Typewriters may have stopped rolling off the production line, but their mechanical chatter and precision components lend them an enduring enchantment “It was a dark and stormy night.” The image of Snoopy sitting on top of his kennel rattling out the opening of his latest bestseller on a typewriter is as familiar as it is cherished. It is also a delightful send-up of the archetypal would-be author at work. Endearing, yes, but dated. Today, we learn that possibly the world’s very last typewriter factory – in Mumbai – has closed. Although its typewriting business has been just one small portion of the Godrej & Boyce manufacturing empire, founded in 1897 by the lawyer and inventor Ardeshir Godrej, a spokesman has told the global media that “currently the company has just 500 machines left”. Hurry while stocks last, as the imposing Prima model dating from the 1950s, now selling for about £160 , is sure to become a sought-after classic of pre-digital design. Or is it? There are now millions of people worldwide tapping away on keyboards who have never sat in front of a typewriter, much less written with one. The machine that gave us the modern open-plan office, with its rows of clerks and typists, can seem as outmoded as Polaroid and Instamatic cameras , Super 8 film, Kodachrome , hand looms and horse-drawn ploughs. And yet, although it is true that desktop and laptop computers and any number of handheld devices have effectively replaced the typewriter in everyday use, there are many people who prefer these miniature desktop printing presses. Typewriters still hold a certain romance: something to do with the Mad Men charm of whisky bottles, green eyeshades , low office lighting, the mechanical chatter of keyboards, the ting of bells and the saw-like rasp and slap of carriages as they are whipped back hastily for the next line of copy to be churned out. And, alongside the image of Charles Schulz’s Snoopy, there are haunting scenes from so many films in which the typewriter has played a powerful role. Think of Schindler’s List , the list itself being typed up. Or Jack Nicholson sitting alone in an out-of-season mountain resort hotel typing that one line over and over – “All work and no play makes Jack a dull boy” – before he goes stark staring mad and takes an axe to his family in Stanley Kubrick’s The Shining . Such connotations aside, the typewriter – refined over more than a century – remains a satisfying machine to anyone who likes to watch precision components at work. I still use my Olivetti Lettera 22 – an elegantly sculpted design by Marcello Nizzoli, dating from 1950 – for personal letters rather than for journalism and books. Cormac McCarthy has written all of his novels to date on this trusty companion . It is small, more tactile and a lot more fun to operate than the wireless iPad, although of course the latter can do so much more than type. It’s a bit like comparing the cockpit of a Tiger Moth biplane to that of the latest Airbus. A physicist friend of mine is currently wiring up another Lettera 22 so that I can plug it into a desktop and enjoy the benefits of both typing the old way and doing at least some of the things a modern computer can. This kind of steampunk word processor has become a popular contraption the world over. And why not? Typewriter design never did stand still. Those who say that typewriters were too much bother, with all those inky ribbons, jammed keys and hours spent sploshing with correcting fluid, have been strangers to advanced machines such as the IBM Selectric , which first appeared in 1961. With its rapid-fire golf ball typing head and invaluable backspace correcting key, here was a marvel of modern office design, however cumbersome. Even my slimline Olivetti Lettera 22 (weighing in at 4kg) feels very heavy indeed compared to an Apple MacBook Air (335g). New technologies naturally push old ones aside for any number of reasons – from practicality to the promise of new functions and efficiencies. And yet, just as photographers still find uses for Polaroid cameras, musicians retain a fondness for vinyl , and steam locomotives attract crowds of fans when they appear on main lines billowing between the latest electric trains, the typewriter will rattle through many a dark and stormy night yet.
Continue reading …
Typewriters may have stopped rolling off the production line, but their mechanical chatter and precision components lend them an enduring enchantment “It was a dark and stormy night.” The image of Snoopy sitting on top of his kennel rattling out the opening of his latest bestseller on a typewriter is as familiar as it is cherished. It is also a delightful send-up of the archetypal would-be author at work. Endearing, yes, but dated. Today, we learn that possibly the world’s very last typewriter factory – in Mumbai – has closed. Although its typewriting business has been just one small portion of the Godrej & Boyce manufacturing empire, founded in 1897 by the lawyer and inventor Ardeshir Godrej, a spokesman has told the global media that “currently the company has just 500 machines left”. Hurry while stocks last, as the imposing Prima model dating from the 1950s, now selling for about £160 , is sure to become a sought-after classic of pre-digital design. Or is it? There are now millions of people worldwide tapping away on keyboards who have never sat in front of a typewriter, much less written with one. The machine that gave us the modern open-plan office, with its rows of clerks and typists, can seem as outmoded as Polaroid and Instamatic cameras , Super 8 film, Kodachrome , hand looms and horse-drawn ploughs. And yet, although it is true that desktop and laptop computers and any number of handheld devices have effectively replaced the typewriter in everyday use, there are many people who prefer these miniature desktop printing presses. Typewriters still hold a certain romance: something to do with the Mad Men charm of whisky bottles, green eyeshades , low office lighting, the mechanical chatter of keyboards, the ting of bells and the saw-like rasp and slap of carriages as they are whipped back hastily for the next line of copy to be churned out. And, alongside the image of Charles Schulz’s Snoopy, there are haunting scenes from so many films in which the typewriter has played a powerful role. Think of Schindler’s List , the list itself being typed up. Or Jack Nicholson sitting alone in an out-of-season mountain resort hotel typing that one line over and over – “All work and no play makes Jack a dull boy” – before he goes stark staring mad and takes an axe to his family in Stanley Kubrick’s The Shining . Such connotations aside, the typewriter – refined over more than a century – remains a satisfying machine to anyone who likes to watch precision components at work. I still use my Olivetti Lettera 22 – an elegantly sculpted design by Marcello Nizzoli, dating from 1950 – for personal letters rather than for journalism and books. Cormac McCarthy has written all of his novels to date on this trusty companion . It is small, more tactile and a lot more fun to operate than the wireless iPad, although of course the latter can do so much more than type. It’s a bit like comparing the cockpit of a Tiger Moth biplane to that of the latest Airbus. A physicist friend of mine is currently wiring up another Lettera 22 so that I can plug it into a desktop and enjoy the benefits of both typing the old way and doing at least some of the things a modern computer can. This kind of steampunk word processor has become a popular contraption the world over. And why not? Typewriter design never did stand still. Those who say that typewriters were too much bother, with all those inky ribbons, jammed keys and hours spent sploshing with correcting fluid, have been strangers to advanced machines such as the IBM Selectric , which first appeared in 1961. With its rapid-fire golf ball typing head and invaluable backspace correcting key, here was a marvel of modern office design, however cumbersome. Even my slimline Olivetti Lettera 22 (weighing in at 4kg) feels very heavy indeed compared to an Apple MacBook Air (335g). New technologies naturally push old ones aside for any number of reasons – from practicality to the promise of new functions and efficiencies. And yet, just as photographers still find uses for Polaroid cameras, musicians retain a fondness for vinyl , and steam locomotives attract crowds of fans when they appear on main lines billowing between the latest electric trains, the typewriter will rattle through many a dark and stormy night yet.
Continue reading …
Grandson given valuable vase in exchange for carrying gardening work An urn that auctioneers used as a doorstop at their showroom before they sold it for a few pounds has been identified as a rare relic worth up to £15,000. Matthew Collinson, from Bradford, who inherited the urn in exchange for some gardening work, has found out that it is Chinese, dates from the 13th or 14th century, and is worth up to £15,000. In the early 1970s, Collinson’s grandfather, Hugh Lambert, a geologist and goldminer, spotted the urn at the sale room in Bradford. He bought it for a couple of pounds and later gave it to his grandson for helping him with the gardening. Collinson, 31, who works in a secondhand shop in the city, said: “He went to an auction house to buy a painting, I think, and after the sale he spotted the urn [which] was being used as a doorstop. It just caught his eye. He didn’t know what it was. He asked if he could buy it, and got it for just a couple of pounds and always kept it at his home. “A few years ago, he gave the urn to me for helping him with his gardening. I didn’t want paying, but he said I could have the urn, which I moved into my own house, when I got one. I was absolutely stunned when I was told that it was nearly 1,000 years old. I am going to sell it, and I think we will have a big family holiday.” China Steven Morris guardian.co.uk
Continue reading …Grandson given valuable vase in exchange for carrying gardening work An urn that auctioneers used as a doorstop at their showroom before they sold it for a few pounds has been identified as a rare relic worth up to £15,000. Matthew Collinson, from Bradford, who inherited the urn in exchange for some gardening work, has found out that it is Chinese, dates from the 13th or 14th century, and is worth up to £15,000. In the early 1970s, Collinson’s grandfather, Hugh Lambert, a geologist and goldminer, spotted the urn at the sale room in Bradford. He bought it for a couple of pounds and later gave it to his grandson for helping him with the gardening. Collinson, 31, who works in a secondhand shop in the city, said: “He went to an auction house to buy a painting, I think, and after the sale he spotted the urn [which] was being used as a doorstop. It just caught his eye. He didn’t know what it was. He asked if he could buy it, and got it for just a couple of pounds and always kept it at his home. “A few years ago, he gave the urn to me for helping him with his gardening. I didn’t want paying, but he said I could have the urn, which I moved into my own house, when I got one. I was absolutely stunned when I was told that it was nearly 1,000 years old. I am going to sell it, and I think we will have a big family holiday.” China Steven Morris guardian.co.uk
Continue reading …Grandson given valuable vase in exchange for carrying gardening work An urn that auctioneers used as a doorstop at their showroom before they sold it for a few pounds has been identified as a rare relic worth up to £15,000. Matthew Collinson, from Bradford, who inherited the urn in exchange for some gardening work, has found out that it is Chinese, dates from the 13th or 14th century, and is worth up to £15,000. In the early 1970s, Collinson’s grandfather, Hugh Lambert, a geologist and goldminer, spotted the urn at the sale room in Bradford. He bought it for a couple of pounds and later gave it to his grandson for helping him with the gardening. Collinson, 31, who works in a secondhand shop in the city, said: “He went to an auction house to buy a painting, I think, and after the sale he spotted the urn [which] was being used as a doorstop. It just caught his eye. He didn’t know what it was. He asked if he could buy it, and got it for just a couple of pounds and always kept it at his home. “A few years ago, he gave the urn to me for helping him with his gardening. I didn’t want paying, but he said I could have the urn, which I moved into my own house, when I got one. I was absolutely stunned when I was told that it was nearly 1,000 years old. I am going to sell it, and I think we will have a big family holiday.” China Steven Morris guardian.co.uk
Continue reading …Grandson given valuable vase in exchange for carrying gardening work An urn that auctioneers used as a doorstop at their showroom before they sold it for a few pounds has been identified as a rare relic worth up to £15,000. Matthew Collinson, from Bradford, who inherited the urn in exchange for some gardening work, has found out that it is Chinese, dates from the 13th or 14th century, and is worth up to £15,000. In the early 1970s, Collinson’s grandfather, Hugh Lambert, a geologist and goldminer, spotted the urn at the sale room in Bradford. He bought it for a couple of pounds and later gave it to his grandson for helping him with the gardening. Collinson, 31, who works in a secondhand shop in the city, said: “He went to an auction house to buy a painting, I think, and after the sale he spotted the urn [which] was being used as a doorstop. It just caught his eye. He didn’t know what it was. He asked if he could buy it, and got it for just a couple of pounds and always kept it at his home. “A few years ago, he gave the urn to me for helping him with his gardening. I didn’t want paying, but he said I could have the urn, which I moved into my own house, when I got one. I was absolutely stunned when I was told that it was nearly 1,000 years old. I am going to sell it, and I think we will have a big family holiday.” China Steven Morris guardian.co.uk
Continue reading …Grandson given valuable vase in exchange for carrying gardening work An urn that auctioneers used as a doorstop at their showroom before they sold it for a few pounds has been identified as a rare relic worth up to £15,000. Matthew Collinson, from Bradford, who inherited the urn in exchange for some gardening work, has found out that it is Chinese, dates from the 13th or 14th century, and is worth up to £15,000. In the early 1970s, Collinson’s grandfather, Hugh Lambert, a geologist and goldminer, spotted the urn at the sale room in Bradford. He bought it for a couple of pounds and later gave it to his grandson for helping him with the gardening. Collinson, 31, who works in a secondhand shop in the city, said: “He went to an auction house to buy a painting, I think, and after the sale he spotted the urn [which] was being used as a doorstop. It just caught his eye. He didn’t know what it was. He asked if he could buy it, and got it for just a couple of pounds and always kept it at his home. “A few years ago, he gave the urn to me for helping him with his gardening. I didn’t want paying, but he said I could have the urn, which I moved into my own house, when I got one. I was absolutely stunned when I was told that it was nearly 1,000 years old. I am going to sell it, and I think we will have a big family holiday.” China Steven Morris guardian.co.uk
Continue reading …Why Is College So Expensive? Might Have Something To Do With The Huge Securities Bubble That’s Backed By Feds
April 26, 2011 No Comment“What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?” Why, I’m glad you asked that question! Turns out that education loan-backed derivatives are yet another investment bubble that helps drive up the cost of education — and We The People are already on the hook for reimbursement when they crash: Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS won’t end any time soon. What analysts at Barclay’s Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it. If this sounds familiar, it probably should, and the parallels with the pre-crisis housing market don’t end there. The most predatory and cynical subprime lending has its analogue in for-profit colleges. Inequalities in US primary and secondary education previously meant that a large slice of the working class never got a chance to take on the large debts associated with four-year degree programs . For-profits like The University of Phoenix or Kaplan are the market’s answer to this opportunity. While the debt numbers for four-year programs look risky, for-profits two-year schools have apocalyptic figures: 96 percent of their students take on debt and within fifteen years 40 percent are in default. A Government Accountability Office sting operation in which agents posed as applicants found all fifteen approached institutions engaged in deceptive practices and four in straight-up fraud. For-profits were found to have paid their admissions officers on commission, falsely claimed accreditation, underrepresented costs, and encouraged applicants to lie on federal financial aid forms. Far from the bargain they portray themselves to be on daytime television, for-profit degree programs were found to be more expensive than the nonprofit alternatives nearly every time. These degrees are a tough sell, but for-profits sell tough. They spend an unseemly amount of money on advertising, a fact that probably hasn’t escaped the reader’s notice. But despite the attention the for-profit sector has attracted (including congressional hearings), as in the housing crisis it’s hard to see where the bad apples stop and the barrel begins. For-profits have quickly tied themselves to traditional powers in education, politics, and media. Just a few examples: Richard C. Blum, University of California regent (and husband of California Sen. Dianne Feinstein), is also through his investment firm the majority stakeholder in two of the largest for-profit colleges. The Washington Post Co. owns Kaplan Higher Education, forcing the company’s flagship paper to print a steady stream of embarrassing parenthetical disclosures in articles on the subject of for-profits. Industry leader University of Phoenix has even developed an extensive partnership with GOOD magazine, sponsoring an education editor. Thanks to these connections, billions more in advertising, and nearly $9 million in combined lobbying and campaign contributions in 2010 alone, for-profits have become the fastest growing sector in American higher education. If the comparative model is valid, then the lessons of the housing crash nag: What happens when the kids can’t pay? The federal government only uses data on students who default within the first two years of repayment, but its numbers have the default rate increasing every year since 2005. Analyst accounts have only 40 percent of the total outstanding debt in active repayment, the majority being either in deferment or default. Next year, the Department of Education will calculate default rates based on numbers three years after the beginning of repayment rather than two. The projected results are staggering: recorded defaults for the class of 2008 will nearly double, from 7 to 13.8 percent. With fewer and fewer students having the income necessary to pay back loans (except through the use of more consumer debt), a massive default looks closer to inevitable. Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. The federal disbursement rate is tied to the guaranty agency’s fiscal year default rate: for loans issued after October 1998, if the rate exceeds 5 percent, the disbursement drops to 85 percent of principal and interest accrued; if the rate exceeds 9 percent, the disbursement falls to 75 percent. But the guaranty agency rates are computed in such a way that they do not reflect the rate of default as students experience it; of all the guaranty agencies applying for federal reimbursement last year, none hit the 5 percent trigger rate. With all of these protections in place, SLABS are a better investment than most housing-backed securities ever were. The advantage of a preemptive bailout is that it can make itself unnecessary: if investors know they’re insulated from risk, there’s less reason for them to get skittish if the securities dip, and a much lower chance of a speculative collapse. The worst-case scenario seems to involve the federal government paying for students to go to college, and aside from the enrichment of the parasitic private lenders and speculators, this might not look too bad if you believe in big government, free education, or even Keynesian fiscal stimulus. But until now, we have only examined one side of the exchange. When students agree to take out a loan, the fairness of the deal is premised on the value for the student of their borrowed dollars. If an 18-year-old takes out $200,000 in loans, he or she better be not only getting the full value, but investing it well too. In other words, it might all be a lot cheaper if we just paid for education outright.
Continue reading …Why Is College So Expensive? Might Have Something To Do With The Huge Securities Bubble That’s Backed By Feds
April 26, 2011 No Comment“What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?” Why, I’m glad you asked that question! Turns out that education loan-backed derivatives are yet another investment bubble that helps drive up the cost of education — and We The People are already on the hook for reimbursement when they crash: Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS won’t end any time soon. What analysts at Barclay’s Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it. If this sounds familiar, it probably should, and the parallels with the pre-crisis housing market don’t end there. The most predatory and cynical subprime lending has its analogue in for-profit colleges. Inequalities in US primary and secondary education previously meant that a large slice of the working class never got a chance to take on the large debts associated with four-year degree programs . For-profits like The University of Phoenix or Kaplan are the market’s answer to this opportunity. While the debt numbers for four-year programs look risky, for-profits two-year schools have apocalyptic figures: 96 percent of their students take on debt and within fifteen years 40 percent are in default. A Government Accountability Office sting operation in which agents posed as applicants found all fifteen approached institutions engaged in deceptive practices and four in straight-up fraud. For-profits were found to have paid their admissions officers on commission, falsely claimed accreditation, underrepresented costs, and encouraged applicants to lie on federal financial aid forms. Far from the bargain they portray themselves to be on daytime television, for-profit degree programs were found to be more expensive than the nonprofit alternatives nearly every time. These degrees are a tough sell, but for-profits sell tough. They spend an unseemly amount of money on advertising, a fact that probably hasn’t escaped the reader’s notice. But despite the attention the for-profit sector has attracted (including congressional hearings), as in the housing crisis it’s hard to see where the bad apples stop and the barrel begins. For-profits have quickly tied themselves to traditional powers in education, politics, and media. Just a few examples: Richard C. Blum, University of California regent (and husband of California Sen. Dianne Feinstein), is also through his investment firm the majority stakeholder in two of the largest for-profit colleges. The Washington Post Co. owns Kaplan Higher Education, forcing the company’s flagship paper to print a steady stream of embarrassing parenthetical disclosures in articles on the subject of for-profits. Industry leader University of Phoenix has even developed an extensive partnership with GOOD magazine, sponsoring an education editor. Thanks to these connections, billions more in advertising, and nearly $9 million in combined lobbying and campaign contributions in 2010 alone, for-profits have become the fastest growing sector in American higher education. If the comparative model is valid, then the lessons of the housing crash nag: What happens when the kids can’t pay? The federal government only uses data on students who default within the first two years of repayment, but its numbers have the default rate increasing every year since 2005. Analyst accounts have only 40 percent of the total outstanding debt in active repayment, the majority being either in deferment or default. Next year, the Department of Education will calculate default rates based on numbers three years after the beginning of repayment rather than two. The projected results are staggering: recorded defaults for the class of 2008 will nearly double, from 7 to 13.8 percent. With fewer and fewer students having the income necessary to pay back loans (except through the use of more consumer debt), a massive default looks closer to inevitable. Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. The federal disbursement rate is tied to the guaranty agency’s fiscal year default rate: for loans issued after October 1998, if the rate exceeds 5 percent, the disbursement drops to 85 percent of principal and interest accrued; if the rate exceeds 9 percent, the disbursement falls to 75 percent. But the guaranty agency rates are computed in such a way that they do not reflect the rate of default as students experience it; of all the guaranty agencies applying for federal reimbursement last year, none hit the 5 percent trigger rate. With all of these protections in place, SLABS are a better investment than most housing-backed securities ever were. The advantage of a preemptive bailout is that it can make itself unnecessary: if investors know they’re insulated from risk, there’s less reason for them to get skittish if the securities dip, and a much lower chance of a speculative collapse. The worst-case scenario seems to involve the federal government paying for students to go to college, and aside from the enrichment of the parasitic private lenders and speculators, this might not look too bad if you believe in big government, free education, or even Keynesian fiscal stimulus. But until now, we have only examined one side of the exchange. When students agree to take out a loan, the fairness of the deal is premised on the value for the student of their borrowed dollars. If an 18-year-old takes out $200,000 in loans, he or she better be not only getting the full value, but investing it well too. In other words, it might all be a lot cheaper if we just paid for education outright.
Continue reading …Why Is College So Expensive? Might Have Something To Do With The Huge Securities Bubble That’s Backed By Feds
April 26, 2011 No Comment“What kind of incentives motivate lenders to continue awarding six-figure sums to teenagers facing both the worst youth unemployment rate in decades and an increasingly competitive global workforce?” Why, I’m glad you asked that question! Turns out that education loan-backed derivatives are yet another investment bubble that helps drive up the cost of education — and We The People are already on the hook for reimbursement when they crash: Even with the Treasury no longer acting as co-signer on private loans, the flow of SLABS won’t end any time soon. What analysts at Barclay’s Capital wrote of the securities in 2006 still rings true: “For this sector, we expect sustainable growth in new issuance volume as the growth in education costs continues to outpace increases in family incomes, grants, and federal loans.” The loans and costs are caught in the kind of dangerous loop that occurs when lending becomes both profitable and seemingly risk-free: high and increasing college costs mean students need to take out more loans, more loans mean more securities lenders can package and sell, more selling means lenders can offer more loans with the capital they raise, which means colleges can continue to raise costs. The result is over $800 billion in outstanding student debt, over 30 percent of it securitized, and the federal government directly or indirectly on the hook for almost all of it. If this sounds familiar, it probably should, and the parallels with the pre-crisis housing market don’t end there. The most predatory and cynical subprime lending has its analogue in for-profit colleges. Inequalities in US primary and secondary education previously meant that a large slice of the working class never got a chance to take on the large debts associated with four-year degree programs . For-profits like The University of Phoenix or Kaplan are the market’s answer to this opportunity. While the debt numbers for four-year programs look risky, for-profits two-year schools have apocalyptic figures: 96 percent of their students take on debt and within fifteen years 40 percent are in default. A Government Accountability Office sting operation in which agents posed as applicants found all fifteen approached institutions engaged in deceptive practices and four in straight-up fraud. For-profits were found to have paid their admissions officers on commission, falsely claimed accreditation, underrepresented costs, and encouraged applicants to lie on federal financial aid forms. Far from the bargain they portray themselves to be on daytime television, for-profit degree programs were found to be more expensive than the nonprofit alternatives nearly every time. These degrees are a tough sell, but for-profits sell tough. They spend an unseemly amount of money on advertising, a fact that probably hasn’t escaped the reader’s notice. But despite the attention the for-profit sector has attracted (including congressional hearings), as in the housing crisis it’s hard to see where the bad apples stop and the barrel begins. For-profits have quickly tied themselves to traditional powers in education, politics, and media. Just a few examples: Richard C. Blum, University of California regent (and husband of California Sen. Dianne Feinstein), is also through his investment firm the majority stakeholder in two of the largest for-profit colleges. The Washington Post Co. owns Kaplan Higher Education, forcing the company’s flagship paper to print a steady stream of embarrassing parenthetical disclosures in articles on the subject of for-profits. Industry leader University of Phoenix has even developed an extensive partnership with GOOD magazine, sponsoring an education editor. Thanks to these connections, billions more in advertising, and nearly $9 million in combined lobbying and campaign contributions in 2010 alone, for-profits have become the fastest growing sector in American higher education. If the comparative model is valid, then the lessons of the housing crash nag: What happens when the kids can’t pay? The federal government only uses data on students who default within the first two years of repayment, but its numbers have the default rate increasing every year since 2005. Analyst accounts have only 40 percent of the total outstanding debt in active repayment, the majority being either in deferment or default. Next year, the Department of Education will calculate default rates based on numbers three years after the beginning of repayment rather than two. The projected results are staggering: recorded defaults for the class of 2008 will nearly double, from 7 to 13.8 percent. With fewer and fewer students having the income necessary to pay back loans (except through the use of more consumer debt), a massive default looks closer to inevitable. Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. The federal disbursement rate is tied to the guaranty agency’s fiscal year default rate: for loans issued after October 1998, if the rate exceeds 5 percent, the disbursement drops to 85 percent of principal and interest accrued; if the rate exceeds 9 percent, the disbursement falls to 75 percent. But the guaranty agency rates are computed in such a way that they do not reflect the rate of default as students experience it; of all the guaranty agencies applying for federal reimbursement last year, none hit the 5 percent trigger rate. With all of these protections in place, SLABS are a better investment than most housing-backed securities ever were. The advantage of a preemptive bailout is that it can make itself unnecessary: if investors know they’re insulated from risk, there’s less reason for them to get skittish if the securities dip, and a much lower chance of a speculative collapse. The worst-case scenario seems to involve the federal government paying for students to go to college, and aside from the enrichment of the parasitic private lenders and speculators, this might not look too bad if you believe in big government, free education, or even Keynesian fiscal stimulus. But until now, we have only examined one side of the exchange. When students agree to take out a loan, the fairness of the deal is premised on the value for the student of their borrowed dollars. If an 18-year-old takes out $200,000 in loans, he or she better be not only getting the full value, but investing it well too. In other words, it might all be a lot cheaper if we just paid for education outright.
Continue reading …