Less Bang & More Debt For Your Tuition Buck

The article originally appeared on my blog, TheReflectionBank.com

I’ve been working on an education piece for quite some time now and I must admit that it has evolved into this sprawling monster that refuses to bend to my coherent will. However, the state of Florida announced its state-wide bar exam results this past week and it provides a case study that is too pointed to pass up.

The factors that have led to nearly $2 trillion in student loan debt are complex and merit the extensive consideration many have proposed and, hopefully, my future post will address as well. However, with all the proposals being presented this election season from presidential hopefuls, few if any have stressed the importance of financial accountability. The higher education system today not only permits but systematically encourages poor financial decisions on the part of students, predatory lending by financial institutions and value-disjointed pricing on behalf of the schools.

It only takes a glance at the retail-apocalypse over the last several years to understand how ruthless the American consumer is on pricing and seeking out value. Unfortunately, when it comes to education, we set aside that scrutiny and jump headfirst into the deep end of the cost and debt pool. All three parties in this transaction are equally at fault here and it is not dissimilar from the issues we witnessed with the housing crisis. The consumer is biting off more than they can chew, the banks are more than happy to lend them more than they can ever pay off and the sellers are eager to cash in on the free flowing debt. The most stunning aspect of this relationship when looking at the education system is how lax students are in demanding the most value for their money.  

Looking at the above memo I want to first recognize my alma mater’s law program. I remember being an undergrad at FIU in the early 2000’s when the law school was founded and to see the strides it has made in such a short time is beyond impressive. Kudos to the administrators, professors and students for making FIU Law the most successful law program in the state!

Where is the ROI?

I suspected that comparing these results with tuition rates wasn’t going to paint a pretty picture. Sadly, I was right. The internet is flooded with woe-is-me student loan debt stories; graduates complaining about the injustice of 100’s of thousands of dollars in student loan debt. I couldn’t help but wonder, “How did they get to those astronomical sums?” The average state school runs roughly $10,000 a year, so how does one rack up $200,000+? There are plenty of reasons for this but it all starts with tuition cost. Where did the scrutiny go? Why don’t students (and the government for that matter) hold schools accountable for their return on investment? Florida’s July bar exam passing rates are a perfect illustration. FIU, UF and FSU had the highest passing rates as well as some of the lowest tuition rates. How do schools at the bottom of that scale justify tuition rates up to 60% higher than their in-state competitors when almost half of their graduates can’t pass the bar? Why are banks offering loans to students of these schools, half of which may not even practice law? Most importantly, why are prospective law students paying a 60% premium for a law education that can’t even get them licensed? Would any of these individuals pay $35,000 for an SUV with the stipulation there is a 40% chance it won’t start?

There are a plethora of complicated answers to these questions and I didn’t intend to answer them here. I think the numbers above provide a glimpse into the problem we are facing and I wanted to highlight them (and how amazing FIU Law is!). In short, accountability is missing from this process and in the information age, the data is highly accessible, empowering students to make smart financial decisions about their education. Prospective students owe it to themselves to ensure they are getting the most knowledge for their buck and the government should hold schools and banks accountable when they charge and lend for programs that have no hope of preparing graduates to pay back their loans.