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The DIRTY BUSINESS of college education


fibonacci
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Little Timmy walks into a bank and asks for a loan to go to college, goes to college 4 years (every year taking out a loan to pay tuition), gets out and pays back his loans to the bank. That's how it works end of story right? Wrong, big time.

After Timmy walks out of the bank with his loan, the bank packages his debt with a whole bunch of other student loans into what are known as student loan asset backed securities (SLABS). SLABS are then sold to investors on Wall Street who make money off of principal payments and payments on interest. SLABS are also guaranteed by the government, so even if tons of students go into default, these investment instruments will still payout courtesy of Uncle Sam. The capital that is created after the lending banks package and sell SLABS then allows them to go out and issue more loans and repeat the whole process over again. The never ending flow of credit and loans then allows colleges to raise their tuitions almost every single year at hyperinflationary rates.

The only ones screwed in the whole process are students. They are the ones loaded up with all the debt so that everyone else can make a HUGE profit off them. No wonder the banking industry spent large sums of money to lobby politicians to make student debt impossible to get rid of--by not allowing students to get rid of debt, it cuts down on the risk of SLABS and guarantees that investors get paid. Open your eyes, you are just a pawn to the system built to make the rich more wealthy while they offer you the American "dream", which in reality, is nothing more than a nightmare. A big portion of people that invest in SLABS aren't even American, they're European. In other words, people who are far, far away, that don't even care about our country or our youth, have vested interest in trying to drive up tuition costs as much as possible here and want to see our kids loaded up with as much non-dischargeable student loan debt as possible! Outrageous. Infuriating. True. Just like the article below says, I guess this wouldn't be America though if you couldn't monetize and gamble on your children's debt and futures on Wall Street.

Read about the whole scam right here in this excellent article, you really should since you, the taxpayer, are on the hook once this giant bubble explodes:

http://nplusonemag.com/bad-education

Edited by fibonacci
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What I would also LOVE to see is for someone to investigate every major university out there and look under the hood to see what they are really investing in. Do universities really have the gall to invest in SLABS? If they did, that means not only would they be making money off of tuitions and fees on students, they would also be making money on Wall Street through investing in their securitized debts--i.e. they'd be getting paid 2x's for every student. In other words, this would give universities strong incentives to increase their tuitions in order to build up their endowments, all at the expense of putting our children in more and more debt. Our system couldn't be this corrupt and sickening could it?

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Yup just as I feared:

http://www.regulations.utah.edu/administration/guidelines_3/endowmentPool.html

universities are free to invest as any other investor would. They are simply limited to the same regulations as any of us by our regulating body for securities in our given location. I found this in several seconds online. Basically this document states they are free to invest in anything considered "fair game" by their securities regulator, when you jump to the securities regulators legal documents it will state that SLABS are infact fair game. Conflict of interest from a students prospective absolutely, do they who knows, but the fact remains--they're allowed. it will be a maze of paper work trying to figure out if they do, but if one finds out universities make a ton of profit off SLABS how much does that say our system is corrupt? 20 or 30 years ago only the absolute elite institutions had big endowments. These days there are way more univsersities with small names that have tons of endowments. Coincidence? Or are universities motivated by 2xs the proffit per student?

Edited by fibonacci
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I think one major thing that has to happen is with society in general, and that is to stop perpetuating the BS belief that everyone deserves a college education. Even people who are stupid or who have no interest in sticking their nose into books beyond high school graduation. Not only that, but the perpetuated belief that a college degree will be your golden ticket to a six-figure job that requires no effort whatsoever. And don't even get me started on the for-profit schools, which is what I went to. They will give even the most worthless, inept students an A to make everyone happy so they can get their money. I went to art school and I saw people who hated drawing graduate with animation degrees. People with no sense of design whatsoever graduate with graphic design degrees. People who got outsmarted by Jiffy corn muffin mix graduate with culinary degrees.

Lenders are just as stupid as students for giving dim-witted eighteen-year-olds private loans for $30K to major in philosophy and expecting to actually get their money repaid. Students can't afford their bills, so they stay unemployed or work under the table like deadbeat parents skirting around child support payments, nobody gets paid, tuition goes up, and everybody gets a little more broke.

Another thing is it seems every single bloody job - no matter how menial - requires a college degree or otherwise some kind of unreal amount of experience. Really, do you need a bachelor's degree to be a truck stop waitress? So basically, I agree that we are all getting screwed. You can't get a job without a college degree, so you go and get one and then you can't pay for it because a million other grads are trying to get the same door-greeter job at Wal-Mart. Massive amounts of defaulted student loan debt will soon become a way of life for many people, so I say let's get used to having wrecked credit, skyrocketing unemployment rates, and national debt we will never ever get out of.

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It also doesn't help when you have multi BILLION dollar entities like JP Morgan, Wells Fargo, etc. rigging the system so that students can't get out of loan debt while simultaneously selling their debt on Wall Street to investors which is putting the pedal to the floor on tuition inflation. There are clear conflicts of interest at almost every single level with regards to student loans, lenders, and borrowers. I suspect that universities too may also be investing in SLABS, which is down right sickening. That would give them incentive to have their students in debt and to constantly raise tuitions. Amazing how the whole country has gone to hell since banks were deregulated in the 90s--.com bubble, housing bubble, oil speculators driving up prices, and a soon to be bursting student loan bubble.

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But is it just me, or is this post aimed at undergrads?

I assumed this was spam, honestly.

Yeah, I agree. It's not the content, which may very well be on to something (I'm Canadian, so can't relate), but the form, which is textbook spam.

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I for one applaud this thread. Some people are stuck in la la land and take out loans left and right, not realizing that they are shooting themselves in the foot. The fat cats win, the students lose. Bravo!

It seems to me that this problem could be fixed if there wasn't social pressure to immediately go to college at 18. Then people could decide not only if they wanted to go, but also what to major in to maximize their benefits (monetary and intellectual), and a lot of the predatory lending would wither away. The predatory lending is a symptom of a bad social structure rather than something inevitable or [insert pessimistic verb here].

And I don't find the thread helpful at all, since the OP has stated that this is just a "we're all screwed" PSA. Pointing out problems is easy, and indulging in a sense of outrage is unproductive. How about brainstorming some solutions? How about proposing alternative visions for the higher education structure? No? I'm sure that's too optimistic and hard. Let's just revel in our doom instead.

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A big part of the problem is that we've had big time qualification creep. Jobs that even a decade ago required a HS diploma now require a BS; jobs that required a BS now require an MS, ect. I know someone who got a BS in business and then a job as an entry level HR droid. She's fully capable of the job (and more), but honestly, any halfway savvy HS grad could do the job just fine.

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  • 5 months later...

Zombie Thread Revival.

I think that given how student loan debt is set to surpass CREDIT CARD debt, the system is very flawed, indeed. Much of the outrage motivating Occupy [place name] in the States comes from the bait and switch that is the student loan/tertiary education system.

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