traditional markers of scapegoating. We have in front of us a very complex and uncomfortable issue, with many factors potentially playing a hand in ways that we may not fully appreciate. But instead of trying to unpack a large and messy issue, we instead focus on the easiest (or most convenient) explanation, and in doing so we rely on what is an overly simplistic narrative of What Happened That Day In Connecticut.

In the discussion on gun control, there is a serious issue of what is said versus what is left unsaid. What is largely left unsaid is our implicit assumption that a certain subset of Americans will always want to do great harm to other Americans, and that we must therefore act to minimize the damage that they can do. We ask very few questions as far as why those Americans must exist, or why they continue to do things like this at a rate that seems to be increasing by the day.

Is there something ill in our society that causes people to become so hopeless or disillusioned that they think these acts are the only way by which they can obtain any attention or fame? Are we doing a disservice to the mentally ill people in our society, ignoring them to the point that they begin doing desperate and irrational things? Could it even be that the drugs we use to try to treat these people's "symptoms" are doing more harm than good (unintended consequences, revisited)? All of these are relevant and important questions and discussions, and yet they have so far largely been drowned out by a chorus of "MORE GUN CONTROL NOW" demands from all corners of the country.

One of the most compelling ironies that I've come across in the past couple weeks came courtesy of the following tweet:

If u run onto a baseball field, TV won't show it, to dissuade copycats. If u kill kids? Anti-hero profiles for DAYS. #newtown @pattonoswalt
— Brian Farnham (@brifar) December 14, 2012

Indeed, this central irony of media coverage is both poignant and dangerous. If you mention the names "Dylan and Eric", most people in my generation will still know who you're talking about, even a decade and a half after the original incident. That's somewhat sick, and it's definitely part of the problem. For good or for bad, the individuals who shoot up schools become national celebrities, and everyone instantly knows who they are—it took mere minutes for the name "Adam Lanza" (well, Ryan Lanza at first, but I digress) to be known from coast to coast. For kids who feel small or hopeless or depressed, it doesn't take much for that kind of anti-hero worship to become incredibly alluring.

I think it's incredibly dangerous for us to singularly focus on gun control as the remedy to our current problem while ignoring the dynamics that I've (ever so briefly) mentioned in this post. Even if our country had no guns at all, it would still be possible for Timothy McVeigh to blow up a building with fertilizer and diesel fuel, and it would still be possible for the next Adam Lanza to emulate these Chinese men, who terrorized schools not with guns but with knives.

Ultimately, the longer this country goes on ignoring the more difficult and important questions in our society, the harder those issues will become to address in the future. It's basic kick-the-can behavior, which doesn't work any better in cases of mass murder and psychological distress than it does in the case of debt crises.

We often take it for granted that America is the greatest country in the world, but quite frankly, in many ways, it is far from it. In the greatest country in the world, Newtown shouldn't happen. In the greatest country in the world, we take care of all our citizens, BEFORE they get desperate and do crazy things, rather than waiting for a great tragedy to show our support (or condemnation). In the greatest country in the world, we try to rehabilitate the mentally ill, we don't just ostracize them and put them in a padded room. And in the greatest country in the world, we don't sit and stare while our suicide rate stagnates at roughly twice the rate of Spain, Italy, and the U.K.

In the greatest country in the world, we ask the tough questions, and we ask them early. Rather than shying away from uncomfortable discussions, we embrace them and attack them head-on, sensing an opportunity to make a great nation even greater. In the greatest country in the world, we don't ask how we can keep bad people from getting guns, we ask how we can keep from having "bad people" in the first place.

Incidents like the one in Newtown are unacceptable, but simply shrugging our shoulders and pretending that blaming guns is a sufficient response is even more unacceptable. The victims and their families deserve better than that, but we all stand ready to give them short shrift. Unfortunately, that's becoming the American way, and it's an awful, awful trend.

If we all accept on faith that gun control and gun control alone is the proper response to Newtown, then I can give you 100% assurance that there will be another Newtown in our not-too-distant future. And in the greatest country in the world, that's just not okay.

Quote of the Week (French teachers' edition)

After a slow start to the week, I've got a whole bunch of posts coming your way today and tomorrow (many of them quick hitters). As for this week's Quote of the Week, this week's contest was in fact no contest at all. French President Francois Hollande won this thing going away, making him (I think) our first ever two-time Quote of the Week champion...

This week's QUOTE OF THE WEEK

"French President François Hollande has said he will end homework as part of a series of reforms to overhaul the country’s education system. And the reason he wants to ban homework? He doesn’t think it is fair that some kids get help from their parents at home while children who come from disadvantaged families don’t."
                                       - Valerie Strauss, Washington Post

Ban homework!! That's a brilliant idea... what we really need in order to reform education is for our kids to be studying less, not more. That's the ticket!

Ironically, countries that are rapidly going broke—which France most certainly is—should probably be encouraging homework, rather than discouraging it. The more learning that can be outsourced to the home, the fewer government-subsidized teacher hours need to be purchased in order to educate the populace. But, of course, that just isn't fair.

Furthermore, this is just an instance of mind-numbing ignorance on the part of Hollande. To assume that simply eliminating homework means that affluent children will learn nothing from their parents when they are home is idiotic. The parents will still have the opportunity to hire private tutors, pay for music lessons for their children, buy their children books that the poorer children cannot afford, and generally provide a well-rounded life full of education and learning, regardless of what's happening (or being assigned) at their schools.

If you want to ban homework, you really shouldn't stop there. The real key is to ban non-affluent parents, because their kids shouldn't have to bear the costs of their inevitable poor parenting. Therefore, from here on out, all French children will be removed from their birth parents and raised only in affluent households by considerate parents. Great success!

[Washington Post]

On intellectual inconsistency

In yesterday's Quote of the Week, I presented a line from actor Craig T. Nelson that displayed a stunning lack of self-awareness, a trend that's seemingly everywhere in our country these days. I had previously discussed this dynamic in a post on "blind spots", which hold the potential to swing elections (and the political and economic future of our nation).

In that post—which focused on a graphic that revealed that a significant percentage of recipients of government welfare programs did not consider themselves to be government beneficiaries—I wrote:

To fully appreciate the importance of these blind spots, I think it's useful to attempt to put these numbers into context. Using just the final line item, "Food Stamps"—which I think is a fairly clear and unambiguous example of a "government social program"—we see that 25.4% of food stamp (pardon me, SNAP) recipients do not consider themselves to have benefited from a government program. This is certain to impact the way they view national issues in federal (especially Presidential) elections, especially when debt and deficits are as large a story as they have currently become. 

Recall next that in several states, food stamp usage covers close to (or more than) 20% of the total population (nationwide, food stamp usage rates are at 14%). If a full 25% of people in these states do not think that they benefit from our "big government", that leaves us with 5% of that state's population—easily a big enough group to decide just about any Presidential election—believing something that is patently false.

Simply put, how can we expect voters to make intelligent and informed decisions about their political leaders when they have such blatant and vicious blind spots obscuring their view of the world (and their role in it)?

Perhaps unsurprisingly, this issue has been coming up quite a bit lately, most recently in Wisconsin, where Governor Scott Walker found himself in a bit of a weird spot with respect to the NFL's disastrous replacement referees.

Nothing brings political enemies together in Wisconsin like the Green Bay Packers. 

Following a controversial game-ending call by replacement referees that cost Green Bay a win over the Seattle Seahawks on Monday Night Football, Wisconsin officials from across the political divide united behind the Packers. 

Even Gov. Scott Walker and a Democratic state senator who were bitter opponents in the 2011 battle over Wisconsin public workers' collective bargaining rights found themselves on the same side Tuesday. 

Walker, whose union-busting efforts have made him the darling of fiscal conservatives, posted a message on Twitter calling for the return of the NFL's locked-out unionized officials. 

"After catching a few hours of sleep, the #Packers game is still just as painful. #Returntherealrefs," Walker tweeted early Tuesday... 

Walker's spokesman, Cullen Werwie, tried to spin the governor's post on Tuesday, saying it wasn't meant as a pro-union political statement. Walker's tweet was being widely mocked on Twitter in light of his push last year that effectively ended collective bargaining for teachers, nurses and most other public workers. His proposal didn't affect private sector unions. 

"I don't think this anything to do with unions, but has everything to do with refs making bad calls," Werwie said.

To be fair to Walker, there's an important difference between the role and operation of public-sector unions as opposed to private-sector unions, a difference that even FDR recognized and appreciated. Nevertheless, the more we dig into this issue, the more inconsistent Walker's analysis seems to be.

According to Sports Illustrated's Peter King, there are some fairly significant parallels between this case and the Wisconsin (or Chicago, take your pick) teachers' case:

One of the emerging and major reasons why a deal has been so elusive... is that the NFL is insisting on getting some control of the officials back that it has ceded in past negotiations with the NFLRA. This includes the league's desire to have three seven-man officiating crews in reserve with the ability to replace—either for a game or longer—underperforming current officials. 

Another source with knowledge of the locked-out officials' position said Tuesday that the NFL would not guarantee that they would work at least 15 games in a regular season. Currently, other than due to injury, an official that starts a season works the full season. The officials source said that this is the main crux of what the NFL is trying to do in these negotiations: wrest back control of the officials' performance week to week in an NFL season. I've been told that the NFL is insisting on being able to make in-season changes to crews based solely on performance of individual officials... 

There's also still the matter of the league trying to roll back the officials' pension. Over the last five years, the league has contributed, on average, about $5.3 million per year to the officials' pension plan. The league, in keeping with the current cost-cutting practice of corporations across America, no longer wants to guarantee how much each official would get in retirement, but rather tie the contributions to a 401(k)-type pension.

The ability to fire underperforming workers? Questions over the funding (and fundability) of workers' pensions? You know, this situation is starting to sound pretty familiar, which of course makes Gov. Walker's support of the referees in this situation that much more ironic.

But then, intellectual inconsistency and self-justifying behavior has become the norm in this country, especially since the financial crisis of 2008-09. As I wrote in this blog post last summer,

In the housing crisis, there were some who blamed the borrowers (i.e. homeowners) for irresponsibly using debt to live beyond their means, but the vast majority felt that the real story of the crisis was one of overly greedy and predatory bankers taking advantage of borrowers, originating loans that were destined to fail. This "blame the lenders" dynamic ultimately became the "winning" narrative in the aftermath of the crisis, hence the incredible vitriol directed at banks today. 

In today's [global sovereign debt] crisis, though, that's far from the case. Instead, we direct our ire primarily at the irresponsible borrowers, blaming the nations in question (rather than the enabling lenders) for their predicament. Instead of blaming China for consistently purchasing our national debt time and time again over the past few decades, we blame our own government for its irresponsibility (which is probably fair, just noticeably different from how we viewed the housing crisis). 

After watching the strange theater of the forced "austerity measures" in Greece this week, I tried to imagine the proper analogy in the housing crisis. What if, instead of foreclosing on a home, banks and mortgage companies came to an individual's house and demanded that they cancel their phone service, cut down on their food intake, and sell their cars in the name of "austerity" and improving the chance that they repaid their mortgage? That sounds completely ridiculous, right? And yet, that's exactly what we're seeing here. 

Ultimately, I think that the differing responses to otherwise similar stories derives from our pre-existing notions of who is the more sympathetic party, rather than the facts of the matter. In the housing crisis, it was far easier (and incredibly satisfying) to blame the big, evil banking institutions than it would have been to accept the blame ourselves, as homeowners. 

In the sovereign debt case, it is far easier to blame one or two basket-case governments (especially when it is so fashionable right now to blame governments—in this case, THEY are the big, evil corporation relative to the smaller banks) than it would be to place the blame on the lenders, who span everyone from the European Central Bank to nearly every American who places money in a money market fund. 

It's hard to trust ourselves when we try to analyze complex situations like these, simply because our reactions are so utterly inconsistent with regard to the actual facts of the case. We all approach situations in life with inherent, trained biases, and it's exceptionally difficult to get past these and assess problems at face value.

We all like to view the world as a universe full of simple narratives, with clear villains and heroes and obvious lines of culpability when things go wrong. But the truth is always somewhere in between—both heroes and villains share some of the blame, and sometimes the heroes in one situation are in fact the villains in another. Because this doesn't fit well with the way that we like to view the world, we instead end up with bizarre and contradictory approaches to what are in fact similar situations, based simply on the role in which we place ourselves.

As a nation, if we are ever going to be able to engage in an open and honest conversation about the issues that plague our country's political and economic systems, we must first start by appreciating our own biases and blind spots, and approach these complex situations from a more detached (and less emotional) standpoint. If we can't do this, then we'll be forever destined to make poor and inconsistent decisions, and we'll all end up in an awkward spot, just like Gov. Walker.

But hey, breaking news, looks like the NFL's "real" referees are on their way back to work, after all. That's great news.... isn't it?

[Sports Illustrated 1]
[Sports Illustrated 2]

The downside of homeownership

In an article this week, The Economist wonders whether the decreasing labor mobility in the United States—which I've covered here before—is a result of a "more efficient market". They write,

The drop in mobility shows up almost exclusively in gross migration, the total number of interstate household moves... The trend predates the housing boom and bust; the crisis cannot explain it.

Some reckon the decline is caused by demography. Young workers, at the start of their working life, have most to gain from moving. An ageing population may therefore be less mobile. Growth in two-earner households could also play a role. When both partners work, it is harder to move if one of them loses his job or is offered a post somewhere else. New research by Greg Kaplan of the University of Pennsylvania and Sam Schulhofer-Wohl of the Federal Reserve Bank of Minneapolis casts doubt on these explanations...

The authors analyse census data gathered monthly between 1991 and 2011, and find that the pattern of falling mobility persists across all parts of the workforce. Mobility is down across “all education levels, for people of all marital statuses, and for both single-earner and multiple-earner households.” Ageing is a red herring: mobility rates have dropped most for young workers. It isn’t so much the American worker that is changing, they argue, but the American economy. Reduced mobility largely reflects two shifts in the nature of economic activity...

The first is that the mix of jobs offered in different parts of America has become more uniform. The authors compute an index of occupational segregation, which compares the composition of employment in individual places with the national profile. Over time, their figures show, employment in individual markets has come to resemble more closely that in the nation as a whole. 

This homogenisation reflects the rising importance of “non-tradable” work. As the name suggests, non-tradable goods and services are not traded across long distances. Californian dentists tend not to clean Floridian teeth; every city has its own dentists. Cars, by contrast, are tradable, so not every state has its own car plant... With more of the country’s employment mix present in each state, it is less necessary to move to find work.

... The authors suggest another force is also reducing migration: the plummeting cost of information.

Young workers in particular used to have to move to gather information: to see whether they could stand a Boston winter, say, or cared enough about the Californian climate to pay Californian rents. In recent decades, however, it has become much easier to learn about places without moving house. Deregulated airlines and innovative online-travel services have slashed travel costs, allowing people to visit and assess different markets without moving. The web makes it vastly easier to study every aspect of a potential new home, from the quality of its apartment stock to the surliness of its baristas, all without leaving home. Falling mobility isn’t simply caused by labour-market homogenisation, the authors argue, but also by greater efficiency. People are able to find the right job in the ideal city in fewer hops than before.

These explanations are, in theory, quite compelling. It's certainly interesting that labor mobility is falling the most among younger workers, and this does indeed seem to beg an explanation beyond just the housing bust and underwater mortgages.

Nevertheless, I can't help but think that the housing dynamic—or, at least, the wider debt bubble that fueled it—has a significant role to play here, if only indirectly. Might it be that young workers, overly burdened with student loan debt and unable to afford places of their own (either to rent or to buy), are shacking up with their (perhaps underwater) parents so as to avoid rent costs? Clearly these two dynamics can play off of each other, given that they both stem from the same basic problem of overwhelming debt, leading workers of all ages to stay closer to home.

In thinking through these problems, I was reminded of this blog post from Tyler Cowen from last month. Citing a study in El Pais, Cowen writes:

Here are the European countries with the highest owner occupancy rates:

1. Romania, 97.5%

2. Lithuania, 93.1%

3. Croatia, 90.1% 

4. Slovakia, 90.0%

How about the lowest rates?

1. Switzerland, 44.3%

2. Germany, 53.2%

3. Austria, 57.4%

Get the picture?

Cowen's point is clear. For years—decades, even—we heard politicians and economists touting homeownership as an integral part of the American dream, and a huge key to our future economic success as a nation. Now, we're starting to see the flip side of that coin, and we're not alone. The most prosperous nations in Europe in fact have very low homeownership rates, while the nations with high rates flounder. This absolutely cannot be a coincidence, and it must have at least something to do with labor mobility.

That, or a high homeownership rate is just a great indication of a society with a lot of debt, a lack of flexibility, and therefore a general lack of entrepreneurship. I hope that we won't some day be reading statistics similar to Cowen's list there regarding levels of college education, but I certainly have to wonder. Debt is an ugly beast, and we can't very easily explain it away by spitballing theories about "lower costs of information". It's a good effort by The Economist, but I remain unconvinced.

[The Economist]
[Tyler Cowen]

The mess at UVA

Given my status as a UVA alum and Charlottesville resident--as well as a frequent critic of our nation's system of higher education--there's really no way that I can get away without commenting about the recent shitstorm at my (graduate) alma mater (it's always fun when one of my alma maters' presidents gets let go, isn't it?).

But since I don't feel qualified to discuss the situation at any great length--in fact, nobody does, because everything has been done with such an air of secrecy and opacity--and I frankly don't know all that much about Dr. Sullivan (Teresa, I Hardly Knew Ye), I'll chicken out here and just re-post what I believe to be the best piece of commentary I've seen on the matter to date. From Duke sociology professor Kieran Healy, I give you an updated Declaration of Independence.

Charlottesville, June 19th, 2012

The More or Less Unanimous Declaration of the Board of Visitors

When in the Course of human events, it becomes necessary for a Board to dissolve the administrative bands which have connected a President with a University, and to assume for themselves the powers of the earth, the separate and equal station to which the Laws of Nature and the Bond Market entitle them, it is best to do it secretly, quickly, and in the middle of the night.

However, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation, especially when one is unexpectedly faced with large, angry crowds on the Lawn at two o’clock in the morning and a quite stupendous media shitstorm thereafter.

We hold these truths to be self-evident, that all Universities are endowed by their Donors with certain unalienable Goals, that among these are Strategy, Dynamism, and the pursuit of some sort of Online Degree delivered via the Interwebs,—That to secure these goals, Presidents are appointed, deriving their just powers from the half-baked ideas of idle Billionaires,—That whenever any University President becomes destructive of these Goals, it is the Right of the BoV to institute a new President, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect Strategy, Dynamism, and Strategic Dynamism. Prudence dictates that Presidents only recently established should not be changed for light and transient causes; yet experience hath shewn, that Universities are more disposed to suffer than to right themselves by downsizing obscure departments such as Classics, or German, or—it now appears—Computer Science. Fuck.

Anyway, it is nevertheless our right, it is our duty, to throw off such Presidents, and to provide new Administrators for my future security. Yours! I mean, Your future security. Such has been the patient sufferance of this University; and such is now the necessity which constrains us to alter its former Systems of Government. The history of the present President is one of repeated injuries and usurpations, all having in direct object the maintenance of some sort of financially viable, intellectually robust, nationally respected institution of higher learning. Such goals are so 20th Century. I read that in Forbes recently. Did I not shew it to you all via e-mail? Perhaps I forgot to attach it. Sorry, where was I? Oh yes. To prove this, let Facts be submitted to a candid world:

* She has refused to listen to me when I sent her this US News & World Report article I read about how Technology is Transforming Education.

* She has refused to hire Consultants at extortionate rates, preferring instead to consult experts on her own Faculty—as if a University were the place to find experts of any kind, the very idea. Far better to hire a team consisting mostly of 22 year-olds from McKinsey, they know how to do those 3-D charts in Excel and have you seen their Powerpoints the transitions are cool I like the flame one the best.

* She has called together legislative bodies at places normal, standard, and proximate to the depository of their public Records, for the sole purpose of keeping the Faculty and university community informed of her plans.

* She did not think Becoming China’s Bitch was a very good book at all.

* She has hired some Officers to implement her goals.

* She has combined with others, like the Provost, to subject us to a set of standards foreign to the understanding of Beach Condo Developers; giving her Assent to their Acts of pretended Administration:

* For Quartering large bodies of actual students among us, instead of on a website somewhere.

* For maintaining Standards without our Consent:

* For depriving us in many cases, of the benefits of future consulting deals:

* She has excited domestic insurrections amongst us—have you seen this crowd outside, Helen? It’s really quite large now.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: i.e., by circulating emails amongst a subset of our group, exchanging links to some stuff in Wired Magazine about Stanford, and ginning each other up for her removal. A President whose character is thus marked by every act which may define an intelligent, decisive, forward-looking, and accountable leader, is clearly unfit to be the ruler of a Nationally-ranked University.

We, therefore, the appointed members of the Board of Visitors, in closed session, Assembled in haste and appealing to the Theory of Strategic Dynamism for the rectitude of our intentions, do, in the Name, and by Authority of some very wealthy people indeed, solemnly publish and declare, That President Sullivan is removed and that Dean Carl Zeithaml shall henceforth have full Power to Dynamically Strategize, set up Online Learning Working Groups, implement Acquisition and Diversification strategies, contract Knowledge-Based Sources of Competitive Advantage, develop Resource-Based Conceptual and Methodological Frameworks for Global Effectuity, and to do all other Acts and Things which Business School Professors may of right do, gosh it’s a wonder capitalism was able to get off the ground in the first place without their assistance. And for the support of this Declaration, with a firm reliance on the protection of divine Providence and please God the Governor, we mutually pledge your Reputation, your Fortunes and your sacred Honor.

As a Darden graduate, it's impossible for me to ignore the apparent role of my MBA alma mater in this mess--the "Becoming China's Bitch" reference in Mr. Healy's piece was a direct reference to that role--and I can't say that I'm proud of what I've read. While I think that our nation's education system is in dire need of serious reconsideration--to summarize, this is a step in the right direction, this is the opposite--I similarly think that the Board owes the Charlottesville community, the alumni of the institution, and the active student body a better and more complete explanation for their actions (if not a more active voice in the process).

Blindsiding the world with an announcement like this unequivocally makes the institution weaker, regardless of the ultimate reasons for the action. This controversy is largely a matter of goals vs. process, and in this case the process was for shit. I may even agree with the goals (it's hard to know, given the continued lack of transparency), but as they say, the road to hell is paved with good intentions.

I'm proud to be associated with UVA, in large part because of the response that has followed from this situation. Whether or not Dr. Sullivan is the right leader for UVA for the next decade, this institution has built its reputation on doing things the right way, the respectful way, and the transparent way. None of those dynamics were on display here, and I'm therefore glad that there has been such an incredible backlash.

In order to get people in the broader UVA community to buy in to the drastic change that the Board is seemingly asking for, it is absolutely imperative that the people in that community believe that the Board is acting in good faith. You can't get people to buy in to your vision (whether you're a college board or a nation's president) unless they trust you and think you're worth following--right now, very few people think this Board is worth following, and that's a problem for their vision. As my political hero Otto von Bismarck would tell you, having the right goal simply isn't enough--process matters. This Board has officially learned that lesson the hard way.

[Crooked Timber]

Quote of the Week (Teachers' Edition)

To tee up this week's Quote of the Week, we first need to introduce you to Michelle Apperson. Ms. Apperson, a 6th grade teacher in Sacramento, just had a very big month--first, she was honored as Sacramento's "Teacher of the Year". Then, she was laid off.

So, either the people who give out the "Teacher of the Year" award in Sacramento are sorely mistaken, or something else is going on here. Guess which is the case?

This week's QUOTE OF THE WEEK

"It hurts on a personal level because I really love what I do. But professionally and politically or economically, I get why it happens."
                                         - (Former) Sacramento Teacher of the Year Michelle Apperson

It seems that Ms. Apperson is too diplomatic to actually say why it happens, so I'll step in for her here. It happens because California, like many (or most) places in our country, has a rule in place that ensures that teachers are laid off based on seniority alone, regardless of performance. Ms. Apperson didn't have seniority, so nothing else mattered. She's gone.

These sorts of rules--which are of course championed by teachers' unions from coast to coast--are devastating our nation's education system at a time when it can ill afford any further strains. Time and time again, teachers' unions have fought for greater benefits for themselves (like, for example, lucrative pensions that can't be funded), with little regard for who will have to pay the price down the road. In this case, it's Ms. Apperson (and Sacramento's students) who are paying the price for the unions' negotiated spoils.

I fully appreciate the potential benefits of unions, but in recent years it seems that many of them have been doing more harm to their organizations than good (Detroit certainly comes to mind). It's one thing to fight over the allocation of revenues or profits between management and labor, but quite another when these negotiations begin to sink the whole ship--if a company goes bankrupt, nobody gets paid. Furthermore, I think that public unions are a strange and ugly animal, and I share FDR's belief that they probably shouldn't exist.

Part of the knee-jerk reaction to Ms. Apperson's dismissal was a call for an overhaul of the way that education is funded in this country--in fact, there's a quote in the Yahoo article that I cited which argues exactly that point. But that idea couldn't be more wrong. This isn't a matter of funding, it's a matter of spending, and of what we choose to spend our money on. Do we choose to spend it on the most senior teachers, or on the most accomplished? Do we choose to spend it on current teachers, or on retired teachers in the form of bloated pensions?

No matter how we raise our money, or where we raise it from, there's ultimately only so much to go around, and we simply can't afford to be wasteful. This goes for all forms of government spending, including education, defense, healthcare, infrastructure, etc, etc, etc. Unfortunately, when budget crises hit, we tend to cut in the worst possible places, using the worst possible methods. So we lay off successful teachers, we stop maintaining our roads, and we end up costing ourselves significantly more money in the long run as a result.

Ms. Apperson's case is only the most recent example of an unintended consequence of government budget-cutting. The simple fact is, the more we insist on ignoring the REAL sources of our budgetary problems (at the federal level, it's Medicare, defense spending, and Social Security; at the state level, it's almost always those un-fundable teachers' pensions), we'll end up cutting all of the wrong things and driving ourselves further and further into the ground. We can't nickel-and-dime our way out of these budgetary quagmires--we need to take on the big problems, rather than counter-productively chipping away at the small-but-productive government programs (like, say, NPR) that always end up being easy targets.

If our retired teachers care as much about children now as they did back when they were teaching, then they should be willing to sacrifice at least some of their pensions so that teachers like Ms. Apperson can keep their jobs. But of course, they won't be doing that any time soon, will they? So Ms. Apperson is out of luck, and so are our children. Good times.

[Yahoo]

Quote of the Week (I love Washington)

Washington, D.C. amuses me. The culture there is just... special. Having lived in New York for several years, I became used to the concept that everyone who lives there either thinks they own the world, or thinks they will some day. In D.C., a similar attitude prevails, except that everyone seems to think that they run the world, or some day will. That's an interesting distinction, but it makes for two vastly different cities and cultures.

This week's Quote of the Week is a brief window into the culture that is D.C., and it comes courtesy of Tyler Cowen of the Marginal Revolution blog, citing an article in Time.

This week's QUOTE OF THE WEEK

"Most of the people who have moved to Washington since 2006 have been under 35; the region has the highest ­percentage of 25-to-34-year-olds in the U.S. 'We’re a mecca for young people,' [George Mason University economist Stephen] Fuller says. One recent arrival says word has gotten out to new graduates that Washington is where the work is. 'It’s a place where a ­liberal-arts major can still get a job,' she says, 'because you don’t need a particular skill.'"
                                               - Andrew Ferguson, Time 

That last sentence is somewhat terrifying to me, and I can't think that I'm alone in that regard--if our nation's capital is becoming the last refuge of our least skilled workers, then its days are almost certainly numbered.

I've written here before about the impending death of the liberal arts degree, and I don't think Washington or any other city has enough job-creating power to change that dynamic any time soon. I also don't think that Washington can survive for very long by continuing to be a mecca for people who "don't need" or "don't have" any particular skills.

While I don't think we should be encouraging our younger people to over-specialize at a young age, I also don't think that we should be producing thousands of unskilled workers every year who have no idea how to operate in any world outside of the weird little Washington bubble. Our education system is pretty badly screwed up, and this week's Quote is just one more piece of evidence.

[Marginal Revolution]

The changing business of education

I've come across a couple of interesting articles recently that have made me wonder if (some) schools are actively anticipating the bursting of the student loan bubble, and responding in advance by streamlining their processes and making education less expensive (and more democratic). The most intriguing of these articles was cited in this post on the Marginal Revolution blog, discussing a new approach to math classes at Virginia Tech.

There are no professors in Virginia Tech’s largest classroom, only a sea of computers and red plastic cups. 

In the Math Emporium, the computer is king, and instructors are reduced to roving guides. Lessons are self-paced, and help is delivered “on demand” in a vast, windowless lab that is open 24 hours a day because computers never tire. A student in need of human aid plants a red cup atop a monitor. 

The Emporium is the Wal-Mart of higher education, a triumph in economy of scale and a glimpse at a possible future of computer-led learning. Eight thousand students a year take introductory math in a space that once housed a discount department store. Four math instructors, none of them professors, lead seven courses with enrollments of 200 to 2,000. Students walk to class through a shopping mall, past a health club and a tanning salon, as ambient Muzak plays... 

Virginia Tech students pass introductory math courses at a higher rate now than 15 years ago, when the Emporium was built. And research has found the teaching model trims per-student expense by more than one-third, vital savings for public institutions with dwindling state support. 

“When I first came here, I was like, ‘This is the dumbest thing ever,’” said Mike Bilynsky, a freshman from Epping, N.H., who is taking calculus. “But it works.” 

No academic initiative has delivered more handsomely on the oft-stated promise of efficiency via technology in higher education, said Carol Twigg, president of the National Center for Academic Transformation, a nonprofit that studies technological innovations to improve learning and reduce cost. She calls the Emporium “a solution to the math problem” in colleges.

This is an interesting development, particularly in light of Stanford and Harvard's recent decisions to begin streaming online courses for free to the masses over the internet.

While Stanford and Harvard's programs' ostensible purpose is to "democratize education", it's hard to understand why they would be so willing to give their product away for free (of course, we could argue that their real product is "diplomas", not "education", but that's an argument for another day). One answer might be that they're experimenting with new (and cheaper) ways of delivering their educational product to consumers, using the public as guinea pigs rather than their tuition-paying students. It's just a theory, but I think it makes a lot of sense.

The simple fact is, the traditional model of education (professor lecturing to a room full of bored students) has in many ways outlived its usefulness (a topic I first explored in this blog post). It's wildly inefficient, and it's now becoming overly expensive to deliver. Many schools on the cutting edge of education are wondering whether there might be a better model out there, and they're beginning to experiment with new options.

Granted, the schools are only doing this experimentation out of necessity, recognizing that the trend of ever-skyrocketing tuition costs simply cannot continue forever. If the schools don't adapt now, they risk being left behind (or left for dead) if and when the bubble bursts. But regardless of the reasons for the experimentation, the outcomes are nevertheless intriguing, and I'm interested to see if projects like the Math Emporium start to catch on elsewhere.

I'm certain that similar experiments will face an extraordinary amount of pushback in the short term (particularly from professors who earn their living from the old model), and maybe they should. But I'm hopeful that a new and more efficient higher education model awaits--and that I won't have to mortgage my house to send my daughter to receive it.

[Marginal Revolution]

Quote of the Week

I really, really, really wanted to give Quote of the Week to Berkshire Hathaway's Charlie Munger, who issued a bizarrely tone-deaf quote about the gold market this week that somehow managed to insult Holocaust-fleeing Jews in Vienna (among others). I also could have shared Tim Iacono's response, which pretty well summed up the strange arrogance of Munger's words.

But given that it's graduation season and about to be election season, I thought this "10 Things Your Commencement Speaker Won't Tell You" piece from the Wall Street Journal was a more seasonally appropriate source for this week's quote. The article itself is nice enough and probably worth a read--I actually think the guy makes some very solid points--but I initially had a lot of trouble getting past the author's first paragraph without shaking my head uncontrollably. Therefore, that first paragraph... is your Quote of the Week.

This week's QUOTE OF THE WEEK

"I became sick of commencement speeches at about your age. My first job out of college was writing speeches for the governor of Maine. Every spring, I would offer extraordinary tidbits of wisdom to 22-year-olds—which was quite a feat given that I was 23 at the time."
                                      - Charles Wheelan, Wall Street Journal

That's brilliant--a 23-year old penning inspirational speeches to be delivered to 22-year olds, spoken as though they were informed by a lifetime of public service. That's pretty much politics in a nutshell, as far as I'm concerned.

It's not like any of this is news to me--I'm well aware that politicians' speeches and letters are essentially written for them by low-level staffers and strategists, which is why we rarely get anything out of them except for stale talking points. But doesn't it seem like our politicians, as public servants, owe us better than that?

We seriously need to get away from politics-as-usual (including political-speeches-as-usual) and get back to focusing on simply good governance--there IS a way to separate the two, I promise. Maybe someday soon we'll see that it's not only possible but necessary to do so.

[Wall Street Journal]
(h/t Falkenblog)

"Predatory lending" in a target-rich environment

This Bloomberg article has been making the rounds lately, and given my history of writing about student loans, I feel as though I have to weigh in.

Susan Romano read her son Zach’s financial-aid letter from Drexel University, and her eyes jumped to the line highlighted in yellow: “$13,442 expected payment” for the first year at the $63,000-a-year school (my note: what in the hell? How does Drexel cost that much?? I digress...). 

“At first, I thought it was great,” said Romano, 48, an insurance claims representative from Huntington, Pennsylvania. “The more I read it over and over, the worse it got.” 

It turned out the college’s “offered financial aid” included $42,000 in loans to be taken out by the family, including a “suggested” $36,178 in parental borrowing or private loans. 

“A loan to me is not financial aid,” Romano said. “It is money I have to pay.” 

As many high school seniors face a May 1 deadline to decide where to go to college, families are struggling to understand financial-aid letters, which can be murky and confusing. While the federal government requires banks and mortgage companies to disclose interest rates and total payments on loans, financial- aid letters for college -- which can cost as much as $240,000 for four years -- are unclear about how much families will have to pay. 

“You have to be savvy enough to know the fine print exists, and then you have to be eagled-eye enough to find it hidden in the letters and on websites,” said Debbie Greenberg, a counselor with College Bound St. Louis, which coaches low- income students about admissions and financial aid. “You also have to have access to a computer.”

Sigh... I can already see where this is headed.

At the peak of the housing bubble, all sorts of banks and other mortgage underwriters engaged in similar behavior in an attempt to generate more business. They didn't particularly care whether or not the borrowers could afford the house over the long run, the goal was to generate as much business in the near-term as possible. When the whole thing blew sky-high, none of the now-underwater borrowers wanted to take any personal blame for the mess they found themselves in. People simply wanted to cast blame toward the "predatory lenders" for the fraud--but as we all know, there are (at least) two parties to any contract.

Now, with student lending creating our economy's newest bubble (and if you think it's not a bubble--and one that's about ready to pop--please read here, here, here, here, and here), I'm already seeing the blame game developing in advance of the inevitable crash. It's not the students who are to blame for taking on debt that they "didn't realize" was debt, or that they didn't realize was non-dischargeable in bankruptcy proceedings. No, it has to be those evil schools who tricked them into doing it... right?

I'm honestly tired of this line of reasoning coming from duped borrowers. If you don't fully know what's in the contract you're signing, DON'T SIGN IT. If you're buying a house with an FHA loan that's only requiring a 3.5% down payment, it's your responsibility to understand what that means (hint: it means that if your home value decreases by just 3.5%, your entire equity stake is wiped out and your mortgage goes upside-down). If you didn't realize that, then it's nobody's problem but yours when you find out that you can't ever move because you have no money left to cover your losses.

For generations in this country now, it has been taken on faith that a college degree is "always a good investment", and that we should all pursue a college education no matter what we have to do to finance it. People therefore rarely blink when asked to sign up for student loans, just like they rarely blinked when signing on the dotted line for a mortgage--remember, buying a house was "always a good investment", too, right up until the time that it wasn't.

More of us need to do what Susan Romano did here--she stepped up and realized that something wasn't quite right, and she took personal responsibility for the contract she signed (or didn't sign). The simple fact is, predatory lenders can't exist in a world in which there's no viable prey--but if we allow ourselves to become vulnerable, then we're just about guaranteed to find ourselves hunted down by some very capable predators.

It's as true in college as it is in the animal kingdom--predators thrive where prey is most abundant. We need to stop letting ourselves become prey, not blaming the predators for being what they are. Period.

[Bloomberg]