Student Debt: Confused? You won’t be, after this episode.

No wonder people get confused about student debt: a new Federal Reserve report shows student debt worsening. A group of universities jump into spending small fortunes creating Massively Open Online Courses (MOOC), which are free. The New York City Council clears the way for NYU to build a $4-6 billion expansion, financed entirely by debt. Confused? You won’t be after this episode.

Soap!

First, the Fed, who are doing a good job of trying to alert lawmakers to the personal debt crisis, not that anyone is paying attention. They use a somewhat different and conservative methodology to arrive at a total amount of student debt but nonetheless their figures show a rise of $30 billion in the last quarter to $902 billion. So student debt is rising at nearly $100 billion a year. Average student debt is now over $24,000. There are over 37 million people with student debt.

What’s freaking out folks at places like the Wall Street Journal is that it turns out that this debt doesn’t go away. 5 million of the endebted are in their 50s and their average debt is $23,000, only $1000 off the overall average. Student debtors know why: compound interest, penalties and other fees make it almost impossible to reduce the principal. For people with children of their own, a second wave of student debt is now breaking. With home equity radically diminished (the presumed source for many to pay college bills), the fastest rising category of Federal education loans is to parents.

Delinquencies in borrowers over 40 are notably up in the past quarter, running as high as 11.9% for forty-somethings but not falling below 9% for any age group over 30. For many middle-aged people–and I know whereof I speak here–debt management is all about redistribution, moving credit card balances, taking loans on home equity or retirement accounts, refinancing mortgages and so on. Only the merry-go-round stopped in or around 2008 and it’s not going to be moving again any time soon.

The reason student debt continues to get worse while other categories of debt “improve” is very simple. You can declare bankruptcy, get foreclosed or default on other debt. Student debt never goes away. There is no bankruptcy or other means of legal adjustment. So while credit card companies have written off 10% of 2008-level debt as irrecoverable, and 5 million homes have been foreclosed, student debt remains. The Fed did not update its December estimate of defaulters excluding those currently in deferral: but it’s safe to assume from the overall increase in default that the 2011 rate of 27% is closer to 30% now.

Meanwhile, universities are responding in two ways: fantasy and insanity. The fantasy is that if you are not a university with a huge endowment, creating free MOOCs will somehow make you more competitive. Everyone knows that Stanford’s Artificial Intelligence MOOC attracted 160,000 people. No word on how many completed the course, still less of anyone inventing a robot or any of the other fantasy outcomes that people associate with A. I. All this has been great publicity for Stanford, which gets to appear civic-minded at relatively low-cost.  With a $16.5 billion endowment for their 18,000 students,  it’s not as if Stanford is broke or looking for new people to apply. For places like that, keeping the rabble out is a price worth paying.

Now a new consortium called Coursera has set up shop using faculty from a range of institutions. There is already a Great Lectures market for CDs and the like that might be in trouble but for state funded or less affluent private institutions, the upside to the “brand” and other publicity generated by the expensive creation of online content is less clear. A MOOC can be fun, you might learn some skills, but it’s really not equivalent to college.

Given that employers are not impressed at the moment by a B.A., what use would a set of MOOC “credits” be? The answer might be this: if MOOCs can supply a skill-set that allows a person to do what they want. For many young people, though, the purpose of college is to find out what it is that they truly want, rather than the limited range of options presented in grade school or locally.

Yesterday NYU persuaded New York City Council’s Land Use Committee that the place more young people want to do that discovery is New York. Its massive expansion scheme was approved 19-1, making it a foregone conclusion that the Council will approve it. Legal challenges may succeed in turning this back but it’s still not clear what NYU is thinking. Why undertake this massive new building when only 18% of it is for academic purposes and it will be paid for by debt? Meaning student tuition fees for the most part presumably, although no budget has been supplied. The answer is the same as the thinking behind the MOOC: college is a mercantilist system in which there are limited resources and schools must aggressively compete for them.

This is a Business School role-playing game and has no educational content at all. And that business-think is so manifestly not working–see above, see the economy, see unemployment– that to begin vast new projects without proper funding based just on that is a threat to the entire enterprise. So are you still confused? I am.

Welcome to the Garbage Can University

In the last few days, a coup at the University of Virginia (UVa) and a report on the mass exploitation of the part-time academic workforce have made it clear that the US university system has come apart at top and bottom. All that’s left is the middle, endlessly putting itself into debt to stay in these increasingly dysfunctional institutions. Welcome to the garbage can university. There’s garbage at the top, rubbish pay at the bottom, and people treated like garbage in-between. And the masterwork of the new Interim President at UVa is on, yes, garbage cans.

First, UVa. This is unbelievable, even by the messed-up standards of university administration. Out of a clear blue sky the Board of Visitors (i.e. the Trustees) simply fired the current President Teresa Sullivan. The email trail dug up by student journalists at The Cavalier Daily, and pursued by the online daily Inside Higher Ed, shows what was up. Board members were so taken by a mediocre  Wall Street Journal piece of hype about online courses that they felt they had to expedite removing Sullivan. Here’s what got them salivating:

Online education will lead to the substitution of technology (which is cheap) for labor (which is expensive)—as has happened in every other industry—making schools much more productive.

The sleight-of-hand that will not have escaped your attention is to transform education, which is a public good, into a private industry. Rather than create a well-informed citizenry, this manufacture can be quantifiably more “productive.”

Perhaps most telling is what the Board did next. Sullivan, an expert on work and debt, was replaced with the Dean of the Business School. What use could a university have for the author of As We Forgive our Debtors : Bankruptcy and Consumer Credit in America? Or The Fragile Middle Class : Americans in Debt? Interim President Carl Zeithaml, former dean of the McIntire School of Commerce, is the third author of Barriers to Corporate Growth (1981). That really tells you all you need to know. Except that Zeithaml wouldn’t make tenure in most places with that publication record. Oh, I’m sorry, I forgot his recent essay “Garbage Cans and Advancing Hypercompetition.” My mistake. What could possibly better summarize the current American university than that?

At the other end of the academic pay scale, we learned today from the Coalition on the Academic Workplace that the neo-liberal revolution has fully succeeded. Composed of 26 scholarly societies like the College Art Association, the American Academy of Religion, and the  Modern Language Association, the Coalition began from this starting point:

According to data from the United States Department of Education’s 2009 Fall Staff Survey, of the nearly 1.8 million faculty members and instructors who made up the 2009 instructional workforce in degree-granting two- and four-year institutions of higher education in the United States, more than 1.3 million (75.5%) were employed in contingent positions off the tenure track.

Rightly, the Coalition saw its responsibility as trying to learn more about the conditions of these workers. Their survey received over 30,000 responses, with 20,000 from self-identified part-time faculty/instructors. The conclusions are stark:

◆ The median pay per course, standardized to a three-credit course, was $2,700 in fall 2010 and ranged in the aggregate from a low of $2,235 at two-year colleges to a high of $3,400 at four-year doctoral or research universities.

◆ Part-time faculty respondents saw little, if any, wage premium based on their credentials.

◆ Professional support for part-time faculty members’ work outside the classroom and inclusion in academic decision making was minimal.

◆ Part-time teaching is not necessarily temporary employment, and those teaching part-time do not necessarily prefer a part-time to a full-time position. Over 80% of respondents reported teaching part-time for more than three years, and over half for more than six years.

It is in this context that we need to discuss the assertion that labor costs are too high at US universities. It is in this context of systematic impoverishment of part-time faculty and instructors that students and those who support them should discuss the value of the tuition being paid for these courses, which now amounts to over $40,000 per year at all the top-ranked private institutions.

The disgrace of all this has been realized in Quebec. CLASSÉ point out that state support for public universities has fallen from 87% of the budget to 71%. That’s a level no US public institution can now dream of receiving. And that’s why they are on strike: because they can see where they are going–a world of essays on garbage cans, garbage level pay and garbage universities. And they want none of it.