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The Great College Hoax

Joined
2/7/08
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Interesting piece in Forbes comparing the higher education racket to subprime and other forms of financial swindling:

The two disillusioned attorneys were victims of an unfolding education hoax on the middle class that's just as insidious, and nearly as sweeping, as the housing debacle. The ingredients are strikingly similar, too: Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.

The rise of private student lending closely paralleled the subprime mortgage boom, which went from 8% of home loan originations in 2003 to 20% in 2006, before the housing meltdown sent that mortgage sector over a cliff. Private student loans resemble subprime mortgages in other ways, too. As banks and brokers did with subprime home loans, colleges and the lenders in cahoots with them commonly market private student loans alongside lower-cost alternatives, blurring the differences.

New York Attorney General Andrew Cuomo has called private lending "the Wild West of the student loan industry." Some problems he notes smack of subprime mortgage lending: lax disclosure requirements, variable interest rates that compound and make paying off the principal a Sisyphean task, and kickback agreements by which lenders pay loan originators--in this case, colleges--a cut of their revenues.

Who gets stuck with these toxic loans? As with subprime mortgages, the people who can least afford them. A disproportionate number of high-interest student loans go to low-income students attending for-profit institutions, according to a 2008 study by Charlene Wear Simmons, assistant director of the California Research Bureau, an arm of the state government.

It's too late to save the country from the housing finance bubble. But the college bubble is not quite as far along.
 
You can get around the financing by working full time and going to school part time. I did this as an undergrad. These days co's are more strict i.e. they'll pay only for MBA's etc. and then you have to stay for some specified time after you graduate. You should always go for value. Not cheapness but value.
 
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