Cruising Into Student Debt

Reading abord a cruiseship.jpg

I once calculated that, for the cost of four years of education at a private American university, a student could take 105 cruises around the world. For the comparison, I chose only cruises that cost about $1,900, as who wants to go through college stuck with an inside cabin? As I imagine it, Cruise College (school motto: “Go Overboard on Learning”) even has some similarities to the landlocked undergraduate experience.
For all I know it may exist, given that higher education is one of the few growth sectors in the U.S. economy.

Despite the decline of American business, private colleges, state universities, night schools, and for-profit continuing education have boomed.

Harvard College will get about 30,000 applications for the 1,700 places in next year’s freshman class. At the same time, there's a strong demand for education at community colleges in economically depressed places, as laid–off workers retool for new jobs.

Beyond colleges with bricks and mortar boards, there is also the flourishing world of online universities, which flash their pop–up banners each time you log onto the Internet. (“Welcome to Faber College: Knowledge is Good.”)

“For profit universities” offer master’s in business administration or degrees in philosophy in exchange for computer clicks and (prepaid) tuition. But you don’t need an online degree from Ace’s Accounting and Appraisal Academy to understand that there are hidden costs.

For years one of the hottest stocks on Wall Street has been Apollo Group, Inc., an education corporation that markets its degree under the flagship of the University of Phoenix.

Its campuses (not to mention leafy computer servers, for online students) are spread across the country and operate in forty states. Among other theorems, Phoenix postulated that continuing educators like their “campus” to be near Interstate exits, and that students usually only will drive twenty minutes to attend class. (It was Mark Twain who said, “Never let college get in the way of the evening commute.”)

Apollo’s stock went public in the 1990s, and reached a pre-crash high of $91 a share, before Wall Street reduced its grade to about $50. Still, it’s a billion dollar company with strong growth, and the University of Phoenix is larger than nearly all state universities, not to mention the Ivy League, with some 470,000 enrolled students.

Faithful to its name, Phoenix believes in the redemption of the American spirit, and it attracts its students with the promise that more degrees will lead them out of their doldrums. Courses are practical, borrowing from the school of knocks.

To “take this job and shove it,” Americans need new skills — as nurses, IT programmers, whatever — and Phoenix (“the drive-thru university”) markets classes at convenient times and places.

The reality of online education, however, is more subtle, as students are not the instruments of a new enlightenment so much as the pipeline of subprime student debt. They are recruited not for their mastery in art or football, but for their ability to fill out bank forms that let Phoenix, like any for-profit school, tap into the vast subsidized gold mine of federal student loan programs.

Imagine, one day, stickers on the back of their Volvos that read “Subprime State.”

For-profit university cheerleaders and even the federal government often brag about the low default rates on student loans. The reason the loans stay current, long after students have flunked out of astrology, is because it’s impossible to walk away from the tuition bills.

Neither a bankruptcy nor an incomplete allows a student an escape from lenders intent on debt collections. (John Blutarksy: “Christ. Seven years of college down the drain.”) Better yet, the ultimate guarantor of the loans is the U.S. government. Knowledge may be Good, but government-backed debt is better.

According to the New York Times, the default rate on student loans was about 7 percent in 2008, the most recent year for which data are available; “In the 2008-9 award year, students at for-profit schools represented 26 percent of borrowers — but 43 percent of defaulters. The median federal loan debt for students earning associate degrees at for-profit institutions was $14,000.”

There is an online Student Loan Debt Clock, which reports outstandings of $855 billion, more than the credit card debt in the United States. It goes up about $3,000 a second, which is 5,684 luxury cruises an hour.

It could be argued that traditional universities have similar Faustian (he coached at Notre Dame) bargains with their students. In exchange for about $200,000, which funds all sorts of professorial sabbaticals and vague courses (“Proust, Prufrock, and Pederasty”), students get undergraduate degrees that can be redeemed for yet more study at the graduate level… should they want to find interesting jobs.

Statistically, an undergraduate degree provides, on average, $50,000 more per year in salary than does a high school diploma, although it is about a wash, were you to invest the tuition money into an S&P stock fund. Engineers are paid more than poets; state universities offer better “returns” than private colleges. It’s hard to date a cheerleader at an online university.

Is Cruise College a better deal than the great American undergraduate experience? I can only speak from personal experience, which is limited. I have only gone on one cruise, while I spent six years in the waters of American and European universities. My quick take: The cruise had better floor shows, but I preferred the college library. The food was about the same. Overall, it would be hard to distinguish those who were drunk at fraternity parties from those merely seasick on board.

And at least the students at Cruise College, for their job networking practicum, can mix with retired American executives.

Because I am a child of mid-century suburbia, I believe in the good of a college education. On the walls of my childhood room were the pennants of various schools, and we covered our grammar school books with the names of great universities. In high school, we laughed at the Woody Allen line: “I was thrown out of there during my freshman year, for cheating on my metaphysics final. You know, I looked within the soul of the boy sitting next to me.”

I loved a lot about my university experiences — the seminars, my friends, and something the cafeteria staff called “Chicken Eugène.” Still, I have no doubt that learning has many paths and that, for some, cruising would work as well as Princeton or Cal State. And for universities to be the instruments of financial sleights-of-hand, as opposed to teaching the great books, seems as distorted as the sermons of Elmer Gantry.

Herman Melville wrote: “A whale ship was my Yale College and my Harvard.” I never read Moby-Dick in college, but I heard that it was a quite a cruise.

Photo by Jonathan Blundell

Matthew Stevenson is the author of Remembering the Twentieth Century Limited, winner of Foreword’s bronze award for best travel essays at this year's BEA. He is also editor of Rules of the Game: The Best Sports Writing from Harper's Magazine. He lives in Switzerland and has two children at universities.

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student debt

Student debt is no joke! It's the ONLY thing that cannot be erased by bankruptcy... the government and private loaners aren't messing around. My son took on 50K in student loans and now, after being in his career for more than 5 years has barely made a dent in it! In fact, he defaulted on a payment one month and his credit score took such a hit that he's had to work on credit repair because he wants to start looking for a new job but almost all employers these days want to pull credit reports/scores on new hires to judge their trustworthiness. It doesn't seem right to me, but I guess time are changing. A man's credit report now seems to be better testament to his work ethic than his character.

As for the federal funding,

As for the federal funding, there is a new rule that was proposed in order to refuse any federal cash advance to any educational institution with the rate of loan default is higher than 30%. Actually, a number of private universities have already reached this level. According to Reuters, students of for-profit, private university face difficulties with unsecured loans repayment more frequently. The Association of Private Sector Colleges and Universities, a trade group of private universities, expressed the protest against the suggested rule and the DOE report stating that this numbers are determined by the current dismal economy. Moreover, APSCU added that the performed data of 2008 doesn’t apply to 2011.

for-profit versus highly subsidized

I'm not a fan of schools like Capella, University of Phoenix and such. From my experience there wasn't much I learned that I couldn't have by taking the same time to do go through the materials on my own (the latter being pretty cheap). For the most part I learned little from other students and near nothing from the teachers.

It did what I really needed at the core but there wasn't anything special about it. But that shouldn't be surprising, they're not claiming to be great. They're just looking to get you that 4 year education with the piece of paper. To complain about the quality of it seems a bit like complaining that I went to Culvers and didn't get some of the best prime rib ever, just something warm, nice and filling.

The real issue, IMHO, is the huge amount of money most state schools spend and what their students have to spend to get an education that isn't much different. I spent a few too many years at one of those two. And aside from from a couple good professors and tending to take classes with sharper students, most of what I gained in knowledge couldn't have been gained on my own just by reading the book and studying on my own.

And let's not get started on private colleges charging $20k / year to get an english lit degree....

In short, the whole system is a mess. It seems rather self serving of the politicians to pick out the private for profits and pick away at them when nearly the same things is happening with many private non profits and - much more so - the thousands of state universities out there. Do we really want to let them distract us from the larger problems?