Financial Aid or The Next Financial Crisis?

Watch Student Loans: More Debt, More Defaults, More Problems on PBS. See more from PBS NewsHour.

Cassandra

Back in October 2011 after being called a "Cassandra" by some Administrators, I wrote about the pitfalls of using Higher One on this blog. Our esteemed Administration kept pushing, I wrote a follow up blog post in December 2011.  That was followed by  students in SHOUT complaining about it and it was posted on this blog. These students were dismissed as "Radicals"and "Uninformed".
Well here it is in the news again.

In case the link does not work here are some excerpts:

...the company hired by his college to pay out students' financial aid on debit cards.
Four years after he opted out, his classmates still face more than a dozen fees , for replacement cards, for using the cards as all-purpose debit cards, for using an ATM other than the two on-campus kiosks owned by Higher One.
"They sold it as a faster, cheaper way for the college to get students their money," said Parker-Milligan, 23, student body president at Lane Community College in Eugene, Ore. "It may be cheaper for the college, but it's not cheaper for the students."
As many as 900 colleges are pushing students into using payment cards that carry hefty costs, sometimes even to get to their financial aid money, according to a report to be released Wednesday by a public interest group.

The following bit caught my attention back in September:

Among the fees charged to students who open Higher One accounts: $50 if an account is overdrawn for more than 45 days, $10 per month if the student stops using his account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents to use a PIN instead of a signature system at a retail store.

The response I was given was similar to the following from the article:
 

Higher One has agreements with 520 campuses that enroll more than 4.3 million students, about one-fifth of the students enrolled in college nationwide, according to public filings and the U.S. PIRG report. Wells Fargo and US Bank combined have deals with schools that enroll 3.7 million, the report says.
Lane Community College's president, Mary Spilde, said in an interview that the real problem is a "lack of adequate public funding," which forces students to seek financial aid and colleges to find ways to cut costs.
"Many institutions are looking at ways to streamline and to do things that we're good at, which is education and learning, and not banking," Spilde said.
Programs like Higher One's shift the cost of handing out financial aid money from universities, which no longer have to print and mail checks, to fee-paying students, said Rich Williams, the report's lead author.

Please remember the faculty at Rio Hondo care for their students.  If we come across as Cassandras it is because we care. We do not accept ideas because they are cheaper. We blindly do not accept procedures just because other colleges do it that way. We ask questions because we care.

Are We Argentina

I do not mean to depress you, but it is the dismal scientist in me. Also these videos are good and I plan to use them in my online classes. This video points out the similarity of what is happening here and in Argentina. But are we the same?

Lords of Finance

I was listening to an interview on Econ Talk with Ed Leamer, an econometrician from UCLA. In this interview he was talking about how stories are important in Macroeconomics. He made a comment (the true intent of his comment scape me) along the lines of macroeconomics should be taught like literature.
This weekend I started reading a book called The Lords of Finance by Liaquat Ahamed and I think I understand Leamer's comment now. It is probably different than he meant it but I like to think this is what he meant. The Lords of Finance is written by an Economist but it reads like a good history book. He goes through the historical personalities that were in charge during the 1930's as the Great Depression hit. He paints these personalities one by one in exquisite detail. I am currently on Chapter 4 and I am totally fascinated by these forgotten financiers. I recommend this book to anyone interested in History.

Cash for Trash & Oligarchy

Why the bad bank idea is bad!

The following is Simon Johnson. He was the Cheif Economist for IMF. Listen to what he has to say.

Two Of My Favorites

Here are two of my favorite economists. Dr. Doom and the author of Black Swan who is a successful trader. This video was very depressing for me, and reminded me why I do not watch CNBC. The anchors are shiny happy people who miss the point being made by these two who "got it right".
Here is my insight: Our society concentrates too much on simplistic talking points and ignores the fundamentals.



Happy Valentines Day

On the Economy

Here are two great music video on the financial crisis. I like the part about the organizational charts.

Why Psychology Matters In Economics

Here is a video that shows an idea which I have held for a few years now. I think psychology matters more in Economics than we (economists) give it credit. Watch the dog experiment!

Answering Joaquin

A month ago Joaquin asked me about Credit Default Swaps and other crazy financial instruments created by Wall Street. I I found the following interview and this Hedge Fund manager explains all of these terms.

Do Not Ask Me For Advice

The other day someone at school asked me "is this a good time to buy stocks?" My reply was "No" . I continued with "I think cash will be king".
I think markets tend to overshoot. The stock market is still overpriced. I look at Price Earning Ratios and they are still higher than back in 1974. Another reason for my pessimism is that changing prices reinforce previous changes not only on the upturn but also on the downturn. Finally my experience of living in Japan and witnessing their bubble bursting makes me a pessimist.
The following interviews are with Nouriel Roubini who has been warning about this collapse for the past few years.