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Are universities unethical?

Should colleges stand up and say, 'Enough is enough -- we can't, in good conscience, send these kids out into the world with tens of thousands of dollars in debt'?

By MSN Money Partner Aug 13, 2012 2:36PM

This post comes from Robert Brokamp at partner blog Get Rich Slowly.

 

Get Rich Slowly on MSN MoneyYes, this is another article bemoaning the cost of a college degree, and the amount of student debt that many graduates take with them alongside their diplomas -- assuming they graduate, which doesn't always happen. (Paying off students loans without a college degree must be the epitome of rock-and-hard-place-ishness.)

 

Image: Graduation cap (© Stephen Wisbauer/Getty Images)You've read all the numbers about how the cost of college has risen far faster than the median household income, and how there's now more student loan debt than credit card debt. But besides the fact that debt stinks, graduating with a $30,000 I.O.U. (or more) has plenty of other harmful effects:

 

Student loans bring future consumption to the present. Debtors (often being paid entry-level salaries) have to devote a portion of their income to what they would otherwise be spending on cars, homes, kids and iThingamajigs (well, they'll still buy those last things, but they'll put them on the credit card, which is just more future consumption being spent now, with interest). This drains money from the overall economy, benefiting no one but the universities and the student loan providers.

 

Families feel as if they don't have a choice. If you're told you absolutely need something, and you can borrow the money to get it, then you'll borrow whatever it takes.

 

Student loans drive up the price of college. Universities increase their price tags far beyond the overall rate of inflation because they can; easy money has removed many of the natural constraints on the price of a good or service.

 

Imagine this scenario: Student loans were completely eliminated. What do you think would happen to the price of a diploma? It would plummet, because only people who have saved thousands of dollars could attend (and we know that few people have thousands of dollars lying around, especially outside retirement accounts). Prices would have to adjust so people could somehow afford it without debt.

 

I'm not necessarily advocating this (well, maybe kinda) because many people could never afford a degree without debt, but I think it illustrates how loans have contributed to skyrocketing prices. Easy money was also a contributor to the recent housing bubble, and we know how that turned out. (Post continues below.)

Teenagers/young 20-somethings are borrowing money to take classes that will do nothing to further their career. In my first year of college when I was studying to be a priest, I had to take a class related to exercise (because the world needs more buff priests). I chose weight lifting, which was a grand way to spend a few hours, but it wasn't worth the money my family paid for it, and certainly not worth paying for with borrowed money.

 

If you have a college degree, I'm sure you can recall a few classes that did nothing to enhance your career, your human capital, your personal productivity, your financial literacy or knowledge of nutrition. (Those last three come from Motley Fool co-founder David Gardner, who during a recent conversation offered those as three topics everyone should be taught.)

 

My suggestion: Seventh- and eighth-graders should go on a series of three-month apprenticeships with carpenters, electricians, salespeople, farmers, bankers, computer technicians and programmers, cooks, etc., and they couldn't graduate until they passed an exam after each rotation. I used to teach middle-schoolers, and I know how little learning can go on during those years. The apprenticeships would be far more enduringly educational, enhance the country's economic efficiency, and might tire the kids out so much that they couldn't be so mean to each other.

 

Many careers aren't worth the extra debt. A teacher with an Ivy League degree is not likely to earn much more than a teacher with a degree from State U. With most careers, the amount you make -- especially in the early years -- falls into a fairly narrow range. Yes, a fancy-name degree can open some doors and lead to a network of contacts who have also found more easily opened doors. But if someone knows that they're going into a job with a low to middle salary and limited potential for a growing income, then they should do everything they can to get a degree without student loans.

 

It's now becoming multigenerational. A recent NPR story told of the woes of a single mother with two kids. The family will be borrowing $124,000 to put the kids through college. But here's the kicker (in case that wasn't enough): Back in 2004, the mom borrowed $60,000 to enhance her own skill set. It led to a higher income, though she had to move across the country to get it. According to the story:

She has no savings, no money put away for retirement, and is thinking of taking on a second job to pay off her kids' loans. And she even has a little bit to pay off in student loans from her first degree -- from 1996.

Now, this family didn't make the best decisions (you know, lying in the bed you borrowed and all that) but, unfortunately, this family's dilemma is becoming more common.

 

It doesn't make sense to borrow money to climb a wall. As this Marketplace segment  points out:

The Wall has become code for the amenities arms race on campuses across the country. Colleges say students and parents are demanding this stuff.

I'm comfortable putting this one on the parents and kids; colleges feel like they have to be competitive with other colleges. The more families of potential students say, "I'm not going to your school, but rather going to another school, because I want to pay for an education, not recreation," the more universities will stop building jungle gyms.

 

So what's the Ivory Tower's responsibility?

 

Let me start off by saying I'm a big believer in personal responsibility as well as accountability for one's decisions, even the bad ones. But are colleges taking advantage of 18-year-olds, who have little appreciation for the decades-long consequences of debt? Of course, their parents are part of the decision, and perhaps should know better (especially since they're usually not on the hook for the debt). But as I suggested earlier, colleges have a lot of leverage; kids and parents feel that a degree is essential, and they're mostly right.

 

As I've written before, despite all my grumblings about the cost of college, my wife and I still contribute to our kids' 529 college savings accounts. At this point, it's a required ticket that needs to be punched before you can enter many types of professions. (Darn you, college cabal!)

My opinion? The Ivory Tower Industrial Complex is succumbing to a conflict of interest, and not doing what's in the students' best interest. I think it's unethical. I worked at a university for a year and found the wasted money and inefficiencies appalling (except my job, of course; it was crucial to the university's mission and future prosperity . . . maybe). They should stand up and say, "Enough is enough. We can't, in good conscience, send these kids out into the world with tens of thousands of dollars in debt."

 

As for how to actually pay for college, here are a few past Get Rich Slowly posts on that topic:

Finally, I'll add one tip that financial planner and GRS contributor of yore Dylan Ross told me at the recent Garrett Planning Network annual conference: College prices can be negotiable! Ross says, "It may be worth trying to negotiate tuition and or financial aid -- particularly if the student has skills the school may find desirable or is applying to one of the school's less sought after programs." You can negotiate college tuition? Now that's a useful personal finance tip.

 

More on Get Rich Slowly and MSN Money:

13Comments
Aug 14, 2012 3:07PM
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I'm a recent college graduate, one of the lucky ones with "only" $20,000 in loans (hooray scholarships). The biggest kicker in the cost of college is NOT tuition, but everything else. By applying to college you agree to pay all of their fees. My tuition was about $5,000 a year, but there was $500 per year for a new gym I never used, plus $5,000 for a dorm (if you live more than 50 miles away as a freshman/sophomore you were REQUIRED to get a dorm room), another $2,000 for a meal plan, $2,000 average for textbooks, plus library fees, network fees, fees for the computer labs, the football stadium, for laboratories if you have a lab class or the opportunity to use a lab, maintenance, and others with truncated titles I could never understand.

Also, I should point out that the gym fee itself was NOT the college, but a private company. Usually, when they build a new building, there is another company who agrees to pay for the construction, gets to keep all of the income from the building, and then sign it over to the college in 50 years or so.

And the worst part of it was, this was a CHEAP college by U.S. standards.

And where the heck do you negotiate for tuition costs? They wouldn't even take off the fee for the gym I never signed up for. You can ask them to look for more scholarships, but that's about it.

 

to "Catch22ofNJ": the way the university is run can be unethical, without considering them to be people.

 

to "giovannitsil": congratulations on your financial success. However, I'm sure the cost of school for you was significantly lower than today's standards. Not only that, but schools are requiring more to graduate. Example: I graduated with an Engineering degree, but was required to take multiple multicultural classes "for a rounded education." Not only that, but to maintain full-time status and so keep my scholarships, I needed 30 credit hours per year, BUT many classes that are 3 or 4 hours per week only count for 1 or 2 credit hours. THEN many scholarships only last 4 years, so you have to pray that you can cram it all in before you lose them, even though it may take 17-20 credit hours per semester (students are required written approval to take over 18 credit hours) to get all of the required classes through.

In the best situation, parents would start saving for their child's college since their birth; however I, like many, was told from a young age "you're going to have to do it on your own." Which, obviously, I did, but my point is that "the real world" you speak of is not the school you went to in the '80s, but is TODAY, and I would like to have seen you in your teens, paying a minimum of $15,000 in lump sums every summer (colleges require advance payment, not payment throughout the semester), with classes and out-of-class school work totalling a 60-hour work week, plus working nights somewhere because your classes are spread out from 8am to 9pm. And this is pretty much your only option, since even the most basic of careers requires a degree - unless, of course, you have a particular skill set that lets you avoid all that and jump into the work force without needing government subsidies for the rest of your life. Sound easy? Not so much.

Aug 13, 2012 5:11PM
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I don't understand.  This same section recently mocked a certain person for calling businesses "people too".  Now, I read where universities are unethical.  Does that make them "people too"?
Sep 6, 2012 12:55AM
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I think part of it that our population is outgrowing our economy. They want more qualifications and are willing to pay us less for it. Of course, we are still stumbling from baby boomer consumerism. Did anyone really think that was a sustainable way to run an economy? How can we expect to get back up to those rates? Oh, and don't forget that schools have been telling students that the only way to be successful in life is to get a college degree otherwise you are poor and stupid. There are other options out there, believe or not, not just any yahoo can fix the plumbing or electric.
Sep 5, 2012 9:20PM
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The thing I found most irritating is the "general Education". I personally am highly advanced in English/Reading etc, purely because I read a TON- I didn't need to sit in a class to be "exposed" to literature, I went to a library. But in college, I have to sit through the equivalent of a high school English course- covering material I've read before (in high school!), while all the kids around me suck air to get the grade. I would have happily participated in the class (and attempted to!) except that I wanted to actually discuss the themes etc, not re affirm that Romeo and Juliet fell in love. These gen ed classes are a waste of time and money for those of us who can do the material. The colleges need to hold students to a higher standard and also permit students to test into the level where they perform, not force us to sit through classes we can already do. 
Aug 14, 2012 7:03PM
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I should add that in other countries, the merit system is applied for college entrance, and even in secondary school, they have students study relevant things that will help them in the area they want to major in later. There is no favoritism if someone is paying cash but fails the entrance exams. So the American system is idealizing the "liberal arts" angle (and broad study has its points) at the expense of student indebtedness, without giving students power to choose whether they want to be "broad minded".

Bearing in mind that the SCHOOL decided for you what is "broad minded" and what is "primitive thinking". Actual terms used by my professors of dissenters. So, if you are not interested in evolution, liberal biased philosophy, or humanistic psychology - shut up. Pay the money, memorize the compulsory information, and get on with your degree and goals in life. Unbiased thinking is a figment of the ideology - they mean free thinking according to the institution's definition. dissent may lose you an assistantship, get you dinged academically so you flunk out (Master's programs and others often have B or better minimums to pass the class, and to graduate.) A couple Cs can mean academic suicide, or financial pain - as you retake those "failed" classes that were against your core beliefs or insulted your value system ... or bored you into a coma.

It's debatable why schools offer impractical degrees -  knowing that employment is improbable, outside academia.

In my experience and that of peers - admissions counselors do not disclose the employment outlook. When asked, they are unable to give placement rates either. Why? Concealment? Ignorance? Honest inability?

I agree, though, that a lot of those liberal arts majors are self responsible shoppers. Really, how many jobs will be searching for degrees in Anthropology, Classical Music, Literature, or Methodology of Paper Making? Vanity degrees. They should be out of pocket - I think that's fair. Subsidies are better given to subjects we need economically, and that can support the scholars, don't you think?

You can always buy a vanity degree later, AFTER you get that good job in Accounting or Nursing.Part of the ethics is on the consumer - and the schools that fail to teach financial planning and responsible consumerism in lower grades.

Aug 14, 2012 6:38PM
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This is great to see - I'd like to hear what ideas are out there for the disabled and non-traditional student? A degree is really the only way to transition out of working poverty or government dependency for those of us unable to do our previous jobs. (Or women who have been either out of paid employment - I don't say "work" because motherhood is WORK - or caring for chronically ill loved ones.)

Unskilled work doesn't pay enough to keep above poverty level, and is progressively harder to come by. Age and ageism limits access to these jobs even more. Out of date skills are unsalable. Technical skills especially, get dated quickly ... in mere months. Licensing is rampant - even secretaries need certifications now! (Look at medical and legal clerical jobs for example.) Even dog groomers and tattooists are supposed to have special schooling and certificates.

Further, aid is overwhelmingly for the young crowd and parents of such. Scholarships and federal grants, school endowments... contests.

I have had to go to college part time because I could not get additional living expenses while in school, thus forcing me to borrow twice what I would have needed for the degree! NOTE - that once one is in graduate school, one may borrow up to projected cost of ATTENDANCE, not just tuition and books. Why not allow this for undergrads? I deeply resent that I have to take a private loan to complete my Master's, because of this oversight.  I could have been done in 5 years, not ten, saving all that interest (deferred, of course) and been less buried alive.

Does anyone else know that schools pick and choose whom to give special aid for the disabled to? It is not based on merit or need. I was told this by a fellow student at a major public university in Ohio, who is deaf and was passed over for this money. Financial Aid got irate with him when he offered to show them the resources he found on his own - which they said they already knew about!

Very, very WRONG. Unethical is right. Sadly, this is LEGAL, unless you could prove case by case that there is some sort of malicious intent or conscious unlawful discrimination. That would take $$$ and black ball you from the institution, though.

And...when you thought college was not able to be more corrupt - get this - a program like Psychology or Counseling or Art can force you out if they want to. This can happen in your last semester. They keep the money, you keep the debt.

HOW? These are "subjective" areas where instructor opinions affect grading, and determine if you succeed. Legally, it is hard to prove discrimination or retaliation here. The grading system is not clear like it would be for Accounting, Chemistry, or Refrigeration Science. They can even tell the State Board that you are "a bad fit" or "lack the temperament" for x-y-z program. This is legal too. A student has no recourse.

This leaves us with the ugly prospect of borrowing to get through, and filing bankruptcy to get clear of the student debt - since I understand the new laws provide for that. The old ones (2002 or so) did not, except for permanent disability.

So - what wisdom is out there for older and disabled people to avoid/manage college costs?

Aug 14, 2012 3:07PM
avatar

I'm a recent college graduate, one of the lucky ones with "only" $20,000 in loans (hooray scholarships). The biggest kicker in the cost of college is NOT tuition, but everything else. By applying to college you agree to pay all of their fees. My tuition was about $5,000 a year, but there was $500 per year for a new gym I never used, plus $5,000 for a dorm (if you live more than 50 miles away as a freshman/sophomore you were REQUIRED to get a dorm room), another $2,000 for a meal plan, $2,000 average for textbooks, plus library fees, network fees, fees for the computer labs, the football stadium, for laboratories if you have a lab class or the opportunity to use a lab, maintenance, and others with truncated titles I could never understand.

Also, I should point out that the gym fee itself was NOT the college, but a private company. Usually, when they build a new building, there is another company who agrees to pay for the construction, gets to keep all of the income from the building, and then sign it over to the college in 50 years or so.

And the worst part of it was, this was a CHEAP college by U.S. standards.

And where the heck do you negotiate for tuition costs? They wouldn't even take off the fee for the gym I never signed up for. You can ask them to look for more scholarships, but that's about it.

 

to "Catch22ofNJ": the way the university is run can be unethical, without considering them to be people.

 

to "giovannitsil": congratulations on your financial success. However, I'm sure the cost of school for you was significantly lower than today's standards. Not only that, but schools are requiring more to graduate. Example: I graduated with an Engineering degree, but was required to take multiple multicultural classes "for a rounded education." Not only that, but to maintain full-time status and so keep my scholarships, I needed 30 credit hours per year, BUT many classes that are 3 or 4 hours per week only count for 1 or 2 credit hours. THEN many scholarships only last 4 years, so you have to pray that you can cram it all in before you lose them, even though it may take 17-20 credit hours per semester (students are required written approval to take over 18 credit hours) to get all of the required classes through.

In the best situation, parents would start saving for their child's college since their birth; however I, like many, was told from a young age "you're going to have to do it on your own." Which, obviously, I did, but my point is that "the real world" you speak of is not the school you went to in the '80s, but is TODAY, and I would like to have seen you in your teens, paying a minimum of $15,000 in lump sums every summer (colleges require advance payment, not payment throughout the semester), with classes and out-of-class school work totalling a 60-hour work week, plus working nights somewhere because your classes are spread out from 8am to 9pm. And this is pretty much your only option, since even the most basic of careers requires a degree - unless, of course, you have a particular skill set that lets you avoid all that and jump into the work force without needing government subsidies for the rest of your life. Sound easy? Not so much.

Sep 6, 2012 4:09PM
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As a graduate student, I can completely agree that the cost of administrations and "extras" are what keep raising tutions. I attend a public university and have spoken with several of the professors I have had over the years. The non-tenured professors (the majority) here make between $1700 and $4000 per course (not class session, week, or month), and the amount they are paid is not based on the class size. As an undergrad here, I never had fewer than 20 students in one course unless it was an independent study or conference course (professors are usually not paid for either, but I still paid for them), and usually had about 50. Given the base $1004 tuition per 3 hour course (plus adjusted tuition for each invididual college) that's over $20,000 per course the university is pocketing. And this is at a university that doesn't have a football team. I shudder to think what that would do.

Aug 13, 2012 3:12PM
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When I went to school all I had was a tuition scholarship. I worked my way thru school. No debt for me because I was taught to be frugal. I went to a cheap state school. Now I have a $1 million saved and will retire easily. Don't see why students need to borrow money to go to college. They should not go if they can afford it. These students today have it easy with Pell grants, loans and scholarships. I earned my degree even thought it took 9 years to do it. Let them see what the real world is like, not the cushy school you have today.

THE REAL WORLD IS TOUGH.

Aug 13, 2012 6:38PM
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This article is nonsensical.

OK, I am Ethical Edith, the college financial officer. You want to go to my Ivy League school and major in journalism? Nope, you can't. The medium income for a journalist is $36,000 per year. Ivy league schools cost a minimum of $180,000 for a four year degree. I can't ethically let you borrow the money.

Your daddy is rich? OK, you're in! See next article on income disparity in America. Which will aggravate income disparity more - letting everyone at least take a shot at investing in their future and making a better life for him/herself - or accusing colleges of being unethical for giving everyone an opportunity to achieve?

No risk, no reward. It is not unethical to give people an opportunity to invest in themselves. Do people screw up? Yes. Can we nanny everybody - NO!

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