Prizes for All

Healthcare and education parallel each other in so many ways.  The No Student Left Behind fad caused almost as many problems as our metrics crap did.  Both didn’t work.  Both were unproven.  The other parallel is the ludicrous cost. We all know that insurance and hospital bills shouldn’t have gone up as much as it did.  I won’t even discuss that in detail here. What about higher education, or colleges, to be more specific?  Other than insurance it is the biggest scam and ripoff there is in this country.  In this WSJ article they explain how nearly half of all undergraduates receive scholarships. In other words, it’s just a ruse to make the kids feel good:

David Strauss, a principal at higher-ed consulting firm Art & Science Group LLC, says schools are using a strategy well known to retailers: Shoppers generally prefer to buy a $60 shirt at a 50% discount than a shirt originally priced at $30.

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I remember when my middle child got into a nice private school in Massachusetts.  They gave him a scholarship but it was still too much.  I told him to email them and say we need more off or there was no chance he could go there.  Guess what? They emailed him and gave him another $10K off.  From an email?! What a scam. And he didn’t go there anyway.  How are they doing this?

“It’s become much more data-driven,” said James Day, vice president and managing director of financial aid optimization services at EAB Global Inc., a consulting firm in Washington, D.C. that works with more than 1,200 schools, including about 140 on financial-aid strategy.

Using econometric modeling, EAB knows that a $23,000 discount on a $50,000 sticker price has a 24% chance of luring a young woman with middle-of-the-road grades to a nearby private college in the Midwest. Bumping the scholarship up to $28,000 yields a 47% likelihood.

See how data can be used?  I’m gagging as I type this.

Why does this happen?  Because we have a new generation of kids that have been helicoptered and guarded.  They were told they are winners no matter what.  Everyone gets a trophy.  They don’t care much about cost because they are worth it.  They don’t care about debt because they think someone will bail them out.  Oh, and they have debt:

  • The average student loan debt for Class of 2016 graduates was $37,172, up six percent from the previous year.
  • Americans owe over $1.48 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt.
  • 44.2 million Americans with student loan debt
  • Student loan delinquency rate of 11.2% (90+ days delinquent or in default)
  • Average monthly student loan payment (for borrower aged 20 to 30 years): $351
  • Median monthly student loan payment (for borrower aged 20 to 30 years): $203
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Sure, they may have school debt but that shouldn’t stop them from having a good time, right? Wrong.  This came from a Fortune magazine:

  • It turns out, nearly 40% of Millennials have spent money they didn’t have and gone into debt to keep up with their peers, according to a recent Credit Karma survey.
  • Expenses range from experiences, like travel, parties and nightlife, music and sporting events and weddings, as well as food and alcohol, clothes, electronics, jewelry and cars.
  • And even if they’re not in serious trouble yet, 36% of respondents doubt they can keep up with their friends’ spending for another year without going into debt.

So where am I going with all this?  We have a generation of kids who feel deserving of the best and now they are drowning in debt due to it.  Yet, it still doesn’t stop them.  We have industries, like education and healthcare, who will gladly take advantage of them.  This means that:

  • My dream of a fully free market system where people shop for the best prices in healthcare may not work with this generation.
  • A fully-rationed single payer system would not work either because they could not handle anything less than the best of everything.  “What do you mean I have to wait for my CT scan?” “I want the best drug and you are not giving it to me”

In other words, I think we are in trouble.  I could be wrong but people don’t call me Nostradougus for nothing.  Or maybe I am just in a bad mood and needed to criticize someone this morning.

What do you all think?

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