Bob Green Innes,


curmudgeon

Hamiltonian by birth & occupation!  

.... seeking to restore values, traditions, institutions, laws and protections Canadians once enjoyed
      .....lost by apathy
          ..... but stolen nonetheless




WARNING

BEWARE OSAP FRAUD

Like the Mafia, OSAP is using sucker rates to tempt innocent students into taking on too much debt. Their calculator shows a default setting of 3.5% which is ludicrous when they know damn well the rate right now is above 5%. Plus, they know rates are headed higher, possibly MUCH higher, like double or triple by the time you were hoping to pay it off. Do not let them sucker you in. See what you can afford at 10%, which is the max setting the calculator allows. Their strategem is deplorable, tentamount to fraudulent. Taxpayers and students, screwed by banksters (agents) - again.

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TAGS

FCP, CAP, Election 2011

Bank of Canada (BOC)

Money - create, inflate, deflate, banks

Fluoridation

LRT 1ST, Latest

Stadium, Ti-Cats, Pan-Am

student debt, OSAP

Light bulbs, ban

Green

Other

Three Part Review of Higher Education and Student Loans

Part 1. On kids Applying for Student Loans - Blog 17a - click to jump

Part 2. OSAP, the Student Debt Trap - Blog 17b - click to jump to another page for technical reasons

If you're too rushed to read, just click the LISTEN button.

Part 3 - Systemic View of the Student Loan & Higher Ed Warehouse Racket

- Blog17c. April 4, 2011

In Part One we looked at an overview of the student loans and the higher education system, in part two, we delved into OSAP and looked more closely into whether it was all worth it. Let's summarize what I think to be the problem and offer a few ideas.

  • more pressure than ever on kids to attend higher education
  • high schools inflating marks, universities deflating standards
  • costs baloon under high demand, little competition and assured funding
  • boomers vote, kids don't, so health trumps education. Budgets get squeezed so...
  • tuition costs outpace inflation,
  • student loan programs discourage restraint by administrators
  • boomers keep working which forces students out of paid summer jobs, so ....
  • volunteer/ internships increase, exacerbating student's money problems, so ...
  • student debt increases, engendering 'bondage' and inflexibility for young graduates
  • good jobs, especially manufacturing, disappear to China, rendering degrees useless, and large debts unpayable but....
  • employers demand degrees, just because they can, so the vicious circle continues, and
  • graduate programs baloon as degrees become a ticket to nothing special, and
  • bureacrats love it - since they closed the bankruptcy loophole, they can extend their pleasures forever in rescheduling debt and making those in bondage feel lousy. We don't treat gambling addicts this way.
  • Universities, once seen as engines of innovation, look more like sponges and tax dodges. So...
  • University thus becomes a self perpetuating racket on the backs of taxpayers & students, but
  • nobody says anything because higher education is a sacred cow, politician paralysis
  • the student loan sector itself enters a bubble phase, especially in the US. Obama's reforms last year seem to have been undone this year.

My research into student loans, although focused on the student's point of view, ran into reports of problems experienced by the loan system itself, beyond the education inflation aspect outlined by such links as Briarpatchmagazine.com below. Coincidentally, I also discovered that Hamilton's bizzare financial strategy, which involves both banking and borrowing huge sums in some sort of muni-money sandbox, is investing in a company (1 Financial, 1fbusa.com) involved in the student loan business. I love it when issues I've been harping on (student & public debt, banking, credentialism) converge. Your scribe has much work to do. If I hear anything more about Hamilton's situation, i'll probably try to post something on my money page and/or Hamilton page.

Anyway, it appears that the big boyz like Goldman Sachs, Citigroup and JP Morgan got rid of their student loan scams, er, busisnesses. These guys never lose, like never, so when they dump, watch out. Umm, is that why we are now learning that default rates are skyrocketing, just like in the subprime fiasco?

Various articles like Lendman, Mish's and Briarpatch, question the whole system as to the supposed benefit of hamstringing new grads with huge debts for questionable degrees in a lousy, and-getting-worse job market squeezed by outsourcing and foreign competition. Briarpatch suggested the following solution:

Source: Briarpatch Magazine · B.A., M.A., McJob: The student debt bubble, the shrinking middle class and the future of post-secondary education

Rather than warehousing our youth in costly institutions, and rather than absorbing the costs of training that businesses used to pay, wouldn't our efforts be better spent working to improve employment opportunities for all? We should be mobilizing against contingent work in all sectors by raising minimum wages and benefits and cracking down on the conversion of full-time to part-time work. We should be asking for government initiatives to bring innovative manufacturing back to our shores and supporting unionization of service work to improve working conditions. In short, we should be working toward a world where young Canadians do not have to sell their souls or drive themselves crazy for the right to work and live comfortably.

I don't agree with all these solutions, but at least its an attempt to do more than just complain. The problem goes way beyond education so I'll be taking a good look at the larger picture during my efforts with the Canadian Action Party in the 2011 federal election. Meantime, here are my thoughts for this sector:

  • The student loan system should be capped at about $10 or $15,000 per student, which means that tuition and book costs should also be lowered to ensure that between the two, most students will be able to gain at least some post secondary education. This essentially shifts more of the burden to the taxpayer, which hopefully will increase pressures to put some brakes on excessive pay packages. Sunshine policies must be in place.
  • The issue of excessive voluntarism or intership must be tackled, possibly even prohibited, churches excepted.
  • The replacement of common sense by credentialism must be discusssed and tackled, possibly by blinding resumes (as is done for age), at least for non professional categories. Thus freed of credentialism, people would pursue education for its own sake and be more careful about expenditures.
  • Should the growth of universities be stopped of even reversed? Are we going too far by trying to push more than half the kids through the system? I do appreciate the potential for universities to undo some of the brainwashing and other damage that occurrs in high school, but it seems that there is just as much brainwashing going on in the ivory towers! Nonetheless, a few years of extended education in a more challenging environment, without any particular expectation, is beneficial from a societal point of view, especially if classics and practicalities are emphasized - I think two years would be enough of a replacement of the old three year Arts degree, now held to be useless. That way, at least they will be able to write proper job applications, and can then persue something more practical, possibly at a community college.
  • much more emphasis should be placed on apprentice and co-op programs.
  • entrepreneurship should be emphasized both during and after class. Canada is sorely lacking in this regard. Entrepreneurial activity offers immediate relief from the deteriorating prospects in many other fields. New grads, like Bill Gates, are too stupid to know that the direct pursuit of one's dream is useless!!

Stay tuned

Bob Green Innes


Part 1 - Ruminations On Kids Applying for Student Loans

& Some thoughts on higher education.

Blog #17a

It's that time of year again. Students have to get their applications in to university or college admissions and parents have to think of how to pay for it all.

Many experience a mixture of trepidation and pride as their son or daughter embarks on this journey. Are their kids making the right move in a day when even university grads are experiencing difficulties in finding serious jobs? Do they really know what they want to do? How naughty or crazy will they be without mom or dad around? Will they be undertaking stunts that land them in jail or hospital? Will they play bridge like a fool, be forced to drop out only to start a billion dollar company - like Bill Gates? So young, so many possibilities, some good, some not.

By this stage, parents generally have done all they can to raise their kids as sturdy, creative, ambitous, responsible people, emphasising all the qualities they consider important, and are proudly ready to ship them off into the world. At the same time, there are always tensions as the young test their powers and try to spread their wings against their parent's strictures. Such tensions often arise over money, especially in families not having a great abundance of it. And especially when kids looking for summer jobs are getting squeezed out of the workforce. While parents want to support kids in their various endeavours, they often either can't, or don't want to indulge them to the point they become spoiled brats. This is about to change. Your child is about to hit a jackpot you might not have been thinking about very much. Student loans.

Arguments might arise, for instance, over which university to attend - the local institution or one in a distant city which necessarily means extra living expenses. I know parents who are trying to get it through the thick heads of their kids to consider the local institution, especially if the logic for a distant school is not very strong. Lets face it, most kids just want to get away from home and experience the thrill of having few restrictions, while being safely ensconced in the same situation as most of their peer group. But money doesn't grow on trees, does it?

While you mutter darkly about the cost of residence adding about 7 grand per year and the debt that will be piling up, the kid cheerily and condescendingly pats Dad on the head and purrs that, no problem, OSAP will take care of everything. OSAP, which stands for Ontario Student Assistance Program, is on the lips of almost everyone in the your kid's class. Visions of credit cards dance in their heads. Meanwhile, you maybe aren't so sure about this whole university thing, never mind going into debt up to the eyeballs for it.

I believe we should start this discussion by going back to first principles, or at least getting an overview of education and loans as a system. You or your kid is going into a whole system with its own mentality, incentives and imperatives. In order to get what you want, you have to understand what they want. The individual student is not important to them, it is all about numbers. Let's look.

Roughly a million students attend post secondary education in Canada according to Stats Can, with the split favouring universities over colleges 60, 40. High schools graduated about 317k students, and it seems that 283k graduated from university in the same year. That's 89% which seems way too high. Another link says "In 2005, more than 1 million Canadian students were enrolled in universities in Canada (781,300 full time) and in 2004, more than half a million students were enrolled full time in public colleges and universities", which seems inconsistent and confusing. No matter. Ryerson and McMaster data indicates that 72.6% and 81.9% of entering students graduate respectively, which still seems higher than years back, when half the freshmen flunked out. Ontario accounts for about 30% of the totals. Is there a lowering of standards going on here, or just not counting people who drop out in the first few months?? No time to find out, but note that one of my searches presented a new phrase - something like 'completion-based funding'. Makes one wonder about incentives. but I couldn't confirm it is actually the case.

Edit Jan 2011 - on the matter of standards slipping, I just listened to a CBC podcast indicating that while Canadian students are still doing fairly well, there has been significant slippage against the competition, notably China. (The current, Dec 2010, based on PISA (sp?) testing). On the last point, this link outlines 'quality assurance' protocols for Canada, that doesn't mention completion based funding specifically, but does indicate similar forms of performance mechanisms are in place. Another link points out that Korea is near the bottom of the post-secondary public spending list (% of GDP), but beats Canada when it comes to results (% of pop. with some post-sec training). A Briarpatch article notes:

But there was no corresponding change at the public-school level to guarantee that more students would be prepared for university. High school grades edged up to meet entrance requirements, which edged down. As first- and second-year classes ballooned to hundreds and even thousands of students, multiple-choice testing replaced substantive testing, allowing [marginal] students ... to get by.

The Feds say: "The Government of Canada provides 60 percent of the assessed need, up to a maximum of $210 in loans per week of study. In the 2006 year, the CSLP provided over $1.9 billion in full- and part-time student loans to approximately 345,000 students, and awarded $141.8 million in non-repayable Canada Study Grants and Canada Access Grants (87,368 grants)." I calculate that their 1.9bn at their 60% (could be 70% according to other links) represents $3.1bn of loans total, including the provincial portion which divides out to 9.17 grand per loan. Multiply this by 3 or 4 years and you have 27.5 to 36.7k loan per student.

An article by The Toronto Star's STEVE RUSSELL reported that "Owing only government student loans: 27% - $16,200 on average. Owing government and other loans: 15% - $31,600 on average." These numbers seem innocuous enough, but bear in mind they are only averages. One certainly hears about students graduating with high five and even six figure debts. You might be cheering or horrorstricken at this example.

The student union folks say: "Of university students completing the final year of their program in 2007-08, about 40 per cent have repayable OSAP debt totaling $25,000 or more."

The Toronto Star article pointed out that "Among debt owners reporting difficulty paying: 12% owing less than $10,000; 22% owing $10,000 to $25,000; 43% owing $25,000 or more". The situation in the US is far worse.

Russell's admonition should also be kept in mind:

a student loan is the one debt you cannot reduce or clear away, through bankruptcy within the first five to seven years after graduation.
The US situation, again, is worse, with fears of debt bondage being expressed.

Taxpayers are lending students about $15billion at this point, of which at least 1/2billion will not be repaid according to OSAP, or triple that according to the student union. Just under 1/4 billion is budgeted for grants, going by the federal info, and adjusting for the provincial 40% share. This is on top of the direct cost of 5 times what tuition brings in, or about 37billion for Canada 14.7billion Ontario. Compare this to 80billion (or 121 billion for Health depending on source). Or 190billion for Social Services. No time to resolve discrepancies. Any way you look at it though, the kids are getting the short end of the stick. At the other end, is the bankers, who benefit no matter what happens, especially when bailouts are preferred over bank failure. Signs of a bubble forming in student loans is becoming more alarming. The systemic failures come later.

This source outlines more details of how universities are funded: "Provincial and territorial governments provide most of the direct funding for public education in Canada (45 percent). The balance of public postsecondary education income is obtained from tuition fees (21 percent), sale of goods and services (14.6 percent), federal government (9.3 percent), investment income (2.7 percent), and other income including philanthropic contributions (7.4 percent).

The view from 50,000 feet suggests we may be in a gigantic bubble, formed by the combination of easy tax dollar infusions to universities, insatiable demand (and willingness to pay) from students squeezed by ever inflating job requirements for the deflating list of good jobs that haven't (yet) been outsourced to China, and oldsters who wont (or can't) fade away. Signs of the bubble's imminent collapse are the aforementioned employment losses and the wobbling of student loan infrastructure.

I hope these numbers, random and inconsistent as they might be, are helpful in framing the issue for parents and other readers. In the next part, I have a look at OSAP in more detail and try to figure out if this is a good thing for our kids. Stay tuned :-)

Jan 10, 2011

Bob Green Innes


PS. Like anybody researching a topic, the researching is never done. What we need, which I may or may not get around to, is to produce graphs showing how the situation has changed over my lifetime. Here are my suspicions:

  • Tuition has increased let's say 10 times since 1970
  • Education funding has increased less than health and welfare/ social
  • Official inflation is less, true inflation is more
  • Wages have not kept pace, After tax wages are even worse
  • Summer job availability and remuneration has declined in real terms, even to the point of volunteerism
  • Therefore students are borrowing more in real terms
  • Unless there are other compensating factors
  • Which probably means students are having more difficulty paying off loans
  • Unless taxpayers are helping more
  • Which means the bureaucracy has probably grown in size and cost
  • All of which means the banks are making more money from this sector

Someday, someone should pull all this together.

From the US

Budget Deficit Accounting Fraud and the Off-Balance-Sheet Student Loan Scam; Time to Scrap Entire Student Loan Program

Inquiring minds have been wondering why the federal debt has been rising far faster than cumulative federal deficits.

I propose the entire student loan program be scrapped. Much of that alleged "aid" goes straight to corrupt institutions like the University of Phoenix which charges exorbitant amounts for fluff degrees leaving students trapped as debt slaves for the rest of their lives.

The second thing we need to do is accredit far more online colleges. There is no reason legitimate courses cannot be offered over the internet at amazingly low prices.

These actions would quickly pop the bubble in higher education costs and make college affordable for nearly everyone without putting taxpayers at risk.

I'm not sure if I agree that there is nothing to be said for the on-campus experience (if embraced fully) but perhaps we are putting too much money and faith into it. His main point that gummerment support has bloated the system is well taken even if it is a bit libertarianish.

A cautionary tale

Supposedly "Ms. Munna and her mother, Cathryn, have spent the years since her graduation trying to understand where they went wrong."

It should take seconds. Going $100,000 in debt to get an interdisciplinary degree in religious and women's studies seem rather foolish to say the least. Exactly what kind of job did Ms. Munna expect to get with that degree?

Now she is working for a photographer and it is plain to see her degree is totally useless.

Again, maybe skills developed on campus, while not immediately applicable, may emerge over time. Many students follow their university degree with practical learning at a community college that will be used to get into the door. Thus, the degree is also about citizenship although Hamilton's stadium debate proves that BS baffles both brains and bozos. A degree gives no guarantee of immunity. This goes back to the credentialism issue.

Criticism of Sudent Loans - quote from Wikipedia (US-oriented)

The student loan system has also been criticized including by supporters of other systems such as a grant system.

In coverage through established media outlets, many borrowers have expressed feelings of victimization.[2][3][4] Common complaints include: feeling like the terms were not clearly described prior to consummation, having monthly payments equal to half of take-home income, wage garnishment by lenders, inability to charge off student debt in the bankruptcy process (as is possible with mortgages and credit card balances) and being crushed by unyielding lenders when befallen by unfortunate life events (such as disability which prevents work).[5] There is a valid comparison between these accounts and the college credit card trend in America during the 2000s,[6] and it could be argued that a similar form of corrective legislation is in order.[7]

It is often more difficult to discharge a student loan in the USA in the case of bankruptcy. The legislation which covers this is 11 USC 523. This often means that student loans survive a bankruptcy unless the bankrupt can demonstrate "undue hardship".[8]

Systemic Predation in the US

Sallie Mae (SM) is the largest student loan originator, servicer and collector, managing over $180 billion in federally guaranteed and private loans from over 10 million borrowers. If they can’t repay after 270 days, loans are in default. Washington pays SM the balance plus interest. For repayment, collection agencies like General Revenue Corporation (GRC), the nation’s largest, impose 25% loan collection fees plus 28% commission charges on borrowers, and can garnish wages and other income for payment.

Congress ended bankruptcy protections, refinancing rights, statutes of limitations, truth in lending requirements, fair debt collection ones, and state usury laws when applied to federally guaranteed student loans. As a result, lenders may freely garnish wages, income tax refunds, earned income tax credits, and Social Security and disability income to assure defaulted loan payments. In addition, defaulting may cause loss of professional licenses, making repayment even harder or impossible.

More Links

Generation Serfdom: The World Wide College Bubble Interesting observations about how the college system has replaced traditional apprenticeships and trapped students into a parallel system with expenses almost as bad.

Peter Thiel on the Higher Education Bubble - chart shows 'eduflation'

Peter Thiel: Were in a Bubble and Its Not the Internet. Its Higher Education.

A true bubble is when something is overvalued and intensely believed, he says. Education may be the only thing people still believe in in the United States. To question education is really dangerous. It is the absolute taboo. Its like telling the world theres no Santa Claus.

He thinks its fundamentally wrong for a society to pin peoples best hope for a better life on something that is by definition exclusionary. If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend? Why not create 100 Harvard affiliates?

n+1: Bad Education

What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce? During the expansion of the housing bubble, lenders felt protected because they could repackage risky loans as mortgage-backed securities, which sold briskly to a pious market that believed housing prices could only increase. ...... But since this wouldnt be America if you couldnt monetize your childrens futures, the education sector has its equivalent: the Student Loan Asset-Backed Security (or, as theyre known in the industry, SLABS).


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Re - recent bid for trustee

Coming Up

    MyStoneyCreek asks pertinent questions - i'd better explain myself - if that is possible!

    Solar energy vs the last of the PIIGS vs local efforts

    Banking, money risks, a modest proposal

    Reflections on a Greek phrase

    Forcing my mind to grapple further with that pesky smart meter thing. I'd hate to be a party pooper when it comes to the good intent of the smart meter - BUT.........

    So much to mention - GMO foods, fluoridation, dogcast listening, Puppy - maybe I'll put up a sort of note space for miscellaneous

    Ongoing economic meltdown - two threads: Hamilton's unique problems and the more general economic melting down of the US. Four Horsemen.

    Global warming questions and myths. I'll borrow this for now.

    Eventually, thoughts on the deeper questions that vex our world.


Favs & Locals

Bob's BlogLog

    This website is finally getting to be something organized. Alas, just as it's getting into full swing, it's getting full! I'll be keeping this site alive for various purposes, but I'll be more or less migrating to my page at Hubpages.com, probably with a trailer here.

    In case you had some difficulty with broken links, please be patient. I'm just changing files over to php so if something doesn't work, try changing the extension from .html to .php. PHP cuts the storage requirements and facilitates the updating of anciliary sections like this one. Master files are used that are pulled into every page (links, header, footer, favs, breviations, etc). For anyone interested, the clever command that is used for this is 'include', the syntax for which can be found on the net. Very cool, no?

    Most blogs are based on simple table layouts - two or three column using a markup language. The professional sites have sophisticated coding in many languages to provide many features such as automatic archiving, variable text size and the like. We shall see what the future brings but for now I'm just enjoying using HTML and a smidgeon of others such as PHP, javascript. CSS looked interesting too but with the above php setup, looks to be unneeded. Debugging is not my strong suit but this page is nothing like the old basic programs that once drove me nuts.
    Next: I'll also be starting to group blogs on the same page - why not - saves storage space too. New table for miscellaneous??? (For now, I'll just stick odd stuff below.) Eventually I may get code to improve the comment section but in the meantime, i found an online forum site which makes things easy and fast. First though is to bring some order to the numbering system which right now is conflicted between normal chronological postings, logical pointing system, and page groupings in reverse chronological.

    Also need to ensure font is not too small on newer hi res screens. Please use your browsers zoom feature as needed - or complain!

    As you can see, Netfirms is hosting this site. My frugal buddy Johnny suggested it as the most economical site for a modest blogger. The two domains and the two sites cost about a case of beer per year which i guess is justified. There is limited storage and limited bandwidth but that's ok for now. They offer pagemaking services but being a control freak, I prefer to stick to my own understandable system. Hope you enjoy.

Bob's 'Breviations

  • LRT - Light Rapid Transit
  • MSM - Main Stream Media
  • k, Mn, Bn, Tn - thousand, Million, Billion, Trillion Dollars
  • GMO - Genetically Modified Organism Foods
  • PIIGS - Portugal, Iceland, Ireland, (Italy?) Greece, Spain,
  • OSAP - Ontario Student Assistance Program.
  • RAP - Repayment Assistance Plan
  • CSLP - Cdn Student Loan Program
  • Cdn, US, Aus, GB, Fr, Ont, PQ - Places abbreviated
  • F - fluorine or, because I'm lazy, fluoride, fluoridated water


Pet Peeves

      * gummerment overspending
      * what we're doing to our political and educational systems -

      * banksterism.

      * political correctness (equity policies) along with

      * MSM - mainstream media, especially the Spectator, our local rag

      * human rights commissions and their guilty-until-proven-innocent destruction of our ancient rights. Soon to get worse.

      * Overmedication in our society - this link relates to kids ADD, ADHD

      * Rigid thinking, dismissiveness, judgementalism, The Spectator

      * legal liability issues - playgrounds, bake sales gone. This is stupid (corporatism).

      * senior (upper levels of ) gummerment funding - distorts and deflects responsibility

      * Public sector unions

      * credentialism

      * a little rant on mailboxes!

      * spelling in the English language. The real culprit is Johnson and his dictionary that picked words before they ripened!

      * apathetic people. Plato said 'Your silence gives your consent'

      * aphids, Torx screwdrivers, proprietary parts, the great Eyeglass ripoff





    * retired Professional Engineer, married, father of 2 including one still in the system.

    * pursuing many interests - partial list below

    * small-c conservative (but not a Harper PC - that's the party of big business!)

    * investigating causes of economic problems, finding troubling trends and possibilities

    * Former candidate, Hamilton East Stoney Creek, FCP, Public System Trustee, Ward 4



Links to other Interests.


Requests.

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