Loans for Kindergarten, Another Middle Class Bubble

Instapundit Glenn Reynolds links to a Gawker post, commenting on an article in SmartMoney by Anna Marie Andriotis:

It used to be that families first signed up for education loans when their child enrolled in college, but a growing number of parents are seeking tuition assistance as soon as kindergarten. Though data is scarce, private school experts and the small number of lenders who provide loans for kindergarten through 12th grade say pre-college loans are becoming more popular. Your Tuition Solution, one of the largest lenders in this space, says demand for the upcoming year is already up: This month, the total dollar amount of loans families requested rose 10% compared to a year ago; at that pace, the company expects its total funding to rise to $20 million for 2012-13. Separately, First Marblehead, which exited the market in 2008, reentered last year as demand for loans began to rise.

Gawker blogger Hamilton Nolan associates this development with a trend among very wealthy private school parents’ hiring expensive admissions consultants, and even Andriotis goes on to say that “much of this demand” for loans is among wealthier families.  Her evidence, though, is that 20% of financial aid applicants had household incomes above $150,000.

Rhode Islanders might be inclined to offer conflicting testimony.

As I pointed out, way back in 2008, when looking at schools with high SAT participation rates, it’s clear that Rhode Island has an average median household income but a very high private-school participation rate.  To some degree, that may relate to a lingering heritage of ethnic immigrant enclaves opting for parochial schools.  Judging from my experience discussing the matter with actual private-school parents of working-to-middle-class means, however, another significant factor (anecdotally, a more significant factor) is that the public schools just aren’t considered adequate.  And high-priced zip codes are less and less a remedy.

I’ve yet to meet a family that has transitioned between private and public schools, or (like mine) from one to the other and then back again, that hasn’t noted a marked difference in their offerings.  Even the children in those families comment on the incomparable experiences.  It may be, then, that families that never would have considered private school have an increasing incentive to find a way to afford them.

Rhode Island has good reason to expect that incentive to continue its upward climb.  As municipal and state budgets have become increasingly strained, public school offerings are being reduced, with some districts considering returning, for example, to half-day kindergarten.

Meanwhile, the economy’s expanding requirement for two-income households is making even full-day preschool an attractive option.  Government requirements, from teacher certification to fire codes, are increasing costs.  Decreasing populations among religious orders are requiring higher-paid staff in religious private schools.  And stretched-thin sources of grant money and scholarships are able to offer less relief.

In that context, private school tuition is akin to another expense that a poorly operated government is imposing on motivated, involved parents, regardless of income.  It is for those parents to decide whether the incentive has reached the point of urgency justifying, ultimately, sixteen years or more of education loans, but public policy is setting the stage.  It would be fair, in other words, to place kindergarten loans in the category not of faddish 1% excess, but in the category of a systematic government-driven reliance of our society on wealth that it may or may not create in the future.