How Higher Education Became an Obscenely Profitable Racket That Enriches the Few at the Expense of the Many (Student Debt-Serfs)

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Top Tier Gear USA


Student loan lenders are skimming tens of billions in profits guaranteed by the taxpayers.

“Legal” rackets have two essential components: a public-relations “cover” that obscures the racket and the mechanism that extracts the wealth from the “marks.” The Higher Education Racket qualifies on both counts:

1. The PR cover is “you all need a college diploma, and we’re here to make that happen.” Yea for more education!

2. The extraction mechanism is student loans. Here’s a chart that shows what happened relatively recently: your federal government began guaranteeing obscene profits to student-loan lenders and debt-serfdom for tens of millions of “marks” i.e. students.

Gordon Long has done some outstanding work clarifying the purposefully obscure swamp of obscene profits reaped from student debt-serfs. Gordon and I explain how the racket works in How College Has Become A Racket! (45 min. video program).

The racket’s foul core is the cartel structure of higher education: if you want a college diploma, you must satisfy a cartel member–an accredited institution.

The problem, as I elaborate in my book The Nearly Free University and the Emerging Economy: The Revolution in Higher Education, accrediting the school gives no indication to employers if the student learned anything remotely useful, or indeed, anything at all.

Consider the study Academically Adrift: Limited Learning on College Campuses which concluded that American higher education is characterized by limited or no learning for a large proportion of students.”

While the majority of students learn little or nothing of value, the legions of overpaid administrators have expanded like rats on a verdant island (i.e. an island with unlimited money via student loans).

New Analysis Shows Problematic Boom In Higher Ed Administrators:

In all, from 1987 until 2011-12–the most recent academic year for which comparable figures are available—universities and colleges collectively added 517,636 administrators and professional employees, according to the analysis by the New England Center for Investigative Reporting.

“There’s just a mind-boggling amount of money per student that’s being spent on administration,” said Andrew Gillen, a senior researcher at the institutes. “It raises a question of priorities.”

The ratio of nonacademic employees to faculty has also doubled. There are now two nonacademic employees at public and two and a half at private universities and colleges for every one full-time, tenure-track member of the faculty.

The number of employees in central system offices has increased six-fold since 1987, and the number of administrators in them by a factor of more than 34.

Paying a bloated, overpaid-admin-heavy institution for the privilege of sitting through four years of lectures, online courses and a few labs no longer makes sense for the vast majority of students. What makes sense is dispensing with the entire bureaucracy of the cartel and costly campuses altogether, and designing directed apprenticeships which combine the best of online coursework with on-the-job training in workplaces.

The vast majority of student are better served by mastering the 8 essential skills required in the emerging economy–skills that students can acquire on their own, a process of accrediting yourself that I address in detail in Get a Job, Build a Real Career and Defy a Bewildering Economy.

Forgiving skyrocketing student debt won’t solve the real problem which is the soaring costs imposed by a cartel that is failing to prepare students for the economy of tomorrow.

As I explain in my books, the only real solution is accredit the student, not the school.

These charts illustrate the soaring costs and diminishing returns of a higher education diploma:

The yield (in earnings) on the increasingly unaffordable college degree is declining sharply:

While the higher-ed status quo is failing the students, it’s enriching itself immensely. Assistant deans of student loans and thousands of other administrators who we managed to do without a generation ago are raking in huge salaries and fat benefits/pensions.

Meanwhile, over in the financial racket that’s enabled functionaries to skim $200,000 a year for doing essentially nothing remotely related to students actually learning anything remotely applicable in the real-world economy, student loan lenders are skimming tens of billions in profits guaranteed by the taxpayers. Yes, tens of billions: $140 billion in pure guaranteed profit has been skimmed off the hapless student debt-serfs herded into the shearing machine known as higher education.

There is something Kafka-esque and Orwellian about calling this vast machine for reaping taxpayer-guaranteed obscene profits “higher education.”

I invite you to learn more about how our predatory, parasitic, neofeudal nightmare “higher education” system enriches the few at the expense of the many:

Of related interest:

Jobs data cannot prove that college is a “good investment”

Student Debt Grows Faster at Universities With Highest-Paid Leaders, Study Finds

Even the Most Educated Workers Have Declining Wages

Everything I’ve Written On Education Comes Down To Cultural Capital And Skills

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Contributed by Charles Hugh Smith of Of Two Minds.

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  • Simon says

    that is what happens when unqualified carrier teachers, unions and pandering politicians make the rules…

  • Howard Beale

    College today is such an absolute joke. These so called ‘educated’ people are nothing more than cheerleaders for fascism, communism and the destruction of the American way (or what’s left of it). Entitled and angry they are the future of our country and we wonder why we’re circling the drain.

  • Phil_Ossifer

    Smith heavily implies this in the article but doesn’t say it outright: the problem is government guarantees of student loans. When you, a lender, know that 1) you can’t lose money because Uncle Sap will indemnify you; and, 2) you are guaranteed a profit far above that available with most consumer loans…well, what incentive do you have to be careful about who you lend to? The schools know this, too, and have grossly inflated tuitions and ancillary fees, bloated up their administrations and expanded next-to-useless “mush” and “feelgood” courses (most of which contain the word “studies”) designed around SJW agendas. Abolish government student loan guarantees and higher education will fix itself almost overnight to the point that pretty soon a college degree will actually be worth something again.

  • anna miller

    Please inform young people these student loans are exempt from bankruptsy laws.
    Any unpaid loans continue to accrue obscene amounts of interest. Any inheritance of properties will incur a lien, and any unpaid loans will br subtracted from social security payment, if one reaches retirement age. This is true even if the student did not graduate. Learn a trade or skill the old fashioned way, apprentice with an elder.

  • Renee Ciccioni

    That’s good old greed and deregulated capitalism or code for allowed corruption.

  • Err Amerika

    There is no need whatsoever now for “higher” education institutions to exist.

    Everything can be taught, and tested online.

    Vocational outlets are the only thing necessary to provide students what they need to physically master their crafts.

    Why are these institutions still around?

    You guessed it: $$$$$$$$$$$$$$$$$

  • celticreeler

    At 11:20 he is saying that there is “no way out” for the student…the student loan debt is not bankruptcy-erased, wages can be garnished, tax refunds withheld. I hope he will expose this program that forgives some if not all of the debt for a student going into GOVERNMENT EMPLOYMENT.

    Aack! Isn’t that horrible?