It’s not just students and parents and grandparents who are drowning in debt today. Schools are too.
In the credit boom, schools have become focused on promoting lifestyle and affluent appearances more than quality education. Showy things like state of the art stadiums, pools, grounds and buildings are expensive to build and maintain. Schools have increasingly used debt to ‘keep up with the Jones’ and all of this has compounded tuition costs far beyond reason.
In turn this means much education has been priced within reach of only the most affluent and those willing to borrow mind-boggling sums to attend. See: NYC Prep schools binge on debt to lure rich with pools, labs
“It exactly parallels what is happening with colleges,” said Emily Glickman, a New York City-based private school admissions consultant. “If you have to pay a boatload of money, you want to get the most that you can. It’s hard to claim to be a really prestigious private school if your facility looks old.”
To lure students, U.S. universities have borrowed more than $250 billion in the municipal market over the past decade for labs, dormitories and gyms with features like rock-climbing walls. For public colleges, it’s a way to attract higher-paying out-of-state students. For private ones, to best the competition…
As endowments swell and parents put a priority on science and technology, schools are borrowing to spruce up their campuses while interest rates hold near the lowest since the 1960s. Bond sales by New York’s private and religious schools are on pace this year to exceed the almost $280 million issued in 2002, the highest on record, according to data compiled by Bloomberg.
The cruel, immoral irony of all of this of course is that bankers and their debt sales have enabled this indentured house of cards, profiting grotesquely from the build, and then again from taxpayer bailouts when the system imploded in 2008 and in the QE re-ramp since. Hence not surprising then, that these same finance types are now some of the few who can afford to pay the exorbitant sums for private schools, universities, private clubs, bequests and the like. As ‘esteemed patrons’ they are also then (of course) invited to sit on all the prestigious boards and offer counsel and advice to these same institutions.
“The schools are popular with Wall Street bankers and hedge-fund managers. At the Ethical Culture Fieldston School, the board includes Laura Jacobs Blankfein, an alumna and wife of Goldman Sachs Group Inc.’s chief executive officer, and Margaret Munzer Loeb, who’s married to billionaire hedge fund manager Daniel Loeb. Bank of America Corp. Chief Operating Officer Thomas Montag is a Riverdale trustee.”
All of these parts of our current global malaise are related. We have seen this mess before in the 1920’s debt boom and financial crash, and the years of painful unwinding thereafter. We know how to stop making matters worse and reverse course. It begins with cutting the line of credit between the government and the bankers, and pushing the debt genie back into the bottle once more. It also requires the masses to stop worshiping finance types just because they are ‘rich’ and start appreciating how so often those riches are being savagely extracted from everyone else. It further requires our legal system to stop offering bankers deference and start enforcing the rule of law and personal, individual accountability. We, the people, cannot afford for the status quo to continue.