Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees with the confidence that their admitted students will be able to pay.
Worse than just "backed by the federal government," the loans are basically protected by the government. Being one of the small list of things you can't bankrupt out of, the risk in giving out the loans has been fully pulled from the lenders.
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.
> Worse than just "backed by the federal government," the loans are basically protected by the government.
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.
Pharmacy benefits managers provide no value and collect absurd fees. Perhaps companies should be required to justify their continued existence if subject of consumer complaints.
Literally all they have to do is limit the maximum loan size. Max $50k per year. Anything beyond that is not subsidized or requires proof of academic performance or ability to repay.
Then parents with money and pull in academic orgs will make sure that tuition will float just far enough above that limit that their children won't suffer from too much competition by the less fortunate.
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.
> Then parents with money and pull in academic orgs will make sure that tuition will float just far enough above that limit that their children won't suffer from too much competition by the less fortunate
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?"
there's a very nice video I saw posted a while back where a graphic designer talks about how he'll charge different amounts for a logo for different customers - a small mom and pop shop will pay much less than a large multinational.
You'd probably need to do that. I pay $6k/sem for my university tuition, but it seems that what doesn't go towards tuition gets sucked up by slumlords or university room and board, so pressing down tuition prices alone doesn't seem like a feasible option. Limiting the overall liquidity, I think, would dramatically improve things.
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.
1. Over what time frame? Med school takes 4 years and Residency takes 4+. JDs+bar take a few years and earnings take some time to ramp up. PhDs take half a decade (Even if we don't need more faculty, we do have a shortage of PhD supply in industry for fields like CS, Chem E, Biotech-ad, etc. and the median salary for those graduates is quite high with unemployment basically as low as you can go.)
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).
Universities have long tried to argue that education isn't 'vocational' that their entire focus should be on producing a well rounded individual.
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.
I have a philosophy degree (and a good career in a different field). It’s a good thing I didn’t wish to teach it, otherwise modern academia being what it is, that would be a life of serfdom!
Yeah if we did that I think we’d need to build some systems for these things. We need artists and writers and what not and precluding anyone who can’t afford it would probably suck for society. We’d need some good scholarship type programs to help out there. Honestly we could probably use those now, I don’t know how realistic a lot of these things are under our current system.
We have far, far too many liberal arts graduates. There is a huge labor shortage that we need those people to fill in fields like restaurants, plumbing, nursing, construction, farming, etc.
There's no labor shortage. There's only a wage shortage. Restaurants are a particularly egregious example, as someone with firsthand experience. Restaurants treat their employees like shit, work them to the bone, and then pay them as little as humanly possible. I got out and never looked back, because it turns out people are willing to shower you in cash if you can string together 3 lines of Python.
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?
+1 to no labor shortage in the construction industry. Good luck getting trained as a tradesman outside the unions. Joining a union is a practical impossibility if you're a white male. You'll be subsidizing your non-union employers with your own savings as an apprentice well into your journeyman career. You'll be sitting idle unpaid in between jobs, when it's raining or snowing, when your car doesn't start... Even when employed, you'll have no benefits, no health insurance, no paid vacation. You'll be competing for the scarce work with people who're in this country without a work permit. Guess what the going wage is for your services.
> 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.
I think your point is valid and worth looking into - there are also many non profit hospitals in the same situation. That being said, I'm sure it's part of the equation, but I'm not 100% convinced everything can be blamed on Wall St with this one.
Sorry, my comment was more snark than content. If tuition was limited to student income the universities would be incentivized to cut departments that don't produce high-income graduates.
Good, the world doesn't need that many liberal arts graduates. Quality over quantity should be the focus in fields where there aren't that many employment opportunities and potential for successful entrepreneurship.
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.
> the world doesn't need that many liberal arts graduates
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.
I think the proper way to characterize the situation is as follows.
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.
Universities have Zero incentives to change things. They get the benefit of all the enrollment of the students that wouldn't otherwise enroll, also.
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?
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.
Now I read that Wall Street is creating CDO's based on these loans, like they (continue to) do on mortgages. Some people die "early" without paying back these loans, and sometimes, they will owe more than they took out. Given the mounting problems with the numbers here, it seems a whole generation of people in the middle of this bubble are going to go to the grave while still owing on these loans. What happens to these CDO's? Are we headed for a smaller "meltdown?"
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.
We learned that people like to gamble and that it’s easy to push things forwards.
Also, better jump on the loan band wagon, or you’ll be left out. Anyone without a mortgage + houw which appreciated has basically been robbed by people who do
This is why I’m 100% sure we’re headed towards another real estate meltdown sooner or later. Real estate prices and rates have skyrocketed. The number of people who could afford 500k mortgages at 3% is much higher than people who can afford 750k mortgages at 7%.
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.
Looked at this a bit ago and share the sentiment. Vancouver, BC was an excellent case study. House prices average: ~$1.1M. Loan rate average: ~5%. Month payment: $5900. Yearly: $71k. Avg Salary: $60k (before tax). After tax: Maybe $48k or less. Result: No normal worker can afford the loan, and the bank won't give you the loan. You pay everything you can each year, and you owe more. This isn't even with property taxes, utilities, other basic Maslow's heirarchy stuff taken out.
Wonder what percentage of this demand is organic home owners vs. investors (including foreign investors).
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.
There might be something to that. Russia has become a bad place to invest money, while china’s real estate bubble looks to finally be popping. It could be that Russians and Chinese are accelerating on capital flight from their own countries due to current circumstances.
But it’s really just speculation. I haven’t noticed an influx of ore Chinese buyers into my market.
You can track political developments in China, Russia, and Saudi by the price of BTC and foreign housing (esp. places like Vancouver, Canada, or London, England).
Effectively a stealth tax for most graduates, if they can't ever hope to repay it. But regressive if you're rich enough to pay it off… or never have need for it to begin with.
One of the core elements of the 2008 meltdown was when someone abandoned a house, all the other houses in the neighborhood would see a substantial drop in their value. This made it more likely that other people would go underwater on their mortgage and also walk away.
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.
It doesn't need to be contagious to create a crisis, just correlated, e.g. if there is a big macroeconomic shock that makes many students unable to pay their loans all at once.
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 in what sense? Elementary through Secondary aka K-12 is, but is mandatory for students unless they take extra-ordinary measures to not be there, e.g. homeschooling, or dropping out at 16. Funding through this is usually handled on the state and local level, often by local property taxes.
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.
K-12 are "free" (funded in large part by property taxes, as I understand it). Higher Education is not, though public colleges tend to be cheaper, from what I've seen.
It's a combination of loans. The idea is let's say I have 100 identical loans I made (in reality, there are averages). Further, we agree 5-15% are likely to default. I'm going to get paid 85-95% of the interest + principle. But I want that money now. You want to invest in future cashflow, so I want to sell you a loan. Buying one from me is kinda risky, you may get back 100% or 0% of the interest + principle you expect. So instead I sell all 100 as a lump sum, and you and 99 other people each get 1%.
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.
Collateralized Debt Obligation, sort of like a bond that's composed from many loans on something you can repossess, like houses or boats. They're notorious because they were involved in the 2008 financial crisis.
The Big Short also has an earlier explanation of a non-synthetic CDO ("we just repackage it [low-quality risky debt] along with a bunch of other shit that didn't sell and put it into a CDO"):
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.
Seems wrong to influence your son's decision based on your financial situation rather than his desires/passions. Of course if he's naturally interested in the trades then sure.
One has to think the ROI for any financial investment in someone <25 YO towards things like education pays off more than similarly-sized investments later in life.
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
Passion doesn't pay the bills. It's good to be passionate about something, but many passions are not marketable.
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.
The countries that have "free" university education also steer young people into career paths starting in middle school. If you're not the sort of person who will succeed at university, you get directed into vocational or trade school or apprenticeships, etc.
If passion doesn't pay the bills, it certainly can't pay taxes. Why should engineers and plumbers and garbagemen pay taxes to send someone to art school for years?
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.
Of course, countries with tax-funded higher education ration degrees. There are limited slots, and art courses are usually at the bottom of funding considerations.
Exactly! Passions are good hobbies. Many people who take their passion and turn it to make it their source of income regret the decision because it sours the passion —it become a job.
There are a lot of ways to make money. Picking a job based on money is a good way to be absolutely miserable. My parents pushed me towards making money my entire life and there is nothing I regret more than following that advice. Every day I wake up dreading going to work and it seeps into every aspect of my life.
Presumably you have enough money now to switch to something that makes you happy?
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
I'm 29 and have 500k saved up (live in Santa Monica which is quite expensive), but yes I think I will quit my next stock vest which is Friday.
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.
Making 40K a year is only sustainable while you're in good health and don't have a family to support. I remember my carefree twenties as well, but things can change as you get older. There is no retirement plan on that kind of income other than waiting tables till you die. At least you should recognize that your relationship to money is very different than theirs. Having half a mil in savings is a completely different ballgame.
I think both situations are unsustainable. I'm not financially stable because I hate my job and might quit at any time and he doesn't make enough money.
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.
The world is cruel and wants to see us all ground to dust. The typical HN denizen might know this at an intellectual level, but few of us have the lived experience. I sincerely hope you never have to learn how much of a privileged perspective you have.
If you don't want to be poor, don't go to university.
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.
Meanwhile in the real world, large companies and public jobs all have practically mandatory education requirements. Your pay as a public employee in Germany is literally determined based on whether you have a BSC or MSC or none.
> 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.
Giving the benefit of the doubt here, I assumed the push toward trade school is because that makes the most sense for the child in question. College is not for everyone, including a lot of people pushed into attending.
It really baffles me sometimes how readily we assume our conclusions apply to others. Most serious decisions in life require balancing multiple difficult trade-offs. To think that our particular biases, experiences, resources and difficulties are anywhere close to another's is a huge leap.
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.
Seems like if we don't think 18 year olds are not legally responsible enough to drink alcohol, then perhaps we shouldn't allow them to take on life-destroying amounts of debt.
Well the CDOs are probably tranched, so there will be some portions that are safe. But in general, you'd think the student loans would only be in trouble if there's a large increase in the unemployment rate. You'd get a meltdown if the government were to announce a change in the laws.
Sort of. They took the shitty bottom tranches from the mortgage CDOs and repackaged them as new CDOs. The credulous ratings agencies gave these new CDOs the same rating as the old ones but it took only a modest market downturn to wipe out even the top tier of these second level CDOs. Even this might not have been a problem if the whole thing hadn't been massively leveraged. The fact that mortgages were involved was nearly irrelevant. This shitshow could have been built on anything. The regulatory reforms that tackled the mortgage market were missing the point.
> But in general, you'd think the student loans would only be in trouble if there's a large increase in the unemployment rate.
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.
Even if you can't discharge the loan in bankruptcy, if someone can't pay, you as the lender have a problem. The balance in your favour might keep increasing with the borrower totally screwed, but that doesn't really help you if nothing is being paid.
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 balance in your favour might keep increasing with the borrower totally screwed, but that doesn't really help you if nothing is being paid.
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.
This is why I'm asking. If that's the case, then I think even I would want to invest heavily in them. As long as the US government continues to make the money printer go BRRRR, this is an investment vehicle that simply cannot fail. (Until it does, in which case it will do so in a most-spectacular fashion.)
There are some loans the government guarantees and other loans that the government merely makes immune to bankruptcy. Obviously, they have different risk profiles.
I'd love to see numbers on how many are actually discharged. My understanding is this is almost as akin to saying that the lottery does, in fact, pay out.
There's more paths to discharging than bankruptcy.
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.
I totally agree, I think most level-headed people do.
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.
> I think they had to be on disability for a certain period of time (measured in years, iirc) before they were discharged.
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.
I don't have numbers but I've read enough stories about it that I think it's far more likely than winning the lottery.
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.
To be fair, I was unfair to compare it to the lottery. That is clearly not paying out often. Such that, if you are comparing to that, you had best be favorable.
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.
Do we have any numbers for how many applicants get their debt forgiven? The requirements seem pretty wishy-washy and easy for courts to just deny out of hand if they want. And while that could go both ways for someone, Americans in general are pretty obsessed with people paying debts in full regardless of how fair or not or manipulative or scammy the deal originally was or the circumstances that brought it about.
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.
My mom’s “City College” MBA student loans were somehow discharged when she went on medical disability. It is totally possible, but she was really not in a good spot after 50 health wise.
Which I find really weird, they take this stance against education but businesses don’t have to deal with such predatory loans - in fact govt loans for businesses tend to have low interest rates, or forgiven like the PPP loans.
Why do we take anti-individual stances, but pro-business stances? Is that a byproduct of capitalism, or am I misreading the world?
PPP loans weren't really loans. It was known they would be forgiven before taking them out. If that had not been the case, most businesses would not of participated. I believe they were structured as loans providing a mechanism for congress to pass the aid immediately.
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).
That’s the part that doesn’t make sense to me. Businesses make way more money than an individual, so why charge the individual more APR?
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.
That's not really true imho. If we are going to be pedantic and talk about the pandemic, almost all taxpayers received individual stimulus checks in the thousands. On top of that those with children received a lot more. The vast majority of PPP loans went to small business and it was to make up for the government shutting down parts of the economy (it wasn't simply an economic downturn). I don't agree with how hastily and sloppy it was administered, you'd think we would have plans in place beforehand. But hey it's the government.
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.
I would kill for such a low interest rate. I graduated soon after the financial crisis and the cheapest loan I had was 4.88%, with the average being 6%, and some were even 8%. I can (could have?) finance a car for cheaper, which is a bit ridiculous to me. Personally, there should be a cap or a set interest rate for education loans but I understand that it’s a contentious statement.
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.
> 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.
If that business goes under, how many individuals are out of a job?
The PPP loans were intended to keep _individuals_ employed.
Where are we taking anti-individual stances? I'm pretty sure you are misreading the world here. Nobody mentioned individuals at all - the question is just how much you blame businesses vs lawmakers.
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.
you are right basically -- with the caveat that "business has shown the ability to be responsible with money" while individuals fail at this for a large variety of reasons. However, in many societies past and elsewhere, not every single individual adult has to manage money like a business. Zoom out a bit and you might imagine that government now treats corporations as a person, and persons like they have to behave like a business.
> Why do we take anti-individual stances, but pro-business stances?
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.
I 100% agree that universities are not incentivized to keep their costs low, and there are so many that could run on a much leaner funding.
> 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.
Comically, the government is the direct lender and is charging “predatory” rates. My loans are all through DEd. At time of issuance, they were double the 30 year mortgage and many multiples of prime. My payments go directly to the governments payment processor (AidVantage/Navient) and on to DEd.
And yet, some lenders (Navient is the big one) have now lost so much money due to COVID forbearance that they've exited that industry entirely.
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.
Since there is pretty much no social safety net, people are probably going to find some sort of work even if they have a lot of student loan debt. And, the debt servicer can garnish those wages. You are essentially selling yourself into slavery if you take a student loan! (And the reasoning is so weird to me; I went to a state school and tuition was $750/semester. Why are people paying more unless they are extremely gifted and they want to go into a highly regulated field like civil engineering or medicine?)
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!)
You're entirely right, but if I have $200K in debt for my useless undergrad degree, and I can only find a job at Starbucks, garnishment or not the bank is not getting their money back. The court will order some kind of payment, sure, but they'll prioritize me paying for rent and food.
I agree with that. Having that money taken out of your paycheck just makes you extra miserable; you're in debt, you get yelled at for not making Karen's coffee right for 8 hours in a row, and you don't even have enough spending money to go see a movie or whatever. It's just miserable and I don't like it; if you have to take a shitty job to feed yourself, you shouldn't have to live a completely miserable life 24/7. That just doesn't seem right to me.
Hopefully for you the court's prioritizing will actually allow enough $$$ for your rent and food and medical expenses and transportation and clothing and etc. And adjust that when inflation hits the costs of those things.
As I have written in another comment. This scheme only works if the college is owned by the bank and the college is spending a tiny fraction of the tuition on the student.
I believe that was the posters original point, because the lenders have no more risk it means that the market solution has been put out of balance, and the current situation is arguably a logical consequence of that imbalance.
I can see that read. I meant that we should not have built a situation where lending money is risk free. It is a perverse incentive to do more lending, and ignores the actual risks that people will be unable to repay.
Just because the loan cannot be discharged doesn't mean there are no risks. The money doesn't just appear out of nowhere if the borrower doesn't already have the money.
What "lenders," and what "market" are you talking about? 92% of all student debt was issued by the federal government. As a matter of social policy, the government does not meaningfully consider credit risk when issuing student loans.
The government taking credit risk into account would have such regressive results it would be hilarious. The cost of college would dramatically plunge for kids from rich families taking CS and finance classes and skyrocket for everyone else
It's also frustrating to see politicians trumpeting efforts to help Americans pay rip-offs like health insurance and tuition, instead of putting a stop to the rip-offs themselves. It's hugely wrong-headed and makes the problem worse.
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.
> 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? 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.
People hate Comcast for raising their rate $10/month but when the government prints trillions causing you to lose 20% of your income and assets to inflation it’s not a big deal.
It’s easy to miss the connection between printing money and the affect of printing money since there is always a time period between cause and affect. The example of comcast raising hour bill is immediate. Well comparatively.
I honestly don't know what you are trying to say here. Government debt has been discharged before. Look into the number of cities that have declared bankruptcy. (That is, you don't even have to look at failed nation states. Plenty of places in the US have done this.)
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?
It's not about getting the risk to zero. It's about managing it. Right now anyone can take on massive debt to go to college programs they almost certainly will not finish. There's no risk evaluation for individual students, no qualification process that decides to only give loans to those with a history of performance that indicates they will finish. And almost 40% of student loan defaults are people that didn't finish [0].
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.
If I loaned out a ton of money to people that couldn't repay it, the system would rightfully tell me that I took on too much risk in lending the money out and that I earned the losses. To that end, the system works as designed and desired. People, by and large, are not capable of putting others in absurd debts that they are unable to get out of.
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?
>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
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.
Yes. It's not the bankers doing it, it's the US Government - the Feds are the market, they own 93% of student debt. What a coincidence they dictate whether you can discharge the debt too, not too difficult to spot the gigantic conflict of interest.
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).
> 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
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."
The cost of studying is amazing in the USA. I did three degrees and I think it cost me around around $2.300 per year. I do think the prices differ between foreigners and local students.
Some of the interest rates I've seen on federal student loans - 7+% - seem exorbitant in general but particularly because the lender takes no risk.
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.
8% is the usual rate for a "qualifiziertes Nachrangdarlehen" in Germany which is an equity based loan that is paid out only when the company is profitable. So you are right. The interest rate is too high.
It's not true to say the Federal government does not take on risk loaning to students. Students are frequently unable to pay. 7% probably does not cover costs.
From an outside point of view, it looks like just another problem of the duality of the American self-image.
"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)
Germany does this with their export policy. The country exports products to Greece which can only be financed by cheap loans from Germany and then when Greece can't pay they turn around and chastise it for buying German products.
Eh I think the impact of the federal government on undergraduate costs is largely overstated. The limits for dependent students, which is most undergrads, is really small over 4 years.
This is wrong. You’re mixing up subsidized loans with the ability to get loans.
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.
I am afraid you are woefully confused. A good friend had $150k in debt from undergrad and $200k in additional debt from law school, and this was 10 years ago.
That is not as clear cut as you make it. There have been rulings in the last several years that have allowed some private loans to be discharged in bankruptcy proceedings.
> 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]
Granted, this is getting very close to "the exceptions prove the rule." :D And this rule is spelled out fairly directly to be as hard as possible to discharge.
Those don't include private loans which can be co-signed by parents if needed, nor do they include PLUS loans where parents also take out loans. Colleges are also quite helpful in what you need to do to be declared independent for financial aide purposes, which almost doubles that limit.
They do have protections in bankruptcy as student loans though so it isn't a normal unsecured risk for lenders. They're also not hard to get, which goes back to the point of easy money inflates tuition.
That’s the limit directly from the government. Depending on what you’re studying for, that might end up being lower than what you actually need.
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.
There is no limit for dependent students of federal support through loans: the limits you cite are the limits for loans to the student for students whose parents are able to get PLUS loans.
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.
Wait, what? That is a misleading read of that page. Only if you have parents/guardians that can get a PLUS loan is that the limit. You have to look at the other column for everyone else.
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.
how is it misleading? most undergrads are considered dependent, which means they can only borrow $31k in total over 4 years. beyond that they would need to tap alternative sources.
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 cap when PLUS loans are not available is $57,500.
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.
Another misleading point, though? As you can then go on to get 138500 for graduate/professional school.
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.
I'm interested in numbers backing up that claim? But, even with that, student debt is almost certainly including PLUS loans which, "The maximum PLUS loan amount you can receive is the cost of attendance (determined by the school) minus any other financial aid received." So... yeah, very misleading read of that page.
> But the government has "protected" all loans - private education loans are also unable to be discharged by bankruptcy,
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.
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.
The CBO estimates that the government is indeed “on the hook” for about 93%[0] of ALL student loans, despite not necessarily being the originator or servicer.
There essentially is no such thing as a “private” student loan anymore.
I can see how you think we were only talking of federally "backed" loans, but I did intend my expansion to be all loans the government has "protected." Which, as the other poster points out, is basically all of them.
I had thought that I had private loans back in the day. Been a long time since I paid all of mine off, though, so I can't remember who they were through. (And, I fully grant that, even if I was private loans, 8% is still a non-zero number...)
Before federal loans were all direct (Ford loans), there were federal loans issued through third-party lenders (Stafford loans) that otherwise worked the same way with the same kinds of loans (subsidized, unsubsidized, PLUS; for a while, both Stafford and Ford were offered at the same time, with identical terms.) These are collectively “federal” loans (and there are still balances on loans originated as Stafford loans) distinct from “private” loans.
I remember I maxed out my Stafford allocation, and then also had to get extra loans to cover my last year. Memory being what it is, I wouldn't be shocked if I am misremembering some.
Regardless, I got them all payed off; and still have a massive distaste at how most discourse over this goes.
I would disagree that 31K is not a lot of money, but then again, maybe it is not a lot of money and my opinion is warped. I think if the government took a few points off for performance as a preferred return on the massive endowments, all of this would go away.
it's $8k a year. that wouldn't even cover rent for a school year at this point.
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.
Please stop. You’re completely misinformed here on how much is available for students to loan. I know multiple people that took out massive PLUS loans from the government that carry interest, are not discharged in bankruptcy, and far exceeded the limits you are talking about ($70k a year for grad schools).
I cannot imagine a more sinister, callus, and destructive way to punch down on some of the most vulnerable people. 18 year olds did not elect any of the people making these laws, every adult before them parrots “go to college”, financial aid offices don’t care what people do as long as they pay tuition, etc.
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.
True, although I expect that the US healthcare system is more than competitive if we consider its bad outcomes and overall inefficiency per dollar spent.
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.
I’m very pro-free market but I would be happy to see this structure replaced with almost anything else. We chose the worst possible combination/bastardization of systems: colleges are given a massive amount of funding by the federal government and the same government guarentees student loans via a debt shackle, lenders are incentivized to lend to students, colleges are incentivized charge exactly what the market will “tolerate” which is horribly skewed due to the abundance of money available to be loaned. This is a losing system for students, even for those who don’t take on debt are spending an absolute insane amount tuition, books, housing, and other living expenses.
This says that the average private highschool tuition is $15,645.
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. Looks like doing the same thing for public 4 year college over the same timespan results in an annual real increase in 2.1%
The first bullet says: “$23,839 is the average annual tuition among the nation’s private K-12 schools.”
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.
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.
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.
But once you've become sensitized to the impact of paying for daycare on your budget, it's easy to logically just continue the same budget and funnel the same money to a different school.
This. I put my kid into daycare because it didn't cost more than daycare and I'd been paying it this long, what was paying it forever when I'm financially stable. My kid is special needs and the public school would have never accommodated her like this private school has.
Depends on the city… in Los Angeles private schools can push $70k/yr/student easily; In the Bay Area I would imagine even higher. In Dallas, where I grew up and went to the same school for much less, tuition is now around $40k/student/year for top private schools.
The highest I've found in the bay area are a small handful of residential private schools (e.g. Athenian is $82k for boarding students). Most of the top private day schools are still <$50k/yr, but I strongly suspect they top that once fees & "discretionary" expenses are added.
There is a chart at the bottom. Costs doubled over twenty years since 1999, directly comparable to the college rate over the same period and well above inflation.
According to that chart, by "well above inflation" you mean "<20% above inflation" and by "comparable to the college rates" you mean ">100% above inflation".
Your use of generalizations seems radically inconsistent.
Daycare is considered by many to be very expensive and a lot of parents would prefer not to (or can't!) pay daycare prices until their kids leave the house.
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.
There is a chart at the bottom. Costs doubled over twenty years since 1999, directly comparable to the college rate over the same period and well above inflation.
This is not wrong (despite being common and the de facto explanation) but it isn't complete either. The reason I say this is because people that often say this (or read this) also conclude that the way to fix this is to just get rid of government backed loans. The issue is that this model doesn't question why the government backed loans in the first place. How they were seen as an investment in the people, as higher education was already prohibitively expensive. The solution failed because it did not account for a feedback loop, relying on competition to keep prices low rather than implicit coordination (sometimes explicit collusion). Mostly being due to momentum and prestige having an ineffable market value.
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.
Easy access to credit is a good thing. I cannot believe I am saying this on HN. The problem as I see it, as a non-American, is that university in the US is a business trying to turn a profit. Even if most universities are technically non-profits, they are managed like businesses by MBAs. In the EU many countries offer guaranteed loans for Uni education, but this has not spiked the cost of education because Universities are not run with the aim to turn a profit.
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 in the US are not legally allowed to turn a profit. There are no financial owners to be paid a profit. So, everything you wrote about that is BS.
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.
I think you and the GP may be getting tripped on word choices. Most private universities in the US are organized as 501c3 organizations. There are numerous requirements[0] to be a 501c3. This however does not prevent a non-profit from being run like a for-profit business.
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.
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.
Society is better off as a whole with a well educated populace. We shouldn't optimize for college only for kids who can learn to program or whatever.
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.
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.
It's not a "congratulations, you are now well-educated" mark. The more educated the population is, the better. Now, at some point there are trade-offs and diminishing returns (if your entire population is busy studying philosophy and everybody starves, that's bad), but considering how much absolutely worthless shit society dumps money into, we have plenty of slack.
Well educated isn't so clearly defined: In general, though, it is having been exposed to a varying number of subjects, be able to read a varying amount of things, have enough general knowledge that they can understand the reason there are "chemicals" in food and the reasons not to mix some household chemicals together. In addition, the person has been able to dive into a particular subject more deeply than the other ones, and understand that other folks have different specialties. While doing this, you are generally exposed to an array of people and if your institutions are fair, they come from mixed backgrounds.
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.
I am not sure if university is an effective place to do this. I think tricking the younger minds at primary/secondary school to be more curious and well-rounded person is much better. Once you get the ball rolling, they will hopefully keep being that way into their adulthood. For example, how do you teach a young adult to be kind when they aren't? Teaching them about kindness via multiple sessions of lectures ain't gonna cut it. You would have to "trick" and "manipulate" them into being so to bypass ego/whatever else which is much harder to do for adults.
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.
The education needed for a functioning society should be delivered by the end of high school. A few generations ago it was delivered by the end of 8th grade.
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.
It’s a question of what kind of “functioning society” you want to have. Those 8th grade education jobs still exist, but they’re in China, Bangladesh and other developing economies. And no offense to those people either. A lot of manufacturing depends on them.
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.
That's a popular opinion, but how do you quantitatively prove it? While the formal education of a population may correlate with wealth, I think it would be harder to prove a causal link.
It's about what is necessary for DEMOCRACY to work well. I don't care what provides a higher ROI to some rich owner-class people, I care about a society that represents its people.
It really depends on what you mean by that. Plenty of people get bachelor’s degrees with little to no civics or history education included. And historically, college degrees were rare. Only 28% of the Silent Generation had any college. Now, 67% of Millennials do. Did democracy not function before?
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.
Democracy gets harder the more technologically advanced the world is.
In the decades of newspapers and limited information it was much easier to control information, placing the burden of information flow on a limited set of journalists.
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.
City and community colleges exist, and are mostly free. But for most people, colleges are more than just an education. College is about signaling their aptitude. And so people keep trying to pile into expensive private school for the prestige.
> City and community colleges exist, and are mostly free.
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.
> private college offered scholarships and financial aid
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.
Work for a public organization or certain non-profits while making 10 years of regularly scheduled payments and you may be qualified for student loan forgiveness. Lots of physicians I know took advantage of this since most of their training is at public academic institutions, and I believe many teachers do as well.
Do you have data on how many take advantage of it? My anecdotes are that everyone who tries this gets trapped in some bureaucratic hell hole that tends to prevent it from actually being used.
"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.""
Yep, 2019 was the first year people would have become eligible for this, as I recall. There's has been federal focus on streamlining the application process since then.
That's only true if the issue is the cost and not maximizing education. The trick is we really do have folks that deserve college and can't afford it without some kind of help.
This is a common theme on HN, but it's not obvious to me if it reflects this entire period we're talking about here. Were government loans growing from 1980 to 2000? I know they have been in the last 20 years, but tuition was clearly growing before that (as you can see for yourself in the graphs of the original article).
Two things you have to do to keep tuition costs down nowadays, by my estimation, unless you get a full ride scholarship or accepted by the an Ivy League:
- 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.
2+2 plans are really, really questionable in my observation. Most students I know ended up doing either 2+3 or 3+3, which since as you pointed out CC are so, so, so much cheaper than university did save them money none the less. However, if you're going into a field that has any kind of improved earning potential from a degree, you have to look at the opportunity cost, taking into account the fact that if they had just gone straight to a 4 year they would have had an extra 1-2 years of making substantially higher wages than they could before they graduated.
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.
Agreed about community college. It’s unfortunate though that, like so many things, it’s essentially a lottery on where you’re born. Some community colleges are wonderful, others not.
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.
That's not the worst part. Rich families had their kids legally emancipated prior to age 16 so that the kids could legally show zero income and zero family net worth on their FAFSA applications.
The FAFSA is such a load of horseshit I don't even know where to begin with it.
It only makes sense if you believe education is just like any other commodity whose price should be driven by market forces. Should government have any say in whether its citizenry gets educated? Is there a public interest in it?
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.
The rise in prices has largely been driven by schools going on real estate binges and bloating administrations.
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.
Ultimately it doesn’t matter if the cause is administrative bloat, government-backed student loans that can’t be defaulted on, or space aliens. What is not debatable is that higher education is necessary in an advanced economy, and starving the job market of highly skilled workers is a fast track to companies shifting to other places where they are more abundant.
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.
When I went to school ages ago when it was reasonably priced, they did a breakdown of the tuition. Half of it was stupid bullshit the student government voted on over the years.
> Should government have any say in whether its citizenry gets educated? Is there a public interest in it?
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.
Strangely, almost all other advanced economies have been able to provide affordable education for their citizenry without it devolving into Nineteen Eighty Four. I wonder what makes the US government so uniquely malevolent.
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.
That is obvious, but it used to be that admission needed some tests which most people simply cannot get past. Colleges lowered the bar of entry to make more money and that caused your point 2 and as well massively lowered the quality of the education making the diplomas not very worthwhile (known exceptions are there of course). Keep the bar to entry very high and you cannot have a reason for upping prices. Get a loan when you are actually really good and otherwise don’t get in, even if your parents have billions.
If that's the case, that the federal government backing the loans is what permits the increases, then why not just have the federal government pay up front and cut out the loan portion? Might give them more power to negotiate lower prices. Though I suppose the loan industry wouldn't like getting cut out of their middleman position, eh, and politicians probably wouldn't stand for that egregious cutting of profits.
> Makes sense when you have student loans backed by the federal government.
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.
It's worth mentioning that degree granting institutions numbered ~3500 in 1980 and total enrollment was almost 10 million, and in 2022 there were just over 4000 such institutions serving 17 million students, and that number of institutions is actually declining from its peak in ~2016. This alone is bound to drive up prices.
More likely cause is the mentality that says universities are a for profit institutions That should squeeze as much as possible.
Instead of "socialist" subsudised school, you give loans...
The reality in many cases is that total cost per student has actually decreased; meanwhile, governmental funding of universities has flatlined for decades. If enrolment doubles and funding remains stable, there's only one solution: Increased tuition.
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.
If only governments could make…laws to restrict the price of University. Or…could limit the maximum loan size thus encouraging Universities to not charge more than that.
Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are worse than the problem they attempt to resolve.
> Price controls are one of the few things that economists on both sides of the political aisle agree do not work, and/or have unintended consequences which are worse than the problem they attempt to resolve.
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
Sometimes it feels like economists come up with these ideas in an ivory tower, detached from reality. Any kind of price control seems to make economists very upset, rent control being another example.
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.
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.
If you actually read the rest of my comment, I acknowledge mainstream (that is to say, neoclassical) economists don't like price controls, which is almost exactly what the wiki page says.
I did read your comment, and I blithely responded with another source supporting my original claim. In hindsight though, you're right: I should have simply picked apart your original argument instead of providing another source, as your argument is self-contradictory.
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?
I don't think you understand what bias is in this context.
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.
I don't think you understand how diverse different schools of thought are in economics. To build on your example, it would be like asking "is abortion wrong?" to a group of religious fundamentalists. Ask a post-Keynesian what they think about price controls, or really, any school that's not a free market fundamentalist.
I don't think you understand how surveys work. The goal of a survey isn't to include everyone's opinion. The goal of a survey is to understand the overall opinion of the population. This is not difficult to understand, I feel like you're being deliberately obtuse to avoid having to admit you're wrong.
> Any kind of price control seems to make economists very upset, rent control being another example.
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.
That is not a good comparison. Scientists that disagree with climate change are like a couple percent at max. Meanwhile nearly every economic topic, including price controls, would have double digits of economists disagreeing with it. Economics is not a hard science where you can take anything in absolutes.
Disagree. Climate science and economics are quite similar in this context, in that both an economy and a global environment are so massive and massively complex that neither can be isolated and studied in a controlled environment.
In such cases, when there does exist a consensus, it's probably correct.
If you as an armchair expert disagree with a broad consensus of actual experts - i.e. people who study something as a lifetime pursuit, your first thought should be that your knowledge is lacking, not that they are wrong. And if you find yourself seriously believing that they are wrong without first understanding how they are wrong, then that should be a strong indicator that your thinking is clouded by bias.
That's not quite true. See for example the existence of the billions of $ of corporate agricultural subsidies, essentially creating an artificial price floor.
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".
You won't find many economists arguing against farm subsidies, which are a form of price control. This is among the oldest practices of statecraft in history.
Seems to work well in the UK. Fees are set by the government and the government provides the loans. Private Uni's can set their own price but the government loan will only only fund about £6k (£3k less than the public Uni fee). Because of this, many private Uni's set their fees at £6k and then make their money on international students.
I don't think that's a fair take on the suggestion. What if it was something like Medicare where services were tax funded and costs are negotiated but fixed?
That's how things used to be. It means that only rich people can go to college, because they are the only ones who can afford it. Prices can only come down so far. The college still has to pay professors and maintain facilities.
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.
> It means that only rich people can go to college, because they are the only ones who can afford it.
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?
The interest rates would be so high that it wouldn't make sense for a promising student to take that loan. If you're a loan company and someone comes to you asking for $100,000, and they have no credit and no family with assets, even with a 4.0 GPA and perfect SATs, they are still a huge risk.
This seems fine to me. If someone has no assets and no reasonable prospects to pay back $100,000 of debt, then saddling them with $100,000 of debt is a bad idea.
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.
They study in a field which has a high likelihood of loan repayment, or study at a less expensive school.
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.
> They study in a field which has a high likelihood of loan repayment, or study at a less expensive school.
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.
I'm not sure loan companies want to get into the business of rating specific programs at specific universities and their ability to produce students who can get good jobs.
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.
Loan companies might not want to do that, but it's absolutely part of the due diligence they have to do. If I borrow a few hundred thousand for a home, the loan company does a deep dive to ensure that my home is a sensible buy (e.g. appraisal) and that I'm in a position to pay back the loan (e.g. credit check, historical performance). It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans.
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.
> It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans.
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.
I think we might have different fundamental viewpoints here, and that's okay.
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.
Why wouldn't it be the first resort? I have a degree in hand, increasing my earning potential by, say, $50k a year. I also have 100k in student debt, and approximately zero assets to my name. Why wouldn't I declare bankruptcy the day my diploma arrives in the mail? It's not like they can repossess my knowledge.
The same reason you don't go on a drunken gambling traveling adventure on the multitude of credit cards you can get at 25 and then just declare bankruptcy, because now you are going to have a bankruptcy status over your head for the next 7 years and you won't be able to buy a house or get decent rent or get a car loan or even be able to sign up for a cell phone without fronting them the entire cost in cash ahead of time.
Well, as a start states can start refunding their colleges and universities, to levels that used to be common [until roughly the 90s].
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.
Now that we have a student loan system, I'm sure that the students who are good bets will continue to have access to credit. You would be insane to not give a student loan to an MIT CS student, for example.
Also, prices should fall a lot, making school a lot more affordable.
Right, let the market decide interest rate charged for them based on risk of default. this will also quickly filter out pointless degrees without much carrier prospect because interest rate would be high. right now basically govt has created a fully protected predatory loan that can follow you to your grave. IDK why is this so hard to understand.
> Proper solution is government to stop guaranteeing the loans and to allow people to put them in bankruptcy.
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.
The government actually can do, and often does, policy with racially disparate impacts. Disparate impact is not a Constitutional limit on government discrimination, its a judicially-created rule in the application of certain statutory anti-discrimination laws.
(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.)
The disparate impact rule is challenging to begin with because literally every policy has a disparate impact, because there is and always will be an uneven distribution of people of whatever cultural or ethnic subgroup they can be divided into in whatever social roles that exist. It should rightly be rid of. There are many other better ways to address discrimination.
> The disparate impact rule is challenging to begin with because literally every policy has a disparate impact
“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 are many things that the government doesn't guarantee loans for. Why is not-guaranteeing for higher education more of a racially disparate action than not-guaranteeing for e.g. vehicle loans?
Govt can totally do that. but you are right in that only congress can do that via legislation. every policy that effects poor has racially disparate impact so that argument can rally be applied anywhere.
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.
Yale is not a representative college. It makes 4x the income from its endowment than from tuition, room, and board. It also has multiple research labs and a hospital. They don't break down the staff (admin) by department, but 2/3 of all faculty are in the school of Medicine, most on the clinical side. I would assume most of the staff (admin) are also working at the hospital.
Universities are not just educational institutions. You can't just compare students numbers to employee numbers without also examining what the university does.
Of course Yale isn’t representative, it’s just one data point in a national trend.
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.
My point is that Universities don't just teach. They also perform research, which requires staff. Yale is researched focused and has more grad students than undergrads. Grad students and research faculty require more administrative staff than undergrads. An increase in admin staff could be caused by a shift to more research rather than bloat in undergrad.
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.
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.
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.)
> 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.
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.
> 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
Research is done by professors and students, not admins.
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.
My point is that the article you linked to is not a data point supporting your assertion that tuition cost increases are caused by more admins.
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.
A lot of the increase was driven by the "arms race" to attract the best students by building ever more facilities to make their ever glossier brochures more attractive. My school when I was leaving in the early 2000s was on a $200 million dollar building spending spree- a new library, a new sciences building, etc. I don't have a citation for this, but I had read somewhere awhile back that the administrative ranks have swelled at these schools and they are making tons more money than they used to in the past as well.
So the easier solution then since the government is effectively already paying for anyone who doesn't pay back their loan (a dead person for example) then is to just pay for everyone's college education (Public Universities).
I've been saying this for a while and no one has ever agreed. They are always like you think they are that greedy. YES I DO. It's not complicated.
If one can get bailed out, one can do what ever they want.
You're missing another driver of the growth in tuition though: many colleges are only superficially "not for profit" and in reality are being run as profit maximizing institutions.
I hope to see the day where interest bearing loans are recognized by the rest of the world as the evil they are. Muslims and Jews know this fact quite well.
Abrahamic religions in general - Jesus was also not a fan.
>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.
The same incentive you'd have to do something for someone without receiving payment - a desire to help. I'd imagine the fact that people in that time had stronger familial ties to others in their village also helped increase payback rates.
And both religious created a way to indirectly pay interest by turning it into a business partnership.
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.
You're supposed to use Mudarabah[0] preferentially, which is dramatically less of a lazy hack around usury rules than Murabaha. (Also as a English speaker, those words are very hard to distinguish.)
Assuming such a rule would mean "all mandatory fees are prohibited" and that we're talking about profit driven ventures (not cooperatives or patrons that might have other reasons to want to lend money than monetary profits), you can be creative and charge money in ways that technically doesn't count as interest.
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.
One of the major dangers with interest is it compounds in bad times. Someone gets laid off for 6 months and suddenly owes more money, this is especially problematic if someone gets injured and can no longer make the same income etc.
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.
Well if you're a credit union that operates in Shithole Town, USA... then in theory if you lend money to people who improve the community, you'll reap the benefits everyone else does by living in a more desirable place (more valuable property, more customers for businesses, etc).
Almost impossible to imagine given the current state of the economy where every possible thing you can imagine has been commodified.
The fact that default risk and time value of money exist are immutable, irrespective of whether you think that's evil. Modern Islamic banks in Sharia jurisdictions still recoup that risk and time value through various means, irrespective of whether you call that interest. (Some forms of "Islamic mortgages" charge you "rent" based on LIBOR/SOFR, which is just interest with extra steps.)
This seems good in theory but hard in reality. The modern economy is built on debt being used for new investments. The problem is high interest rates, not interest rates in general.
Something never asked is whether what the modern economy is built on makes sense for longer than a couple hundred years. It seems premature to assume that the modern economy is sustainable ad infinitum.
Christianity also used to have many restrictions on charging interest, but that got lost somewhere around the 19th century.
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.
Those are the private loans not backed by the government. The government ones are basically at the prime rate or less to fund the administration of the program.
Another problem with student loans is that they are frequently issued for way more than bare minimum required to pay tuition and study materials. This extra amount just exacerbates the problem and gives universities room to get to that money via tuition increases. Students may legitimately use that extra cash for living expenses, but most of the time it is just fun money expense.
> Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan
This is the exact problem. Whoever makes the loan has an incentive for eternally increasing prices.
You're right that state govs have definitely reduced funding in many places for public colleges. And although this started decades ago in some cases, it is significantly exacerbated by the size of loans that students can easily access (due directly to federal backing of such loans). Therefore, states can reduce spending on colleges with the knowledge that the colleges can easily increase tuition to make up the difference.
