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Comment by JackFr | Hacker News Reader

The most earnest attempts to help are again struck down by the law of unintended consequences.

From the article, for the 8 million people currently in default the average outstanding balance is < $10,000. For the people enrolled in the income-based repayment plan the average outstanding balance is > $67,000. So it seems if the marginal cost of borrowing more is 0, people are going to borrow more.

I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.

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I agree.

When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring.

They are private institutions. They can charge whatever they like. How about not providing easy money to absolutely anyone for a college degree?

>> When the government subsidizes student loans...there must be cost controls on the school (no NE private school art majors costing 100k+)

I never said that they couldn't. I said that when the government pays for student loans they should enforce price controls and underwriting of the loans.

They are private institutions that ride on tons of government money because they are for some reason considered non-profit.

> When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring.

If the government really wants to get involved in this (which I really wish they didn't) they should build and operate more schools. Make them either at-cost, heavily subsidized, or (my preference) entirely free for anyone to attend. Forget income requirements, residency requirements, or anything else. Just make it entirely free to anyone that wants to show up and learn.

This would force the private sector to actually compete against something meaningful and that would lead to lower prices. The current system of the government handing out loans to anybody for anything is what leads to $100K 4-year tuitions.

We've already got a decent baseline of community colleges throughout the USA. If they closed off the student loan spigot and poured that same money into there we'd all be much better off. If someone wants to go to $EXPENSIVE_SCHOOL then fine, let them figure it out on their own or get the school to use their $N-billionaire dollar endowment to subsidize it.

> If the government really wants to get involved in this (which I really wish they didn't) they should build and operate more schools. Make them either at-cost, heavily subsidized, or (my preference) entirely free for anyone to attend. Forget income requirements, residency requirements, or anything else. Just make it entirely free to anyone that wants to show up and learn.

By financing loans, aren't they already trying to do this? Building and operating more schools just adds more cost.

IMO, when you have a functioning government, this is what makes a single payer system (like is often seen in healthcare) so great. If schools can't come to a reasonable price/agreement with the single payer, they don't get paid. And it also leverages a central tenant of Capitalism... there's always someone out there willing to work for less.

I know people see this as a bad word, but if we leveraged the best of both Socialism and Capitalism in situations like these we would be better off.

> By financing loans, aren't they already trying to do this? Building and operating more schools just adds more cost.

No providing loans increases the demand side of things (more people capable of paying) without controlling costs or increasing supply.

Building and operating more schools increases supply which would have a downward pressure on costs as private institutions would then be competing for students against (more) government run schools.

> IMO, when you have a functioning government, this is what makes a single payer system (like is often seen in healthcare) so great. The single if schools can't come to a reasonable price/agreement with the single payer, they don't get paid. And it leverages a central tenant of Capitalism... there's always someone out there willing to work for less.

Ha! This is first time I've heard someone try to explain single-payer healthcare as an example of capitalism.

> Ha! This is first time I've heard someone try to explain single-payer healthcare as an example of capitalism.

Well single payer isn't Capitalism, it's Socialism. I wasn't trying to represent it as Capitalism. In (this form) Capitalism, if one buyer and one seller can't agree (where the supply and demand meet), then that's ok because there are (most likely, given a supply/demand graph) other buyers and other sellers.

In (this form) Socialism, if the sellers cannot agree with the single payer (or the payer that represents an overwhelming number of the potential buyers) then they don't get paid for services (or are relegated to the much smaller market segment).

>> I know people see this as a bad word, but if we leveraged the best of both Socialism and Capitalism in situations like these we would be better off.

Not to imply that you were being disingenuous/malicious, but leaving out this part of my post misrepresents what I was trying to say.

Single payer systems are neither Capitalist or Socialist. It's just a form of public spending.

Under (pure) Capitalism, there isn't public spending for private individuals. Not to mention government influenced pricing... single payer is pretty far away from laissez-faire and capitalism.

Capitalism is simply an economic system based on private ownership of property. Public spending is completely irrelevant. Single payer systems are entirely compatible with capitalism, and is a good example of Social Democratic policy (not to be confused with Socialism, which it is not), which seeks to work within the structure of Capitalism. A Socialist system would be one in which private ownership (of health care) is prohibited; perhaps the closest example among modern democracies being the NHS in the UK.

> By financing loans, aren't they already trying to do this? Building and operating more schools just adds more cost.

You could say they are doing this but in a super inefficient way. With plentiful student loans you end up a lot of actors that capture the money that should be going to eduction (the goal). This includes schools (and their growing administrative departments, lenders, expensive sub-standard housing).

You know when college was the most affordable in the US? It's when the states contributed the biggest part. http://fivethirtyeight.com/features/fancy-dorms-arent-the-ma...

I'm personally in favor providing an option at decent post HS education to almost everybody for a modest cost (so people do take it seriously). This shouldn't be just college or generic 4 year university but also vocational training (HVAC, nursing, electrical). If you want to go to a private institution or non public-private partnership, that will always be an option.

I also think there's a lot of room for redesigning the 4 year university. I did enjoy some (but not all) of my required electives courses like History of Theater, Early American Literature, History of Africa (you could pick an area), but I don't think it's ethical to shove down a year of classes that may or may not be helpful to people in their life and saddle them with additional debt for that so smugly we can claim they will be more rounded.

You can also look at this from a selfish long term angle where we equip people with the tools for the future so they are more self reliant (less reliance on government programs) also offset with higher tax recipes in the long term.

I was impressed with the community college classes I took. I can't imagine how much better the quality would be if you redirected that money from expensive schools to them. The cost of failure would be much lower if you decide that chemistry isn't for you and you want to do something else. That could really retrain our workforce for the future and I think it would be politically palatable.

Not sure how you'd manage class sizes while still maintaining quality (assuming increased enrollment). I guess would this end up turning into a "grade 13-16" thing where you have the same problems you have funding schools and paying teachers a good salary.

> I can't imagine how much better the quality would be if you redirected that money from expensive schools to them.

Yeah, but you'd lose a football team, an expensive stadium for which the bond payments are still due, and a lot of nice offices for staff.

Uhhh, the government does build and operate schools? So many schools. There are public Universities in every state. Some of them top notch and as good as the best private universities in the world. Most of them decent.

Government loans should only apply to state schools, the schools should be funded better, and there should be more oversight and price controls, sure (public schools waste millions of dollars just like private ones on sports, administrator salaries, fancy buildings and landscaping that aren't necessary, etc).

This is exactly the reason Clinton/Sanders proposed a plan to include free tuition for /public/ universities for people meeting an income threshold. No free rides to Sarah Lawrence.

> Uhhh, the government does build and operate schools? So many schools. There are public Universities in every state. Some of them top notch and as good as the best private universities in the world. Most of them decent.

And I'm saying we should have more (assuming we want the government to have any hand in this).

> Government loans should only apply to state schools, the schools should be funded better, and there should be more oversight and price controls, sure (public schools waste millions of dollars just like private ones on sports, administrator salaries, fancy buildings and landscaping that aren't necessary, etc).

Screw loans. Just let people go to school for free.

> This is exactly the reason Clinton/Sanders proposed a plan to include free tuition for /public/ universities for people meeting an income threshold.

Screw income thresholds too. I don't care if your a prince or a pauper, it should be free regardless.

Income thresholds are a pain in the ass to implement and verify. Plus they have the insanely stupid consequence of causing people not to save money as it's only going to be used against you.

For every millionaire's son that's going to get a free ride under by "everybody's included" plan, you'll get plenty more people that were on the cusp of whatever income threshold you've chosen. I can live with that (hell I think it's more fair than discriminating based on the success of your parents).

> No free rides to Sarah Lawrence.

That'll still exist but it'll have to be the student's uncle instead of Uncle Sam.

Are there not caps on student loans in the US? In Norway student loans are given by a government body and there is a capped amount per year of studies. This effectively caps the private schools tuition too.

There is a cap on what the government will directly loan, which is fairly low for undergrad, but higher for grad school.

http://studentaid.psu.edu/types-of-aid/loans/federal-direct/...

Gives you about 31k as an undergrad, and 138k as a grad student.

So combined you could be 160k in debt, which adds up especially if you don't do payments for a few years.

Then there is a whole other product of "private loans" where a bank gives you a loan, but the government agrees to back against loss to some degree (unsure of exact rules). Seems like this limit varies by lender, but is in the 70-120k range

https://www.edvisors.com/college-loans/terms/loan-limits/

So all said, you can end up with a LOT of debt.

There are limits in the US as well, but I think there are ways around them. https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...

>I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.

Well, uh, yeah, what did people expect? This was a pretty deliberate policy shift. Public higher education used to be funded by per-student block grants at the state level, whose conditions said that tuition and fees had to be kept below some maximum level and could not rise faster than some maximum rate. Now it's mostly funded via subsidized loans.

When you subsidize education-usury instead of education, you get more usury and less education, because that's what you paid for.

> the value is being captured by the school, not the student

Yup. That's also why so many for-profit schools popped up.

All of the private schools are for-profit. They just have a scam going to call themselves otherwise.

Also, government should not subsidize zero-sum games. More people go to college and suddenly a college degree is not a comparative advantage anymore, it becomes a baseline. Nobody benefits.

http://slatestarcodex.com/2015/06/06/against-tulip-subsidies...

An educated population is NOT a zero sum game.

The top thing the government can do for it's people is to keep them alive. (Free from invasion, murder, etc).

The second thing the government can do for it's people is to keep them healthy. Access to health care, etc. etc. More of an offshoot of above, but for things deeper than alive.

The third thing the government can do for it's people is to educate them. Not so that they can get "better jobs", but so they can be educated. The people around you vote just as much as you do. They decide the future of the country just as much as you do. Would you rather someone who never ever set foot in school helped elect your local government, or someone who has a PhD from a good college?

Kind of a hierarchy of needs.. education doesn't matter if you aren't safe.. but once you are safe, it seems very important. Not at ALL a 0 sum game. You don't educate to give people better jobs, but to enable them to think critically. Which is why 4 year colleges do a lot more for the world than coding boot camps or trade schools.

The US has one of the best (albeit expensive) college education in the world. The primary/middle/high-school system is seriously under-performing, though.

Couldn't those be improved instead? It would benefit everyone, not just the upper-middle classes that can afford college.

How do you increase the performance of the primary/middle/high-school system? To me, that means creating better and more educated teachers that can generate more 'performant' students!

You've got to pay those teachers a competitive wage, if you want to get better quality out of them. Teaching is already kind of a shitty deal, considering you need a four-year degree, plus specialty teacher training, and then continuing education to maintain your certificate, and then they pay you peanuts.

Teachers make over the median wage on average, and work less hours per year as well. How much do we have to pay them in order to encourage them to do their jobs in your opinion?

"The BLS reports that elementary teachers in the U.S. receive an average annual salary of $55,270. Many teachers, including those in New York City, receive their pay at set intervals throughout the course of the year. In other areas, teachers only receive pay when school is in session. The BLS does not gather data relating to hourly wages due to the manner in which most elementary teachers are paid. However, someone working a typical 40-hour work week would have to receive an hourly rate of $26.57 to earn as much as the average elementary teacher over the course of a year."

http://work.chron.com/hourly-wages-teachers-2044.html

That seems pretty high. My mother with 27 years of seniority and a master's degree only makes about that much, and she is the highest-paid teacher in her school district. Starting salary in Maine is something like 30, 32k. Technically, teachers do only work about 3/4 as many days as the rest of us that work full time, but it's not exactly easy to pick up another real job for those two and a half months in the summer. You're not going to get people that have better options to gravitate towards teaching at those kind of rates. Especially for math and sciences, where you could start out making double or triple a teaching salary in an industry job.

>That seems pretty high.

That article is quoting BLS statistics[0]. Where are your numbers?

[0]http://www.bls.gov/ooh/education-training-and-library/kinder...

> over the median wage on average

That's an odd measure. Why use the average median instead of the median median or the average average?

Remember also to take into account the median (or average, whatever) wage among people with four year degrees + special training + willingness to continue training to maintain their certificates.

My mistake, I mean't to type simply median wage. A single teacher makes more than the average household ($53,657).

https://en.wikipedia.org/wiki/Household_income_in_the_United...

>Remember also to take into account the median (or average, whatever) wage among people with four year degrees + special training + willingness to continue training to maintain their certificates.

And then cut that number(50,556)[0] by 1/4th, and you are at a number much lower than what most teachers make currently and that's before you factor in pensions and benefits.

[0]http://time.com/money/3829776/heres-what-the-average-grad-ma...

Conflating university degrees with the general educational of all citizens is a mistake.

Universities are useful in attaining a particular type of education that is not suited to every highschool graduate. It's fairly clear once you've spent time on an American university campus that not everyone there "needs" to be there on the governments dime for the betterment of society.

Why do you think they've reduced the level of knowledge of the average HS grad so that they have to go to college to get a decent job? Sure, you have to know more by age 20 now to get employed in a brain-based job, but education should be much easier and more efficient by now.

It is. We have MOOCs now, and ebooks, and online encyclopedias.

But it's like those synthetic diamonds: It doesn't matter how much shinier, purer and cheaper they are, they will never replace "real" diamonds because the whole purpose of diamonds as a status symbol is that they are expensive.

Except a college degree isn't just signalling; you do actually learn things there.

> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.

And thus it's in the academic class's self-interest to encourage both more lending and more debt forgiveness — and remarkably enough that's exactly what the academic class is arguing for.

I don't think that they're acting in bad faith, just that there's little incentive for them to examine their assumptions. After all, from the perspective of a tenured professor or a university executive, higher education is an unmitigated good, his life's work.

> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.

But is this really an unintended consequence? Who has more lobbying power in Washington, students or Princeton and Yale?

I hear your point, but neither Princeton nor Yale require students to get loans. Along with a number of other super-prestigious schools, they offer all students full grant coverage of all the cost they can't afford.

"By committing to an admissions policy that does not consider a student’s ability to pay, and by meeting the full financial need of all admitted students (with no loans required), we ensure that Yale is accessible to the most talented students from around the world, regardless of their family’s income" http://admissions.yale.edu/financial-aid-prospective-student...

The whole mess that is higher education sickens me. The bankers did this. They colluded with susceptible financial aid officers and corrupted and victimized. Now the rest of us are left holding the bag, as usual. Socializing the losses. This is unacceptable. I still think the idiots who took out the loans need to repay them, not be let off. You might say it is akin to modern day slavery, and I get that, but the fact of the matter is, it is the bankers who are looking for the write offs because a) they still get paid and b) they need those same suckers to take on loads more debt buying houses.

Modern investment banking seems to be at the root of a lot of society's ills.

Bankers didn't raise tuition and pile on fees on top of that.

Agreed.

1) The universities obtained massive loans to build fancy new buildings and that cost is simply being passed on to students.

2) The ease to obtain educational loans prevents universities from having any sort of revenue constraints.

Constraints breed innovation. If there are no constraints, the universities have no incentive to reduce costs.

I think some of that is certainly true.

But it's also true that the costs of employing professional workers has increased, primarily in the guise of health care premiums. There are more parties involved in this chain than just a university and students. A health insurance company (or any service company) may be able to increase premiums knowing the university has access to easy money from students.

And a public university (or any public institution) rarely has the option of laying people off and hiring ones with the right skills in order to maximize value. Universities are subject to so much political scrutiny that more popular options like hiring freezes or pay raise freezes are preferred, leading to this bizarre attrition that makes it difficult to get value out of your most expensive resource: faculty and staff.

What about private institutions? Are they not subject to the same constraints?

https://priceonomics.com/static/images/college-one/Yearly_Tu...

Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.

> What about private institutions? Are they not subject to the same constraints?

They are not, but they offer a very different set of problems. In that situation buildings are not the issue, but inflated tuition before loans. I appreciated the government coming down on for profit institutions and would definitely like to see more scrutiny of private colleges in regards to loans.

>Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.

That's just not true. Plenty of institutions are exploring these or using them, either to reach students that are not local or to teach local students. My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students).

The other issue that comes up with MOOCs -- at least where I am -- is that students who might go to a local community college or small university are going to larger institutions in state because they can take courses online. That leads to a great deal of political hostility towards the large institutions.

> That's just not true. Plenty of institutions are exploring these or using them, either to reach students that are not local or to teach local students.

In California, they kinda bricked the online courses (at the time). You would get no credit for the course if it was within your major. The material was also somewhat simplified. Also, the fact that you took an online course was looked down upon.

> My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students).

That sounds like great news. Your right, it seems to boil down to politics.

Professors, by and large, are freaking out about a new proposed law to mandate accepting online course credit. “There is no possibility that University of California faculty will shirk its responsibility to our students by ceding authority over courses to any outside agency,” wrote the faculty senate in a strongly worded letter.

https://techcrunch.com/2013/04/03/a-few-crazy-college-fees-t...

> That sounds like great news. Your right, it seems to boil down to politics.

I think the problem here in Minnesota is not the professors, but the students, who don't want to take an online course, especially since it does not seem to lead to a reduction in tuition. Several faculty had already integrated MOOCs into their curriculum (staff cuts may have forced their hand), but your customer have to want it. Placement partners also felt they were not necessarily preparing students to the agreed upon level.

The approach to MOOCs should be done differently:

1) The courses should be VIGOROUS and SELF-PACED (no quarter, semester).

2) Billed on a monthly subscription.

Students are short-sighted:

1) They can load up on more classes concurrently.

2) Spend more time on hard courses and breeze through on easy ones.

3) Have access to more courses and not be constrained by univ. budget or professor availability.

Basically, the students get more for their money in the near term. At some point, the tuition will flatten out and potentially increase access to those who could not previously afford to attend.

I believe the increased costs stem more from administration bloat.

For state schools in my state, capital funds for school buildings come from a different pool of money. And for any "student initiative" buildings, such as a rec center, current students vote to increase their student fees to help pay for them. Which is stupid. The are sacking their wants onto future students and increasing the costs for them with "non-education" related things. Most of these student fees are outlaid for more than 4 years. If you want a gym to workout in while a student, get a membership to an existing local fitness center. Don't force all the students to subsidize your wants.

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