Tuition costs have risen 710% since 1983
statecraft.beehiiv.com
statecraft.beehiiv.com
It is frustrating to hear the discourse over the inappropriate students that are taking on too much debt, all the while ignoring the lenders that are taking on too much risk. At least, they would be taking on too much risk, if they hadn't captured the market so effectively.
The lenders are taking no risks since these loans cannot be discharged through bankruptcy. There are also very large late fees and penalties that can triple (or more) the amount owed.
Why do we take anti-individual stances, but pro-business stances? Is that a byproduct of capitalism, or am I misreading the world?
Actual business loans require assets/collateral, even those from the SBA. At least this has been my personal experience with my businesses. You can't get a loan with no credit or assets (like a student can).
And PPP really should not have been forgivable - if you run a business, then it’s your responsibility to have enough money in the coffers to survive any economic downturns. Individuals get punished way more harshly than businesses when things go south.
As far as interest rates, I had six figures of student loans and they were at 2.88%. Rates today are higher, but that's because they very loosely follow the federal funds rate. This is no different for business loans. But loosely speaking, interest rates on federal student loans are pretty low compared to other types of loans.
In fact, the reason the stock market reacts so badly to interest rate increases is precisely because it increases the cost of borrowing for business.
Yeah there were stimulus checks, and I saw a lot of people say something like “wow look at all these handouts people are getting, they don’t deserve it all!” but then they turn around and say the PPP was the greatest thing ever and businesses deserved them.
I think we are too critical of individual choices nowadays, but not critical enough of the terrible choices that businesses make. That’s probably the gist of my discontent.
If that business goes under, how many individuals are out of a job?
The PPP loans were intended to keep _individuals_ employed.
You're presuming a fact that's not in evidence. I know it's the flavor of the month whataboutism to point to PPP as an excuse to forgive student debt, but PPP was wildly unpopular amongst people who didn't directly benefit from it as well. I have full faith the SBA makes terrible loans as well.
Also, anti-student loan isn't exactly an anti-individual stance. It can also be interpreted as anti-University subsidy. And when you look at the absurd wages professors and administrators can command at these places, I wouldn't blame someone for thinking these loans are distorting the market so badly that it harms consumers/taxpayers while enriching professors and administrators.
> You're presuming a fact that's not in evidence. I’m not so sure about that. How many executives get paid remarkably well, even though they fail miserably? Sometimes even with tax payer money.
I claim that the blame here really rests on big government for creating this fucked up system, not the businesses that work within it. By the way, I blame the government for the PPP fiasco too.
None of this is particularly pro-business, but a lot of people are apologists for big government and need to be disabused of that notion.
I went to school from 87-91. I could already see the problem starting. I was hoping this bubble would burst before my own children went to school. Two of three have gone to public schools so far, and we've paid through the nose for it. We are pushing our third towards some sort of trade school.
Personally, if you’re going to be miserable anyway (as most Americans are these days), it’s probably better to be miserable with money than without money, lol
And idk. My best friend from high school moved out here with me and he's a waiter making 40k a year and seems totally happy. Works like 30 hours a week, no mental stress, able to work out and work on himself. I think money is highly overrated.
But I think my main point is both of us have a way of becoming sustainable so you might as well do what makes you happy instead of working a job you hate for 8 years. Being a waiter making 40k isn't enough long term, but working your way into a higher end establishment or management is. A girl I dated started out as barista, became a store manager, and is now the regional manager and makes ~125k a year and more importantly she is a perfect fit for the job and enjoyed it the entire time.
All I'm trying to say is there are a lot of paths to a sustainable life even when following your natural inclinations.
But anyway OP responded his son's not super interested in college anyway so his plan sounds good to me anyway.
> every day I wake up dreading going to work
This sounds terrible. But at least you have a job. Many people wake up with dread every day for whether they or their baby will starve to death.
Also, it’s never too late to change.
Academia should be a place for people who run away from money, because it's the last thing upon the list of interests for them. Academia should be a place for joy in learning concepts, and in some circumstances, which strive to be useless. Mathematics is one of the most exemplary fields for this, which is summed up quite nicely with the following quote:
"The mathematician does not study pure mathematics because it is useful. He studies it because he delights in it, and he delights in it because it is beautiful."
Never go to a university expecting to improve your wealth status, because it very likely won't happen. Turn elsewhere to find wealth.
Many have drowned in student debt following their passions, but this wouldn't be so in many countries that have university education fully covered or significantly subsidized by taxes.
Once something is paid for with tax money, then the people paying the taxes want a say in how it's spent -- which is not just reasonable, it's a requirement of a liberal democracy.
It's fine to speak from one's experience, but to say that someone else should make the decision one thinks is wise based on a single comment is either ignorant, arrogant or both.
Edit: I replied to you @allenrb, but I'm not directing these thoughts toward you. I'm just pointing out a general behavior I see (but wish I didn't) on the internet and HN.
Interests are all well and good, but costs are real. Following passion is for rich people (or people who get unlimited student loans).
I think this is a truism that people want to be false.
But in any developed country, most poor people are pretty rich when compared to the world, and it offers them lots of freedom to choose what field they want to work in, where they want to work (both city and company), etc. There isn't the expectations that sons take their fathers' jobs and that daughters take their mothers' (often being a homemaker).
It still sucks to be relatively poor in a developed country, but most are rich enough that they can follow their passions in ways their grandparents never could and half the world can't today.
If you don't do a modicum of Research before you take on tens or hundreds of thousands in debt to invest in something, that's on you and you alone.
If people were not bailed out and subsidized we would not have these issues of this magnitude.
Regardless of whether the parent can support that tuition cost or the kid has to take on loans themselves, it should be up to the individual whether they take on that risk irrespective of the parent's financial situation, which is I think where this heavily-downvoted reply was going.
As somebody who's education was way less supported than the rest of my family, who came out with a better job than all of those others in spite of that, there's a decent chance your kid will resent being "held back" by such a choice for a very long time if you give them trade school as their only option in life.
Lots of people find ways to be successful in the arts by eventually finding something cross-disciplinary, and with the direction most non-white-collar jobs in the US are heading I wouldn't bet my kid's life on trade school. What made sense as a sentiment on Mike Rowe's "Dirty Jobs" 10+ years ago doesn't quite hold up as well today, and those projects were funded by the Koch brothers and the whole "trade school is just as good" thing should be taken with a mountain of salt. I'd love to see more data proving trade school proves better today, especially for young adults with educational backgrounds and access to learning and job opportunities whose parents are in the economic class to be browsing HN
At $60k per annum... that's crippling debt.
The mortgage CDO's where tranched in 2008 also.
I thought the government guarantees these loans, but maybe I mis-read that, mis-understood, or something changed. I think the borrower is still on the hook and accrues fees if they don't pay but I also thought the federal government literally paid to keep the bank whole.
Have to wonder how this interacts with the US healthcare system. As people get older they are more likely to have health problems that prevent them from working and cost a bunch of money.
The secret is to lend money and then make people spend it on something worthless. You know, the easiest way is to lend someone money so they can gamble the money away. You might now argue that this is terrible for the lender, but only if the lender doesn't own the casino. Then the gambler ends up in massive debt for no benefit. It doesn't matter if the borrower repays the loan or not because the lender didn't lose a single penny and every payment results in profit.
This is just a hypothesis because I am not aware of any banks or financial institutions operating an educational institution, except maybe lambda school which was heavily incentivized to get people to sign up for income sharing agreements but then only deliver some low quality MOOCs with the only source of support being TAs who themselves are former lambda school graduates.
You take a bunch of loans and bundle them together and securitize the bundle to sell to the public. Mortgage CDOs crashed the global economy in 2007-8.
https://www.investopedia.com/terms/c/cdo.asp
Or if you prefer the Big Short explanation:
But, CDOs go a step further. You may have more or less risk tolerance. So we chop it up. You can buy something that gets paid back if 70% of the loans are good, or only if over 70% or over 80%, or even over 90%. The less likely you are to get paid back, the more you make.
So the person who absolutely wants to get paid back gets a small interest rate. The person who only gets paid back if literally every loan pays off gets a much higher rate.
In 2008, what happened is all those people buying the "very safe" 75-85% failure rate sections also were getting wiped out.
Education doesn’t have this kind of contagion. If you stop paying your student loans it has very little impact on the value on my education.
It's never been more true that education is overpriced and underdelivers.
The contagion may not be "house goes bust and my house value goes down"... but there is a contagion: My degree is now no better than the degrees for the mills pumping out idiots while lowering standards and full of soft degrees filling the markets with "educated" people that aren't qualified to fill a coffee cup at starbucks.
If you don't see a market flooded with lower value results as devaluing the worth of higher education then you're not looking closely enough.
The official term is SLABS: Student Loan Asset Backed Securities. Here's a recent paper on the subject.
But lenders aren’t going to suddenly go from approving 100 loans a month to just 10 a month. The incentive structures are designed to weasel and lie to pump out flattering bottomlines every quarter.
You can trot out the statistics but you can’t change human behavior without changing the incentives.
There’s been massive capital movement across the globe. Money moving out of China and Russia in particular. And the gulf countries with a surplus of cash thanks to multiple years of expensive oil.
But it’s really just speculation. I haven’t noticed an influx of ore Chinese buyers into my market.
Yes prices are crazy but if demand is still not being met, then prices are meant to be crazy.
> Two of three have gone to public schools so far, and we've paid through the nose for it. We are pushing our third towards some sort of trade school.
Jesus Christ. You're gonna give child one and two full opportunity to realize whatever potential they have, but steer child three?
US community colleges (usually 2-year) tend to have low tuition and may offer flexible scheduling so you can pay as you go and/or work through school. Housing can still be expensive though.
US public universities may have lower fees for in-state students. UC Berkeley costs some $41K+ per year (including on-campus housing, food, etc.) for CA residents - not particularly affordable to begin with - but charges an extortionate $33K "nonresident tuition fee" on top of that for non-resident students (including any students under 24 whose parents live out of state.)
Public Universities are ones funded by the state, to varying degrees.
Private Unis have their own funding, usually through a mix of tuition and large endowments.
- https://studentaid.gov/manage-loans/forgiveness-cancellation...
- https://www.consumerfinance.gov/about-us/blog/busting-myths-...
Somebody I know had a medical emergency while in their repayment period. They were unable to work and went on to disability insurance, and eventually had their loans forgiven. I think they had to be on disability for a certain period of time (measured in years, iirc) before they were discharged.
Eventually, they recovered sufficiently to be able to return to the work force debt-free. I'm not sure if the hurdle for loan forgiveness ought to be "you have to basically die", but it's at least that high for now.
There's also the well-known "public servant" path. I'm sure there's some ironic joke to be made comparing the two.
Doesn't it seem like a society shouldn't encourage people to financially self-immolate in order to start their adult life?
I mean, giving the self-immolators some tweaky hacks to prevent being lit on fire is not really the best solution.
It's a tricky problem. We want people to have equal opportunity to pursue college, even if their parents can't afford it. But at the same time, we don't want to subsidize cost creep.
Clearly the current solution doesn't work. Alas, we're deeply invested in it (literally), and each passing year the entanglement grows.
I think you can make a strong case for govt-funded tuition at public universities. But I don't know how to get to there from here without making a handful of people very unhappy.
In other words, basically borderline poverty for years before people realized it was never going to happen, and got lucky enough to get out of disability -- cuz a lot of people don't.
The bigger problem is that people _think_ it won't work and they don't bother trying. How many folks could have met the hardship burden but didn't apply?
We need to stop repeating the falsehood and instead be truthful: Student loans CAN be discharged via bankruptcy, if the applicant meets a hardship threshold.
I'm assuming it pays out at 100x lottery numbers. But, again, that is still basically zero. Is why I don't regularly buy 100 lottery tickets.
Every other debt having your bankruptcy approved is proof enough that you were under undue hardship and couldn't crawl your way back out. But student loans are special and need further proof, which means they are definitely not that easy to get out from.
Student loans not being dischargeable through bankruptcy creates a moral hazard, much like bailing out banks. Banks will lend an infinite amount of money for student loans, because there is no risk to them. Creating free money always devalues it; if you have to work for your money, an education is priced $X because that's the maximum people will pay. If everyone gets unearned money to pay for education, it becomes worth $X + $Y. This is just the SaaS model for people. (Consider AWS; "oh you want to make money selling a SaaS service? we'll take 10% of your revenue for servers." Student loans are the same thing, "oh, you want to go into a high-earning field? we'll take 30% of your income for the next 10 years.")
Compare this to things where banks could lose money, like mortgages. If you bid $1,000,000 on a property that's worth $200,000, the bank will simply require a down payment of $840,000. They have no interest in your starry-eyed games. If you walk away, they can close out your loan by selling the property at the appraised value, and they're happy. Banks have the right amount of paranoia about lending for this kind of purchase; their goal is to never lose money. Student loans should be no different; current grades and expected job prospects should play heavily into the decision as to whether or not to lend money. This will reduce the cost of education because selling a $600,000 art history degree to straight-C students won't be viable in the market anymore. (Universities will fight hard against this, because the degrees are cheap and everyone pretends they have some value. If people realize degrees don't have much value, the cash cow dries up. But we have to kind of look at the effect on society as a whole and realize that work experience is actually what we value. After the first 4 years of your career, nobody cares about your GPA or where you went to school anymore. And incidentally, 4 years is exactly how long college takes!)
> I went to a state school and tuition was $750/semester.
I paid about $800 per quarter in 1996. Even at tax subsidized state schools, tuition has gotten much more expensive since then.
There's inherent risk to everything, everywhere. Making the loans undischargable in bankruptcy doesn't negate the risk of non-repayment; it just hides it. Until, eventually, all the band-aids fall off, reality bares its ugly head, and we all wish we hadn't-a done that. Yet, in thirty years we'll forget about it and do it all over again, in some new, crazy, way.
Look at footnotes 1 and 3, which rely on the Department of Education’s and the Fed’s own numbers. $1.64 trillion/1.77 trillion = 92.6%.
Less money for borrowing means students can only afford lower tuitions and colleges are incentivized to efficiently use your money.
This was among a debate where people were asking for more federal and state funding.
Its crazy to see this point become so mainstream. I suppose it was inevitable if it was the truth.
"We want everyone to have a chance at school, but public schools are government indoctrination so we'll just make sure people are in un-releasable debt to private companies."
"We don't want to see people dying in the streets, but universal health care is "socialist", so we're create these convoluted insurance systems, but still require hospitals to provide free ER care (that has to be covered by everyone else in the end)."
"We're afraid of immigrants, but our agricultural industry is dependent on their cheap labor, so we'll make legal immigration difficult, and keep pretending that we're going to restrict illegal immigration, but never actually do anything effective to curb it."
(I also want to add that mentalities like this are not at all exclusive to the US - you can find similar inconsistencies in every countries self-image, the US just seems to have them in more fundamental issues that other countries made a decision on long ago)
https://studentaid.gov/understand-aid/types/loans/subsidized...
You can only borrow $31k over 4 years. That isn't a lot at all.
i think a lot of people seem to believe that the federal government is handing out $50k+ a school year when theres a very small limit. people who need to borrow likely have to tap private lenders.
But the government has "protected" all loans - private education loans are also unable to be discharged by bankruptcy, for example.
the government is not on the hook if a student defaults on a private loan. the critique was that tax payers were somehow on the hook for most undergraduate costs when $31k over 4 years barely pays for rent at this point.
Regardless, I got them all payed off; and still have a massive distaste at how most discourse over this goes.
There essentially is no such thing as a “private” student loan anymore.
[0]: see sibling investopedia link
Private education loans are mostly an issue for non-accredited schools, since usually you can cover the full costs, with better terms, with federal loans at accredited schools. They are also less than 8% of the volume of student loans. They are basically a whole different (and much smaller) policy issue.
And that is the principal. With a short limit on how much of that can be subsidized, meaning the rest is accruing interest from day 1. Such that they amount you would owe will be laughably higher than even that number after your school. And that is assuming you don't have to then delay repayment for financial hardships.
Because the limit cited only applies to students whose parents can get (federal, direct, and capped only by the school’s estimate of costs) PLUS loans, and yet is characteized as a limit of the impact of federal subsidies on school costs.
A cap that only applies where another unlimited federal loan stream is available to the same student is, well, not a limit at all, when discussing federal impact on prices.
The impact on prices is not just the direct, but the general understanding that private educational loans also could not be discharged in bankruptcy that was created by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Courts have started to push back against that but there are only a handful of precedents.
I'm interested in how many students aren't able to have their family go in on PLUS loans. As that is still a gaping hole to relying on the page and limits linked.
But PLUS loans themselves have no cap, so the amount of potential federal impact on potential costs for this population—which, as you note, is most undergraduate students—is infinite, not $31K over four years.
People can get unsubsidized loans that still come with the same constraints around inability to discharge in bankruptcy for vastly more money.
It’s essentially all unsecured student loans (i.e. effectively the entire student loan market) that have this risk free model for lenders.
It would all be completely toxic trash otherwise that no lender would issue. A student with no assets, no income, and no credit history to preserve has no downside to just declare bankruptcy after school and get $200k or whatever essentially for free.
Literally says "Subsidized and Unsubsidized Aggregate Loan Limit $31,000-No more than $23,000 of this amount may be in subsidized loan"
Just confirms most people have no clue how small the limits actually are.
Looked up the prices just now. Undergrad + postgrad can come up to the price of small town houses.
> In January 2020, the U.S. Bankruptcy Court for the Southern District of New York discharged over $200,000 of student loan debt for one borrower. Then, in August 2020, a ruling by the 10th circuit federal appeals court based in Denver, Colorado eliminated $200,000 for a Colorado couple who held 11 private student loan accounts. And in September 2020, a judge for the U.S. Bankruptcy Court for the Southern District of New York ruled to enforce a prior bankruptcy discharge of a borrower’s $400,000 of federal student loans that a servicer had failed to carry out.
> These decisions could serve as a precedent for future bankruptcy cases involving student loans, says John Rao, an attorney with the National Consumer Law Center.
> "A lot of people, even some of the lawyers who represent consumers, thought for years that you really shouldn’t even try because there's not a chance you’ll win, but I think everyone is looking at it now with sort of a fresh look," Rao says.[0]
[0] https://www.nerdwallet.com/article/loans/student-loans/stude...
For instance, when I was in college (undergrad) I took the maximum, but it wasn’t enough for me to pay tuition, rent, etc. Also those loans don’t pay during the summer, so you’ve to budget for that as well. My part time job tended to cut hours because there’s a high influx of kids who also want summer jobs, which meant less money overall for me. I ended up taking some more loans from Wells Fargo to make ends meet.
In hindsight, I should have got a better job instead of retail - some sort of office job. But I didn’t have a car, so I was limited in how far I could go.
Graduate students are where it gets wild though.
It's designed by the US Government to bring in massive, on-going funding to help fill in the red ink in the entitlement programs now that those are no longer funding sources to steal from (entitlements used to produce persistent surplus funding the politicians used to steal from for decades). That's why they'll never allow it to be dischargeable. Their margin on the loans is de facto 100%: it's all magic printed dollars or otherwise taxpayer dollars (makes no difference to them).
Massive? Even before COVID and the lockdowns (and the pause on repayment), the student loan program was operating at a _loss_.
The Dept. of Education has presumed (because they're incompetent AND corrupt) the program would be net positive but only to $114B over 25 years -- that's an average $4.5B per year. In 2019, the federal government spent $4.4T, so the _expected_ return from student loans would have only been 0.1% of the federal budget.
That money couldn't fill squat.
----
"From 1997 to 2021, the Education Department estimated that payments from federal direct student loans would generate $114 billion for the government. But the GAO found that, as of 2021, the program has actually cost the government an estimated $197 billion.
"A percentage of that shortfall, $102 billion, stems from the unprecedented federal student loan payment pause that began under the CARES Act in 2020."
https://www.npr.org/2022/07/29/1114560119/student-loan-progr...
https://en.wikipedia.org/wiki/2019_United_States_federal_bud...
The lenders? Risk? 93% of all student loan debt is owned by the US Government. What risk?
How is it everybody pretends it's the Big Evil Bankers making all the money on this racket? It's equivalent to the false narrative about private prisons driving the high US incarceration rate (when in fact it was over 95% government prisons across the decades that the rate was skyrocketing).
It's a government replacement funding system for the entitlement programs that are bleeding out. They had to find a new funding source as entitlements dipped red, so they're strapping young people with massive debt (forever rising interest payments) they can't discharge and that derives from magic fiat dollars the US Government 'prints' at will.
This is another case of the government abusing the population.
Anti abortion laws? Government.
Anti gay marriage laws? Government.
Anti trans laws? Government.
Segregation laws? Government.
The war on drugs? Government.
The war on terrorism? Government.
Foreign adventurism wars? Government.
Vast illegal domestic espionage? Government.
Non-existent social security 'lock box' (not filled with $10+ trillion like it should be; should be the world's largest sovereign wealth fund)? Government theft.
How many examples do you all need?
Eventually and hopefully people will wise up.
That is, no amount of lending is ever risk free. To pretend that you can hedge all risk out of a loan is the problem. It doesn't matter who issues it. It doesn't matter why they issued it.
So, to put the question back to you, why would you feel there is no risk in lending to students to go to college?
Whether they finish or not, it surges the demand for education and makes it more expensive for the people that did perform well in high school and achieved a minimum level of personal organization to succeed in an academic environment.
[0] https://www.wral.com/story/fact-check-how-many-student-loan-...
The way these loans are done, the "risk" is supposedly managed down to zero by some byzantine limits on how much people can take out. This is silly, at face value, as the limits on how much a family can take out are basically non-existent. Yes, we have limits on individuals, but those seem to be little more than token talking points.
That said, reading your post again, feels like we are in agreement?
But then, how do you secretly replace the billions in bribes to your friends in the universities?
It is really strange that government does not constrain tuitions of the colleges participating in the loan program. Currently, Universities have no incentives to control costs in any way.
(This message brought to you by people-with-thing-to-sell.)
Besides, nothing prevents one from pursuing a career in most liberal arts without a degree, assuming you don't want to be a researcher. You can always be a nurse or an engineer with arts related side-job, but doing it the other way around is hard.
If I were to make a list of the problems with the world, having too many people with liberal arts degrees would not be anywhere near that list.
Too few, yes. Too many business school graduates, yeah. Too many law school graduates, probably. Too many STEM field graduates, maybe. Too many graduates who look at people as a resource to be extracted, or an abstraction to be ignored. But damnit, we need more people who care about the quality of human experience.
The university were founded largely for the sake of teaching the liberal arts, that is, the free arts (as opposed to the servile arts). I am using the traditional meaning of "liberal arts", and not the tragedy we have now. The university was supposed to educate the man, to mature him intellectually, to free him to be able to pursue the truth and to do so effectively which meant also the ability to draw from and participate in the tradition.
The feverish mission to push everyone through college is a fool's errand. It is not for everyone. The result is that universities had to change to make this possible, thus failing their founding mission. But at the same time, they aren't good at vocational training. So for most people, it's a waste of time and money.
We would be much better off with a system of vocational schools and apprenticeships. This would unburden universities and free them to pursue their original mission, and it would enable vocational schools/apprenticeships to provide excellent training for workers.
Primary education is, frankly, in an awful state as well, as it, too, is supposed to educate the man, and it is here where the vocational stuff is still not necessary to learn even for those who will eventually enter the vocations.
We're seeing some interesting developments in both primary education (with the spread of classical education) and the founding of small colleges that aim to avoid the failure of the university. Some try to combine intellectual formation with an apprenticeship program to try to reconcile the desire to form the man with the need to find a job. Apprenticeship is also used to cover at least part of the costs of the education.
Ballooning costs are a symptom of corruption and bloat. The mission is lost, so it's a numbers game now. There's no reason a university education should cost anywhere near what it costs today, especially given the mediocrity of the education. I don't really see much will to change the status quo among those in power, so we'll probably see a combination of hamfisted maneuvers like debt cancellation to maintain the status quo, but ultimately, probably a collapse of the system.
Healthcare as a whole baffles me. They pay well enough, sometimes, but they also just treat their employees like absolute crap. Would it really break the bank to hire 25% more staff instead of having your entire workforce getting paid overtime week after week?
Them stocks gotta to up, mang.
Take a look at the Fortune 500, and look at how many healthcare companies are publicly traded and in the top 100.
That dog don't hunt when that 'well rounded education' costs tens or even hundreds of thousands of dollars and will burden the students for the rest of their lives. Once the student is on the hook for that debt, it becomes a strict return on investment calculation.
Want to study philosophy? By all means! It's among the most important subjects humanity can study, but you probably shouldn't be seeking a degree in it if you don't wish to teach it, and you damned sure shouldn't be condemned to serfdom because of it.
2. Even without graduate education requirements, other fields have loooong ramp-up times but eventually end up doing well.
3. There are also jobs that are extremely valuable to society despite the expense of education (nursing comes to mind, as does teaching).
4. We would end up with stupid boom-bust cycles in labor supply and demand, even worse than what we have now. Reducing labor supply by making loans unavailable increases labor prices eventually, which eventually results in loans becoming available, which saturates supply, and then repeat the cycle every couple decades. Constant idiotic predicable crises. Welcome to myopic financial capitalism, where trust fund kids who never needed to pass their delay differential equations unit have all the power.
So to make this work you need some form of central planning of supply and demand -- by DECADES at a time. Who knew we'd need so many Python programmers in 1980 or even 2000? Which, if that predictive function works, why the FUCK are we using markets anyway?! Cut out the middle man if central planning works. (It doesn't.)
How about we just lose the cold war brain-rot and stop trying to use markets -- a legal fiction and policy tool!!! -- where they make no fucking sense. Markets are an incoherent solution to allocation problems where price signals are EXTREMELY delayed (education) or EXTREMELY coercive (health). Just fund it with tax dollars instead.
The market religion zombie from the red scare era needs to die. The amount of absolute brain rot in the American public caused by the inability to understand that markets are just fucking tools that depend on government coercion anyways is sending our entire society into a death spiral.
It's somehow unsurprising that the one true American religion of the 21st century -- deference to The Troops -- is the place where we're completely okay with socialism in higher education (the military academies).
But then on the other hand I'm not really convinced that this would actually be worse than the model of betting (or worse: bidding, it's a market with limited supply of high-status slots) seemingly unbounded amounts of future income on flying really high. And if they do fly high, just not quite high enough, it's effectively indentured service. No limits gambling is never a good idea, even if the game is not entirely devoid of an element of skill.
Universities do that already. "Need-based" financial aid ensures that the parental contribution is near the hardship threshold for low-income parents - tipping the scale toward those with greater ability to pay. And external scholarships are simply deducted from "financial need" and largely pocketed by the university (which usually prohibits the funds from being used to reduce the parental contribution.)
Isn't it wonderful to be in a business that requires customers to turn over their financial records and charges based on "ability to pay?"
You price the customer, not the service.
I teach part time at a relatively affordable public university and the waste, inefficiency and bureaucracy takes my breath away.
Limit loans to 15k/60k lifetime and make them forgivable. You would be amazed at how focused, productive and inexpensive higher education could get.
It's either that or enrollment drops off a cliff because the college proposition is so off the rails. That appears to be the current trend, I believe.
Most universities are the supporters of the existing government structure, so it seems to be a mutually beneficial relationship.
This is essentially how the US works. We're built on debt. Sometimes I think our society would collapse without all the debt we create.
Note that universities also basically act as a cartel.
What I have never understood is why career counselors aren't advising students against the downside of getting into so much debt so early in life. Going to your dream school is nice but not if you have to pay for it the rest of your life. My counselor was all about applying to the best schools with little talk about costs.
Why aren't student's suing the counselors for malpractice?
But as you point out, the lenders are not taking on risk. The only ones who are silly in the deal are the students.
The system is really messed up. But when it comes to your individual student making that deal, it's often a dumb idea.
AFAIK virtually every financial institution has been pulled from student loans.
The U.S. government is now the only major lender.
I went to a major private university, and several years after I graduated they raised the tuition 24% in one shot. When asked why, they basically answered, "Everyone else did it."
It's time to revoke universities' tax exemptions when they pull shit like this, or are rolling in massive endowments, windfalls from sports programs, whatever. The regression of education in the USA at all levels marks the continuing decline of our society. We've gone back to book-burning in some areas. Now college is unreachable or a crushing burden. WTF.
7% interest on a loan in a year with 3% inflation (the real cost of having money that year) that is guaranteed to be repaid seems like evidence of corruption to me. But maybe I think too simplistically.
Prices will collapse to what people are willing to pay in real time, or save up for.
(And the disparate impact rule is politically and legally unpopular with the same faction that currently dominates the Supreme Court and whose members on the Court have shown an unusual willingness to discard precedent, so its quite likely it won’t be a limit on discriminatiom under those statutes much longer, either.)
And I said your argument for that is nonsense, since the government does lots that has racially disparate impacts.
“Disparate impact” prohibited by the rule isn't just unequal impact, its unequal impact without sufficient justification (what qualifies for that differs between the employment and housing contexts where the rule is applied.)
There needs to be a middle ground where we support poor but promising students in a way that doesn't inflate prices. I don't know what that solution is.
I hear this a lot, but I don't understand the argument to be honest. If someone is poor today, then they can take an exorbitant amount of debt that they can't discharge in order to attend university.
In a world where loans are dischargeable in bankruptcy and the federal government limits subsidizes loans, we'd expect prices to fall somewhat and rates to rise somewhat. It seems like we would still expect the poor student to be able to take on a large amount of debt to attend university, though, no?
Additionally, discharging student loans in bankruptcy should absolutely not be a way to get off scot-free, it's meant as an escape valve. If your options are the terrible downsides of declaring bankruptcy and the terrible downsides of a life in extreme debt, neither option is great, but having the choice is useful.
If a really smart poor person wants to become a really smart rich person by pursuing a degree in film studies, it's reasonable (in my opinion) for a bank to say "borrowers whose only education is a bachelors in film studies tend to have trouble paying back loans, so we won't lend you very much".
If that very smart poor person is pursuing a degree in accounting or engineering, though, most banks can do the actuarial work to determine that the likelihood of payment is pretty good.
This all seems totally fine and fair to me. And if the really smart person does have trouble paying back their loan, bankruptcy can be the absolute last option they resort to, just as it is with most other loans.
And also if they did do that, we get back to other problem which is that schools will only offer programs that lead to high paychecks making them just job training and not places of overall learning.
Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? I would absolutely argue that a poor student would be better off being unable to obtain loans for a degree with poor returns then they would be taking on mountains of debt that they can never discharge.
For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.
We haven't absolved them per se. At first they tried to get the data and make smart decisions, but there just wasn't enough data for them to make good decisions, so they denied everyone. That's why the government got into the business of backing the loans in the first place -- it was the only way to get the loan companies to make the loans.
> For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.
There wouldn't be enough students to support that, because amongst those people, many would still choose the lucrative majors.
> Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing?
Now we have a philosophical debate. Do we want to live in a society where no one studies philosophy, poetry, art, music, creative writing, and so on? Ironically, someone who studied philosophy would probably be more suited to answering this question than I am.
In my view, current government policy is actively enabling people to dig themselves into holes of debt which they'll never be able to get out from.
It's great that people are choosing to study art, music, and philosophy. I personally have a degree in music, and it's one of the great joys of my life! Whether the government should loan me an absurd amount of money strictly for those pursuits, though, is a different question. There's great value in history, but I think most people would hardly endorse a government policy of loaning anyone a few hundred thousand dollars in living expenses to go to their public library and read about the Civil War for a few years.
Also, it's completely feasibly to encourage a broad range of studies while also conferring a degree in an employable field. This is the model of liberal arts schools: you study art, music, philosophy, literature, etc. but you can leave the school with a degree in an employable field.
As far as I understand it, your belief is that without the government lending people money with minimal constraints, fields that are less employable would go away almost entirely. I don't agree that this would be the case, but if that's where you're coming from I think that's a reasonable enough disagreement that we can land on.
After Rounds of laughter. “If I failed to pay, the government will pay you back.”
Bank. “Here’s 10 million dollars. Let us know if you’d like more. “
Banks and other lenders do basic sue diligence all the time. It’s government that screws this up.
What you're saying here is that only rich people get to go for degrees which don't have a guaranteed return on investment. Is that the kind of society you want to live in? Where only the rich can study philosophy, or history?
Alternatively, university could be paid for like K-12 is and everyone could have a chance to go, or go into a trade school. You'll have a much more educated, diverse society and kids don't need to worry about bankruptcy and crushing loans.
After that, it becomes more prescriptive around roles of operation, and that's murkier. For example, I'd be happy to see hard caps on $ of operational budget spent on admin. I'd also be happy if sports was budgeted for separately and that student athletes were separately admitted to both their sport(s) and for academic study. There are many things states could do that would impact how schools are managed, regardless of the federal government's rules for student loan lending.
Also, prices should fall a lot, making school a lot more affordable.
Proper thing is for the government to stop issuing the loans, and instead do need-based grants plus establish cost and quality controls for institutions that wish to be grant eligible, while prioritizing federal institutional funding other than direct student aid for institutions that, whether througj grant eligibility or their own pricing and in-house aid programs, or both, meet set financial accessibility standards.
Australia effectively has price controls on both health and tertiary education. It isn’t perfect but it is hardly terrible.
I know the US pharmaceutical industry hates it - the Australian government uses its monopsony power to limit drug prices and hence drug company profits - and is forever lobbying the US government to use trade negotiations to pressure to undermine it (but hasn’t yet succeeded)
Universities can charge as much as they want - but if they want students to have full eligibility for government student loans and government tuition subsidies, there is a maximum they can charge. Students want that full eligibility, so for the majority of places they stick to the maximum
Reality is that there are so many other factors that it’s probably better to have some sort of price control as a form of regulation, instead of only focusing on supply/demand levers.
I’m not an economist so I’m happy to be proven wrong, but the stance of “x,y and z policies need to be implemented so supply/demand is changed to mitigate these issues”, but the reality is that politicians and the business landscape doesn’t incentivize such changes. For example, colleges aren’t incentivized to keep the cost low, housing construction isn’t incentivized because NIMBYs control what can be built where, etc.
So when someone says “well the economists don’t agree on that”, it really rubs me the wrong way.
They're probably upset the same way that climate scientists get upset when people dispute climate change; that is, it's a widely-studied phenomenon by economists of all political persuasions with lots of evidence to back it up.
A price ceiling causes a shortage, like cars lining up at gas stations during the 70s oil crisis or the 10+ years of wait time in Stockholm apartments. A price floor causes a surplus, like unemployed workers at the minimum wage.
In such cases, when there does exist a consensus, it's probably correct.
Mainstream economists have thought very different things at different times. The current mainstream orthodoxy is largely free market fundamentalists that took over in the 80's. There are heterodox economists that disagree with this view. Practically, there are also many examples of price and rent controls and de-commodification "working" throughout modern history and currently on other countries.
You argued that econlib cherry-picked economists to generate a biased result, which you then followed up by acknowledging that "mainstream" economists do not support price controls, which is exactly what the survey showed.
There is, in fact, a broad consensus among economists that price controls are generally counterproductive. The econlib survey showed it, the wikipedia links support that, and you apparently agree. So... thanks?
To illustrate this, consider the following hypothetical survey.
Survey:
"Is murdering babies wrong"?
End Survey
Essentially everyone will respond with a strong yes.
By your logic, if I don't include a dissenting opinion, the poll is necessarily biased.
Of course that's not correct.
The purpose of a poll is to understand the opinions of a population by understanding the opinions of a randomly selected sample of the population. If the population has strong opinions on a given topic, the survey will return lopsided results. That does not make the survey biased.
If however you seek out people with opinions to the contrary for the sake of including unpopular opinions, THAT DOES bias the survey, because the survey sample is then no longer randomly selected.
The primary reason price ceilings are criticized by "both sides" is because the shifting Overton window has resulted in both the Republican and Democratic parties having quite neoliberal views. In an international context the two sides of the aisle can be described as "right" and "far-right".
[0] https://educationdata.org/average-cost-of-private-school
Btw private school looks quite affordable. I used to think my neighbor was rich, they were, but for only $20k/yr you can send 2 kids to private school? That is cheaper than daycare.
Your use of generalizations seems radically inconsistent.
If you're paying $20k for private school, and there's a free option (public school) - you obviously have a healthy amount of disposable income.
The link says the average for HS is $15.6k; if that's a mathematical mean, that's going to be driven up by a handful of very expensive schools.
> and there's a free option (public school)
Most public schools in the US are garbage.
> - you obviously have a healthy amount of disposable income.
Or make frugal choices elsewhere, or receive scholarships/ financial aid, likely both.
Yes, that's right, parents can drive an older car and skip buying a bigger TV and cook at home and save money in all kinds of ways, and private schools offer scholarships and financial aid to advance missions of service.
Most people are already doing that and still can't spend $20k to send their children to a non-"garbage" school.
The study also does average and median prices and increases.
Of course there is variability. What does you living in a higher cost of living area have to do with the points in this thread. Are you distributing?
Or just wanted to note that there are outliers that factor into the average? Maybe there’s something noteworthy about your private schools, but please add more info.
Please correct me if I've made some mistake, but plugging those numbers in shows that the annualized real increase in price is 0.5% per year over 20 years. Looks like doing the same thing for public 4 year college over the same timespan results in an annual real increase in 2.1%
Edit: it looks like there is an error on this page. The bar chart the numbers are much higher. Anecdotally, private high school is always more expensive than private elementary. That is what the bar chart shows but not the bullets.
One half is easy access to loans, the other half is student debt relief programs.
Between the two, colleges know they can charge absurd prices and pocket the money.
It's awful, and I wish someone was doing something to stop this. It cannot go like this forever.
...which student debt relief programs?
Afaik there are no widely used student debt relief programs.
"By the department's last count, only 1% of the people who think they've made their 10 years of payments and apply for loan forgiveness are getting approved.
If you took all the people getting rejected and got them together in one place, Peterson says, you'd have "football stadiums full of nurses, firefighters, teachers, law enforcement officers that are seeking to have their debts forgiven.""
Its only half the problem because you'll still see inflated housing as well but at least its something.
1) Increased demand.
2) Increased what the market could bear.
The result is Economic 101. There are no surprises here.
p.s. Note: Roughly the same applies to mortgages. The idea that more affordable mortgages (i.e., 30 yr) was going to make homes more affordable, is comical at best. With a relatively fixed supply, increasing demand is only going to have one effect on price. And the solution? The 40 yr or 50 yr mortgage.
Round and round we go.
1. State govs have reduced funds to all public colleges. 2. Fed gov has refused to increase grants such as Pell on inflation basis.
And that is way before the other forces of price increases and demand increases.
i.e. when you are helping someone (a friend, relative) you don't pay interest. But when it's a business loaning the money that desire to help doesn't exist, and it becomes a business partnership instead.
https://en.wikipedia.org/wiki/Loans_and_interest_in_Judaism specifically: "Heter iska". And https://en.wikipedia.org/wiki/Murabaha for Muslims (I think there are other forms as well). A copy of a Heter Iska: http://www.jlaw.com/Forms/iska_d.html
Fees are one option. If you agree to a 2 year loan of 100$ as long as they pay you back 110$ that’s acceptable, the difference being if it takes them 3 years you still only get 110$. Obviously this runs into problems with inflation and people skipping payments etc, but it’s one socially “fair” way to handle loans between friends and family.
The Medici bank gained lots of their money from foreign exchange speculation issuing a sort of option for buying foreign currencies at a specific date (this would probably be a lot harder to do today), you could also charge late fees with the social understanding that paying a loan back on time is really bad for your credit score. I guess a modern conglomerate might make money by putting certain terms in effect: You want to build a house but need some money to do so? I will lend you the money if you contract my contractors to build your house. A university could lend you the money but keep charging extortionate tuitions as long as the cost for the education service is unregulated.
Almost impossible to imagine given the current state of the economy where every possible thing you can imagine has been commodified.
>Jesus went into the temple courtyard and threw out everyone who was buying and selling there. He overturned the moneychangers’ tables and the chairs of those who sold pigeons. He told them, “Scripture says, ‘My house will be called a house of prayer,’ but you’re turning it into a gathering place for thieves!”
- Matthew 21:12-13
>If you lend money to my people—to any poor person among you—never act like a moneylender. Charge no interest.
- Exodus 22:25
KJV used the word "usurer", but it's the same idea.
It is where the whole "Jews are greedy bankers" stereotype comes from: during the Middle Ages Jews were allowed to charge interest to non-Jews, so they were essentially the only people who could act as bankers for Christians. Combine that with a large dose of racism keeping them out of a lot of other jobs, and you end up with a lot of Jewish bankers.
I feel you also need to argue: "18 year olds don't realize they are being ripped off", or "college is actually worth that much". It's probably a different answer for different students.
Most other developed nations manage to send every smart kid to college for ten thousand dollars per kid or less. Once again, it is only the US that thinks it is a special butterfly that can't somehow manage to give kids college. Sure, most European colleges don't spend one billion tax dollars on a football stadium, but that is also a good thing.
And no, those sports complexes largely DON'T pay their own way. A significant amount of college sports don't make much money, and don't give it back to the campus as a whole, and that's WITH literal free labor of NCAA athletes.
And yes, college sports on the whole does pay for itself. Those stadiums are built by donated money, and revenue from ticket sales. Yes taken in isolation there are a lot of sports that don't make money, but they are subsidized by those that do (chiefly football and basketball). Sports stadiums are not the reason tuition has inflated by 700%. They are two separate pools of money. If you got rid of sports entirely it would not affect the finances of the academic side of the university at all.
Those are certainly “functioning societies” but their economies are much less advanced than in the US. It’s not realistic to say that an advanced economy can get by with education ending at age 18.
Does this mean ability to read, write, and do arithmetic? Does this mean the ability to speak and read Latin with an understanding of the classics and the Bible? The ability to fix a car and build an engine? Program a computer?
One could argue that a university does very little to make a populace more educated, since they can already read, write and do basic math (or should be able to) to get into school. Is taking psychology making one better educated? Maybe? Maybe not.
Realistically, the basic information will be similar (basic science, health, reading, history, and so on) but we'll have different areas of interest and skill, so the exact subjects will be individualized to an extent and will definitely change over time as the world changes. You can't say for certain that psychology will make you better educated, but an introduction to the basic field might open someone's mind to being educated in that field, which helps society at large. Other things will be more esoteric: Go to art school, work in retail, and happily make art doesn't have the same sort of immediate payback - but chances are, they are more likely to be a bit compassionate just by having the education.
No matter how curious you are, you tend to benefit from learning from others. There is more to university than learning from books. You wind up being around folks you wouldn't otherwise be with. For some folks, it is their first experience being without supervision. And stuff like that. It doesn't need to be university for all so long as there is some sort of schooling that meets these needs for folks. We can start doing adult-lite at 15/16 and have people move into dorms their last couple of years. Doesn't mean that a lot of folks wouldn't benefit from university or something akin to it: A chance to have an intensive course learning another language, for example, with the goal of fluency.
You can't force anyone into being kind, and some folks are simply going to be sour. We do start teaching folks as children, after all. Make peace with the fact that some individuals aren't going to be: That's OK so long most folks are and it shows in society and programs that help others.
Universities build on this so that people can do more than just the three R’s…
> Is taking psychology making one better educated?
Yes, without a doubt.
https://www.pewresearch.org/social-trends/2019/02/14/millenn...
However, to the extent that education enables better income opportunities I agree. Education can reduce economic inequality which is a huge barrier to social cohesion and civic trust. However education isn’t the only path to better wealth distribution.
Now that burden is put on each and everyone of us with social media and other alternative media. People from the Silent Generation are drowning in todays information age.
Tuition, usually. Books, maybe. Room and board, ha!
As an anecdote, it cost less for one of my kids to go out of state to a private college than in-state to a public university; tuition at the public university would've been free, but the private college offered scholarships and financial aid that fully covered tuition and most of on-campus room and board.
Sure, my kid could've gone to a community college and lived at home, but the education would have been far worse, food isn't free, and it's harder to build a community when folks have to leave in the evening to travel 30-60 minutes in any direction.
That's the thing that people don't understand about private universities' tuition prices: They're not real. The really rich kids are paying more, through donations and the like, and most students are being offered substantial discounts through both need and merit based scholarships. The inflated tuitions are all about A) signalling prestige and B) redistributing money from the rich and dumb to the smart and less wealthy.
There’s a growth in admin [0] that I think is the proliferation of the most bullshit of bullshit jobs. It’s weird that I think the issue is much worse by basically funding all these admin positions that pay more than actual instructors and researchers yet I’m not sure what they really do.
I’d like to see universities advertise low admin:student and admin:instructor as measured of quality.
[0] https://yaledailynews.com/blog/2021/11/10/reluctance-on-the-...
https://oir.yale.edu/data-browser/faculty-staff/faculty/facu...
Universities are not just educational institutions. You can't just compare students numbers to employee numbers without also examining what the university does.
I don’t understand your point.
Do you dispute that admin staff have grown at a high rate?
My point is that universities have too much admin and that it’s growth quickly. I think it’s perfectly reasonable to compare this trend without knowing exactly what specific universities do.
I agree that comparing medical system admin staff wouldn’t make sense, and the article I linked excludes medical system and other non-university staff.
For example, a teaching university like Central Washington University has 500 faculty, 500 admin, 11.4k undergrads, and 900 post-grads. They do research at CWU, but their primary focus is teaching.
https://en.wikipedia.org/wiki/Central_Washington_University
In comparison, UTHealth Houston is a medical university and has 2.1k faculty, 5.3k admin, and 5.2k students. UTHealth requires far more staff than CWU because it has a different focus.
https://en.wikipedia.org/wiki/University_of_Texas_Health_Sci...
Finally, Stanford is a mix of the two and has 2.3k faculty, 15.3k admin!, and 17.2k students. (Stanford includes the clinic staff in their numbers. I think that clinical staff is split between Yale proper and the New Haven hospital.)
https://facts.stanford.edu/wp-content/uploads/sites/20/2021/...
---
This brings me back to Yale. From the article:
> In 2003: 5,307 undergraduate students ... 3,500 administrators and managers. In 2019, before the COVID-19 pandemic’s effects on student enrollment, only 600 more students were living and studying at Yale, yet the number of administrators had risen by more than 1,500 — a nearly 45 percent hike.
So the first issue is with the student number. Yale had 12,438 students in 2019, an increase of 1278. This isn't a huge issue because the % increase is the same, but leaving out grad students is a huge oversight.
> 2003-p19(21) 11,160 students; 5,307 undergraduate, and 5,853 ... Graduate [students]
https://your.yale.edu/sites/default/files/2002-2003_annual_f...
> 2019-p7(9) 5,964 undergraduate students ... 3,032 Graduate [students] ... 3,442 [professional] students
https://your.yale.edu/sites/default/files/annual-report-2018...
Secondly, the admin:faculty ratio has decreased. Yale expanded their faculty from 3.2k to 4.9k, which is +1.7k (+53%). This tells me that Yale increased their research focus and are not (necessarily) bloating their undergrad program.
> 2003-p22(24) The University employs approximately 3,200 faculty, 3,500 managerial and professional staff, and 4,000 unionized clerical, technical, service, and maintenance personnel.
https://your.yale.edu/sites/default/files/2002-2003_annual_f...
> 2021-p13(15) With 4,937 faculty, 1,428 postdoctoral associates, 5,066 managerial and professional staff, and 5,205 clerical, technical, service, and maintenance personnel
https://your.yale.edu/sites/default/files/2020-2021-yale-uni...
The overall average trend in the US is for administration costs to increase and instruction costs, relative to admin, to decrease [0]. Some universities will vary, but the trend is important to look at overall.
A) Yale is a research-heavy university so the admin:student ratio shouldn't be expected to be constant. B) Yale's admin:faculty ratio decreased from 2003-2021, directly contradicting your claimed trend.
This is the exact problem. Whoever makes the loan has an incentive for eternally increasing prices.
I can’t think of an easier way for e.g. China to win the 21st century. American undergrad enrollment is already down. As the world gets more technical, that is not a good sign.
When an entire generation of Americans are priced out of higher education, who is going to develop the technologies of tomorrow? Should we assume foreign students will always want to come to our schools and stay to work in our companies? It’s not sustainable.
Right before I graduated, my school decided to build a new football stadium, because they decided using the city's stadium wasn't attractive enough for students. They promised tuition wouldn't be used to pay for it, and it wasn't. We just got something like $500 added to student "fees" instead.
I have no sympathy for universities and colleges in the US, only for the students who were duped into thinking they didn't have another choice.
"Too many piglets, not enough tits" -AL
Either the US will figure it out like every other developed nation has seemed to do, or there will be grave geopolitical consequences. Whether the US political/economic machine can figure it out is a question that only time can answer.
That's a very dangerous road.
Governments are not some benevolent creature which always acts in the best interests of the People. As a practical matter, governments are usually incompetent and corrupt (usually in that order), and try to get the masses to further the interests of the politicians, the bureaucrats and the donor class.
I want an educated populace. For that reason, I want government as far away from it as possible.
IMHO, easy access to credit is one of the best things about the American economy, and hiring MBAs to manage things that aren't for profit corporations, one of its worst aspects.
Not-for-profit businesses are still businesses; they need to take in as much as they spend, whether it's through fees for service (e.g. tuition) or donations. Colleges and universities in the US spend a lot of time begging alumni to donate money.
And yes, there is education and training specific to running a not-for-profit _business_, and many GOOD leaders have MBAs. I have watched a lot of them fail because the folks at the top did not manage money well.
One of the most crucial components of operating a 501c3 is the financial statements reporting requirements[1]. From an accounting perspective, the organization cannot keep retained earnings (owner’s equity) balance at year end since there are no owners. Rather than having retained earnings, 501c3s deal with net assets, which no person can have ownership of.
The crucial thing here is that the business does not retain profits at the end of the accounting period. However, it can earn what we would call profit in a non-501c3 scenario and then use that money for business activities, paying employee wages, investing, etc. Accordingly, a 501c3 can take in more than it needs to spend. It just has to properly handle that excess money to meet the accounting standards.
See the Wikimedia Foundation’s financial statements[2] for a great example. They spend a minuscule amount of their net assets on actual business expenses. They spend quite a bit on wages, travel and conferences, and various other things that are arguably unnecessary to serve their core mission. However, they follow all of the accounting guidelines and are therefore granted reasonable assurance that they are fairly representing their financials according to KPMG.
Back to the initial topic, it’s now clearer to see why and how a university such as Harvard can be a 501c3 and bring in exorbitant amounts of “profit” that probably do not better serve their core mission as an education center. However, it’s all about following rules and how you spin it. Harvard isn’t begging alumni for donations because they need it. They had $61B in net assets at year end[3]. I think it’s completely fair to argue that Harvard doesn’t need that much money while they deliberately stay at their current size. In fact, I would argue one step further that they have so much money on hand, they shouldn’t even be charging tuition. Their $59B investment portfolio makes up the bulk of their net assets. From a book perspective, they are essentially an investment fund with a university attached.
Looking at a public university, the University of Texas ended the year with a $66B net position[4]. They paid their football coach over $5[5] from their massive pool of assets and are still paying their former head football coach tens of millions of dollars.
I would be interested in hearing if there are universities in Europe that operate like this. Quickly looking up the aggregated statement of financial activities for all Oxford colleges[6], I see that they had a 63M£ expenditure (loss) but carried forward 1.35B£ to end the year with positive funds carried forward of 1.36B£ (after a prior year funds adjustment). That’s incomparable to Harvard. As a CPA (who is not an expert on UK tax law), Oxford’s financial statement appears much more inline with the spirit of what I imagine a non-profit university should be. Harvard and the University of Texas look like two of the most successful companies in America to me.
[0] https://www.irs.gov/charities-non-profits/charitable-organiz...
[1] https://www.fasb.org/document/blob?fileName=ASU_2016-14.pdf
[2] https://upload.wikimedia.org/wikipedia/foundation/2/26/Wikim...
[3] https://finance.harvard.edu/files/fad/files/fy22_harvard_fin...
[4] https://www.utsystem.edu/sites/default/files/documents/repor...
[5] https://www.texastribune.org/2021/02/22/steve-sarkisian-sala...
[6] http://d307gmaoxpdmsg.cloudfront.net/collegeaccounts2122/agg...
- Do your first two years at community college. A lot of states have zero tuition costs for community college credits. I think in all 50 states its the absolute cheapest way to do get your first two years done
- Enterprising students may realize that if you're married, FAFSA (which is used to compute both federal and state aid) will use your married income and not your parents. Most students make little to money while in school. This automatically games the algorithm in your favor. Tricky to manage socially.
I’ve heard of other FAFSA games as well - last I heard the parents’ cars and primary residence were excluded from the FAFSA expected contribution calculation so middle class folks with a fat savings account might decide to buy new cars or pay off the mortgage or do something similar to make the cash “disappear”. Deferred compensation plans are used along the same lines for income. The fact that such games are viable is a shame but probably unavoidable unless we have government foot the bill for college.
The FAFSA is such a load of horseshit I don't even know where to begin with it.
If you have a kid who doesn't really know if they want to, say, be an engineer, then a 2+2 plan that they realize they aren't cut out for during the cheap years probably is a huge price save. But for the kid with the tools to succeed in school, a passion for a field that pays well, and the opportunity to get into a 4 year, they should absolutely just go for it off the bat.
The other problem with the 2+2 is that you're sacrificing 2 years of one of the biggest advantages of going to competitive universities: meeting other students who could get into competitive universities. I met most of my friends I made in college in the first 2 weeks, freshman year. It's probably the single easiest time in anyone's life to make new friends and acquaintances. And those friends, beyond being invaluable to me for social and romantic reasons, also have benefited me financially: one friend's dad got me an internship, which I was able to leverage into my first job. I got my second job by no small part thanks to the recommendation of another friend who already worked there. Looking back in time, the ROI on the bottle of vodka I brought to the dorm nextdoor move-in weekend is likely in the ~10,000,000% range.
Transfer students get a greatly diminished version of that opportunity. By their upper-division levels, most students are spending a lot more time on school work, and much less time randomly meeting their dorm-hall mates. It's still possible to meet people, and my high-school friends who did the transfer route did meet some people, but there's a much greater than 50% loss in networking opportunity.
So we need to resolve that issue as well if we're to stop federally backed loans. There's more things at play as well and the convoluted mess is the real reason we haven't solved the problem. Realistically, this is probably true about most of the larger issues we face. I'm concerned that over simplifying the problem statement results in an over simplification of the solution and it just causes us to argue (which can be supported by evidence) or take ineffective/theatrical action rather than actually resolving the problem (meeting the intended goals (plural)).
We can keep having this conversation over and over, but it has happened for well over a decade now and no real progress has been made. We gotta start looking at the actual complexity of the situation as first order modeling isn't good enough.
Everyone says that, but I've not seen much actual evidence.
I tried to find evidence, by looking for tuitions of various major universities over time and seeing if there was any clear difference in the tuition growth rates before Federal loans and after.
I know the data is available. Most schools list tuition in their catalog, and have their old catalogs in their library, but it wasn't turning up in. Google searches.
I was only able to find historical data for Stanford, giving tuition by decade, and one big state school whose name I don't remember. Here's a graph of log10(Stanford_tution) over time [1]. I don't have a copy of the graph for the other school but recall it was similar. It looks like it has been growing about the same for a century.
I also remember comparing tuition rate increases to inflation, and found that tuition has grown pretty consistently at roughly 2x inflation both before and after Federal backed loans.
But grants, you say! We can avoid loans. Not so fast. If your parents made a certain amount, they are fully expected to pay a certain amount for their now adult children to go to college. To qualify for any aid, you need your parents’ income, demanding that A middle class family may still be fully expected to pay multi-thousands of dollars. The student must then take out loans to pay for the rest, which might be the full amount.
This is certified, nonsensical, bullshit. No credit system in history has been given the grace to royally fuck over generations of students, saddling them with loans that cannot be discharged, whose amount is effectively dictated by the institution that is charging tuition. This is a scam at the highest level, sanctioned by the federal government, and perpetuated by every adult figure in the students’ life.
Systems where there is competition, but where efforts are made to make the service providers not really have big advantages for cutting costs, will get you bad outcomes. It's just unfortunate that avoiding needing healthcare, or going into many careers without paying for the very expensive college degree, is such a big gamble.
A fully public system would be very different. An unsubsidized market system would also be very different. Either one would be dramatically cheaper than what we have, which gives us the worst incentives of both worlds.
https://www.nytimes.com/1987/02/18/opinion/our-greedy-colleg...
Here is something interesting:
Easy access to loans may create large amounts of debt, but increased tuition fees are mostly -- though I admit my research isn't exhaustive -- a function of an effective decrease in governmental funding per student.
Remove this "free money guarantee" and watch how market corrects itself. When students can file for bankruptcy and/or the debt is not guaranteed by Govt, lenders would now use the same criteria they use to issue credit cards to 18 year olds. Hint: It's tough to get your 1st credit card if you have no credit history in the US and most lenders will not even entertain that idea. Some will do if you put in a collateral like $500 of actual cash deposit to guard against the default risk.
When lenders stop lending or get strict, colleges will have to consider how quickly and by how much they keep raising costs.
They won't go after your estate for the balance.
So schools and lenders are acting as if it’s true.
If the government is going to step in and provide direct funding, it will almost certainly only apply towards community colleges followed by local state schools.
People from low or mid-income families have access to scholarships and funding. Kids from ideal backgrounds don’t take out loans.
If you’re saying schools get a blank check via grants and scholarships, then I’m not seeing how that fixes the issue.
This problem feels super similar to the Us health care system. Those with blank checks for pre-negotiated prices (have health insurance), pay low healthcare costs, and those without pay insane prices. Overall everyone is paying insane prices.
Can you explain your reasoning more?
It might be relatively common for low income to get full rides or near full rides, but anyone in mid-income is getting saddled with tons of debt.
I applied to college in 2011 with a household income of like 95k, with an older sibling already in college, and most "financial aid" packages from state universities added up to between $60k-$160k total debt for four years. Going out of state to places like Ohio State, Maryland, etc. was already $50k/year back then.
This was inclusive of significant amounts of merit-based scholarships. Most (all?) schools do not allow you to stack merit scholarships with need-based grants. If you earn a merit-based scholarship, they reduce your need-based aid by that exact amount.
Assuming this is a Supply vs Demand problem, blank checks to more people will increase the demand for the services, but does not modify supply or competition for the demand.
Increasing demand with static supply will keep tuition increasing.
Because the government has determined that you or your parents make enough to pay for school on your own should you prioritize it financially. The low income people could not. For reference, my families household income was near $25k/yr and I got the first two years covered by a Pell. For $95k/yr you could certainly afford college.
No. For 95k a year for a four-person household you certainly could not afford to send two children to universities that were $50-70k/year - which was the price of standard state universities at the time. Not without going into significant debt.
My parents scrimped and saved for decades and commuted hours every day to teach in higher-paying school districts while living in a low-cost-of-living areas and I was awarded all kinds of academic scholarships and I still had to go into debt and work all the way through college. And they were lucky enough to be working when the school districts would still give yearly raises, which has all dried up now.
The financial aid calculations that determine "ability to pay" are just bullshit to make you take out loans.
Maybe start with what city you lived in yea?
I said I was mid-income (just below the median household income for our area at the time) and that it's the mid-income families that get saddled with tons of debt, and the idea that there's financial aid and scholarships to cover that gap in the middle income range is a fairy tail.
When I transferred to a 4-year, I once again filled out the FAFSA and was eligible for an interest-free loan which covered the difference between tuition and my Pell Grant.
Really, the current grant system doesn't work.
We should tell the universities they must provide needs-based grants on their own and prohibit using ability to pay during admissions - or they don't receive federal grants. This way they aren't incentivized to continue to bloat costs (as happens now), since now the school is responsible for the costs.
There’s at least one site showing (oddly enough) private schools with lower tuition than Penn State as well as some non-private [1], but you’re still over the max of a Pell grant
1: https://www.bestvalueschools.org/cheapest-colleges-in-pennsy...
No, tuition rates at some schools are absurd. Max Pell Grant is enough to cover tuition at the three universities closest to me.
I went to community college in 2009. I filed my FAFSA and if I recall correctly, my Pell grant was $300/term. Meanwhile, tuition was $115/credit. My full-time class load was nearly $2,000/term once you included the books.
When I transferred to the state University, tuition was double that and my Pell barely changed.
I was 27 years old when I started college, working at a Subway restaurant for $10/hr, had no savings, and parents that did not give me a dime after I moved out at 21.
I finished my degree with $45K in debt.
The amount you get is based on your financial need amongst other things, so likely your parent could afford some amount of tuition from the govs perspective.
Max for a Pell grant is about $7k/yr atm
Oh, they absolutely could have, but they didn't. Pretty sure the FAFSA even had a line about money coming from others, and I put $0.
And so I get a little salty when my peers talk about being short on money because they're paying for their kids' college.
Whatever, though. I'm making good money now, and I can accurately say that I'm a self-made man.
Think about free education like you think about universal income, except free education is not an experiment with limited data to back up it’s value, but rather a tried and trusted policy with ample data to back up it’s success.
It is also a bit unfortunate that you view education that doesn’t lead directly to a career to be “worthless”. You learn a lot of skills when you get university education, including but not limited to knowledge about the field at hand. If you get education in one field and then go into industry in another area, you will take those skills with you, and the industry at whole will benefit from having a wider skillset among its workers.
For sure there are crafts programs and vocational schools which teach basket weaving, surely you must see the value in maintaining the craft of basket weaving and for there to be skilled basket weavers out there weaving quality baskets, and those interested getting into the industry of weaved basket, there should be an available avenue to learn this skill.
I’m guessing you’re not from this background?
Low income people have a huge amount of programs available to them that decrease or entirely remove that disadvantage. as one example over 20 years my school district placed imacs and cable internet connections into low income homes for everybody in the district that qualified, and paid the internet bill for a year.
What is "merit" for access to education?
Is that true these days? At my university 20 years ago, the credit card companies would bribe 18-year-old freshmen to sign up for their cards.
That was a “student card,” so optimized for people who don’t have a credit history. After having that for a while I was able to leverage it into standard rewards cards.
I'm still FB friends with the girl that gave me a free t-shirt for signing up. LOL.
The conventional wisdom at the time was that (a) we were college students and were therefore more likely to have earnings in the near future to cover those small credit limits, and (b) we were college students and were therefore more likely to have parents to bail us out if we got in trouble with the credit card, and (c) there's no better time to snag a lifetime customer than at the very beginning of their adult lives.
The students working in the mail-room of my dorm were ... less than meticulous about sorting. My bills occasionally went to the wrong box, leaving insufficient time for me feel safe that my payment would arrive on time. When this happened with Discover, I just called customer service and they said they'd waive the late-fee since I called in advance. It happened once with Citi, I called and they said I would have to do an electronic payment with a $10 service charge. paid the bill and immediately canceled the Citi card.
Guess which (of Discover and Citi) I'm a lifetime customer of, and which one I will never sign up for again.
P.S.
After re-reading the above, it strikes me how much of a "period piece" the comment is. The bill arrived in the mail, I had to mail in payment, and I spoke with a person on the phone when I called the credit card company.
Ha. I mean, I got a free CD, which itself dates the story. But even more old-timey? That Citi card I referenced above was actually an AT&T Universal Card. The "Universal" was because it was also a calling card! On the back was a separate number I could use to place calls from a payphone, at cheaper rates than dropping coins into it.
It's been many years since the card had that feature, but the branding relationship must be strong, because it's still called that, and my card still sports an AT&T logo on the front.
The reason student loans aren’t dischargeable in bankruptcy is because it’s basically literally impossible to collect on them, you can’t repo a college education
You can revoke the degree. Given that most people out of school don’t remember most of school anyways this should be enough for most.
This was about 5 years ago.
My parents didn’t co-sign, though I did use their incomes for the “household income,” which I don’t believe was a lie.
There needs to be some formal patronage of the arts, but I have no idea how to pursue that.
While I agree, I can't imagine what it would be like for the first generation of students under such change. The reason they are government backed is to make college a possibility to begin with.
First ones in line would probably get massively screwed, no?
No, College education will become cheaper, mechanically. Right now, it's the government that is highly distorting the education market with that loan system under pretense of allowing everybody to get an education.
Agree with everything you say, except for this.
Allowing student loans to be discharged in bankruptcy will result in millions of students pulling that lever as soon as they graduate. They, of course, get to keep their degrees and use them to make money their entire lives.
If you file for bankruptcy and, for example, want to keep your car (which has a loan), you have to reaffirm that debt and continue paying. Same with your home, etc.
Student loans provide you with a valuable life-long asset. Allowing discharge simply isn't right and is economically destructive. How about I BK, discharge my mortgage and keep my house forever? Same thing.
I agree 100%, government has to get the hell out of the student loan business. Universities and students need to be forced into a situation where risk is assessed and loans are issued --or not-- accordingly. The university has to have risk. And students have to be held to their commitments.
The other problem the current system causes is what I call "course padding". Most degrees in the US have a year (or slightly more) of coursework unrelated to the field of study. In the case of STEM degrees, students spend a year or more on non-STEM courses.
This is detrimental on many fronts.
First, the time to graduation rate for undergrad is 33% longer than it would be without this irrelevant coursework. No employer cares about this stuff for STEM degrees. Some might differ wit this. OK. Let the free market decide then. If Google wants engineers who have taken three semesters of Underwater Basket Weaving History, the free market will drive students to take those courses as enhancements to the required curriculum. They should NOT be conditions for graduation at all.
This would reduce a typical engineering degree from four years to three.
Second, these non-major courses add 33% to the cost of a typical STEM degree. Whatever a year costs at a school (including housing, etc.), that's what they add to the student loan. That could mean $30K to $70K. This is horrific, unnecessary and counterproductive. If the student wants to take these courses because they add value and become additive to their career, they can make that decision --not be forced by government into it.
If government wasn't in this business, bullshit degrees and bullshit unnecessary courses would cost a ton less and some would completely evaporate from our universities. A few weeks ago I was watching a show where this guy helps people deal with debt. This poor fellow had over $250K in student debt for a degree that might not even make him $50K a year. The only way that happens is in a distorted market, one that is distorted by government in favor of what usually ends-up being political agendas disguised as good intentions.
The other element of this equation is our failures in K-12 education. Again, government (and union) meddling has caused much of this.
Our 18 year old's graduate high school devoid of marketable skills. They are useless to most businesses without training and, generalizing, are ignorant about most things that matter as they transition into adulthood.
For example, they have no understanding of money and finances and no skills to help them make sound decisions. So, someone throws a $200K loan at them for a degree on Basket Weaving and they take the ride, not understanding they are going to make just above minimum wage and have signed-on to financial hell for the rest of their lives.
That is a failure in pre-college education. And a serious one at that.
Not everyone has to go to college. Our K-12 path fails that population as well. The average US high school graduate requires training to stack boxes on shelves and make coffee. That sure sounds like a formula for societal success, doesn't it?
At the end of the day, the problem might very well be that education, in the US, has become a political punching bag. One could come-up with dozens of scenarios to understand why we seem to insist on destroying our nation by not doing a good job educating our kids. All of them would seem insane to even suggest. And yet, here we are, it's 2023 and our kids rank below third-world-nation levels almost across the board.
This is insane. What are we doing?
What happened in the days before student loans become exempt from bankruptcy?
That might as well be another century. My guess is not many loans discharged by BK. I would also guess loan amounts were not insane, as they are today. I would further guess the no-discharge rule had to have origin in excessive defaults. Nothing happens in a vacuum.
Surprisingly (some) student loan debt can be discharged under bankruptcy per the CFPB: https://www.consumerfinance.gov/about-us/blog/busting-myths-...
What a mess.
expecting academia to be a job training program, reprimanding higher level general eduction as "33%" waste, trying to address the symptom (high loans) instead of the disease (why are they high) and pretending that cutting required courseloads wouldn't also reciprocate to higher tuition costs like every single time financial aid services like FAFSA increase, repeatedly posting out-of-touch "basket weaving" examples instead of allegedly any single other degree path with "bullshit degrees", having your only argument to discharging loans be that you can't repossess knowledge like you can cars, pretending this is an issue about students not holding "commitments" instead of addressing targeted bilking of a vulnerable group of people, trying to set up a cringe libertarian stance about government stepping in to "force" you to take courses and "distortions" from "political agendas" and anti-union sentiments completely irrelevant to any other issues anyone is talking about, creating huge fake scenarios of being hundreds of thousands in debt for fake degrees and passing this off as an even slightly applicable scenario to others, ... etc
> Our 18 year old's graduate high school devoid of marketable skills
it's really unfortunate for them that they had dead weight watching over them for 18 years, waiting for them to fail and to then immediately turn blame on someone else. it's not unknowable what they're being taught. the problem more and more seems to be that people like you have a voice in the world that someone might be fooled into believing is valid.
Wow.
It sounds like North Korea Would be fantastic for you. You never have to hear from anyone with any opinion outside the officially approved. You’d fit right in. Highly recommended.
i also notice you skipped any prior points to give a vapid reply while also doing the same thing you accuse me of (https://en.wikipedia.org/wiki/Accusation_in_a_mirror), so I'll correct myself from cringe libertarian to cringe lite-republican and highlight that point here as a way to lightly confirm that you don't have anything of substance to contribute besides mindless outrage
When I was looking for colleges in the 80s, the most expensive private schools were on the order of $20K all in. Those same schools are on the order of $85K all in, which is an increase of "only" (hah) 450%.
However, my alma mater (SUNY Buffalo) has increased in-state tuition 830% ($1300 to 10.8K). When I went to school there, minimum wage was $3.35/hr. That means that I could work 10 weeks at 40hr/week and pay for my tuition. That's the main reason I graduated without student loan debt. The NYS min. wage is $15/hr, so a student today would have to work 18 weeks to pay for their tuition.
We need to increase state funding for higher education.
As of July 2023, the average rent for a 1-bedroom apartment in SUNY College Purchase, NY is $2,696. This is a 12% increase compared to the previous year. https://www.zumper.com/rent-research/near-suny-college-purch...
It's one university, so I don't know if it applies to the others, but drops in state support is often excluded from these conversations.
While tuition at private institutions have also gone up, so has the amount of financial aid (scholarships) that they've made available:
https://www.brookings.edu/articles/college-prices-arent-skyr...
The result is that the net price hasn't increased all that much for the average student.
What does feel bad is turning qualified students away, like one school I know used to do.[1] Every year they would pick a GPA cutoff to admit more engineering students to the upper level classes you need to graduate, not based on evidence of students failing but on faculty headcount. It's a total bait and switch, and thankfully it seems they ended the practice right before the pandemic.
And it's tricky, we run teaching universities because we think there's some benefit to students being taught by practicing researchers. But the reality is that, especially in STEM, research funding is what matters more than tuition funding. Which in essence means in order to admit more students we need more research labs and buildings, because the 3/3 teaching load of a tenure track faculty member will not yield competitive wages.
[1]: https://today.oregonstate.edu/news/osu-college-engineering-c...
It's really screwy that a great many universities have essentially said there can be no long-term work situation for teachers if they aren't also researchers.
Increased costs at public universities are driven largely by lack of state funding. This is also in part because the number of students attending public universities has gone up tremendously but state funding hasn't kept up.
https://www.brookings.edu/articles/college-prices-arent-skyr...
https://www.nytimes.com/1982/12/28/science/california-weighs...
Apparently University of California used to be free.
What a damaging thought for him to put out there.
Since you could earn about $1500 working each summer, your maximum shortfall was $1500 per year (assuming no loans or grants), or $6000 per bachelor degree. At the CPI's 194% inflation, today that would equate to less than $12k of debt.
I'd also like to know how much nonacademic college costs like R&B have inflated -- when provided by the rapacious university system. They should have followed the CPI. But I'd lay strong odds they haven't.
Funding directly by setting a price cap, and paying vendors that amount for services rendered? Seems to work for almost every other developed country in the world.
With the monetary savings of #2, it could even give every medical student a fully free ride.
I love when someone says "seems to work". In the strict sense, that only ever means "does something". Not necessarily "does what someone wants"... and never "does what I want".
When it works for those other countries, does it "do what you want"? Because it doesn't "do what I want" at all.
> With the monetary savings of #2, it could even give every medical student a fully free ride.
Won't someone think of the millionaire heart surgeons in the 1%? They obviously needed free rides back when they started, it's why they're only single digit millionaires!
> Funding directly by setting a price cap,
Starving the people you want to provide your medical treatment isn't the brightest strategy. Increases to price caps are always reactive, after they've been complaining for years. The bureaucracy demands that it take years more to raise the price caps. And by the time that happens, they've been bleeding money the whole time. It's a strong incentive for them to do all sorts of things that you don't want... and if you do it for any length of time at all, it trains them to do these bad things so even if you realize the error of your ways and withdrawn the bad policy, they keep on doing the bad things.
Quite clearly, the problem with health insurance is that we need a gigantic insurance company larger than any other in history, and that it needs to be managed by the paragons of competency, the federal government. Of course, they'll need to staff up... and with all the layoffs in the private insurance industry, we'll hire all those empathetic, kind-hearted subject matter experts.
Should be the best thing ever. I can't possibly see anything that might go wrong.
If "better health outcomes per dollar" is not "what you want" -- how come?
[1] https://www.pgpf.org/blog/2022/07/how-does-the-us-healthcare... [2] https://www.piie.com/blogs/realtime-economic-issues-watch/wh...
IMO, if the US decided to actually help its citizens every country the average progressive considers "great at healthcare" would likely implode under the sudden increase in cost. The cost of medication alone would likely nearly bankrupt several governments. Imagine if the price of insulin, almost completely funded by US citizens paying absurd prices, went up to its US price.
Much like with defense, the US taxpayer is the hero of the rest of the world's healthcare. Without US tax cattle the rest of the world would not be as nice as it is. It's just like when prices go up at your favorite store due to theft. The US is punished by insurance companies because other countries refuse to pay more.
If we're paying more for nurse salaries, hospital administration, insurance company bureaucracy, and ineffective procedures near end-of-life with low probability of success, it's unlikely the cost diff is mainly due to "subsidizing innovation."
By removing the for-profit system, you would actually be removing rampant rent-seeking on something that should be a human right.
> Imagine if the price of insulin, almost completely funded by US citizens paying absurd prices, went up to its US price.
A very strange example to select, considering it was first discovered by Canadians and the patent was later sold for $1. US citizens are certainly not "subsidizing" insulin elsewhere.
[0] https://www.pbs.org/newshour/economy/do-other-countries-pigg...
[1] https://www.washingtonpost.com/opinions/2022/11/29/us-health...
Of course, anyone can do a google search and find some opinion pieces confirming their world view, that doesn't make it true.
The post article in particular just looks at the total revenue and essentially says "look how big it is compared to other countries, we must be subsidizing them". But this just justifies the extreme profit-seeking already in the sector, it's not an argument that it's necessary for innovation.
Even your own source [1] contradicts the idea that high costs are inevitably caused by this subsidization:
> Why doesn’t competition bring U.S. health-care prices down? The answer: America’s stagnant third-party payment system allows hospitals and doctors to avoid competing on price.
Because I don't confuse "individual" with "group".
The fallacy here is to tally up every dollar spent on medical treatment in a given year, then saying "here we spent X on medical treatment, but it could only be 0.7X if the government were in charge".
But you never asked me how much I spent on medical treatment. What if I spent 0?
Well then, your plan has me spending more than I used to, to get me something I didn't want/need. It's not a good deal for me. And if it's a good deal for someone else, it's only because you shackled me up and made me work the fields for their benefit. No thanks.
Even if I was the sort to engage in that non-sense, the problem itself is insurance. And that holds true whether some private company (or many) is in charge of the insurance, or the government is in charge of it. You think BCBS rejects claims, but that the feds don't reject them? Wow, do I have a bridge to sell you.
When someone wants a good or a service, and they pay for it themselves, they are price-conscious. When they don't pay for it themselves (because the insurance company does, or the government), they aren't price conscious. But this encourages the goods-provider to raise their prices... even discourages them from keeping them low. Low prices signal low quality. This encourages the payers to reject claims, then once more the goods-providers to raise prices again to cover for all the rejected claims (bonus if they can go after the goods-buyers for the price too!).
And it all spirals out of control. There is nothing in this mechanism that makes it less ridiculous if the federal government owns the insurance company, and it is the only insurance company permitted by law.
I take that back, there is one thing different. Now you can introduce price caps, woohoo! That will certainly fix the problem. Some committee 2000 miles away and months-distance from the facts can magically determine a fair price for all physicians and surgeons nationwide for some procedure's medical code (not the procedure itself, these are always unique... but the little alphanumeric codes, nice and uniform so they fit in the database).
That definitely won't cause further meltdowns. Will it be blamed on nefarious capitalists hiding in the woodpile? Will it just be chalked up to disappointing reality "there can be no other way"? Probably will depend on just where we're at in the election cycle.
If you want to see prices drop (plummet really), outlaw all insurance. Make people pay cash, out of pocket, for everything. You starve if you can't sell your stuff to people who want it, and if those people only have 1/100th of what you used to ask, then you either learn to live with the 1/100th, or you starve. No one gives out bank loans for heart transplants.
But... they don't. Peer countries with gvt subsidized/socialized care spend less than the US (per procedure and in aggregate).
> Starving the people you want to provide your medical treatment isn't the brightest strategy
Gosh, it's almost like I pre-empted the latter complaint with the note that you've responded to above...
Expanding the number of doctors, and lowering doctor pay and workload, and lowering the cost of becoming a doctor will produce better health outcomes for everyone. Yes, some people will stand to lose from this, just like the current bloat of worthless administrators and billing clerks and other paper-pushers will stand to lose from a cleanup of the system.
I don't care about their well-being.
> I love when someone says "seems to work". In the strict sense, that only ever means "does something". Not necessarily "does what someone wants"... and never "does what I want".
> When it works for those other countries, does it "do what you want"? Because it doesn't "do what I want" at all.
This exact criticism can be levied on the current US system.
So go do it. No one's cockblocking you. Well, except the AMA. Or are you saying that you'll only do this if you get your socialized medicare-for-all quackery?
Wouldn't be shocked if it was held hostage like that, but no thanks.
> This exact criticism can be levied on the current US system.
I never said it worked. Wouldn't catch me saying that ever.
Hopefully states experimenting with universal higher education legislation makes some improvement possible: https://apnews.com/article/minnesota-legislature-college-tui... ("Minnesota lawmakers reach deal for free college tuition")
Note for this article that private colleges have the highest drop out rate, and Minnesota's plan excludes such institutions:
> Qualifying students would have to attend a two- or four-year school in either the University of Minnesota or Minnesota State systems, or a tribal college. Private college tuition would not be covered.
> From 2008 through 2009, enrollment in private for-profit colleges rose disproportionately compared to private non-profit and public colleges. Private for-profit colleges have extraordinarily high rates of default, near 16% of borrowers default within 3 years.
The rest of your point stands though.
The whole "get a college degree if you want to be middle class" scam is evaporating, which results in your observation.
https://reason.com/2023/03/31/poll-most-americans-dont-think...
https://apnews.com/article/skipping-college-student-loans-tr...
Year over year they get at least 5% pay increases with US tax dollars. Not to mention, they get private pay increases by weaponizing the ACGME to keep residency slots low.
Residency does not need to be paid. Outside of the Medical industry, people pay for their college. For some reason Physicians make tax payers pay for their education and a decent salary.
Residency is more like on-the-job training (a hospital still makes money when a resident sees and treats you). It just takes longer to train a physician because there are human lives at stake.
Yes, teaching fellows and others in academia are often taken advantage of and work for free, but that doesn’t mean physicians are evil for getting paid during residency.
Airbags?
Our electrical infrastructure?
Our plumbing?
Please, there are plenty of of industries that have lives at stake and we don't have a cartel controlling the supply of people. The issue is that we don't have enough Physician(By design), so they need to operate independently. Any other industry has multiple layers of qualified people checking to make sure things are safe.
I kind of dream of a world where you'd have 1 physician and a physician manager and a physician director all looking at your paperwork. Instead you get 1 total.
However, the human body is much more complicated. Would you trust the life of a loved one who, God forbid, has cancer or needs surgery to a person with a fraction of the education and training physicians receive?
By the way, I’m reminded of a joke: a doctor called a plumber for a faucet leak. The plumber fixed it in 5 minutes and charged $175. The doctor said “how can you charge that much for 5 minutes of work? I spend a whole hour with a patient and charge less!” The plumber said “that’s exactly what I used to say when I was a doctor.”
False dichotomy.
Right now the ACGME limits the number of residents. This causes a lower supply, so instead of having 6 surgeons working on you, you have 1-3. Do you only want a few people fresh from residency working on you? Or a bunch of physicians with various experience?
Also, plot twist, we own a medical company. (not physicians, but a different cartel that is paid way less and got a pay cut since 2016) You can treat 7 people per 37 minutes, each paying between $40-$125. Physicians is way worse, you can charge $250 for 5-10 minutes.
(Note that this ignores documentation costs/times, but it should give you an order of magnitude to play with.)
We don't do that blatant 7 people per 37 minutes, its more like 1 person per every 60 minutes, but as the clinic grows we've had 2 people per 60 minutes out of necessity. The hospital/other clinics do this.
I need to do an AMA on owning a medical clinic. My wife, the primary doctor, isnt exactly happy that I bite the hand that feeds. We already lost our chiropractor referrals because I couldn't handle their mysticism and spoke out against it.
Hospitals lose money on residencies. That's why there aren't enough and the ones that do exist need to be subsidized by the federal government.
I _have_ been a patient going to a specialist appointment where the only doctor I saw was a resident, and I don't think I or my insurance were charged any less. So if their work brings in the same amount of revenue for the same services, and if resident often do a lot of hours (I seem to recall several years ago their hours were capped to not be _dangerous_ but are still a lot), and they're paid less during their residency than after it ... why _don't_ hospitals make money off residents? Is there some training going on parallel to seeing/treating patients which is really expensive?
Residency is not college, residents are practicing physicians that are providing considerable value to society and in many cases they are paid appallingly little for the amount that they work.
Physicians are not advancing scientific knowledge.
Also a co-op during a CS degree isnt paid with taxes.
Yes, but they are providing a similarly valuable service. And, in fact, almost all medical practice contributes to the development of knowledge as well. Lot's of physicians (even residents) write papers.
I don't understand your point about scientific knowledge, in my mind keeping people alive is at least equally as important as advancing scientific knowledge.
(Mind you, I know "largest" doesn't mean most expensive usually - indeed the most expensive TV was "only" 65" but was still <$2k.)
Capitalism has certainly worked really well for this one specific consumer good.
There obviously is a different arrangement when you have companies like TCL putting in Google TV.
"When dad was your age, TVs cost a heck of a lot of money, had terrible resolution, took several grown men to carry, and were almost as deep as they were tall"
"Last year I carried home a larger TV with 40x the number of pixels by myself, and paid for it with one day's work"
https://en.wikipedia.org/wiki/Baumol_effect (See also section on education https://en.wikipedia.org/wiki/Baumol_effect#Education)
Basically as scalable goods and services get cheaper, non-scalable goods and services become relatively more expensive. In terms of hospital services and college tuition, this is a much more intuitive explanation than government regulation, although I'm open to more informed opinions.
https://www.lesswrong.com/posts/FCMfToFnRXhsfpfQB/book-revie...
In a graph in that wikipedia article, we see that from 1998-2018, average hourly earnings increased by less than 100%, but tuition increased by more than 150%. If wages for university staff (who aren't becoming more productive) are rising to match wages for those who _are_ becoming more productive, why should tuition costs rise significantly faster than the rise in other wages?
https://en.wikipedia.org/wiki/Baumol_effect#/media/File:Pric...
Further, one statement in the education section sounds right to me:
> The economists Gary Rhoades and Joanna Frye went further in a 2015 study and argued that the Baumol effect could not explain rising tuition costs at all, as "relative academic labor costs have gone down as tuition has gone up".
And we know there's a trend towards shifting teaching responsibilities from tenure-track faculty to cheaper adjuncts. And from anecdata, I get the impression that in the humanities especially, salaries _are_ quite low and raises are currently below inflation.
And my understanding is also that the trend at many schools is towards larger classes e.g. when UC Berkeley increased the freshman class size by a third, there was not an across-the-board increase for departments to hire a proportional increase in faculty and staff, nor did existing faculty and staff get a raise ... so the same people are asked to just teach larger classes (does that count as a productivity increase?), and students just get less interaction with their professors.
Now look at the board of trustees of your local University, and play spot the construction firms...
Then there's a lot more old people with a lot of complicated cases, which require a lot of person-hours.
And we still don't really have turnkey solutions. Sure, we have nice vaccines, but they are not 99.99%, there still are complications, there still are ridiculous inefficiencies (why do we still don't have combined yearly multivalent boosters for influenza+covid+others)?
Education also suffers from this overcomplication, but it's mostly because of credentialism. It's perfectly possible to watch lectures at home, complete coursework at home, and then go to some place fill out a test, and then do oral and practical exams. Grading can standardized (high-school exam is already done this way here in Hungary, there's a PDF booklet issued to teachers conducting the exam; and profs and TAs already do the same basically verbally).
[1] https://www.reddit.com/r/Professors/comments/un7uei/average_... [2] https://tuition.psu.edu/tuitiondynamic/tabledrivenrates.aspx...
I always thought the issue was in admin body count. However, just picking the largest universities in Germany and US on wikipedia we see:
Ludwig Maximilian University of Munich Academic staff: 5,565 Administrative staff: 8,208 Students: 51,606
Michigan State University Academic staff: 5,703 Administrative staff: 7,365 Students: 49,809
Those look pretty comparable, so what is going on?
The way student loans are structured is the cause.
Stanford University, for example: Academic staff: 2,279; Administrative staff: 15,314, Students: 17,246 - that's basically 1:1
A less prestigious private university like University of Southern California: Academic staff: 4,706; Administrative staff: 16,614; Students: 49,318 - that's about 1:2.5
You have to really break down the administrative staff number (if that's what's of concern here) to see what people are doing to make an informed argument (not saying you are making an uninformed argument or anything like that).
-edit-
For a while I was in on the administrative staff thing and I certainly think there is bloat and just flat out incompetence at many universities in this area, but I also think it's a bit of a red herring to avoid other issues like funding reductions, etc.
https://www.opensecrets.org/federal-lobbying/top-spenders?cy...
The medical cartels need to be destroyed.
I think some major force is needed to counter-act the runaway price growth without cutting off borrowing for students from low-income families. I think university prices should be capped by law at the inflation rate.
Think rent control for tuition.
The only thing economists from every politic view can agree is horrible?
In general there is a an oversupply of higher education capacity due to demographic downturn and a decline in enrollments since 2010. Smaller colleges have been closing because they cannot attract enough students.
You can argue that those people will learn skilled trades or online but university has always been and will continue to play an important role in economic output in the US. When only those in the highest tax bracket can afford college it exacerbates instability and undermines the economy.
Universities used to be separate systems, and you could opt out of one and into another, and most people wouldn’t even go to one at all. But now they are basically all parts of one whole (within the US, at least) and everyone is going and the universities are all failing in the same way.
It could be financial, but I think it’s because of the academic track and social status.
There’s a consensus that college is good and will turn you into a professional leader with a nice job title that reflects elite values (which happen to be a certain kind of liberal but it’s more about social status than politics philosophy). But it turns out the world only needs so many Environmental Justice Media Liaisons, so the universities are just making up these job titles to absorb their own graduates.
Of course, that doesn’t work well financially, so they pay them nothing for as long as possible and then close to nothing after that, and crank up the tuition promising the next batch the same deal.
The students put up with it because it’s hard to evaluate the numbers that they can actually expect from such a ridiculous job, and because it sounds like a cool (or at least acceptable) job title to announce at parties. The fact that a plumber makes three times as much is not worth acknowledging.
My claim is that buyers (parents+children) of college degrees are maybe not behaving rationally with respect to cost.
High-cost schools position themselves as offering a "better" outcome or opportunity to students. I'm really conflicted about this viewpoint. I have two children in high school with one a rising senior. So my family is discussing colleges and college costs somewhat regularly. We have visited a small number of state schools and a small number of smaller private universities and colleges. The smaller schools do a VERY good job of selling extra opportunities easily available to students. My experience is that opportunities can be found by a motivated college student at any institution but the small private schools seem to make it almost hard for a student to NOT be involved in meaningful outside-of-the-classroom options.
Generally, go for the one with the lower student:teacher ratio. My anecdote:
I and a friend both went to low ranked undergrad universities (state schools). Mine, however, had a low student:teacher ratio per class. Comparing notes with him, the main benefit was that professors actually cared about teaching. The number of students wasn't high enough to be a burden. They didn't repeat the same HW and exams every semester. The number of office hours per week per professor was 3-9 hours. They could be that generous because there simply weren't enough students to use up those hours.
We also didn't have TAs teaching any course.
(Also went to a top ranked university for grad school - very few professors cared about teaching).
I also then went to a well-known and ranked R1 university for grad school. I didn't enjoy it very much but also didn't match well with an advisor out of the gate. That colored my experience significantly and in hindsight was really mostly my fault.
Oddly enough, I returned to this school and work a somewhat hybrid staff/research software engineer job and have been here for more than a decade. Go figure.
We are questioning if it is even an average investment, especially the truly high-cost and selective private schools where tuition sits at $80,000+ contrasted with $30,000 at our state's well-known and respected flagship university. The extra $200,000 in costs is breathtaking to consider.
I'm a product of the California Community College system and a lot of my teachers were teaching both in the UC and Cal State systems at the same time. I am happy with the quality of education I received.
Another way to get free college is to just join the national guard program they have. A few friends did this as well. You do bootcamp which sucks, and like one weekend a month playing army in the woods during drill which I’m told also often sucks. But in the end you get free school and some pay. If you are used to doing hard work like manual labor, a weekend a month is not a bad deal. You can even land a job after through this experience and your degree e.g. in cybersecurity.
There are options, obviously not as good as affording it outright but there are things you can do that aren’t going out of state on a huge loan, so I’m surprised why so many people opt to take routes that put them in the same exact place by their mid 20s but with a massive debt over their heads versus these seemingly less glamorous routes. Maybe the marketing of “leaving the parents nest” is just that good?
The biggest issue in my opinion would be all of the people who have tons of student loan debt but didn't exactly graduate. You have the worst of both worlds
I'd like to see universities be able to register for a share of tax revenue from their students post-graduation.
For example "This course costs 5% extra income tax for 20 years".
Then, you pay nothing for the course, but after you graduate you pay a 5% higher tax rate, and that extra money goes to the university. The IRS would administer the scheme since they already have to do all the math anyway for every taxpayer.
This gives the university a strong incentive to make sure their students are productive. They'll help push students into studying finance rather than 'soccer studies'.
Obviously the university needs money now, not in 20 years, but private lenders can help cover that gap (and then the lender also has an incentive to make sure the university is doing a good job educating students).
Ultimately, I think it's a market non-optimal way if you're the university since student loans allow you to decouple pricing entirely and completely derisk the student.
There is still value in providing philosophy courses and music and art and all the other things that don't lead directly to high paying jobs.
So the philosophy department will still be earning - just less.
They could also charge a higher percentage of future income to make up for the loss of earnings.
Then it's presumably not a CS degree...?
While it is technically the student paying, in reality the money is going (indirectly) from the federal reserve to the universities.
Everyone loves free government money...
The fact the student may never pay off those loans (and hence the government foots the bill) is the cherry on top.
Government (taxpayers) underwrite unlimited amounts to uninformed buyers paying informed sellers.
I am a seller (college boss), and I can boost my own income, and I know I have no competitive pressure to keep prices down, so why not increase the college budget and spending, hence justifying tuition increases.
You are boosting your income by exploiting students through usury.
Lets say there is no government, then where was the 'competitive' pressure? How does government loans take away competition? Did they close schools to eliminate the competition?
1. A large increase in demand for College. I could imagine this may be, in part, due to more accessible student loans. But it appears that many factors have come into play, and the main one is the perception that you cannot get a liveable wage in this country without a college degree.
2. Less funding from state governments
3. Increased spending in administration and student services unrelated to education.
Here are the sources I've read through so far. https://www.bankrate.com/loans/student-loans/why-is-college-... https://manhattan.institute/article/a-new-approach-for-curbi...
In 1 you're talking about a self-reinforcing effect. "I have to put on makeup to look pretty because everyone puts on makeup to look pretty". When everyone believes it, it becomes true.
All your drivers cannot cause a price increase if an 18 to 25 year old cannot get unlimited funding from a lender to make a stupid decision.
Common sense is the rallying cry of people who cannot backup their claim by other means.
https://www.google.com/search?q=what+percent+of+student+loan...
92% Federal student loans make up the vast majority of American education debt—about 92% of all outstanding student loans is federal debt. The federal student loan portfolio currently totals more than $1.6 trillion, owed by about 43 million borrowers.
I think it's then pretty fair game for a forum comment to then suggest there's a causal relationship between "an entity that can print the currency that denominates the debt is backing the debt" and "this drives the price of the thing up due to easier access to funding for it".
To prove that claim, you'd need to actually demonstrate some sort of causal relationship and have data to back it up
For example, you could make the argument that:
1. Demand is the primary cause of tuition increases
2. Government backed student loans are the primary cause for the increase in demand
I believe that 1 is almost certainly the main cause of tuition cost increases. What I haven't seen any evidence for is 2. If it's true, show me the evidence. I'm open to it.
From what this article states and the research I've done, the main driver of demand is not cheap government loans. It's the labor market. The best jobs in this country require a college degree. That is what is probably driving demand, the desire to earn a liveable wage. Not the fact that you can get a cheap loan.
The claim: > Main cause: Government-backed student loans.
I've read the article. It discusses student loans and how they've skyrocketed, but never makes the claim that their availability is the cause. Instead, it argues a change in America's "labor profile" is to blame for the rise in demand (which, in turn, leads to higher tuition):
> Rising enrollment is also associated with a changing US labor profile; for example, manufacturing jobs were eclipsed by “business and professional services” jobs as well as healthcare, education, and retail jobs.
Going further, the author suggests we need to forgive/cancel the student loans:
> These loans should be forgiven/cancelled
To me, this implies the author does not believe federal student loans are to blame.
They could just give money direct to universities - but then it's hard to ensure they're getting good value for money.
But by giving it to students to in turn give to universities they get better value for money.
One day someone has to pay for that - and the students paying it back via loan repayments isn't awfully different to citizens paying it back via taxes. But with the student route everyone is more invested in getting good value for money. And non-university users (who tend to be the poorest) don't end up paying. Win win.
We're at a point where going into college for non-STEM degree can (and likely will be) one of the biggest mistakes of your life.
(and don't confuse the issue with current debt relief bill. The current bill has not been in effect since 1983, it is trying to give relief for this situation, not causing it).
It is NOT free to the student who is definitely affected. They are in debt and now crippled. But the university got it's money.
If you want to blame the government. Why is it the governments fault that Universities are now behaving like scammers and charging more for less and leaving the 'customer' stuck.
----
Lets say I go to a used car salesman, and they want to cheat me.
Lets say (before 1983) I would pay 2000$ for the car, but I'm scammed and out 2000$. I lost 2000$
Lets say figuratively now it is (2020), and I can't afford the car, so a rich uncle co-signs, and give me 30,000$.
I still get cheated, but now I'm out more money, AND now I'm in debt to my uncle (who lets say wants some 'payment' I feel uncomfortable performing).
The used car salesman is a cheat either way, for lesser money or more money, and either way they got my money.
And I'm in debt and blowing my uncle until it is paid off.
In the end, I (the student) am stuck. Is it my uncles fault? Is it the crooked salesman? Maybe my uncle didn't know the salesman was a cheat either (but like a bank, does want something in return)? Should I know the salesman was a cheat? Maybe I'm young and just starting out in life and not sure about the warning signs? Should we allow the young and in-experienced to be exploited?
Because the government is not doing its due diligence as a lender, because current voters and government employees have no problem soaking future taxpayers. And crippling uninformed 18 year olds’ futures.
That is called regulation, and once you start putting in regulations, then everyone starts screaming about big government and over-regulation. There is no winning, put in protections and you are some big government commie bastard, don't put in protections and you are heartless and ineffectual.
And, I dare say, banks even in other areas where they could lose money (2008 real-estate), are just as eager to reel people in and ignore bad loans.
The government offering loans in the first place is regulation, and choosing not to do underwriting is part of that regulation.
I.e. the government regulated that they would lend tens of thousands of dollars to any student, so student A can no longer bargain with the school for a lower price because student B, C, and D are lined up to pay whatever is asked.
Private high school costs have also gone up astronomically and there are no federal loans for them.
[0] https://educationdata.org/average-cost-of-private-school
In 2003, the average private highschool tuition was $8,412 (Snyder, Dillow, & Hoffman, 2008), or $14,079 (in today's dollars).
Please correct me if I've made some mistake, but plugging those numbers in shows that the annualized real increase in price is 0.5% per year over 20 years.
"In 2000, 44.4% of all undergraduates received grant aid, whereas in 2016, that number increased to 63.1%."
College prices are about as real as hospital prices. Sure, some outliers literally pay that much, but the vast majority receive a discounted price for various reasons. When you factor in those discounts, the cost inflation is 2.5x instead of 17x as the article suggests. It's more than a forgettable idiosyncrasy. It's "how it works" and if the author of the article doesn't mention it, they're either so ignorant as to not be worth reading or they're being dishonest.
I thought it was important to give that context.
American higher Ed is often about prestige and branding. The pricing strategy is similar to luxury goods.
2. https://www.pushkin.fm/podcasts/revisionist-history/a-good-c...
- Get loans and go to school, or I (your family, society, the job market) will punish you.
- Do not get loans, or I (the economy, lenders, your credit score) will punish you.
- You must got to higher education and get a degree, but only if you want to. ("college isn't for everybody", except all we ever say is a HS education is a dead end).
- With a blaming tertiary of "You should have already know that and realized what an issue large student debt was before taking the loans. Why are you trying to act like such a victim?"
And I admit, I've fallen into this previously of "how did they borrow so much money?" Except its this same issue of "we put you in a bad situation, and then blame you for not escaping earlier."
Growing tuitions are a predictable consequence of the federal government subsidizing higher education systems that they don't control (unlike state funding of state universities). The feds should impose price controls on any institution that receives federal funding (including from federal student loans): https://prospect.org/education/case-for-higher-education-pri.... Otherwise, costs will predictably skyrocket.
[0] https://deanclancy.com/a-list-of-colleges-that-dont-take-fed...
That is enough to refund $500,000 to every student they've had for the past 50 years.
Why are universities hoarding so much money?
https://www.highereddive.com/news/how-20-largest-college-end...
Why are universities hiring so many administrators in relation to professors and students?
https://www.usnews.com/education/articles/one-culprit-in-ris...
Academia in the US has become a business, and the business is being run by the secretaries.
See: https://www2.ed.gov/policy/highered/reg/hearulemaking/2011/c...
Lifetime net earnings increase for progressively higher levels of education, resulting in overall GDP growth and a wealthier society better able to pay for public goods and the social welfare of all. The vast majority of college students who attend a 2 or 4 year in-state program will net a significant increase in lifetime earnings and the amount they pay for that degree, even assuming they maximized their federal loans, will be dwarfed by their lifetime earnings increase.
Even for those folks getting masters degrees to the tune of hundreds of thousands of dollars, the Department of Education finds that the lifetime net earnings increase by nearly $1.5 million over a high school education, and yes, actually, around $300k over a Bachelor's degree.
My guess is that the adjusted wages haven't risen much over time, or at least nowhere near as steeply as the associated education costs have.
Since 1980, that has gone up a lot. This method is
Last time I ran numbers, it was one of the best investments one could make; better return than historical stocks, real estate, or just about any similar volatility asset class.
You also might want to figure in lifetime expected unemoloyment- there's usually a decent gap between college degreed unemployment rates vs non-degreed rates.
And the gains given to skilled vs unskilled are only increasing.
I used loans to pay for my education, and one effect that has from an individual level is that it really changes your appetite for risk during the payoff. From a macro level it’s probably nice to have indebted young people motivated to work; however, I’m sure it produces a lot fewer entrepreneurs willing to gamble on a great idea.
I understand financial planning, but I'm having a hard time wrapping my head around how to think about college. Does anyone have insight beyond "Don't pay a tuition amount that's out of line with likely earnings"?
Textbook Publishers
University Tuition
It's a triangle scheme where one feeds the other and it's all fueled by non-dischargeable government loans.
Student Loans are the hill to die on. As someone who isn't eligible for Military Service, I don't get supplemental housing, free healthcare, free college education, hiring preferences, small business loan preferences, nor a lifetime of "OH THANK YOU FOR YOUR SERVICE!!", and that's if you aren't one of MILLIONS of Veterans gaming the VA disability system.
The military decided asthmatics and ADHD kids will forever be second class citizens because we can't join the drunken sexfest that is modern military service; which has essentially become a daycare for 18-24 year-olds.
It's absolutely unconstitutional for the military to relegate individuals to specific spectrums of society given how they were born. I'm not gay so I guess that doesn't matter. But, who cares? If the Constitution mattered we wouldn't be where we are today.
Wait, what did I miss?
Here, in case you missed this too:
https://www.npr.org/sections/alltechconsidered/2014/11/19/36...
Georgia Tech and others have shown this is possible (see their 13 MS degree programs in engineering). Certainly by enlisting the growing set of tools used for remote professional collaboration, it should be possible to cover a wide variety of subjects, especially if the staff is also remote (and not overpriced).
Compared to the $240K of almost all private colleges in the US, a viable alternative that costs only $20k should quickly reset the cost of advanced education to be a LOT more reasonable.
In addition, a cheap remote-only college system be a great resource for many people who want to take college courses but live nowhere near a full-time school, or who need retraining as they change careers or advance professionally.
Really, this solution is long overdue.
- Western Governors University (WGU)
- Open University (OU)
Both online; both relatively cheap.
N.B. Georgia Tech’s online masters programs are professional masters and not research/thesis masters — so unless you are getting paid by someone else to get them, they are almost certainly a waste of money (and there is negative selection pressure during hiring for people with these sorts of degrees).
This is a great point.
Professional masters are often compared to a BS curriculum, which is in no way a disability to hiring or advancement since most people in engineering don't have research degrees nor need them to thrive.
In fact, the presence of a research thesis in lieu of taking a couple more courses in useful subjects would be more of a waste in the real world than the reverse, IMHO.
https://research.collegeboard.org/media/pdf/trends-in-colleg...
The OP also barely acknowledges the huge reductions in state funding for higher ed. In the 60s California paid 100% of educational costs for students. It's now down below 40%. Tuition has gone up to close the gap. https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
> Long-term, controlling the underlying cost of higher ed itself is an imperative.
Nothing in the OPs analysis supports any increase in the underlying cost of higher ed. While there may be some, it's well well below the nameplate tuition increases. Here's the best data I have on expenditures by college on a per Full-Student basis, and they are nowhere near what the OP is claming: https://nces.ed.gov/programs/digest/d20/tables/dt20_334.10.a...
Lastly, while the argument for some student debt relief is a good one, and his points are well made, the correct policy is Biden's, a universal reduction in debt in the $20-30k range. This gives all students some relief, but doesn't give a regressive windfall relief to doctors, lawyers and other professional students with good career prospects and six-figure debt.
However there's another way to look at it: over the summer I would earn over $10K so roughly covered my tuition. Admittedly that was at the high end of summer job compensation due to the AI boom, but gives you a rough idea of where that tuition fee fit. I finished school with no debt.
These days I doubt anyone is getting $50K for a summer job.
Enter Citadel: https://fortune.com/2023/06/28/wall-street-citadel-summer-in...
It's possible some grad students in AI are getting that kind of money these days. I was talking about my undergrad.
Average annual tuition in Canada in 2006: CAD $4,400. 2023: CAD $6,834. So I could see it also being in the ballpark of 710% since 1983 as well.
https://www.statista.com/statistics/542989/canadian-undergra...
People are going in to get a degree with a job, meanwhile there's a whole bunch of administrators and people that think universities should be for rounding out your knowledge so you're required to pay thousands more for courses not needed for your degree. If we really wanted to, I am sure we could condense a bachelors down to 1-2 years with 2-3 years of practical learning in the field.
Reprinting a new edition every year with minimal changes but a nice $50 price increase (on top of the book already costing several hundred) is a nice way to do that.
Sick bastards, the lot of them.
> Between 2006-07 and 2019-20, COA [cost of attendance] increased by around 27% at both types of institutions, but declined by 7-8% in the few years after that. The recent decline occurred because colleges posted similar nominal COA increases as in the past, but inflation was higher. Overall, COA increased by almost 20% over those 16 years at both types of institutions.
> But average net prices rose at a considerably more modest pace. Between 2006-07 and 2019-20, average net price increased by 13% and 7% at public and private four-year institutions, respectively. Those increases reversed in the post-COVID years. Overall, average net prices are largely unchanged, adjusted for inflation, compared to 2006-07.
https://www.brookings.edu/articles/college-prices-arent-skyr...
in the past 15 years in particular, the big story of college pricing is that it has become more progressive, i.e. more expensive for those with higher incomes.
"List Price" is meaningless at university.
Student: How much does it cost to attend your school?
University: How much do you have?
The base cost is some ridiculously high value and can be brought down with grants/scholarships/loans, which are needs based.
For example, if we allowed student loans to be a bankruptable form of debt, then over time, certain schools and majors would be unable to get loans, which then could have a series of economic responses such as universities increase tuition for ROI positive majors to support ROI negative majors or some departments might close or we might see consolidation of universities specializing in certain types of education.
If we didn't set up 529 plans years ago loans would be our only option to pay for the quarter of a million dollars required for both of them. If they were in private colleges, the combined outlay would be well over half a million dollars.
FWIW we did look at Canadian schools which may be affordable to Canadians, but not to international students ... mid 40s pre-Covid when my oldest was applying.
Any other industry has all kinds of regulations and consumer protections they have to comply with.
A university is allowed to sell degrees to unsophisticated buyers, and if the degree is worthless, they are not on the hook. Who else can do that?
Universities never experience recessions or any other kind of contraction, so they never have to shed dead weight. The administrator to student/faculty ratio is way out of whack.
Student loans should be guaranteed by the university, not by the government. If the university has enough confidence in admitting a person and conferring a degree, they should stand behind it.
They do a lot of catering to student egos too to get them in the door - "ooh, you're so special and wonderful, we're going to help you make it with our programs", knowing full well that most of the degrees were garbage.
People react to incentives. Systems react to incentives. America has been ignoring this for 50 years.
710% rise in education costs is American exceptionalism and greed.
If the federal govt stopped backing loans and let the market play out, the prices would come down.
If they removed employment sponsored healthcare loophole, and allowed a transparent pricing (like the one you get from your car mechanic before they fix your car), prices would come down.
There’s nothing magically different in health insurance vs car insurance.
I’m gonna get downvoted for this. Democrats have a good heart, but when they start giving away money, it’s not well thought out on how supply will react to increased demand.
PPP loans were a huge clusterfuck of giving out free money.
Now they’ve blown the debt ceiling.
The goal should be to lower prices, not to doll out more free money.
Inflation in house prices is nuts.
So you’ve got young people who can’t afford to own their home, ridden in education debt they may not be able to pay, not having kids since they can’t afford em.
Doesn’t look like a bright economic future.
I remember getting lunch freshman year and one day, the signs in the student union cafeteria were printed on poster board and the next they were flat screen TVs. When I asked the on duty manager why, they just said "because it's more eco friendly."
My entire world view shifted in that moment.
This is how lemon laws work with cars.
Today, that tuition is $28k. But the dollar has also appreciated so real cost in local currency is now 2,268,000 - an appreciation of 467%.
The only way this will stop is if the universities are forced to take on the risk of the debt.
I think the way we calculate inflation is kinda weird.
Suppose it kind of makes sense, since the rich control the country, and they are the ones directly benefitting from the asset price inflation.
Also fascinating is the increased room and board (square area requirement per student) due to the lack of experience sharing rooms in the family as family sizes have collapsed to sub replacement levels.
If those tuition/fee dollars dry up, then that money isn't out there floating around to chase after with poor decisions.
However, all the previous poor decisions were still made, and they're still paying for all the extra buildings and gardens and resort spa dorms thinking they'd have time to pay them off. Not to mention the absurd increases in (non-faculty) staff levels... those people might be looking at unemployment.
But, and this is the most important point: allowing bankruptcy is never a bail out. It's the acceptance of reality. Yeh, "loan forgiveness" is sort of screwed up, but why has bankruptcy been denied these people? Why is education debt such an important kind of lending that we must make an exception for it and allow the lender to do what we allow no other lenders to do?
Well, because we don't technically allow debtors prison. It is an unsecured loan which are not really that common.
A supply-side solution to education would be to create more spaces in quality higher education and to make those places cheap or free by government subsidy, often with price controls on the receiving institution. This is largely how most of the developed world works.
A demand-side solution is to make something more accessible, which has the net effect of increasing demand. This almost always raises prices. It's no surprise that money backed by the government has increased prices. It's inevitable. Demand for high-quality college places still exceeds supply so those colleges can (and do) respond by increasing costs. Sometimes that extra money benefits the students through better facilities (eg a new library, better and/or more dorms, etc). Often however it's lost in subsidizing college sports, which most colleges lose money on, and inflating administrative costs. Division 1 football coaches make millions a year for a supposedly amateur (that's what one of the As in NCAA stands for) competition. That extra money makes those programs more expensive to run too through the same means.
We see the same problem in housing. Nearly all legislative efforts are demand-side (eg programs to help first homebuyers) where what we need is simply to increase housing supply by building more units, making more current units available or both. But that runs afoul of vested interests where our homes have become retirement accounts.
It's worth noting that many elite colleges are sitting on eye-watering endowments that could easily be used to pay for tuition but they largely don't do that (outside of a few programs for students from poorer backgrounds).
Pretty much all of this is by design. Post-WW2 there was a concerted campaign to charge for things that were once cheap or free including health care and education. This is nothing more than economic bondage, the developed world's equivalent of Pakistani brick kilns. A person saddled with debt is a compliant worker who will show up to work and not complain or fight for better working conditions. That's literally the point.
It's why the prison population is used as cheap labor. It's why most states like illegal immigration. It's why states are enacting child labor laws. My point is that all of this, including spiralling student debt, is a systemic problem.
Education should be free.
What is the "best" thing for parents to do?
For "best", I'm interested in two things: making the system less broken, and the kiddos being ok as adults.
The entire point of an education is to make you a good worker/citizen. That's it. People completely lose sight of this and think that the point of an education is to get a degree.
Therefore we end up with legions of kids trying to "get a degree" as opposed to "become a good worker/citizen".
I've worked with dozens of self taught programmers, designers, operators, etc. Look at how much more information is available via the web now vs what was available in 1983.
However, for people that did not pursue that route, it is also true that many employers require a college degree for many jobs. Some 19-year-olds may "pattern match" well enough to get some hiring managers to grant exceptions. But these are exceptions and by definition not good general advice.
> Not all answers lie in institutional credentials.
Also consider that the truth of this may depend on the specifics of a job-seeker's phenotype. YMMV.
https://scaleatucla.weebly.com/uploads/2/9/9/2/29923337/4935...
stanford has more administrators than undergrads now.
administrator growth is like a cancer
What would be the impact? What are the drivers that could enable youth to participate in sports run/administered by a 3rd party as well as attend college?
The thought that public universities should “run like private businesses” is a disease of neoliberalism. They largely succeeded in running like businesses, but it’s all the wrong metrics. public goods should not be profit centers for state or federal government budgets.
Take away state funding, make it a business objective to capture students, add a abstraction of student loans and direct federal funding, and of course tuition increases.
rising tuition is bad, but if schools had retained the monopoly on education they had before it would be fatal instead of annoying.
internet and cheap laptops ftw.
Let me give an example that can illustrate this: a typical mobile plan from Verizon in US costs $45/month and gives you 15 Gb of traffic. At the same time in Russia one can get 30 Gb for $9/month. Are expenses for maintaining a cell network 5 times higher in US? Unlikely. It is just customers in US are richer and are ok to pay more for the same service.
I don't know how this effect is called, but couldn't the same thing happen to education, land or housing costs? These are obviously things that everyone needs desperately so the seller will squeeze the maximum they can, and the price is unrelated to how much the lecturer earns or how much the bricks cost. The house will cost you almost all your life's earnings no matter where you live.
The fact that student loans are backed by the government would in fact undermine this as a good example of a free market.
Yes, mobile providers market is not a free market, as there are small number of companies both in US and in Russia. But the price they charge customers is different in these countries despite they use similar equipment which probably has the same cost. So the difference in prices can be explained by what people in different countries consider "cheap" and "expensive". The provider charges as much as possible, but less than a customer would consider "too expensive".
And the same thing is about housing prices, they do not really correlate with expenses to build them. It takes the same amount of money to build an apartment in Moscow and in a small city in Siberia, but the price for the buyer will be very different.
This sounds a lot like 2008 housing crash, among others.
no they don't, as mean as this may sound. The data shows that college grads earn way ore than non-grads, even after accounting for inflation and loans. people who fial to finish or fail to attend college do way worse. Thanks to an abundance of aid, scholarships, and other discounts, hardly anyone is paying these inflated tuition prices in full.