Market Inconsistencies (OR Where markets fear to tread)

Another story from Marketplace caught my attention. Apparently (and this really isn’t a surprise), banks are hesitant (at best) or unwilling (at worst) to offer student loans.

Nancy Marshall Genzer: Since the latest credit crunch, banks have been re-evaluating risk. The latest group to be hit by this are students at community colleges and technical schools.


Statistically, students at these schools are more likely to default.


You can get a student loan directly from the government, but those loans are limited — enough to pay the tuition at a community college, but not much else.

So, here we are, with an economy in the toilet, global competition for skilled work growing by the day, with Presidential candidates promising “green” jobs which will (I imagine) require a more skilled workforce. Yet, there doesn’t appear to be a path from here to there. We’ve relied on private banks to provide loans to students, trusting in the wonders of the free market, which has worked well, when the economy is doing OK, or at least, when credit was easy to obtain.

But now the credit market has imploded and taken the economy with it. Now, some out of work people who want to return to school to obtain newer/better/more applicable skills can’t, because they can’t get a loan. Or high school graduates hoping to prepare for career, or just get the degree everyone says they need to get a good job, can’t afford college, because some rich guys on Wall Street decided to play fast and loose with “collateralized debt obligations.”

If our society’s success is based on a continually growing economy, shouldn’t we be investing in the success of the future workers in that economy? Shouldn’t we be willing to pay to provide everyone access to quality education at all levels? Maybe post-secondary education will always require loans, but shouldn’t we be willing to protect the availability of those loans from market vagaries?

I do wonder, sometimes, if these sorts of free market failures will open our eyes a bit, and help us realize that, as Sen. Obama says “we’re all in this together.” And I hope that realization makes us more willing to embrace things like Universal Health Care and Universal Pre-K.

One Response to Market Inconsistencies (OR Where markets fear to tread)

  1. Claire says:

    On a related note, in my limited grad school experience, funding is minimal at many state institutions. To compound that, students with funding are only paid during the school year in many cases (TA/GA etc.) and have to scrabble to find a summer job along with how ever many zillions of other students. My experience is only in the Arts & Humanities, but from what I hear, this is true at both private and public institutions. I was thinking the other day about what amount I would need to borrow per month (and by extension, per year) in order to cover expenses were I a single grad student renting an apartment, paying for necessities and tuition. Multiply that number by 3-4 years (depending on coursework, availability of work, etc.) and it’s a frightening number. I’ve been paying my undergrad loans for 6 years now, and while I’ve made a dent, I haven’t come even close to half of the original amount borrowed. If I were to take additional loans for graduate school, I’d be somewhere between 45 and 55 before the loans were entirely paid off. What does that say about our culture that the more specialized training one wants to have, the longer one has to pay and potentially work well past retirement age in order to have “enough” when one does manage to retire?

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