Trish: College Is Becoming America’s Biggest Financial Scam

This is a rush transcript of The Trish Regan Show August 10, 2021 and may be updated. Listen here and follow along with the transcript below.

Do you remember that guy that used to say ‘the rent is just too damn high?’

Well, here’s a new one for you: The cost of education is too damn high. And our kids and all of us as taxpayers are paying the price and will continue to do so!

Hello, everyone. Welcome to the Trish Regan show. I am Trish.

This is highway robbery. You’ve heard of the so-called “military government complex.”  This is like the “education government complex.”

Think about this fact: One thousand, I want you to commit this this number to memory, 1,375 percent.

That is how much the cost of an education in the United States of America has gone up since 1978, 1375 percent, which is more than four times the rate of inflation!

This is total nonsense. And, our government is fueling this nonsense in education right now.

Look, the average school now is is in the tens of thousands of dollars. It is not unrealistic to be spending seventy five thousand dollars for tuition, room and board for college. Think about this: The median income in America right now for a family is 79k and that’s pretax!

So, how do people afford this? Well, the answer is they can’t, they can’t afford it.

And so kids are taking out loans, parents are taking out loans. And, this is where the government steps in and creates a heck of an industry, a messed-up industry.

I’ve got some extraordinary details on how this all works and we’re going to dig deep, deep into this story today. But first, a quick word from one of our sponsors. (commercial.)

I think the only way you’re gonna be able to do this going forward is to really just break down the system and start over when it comes to education because I’m sorry. Seventy five thousand dollars. Who can afford that? People can’t. And so people are borrowing, kids are borrowing, borrowing, borrowing. We’ve created a messed-up broken system that’s sending our middle class further and further into debt, punishing our middle class taxpayers and leaving young people without a fighting chance in the world.

I mean, heck, you start off and you’re not even making as much as you owe? how does this work? More than two million Americans have have already defaulted on their student loans. That’s in the last six years. And you know what? That number is growing and growing. They’re talking about 4500 people a day that are defaulting. And taxpayers, we’re now on the hook. Right?

If it’s up to Elizabeth Warren, well, she’s just going to wipe it all out together. And I guess we start anew and we give out even more money. That doesn’t make any sense.

Students Not Graduating, Yet Still on The Hook For Massive Loans

Do you know that people aren’t even graduating from school? I mean, you’re really lucky to make it all four years and you make it all four years. And then what? You become a barista at Starbucks. Look, you could have done that without a college degree. I’m sorry. You know, I’m not begrudging anyone an education. But let’s be realistic. If you want an education, you don’t need to go to school for that. You don’t need a diploma for that.

This analysis by the New York Federal Reserve found that four out of ten recent college graduates are in jobs that don’t ever require college degrees.  Wo they got the college degree, which again, that’s lovely, that’s wonderful. I’m all for education. I’ve had a tremendous amount of education myself, and it’s a great thing. But when you’re graduating and you can’t get a job to pay back the loans, that’s not a great thing, OK? And that’s all too common.

The Wall Street Journal, I’ll tell you, they’ve been all over this story and I applaud them. They did a big front page piece last week on the University of Miami Law School, and they reported that recent graduates of the University of Miami School of Law who used federal loans, borrowed a median of $163,000. Yes, one hundred and sixty three K. Two years later, guess what? Their earnings were $59,000 a year or less, which is actually the biggest gap between debt and earnings the Journal points out among the top 100 law schools as ranked by U.S. News and World Report.

So $163 K in debt… making $59k in your career. What the heck?

We’re saddling our young people with all this debt and why? Oh, I’ll tell you why. Because you know what? When you got free money, there’s no limit on what you can spend. And believe me, you’re going to spend it. We’re going to get into all of it. But first, just another quick word from one of our sponsors. (commerical)

Where Does the Money Go?

OK, let’s get back to where your money is not protected. And that’s in education. This this racket, really, this education complex, is a total government racket. 75k you’re paying? Where is all this money going?

I get the faculty right. And look, I mean, aside from the fact that they’re all total lefties, I actually don’t begrudge the faculty’s making a decent living. I mean, they should be well compensated. I don’t have a problem with that. But it’s gotten really nuts because the compensation is sort of out of whack. I mean, a lot of these these professors aren’t even really teaching. They’re out there publishing…and university presidents, meanwhile, are all compensated, at least 70 of them for one report in the millions of dollars.

And so you’ve you’ve got to sort of think about where all this goes. The former CEO of Sallie Mae, a man named Al Lord, told The Wall Street Journal that some of these schools have operating budgets in the many billions of dollars. He actually cited Penn State, where he had gone for like $175 bucks a semester, way back when. Wow, times have changed. They have a seven billion dollar operating budget because they have, you know, new stadiums and dorms and libraries and theaters.

And I guess what you realize here is that this is one big giant business that is fueled by the American taxpayer. Yet simultaneously, it doesn’t quite operate like a normal business. Right? Because in a normal business, you don’t just spend money randomly and you don’t just keep hiking prices.

But in these schools, because they are enabled by this government funded student loan program, well, they get to kind of just do whatever they want.

Look, again, I love education. I believe in education. I don’t necessarily think you need a stamp of approval, but the reality is…look, I probably wouldn’t have gotten the opportunities I’ve gotten had it not been for my little stamp from Columbia University and by the way, I borrowed money to go to Columbia University. And I can remember signing on the dotted line and thinking like, this is a lot of money and I’m going to have to pay this back. But that was just sort of my realization. Not everybody quite gets that right, because they’re just handing out cash, you know, sign on the dotted line. Here you go.

Good Intentions Gone Bad

It it all started, really, if you go back to the 1960s. And this is becoming a common thread when you think about all the efforts that were made in the 60s to try and make the world a better place….

I don’t doubt that that’s exactly what they were trying to do. Right. Very good intentions, but something got a little messed up along the way. And it’s in part because the law of unintended consequences.

Look, in the 1960s, you had Johnson in power and there was a desire to make sure that everybody could get access to an education. Right. Not just wealthy white kids, but middle class Americans, minorities. This was this was an important step. And they thought to themselves, like, how do we make sure that this happens? How do you make sure that everybody has access to an education because an education is a good thing, right? That’s going to improve our overall society.

You know, at the turn of the century, only 10 percent of people in America had a college education, just 10 percent. And so by the 60s, that had already changed dramatically. But they wanted to keep encouraging more and more people to get that diploma. So in order to do that, they created a system that enabled everybody to borrow money.

So good idea, right? I mean, you think, ‘hey, you know, anybody should be able to go to school. Anybody should be able to take out a loan,’ but nobody’s going to lend to an 18 year old kid or a kid with no credit history. So banks don’t want to lend to them. And then it becomes sort of the government’s responsibility (or they believed) to make sure that those kids got access to capital.

President Johnson and Congress, they passed the 1965 Higher Education Act. And the whole goal is to make sure that more people are going to school. And so they’re effectively having the taxpayer out there guaranteeing student loans made by the banks. So they’re shifting all the risk to taxpayers. And so the banks now are like, ‘well, you know, sure, I’ll make that loan because if the kid defaults, well, then the taxpayer will pay the bill.’

So all of a sudden, like kids have blank checks, sort of it’s it’s like somebody saying, ‘hey, here’s 20 million bucks, go out and buy a house, whatever house you want.’ Right? It’s 20 million bucks free money! So you think that’s going to have an effect on housing prices? Yeah, you better believe it would! Housing prices would go up because you’re creating inflation. You’re flooding the marketplace with all this cash that people have now to go buy fancy homes. So I understand the intentions. Again, they were quite good.

But the way this played out actually put kids more and more at a disadvantage because schools are out there willing to take every last nickel. And, suddenly the basic laws of supply and demand don’t really apply the way they should because this is a messed up artificial marketplace.

And schools want the money, the governments there at the money. So they relax their admissions standards and they let people in because they can get the aid money and then you have kids that maybe shouldn’t really be at college in college. I mean, we’ve come to accept this idea that everybody’s going to go to college like everybody does not need to go to college. Again, you can be very well-educated on your own. And frankly, there’s an opportunity cost associated with college. It’s four years of your life and a heck of a lot of debt. Wouldn’t it be better if we encouraged people to have a lot of different options? I mean, I have known some pretty darn wealthy electricians and plumbers. That is a very good business to be in, but society kind of looks their nose down on these jobs, which is wrong. There’s this this brainwashing that you have to go and get a four year degree of four year degree is great. I’m not knocking it, but simultaneously, I don’t want us to lose sight of the reality that we need a lot of different people that can do a lot of different things. And you can be successful in many, many different fields and you don’t have to go to college.

But this whole complex, this whole education government complex has convinced you of that. That you ‘need’ college. And it’s sad because these schools, they’re there, hands out, ready to take these kids’ loan money and they don’t care whether the kids graduate!

I mean, up until recently, you actually couldn’t even get this data on graduation rates. It wasn’t even available until 2019 as to whether or not people were actually graduating from the school. That’s kind of pathetic, right? We’re just giving money out indiscriminately and we’re not even checking to make sure that these these colleges are graduating their students? We’re not checking to see how many students are defaulting on the loans?

We just didn’t bother because it’s typical big government and schools don’t care. It’s the students’ problem which then becomes the taxpayers’ problem, which, of course, is a societal problem.

Student Loan Debt Crisis Similar To Subprime Housing Crisis

There’s actually a tremendous similarity with what happened in 2008 with subprime loans. Congress wanted to make sure everybody could get a loan. And so they put mechanisms in place to make sure that everybody could get a loan. It was member of the NINA loans, no income, no asset loans.

And so all of a sudden there was this free money out there, drove up real estate prices. People that, you know, maybe couldn’t afford these homes were buying these homes. Nobody cared until everything nearly collapsed.

We don’t have nearly as much student debt right now… it’s nearly two trillion, but the the housing market was more like 12 trillion in subprime debt. So, a very big difference, but nonetheless, a very similar analogy could be drawn.

So the government’s out there making all these loans to kids. And, you know, hey, I like that we have this spirit of anybody can go to college and money is not going to stand in the way. But this is not the right approach.

There is a way to ensure that everybody can get access to an education. I’m going to get to that in just a bit. But this is certainly not it.

But  back to what was going on here. So in the 1960s, the whole idea is, ‘OK, we’re going to open this up. Everybody’s going to be able to get an education.’

And then, the Obama administration actually made it even worse, because around 2010, he really opened the spigot. He was like, OK, we want to make sure that people aren’t really decimated by this, you know, loan thing. So we’re going to, after 20 to 25 years, forgive part of the loan if it’s exceeding 10 percent monthly payments or exceeding 10 percent of your discretionary income. So now you really do have free money, right? After 20, 25 years, you get to erase part of your debt. You don’t have to pay it back at all. The government is just going to wipe it out. That created more inflation.

I mean, why not charge whatever you want if you’re the school?

And, sure enough, what did colleges do? They raise tuition even more. And now we have what I would call one big hot mess. Again, it wasn’t even available until just a couple years ago, whether or not kids were even graduating, whether or not they paid off their debt.

The Solution? Limit Tuition at Schools That Accept Govt Loans

I’ve thought about this a lot.

And my feeling is, yes, we need to still ensure that everybody has access to an education and they have to pay for it. And if it’s loans, it’s loans. But you know what? We’ve got to be more creative about it and, in that creative process, we should be looking at putting locks on tuition increases.

If colleges are going to be able to access all this money, then we got to say, guess what, guys? You cannot raise your tuition X percentage points above inflation. You know, if inflation is say, and I’m going to be generous here because it was five point something percent recently, five point four percent, let’s say it’s four percent, then tuition can only go up by five percent or six percent. You say, you know, one, two points above inflation and that’s it. You can’t go up 1375 percent. Right. I mean, this is insane.

We need some kind of system of checks and balances. And it’s mind boggling how you had some really smart people there that were trying to figure all this out in the 60s.  With Johnson and then throughout numerous administrations and even the Obama team, they’re trying to fix it, but they don’t fix it. They just keep making it worse. So here’s what you need to do, OK? This is the Trish Regan solution. You say, ‘OK, schools, you know what? We’re going to continue lending this money to American students. But here’s the deal. If you want as a school access to those students and access to that money, then guess what? You cannot raise your tuition more than inflation.’

We need these checks and balances. Otherwise, it’s devastating. Young people are graduating from college trying to build lives for themselves, and yet they can’t get out from the debt that they’ve they’ve amassed while in school. And it’s all our own doing. So let’s think about this with clear heads. Let’s recognize education for what it is. Let’s recognize that not everybody needs to go to four years of school. But if you want to go, you go, you study, you get a good job. And hopefully our government is policing this so that your tuition bills are not so insane. Someone’s going to get a handle on it. Otherwise, you know what? We will run the risk of another credit crisis. We’re at nearly two trillion now. Again, subprime was 12 trillion. All it’s going to take is a few more years of this and we are going to be in a real giant mess. So listen to what I’m saying. We need to start putting pressure on lawmakers to see this change. And the answer is not Elizabeth Warren’s free college. No, no, no, no, no. The answer is making sure that these tuitions are kept in check. Thank you for listening. Make sure you go to Trish Intel dot com, sign up for my newsletter and I will be back with you again tomorrow.