Yeshivas/Day Schools as Lenders: Yay or Nay?

In a previous post, a commentor asked about the idea of floating a bond to pay for Yeshiva Education, an idea brought up in a shiur. I've heard this idea forwarded before. I believe that under this plan, the Orthodox public would pour money into schools in the present through some type of bond, and be repaid a higher amount years in the future. I can say I would never make such an investment. There are plenty of cities, with large tax bases, already talking about defaulting on bonds because the money just isn't there. I can't even begin to imagine "investing" in a system that is less than transparent. I'll give a donation than you very much.

In a recent post, ProfK forwards a similar idea that she believes could help make Yeshiva Education more affordable, while giving schools a steady stream of income. The idea is for Yeshivas to go into contract with the yeshiva as lender over a longer time period, allowing parents to pay their obligations with far fewer discounts.

I don't quite have articulate thoughts, but I don't care for the idea at all. So, I will just list some of my thoughts and you can articulate your own:

*No Expertise: On top of the fact that I don't see schools as having the expertise and know-how to become a lender [insert bad joke about actual banks who have recently failed this role], more than a few parents have already mortgaged and remortgaged their homes, in addition to running up credit card bills to pay for Yeshiva Tuition. At least the burden of collection is on the bank, rather than the yeshiva, which probably has little ability to enforce payment.

*Credit is Being Used. . . and that is part of the problem: It isn't as if good number of parents are already using credit to pay for Yeshiva Education, via home equity lines of credit and credit cards, as well as personal loans. The overuse of credit has surely done damage to the Orthodox community, by weakening the financial foundations of too many people. And, despite ProfK's statement that "maybe if some parents knew that they were endangering their ownership they might rein in the type of spending that is making it impossible for some of them to meet their tuition bills," the overuse of credit has done nothing of the sort. On the contrary, the overuse of credit has caused hyper consumption as families "put it on the house." My opinion: credit does NOT slow consumption, it speeds it up.

Balance Sheets Stacked with Collectibles: As it stands now, many organizations already have a balance sheet packed with receivables, many of which will never be collected. Giving loans will just pack the balance sheet with even more collectibles (extremely long term collectives, backed by no collateral), many of which will ultimately go uncollected, yet will make many a finance committee member feel that the picture looks reasonable, when it is in fact not.

ProfK writes "Maybe we will have learned something from the sub-prime mortgage lending mess out in the secular world. Schools really cannot afford to be giving away something for nothing. . . . . " I am learning a different lesson: banks, credit card companies, retail stores offering credit, etc, are taking a huge hit and many are no longer going concerns because they lent money to consumers that had no business taking such loans. The overzealous consumers consumed, and the entire country, from the irresponsible to the responsible are taking a hit that will take decades to recover from.

Meanwhile, business expanded their operations (read: spend more and more money) as credit fueled over consumption. But eventually it became obvious that an overextended public could no longer keep spending because there was nothing left to spend, hence a collapse of many large stores. Like I said before, credit is more likely to speed up consumption, rather than slow consumption.

Lessens the Emergency that the Community should be Feeling: I'm not sure we want to make schools feel as if cash will keep pouring in for 30 years, when that is likely the case. I'd rather schools feel the "tuition crisis" IS the emergency that many believe it is and act accordingly. I'm not being particularly articulate, but I do NOT believe that trading in scholarships for loans due years later will help schools face reality head on. Public schools are currently under their own "credit crunch" as voters are no longer passing bond measures for schools. An education system that got overloaded is finally starting to look for real cost savings, rather than ask for more credit.

What I do Support: Minimum Tuitions, Bill for the Future(but don't stick it on the balance sheet as a receivable), Having an outside tzedakah organization deal with scholarships (an idea presented in the comments) as it would likely force greater transparency as an outside organization will have an interest in making sure they are getting bang for their buck.

What I do Not Support: Introducing more avenues to "put it on the house" in the Orthodox community. Frankly, we need to end this obsession with credit and get people to start operating mostly on a cash basis.

Let the comments fly.
In the previous few posts, I've had the opportunity to forward an idea, rather than say why it will never work. So I hope ProfK will forgive me for playing the opposite card today.