Mark Cuban Tackles America's Student Loan Bubble, Then Roots for It to Burst
In addition to sports team ownership and a sideline in media impresario-ness, Mark Cuban is quite the blogger: dishing out advice to the Occupy movement, fulminating about patent law, apologizing for some casual homophobia. And a few days ago, he aired his views on the small matter of student loan debt, which, he says, is quickly taking our country down in flames.
Mark Cuban's really sweating the education crisis.
Cuban writes that student loan debt dwarfs credit card and auto loans, and that the average amount of loan debt is growing every year. He's absolutely right. A recent NPR story broke it down with data from the Federal Reserve Bank of New York: Americans owe $867 billion in student debt, compared with $734 billion in auto loans and $704 billion in credit card debt.
What Cuban doesn't mention in his piece, though, is that this huge amount of loan debt isn't only due to individual students borrowing more money every year. NPR found that national loan debt is also growing so quickly because more students are going to college than ever before, and they need to borrow money to get there.
Still, Cuban has a good overall point here, one that an ever-increasing number of people are making: college students are having to take on massive amounts of debt, which is forked over very willingly by both private and public lendors. (And as a recent post on the Atlantic's website pointed out, some students, especially the ones who get seriously into debt, may not fully understand the agreements they're signing.)
Plenty of those people will simply never be able to pay back the money they owe. Some have simply stopped trying. As an extremely depressing New York Press cover story last year pointed out, 35 percent of student loans are delinquent, the lowest repayment rate the Department of Education has ever seen. (Disclosure: The author of that piece is a friend of mine, from back when we were busy incurring massive debt together during journalism school.)
Cuban argues, pretty reasonably, that having this many people this far underwater financially for essentially their entire working lives is very bad for those people, for the economy, and for the country as a whole.
"We freak out about the Trillions of dollars in debt our country faces. What about the TRILLION DOLLARS plus in debt college kids are facing?" he writes. ""The crush of college debt has taken an entire generation of graduates, current and future out of the economy. Which is exactly why the economy hasn't grown and won't grow beyond microscopic growth rates we have seen so far."
The economy would do a lot better if we forgave some of this student debt, for sure -- soon enough, student debt will also become a drag on the housing market, as Bloomberg points out, another drag it really doesn't need.
But then Cuban loses me with his argument that hey, aren't un-accredited schools a reasonable alternative for college students, if they're offering the same education for less money?
Prices for traditional higher education will skyrocket so high over the next several years that potential students will start to make their way to non accredited institutions.
While colleges and universities are building new buildings for the english , social sciences and business schools, new high end, un-accredited , BRANDED schools are popping up that will offer better educations for far, far less and create better job opportunities....The number of people being prepared for the work world in these educational environments is exploding.
Cuban seems to be referring mainly to Khan Academy, a stylish series of online teaching videos from a tech entrepreneur named Salman Khan, which Wired wrote about at length last year. And sure, online classrooms are a way for some students to learn some skills, but they're hardly a wholesale replacement for a B.A., and even less so for other advanced degrees. For some things -- like, say, a degree in counseling or teaching, or one of those licenses that lets you cut people open -- you really, really need to attend an accredited school.
Cuban also argues that the education system is heading for a "meltdown," which is pretty clear to everybody. But he says it's one that "can't happen fast enough."
"Like the real estate industry, prices will rise until the market revolts," he writes. "Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was." The whole thing, he says, will lead to a much-needed "destabilization" of the university system.
Maybe. But the market doesn't show any signs of "revolting" yet. Schools keep charging sky-high tuitions. Public and private lenders both continue to loan huge amounts of money to students, then turn around and attempt to recoup that money using companies who are very happy to employ strong-arm, borderline illegal tactics. All the while, states and the federal government alike keep cutting education funding. Nothing Cuban is proposing will actually fix the way we're approaching education in this country (and really? Is it Mark Cuban's job to fix education? Hasn't he saved enough beloved institutions this year?)
We're in an education crisis, to be sure. But unlike Cuban, we're not at all sure the final "meltdown" will be a good thing.