Student Loan Debt Blame

"Who is to blame for soaring U.S. student loan debt," asks Fox Business News' Elizabeth MacDonald, "that now surpasses credit card and auto-loan debt, at an estimated $1 trillion, according to the Consumer Financial Protection Bureau?" Could it be the colleges? Consider this:

• More than 75 colleges and universities sit on record endowments in the tens of billions of dollars from donations made by people who believe their money is going towards cutting tuition costs. ... But one estimate shows that colleges only spend an average of about 3% of their endowments on tuition.
• Census data show that, as of 2005, colleges and universities employed more than 675,000 full-time faculty members — but 756,000 administrators, counselors, accountants, alumni relations officials, and attorneys, among others. Between 1976 and 2007, the proportion of administrators to students doubled at colleges nationwide.
• As part of their collective flight from reality, too many colleges have locked themselves into a vicious cycle where "you raise tuition, so you can give out more aid, so you can raise tuition," Jacqueline E. King, director of federal policy analysis at the American Council on Education, a Washington education lobby group, has said. "Institutionally based financial aid accounts for about one-third of all the increases in tuition," David L. Warren, president of the National Association of Independent Colleges and Universities has said. "It's the driving force behind rising fees."

Or how about the government, "whose well-meaning student aid fuels higher tuition costs which relies on more student aid"?

• The College Board estimates more than $60 billion in financial aid—most of it from the federal government—is annually available to students as of a few years ago. But 60% of that aid was in the form of loans, up from 40% in 1980.
• Mark Zandi, chief economist at Moody's Analytics, has said government loans and subsidies are not cost-effective for taxpayers because "universities and colleges just raise their tuition. It doesn't improve affordability and it doesn't make it easier to go to college."
• The dilemma, say economists, is a simple supply and demand problem. Colleges can "raise tuition because they can," David Breneman, dean of the Curry School of Education at the University of Virginia, has said. When the government subsidizes something, producers respond by raising prices to soak up as much of the subsidy as they can.

The danger here is taxpayers could be on the hook for belly flopping student loans," writes MacDonald, "since eight in 10 of these loans are government-issued or guaranteed, a support that increased after the government stepped in to help this market after it iced over during the financial crisis in 2008."