Parents of College Students Fight To Keep Them In Debt

"Sticks and stones may break my bones but loans and debt excite me."

In a recent interview on Meet the Press, Ron Paul had an excellent discussion with the host about his policies and his presidential candidacy. One of these topics has become a hotbed of discussion concerning Dr. Paul's answer about Federal Student Aid. When asked about the prospect of eliminating Federal Aid, he responded that although it is not in his plan outlined recently for the economy, he hopes that in the future, once prices have begun to decrease, that Federal Aid could be eliminated due to no longer being necessary.

Dr. Paul's thoughts come from the notion that government loans have helped to inflate the prices of schools across the nation, a thought shared by some economists and, particularly when these loans are often offered by the very companies that led to the housing bubble, many are sharing Dr. Paul's sentiments, especially some college students who are feeling the brunt of the loans as they graduate.

Parents of the students, however, have made their stance very clear: they want their children to remain in debt.

"Having Joe be in debt will put some hair on his chest," says Joe's father Moe, 56. "Debt is a part of our society, he should get used to it now while he is young."

Mary Catherine's mother, Susan, has a different outlook: "I don't want to pay for my kid's schooling and I sure as hell am not going to send her to some sort of crappy state school," she said angrily. "Dr. Paul is trying to make my daughter poor."

Dr. Paul's analysis of prices in the school market is actually quite sound. Take hypothetical School A. School A had a tuition of $250 a semester in the year 1965. Students who could not afford School A attended the much cheaper School B. If School A raised prices too high, such that no students could afford it, the school would be forced to close and School B would get all of the students. 

However, once student loans became widespread, anyone who could not afford School A could now simply take loans to pay it. This meant that School A was getting the full $250 per semester from students who were now, essentially, subsidized by the Federal Government. School A now raises tuition to make more money, knowing full well that, with the new easy loans, the students will still attend and the school will get the new tuition, in full, despite the tuition hike. This essentially eliminated any reason for School A keeping tuition low. Rinse and repeat until you get up to $40,000/yr.

In the state of New Jersey, however, analyses like this fall on deaf ears, with the best comparison can be seen between two competing schools: Rutgers, the State University, and Rider University, a private school in the west of the state. 

"I could have gone to either," said student Charlie Bonbay, "and Rutgers was cheaper and I actually could have had most of my schooling paid for by the NJ Stars program, and it is also a better school, but I heard that Rider was an awesome party school so that's where I am going to go."

The price difference? Almost $30,000 per year.

"I shouldn't have to pay more to go to a good party school," said Charlie, "it's not fair and it's not American."

Of all of Charlie's financial aid, only approximately 25% was from a Federal Loan, the rest being scholarships and State Grants. 

"I'm upset that he got that many scholarships," Charlie's father said in a phone interview. "He doesn't have to pay that back. That's free money, and that's communist."