Ted Rall rightly goes contrarian on fed money for higher ed

He says (and he’s largely right) that both public and private colleges are awash in money as is.

The implied thought is that ramping up federal money for college, whether a full blown GI Bill for Iraq vets, lower interest and more availability on federally-guaranteed student loans, or bigger Pell Grants, is that universities will just take the money and run.

With Texas in the lead, but by no means alone, in at least partial deregulation of tuition costs, Rall’s right. Here, UT down in Austin would swallow that money and raise its fees another 5-10 percent.

That’s especially true of Virginia Sen. Jim Webb’s proposed new GI bill, which would pay 100 percent the cost of tuition at the most expensive public university in a vet’s home state. Unless Webb attached mandatory price caps, you can see what would happen next.

The “college CEOs,” as Rall calls university presidents, would do exactly that:

Since 1981, when President Reagan got rid of a financial aid system mostly based on grants (which don't have to be repaid), easy credit on student loans has made it possible for any student to borrow as much as he or she needs — or, to put it another way, however much a college decides to charge. It's simple supply and demand; with no downward pressure on tuition, the warlords of college have an overwhelming temptation to gouge.

And gouge they do.

No one seems to question the wisdom of lending tens of thousands of dollars at above-market compound interest rates to children whose employment history amounts to, at most, a year at Burger King. 17-year-old borrowers have no idea what they’re getting into; parents imagine (usually wrongly) that kids’ college degree will guarantee them high enough wages to pay it all off and then some.

In other words, Newt Gingrich’s GOP revolution came to rest not in Congress, but American academia, despite conservative myths and lies about “leftist universities.”

College CEOs who wanted their companies to survive would be forced to recognize the new market reality. They would streamline their operations and reduce wasteful spending so they could cut tuition and other expenses. As Harvard and other Ivy League schools have already begun to do, they’d dip into the hundreds of billions of dollars currently sitting idly and uselessly in endowment investment accounts. And tuition would drop.

Ideally, that’s what would happen if we cut off, rather than ripped wide open, the student loan spigot.

But, because too many Democratic as well as GOP politicians get way too much money from the amorphous “financial sector,” this ain’t too likely.

And, if you don’t believe me and Ted that college CEOs would and will act this way, we’ll sell you some swampland in the nearest college quad.