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Comment by andr3w321 | Hacker News Reader

I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

Of course this ignores financial aid so Yale's operating costs are much less than $500 mil/year. If you're going to donate to a university your money will go much further at a small college that actually needs your money and will actually spend it rather than hoarding it. TMQ had some great articles about this topic back in the day. http://espn.go.com/nfl/story/_/page/TMQWeekFour140930/robert... Halfway down.

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Even worse, in my opinion, is that these institutions can continue to be considered Not for Profit organizations.

Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in particular, has really been furious at this trend. In Worcester, the colleges use up city resources and yet pay nothing in taxes in terms of city services.

Am I reading this correctly? A non-profit can buy real estate property and not pay taxes on the property? Is this investment property, or property being used for university usage?

It is both, it is the nature of mega universities as the operating arm of large trusts. Northwestern is receiving similar pushback from Evanston, IL.

That's why churches can remain where they are, often in very desirable locations.

It is also why charity shops annoy people so much, they can afford to run rather easier whilst skipping out on chunks of business rates etc

Who's annoyed?

Mostly their competitors, and perhaps people who would prefer more upscale shopping.

Or maybe people who like roads, firefighters, police ....?

It gets even worse. Harvard Housing charges students "market rates" [0], i.e. they don't even subsidize what they are not paying in taxes off their own students' rent.

[0] http://news.harvard.edu/gazette/story/2014/01/harvard-housin...

I believe Columbia is the 2nd largest land owner in NYC. The first is the Catholic Church.

http://nymag.com/listings/attraction/columbia-university/

NYU must be third.

Harvard doesn't have to pay tax but Harvard and MIT have made tens of millions of dollars in "voluntary" contributions to the municipalities they reside in over the last decade. The situation is weird but Harvard and MIT give enough money to make property tax in Cambridge dirt cheap. I'm only paying ~0.375% for example.

Real Estate is a good investment for university endowments for a few reasons:

1 - They can hold onto it for a very long time. (Real Estate is best seen as a very long term investment)

2 - It can generate rental revenue in tough times, when their financial needs are higher.

3 - It's an asset tied to one of their future liabilities. Growing universities need to buy land, so investing in land effectively hedges some of that risk.

Now your point of their being non-profit - that's much bigger. I think most universities (and sport leagues, and many others) could be considered for-profit based on much of their behavior.

> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]:

> But there is one misimpression that people seem to have[]: the purpose of Harvard is not to educate students. If anything, its primary purpose is to produce research and scholarly work. Nobody should be surprised that the gigantic endowment isn’t put to use in providing top-flight educational experiences for a much larger pool of students; it could be, for sure, but that’s not the goal. The endowment is there to help build new facilities, launch new research initiatives, and attract the best faculty.

The purpose of an endowment is to generate an income stream forever. It's typical for the organization with an endowment to spend only what they earn in interest at most, with some preferring to spend less so that the endowment grows over time.

It's possible that they're investing so well that they can afford to spend 2% every year, but that's just one cost among many costs that the university has - such as paying for its staff, its facilities (real estate, buildings, and so on) - and staff and buildings that help produce research.

[1] http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/...

> The purpose of research universities is to engage in scientific research, not to educate people.

Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.

Yes. Funny, that.

Turns out money can't buy everything. Especially when directed at the things that don't matter.

In the case of Yale, it does buy prestige.

It buys prestige within the group that values universities. But that group is shrinking. The more people reach the conclusion that attending these private universities have bad ROI compared to other educational resources the more people will loose trust in them and the less valuable that prestige is.

If this claim were true, the admissions rate at Yale would be rising. In fact it is falling/steady at Yale and most (all) of Yale's peer institutions.

Considering USC's rapid rise up the rankings by employing their money wisely, I would say that you can in fact "buy" engineering ranking in US News, if the institution makes it a priority.

University research encompasses more than just engineering.

> The purpose of research universities is to engage in scientific research, not to educate people.

I take issue with a couple things in that sentence. That is the goal of a small number of private research universities. I don't know of any public research universities, even the highest ranking, that don't dedicate significant resources to undergraduate education.

The second thing is that the mission of Harvard et al is primarily scholarship (in any field) and graduate education, not just scientific research.

These are minor points relative to your comment but I don't want the public to believe all research universities exist to do only scientific research.

> The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People"

Actually, no. Despite what some physicist may have written in an op-ed in Discover magazine, The Charter of the President and Fellows of Harvard College says something quite different:

"Whereas, through the good hand of God, many well devoted persons have been, and daily are moved, and stirred up, to give and bestow, sundry gifts, legacies, lands, and revenues for the advancement of all good literature, arts, and sciences in Harvard College, in Cambridge in the County of Middlesex, and to the maintenance of the President and Fellows, and for all accommodations of buildings, and all other necessary provisions, that may conduce to the education of the English and Indian youth of this country, in knowledge and godliness: It is therefore ordered, and enacted by this Court, and the authority thereof, that for the furthering of so good a work and for the purposes aforesaid, from henceforth that the said College, in Cambridge in Middlesex, in New England, shall be a Corporation, consisting of seven persons, to wit, a President, five Fellows, and a Treasurer or Bursar. . . "

Also worth noting from the text, was that over 350 years ago, it was the growing endowment which led to the incorporation. . .

http://library.harvard.edu/university-archives/using-the-col...

The founding principle of universities (in Paris and Bologna 5 centuries ago…) was educating students outside of the clerical teaching system in place at the time.

In Bologna it was even more striking, as it was the (foreign) students that created the university and found, paid and lead the teachers. From what I understand in Paris it was more teacher-lead.

From what I read in this thread, Harvard has not a all deviated from this when it was founded (but might have been taken over by other interests now, of course).

Most endowments spend more than 2% per year. There's a 5% minimum spend for non-university endowments, and there has been pressure for universities to apply this too.

> I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

It's mainly a tax on rich people. Students from lower income households don't pay that tuition.

I walked out of MIT with $100K in student loans, because I had the combination of 'parents who make too much money' and 'parents who had five kids and did not adequately save for their children's education'.

I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.

> I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.

A private school deciding to charge for its valuable stamp of approbal has nothing to do with it being a fair price.

Whenever people talk about making 'the rich' pay for something, remember that their definition of 'the rich' usually ends up being anyone who makes more money than them.

It's possible that you're one of the unlucky people who falls into the combination you described above. Unfortunately, even the best system currently available will often have cracks, and you seem to have found the one that currently exists. The vast majority of the time, kids with rich parents have a substantially blessed childhood & family-support, which justifies them having to pay substantially more in tuition fees.

I tend to dislike systems of the form "if you make/own less than $X, you get $Y benefit". It often leads to nasty non-monotonic outcomes and like this.

For actual public benefits, I'd much prefer to give all the benefits to all the people and raise taxes accordingly. This means that, as a CA resident, I think I should be permitted to deduct rent even if my AGI is $38,259, and I think I should get the full Affordable Care Act subsidy regardless of my income. The rules would be simpler and my taxes would be simpler. In exchange, I would gladly pay higher taxes to make up the deficit.

For public university, it's a bit messier because of state residency rules. And for private universities, this wouldn't work at all unless the government directly subsidized private education.

(But maybe the government should ditch all the complicated student aid and student loan benefits and offer a blanket subsidy for education at accredited universities.)

Throwing more free money at universities will just make things worse.

The universities I know of that have free-tuition programs do phase them out gradually, to try to avoid too much weirdness that would come from a hard threshold. For example, Harvard charges no tuition to students from households making under $65,000, but above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+.

However I do agree your proposed solution is better. Have universalist public programs that everyone can take advantage of regardless of income (tuition-free public university, no-charge public healthcare, etc.), and then instead of mucking with means-tested benefits and aid phase-outs as a way of indirectly taxing the rich, just tax them through actual taxes, the old-fashioned way.

> above $65,000 tuition phases in slowly, reaching full tuition only at $150,000+

Which is still silly. Who has more to spend/better opportunity to save? Two parents that make $75k each in Mountain View or 1 parent who makes $64,500 in Nowhere, Indiana?

"I think I should get the full Affordable Care Act subsidy regardless of my income"

I appreciate your sentiment, but you realize all of the insurance companies will just raise their rates by the amount of the subsidy, right? More demand in the form of government money earmarked for a specific good, with the same supply of the good, means higher prices.

> you realize... right?

Gosh, I really dislike that turn of phrase.

Anyway, they can't do that, since the ACA has mandated that insurers spend at least 80 or 85% of premiums on health care costs since 2012.

The insurers ride that line as closely as possible, since their profit has to come out of the 15% allowed margin. This means an increase in total premiums without a commensurate increase in the cost of claims cannot happen. If an insurer's payouts don't exceed the mandated Medical Loss Ratio, they have to refund their insured customers for the difference by mailing out rebate checks. I've received two such checks myself.

> Anyway, they can't do that, since the ACA has mandated that insurers spend at least 80 or 85% of premiums on health care costs since 2012.

That part of the law is particularly terrible. It directly incentivizes keeping costs high as the profit of the insurer is a fixed (says max but that means exactly 15%) percentage of the gross. It's in their interests to have the price of everything go up!

The whole law is terrible and it should be repealed and replaced with a nationalized system. As long as you have the insurance companies acting as middlemen, it's in their best interest to deny care as much as possible, to increase their profit. What actual good do they do? None, they just come between the patient and the caregiver.

> it's in their best interest to deny care as much as possible, to increase their profit

That's not the case, as the comment you replied to points out.

Let's say an insurer collects $1B in premiums some year. The ACA mandates that at least 85% of that is spent on healthcare costs. At most, the company gets to keep $150M, or 15% of the premiums. For every claim denied bringing the payouts below $850M, the number they keep 15% of goes down, so their profits go down. Denying claims costs them money, rather than letting them keep more.

If the insurer wants to make more than $150M the next year, there is only one way to do that: pay more than $850M in healthcare costs this time, and increase premiums by the same amount. That means encouraging and approving more claims, not fewer.

Unfortunately, this aspect of the MLR promotes, rather than punishes, increased healthcare costs as a byproduct. Competition is supposed to be the check on that -- if an insurer doesn't control costs so that it can raise premiums and keep 15% of a bigger number, you'll switch to a plan with another insurer that isn't doing that and offers lower premiums. Unfortunately, that's not doing the job very well for a variety of reasons.

> What actual good do they do? None, they just come between the patient and the caregiver.

Insurance protects the insured from catastrophic losses by pooling risk. When the caregiver wants to bill me several hundred thousand dollars in unavoidable expenses, I very much appreciate having a middleman I only pay $200 per month to instead.

For your point 1, that's just splitting hairs. It's in the insurer's interest to increase profits, rather than to provide care. So you just pointed out a way they found of increasing profits, which results in both ballooned healthcare costs and increased premiums all around. This isn't helping me get high-quality healthcare at affordable prices.

For your point 2, you protect people from catastrophic losses by having a single payer: the government. Insurance is supposed to be a way of protecting people from catastrophic losses, which is why we have it for house fires, car accidents/thefts, etc. Healthcare is not about catastrophic losses in most cases, it's about ongoing care to maintain health. You getting your yearly checkup at the doctor is not a "catastrophic loss", nor is you getting an ultrasoound to check out something the doctor found to make sure it isn't something really bad. These are just ongoing care, and it isn't what insurance is designed to handle fundamentally.

As for $200/month, I wish. More like $800/month.

Remember profit is a funny thing. If I own a company and I net after taxes 100 million a year and then pay myself 75 million in compensation I can claim that my company only makes 25 million a year.

"Gosh, I really dislike that turn of phrase."

Point taken.

Maybe:

"I appreciate your sentiment, but won't that result in insurance companies raising their rates by the amount of the subsidy?"

I think that reads better. Makes the same point, less argumentative.

There was an article recently where Finland was considering something along those lines. [1] is all I was able to find quickly:

> The Finnish government, elected earlier this year, is planning to introduce a tax-free monthly payment of 800 euros ($865) to all adult Finns, regardless of income, wealth or employment status. The payment would replace most other state benefits.

[1] http://money.cnn.com/2015/12/07/news/economy/finland-basic-i...

> The vast majority of the time, kids with rich parents have a substantially blessed childhood & family-support, which justifies them having to pay substantially more in tuition fees.

How does it justify that? We want to punish them with debt because their parents might have provided them with some opportunities?

The current system of funding higher education penalizes children of parents who don't prioritize college. There is no point to this and it just helps perpetuate privilege. We should stop unfairly assuming that parents are willing and able to pay for college.

We have a limited amount of subsidy to allocate where it will do the most good. Most of the time the children of rich parents - even those who had little interest in college - have more advantages overall than even a fully subsidized poor student would have. So it makes sense to focus our subsidy on those poor students.

Rich parents? Hilarious. You way overestimate where the line is drawn. When I went to UCD, my parents' income was ~$70k (in California) and I got some subsidized loans, then mostly unsubsidized loans, then they made my parents take out PLUS loans in their own names (more accurately, they capped the amount of loans I could take personally and the only way to make up the delta is either family cash contribution, or parent PLUS loans). Except for a small amount of interest subsidy, I got $0 financial assistance.

Now, my own personal situation is a deal of my own making -- I decided to sign on the dotted line. But in the aggregate, considering all the other students like me --- I'm actually shocked at the push back in this thread. The same group of people that bemoans the death of the middle class can't see how this is a part of the problem?

I feel lucky. I was in one of the last generations to get halfway-decent interest rates. My younger brother is paying through the nose (what is it now, 6-7%?).

Yeah, 70k is well into rich territory. What's the median income again?

Sorry, what you call a 'crack in the best system available' is the life I've had to live. I've had to take less societally-beneficial jobs because they paid more, while my loan-free friends were off joining the Peace Corps or teaching. I think the world is made a worse place when people like me are turned into mercenaries.

MIT thinks it's okay to boil down someone's financial future into a single dominant number (parental income). What if your parents had a lot of debt because of a major illness or death? What if that supposedly high income is counter-balanced by living somewhere expensive because that's where the high-paying jobs are? The fact that none of that is taken into account means it's not about bad luck, it's about an unjust system.

MIT could afford to make tuition free, but the popular misconception that they're levying a tax on the rich means they won't. If you want to control how much one generation passes on to the next, there are far better mechanisms to do that than college tuition.

How could MIT sustainably afford to make tuition free? Genuine question. That's a pretty bold assertion.

That's an interesting problem.

I have a few ideas 1) Replace tuition with taking x% of income for y years following graduation. I'm not sure how this would work in regards to low-income degrees / departments. For example, would the low return on investment for an arts department mean it would get less funding? I suppose this would cause universities to optimize their education for earning potential of graduates. Could have interesting effects. Not all beneficial.

2) Could they use their endowments to essentially provide interest free loans? I'm guessing their would be lots of problems with this that I can't see.

3) You pay nothing while in school, but you pay a straightforward fraction of the school's operating costs for the next x years. I like this concept. If you make x long enough, your graduates have an interest in ensuring future students are able to contribute to the cause. Of course, they also have an interest in keeping costs low. That could create poor dynamics. Improvements would have to come from donations, not be a part of the budget.

Presumably using the proceeds of the hedge fund they're running on the side.

Have you actually done the math to show this works out in the long run?

http://web.mit.edu/facts/financial.html

In 2015, tuition accounted for only 10% of MIT's yearly revenue (~$331M), so you have to cut the rest of the budget by 10% to give everyone free tuition.

One natural area to focus on is yearly administrative costs, which in 2015 were $763M.

If you gradually cut administrative costs by building fewer beautiful buildings for undergraduates to be indebted in or hiring fewer administrators, you can afford for every undergraduate to attend tuition free.

You take no responsibility for your situation. You talk like MIT just happened to you. You turned yourself into a mercenary by attending MIT and accumulating the debt with full knowledge that you would take high-paying jobs to pay it off-jobs that you could get thanks to your MIT credential.

Once your debt is paid off you will have one less excuse to go do whatever it is you claim you really want to do. The only question is whether you will actually take advantage of that or whether you continue to whine about the world of opportunities that were somehow foisted upon you when you willingly chose to attend MIT.

I willingly took the best deal I could get, and I would make the same deal with the information I have today. At the same time, a system that arbitrarily indebts some students and gives others a free ride is unfair and needs to change. Also, I think calling my position whining is a pretty low level of discourse.

It also seems unfair when one's parents lived well within their means and prioritized saving and spending on education, so one's family has to pay all their life savings for university, while a friend's family with the same or slightly higher income but no savings is given significant financial aid.

(Or maybe they're better at filling in FAFSA? My father is a self-taught accountant who later went pro (incl. classes/tests etc), but may have been too honest.)

I mean, if tuition was free it wouldn't be unfair, because you'd both be getting it for free.

The price of Serious Education, like that of Serious Illness is now quoted at $ImpossibleSum and then generously negotiated down to ($EverythingYouveGot + $EverythingYouCanBorrow).

This is the economic issue in the U.S. right now, and the only candidate who seems to even acknowledge it is Bernie.

It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment.

And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school without going bankrupt.

The Republicans aren't as bad as you think. Trump has said (vague) things about providing health care for everyone. He's said a lot of things that are a big departure from standard Republican ideology, which is why a bunch of Republicans are calling him "not a real Republican" and the party as a whole is having a major shit-fit about him possibly getting the nomination. The guy isn't really a right-winger, he's a centrist nationalist as far as I can tell. The GOP is pissed at him lately because of his foreign policy stances, because he's voiced support for non-interventionism and staying neutral on Israel.

But you're absolutely right about Bernie and Hillary. Hillary, to me, isn't much different from Ted Cruz, and even more like Rubio. They're right-wing war hawks in the pocket of Wall Street, and the only things they differ on are social wedge issues that they use to get people on each side to vote for them.

AFAIC, our best hope is Bernie. Cruz and Hillary will both be a disaster and lead us into another war, and Trump is a wild card and highly unpredictable, though I think he's a lot less likely to get us involved in another war than Hillary or Cruz (he royally pissed off the GOP by saying the Iraq war was stupid).

> The guy isn't really a right-winger, he's a centrist nationalist as far as I can tell.

There's a word for that: populist. Policy by opinion poll.

As most European democracies have found out over the past decades, most voters aren't political idealists. Ideas from all over the political spectrum appeal to them. Many of them end up not voting because every major party comes with a package of political ideals that don't work for them.

From time to time, a politician appears who manages to tap that potential, and throws the traditional, ideals-oriented politics into disarray.

Trump made that claim about health care. Then when it polled badly with the hardcore Republican base (you see Obamacare = bad because Obama = bad, mumble mumble ~reasons~) he flipped faster than you could blink.

Go look at his website now. It's the same old tired Republican canards like selling insurance across state lines (aka gutting your state's insurance commission as all insurance companies relocate to states without meaningful regulation like South Dakota).

Bernie seems like the only sane person on there. Hillary is the worst of them, and I say this as a Muslim. Trump might hate me, but at least it's irrational unlike Hillary who is a first-class warmonger and only exists to sell multi-billion dollar weapons.

The world could do a lot more with lesser wars, no unwanted migration, and no terrorism. The vicious cycle of violence killing innocents and following hate attacks are unbearable. I can't take it any more, I don't think anyone can.

From what I've read, Trump's anti-Muslim comments seem to basically be along the lines of stopping any of them from entering the country until some better screening measures are instituted, and worst-case, not letting any more in. However, he's been pretty clear about being interested in a more non-interventionist foreign policy, and our military involvement in the middle east is exactly what's created this monster. The establishment politicians, on both sides, by contrast, are warmongers like you say. I think they'll just make things even worse.

What is irrational about blocking Muslim immigration? I could understand an argument that it's mean, racist, or a few other negative things, but from the position of a non-Muslim what about it is irrational?

Because there's nothing else that's different about me from a non-Muslim. I'm a qualified Engineer, who pays taxes, abides by the rules, performs community service, a blood donor, etc.

I'm just an average guy looking to live my life, all Muslims are like that except those that have been brainwashed and are used for political reasons.

Why discriminate against me for my faith? Isn't the U.S. a secular country?

For every Muslim immigrant who is a tax-paying engineer, there are a hundred who lack any sort of skill and will spend their entire life dependent on costly social programs. In Germany, for example, the average cost per refugee is 12,000 euros per year.

There's simply no reason to bring in populations that require more money to support than they contribute.

This sort of generic, hand-wavey attack on an entire population crosses into religious flamewar, which is not allowed on HN. Please don't post like this here.

The Trump supporters are driven by the same things that Bernie ones are. Anger at economic insecurity. The racism is mostly a side dish.

If we have a great compression, growth and redistribution like in the 50s/60s expect racial/immigration tensions to decrease a lot.

>If we have a great compression, growth and redistribution like in the 50s/60s expect racial/immigration tensions to decrease a lot.

I wonder what led to such environment then, can't be because of anything that happened in the 30s/40s…

Is that sarcastic? You had great destruction of capital in WWII, there was severe labor shortage and you had the GI bill. And you had the whole world to be rebuilt.

let's for a moment consider the economic issue OF THE FUTURE. we're spending our grandkids earnings on shit today with a promise to pay with interest sometime forward. anybody know a guy who was in congress while all this was happening? stop with the magical bernie economic mathematician nonsense.

>spending our grandkids earnings on shit today.

I'm not sure that's true. College kids aren't producing anything today. What we're trying to do is to force them to fund our long (and I do mean long) cushy retirements with what they will produce later.

The whole system seems to be set up right now to extract a great deal of what they will produce in the future and pull it back to the older generations. It's a promise to make them pay in the future. Well, promises can be broken, and in this case I'm almost certain will. They can say no.

It's not quite $EverythingYouveGot (for parents), but $EverythingYouveGot - $WhatWeThinkYouReallyNeed. Financial aid offices compute an allowance for parents, and then demand the "extra" money.

It is "Everything You've Got" for students, though. If you have any college savings in your own name (or earn any scholarships), it will simply cancel dollar for dollar with university grant aid. Unless you can save more than the total of your grant over 4 years, better to spend it before the first financial aid paperwork (or not save it at all).

Though this only comes into play at a school that offers substantial grant aid. At a state school your savings can actually help.

> but how is that fair?

Socialism is only meant to be fair if you are poor. And as you say you are rich by association.

I'm in a similar situation right now: on paper my father's business owes him a lot of money that he "loaned" it from his salary, but in reality that money does not exist and it's not going into his pocket any time soon. Mix in two brothers with their own college costs, stir to taste. I took two gap years to work and save money; it's absurd to me that I'm paying full tuition price in this situation, but the financial aid office doesn't give a fuck because they know as soon as my savings run out I'll take loans.

Your family is too proud for the business to declare bankruptcy and go through Chapter 11 debt restructuring? When you're looking to pay tens of thousands in tuition, it helps to have a smart accountant, and plan a few years ahead. Is it a little unfair that people enter adulthood without a spec of financial literacy, and are immediately taken advantage of? Yes, but if a fool and his money are easily parted, the only real solution is to lessen that foolishness.

If only these people could get some sort of... I don't know... "education" to learn how not to be so foolishly parted from their money...

After 12 years of primary and secondary school, one would think they'd have gotten some, wouldn't one?

Wow, fantastic advice -- if only we weren't so financially illiterate, proud, and foolish to boot!

Why's your father's business not bankrupt then, and why are you pissing away a fortune and going into debt when you shouldn't? Add denial to the lot.

gr8 b8 m8

great advice. I could never have thought of this. Me, a silly and complete financially illiterate fool, must work hard now to become financially literate. Thank you again. Can't upvote enough :(

I suppose it's a question of utility. If universities truly (I doubt this is really true) cannot afford to pay everybody's tuition then how do you prioritize need? One could argue that as someone from a wealthy family that you have a decent safety net if you fail even with large student loans. You probably have a place to stay at your parents home if you really needed it. Contrast that to someone who might be poor and have the same loans as you do but perhaps they don't have their parents' illiquid assets to fall back on.

This happened to me around my senior year of college. It's a scary thought that once you're done with college you need to get a job or be homeless. It lead to a lot of stress in the fall semester of my senior year while I was job hunting. It also stands to reason that if you're from a wealthy family then you had access to a good education. I can't understate how unprepared I was for college being from a poor school district even through I was in the honor classes! Poor students play a lot of catch-up in college early on. This is really hard to do when you're also trying to work 20 hours a week to afford food.

I'm not saying it's fair that you have so much debt but if it's zero-sum for financial aid I can understand why you were not given any over poor students whose parents are equally not able to pay. You're not thinking about the external factors that statistically probably put you ahead over a lot of poor students. Unfortunately that is life all we can really do is make sure our kids don't have the same problems!

You're all for soaking the rich, except when it applies to you?

Almost by definition, "the rich" in the context of who should pay more in tuition/taxes/whatever is "someone better off than me".

My line there was intentionally facetious. That being said, there are people who can legitimately afford to pay $100K in tuition. I was not one of them. I am doubtful that universities are able to distinguish between the two, but currently they pretend they can.

> I'm all for soaking the rich, but how is that fair?

Perhaps this experience should make you rethink your support of "soaking the rich."

The difference is that you come from a background where you see people (eg your parents) earning a good income and believe that a $100k loan is something you can actually afford in the long term. Someone from a poor background whose parents have never earned a high income would very likely see $100k debt as an impossible barrier they'll never get past, and consequently would be a lot less likely to take on the risk.

If schools didn't "soak the rich" then the potential of the student from a poor background would never be realised, and humanity would be the worse for it.

I'm not saying we should saddle people from poor backgrounds with the same crushing debts as the middle class folks. I don't know of another country that expects any students to take on the kind of debt burden that we take on here in the US. If they can make college affordable for everyone, even the middle class, then so can we.

You know if you didn't want the 100k loan, you could have gone to another university...?

You make being a privileged middle class kid seem like such a chore.

There is always someone better then you, and there id always someone who got what you did for less. But on the flip side, you are also the someone to someone else.

FWIW, the total in-state cost for students at UVA is approaching $28,000/year[1]. U. of Michigan and Georgia Tech are similar.

Take out the room/board fees, and you're still looking at $14,000/year just for tuition.

So, even going to a top state university isn't going to keep you debt-free. Maybe not $100,000 in debt, but still a significant sum.

There is definitely a "donut hole" in terms of aid available to middle-class undergraduates[2]. If you're poor, chances are you can obtain grants or other aid. If you're rich, you can pay cash and not sweat it. If you're somewhere in the middle, that aid dries up fast, but you can't write a check.

[1] https://news.virginia.edu/content/board-visitors-sets-2015-1... [2]https://www.washingtonpost.com/news/get-there/wp/2015/01/29/...

I agree with your point that state schools are becoming extremely expensive for many. Georgia Tech (and all Georgia public schools) have the Hope Scholarship[1] for in-state students which pays 90% of your tuition if you meet certain academic requirements. They have the Zell Miller scholarship with higher acadmic requirements for the remaining 10%.

It ends up being very good for lots of people, but the academic requirements, especially for your high school record, do introduce some socioeconomic and racial disparity with the awards.

[1] https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_...

Sadly, Virginia doesn't have a state-wide merit program. There are some school-run programs, but the achievement level to qualify is generally very high (Jefferson Scholar program at UVA, for example).

The Hope Scholarship looks REALLY nice - it appears available to any student who graduates with a very achievable GPA (3.0/4.0).

You don't think an MIT education is worth $100K?

It is definitely worth $100K. Just because it was a rational decision from my perspective is separate from saying that the system which decided to charge me that amount is a good system.

Technically you walked in to MIT knowing you would have $100K of debt and weighed the pros and cons and decided in the end that, yes $100K for a MIT education was worth it.

And its his decision alone that makes it worth it, indeed. Nothing to do with economic pressure.

I fully concede that taking $100K in debt was my best option. Saying that I did it freely and even well-informedly is not the same thing as saying it was a fair situation.

>but how is that fair?

Having no monetary help from a family making 100K a year is still different from having no monetary help from a family making 20K. If we want fair, how is growing up in a family with poor parents fair compared to growing up in a family with rich parents? While you might be able to blame the parent for their own financial situation, you cannot blame the child.

>it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.

Considering that they already had an ~18 year start of life where they likely weren't having it easier...

I like that you talked about being "unfair" to rich people and fair to you in one sentence.

So we should encourage people that earn decent money not to save adequately for their children's college education?

I am not my parents. I did not have a say in their financial decisions. The argument you're making is equivalent to arguing that the debts of parents should be passed on to their children, a practice that was outlawed long ago.

While there is theoretical merit to that line of thinking, the practical extension of that thinking is that for all intensive purposes nearly every student planning on attending college is jobless and broke (aka a high school senior) and therefore can not afford college, and thus entitled to financial aid (regardless of if their parents are billionaires or below the poverty line)

If we had a functioning state university system, you could have gone to UMass for basically nothing.

That pricing structure has allowed these elite colleges to get away with gross waste and inefficiency. Imagine the scandal if Yale actually cost $50,000 a year for your average family. It'd blow up even more when people realized where all the money from tuition hikes go (hint: it's not toward hiring more professors). The people who get really screwed are those just above the threshold where they receive no or negligible financial aid.

It's a tax on anyone whose parents have any financial assets. If your parents have next to nothing, sure, tuition will be very low. Whatever your parents do have, though, tuition will be set at the optimum value to extract as much of it they possibly can.

Yale's financial aid is extremely generous. It's free for HHI below $65k per year. It's $12,500 per year up to $150k. It's half-price up to $200k. I'd argue it's better for families making more than $200k/year to be paying in than to give them free tuition.

Yale, Harvard, Penn (to a lower extent) all have a no-loan financial aid policy. Cornell with its $6b endowment doesn't - and neither do many other schools - and that's ludicrous.

Harvard Endowment - 37.5B. Yale - 25.5B. Penn - 10.13B. Cornell - 6B (as you said).

Harvard Undergraduates - 6,700. Yale - 5,500. Penn - 10,500. Cornell - 14,000.

Maybe it's because Cornell has less money and more students than the other schools you listed?

Spending 4% a year, that gives Cornell about 17k per student. It doesn't sound unreasonable to think that's just not enough to cover the tab.

That's much better than I expected. That being said, outside of a handful of extremely rich universities (and we are really talking a handful or two), most tend to "tax" the middle class more than anyone.

I mean... I'm not sure if I'd consider 150k for a household middle class (probably upper middle) but in most places, again, with a few exceptions, you're basically required to pay the full tuition. In cash. After taxes. $50k a year. It's an astronomical sum for just about anyone. And these are not terrible schools, we're talking some of the top universities in the world here, sitting on tons of money.

I mean, I know the gutting of the middle class is hardly news but, phew. Education costs really take it to another level.

Tuition is tax deductible, you can also save for it tax-free (529 plans).

If a family of 4 cannot save for college on $150K a year their priorities are out of balance. My parents did it and they never made half that. Put my brother and I through college with no financial aid. In-state, but still....

> My parents did it and they never made half that. Put my brother and I through college with no financial aid. In-state, but still....

I don't necessarily disagree but what time frame are we talking about? Because even 10 years ago state was massively cheaper than private, particularly the upper private schools.

If your parents made 70k and put you two through state, I'd assume they either saved an incredible amount or were paying somewhere around 10k/year. Perhaps I'm wrong, just guessing.

But I think you can do the math on 10k expense on 70k income versus 50k expense versus 150k income (as incomes haven't improved in a very long time).

The trouble is, not many families with HHI below $65k know that Harvard, Yale, etc are free for them. Instead they see the enormous sticker price and they hear on the news constantly that college is expensive. The guidance counselors who know enough to tell them are mostly at richer schools. If a news story went out tomorrow saying "Harvard is free," Harvard would get a lot more applicants from the <65k bracket. I agree that it would be better to be free for the poor and expensive for the rich, but right now that free tuition policy is nestled under a billboard saying "$45,000/year."

That's what High School counselors are for?

I don't think a ton of high school counselors push their poorer students to apply to highly selective schools. I think the kids with wealthier parents usually end up better supported.

My high school had 1 college counselor and 1 financial aid counselor for 812 graduating students. They just focused on the top 60 students.

Tuition is a red herring - it's a made up number. A better metric would be what is the school's operating budget? In Yale's case it's $3.2 billion...I'm not saying free tuition isn't an option for a couple of schools with mega endowments, but you're analysis misses the mark.

http://finance.yale.edu/sites/default/files/2014-2015%20Annu...

>Tuition is ~$45,000 per student. $45,000 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?*

Most schools with that size of tuition don't. Stanford (http://thinkprogress.org/education/2015/04/02/3642085/stanfo...) is free is your household income is less than $120,000, and cheap from there on.

I didn't know that the aid would be that significant. Abroad, we hear so much about student debt and parents saving for college fees, but I imagine there'd be a large group of families under that $120k figure.

That's Stanford's own policy, not a standard practice for colleges in the US.

Just to add some fact. According to Yale's financial statement [1], their operating expenses in 2015 was around $3.2 billion. So tuition doesn't come close to covering their operating costs. And it looks like they typically spend around 5% of their endowment (the spending level most foundations target because that is the minimum a foundation must spend to maintain their status).

[1] http://finance.yale.edu/sites/default/files/2014-2015%20Annu...

So glad you brought this up as well, it's one of my pet peeves (thinking tuition and expenditures are linked)...this is also pretty scary http://www.bain.com/sustainable-university/interactive.asp

> They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

The safe withdrawal rate is set at 4 percent. Earmarking half of that 4 percent for student aid is pretty severe on the budget.

Just to clarify so that people won't plan their retirement wrong, the 4% safe withdrawal rate from the Trinity study is for having at least $0 of a fund at the end of 30 years. The withdrawal rate for an indefinite fund like Yale's is much lower.

You say that, but Wikipedia states that 4-6 percent are spent annually on operations and capital. It offers no citations, but I can produce some:

Princeton (https://finance.princeton.edu/policy-library/endowment/endow...):

> The Trustees have endorsed a spending rate range of 4%-5.75% to achieve this balance. In order to enhance predictability and stability in endowment payout, the Trustees have established a standard spending rule that increases the spending distribution per unit by 5 percent per year, although the standard spending rule increase may change if necessary to maintain the spending rate within the prescribed policy band.

Yale (http://giving.yale.edu/ways-to-give/endowment-fund):

> Yale combines a long-term spending rate of 5.25 percent of the total endowment value with a smoothing rule that adjusts spending gradually in accordance with changes in the endowment market value. ... In January 2008, Yale announced that in the future, its endowment formula will be modified to place a floor of 4.5 percent on the expected payout rate and a ceiling of 6 percent.

I might not have called it 'safe withdrawal' rate, as it conflates the two spend rates. But it's in the same ballpark. 2 percent of the endowment would be 1/3 to 1/2 the annual spend.

And this all sets aside the concept of earmarks; money donated with an earmark cannot be used to offset the loss of income to the general fund.

I was specifically clarifying the 4% safe withdrawal rate, which is often used in the context of retirement and is often misunderstood as safe to withdraw for perpetuity. For perpetuity, a lower withdrawal rate is required. As for Yale's and Princeton's higher withdraw rate, they probably count on additional incoming endowment going forward.

Interestingly, when Trinity College @ the University of Cambridge decided to make all tuition for its students free, the remaining colleges protested that it was "unfair" that Trinity would be able to attract the best students simply because it had more money than the others (it owns the second largest port in England, among other assets). Their policy was rescinded.

I heard another rumour that they wanted to provide free accommodation for their undergraduates as well. In 1988 they setup the Newton Trust [http://www.newtontrust.cam.ac.uk/studsupport] which awards "bursaries to nearly 3000 undergraduate students every year" which seems like a pretty good use of their money.

Ever heard of price differentiation, is that what you allude to? Also, it's not like %2 was a small gain for stable growth.

On a individual level 10.000$ per month of activity, not counting 2 months vacation per semester, would be enough for a good enough private instructor. Certainly, tuition, as in schooling, is completely covered by tuition, so it's not completely fair to throw it all in one bag.

That is, of course the billions can be taken into account in a mixed cost calculation, but that would delude the elitism, wouldn't it? I agree, subsidized gratis pro bono education should be possible, but it could never be costless.

Now, what about the private tutors: Wouldn't one on one instruction be a remarkable improvement over huge, passive lectures? There is the problem of quality control, but from what I can tell, this does exist too to a lesser degree in academia. It can sway into the opposite direction even, if a research professor is too far out there to be helpful, for lack of better words. A lot of undergrad classes are taught by mere grad students. There are a lot of them.

Wouldn't the dialog still far outdo the lesser quality content that is communicated, because the latter relies a lot on the students understanding anyway and the sooner that reaches a certain basic level of fundamental knowledge, the better? Edit: Meaning, fundamental knowledge that is enough to allow the student to judge the progress and to also study independently, knowledge that is fundamental enough, that less than world class understanding makes virtually no difference.

>They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

Oddly enough, it's possible they can't. Endowment bequests frequently come with conditions, so they don't have complete flexibility in that respect.

Mos of these financial institutions actually have high fees that are only charged if your parents are rich. I've been surprised to see how high your income may be at some of them, and still receive near-free education.

Thus the fees aren't really fees, they're fees for rich people who can afford them. And then you may wonder why you'd give a rich person free education by paying it from an endowment that, among other things, pays for the poor people's education, when the rich person can afford it.

As for your note on donations, I fully agree. You really, really, don't need to donate to Harvard. But that's mostly a function of alumni networks/events of the university itself, not necessarily people going 'hey I want to donate to a university... ah well, guess I'll choose Harvard then'. So it's not a decision you'll change easily.

the problem is that when the economy falters or the government fights with itself (look at what's happening in IL) these universities would very much prefer to be self-sufficient. It isn't the only reason of course, but with the anti-intellectualism movement in america growing and the government playing more and more budget games that affect people's livelihoods I don't really blame them.

That's why they should flip the classroom

Great question: what is this money for?

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