Mon Aug 22 11:18:28 2011 - The Hidden Costs of Higher Ed
Yesterday, over at the New York Times, Noah S. Bernstein published an op-ed entitled The Hidden Costs of Higher Ed. Articles like this are the reason that liberal movements like the New World Foundation always fail to achieve their goals.
First, let me give you a little personal background. I graduated from Marquette University in 2006 with a student loan bill on the order of $85,000. I have been paying approximately $600/month since that point, totaling around $36,000. My current payoff balance? $86,000. I know a thing or two about the hidden costs of higher education.
Throughout his 706 words, Noah makes two basic arguments:
- Colleges and universities are raising costs of tuition by "tack[ing] on a hefty charge for credit card payments."
- "Monthly payment plans, and prepayment plans, thus pack a double punch. On one hand, they make it more expensive for struggling families to send their children to college. On the other hand, they make it cheaper for wealthy families to do so."
Let's start with the argument on credit card payments. Again, for some background on myself, I am a QSA / PA-QSA for a well established PCI consulting firm. For those of you not into the alphabet soup, that means I know what I'm talking about when it comes to credit cards.
In the article, Noah mentions specifically Tuition Management Services' 2.99% and Swarthmore's internally managed 2.6% fees on credit card payments. Let's see how this stacks up against some other well known credit acceptance companies:
- PayPal
Purchase payments received (monthly) Fee per transaction $0.00 USD - $3,000.00 USD 2.9% + $0.30 USD $3,000.01 USD - $10,000.00 USD 2.5% + $0.30 USD $10,000.01 USD - $100,000.00 USD 2.2% + $0.30 USD > $100,000.00 USD 1.9% + $0.30 USD 
- Google Checkout
Monthly Sales Through Google Checkout Fees Per Transaction Less than $3,000 2.9% + $0.30 $3,000 - $9,999.99 2.5% + $0.30 $10,000 - $99,999.99 2.2% + $0.30 $100,000 or more 1.9% + $0.30 - Square - 2.75% flat across the board
Notice anything interesting? That's right, they use the same fee structure and everything is approximately 2-3%. Know why? Because that's what the acquiring banks charge. That's why. Ok, so we've settled that the credit card payment fees are in-line with the rest of the world. Let's finish defeating the argument.
Credit card payments are optional. Understand? Optional. No one is forcing anyone to pay by credit card. How is offering additional ways to pay adding a burden?
To continue quoting the article:
To ease the burden of such large bills -- recent data shows that tuition and fees have increased 439 percent from 1982 to 2007 -- many colleges have instituted monthly payment plans, while charging zero interest. Even many families that could afford to pay an entire semester upfront find such plans appealing.
And a little later on:
Another way colleges and universities stack the deck is by allowing students or their parents to front the costs of two, three or even four years of school, thereby locking in current tuition prices; some schools even offer discounts for prepayment. Families receiving financial aid are typically excluded from prepayment options.
Of course, only the wealthy can afford to pay even a single year of college upfront, let alone multiple years. And yet, with annual tuition increases running between 4 percent and 10 percent, those who can afford to pay early end up paying significantly less.
Coming back to payment plans:
Monthly payment plans, and prepayment plans, thus pack a double punch. On one hand, they make it more expensive for struggling families to send their children to college. On the other hand, they make it cheaper for wealthy families to do so. And given how long it takes these days to pay off college debt, these disparities will have ramifications long after students have graduated from college.
Alrighty, let's break this down. So, education costs since 1982 are up ~5x. (Hint: This is the real problem. Inflation since 1982 is less than half of that.) Institutions of higher learning are offering zero interest payment plans, and you think this is the problem?
To set the record straight, monthly payment plans and prepayment plans have absolutely no effect on the cost for struggling families to send their children to college.
If I'm a low-to-middle class household living paycheck-to-paycheck, I probably can't afford a $5,000 lump sum, but I can possibly afford $416.67 monthly. Thanks to the zero-interest payment plan, my child can now go to college. QED.
Add on that 3% fee and we're looking at $428.48 -- not much different. Yes, with that 3%, you're now looking at $5150, but that's 100% because of the use of a credit card not the use of the payment plan. (Now, if you want to go off on a treatise belaboring the evils of credit cards and the fact that these struggling families are surely being charged 20-30% interest turning that $5,000 into $20,000-30,000 by the time it's paid off, I'll be right there with you.)
Next, prepayment plans. How in the world does this hurt anyone? It's offering an incentive to those who can pay upfront and leveraging the time value of money. Yes, it lowers the cost of tuition for those who can afford to pay up front. However, it does absolutely nothing to the cost of tuition for those who choose to go with a payment plan.
Get your facts straight, Noah, before writing authoritatively. The real bitch of this whole ordeal is that I honestly agree with what Noah was trying to say. He just did a piss-poor job of making the arguments.
Finally, the closer:
Our institutions of higher learning cannot continue to offer their best deals to a privileged few. Our country needs colleges and universities to recruit and cultivate talented young people from diverse backgrounds. To do so, we must ensure that children from working families have the mechanisms not only to obtain college admission and afford to attend without compromising their studies, but also to be free to enter the economy relatively unburdened by debt.
This problem is not with our institutions of higher learning. The problem with our institutions of higher learning is that the quality of education keeps falling and the cost of tuition keeps rising at twice the rate of inflation. There's something not right about that.
The problem at hand is a problem with lending as a concept. In every situation, those with resources will come out better than those without. This is pure, natural economics. How do you provide a leg-up to the downtrodden without encouraging the problem. Look at welfare. It's more profitable to stay home doing drugs and making more ghetto babies than to look for work.
If you really want to solve the problem, stop bitching about economic incentives that benefit the wealthy and start looking at why education is so damn expensive in the first place. Better yet, New World Foundation, start you own university, get accredited, and offer less expensive classes. Nothing drives down prices like competition.
Fri Aug 12 12:43:24 2011 - Son of iPhone
Sat Aug 6 12:36:59 2011 - Human Authenticity
One of the most interesting parts of this week has been a rather unexpected and completely unintentional study of human authenticity. I've actually been quite surprised at how real a good portion of people at Defcon actually are. That said, those who have chosen to go with falsification seem to take that track to the extreme. I suppose events like Defcon are known for polarizing people, but I guess it's just interesting to see.
Wed Aug 3 20:10:50 2011 - I Hate Las Vegas
I've been here for five days and have contemplated suicide as a serious alternative to leaving my hotel room on several occasions. Seriously, I can't travel with a knife, so I ran through a whole plan of using the little nail file from the Vanity Kit to sharpen the clip on my pen to the point that I could slit my wrists.
Now, I've not been called particularly stable for the last few years, but this is just out of hand. This place sucks in every possible way and just being here really does make me question whether or not life is worth living.
So, why does Las Vegas suck? Gambling, drinking, smoking, gratuitous sex, stupid people, engineered greed. I was going to go into a longer explanation, but that's really about it. This place actively goes against every core value I have and is elated about it. Or maybe I should say "blissful"... Fuck Las Vegas.
Seriously looking forward to going home.
Wed Aug 3 20:10:26 2011 - Starting Over
I've been thinking a lot recently about my writing. I'm looking at getting back into blogging for work. It's time I started writing again for me.
