Tuesday, May 15, 2012

It's The University Business Model Stupid, Not Interest Rates


It’s The University Business Model Stupid, Not Interest Rates

            The New York Times feature story on student loans (A Generation Hobblied by the Soaring Cost of College) was sheer idiocy – focusing on the capillaries (student loan interest rates) not the heart of higher education costs (personal financial ebola) that indentures students and or canabalizes or defers the work free retirement of their co signing or borrowing parents: the damn incompetent featherbedding arrogant inefficient effete normative pompous recklessness of the university business model based to tenure and collegiality rather than the  cost benefit ratio to the student and the learning delivered.
            And the Times and its douche bag writers (sorry Vince this was a political agenda in search of a story) accomplices to a political agenda as they know better. And yes, I’m maligning their motivation – which journalists practice daily – but are thin skinned when it is their ass.
            My assertion is illustrated by the numbers below:

Higher Education Personal Financial Ebola

            The example below assumes:
  • Private school 4 years – room board tuition books starting at $40,000 a year
  • Higher ed inflation of 9% versus the overall inflation of 3% (300%+ has been the higher education inflation cost historically)
  • Graduation in 4 years (when less than 25% overall graduate in 4 years)
  • Reinvestment rate in a 401K of differential @8% which is conservative given PERA uses 8.5% and Calpers 7.75%.
  • Without reinvestment the differential in higher education costs in $482,000 and with the difference reinvested $546,000 ($818,000-$272,000) is the cost per child that otherwise could go to the parents’ retirement for example

160,000@9%
new value
160000@3%
new value
inflation diff
'infl diff invest 8%
14400
174400
4800
164800
9600
35520
15696
190096
4944
169744
10752
36835
17109
207205
5092
174836
12016
38116
18648
225853
5245
180081
13403
39367
20327
246180
5402
185484
14924
40587
22156
268336
5565
191048
16592
41781
24150
292486
5731
196780
18419
42946
26324
318810
5903
202683
20420
44085
28693
347503
6080
208764
22612
45201
31275
378778
6263
215027
25012
46295
34090
412868
6451
221477
27639
47368
37158
450026
6644
228122
30514
48421
40502
490529
6844
234965
33659
49456
44148
534676
7049
242014
37099
50472
48121
582797
7260
249275
40860
51471
52452
635249
7478
256753
44974
52457
57172
692421
7703
264456
49470
53427
62318
754739
7934
272389
54384
54384
inf diff + reinvest




$818,189.00
infl diff
$482,349.98





            So while politicians are fiddling with student loan interest rates, unaccountable effectively un-terminable tenured holier than thou professors and their administrative enablers like former University of Colorado President and now Ohio State President Gordon Gee Whiz (On Your Wallets) making serfs out of indentured students and or delay or waylay parents work free retirements.
            It was Gordon Gee Whiz On Your Wallets, making reportedly high six figures (1) who said in the May 12, 2012 New York Times article A Generation Hobbled by the Soaring Cost of College “I readily admit it. I didn’t think a lot about costs. I do not think we have given significant thought to the impact of college costs on families.”
            Duh
           
(1)   In addition, Ohio State has spent at least $844,000 on the school president's travel since 2007, including more than $550,000 in the past two years that included two trips to China plus two other international trips to Iceland, Turkey, France and the United Kingdom, according to a report by the Dayton Daily News. And according to Wikipedia “Gee's base salary is $802,125, with a total compensation package of $1.6 million, making him the highest paid public university president in the United States”