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The rise of the luxury university town

The rise of the luxury university town

Democrats and Republicans agreed to a deal last week raise the debt ceiling and avoid a default. The deal comes on the condition that the student loan payment break ends after August 30, 2023. About 45 million Americans will make their first payment on their student loans within three years of the break in covid Student loans have grown enormously and are no longer few.

By 2022, the federal student loan portfolio exceeds $1.7 trillion. This is more than the GDP of Spain and half the GDP of the United Kingdom.

Over the past 20 years, enrollment has skyrocketed. The reason is simple, the federal government guarantees student loans. This means that universities can raise prices, and students will automatically receive loans from the federal government to pay for those increased prices. It is a subsidy without any kind of price regulation.

The same thing is happening now in Florida. Governor DeSantis and the legislature passed a law that allows any student to attend a non-public school of their choice and the government will pay the school’s tuition. After the state law passed, private schools raised their prices.

Prosperity in the middle of the country

Whenever you see a list of America’s top cities or towns, you’ll notice a certain trend. There are great universities located in these cities that shape the local economy: Boulder, Knoxville, Madison, Ann-Arbor, Princeton, Colorado Springs, Tucson, Austin, Charlottesville, Bloomington, Columbus.

I grew up in Chicago. I remember going down to visit my friend who attended the University of Illinois at Urbana-Champaign. It’s about 3 hours by car. I spent most of it traveling through nowhere or cities. And then, suddenly, a prosperous and rich town appears. I have arrived at the University of Illinois. An oasis

British writer Tony Judt he had a similar reaction when he was driving to universities in the midwest. That was in 2010, there has been a lot of development since then in those towns as well.

I saw the same thing happen in the real city. The South Side of Chicago has poverty rates between 40-60% and crime is very high. It’s one of those areas of America that looks more like a third world country than a first world country. However, if you travel to a southern neighborhood called Hyde Park, you’ll find a quiet, beautiful, and wealthy area that rivals the most beautiful neighborhoods in any American city. It’s not like that Coincidentally, this neighborhood is home to the well-known University of Chicago.

A similar pattern is occurring across the country. College towns tend to be “nice” places relative to their surroundings. Sometimes they are even the prettiest small town in the entire state. What do I mean by nice? A place that has a low crime rate, lots of good jobs, growing, food options, all the perks of cities without the drawbacks with small town charm. These places are a little expensive, although not expensive in New York or California.

This is all new. America has once had thriving small towns with industrial bases. But the university town as a rich enclave in a sea of ​​decay is a new phenomenon. In the 1980s and 1990s, college towns were not generally characterized as particularly wealthy.

The old American economy collapsed amid deindustrialization and the collapse of high-paying blue-collar jobs. In 1975, the percentage of high school graduates enrolled in college was only 51 percent. America transitioned to a service economy. Universities found themselves in the fortunate position of being the only places legally authorized to sell credentials that opened the door to a stable and prosperous life.

How did they get so nice?

A university is now the largest company in two-thirds of America’s 100 largest cities and more than a few states. It’s best to think of universities like the old coal mines or steel mills of yesteryear. They are large companies that dominate their region or state.

1) Money. Traditionally, universities in Europe were always located within large cities. Instead, many American universities were established outside the big cities. Today, a lot of money is flowing into these universities in remote areas, while much of rural America is in decline.

2) The company city The college town is essentially an upscale company town that competes with other upscale company towns in the US for customers. This allows them to shape their local environment in a way that no other private party or governing body can.

3) What is the future of university towns?? What will happen to them when the student loan bubble pops? What about demographic change or if people decide to stop caring about college degrees?

American cities and money

For some reason, it’s easy to see when a city in America is in decline, but it’s much harder in Western Europe.

I spent a few years in France and drove around a lot of small towns in Normandy, but I couldn’t tell if the town was in decline or thriving. Everything seemed fine to me. Part of this is that the public facilities are well maintained, the roads were paved and any crime was rare. take the the city of Lisieux, for examplethe average salary is about $20,000 and the population is not growing. Basically, there are no growing industries or people moving in. But you wouldn’t know it if you walked around.

In America, if there is no money continuously, things seem to fall apart. We all know the examples of Midwestern rust belt cities that once housed industry such as Gary, Indiana, Harrisburg, Pennsylvania, East St. Louis, Illinois or Toledo, Ohio. Over the last 10 years, large areas of the Midwest, the Rust Belt and the Appalachians lost population

Sources of cash flow

1) Registration. I already talked about the $1.7 trillion in tuition tied to student loans that are combined with those paying full tuition.

2) Subsidies. Academics and institutions receive grants, usually from the federal government, to conduct research. These grants pay for the school, pay the academic salary and also pay for the research itself. Scholarships at universities totaled $41 billion from the federal government in 2018. The same federal agencies gave grant money based on the topic.

3) Hospitals. In many ways, the modern university system has surpassed the role of the Catholic Church in modern life. The church used to be the repository of knowledge with the priests also administering the education that the University has taken over in modern life.

The church also built and ran hospitals for centuries. Today, some of the nation’s largest hospital systems are connected to universities. Health care is an extremely lucrative business in the United States and provides many jobs. The University of Iowa Hospitals and Clinics (UIHC) in Iowa City is one of the largest employers in the Iowa City area and plays a crucial role in the local economy.

4) Endowments. they are another source of income. Universities play in the stock market and also invest in companies. A college endowment refers to an investment portfolio owned by a college or university. The average endowment for public colleges and universities is $35.4 million. Some endowments can be in the billions.

5) Donors. The rich do all kinds of things with their money these days.

One thing they no longer do is become patrons of their towns or cities. This is an old tradition that reached all the way back to the Renaissance and even into early America with Carnegie. Why do you think Italian cities like Florence are so beautiful?

The rich competed with other rich people who lived in the cities to see who

could build the most beautiful facilities for the citizens. This includes artwork. stadiums statues gardens churches

They no longer give beautification towards their cities, unfortunately. But they do give to their alma mater. The rich see their university as a marker of identity, not their city.

6) Being a owner. Universities own lots of land, housing, buildings and real estate. As college towns are thriving, the value of their real estate portfolio continues to rise.

7) Sports. Sports can be a great money maker. Every Saturday, thousands of people flock to stadiums to watch college football games. There are TV rights and sponsors. Collectively, college sports generate about $14 billion in annual revenue for schools.

Look at all this funding. How is any other town in America supposed to compete with that?

Competition between cities of luxury companies

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