Wednesday, April 25, 2012

Student Loans: a burden or a purposeful politico transfer of cost?

On April 24, 2012 president Obama visited Chapel Hill, NC the home of the University of North Carolina to make his political pitch regarding student loan interest rates. Leaving aside many items that circulate around the topic and proposal, one might want to focus upon his talking point that student loans “become a burden”.

One might say the “burden” is due to too much loan value in relation to income earned after graduation. One might say the “burden” is the inability to finance other items in the near term such as a car or home until student loan balances are paid down/off. However, one might want to also consider that the burden is purposely placed upon the student. How so?

If one considers public universities one must consider that these institutions are public sector entities. That the same over staffed and over paid bureaucracy exists at universities that exists in many other public sector entities albeit the bureaucracy is entitled “administration” at a university.

At many, many universities a long-term trend stretching back to approximately 1979 is the ever increasing size of the administration at universities. Today the number of employees within university administrations is approaching , equaling or exceeding the number of professors at particular institutions. Therefore, like any other public sector entity a very well paid and benefit laden bureaucracy exists.

If one goes back to the explosion in college costs, one will see the escalation began in 1979 which coincides with the explosion in administration size.

Returning to the concept of “burden”, is the burden purposefully placed upon the student in that their loan amount reflects an exploding tuition cost associated with an exponential growth in public sector bureaucracy at universities? Is the “become a burden” political dupery as politicos through the mechanism of government have encourage the administrative increase as a dependent political constituency building exercise with the student “burdened” with the cost?

Stated alternatively, has the politico through dependent political constituency building regarding the increased sized of public sector university administration shifted such cost of the dependent political constituency building exercise onto the unknowing student and consequently the size of the students’ loans? Is the “burden” no more than the burden of the cost purposely transferred to the student by the politico and then “become a burden” is merely a politico dupery talking point to deflect the real source of the burden?

Update 04/29/2012: The Political Obsession with College Education Has Created an Unsustainable College Tuition Bubble, carpe diem blog, Dr. Mark Perry. Link appears below:


  1. Bill, great post.

    I would add one other point. When government provides systematic, automatic subsidies-- e.g., student loans and grants-- it is inherently inflationary. It increases the amount that colleges and universities can charge. They just increase their prices.

    The suppy/demand market signal is distorted that would ordinarily set prices at a lower level.

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