On inheritance, college tuition and college loans

My parents died as paupers, so there wasn’t anything for me and my four siblings to “inherit” upon their deaths. No matter. I figure I got my inheritance on the front end, because my folks paid for my college education: tuition, room and board. Even correcting for inflation, tuition* at the University of Tennessee was cheap: ca. $160/quarter for a full load. I was fortunate that my parents had the money; even though I also carried a work-study job through most of that time, it wouldn’t have paid the whole cost. And I was fortunate that the state of Tennessee heavily subsidized higher education. Both community college and four-year college tuitions have increased far faster than inflation since then.

In addition to the expense of college attendance, there’s an opportunity cost. You could be spending those 4+ years working and earning an income. The business model is that a college degree can position the graduate for a higher lifetime income than a worker without the degree. The data support that, on average.

That said, far too many people are getting loans to pay tuition at community colleges and four-year colleges and universities that they struggle to pay off but cannot discharge through bankruptcy. This isn’t happening in most industrialized nations on the planet. What do they know that we don’t?

Back in the day, Milton Friedman, that paragon of free market economics, proposed allowing investors to pay university tuition in exchange for a percentage of the student’s future earnings. And he got what he wished for. How’s that working out in the free market utopia?

What is to be done?** Well, I guess we could blame the victims. You should have weighed the risk that you might not finish that degree, or that you might not find a job that allows you to pay off the principal as well as the interest. Is debt slavery good for the country? Forgiving those loans could actually boost the economy by increasing the velocity of money. Maybe as a society, we could come to see investing in our human capital as a means of keeping the nation competitive.

*technically, there was no tuition. These were “fees.”
**to quote Lenin
The Shrinking Future of Colleges, Especially the Small Ones, Angry Bear, angry bear blog