There have been endless stories about the massive student loan problem. One in six borrowers are now late in their payments. It’s a crushing burden for college graduates who can’t find a job or don’t have one that pays enough. We also hear about colleges and universities that are struggling with debt loads that they took on to finance new construction. The New York Times reported in December 2012:
But some colleges and universities have also borrowed heavily, spending money on vast expansions and amenities aimed at luring better students: student unions with movie theaters and wine bars; workout facilities with climbing walls and ‘lazy rivers’; and dormitories with single rooms and private baths.
Instead of funding better instruction, the borrowing mainly addressed campuses and housing. More from the Times:
Spending on instruction has grown at a much slower pace, studies have shown. Students end up covering some, if not most, of the debt payments in the form of higher tuition, room and board and special assessments, while in some instances state taxpayers pick up the costs.
Several well-known schools have been downgraded to junk or speculative-grade debt for problems related to cash flow problems (spending faster than money comes in).