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Are Colleges Just a Marketing Arm of the Banking Industry?

Or are the banks just a way for schools to keep sticking it to their students after they graduate?

The Consumer Finance Protection Board is looking at the cozy relationship between the banks and the schools now that its early leader, Elizabeth Warren, is safely back in her student-debt-padded womb at Harvard Law. Or so reports Chris Morran at Consumerist. 

I’m a bit skeptical that this is something really horrible, but let’s give it a whirl. The schools have a captive audience with a taste for gorging on debt. The banks need people with eyes bigger than stomachs because banks need to loan money. Why not bring the two together?

Is it fair for schools to market to their students? Should they take a cut? Should they take a cut of the debt payments the students will pay later?

If the schools think it’s okay to pile on non-dischargeable student debt, then what’s wrong with helping the students take on even more credit card debt which is often gentler because the bankruptcy court will let you off the hook?

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Related posts:

  1. Luxury goods manufacturers borrow marketing techniques from colleges
  2. Conflict of interest accusations rise for Elizabeth Warren’s push to tackle the credit industry.
  3. The size of the banks’ kick back to the colleges? $83m
  4. More lawsuits against colleges
  5. For-profit colleges make old-fashioned colleges look kind and gentle

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This entry was written by admin and posted on February 4, 2013 at 11:18 am and filed under Uncategorized. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.

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5 Comments so far (Add 1 more)

  1. Some for-profit colleges are owned by Investment banks/hedge fund/private equity groups.

    1. Monica Barber on February 4th, 2013 at 2:41 pm

  2. “Ohio colleges: Decade-long building boom erected on a mountain of debt” By Encarnacion Pyle in The Columbus Dispatch on Sunday February 3, 2013 at p. A1

    http://www.dispatch.com/content/stories/local/2013/02/03/a-decade-long-building-boom-erected-on-a-mountain-of-debt.html

    With interest rates low, most of Ohio’s colleges have gone on spending sprees to build the biggest and best academic buildings, dorms and recreation centers to attract better students.

    And if schools don’t find new resources to finance their “ever-increasing aspirations,” some higher-education experts warn, future generations of students will end up paying the price with even-higher tuition and room-and-board rates and special fees.

    It’s a national issue, but in Ohio, the total outstanding debt among the state’s 13 four-year public universities has nearly tripled over the past decade. In some cases, such as at Ohio State University, which has built the Cadillac of college recreational playgrounds and a grand student union, it has more than quadrupled.

    ***

    Of the state’s 13 public universities, Ohio State has the largest total debt load at nearly $2.5 billion — more than four times what it was in 2002. It is followed by the University of Cincinnati with $1.2 billion in debt, Kent State University with $499 million and Miami University at $444 million.

    ***

    Ohio State … issued an unprecedented $500 million in 100-year bonds in 2011 … giving it cash for its $1.1 billion Medical Center expansion and South Campus dorm project …

    ***

    [Geoffrey] Chatas [OSU’s chief financial officer] said he doesn’t think either the university’s $140 million recreation center, which has an unmatched 568,459 square feet, or the $118 million union are lavish, considering the 100,000 students, faculty members and staff members who use them every day. “The union is the ‘living room’ of campus,” he said. “How do you put a value on that?”

    2. Fat Man on February 4th, 2013 at 4:18 pm

  3. Sorry Wrong Name:

    “Ohio colleges: Decade-long building boom erected on a mountain of debt” By Encarnacion Pyle in The Columbus Dispatch on Sunday February 3, 2013 at p. A1

    http://www.dispatch.com/content/stories/local/2013/02/03/a-decade-long-building-boom-erected-on-a-mountain-of-debt.html

    With interest rates low, most of Ohio’s colleges have gone on spending sprees to build the biggest and best academic buildings, dorms and recreation centers to attract better students.

    And if schools don’t find new resources to finance their “ever-increasing aspirations,” some higher-education experts warn, future generations of students will end up paying the price with even-higher tuition and room-and-board rates and special fees.

    It’s a national issue, but in Ohio, the total outstanding debt among the state’s 13 four-year public universities has nearly tripled over the past decade. In some cases, such as at Ohio State University, which has built the Cadillac of college recreational playgrounds and a grand student union, it has more than quadrupled.

    ***

    Of the state’s 13 public universities, Ohio State has the largest total debt load at nearly $2.5 billion — more than four times what it was in 2002. It is followed by the University of Cincinnati with $1.2 billion in debt, Kent State University with $499 million and Miami University at $444 million.

    ***

    Ohio State … issued an unprecedented $500 million in 100-year bonds in 2011 … giving it cash for its $1.1 billion Medical Center expansion and South Campus dorm project …

    ***

    [Geoffrey] Chatas [OSU’s chief financial officer] said he doesn’t think either the university’s $140 million recreation center, which has an unmatched 568,459 square feet, or the $118 million union are lavish, considering the 100,000 students, faculty members and staff members who use them every day. “The union is the ‘living room’ of campus,” he said. “How do you put a value on that?”

    3. Walter Sobchak on February 4th, 2013 at 4:19 pm

  4. Size leads to more and better margin/leverage privileges. This is the real secret as to how big institutions regularly “outperform” the market; they are rigged to succeed by the Fed! Colleges are just really effective at bringing a lot of money to a single place, that can get a much nicer helicopter handout from Uncle Ben.

    The student debt racket is really just a fringe benefit. Think about that. That’s the importance and power of margin, the way the masters of the universe choose “winners” like themselves.

    4. Anonymous2 on February 4th, 2013 at 5:23 pm

  5. “now that its early leader, Elizabeth Warren, is safely back in her student-debt-padded womb at Harvard Law”

    That is Senator Warren to you, dude. She is now the senior U.S. senator from the Commonwealth of Massachusetts. She has more job security than a Harvard Prof.

    5. Walter Sobchak on February 5th, 2013 at 2:15 am