Wednesday, June 02, 2010

Misplaced Values, Bad Advice, a Bleak Future...

Cortney Munna wanted to graduate from a top-ranked university. She managed to do so, but as the New York Times explains, it's going to cost her much, much more than she bargained for:

Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it.

Citibank gave Cortney Munna $40,000 in loans, though she had already amassed debt well into the five figures. It was like the “no doc” loans that home buyers used to get in over their heads.

Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she’s been enrolled in night school, which allows her to defer loan payments.

This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.

After reading that, you might wonder what field of study Ms. Munna pursued at NYU. Did she graduate with a degree in medicine, molecular chemistry, accounting, finance, or pre-law? In short, did she invest $100,000+ in a degree that would place her into a field in which she had the potential to earn a salary sufficient to repay her debts?

Alas, no.

She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies. After taxes, she takes home about $2,300 a month. Rent runs $750, and the full monthly payments on her student loans would be about $700 if they weren’t being deferred, which would not leave a lot left over.

The Times notes that no one at NYU warned her of the escalating debt she was accumulating.

“Had somebody called me and said, ‘Do you have a clue where this is all headed?’, it would have been a slap in the face, but a slap in the face that I needed,” said Cathryn Munna. “When financial aid told her that they could get her $2,000 more in loans, they should have been saying ‘You are in deep doo-doo, little girl.’ ”

That’s not a role that the university wants to take on, though. “I think that would be completely inappropriate,” said Randall Deike, the vice president of enrollment management for N.Y.U., who oversees admissions and financial aid. “Some families will do whatever it takes for their son or daughter to be not just at N.Y.U., but any first-choice college. I’m not sure that’s always the best decision, but it’s one that they really have to make themselves.”

Well, naturally NYU wasn't going to point out Ms. Munna's own foolishness to her; NYU is in the business of making money, not sending it elsewhere, no matter what they claim. Nor, very probably, could any financial adviser point out to Ms. Munna that spending $100k+ on women's studies degree was idiocy. To admit that would be to concede the underlying worthlessness of the women's studies program. And that sort of unacceptable political incorrectness (read: truth), if it got back to the right ears, would end the financial adviser's employment very quickly.

But NYU is hardly the worst offender in Ms. Munna's jermiad. Rising indebtedness amongst college students and the astronomical escalation in college tuition is the direct result of the US government's student loan program. It is a perfect example of good intentions producing malign results. Politicians claimed that providing low interest loans (guaranteed by the government) would permit more worthy students to afford college. What happened in practice is that it handed colleges and universities carte blanche to raise tuition since students could now borrow endlessly to pay whatever the colleges demanded. Worse, it placed college within the financial reach of most high school graduates. Unfortunately, most high school graduates are simply not suited for genuine college work. In order to get around that hundreds third rate institutions and endless numbers of "community colleges" sprung up to handle the students that no reputable college would accept at any price. But even at the best ranked schools the combination of political correctness and greed produced a panopoly of academic departments whose intellectual credibility borders on the laughable, but who provide watered-down, non-rigorous, but ideologically tainted, study material for people who really shouldn't have been at the university in the first place. Women's studies, ethnic studies, increasingly large swaths of the humanities, queer studies, religious studies, and - the absolute worst offenders - colleges of education, places where credulous and thoughtless people (mostly female) are inculcated in the latest politically correct swill, drilled until they can repeat it verbatim, and then gleefully dispatched to ruin the next generation of school children.

In many ways, the student loan program has done to US higher education, what Freddy Mac and Fanny Mae did to the US real estate market. And with stories like Ms. Munna's beginning to appear in the news, the education bubble may not be far from bursting.

Of course, Ms. Munna deserves the lion's share of the blame for failing to understand her own finances and the likely outcome of her decisions, but if the US government hadn't made it possible for her to borrow the money neccessary to earn a degree that has little financial value, she wouldn't be in so much debt. Note that the article also reveals that Ms. Munna's mother has her own student loans. Also note that there is no mention of Ms. Munna's father in the article.


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