Monday, May 13, 2013

Clueless Economist of the Day

Joseph Stiglitz, who has been one of the leading economists calling for more government intervention in markets over the last 30 years is shocked to find that student loans are a financial bubble. With a complete lack of self-awareness though, he claims that rising tuition is the problem.

America is distinctive among advanced industrialized countries in the burden it places on students and their parents for financing higher education. America is also exceptional among comparable countries for the high cost of a college degree, including at public universities. Average tuition, and room and board, at four-year colleges is just short of $22,000 a year, up from under $9,000 (adjusted for inflation) in 1980-81.

Uhh, yeah, ever think soaring tuition might have something to do with the fact they are being subsidized by goverment loans?

Then he, of course, blames this on the relatively minor for profit sector.

Yet education loans are almost impossible to write off in bankruptcy court — even when for-profit schools didn’t deliver what they promised and didn’t provide an education that would let the borrower get a job that paid enough to pay back the loan.

We should cut off federal support for these for-profit schools when they fail to graduate students, who don’t get jobs and then default on their loans.

While I am not opposed to that, what about the non-profit schools? It can cost $150,000 to go to law school, in an industry where there is little need for new lawyers.  I am pretty sure the University of Phoenix doesn't cost that much.

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