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Comment by vowelless | Hacker News Reader

On the other hand, one should wonder why college is so expensive in the US in the first place. Even without any subsidies, non-American tuition is a fraction of the cost of the big universities in the US. Why? Why are book so expensive here? Why is so much money spent on buildings, stadiums and hiring football coaches? The highest paid public employee in 39 states in the US is a college sports coach! [1]

Throwing more money at this problem will hardly combat this issue (it's an issue in my opinion).

[1] http://www.businessinsider.com/us-states-highest-paid-public...

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College is expensive because debt is cheap because of the expansion of pensions and retirement accounts as a proportion of the economy.

You had me at easy credit, but lost me with the reasoning.

I would assume because retirement fund managers and pensions like constant safe returns on investment, given they have a to have a constant payout, they go for things like debt, especially tasty non-dischargable student loan debt. Debt is a lot easier to predict than investing in companies.

Investing in companies vs lending money is a pointless distinction here. The total return for the business venture is the same if, for example, a company borrows money to buy back stock. All kinds of the return-on-savings are fungible with each other, and work together to drive down the risk-free rate of return.

Savers are counter-parties to debtors. Every debtor that consumes real goods and services now in exchange for forgoing later consumption gets paired with a saver that forgoes current consumption in exchange for later. The market has to clear, and the price is the risk-free rate of return. More people interested in saving? The natural effect of this pressure is to drive interest rates and credit standards down until you find enough people interested in borrowing.

Equity is fundamentally in the same boat - it's really the same thing as a loan, except the repayment term is a percentage of the economic output of a business venture. There's even some cool math-y economics about how the value of a firm doesn't change when you change the capital structure, so replacing $100M of equity with a $100M corporate bond just shifts risks from bondholders to shareholders.

Anyhow, the short story is that the West is having fewer children later. This means fewer currently-productive members of society per retiree. So, larger amounts of savings/debt required, which means better terms need to be offered in order for the market to clear.

Interest rates aren't set by a free market.

The prime rates aren't, but the rates at which the overwhelming majority of debt is issued are.

Sports have little to do with it as most of that money is completely separate from the operating budgets of the Public Universities. It does seem to be a good way to attract students for whatever reason. Textbooks are expensive because they have a limited monopoly, but they still aren't a huge expense compared to the per-hour tuition and fees.

The issue, IMO, comes down to decades of budget cuts from state legislatures that ends up being borne by the students. The "fees" end up paying for new buildings for student use, which used to be part of the budget allocation from the state. The "tuition" partially is related to increased administration costs, and partially due to the fact that budget allocations have been frozen for 10+ years but they still have to give professors a COL increase if nothing else.

TL;DR: state budgets have been static for a decade or more while more students are trying to attend. If they want to have classrooms and facilities for these students, and they can't get more money from the states, then they need to raise tuition or hit up donors to build them.

Most sports programs (>80%) are subsidized by the university through mandatory fees charged to the students.

> Sports have little to do with it as most of that money is completely separate from the operating budgets of the Public Universities.

The taxpayers still cover the cost of stadium and other facilities at state schools, usually via bond issues.

Sports often generate enough revenue to cover the costs for the top tier schools. Top ranked universities use sports to build donations from alumni, brand awareness, etc.

If you want to tackle a good portion of the high cost of higher education tackle medical costs. It influences the cost of everything in the US. If you earn $50,000 a year the university is paying another $10,000 - 20,000 for insurance.

How do you do that without massive numbers of voters losing their jobs? The US spends 17% of its GDP on healthcare. Europe spends an average of 10%[1]. Do you know what it is called when a country loses 7% of its GDP? Recession.

How do you incentivize a group of politicians to intentionally do that?

[1] http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

This is of course self-reinforcing. The reason they want lots of donations from alumni is because it increases profits. But they can only get those donations if the alumni have very fond memories of college. Thus they need to spend donated money on making students feel like they're part of something special, something they'd want to contribute back to. And that increases costs further.

(I went to a humble college, got a degree that doesn't do much more than tick boxes on job or visa applications, and enhanced it with self-study to get an effective education. I feel no obligation to send donations back to my college.)

I have no inclination to donate back to the university I attended since I paid more than enough in tuition. Also, as an out of state student at the time, the tuition and fees I paid was used, in part, to subsidize in state student costs.

Actually, I think this is at least part of the reason for increased healthcare costs. The consumer almost never the one paying for healthcare. It might help to lower healthcare costs if there was no longer a tax incentive for employers to use healthcare as a form of payment. If that happens it will make far more sense for employers to let their employees deal with the administrative overhead of finding health coverage and pay them higher wages to make up the difference. Suddenly the employee is much more aware of what their health coverage is costing and now has a much greater interest in it costing less. Without the consumer being the one paying for things costs can on paper get a bit crazy when in reality it costs the company a reasonable amount overall as they've negotiated with the insurer and the insurer has negotiated with the hospital.

"Nearly every university loses money on sports. Even after private donations and ticket sales, they fill the gap by tapping students paying tuition or state taxpayers."

https://www.usatoday.com/story/news/nation/2013/09/15/athlet...

But all you're really saying with sports coach comment is that, among people in a sector that is not profit-oriented or known for high wages, the highest paid employee is the biggest differentiator of success ("amateur" participants notwithstanding) for a lucrative entertainment business. That's not really surprising on its face.

Except that college sports aren't really a "lucrative entertainment business." See http://www.politifact.com/virginia/statements/2014/dec/22/ji...

Agreed – see my comment lower down the thread. But even some athletic departments that are net in the red have football programs that make money on their own. Their coaches are paid market value, more or less.

https://news.ycombinator.com/item?id=72825141901

Very few college football programs generate a profit for the school. A large majority of college football programs are propped up by mandatory student fees. College athletics is not profitable for schools with the exception of very few of them.

We created terrible economic incentives.

Instead of investing directly in public universities, we decided to provide grants and loans (but mostly loans) directly to students to use at any university, public or private. This simply created a bubble, similarly to the mortgage lending bubble. College tuition in the US is just another over-inflated asset class.

The top paid coach there is Nick Saban; Alabama football made over $100 million in revenue last year.

https://www.seccountry.com/alabama/alabama-football-reported...

That's a common misconception. Very few college athletic departments are in the black. And even among those, usually only football and men's basketball make any money at all. Sorry no link...should be easy to google statistics.

Every single one of those programs listed is making money, though. That's also easily Googleable and you can see that above link.

It might be wise to not link to an article in which every single sports program is massively profitable as an example of how college sports are causing financial issues. There's an argument to be made for that, but that link isn't it.

The parent comment to my previous was completely rewritten after I replied. It originally said something like "those athletic programs make tons of money for their schools." I was just saying that only a relative few really made a lot of money, which is what the link shows (as you said).

That's not necessarily true.

The big sports programs are profitable, but not all of them.

I guess many state schools do have successful sports programs with big TV deals. For example, 2 of the highest paid NCAA football coaches are in self sufficient programs at state schools in just 1 state: http://www.mlive.com/news/index.ssf/2016/08/big_10_schools_l...

Does that include cost of building the stadium? The gyms? I don't think it does.

The stadium has been there since 1929, so presumably.

Upkeep is not $50 million.

Building maintenance isn't free and comes out of university funds. Especially at state schools you see politicians posing in front of a new building they have arranged funding for. Trouble is, the new building requires maintenance, as does the existing building stock, and oftentimes it would make better economic sense to renovate the buildings that are already there as you don't increase the number of buildings. But you won't find a politician to pose in front of a renovation, consequently you won't get free state money either.

At Alabama. What about the other 100 or so FBS schools? Does Alabama make a profit without mandatory athletic fees? What about other schools? Alabama is an outlier and even its numbers are not as good as they make them out to be.

Typically funds for new or renovated facilities come from donors/boosters.

At programs like Alabama. But not at most programs.

Because US colleges are better than international on average?

Well, for one, college sports is a GREAT selling point to students and alumni, who in turn stay involved and donate back to the universities.

For another, there are quite a few college athletics programs that fund themselves through ticket sales, televised game revenue, televised show revenue, and private donors.

Because the market automatically adjusts to the highest possible cost in a situation like college (as opposed to pork bellies, for example).

It's the same reason healthcare is so expensive.

College is expensive because it has resisted commoditization. You can't get a Stanford diploma from just any school if you know what I'm saying.

While the college coach is often highly paid, keep in mind that the football program usually brings in a boatload of money, and that money goes on to subsidize other NCAA sports and in many cases even returns money back to the university.

I'm not a fan of the sports-fetish of college sports, but I do want to make a balanced point for others to consider.

> football program usually brings in a boatload of money

Let's ask some nice people at NCAA to quantify those boatloads.

http://www.businessinsider.com/ncaa-revenue-expense-report-2...

"Of the 120 athletic departments in Division I-A (sorry, the Football Bowl Subdivision) just 22 were self-sufficient last year. That's actually actually an improvement from 2009, when only 14 schools turned a "profit.""

And as your link says 58% of football programs are self-sufficient. Your link is also referring to sports programs as a whole. So yeah cut out all the women's sports and even more will be self-sustaining (not that I'm advocating that). And, it appears that more programs are making more money as time goes on.

So sure boatload could be a mischaracterization, but majority certainly isn't.

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