Posted on 01/17/2007 6:37:36 AM PST by .cnI redruM
As a young child, I used to love those coyote and roadrunner cartoons from Warner Brothers where the coyote barreled off the edge of a cliff, took a few extra steps and then looked down. This was then followed by Wile E. Coyote, Super Genius getting his traffic ticket from the gravity cops. It’s a shame that Nancy Pelosi’s idea to cut student loan interest rates in half by legislative fiat won’t lead to a similarly amusing comeuppance.
Actually, this law will most certainly lead to someone’s embarrassing pratfall, it’s just that no one that has contributed to the outrageous tuition rates of colleges and universities will land squarely on their cans; nor will the faux-populists in congress. This will happen because our government’s leaders are proceeding in willful ignorance of how exactly an interest rate gets established in the first place.
An interest rate is a price, a rent more accurately. It bows to the laws of economics, like the price of any other commodity on the market. In much the same way that an apartment landlord leases you the use of some of his building to live in, a financier allows you to put a portion of his funds to work on behalf of your interests. Interest rate controls will effect the availability of money the same way rent control has led to a glut of affordable apartments in Santa Monica.
The measure has been brought forth to help students afford the ever-spiraling costs of a college education. However, it does nothing to get after what actually serves as a graveman, lifting the prices of a four year degree.
Like health care subsidies and food stamps, controlled interest loans have a noble purpose that runs afoul the Law of Unintended Consequences. These government subsidies fail to account for the degraded decision making ability of a consumer that does not see and feel what a good or service actually costs. Our academic advisors and guidance counselors tell us to factor cost out of where we decide to attend college.
People who have comprehensive health insurance don’t shop for their medical care based on price. Prospective college students awash in available aid will do no better measuring and properly evaluating tuition costs. When consumers consider the money to be almost free, they value that money the way a user of a public toilet values the toilet paper: not very highly.
The law also fails to recognize that a high tuition actually becomes a mark of value and distinction amongst selective schools. As it becomes increasingly difficult to discriminate in equalitarian circles such as academia, price discrimination becomes a method by which self-selecting, wealthy elites can find their own. Barring a matching price control, Pelosi’s control on the rental rate of capital can only lead to further tuition escalation.
Raising the tuition is sub-rosa method by which Bull Conners now stands athwart the entry of poor, underprivileged children into our elite schools. Wishing interest rates wouldn’t effectively measure the value of renting money over time won’t alter this fundamental reality. Swarthmore College doesn’t want the children Pelosi tries to hand cheap money to on their pristine campus; amongst the status and the lucre. The elitist liberal scum, that squats on our prestige universities, would genuinely prefer to leave these children quietly behind.
When we cut down to the bone of this issue, the low interest loans are a way to dodge the sordid truth. No one in our nation’s leadership wants to face the fact that Harvard and Haverford don’t want James Meredith or anyone of his social class to add their brand of diversity to their campuses any more than The University of Mississippi wanted to invite Mr. Meredith over, to help them racially integrate. They just use more the more subtle means of outrageous pricing to keep out the great unwashed masses using non-violent means.
This interest rate scheme will not make college more affordable. The real price of a year at Old Ivy will not change. This means that as the money supply increases, so does the nominal price. College tuitions are like Northern Virginia real estate prices. Half the cost is determined by who the pricing is designed to keep out of the market.
Part of the problem of high tuition is the salaries being paid to the tenured professors who are imparting their very questionable "wisdom" in the liberal arts programs of these esteemed instutions.
College should be free to everyone - legal or illegal. It is the role of government to make society better and a better educated society is good for all.
Congress should just forgive all student loans like it does for foreign countries that never pay us back and we should all just move forward freeing all those shackled by these loans.
/s
The Wall Street Journal had an article on this a few months back. If Princeton raises its tuition, Harvard will immediately raise their's -- because Harvard does not want to be "looked down on" as the "cheap alternative" to Princeton.
Market prices are not simplistic. There are always unintended consequences to market manipulation -- and government always messes things up when the politicians involve themselves.
I agree with the point this writer makes, but I don't think the motivation of most Universities is as diabolical as he makes out. The simplest, the therefore probably the best, explanation for the unintended consequences is purely financial. Universities and colleges react to more money available to students by raising prices to extract it from them. They do this across the board, not just at the top tier.
A: Wait a few minutes and he'll tell you.
Having gone to a southern "state" school, I have no first hand knowledge of the Ivy League, but I've been assured that the price tag isn't so much for the education as it is for the roladex you accumulate while there.
Those contacts alone can easily be worth six figures.
That's true. Some of these guys are getting Terrell Owens money and then dropping the ball...
True enough !! LOL
Cornell class of 2000
I used to sit in University faculty meetings where faculty would assert that we just needed "warm bodies" to fill our classes so we could keep our jobs. Those warm bodies may end up with student loan bills that are unjustified and hard to pay. Newt did a show on this. I remember a teacher with a big bill and modest salary crying because she could't afford to buy things she wants.
I dunno about that.
I heard a claim once that the interest Harvard collects on their "Endowment" funds would cover the full operating cost of the school; there's no economic need to charge tuition at all.
Such ruminations might sell on the fringes of conservative thinking, but it's still a pants load.
There is plenty of education value added well apart from the upper cast liberal arts institutions. There's more than a few good science and engineering programs/institutions with more than a few good students becoming MD's, and math/science/engineering BS, MS, PhD's - effectively using student loans etc.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.