8 Ways to Short the Higher Ed Industrial Complex
College Is Fiat AF
Payments for federal student loans are due again this month after three years of forbearance.
I’ve read a number of articles in which the authors have discussed what the default rate on these loans might be.
Nik Bhatia and Joe Consorti over at The Bitcoin Layer wrote a good piece entitled “45% of student loan borrowers expect to go delinquent” and my co-workers at Finder wrote an excellent piece entitled “$265 billion in student loan debt might not get paid” in which they discuss how 22% of borrowers say they won’t be able to make their upcoming student loan payment.
I first planned on discussing what these potential defaults might mean in the current macroeconomic environment, but I then realized how little interest I had in writing about this topic. I figured I’d probably come to the conclusion that it’s probably not a good thing for the economy nor for the debtors themselves that a certain percentage of borrowers won’t be able to make their payments. And then I’d probably get sad.
So, instead of restating what seems obvious and subsequently feeling down, I’d like to discuss some ways to help you avoid falling into the student loan debt trap.
But first, I’ll share why this is important to me, how/why student loan debt became such a thing and why student loan debt is so pernicious.
A story about your boy, Francisco
I was in a six-figure amount of student loan debt when I finished graduate school in 2013. Granted, I willingly attended a private institution, but, even if I’d gone to a public one, I still likely would have come out with about $70-75k in debt.
One way or another, I would have been in a situation in which I owed hundreds of dollars per month in interest alone on the debt — a situation that a notable amount of college graduates find themselves in here in the good ol’ US of A.
Now, I needed my master’s degree to teach in both K-12 and university settings, which I did for about 12 years. I’d applied to get my master’s in education paid for through programs like Teach for America, but never made the cut. (I’m assuming they didn’t like when I responded with a resounding “NO” when they asked me if I agreed that improving the education system in the US was the number one way we could reduce poverty here. I may have even chuckled a bit before I shared my thoughts on how much more important it is for the parents of students to have good earning opportunities and to be able to spend time with their children at night instead of working multiple jobs. Had I known how evil The Fed was back then, I probably would have launched into an hours-long oration on how ending The Fed would be the most effective way to reduce poverty in our country, but I wasn’t quite that woke yet. People who work at places like Teach for America like to believe they’re doing God’s work — white savior complex type shit — though, so when you tell them in so many words they aren’t necessarily, they don’t tend to like you very much. But I digress…)
Carrying student loan debt around was(/has been) painful. It was hard to know that I had to work a significant amount of hours every month just to stop my loans from growing. But I’ve learned from this experience that pain is a signal and that it can be a great teacher if we’re willing to learn from it.
So, learn from it I did. I decided to become student of money in efforts to figure out what I’d done so wrong financially and why I was struggling when it came to my financial situation.
And my studies — which included doing part of my MBA (a painfully fiat experience that I luckily didn’t have to pay for) — eventually brought me to Bitcoin, the apex predator of money, which I’ve come to appreciate almost as much as the oxygen I breathe.
I’d love to put a positive spin on my experiences and say that this has all been such an incredible journey and that I’m grateful that my student loan debt led me to Bitcoin, but I’m not, and you can get that Elizabeth Gilbert bullshit right out of your pretty little head.
Going to graduate school is one of my top regrets in life, and not necessarily because I didn’t enjoy the experience to some extent, but because of the financial situation I was in afterwards. And after working at a dozen or so colleges and seeing firsthand how haphazardly money is spent at these institutions and how little of it actually goes to the people doing the teaching (even though many of these people are terrible and don’t deserved to be paid well), I really lost it (which might not necessarily be news to you if you’re a regular reader of this newsletter).
Why is college so expensive?
Well, as always here at new renaissance capital, we start with The Fed and how fiat ruins everything.
Let’s take a look at how things have changed since the US went off the gold standard in 1971.
But it was Obama who really exacerbated the situation. It’s almost like facilitating the process of putting a federal backstop behind student loans disincentivized universities from economizing at all and just enabled them to charge whatever they wanted. Oh, wait. It’s not almost like that. It’s exactly like that.
I’m starting to think Isaiah Jackson was right when he called Obama the antichrist (41:27 to 47:37).
But Captain Joe, Obama’s former VP, was going to come in and save the day, right? He was going to forgive some of those students loans that inflated so notably under Obama, right? RIGHT?
C’mon, playboy.
You got bribed for your vote, and then never got paid out. And this will likely happen again in 2024.
And one more reason colleges are still expensive has to do with the concept of artificial scarcity, which refers to the idea that a person or institution claims something is scarce, when, in fact, it isn’t necessarily.
In a world where the internet is free and open and in which you can obtain a public library card at no cost, information isn’t scarce and anyone can obtain as much knowledge as they’d like.
But so long as people still widely believe that those who have attended universities have obtained an adequate amount of as well as the right type of knowledge (or jumped through enough hoops, depending on how cynical you are), then universities will continue to have power.
However, as more and more people obtain college degrees, the less relevant they’ve become, and I believe that this trend will only accelerate.
Why is student loan debt so pernicious?
Student loan debt is leverage that works against you.
Not only is college more expensive than ever in the US, but student loan interest rates are higher than ever, which exacerbates the student loan debt issue.
Once you take out student loans, you enter into what feels like — and what actually is for some — a never ending spiral of debt.
The issue becomes particularly troublesome when the money you earn to pay back that debt becomes worth less and less each passing day.
What I mean by that is the Federal Reserve in conjunction with the US government steal a large chunk of your money’s value every year by inflating the money supply.
The Fed says that is only aims to steal 2% of it each year, but the reality is that inflation is a vector and certain items like property in attractive jurisdictions, healthcare, organic food and, you guessed it, private university degrees have increased in price at a rate of much higher than 2% per year, especially since 1971 when the US abandoned the gold standard.
So, the situation looks like this: you’re taking on more debt than ever to go to college, that debt is being taken out at high interest rates and the money you’re earning to pay back that debt is like melting ice cubes.
Are we having a good time yet?
If we want to be financially successful in life, we want to have leverage work in our favor, not against us.
We want to be able to invest in a house or maybe some assets to have our money work for us, not go into so much debt that we can barely make interest payments on it.
So, given that both universities and the powers that be continue to make the student loan issue worse, we need to make some changes.
Tips to short the higher education industrial complex
Become an autodidact. Embrace learning on your own. Obtain the knowledge and skills you want via free or low-costs platforms. For example, if you want to learn more about finance, go listen to a podcast, read a book, or watch a YouTube video on the topic before you consider doing an MBA.
Take free classes. Michael Saylor, the CEO of MicroStrategy who, between him and his company owns about 1% of the supply of bitcoin, recently started his own educational platform, Saylor Academy. At Saylor Academy, you can learn everything from business administration to computer science to political science FOR FREE.
Don’t ask applicants if they have a college degree. If you’re an employer, normalize not requiring people to disclose whether or not they went to college when they apply for a job. A buddy of mine (who has a law degree) does this and his company is doing just fine.
Show your work. Create a personal website or an online portfolio that features what you’re all about, what you’ve created and/or what you’ve accomplished. This makes it much easier for companies and clients to see what you can offer them.
Stoping contributing to university endowment funds. Next time someone from your alma mater calls you to ask for money, talk to them like Catherine Keener talks to Steve Carrell the The 40 Year Old Virgin when she thinks he’s a telemarketer…
(…j/k. Be nice to the people that call for donations; politely tell them “no”.)
Explore before committing. If you’re graduating from high school and on the fence about what to do with your life, consider taking some time off from school or maybe take some classes at a community college (CC) until you find some direction. You may realize you don’t need school to do what you want to do. And if you do realize you need school, you’ve already got some cheap credits from the CC under your belt as opposed to dilly dallying around at a private university, falling deep into debt in the process.
Think of your student loan payments in bitcoin terms. Every four years, the price of bitcoin has increased exponentially. This trend will likely continue. Would you rather be investing in such an asset each month or be fighting to pay down debt/interest on debt that you incurred for an overpriced degree?
Go to a city or state school (or get scholarships). If school is a necessity, try to go to a solid, but low-cost city or state school. (Or if you do go to a private school, try to get as many scholarships as possible.) Just know that in doing so you might get quack professors like Nobel Prize winning economist Paul Krugman, a professor in New York City’s public university system who tweets things like this:
(If you just don’t need a home, transportation, food or artificial light and heat, everything is fine. Die slow, Paul.)
At these types of institutions, you’ll also find plenty of professors with communist or socialist sympathies who refuse to acknowledge that the US government bureaucracy has never been bigger and that power in the US never been more centralized, yet poverty rates and wealth inequality continue to soar. In essence, they believe that the issues that centralized power has created can only be solved by more centralized power. Big brain energy.
Main takeaway: Just like buying bitcoin is a way to short the fiat money system, learning to learn on your own and to publicly illustrate what you’re capable of is a way to short the higher education industrial complex.
And if you already have a notable amount of student loan debt, you might want to consider getting some good leverage in the form of bitcoin in your corner (not financial advice) because trying to fight the debt off solely with your labor is quite challenging/borderline impossible in certain cases.
And, with that, I bid thee adieu.
Talk it ease, everyone, and talk soon.
Best,
Frank
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Our boy! Francisco!