More Americans Are Falling Behind on Student Loans, and Nobody Quite Knows Why | Hacker News Reader

More Americans Are Falling Behind on Student Loans, and Nobody Quite Knows Why

bloomberg.com

125 pointsphiskk287 comments

I hate sounding both old and weird but I cannot shake the feeling that much of the claims of economic health and growth in the US is... if not fake (I’m not totally nuts) but not accurate. My most charitable interpretation if I’m right is that we’re using the wrong metrics (possibly intentionally) that give a distorted view of the economy. But I keep hearing employment is great, productivity is great, stock market is great, and yet it seems like most anecdotal evidence I see and read about suggest this is all hollow, and things are actually really bad for the average American.

I don’t know. I know how it sounds. But I can’t stop thinking that stuff isn’t adding up. And this article is one more to add to the pile of “how can this be happening if the economy is actually healthy, at least in a way that means people’s financial lives are healthy and prosperous?”

>But I keep hearing employment is great, productivity is great, stock market is great

The question you have to ask is, who are you hearing this from? The answer is: people with a vested interest in making you believe the economy is doing great, or people fooled into believing this by those with a vested interest.

I suggest you closely examine the metrics used by those who claim the "economy is great". First these metrics are usually comparing year-over-year changes to point to "positive changes" in the economy. What they fail to announce is that the formulas they use to calculate these metrics are "adjusted" regularly to ensure that the numbers they seek are reflected. CPI is a perfect example. The FED claims that inflation has been very low, if not non-existent for years (good for workers, since their wages have fallen or remained stagnant for decades). Some have noted, however, that prices for most of the things people need to survive (food, rent, education, healthcare, insurance) continue to rise dramatically. How can this be? Well one way the FED lies with their numbers is through a mechanism called the "hedonic adjustment". If you paid $2 for a roll 60-sheet roll of toilet paper last year. This year you paid $3 for a 60-sheet roll this year, that's some serious inflation, right? Not according to the FED. The FED claims that the quality of the toilet paper is better now. Even though you are paying 50% more, the FED says the toilet paper is 50% better, so there is no inflation. How are these "hedonic adjustments" calculated? Arbitrarily by FED functionaries, in a black-box.

Rising debt, falling and stagnant wages, higher prices, consolidation of wealth - these are the real conditions we face and why our economy is lagging. Many will look at you as if you are wearing a tinfoil hat if you question the "official numbers", but even casual scrutiny of the methods and metrics used (the ones they do release) will raise substantial doubts about their worth.

"Hedonic adjustment" is meant to control for the 'quality' of some (limited) products sampled in the CPI such as rent, computers and automobiles. 'quality-adjusted' means that they run a standard linear regression across the features of sampled items to normalize the variation in the sample. For example, the sampled rent of apartments would be modeled as (in the simplest example I can think of) :

y = rent, b = slope, x = sqft

y ~ b + x is the extent of the 'hedonic adjustment'

There don't really exist any control variables for 'better'. Nobody at CPI is subjectively saying toiler paper is better. What they will stochastically estimate is the per-unit price. So if for $10 you get 9 double roles, and last year you got 9 single roles for $10, then the price went down. But I assure you as someone who has looked at row-level data of what the CPI samples and does, there are no cases that are this extreme in the aggregate. They could drop the hedonic adjustments and it would make no practical difference. Private companies use similar sampling methods with better data and don't show wildly different headline inflation (see: Billion Prices Project http://www.thebillionpricesproject.com/)

There is no doubt however that the CPI data is inadequate, has a non-trivial lag, and does not capture true regional differences in prices. Just try using it to adjust your salary if you move from Birmingham to New York City and see how comfortable you'd be. But there is no conspiracy; that would presume far more competency than they have hired for.

> But there is no conspiracy; that would presume far more competency than they have hired for.

This seems to be the case almost universally, but I guess it's easier to jump to the 'malice' conclusion than to attribute it to lack of competency.

Perhaps more succinctly: if you think the world is out to get you, then it is.

> But there is no conspiracy

People want structure and simplicity in the world. They want to believe someone is in control, even if that someone is harming them.

People assume structure and simplicity.

Therefore if something is wrong, someone is responsible.

I'm not claiming a conspiracy, its more a confederacy of dunces staffed by people who have a vested interest in reaching conclusions that affirm the wishes of their bosses. Any such system that includes a bunch of very complex algorithms filled with uncertain data and arbitrary variables that can be tweaked by the people crunching the numbers you are going to come out with a garbage result. The FED is literally engaged in voodoo economics. Scarily they even acknowledge this simple fact, but still people take their tea-leaf readings seriously.

https://www.federalreserve.gov/econresdata/feds/2015/files/2...

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” - Upton Sinclair

Difficult or not, you don't seem to be trying very hard. You didn't address the concrete argument you were presented with.

The result doesn't appear to be garbage. The BLS's CPI data is very close to MIT's BPP.

Agreed. They all have the same incentive. There's no need to full conspire. The insentive is strong enough for most of those involved to act in a conspire-esque sort of way. Emergence, if you will.

Your equation does not make sense to me. Is b really a slope (* instead of +?) or an intercept (seems simpler to have a "k*x" term than pretending that "k=1")?

Hanlon's Razor seems to be applicable here.

That is an interesting anecdote, delivered with lots of confidence. However, despite the just-so manner you delivered it, I don't see a compelling argument. For starters, the CPI isn't calculated in an opaque manner; it's explained here: https://www.bls.gov/news.release/pdf/cpi.pdf.

The costs that are increasing for most Americans are housing, healthcare, and education costs. Yet over 40% of American households own their primary residence. Then you can factor in the lack of rent growth away from urban centers, and you see that this metric isn't as pronounced when it comes to the median American. The costs of many goods are falling. Commodity prices are low despite the fact there is a healthy demand for them. It's strange that you're calling out toilet paper. Its price has fallen [1].

The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2]

The unemployment numbers being released should be viewed with skepticism, and there are plenty of good articles explaining why the main unemployment rate should be viewed in context with the other unemployment metrics, such as U6. (The idea is that there are many people who want to work who aren't counted in the main unemployment statistic.)

Furthermore, certain localities are experiencing extremely high price increases in housing, such as the Bay Area. Anyone in such a locality is going to feel the squeeze. The problem is that these statistics represent the nation, not individual localities.

1. https://www.bls.gov/news.release/pdf/cpi.pdf, page 12; table 2: Household paper products.

2. https://www.bloomberg.com/view/articles/2017-09-26/yellen-kn...

Did you even read CPI information from the link you posted? Literally every page is riddled with opaque reference to arbitrarily defined values and modifiers inserted by the FED.

>In calculating the index, price changes for the various items in each location are aggregated using weights, which represent their importance in the spending of the appropriate population group.

What do you think "aggregated using weights" means? How does the FED determine what those weights are? Who decides how how much these "weights" should factor in deciding the proper "spending of the appropriate population group"? Where's a description of their formula? There is none - its made up.

> The CP I-U and CP I-W are considered final when released, but the C-CP I-U is issued in preliminary form and subject to three subsequent quarterly revisions.

In other words, they revise their ridiculous assertions months after the headlines to look less ridiculous in retrospect.

>Seasonally adjusted data are computed using seasonal factors derived by the X-13ARIMA-SEATS seasonal adjustment method. These factors are updated each February, and the new factors are used to revise the previous 5 years of seasonally adjusted data.

More arbitrary "seasonal adjustments". How would the IRS feel if you reported your taxes but you said that you reserved the right to adjust them up to 5 years later?

>Seasonally adjusted data, including the U.S. city average all items index levels, are subject to revision for up to 5 years after their original release.

Which they change up to 5 years later!

That's just from one page of their nonsense! Read the footnotes beneath each chart of "data" to see a slew of arbitrary adjustments that are made for every "calculation".

How many invented variables do you think it takes to invalidate their formulas? 1? 2? or the dozens they have?

So what about this data: http://www.thebillionpricesproject.com/datasets/

I think to support the argument that CPI is cooked you need to show that you have some reasonable sampling of prices of some reasonable basket across the entire country. You can search online for rent prices, you can see real estate prices, you can see product/produce prices... You can find out what % of the population rents vs. owns and factor that in. Let's see that data that shows us that CPI is really wrong and not some anecdotes. I think there's enough data in the public domain to be able to form a pretty good estimate. Also we need to see that over a long period since some prices go through big cycles, real-estate can crash 40% and then go up, so we may want to reduce the impact of that...

A variety of organizations have already done this. One of the better known is Shadowstats.

http://www.shadowstats.com/

Here's a sample of Shadowstats: http://www.shadowstats.com/imgs/sgs-gdp.gif?hl=ad&t=

Shadowstats claims that real GDP growth has been negative for every year since 2000 with the exception of 2004. Nearly 2 decades of GDP contraction. Seriously?

It's better known as being completely unreliable. It's the post-truth version of econ stats. It builds its own reality, selectively choosing and omitting facts.

There are a lot of detailed and nuanced articles/posts on the Internet that debunk this site and point out serious flaws. I can't compete with the quality out there, but you must read more before feeling so confident in this site.

A mother who has cancer tells the kids what they need to hear. You tell the kids too much, and they grow up thinking there is no point to life. Which is not right or good for them. If you were in her position or the FED's you would do the same.

This is a bizarre conclusion you invented whole-cloth from your tortured parable. It's not even how cancer is disclosed to children! A simple scroll through social media will show images of children "beating cancer" or missing a relative who died of cancer.

The idea that the Federal Reserve lies to the populace to keep them productive is absurd. Every recession has been addressed (eventually) by the Federal Reserve. There have been catastrophic blunders, such as the tightening of credit after the sustained bank failures in 1929-1933, and the vastly too-late raising of interest rates at the height of the housing bubble in 2007.

However, the directors were rightly castigated for their failures; Alan Greenspan is still mocked for failing to address reality. The Fed is blamed as a major cause of the severity of the Great Depression. Yellen et. al. have been criticized for their caution (financial news calls it "dovish" behavior). The Federal Reserve have every motivation to tell it like it is, lest they end up like Alan Greenspan.

> The directors of the Federal Reserve, if they had some secret interest in tricking everyone, wouldn't be flatly admitting they consider why inflation isn't hitting targets a "mystery." [2]

So you're saying these people with all the humility required to announce they have solved economic crises for at least a lifetime [1] wouldn't lie or deceive themselves ?

I wouldn't make that point. Seems unlikely that hubris like that would be limited in any way.

Central banks have a long history of ... well, either outright lying or incredible self-deception, including the federal reserve under this chair. [2] No sane person at this point believes the FED's economic predictions.

To make the difference I would put forth this point: finding analyses that defend the point that the US government (and indeed almost all governments with pension obligations) would be bankrupt in 2 year with a 4% funds rate and 6% inflation is easy. In other words, the FEDs predictions, if implemented, would blow up governments, make them bankrupt. Not just the US government (in fact the US government can probably last longer than the EU or Eastern European governments). I agree with that assessment. Maybe they can make it 3-4 years, but certainly no more.

So in order to believe the FED's predictions and stated reasoning are honest (same with ECB) you have to believe that somehow it escaped the attention of these finance industry 4, 5 and 6 decade veterans that this would cause a financial disaster worldwide. I find it hard to believe that these people are this stupid. I also do not believe the FED would destroy the government it's part of.

So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying.

They are lying about the CPI too. European inflation measures are similar, as they directly influence pension increases, and "surprisingly" they're very low.

[1] https://www.reuters.com/article/us-usa-fed-yellen/feds-yelle...

[2] https://mises.org/sites/default/files/styles/full_width/publ...

http://www.investmentoffice.com/show_image.php?file_id=2151

http://ei.marketwatch.com//Multimedia/2016/09/28/Photos/NS/M...

Your argument about the so-called certainty of the Fed Chair and the other directors is disingenuous and not supported by the links you provided.

Link #1: She talks back this assertion in the very next sentence! She says she is probably exaggerating, but she has good reason to think there won't be another major crash of that magnitude, provided there are [list of conditions]. Furthermore, she at no point takes credit for this achievement during the interview.

Link #2: Yellen gets asked why she doesn't raise rates all the time. Far from unwarranted certainty, she admits that she expected the economy to to better, doesn't know why it hasn't, and has therefore revised predictions of when the rates will be raised! Any consumer of financial news over the past 4 years should be familiar with this. The fact you omit this is highly disingenuous.

The very last link summarizes my position pretty well. The experts, who admit that things can be a "mystery," change their minds and models based off of reality. Is that not humble enough for you?

I am curious why you continue to vigorously assert a view that you have failed to demonstrate. What is your personal connection to this, and why do you pursue it?

> Link #2: Yellen gets asked why she doesn't raise rates all the time. Far from unwarranted certainty, she admits that she expected the economy to to better, doesn't know why it hasn't, and has therefore revised predictions of when the rates will be raised! Any consumer of financial news over the past 4 years should be familiar with this. The fact you omit this is highly disingenuous.

I agree with you, to some extent. Yellen is actually one of the more humble central bankers. Not much competition there, of course. But I would still classify what she says, and doubly so what she does, as unwarranted certainty.

The net effect of what she does, incidentally, is an unprecedented redistribution of wealth in the US economy (and elsewhere) from the poor to the rich. The fact that she does this things like this while being unsure about the consequences ...

And of course, she is like all other central bankers. As you say, she doubts whether what she's doing is the right thing. So what does this person do when she doubts the effects of her unprecedented policies ? Why, more of them, of course. She errs on the side of making the rich richer yet again and sabotaging the poor even more ...

Let's just be glad this woman is not a pilot.

My personal connection to this is that, like all central bankers, Yellen is effectively spending (sorry "loaning") my own money back to me, enriching a lot of people in the process. Needless to say, I feel less than ecstatic. And please don't make the central banker's argument (that it's to "save me from an economic crisis that didn't happen", ie. a counterfactual argument. It's about as realistic and useful as the quintessential example of such an argument "why didn't they just kill Hitler/Stalin/...")

And, yes, I understand why she can't be really humble.

>So I present to you: they are lying. They are lying about their reasoning, they are lying about their models, they are lying about their predictions. I understand why they're lying, but they're still lying.

Some are no doubt lying, but never underestimate one's ability to delude themself.

What if they are lying to spur market optimism? It could become self reinforcing.

I dream about the day when the CBO and the Fed lay out all their calculations in a Jupyter Notebook and some means of accessing the raw data used. I can smell the transparency there.

I haven't looked into this carefully but I believe the UK does this already in R: https://twitter.com/Rbloggers/status/846887304379744259

The top captures all the economic growth: http://time.com/money/4371332/income-inequality-recession/ .

This doesn't give me a great feeling for whether they're recapturing losses from the downturn (from which the rich 'suffered' disproportionately due to their heavy involvement in asset markets), or whether that 85% of the gains is in proportion to what they already took home in proportion of total dollars.

It could be they're taking home 95% of the income so capturing 85% of the growth is actually relatively low. I just don't know.

The poorest quintile suffered disproportionately, particularly minority workers.

I'm sorry, I meant in absolute dollar terms (which is why I put 'suffered' in quotes for the rich). That's not meant to minimize the fact that the poorest had the most actual suffering. (and, likely, on average, the greatest % decrease in earned income due to unemployment).

I was speaking in terms of percentages. In absolute terms, it's almost a meaningless comparison because the highest quintile will almost always experience a larger dollar fluctuation.

The problem is the article terms the rich as getting "85% of the gains" which, while a percentage figure, is not a percentage of their wealth -- it's percent of actual dollar figures. So if we're trying to decide whether or not they disproportionately profited from the rebound, we'd have to figure out how it compared to their losses.

Sure it's fake. Our economic models are so out of touch with reality, it's a wonder the system works at all. We treat digital goods the same as physical goods, we spend tons of money to prop up giant failing structures instead of letting them fall apart, we let those that make the most walk away without paying their fair share, we subsidize stuff that nobody wants and is harmful to us, and aren't even close to making anyone pay for externalities accurately.

I feel like we're headed into a really deep economic downturn, but hey, at least we have plenty of golden parachutes for the rich!

> We treat digital goods the same as physical goods

I'm struggling to see the impact this has on economic reality. Could you expound?

I took that as a reference to the decline of manufacturing in the United States.

Even so ... if we've supplanted manufacturing with non-tangible good production, what impact does that have on economic reality?

I agree. On the whole, with a service economy and comparative advantage, we should be better off as a result. Automation, however, is redistributing a greater share of wealth to those with capital. The adverse side effects of that phenomenon, which is unstoppable, are being conflated with outsourcing, which can be disincentivized. People know as a fact that things used to be better when there were more manufacturing jobs around. They are simply acting on what they know instead of confronting a novel problem with a novel solution. Rethinking education and the cost thereof would be a good place to start.

sorry if this is a bit ranty:

We should be able to freely sharing digital media as virtual-goods are immediate to duplicate. Instead we've created artificial barriers (drm, paywalls, streaming services, etc).

The only reason these barriers are allowed, is a dying industry is trying to stay relevant. The economic impact of the media industry loss would be great, and the media industry does still have a place in our system, but they need to let go of distribution.

It no longer makes sense to have laws protecting the sharing of media, but we are propping up a false representation of our economic system by trying to do so.

How do you envision media companies making money if people don't have to pay for their product once it's produced?

It's not like most people are going to pay Disney ahead of time for the next Pirates of the Caribbean movie, even though a lot of people will (inexplicably) pay to see it in theaters.

I'm not sure how, but I'm very sure that our current model makes no sense. The cost of producing media is all up-front now. It used to be that it cost a lot up front, and a lot to distribute. We would charge people on the distribution side, because that was easier. Now that there is no need for a distribution system, we need to find better funding systems for those companies, rather than relying on the physical media mindset.

People are still paying a lot of money right now to fund media even though they can get it for free. It's not that people won't or don't want to pay, it's that we're paying on the wrong side of an outdated economic model.

The value in the music industry has never been in the duplication (or do you really think CDs cost $20 to make while AOL was simultaneously giving them away??). The value is, and always has been, in the talent of the people making the music. DRM is that industry trying to ensure that people who create amazing content are still interested in doing so.

You are essentially arguing that we should let everyone steal since stealing is easy.

Not at all. I'm arguing that paying artist per album is a stupid model that doesn't reflect reality. The only reason we pay per album is that it made sense when distribution was hard. Now that distribution is a solved problem, we need to adjust our economic model to match.

Let me add this to your theory (which btw I agree with). Fracking! It was allowed to hockey stick - despite the ecological damage - because without historically low fuel prices the US economy would be into the weeds. Ultra-cheap fuels is a (temporary?) fix to hide plenty of ills.

Keep in mind, much of the hockey stick'ing happened under Obama, who was and still is perceived to be a green prez. Yet no one has really stopped to ask why is gasoline so cheap? Why would we sacrifice the planet for fossil fuel burning? The answer is simple: because we have to.

p.s. Low oil prices also puts the screws to the Russian economy. That probably isn't a hig deal but it's certainly for some a nice bonus.

This is my current hypothesis. Been too lazy to look at the figures though.

I've definitely read things on how much fracting has increased, especially in the last 5 to 10 years. We talked a good green game but it was the economy that won out.

Alternatively, student loans are rediculously high. Every adult I know always pushes college, but had I been given a $100k loan to buy a rental unit at 18, I'd have turned that into $250k by the time I finished 5 years of school.

Not to mention, I could have worked a 9 - 5, $25 / hr job, and bought a second or third...

Perhaps school isn't the best in many cases.

Now I pay $1k a month in student loan payments, on top of everything else. I'm in tech too, so it's not bad - but I can imagine the 95 / 100 who don't get a tech job are struggling

Where do you get a 9-5 job that pays $25/hr without going to college? I know adjunct professors that get paid less than that.

Adjunct professors make less money than just about anyone, college educated or not. Many skilled trades can easily make $25/hour. The median wage for an electrian, for example, is $25/hour based on a quick search. That will depend on location and experience, but college is not the only way to get a decent paying job.

Sure, but how many people are trained in skilled trades?

I got that starting w/o a degree in web dev...so...yeah.

That's the median starting salary for a lot of places. I was actually speaking to a UPS driver about how that was his starting salary..

UPS drivers don't start out as drivers. You have to work your way up from package handling to get to that point. $25/hr isn't reasonable for any entry level job with no college degree requirement. Even a skilled trade like an electrician still requires training and apprenticeships. You might not be going to college but it's going to take just as long to become a journeyman in whatever trade you are looking at.

I made that as a roughneck straight out of high school. It's not that unusual.

It's doing great for those who the people that matter think matter.

Eventually somebody will say "let them eat cake" and heads will start ending up on spikes.

It's been the same process throughout history: an aristocracy forms, they become blind to the suffering around them, heads on spikes.

Official US government "unemployment" rates only include people who are "jobless, looking for a job, and available for work". This means that the graduate who can't find work, gives up, and goes back to his parents' basement is not unemployed. The guy who can't work anymore due to injury or chronic illness, barely surviving on disability, is not unemployed. The man begging for change outside the subway, who doesn't look for work because no one will hire someone who can't get clean clothes or a shower, is not unemployed. They are, rather, "not in the labor force."

Keep this in mind when you hear someone saying that unemployment is down.

Source: https://www.bls.gov/cps/cps_htgm.htm#concepts

The old U3 vs. U6 argument gets tired quickly. It's not a conspiracy that the government still relies heavily on U3 -- it's just more useful for what the government does and it's more accurate than U6 measurements.

U3 is the official measurement because it has a long history and it's useful for simplifying policy decisions. It's also fairly accurate because it's largely based on unemployment insurance claims forms, which have to be re-filled every 1-2 weeks.

U6 is also an BLS measurement[1] but it not as useful. It contains far more noise and is far harder to get an accurate count (because many of the constituent groups can't be surveyed without random samples). U3 will probably continue to be used as the "official" measurement so long as there are significant tradeoffs to moving to U6.

[1] https://www.bls.gov/news.release/empsit.t15.htm

I'm sure it has its uses, but when the news publishes an unemployment percentage that does not actually describe the percentage of people who are unemployed, that's deceptive and dishonest. I dunno if it's down to malice or just bureaucratic incompetence, but it's false either way.

> It's also fairly accurate because it's largely based on unemployment insurance claims forms, which have to be re-filled every 1-2 weeks.

That's even worse. You can only claim unemployment insurance for a few months after losing your job. Claiming that's more accurate because it's easier to measure is like the joke about the guy who lost his keys in the bushes, but is looking for them under the streetlamp because it's easier to see.

Everyone young is rushing to the cities in order to make any sort of decent living but finds that housing costs are so high it doesn’t really matter much. Those staying in rural America can maybe afford housing but they have no stability.

The stability factor is really the key - I know of few people that expect to be in the same job in 5 years, and everyone stretching for housing to try to get some longer term stability are on a knifes edge. That’s at least my perspective from where I’m standing.

> But I keep hearing employment is great, productivity is great, stock market is great, and yet it seems like most anecdotal evidence I see and read about suggest this is all hollow, and things are actually really bad for the average American.

Stock market and the incredible rebound of housing prices are great if you are older/wealthier and own assets.

There is no denying that if you were wealthy and an asset owner, you did incredibly well.

But if you are young with student loans or an average joe with a few thousand in the 401k, then it isn't going to affect you much.

The years since the financial crisis was primarily about bailing out the big banks and the wealthy asset owners.

If you are an young or an average person, you are doing even worse now since medical costs have increased. The ACA ( obamacare ) was about transferring the burden of medical costs from the elderly and sick to the young and healthy.

If you are older, wealthier and owned a lot of assets, the past 8 years have been the best years of your financial life. The S&P 500 rose from 600s to 2500s and looks to be headed to 3000. Everyone else has fallen behind. Stagnant wages and increasing medical insurance costs.

Maybe what that means is that the economy (or perhaps society in general) is/are changing in ways that are genuinely new, and our understanding of it is lagging behind.

But why is it lagging, what feels to be, so far behind? Perhaps there's a reason to delay the truth? Because it's not pretty? Obama sold hope for 8 years. Trump is making America great again. This perception ponzi scheme can't keep going forever. Or can it?

Yeah, that's what I was trying to say with my "charitable interpretation", you articulated it much better.

Define people?

You can look up the statistics but the wealthy top 5% have been doing very VERY well these last 30 years and everything continues to be great.

People aren't wrong when they say how amazing it is that Trump managed to bankrupt himself.

I've definitely heard that productivity isn't great, it's been growing very slowly for quite some time:

http://www.npr.org/2017/06/02/531173429/understanding-the-pr...

https://www.bls.gov/opub/btn/volume-6/below-trend-the-us-pro...

Is it possible even in principle to calculate things like CPI-U from publicly available raw data? It would be really cool to have access to time series prices for broad swathes of goods amd from various locations across the country/world.

I'd be interested in playing with that data to see if the official numbers are reproducible. Also, it'd be cool to see how well one could predict future prices of certain goods, like toilet paper.

We probably also want data on the spending habits of various locations and demographics.

I live in a city on one of the coasts and the growth right now is out of control.

They should use the metric of purchasing power, not just an abstract "growth". If anything purchasing power seems to be dropping for a lot of people.

That still has a very consumerist bent to it. What about some real outcome-based measurements?

Why aren't we measuring how well the economy performs by measuring how healthy people are? Or levels of malnutrition? Or happiness? Or stress? Or education?

We should measure our economic progress by how well we're doing as people, not by how much extra shit rich people can buy.

Let's rephrase it. When people can't buy necessities, they aren't doing well.

When people can buy necessities and luxury items but depression is at an all-time high, they aren't doing well either.

Theoretically economics could be about "utility", but in practice it's too subjective to measure what different humans value so we measure transactions because those largely use consistent measurable currencies.

It's interesting that economics doesn't usually factor in how much value is created by things that has a transactional value near zero, such as:

  * a housewife maintaining a household,
  * a person who quits work to care for a dependent family member, or
  * open source software.

I'm curious how you know depression is at an all-time high given it has never really been measured before. Do you really believe people in the US are more depressed now than in the early 19th century, say? Consider that people includes Native Americans and African Americans.

All of the above might be great, but that doesn't mean the day-to-day or debt obligations of fellow Americans have improved.

Lets just say the rich are doing well.

Maybe decision makers are too data driven? Whatever they do has to be justifiable and most people don't argue against numbers. So trying to optimize aggregated or averaged numbers looks like a sensible approach. The problem, however, is that aggregated numbers don't tell much about the gap between rich and poor and averages don't describe individuals. As a result, there is a gap between reality and what people believe the data tells us.

What is the trend of consumer spending? A possibility is that people are developing bad spending habits.

do not worry, central committee will fix it in the next 5 year plan.

In a nutshell, as a generic reasoning, say that a few years ago the student loan was about US$ 100,000 and once you got the degree you had - on average - a higher pay of around US$ 10,000 per year (net).

You could repay it in 10 years time while living at the same level of your non-graduated friends.

Now say that the student loan averages US$ 150,000 and - still on average - the increase in annual wages is US$ 7,500 (net).

So you can either:

1) live as before BUT repay it in 20 years instead.

2) live at a 7,500 US$/year lower level than your friends and still repay it in 10 years.

3) live at a 7,500 US$/year (or 10,000 or 15,000) higher level and never repay it.

I suspect that besides the lessened "value" of the university degree on the labour market, there is also an increased number of people that choose option #3 over option #2 or #1 (whether out of need or because of other reasons doesn't really matter).

Speaking of lessened "value" of degrees, University's need to be held accountable for some of the debt that they are encouraging students to take on. For example, at my public university, STEM students were charges several thousand dollars a year more than humanities students. STEM programs also did their best to discourage enrollment. Meanwhile the anthropology department is literally begging students to stay and get a masters or phd with them.

> STEM students were charges several thousand dollars a year more than humanities students.

That actually seems more equitable to me than what happens at some other schools, where everyone pays the same credit-hour rate no matter what course they take.

Teaching STEM courses, intuitively, seems like it should cost more. The pool of professors and TAs is smaller, a lot of courses call for lab equipment and the maintaining of labs and so on. And students have higher earning potential upon graduation and should, in theory, be willing to pay more.

Many humanities courses in contrast (literature, philosophy, sociology, political science, languages) can be taught quite cheaply, with labor being the only major expense. It seems unfair that humanities degrees (which are also worth less than STEM degrees on the job market) should be anywhere near as expensive as STEM degrees.

The higher cost of delivering classes with a lab component is generally solved via lab fees. This seems a much better solution than raising the cost per credit hour.

Also, some STEM-type departments get grants (public and private) at a rate that's much greater than liberal arts departments, and grant recipients have to tithe back a large portion to their parent institution in a way that defrays facilities costs, etc. So there are other sources of income besides student tuition.

If you started treating departments as P&L centers, I don't know that I'd want to be in Anthropology vs. MechE.

Ironically, I have been in several research heavy departments that have been looking enviously at the teaching-heavy, undergraduate centric departments with steady and predictable funding streams.

Two things to keep in mind:

1. Grants are difficult to get. The pay lines at both the NIH and NSF have been decreasing for quite some time, and even successful departments don't have the feeling of swimming in cash.

2. Overhead rates (the "tithes" you mention) do not necessarily cover the full administrative cost of a research-heavy department (especially things like capital construction).

There are certainly institutions that have built a great deal of monetary success on their research programs, but not as many as one might think. This is why, for example, in my field we're seeing a proliferation of MPH programs - student tuition is a more reliable income stream.

> The higher cost of delivering classes with a lab component is generally solved via lab fees.

That's fair. Just that (again, my experience) you were charged a fixed amount in lab fees every semester regardless of courses. It's probably varies between unis.

> If you started treating departments as P&L centers, I don't know that I'd want to be in Anthropology vs. MechE.

I don't know if you need to treat each department as a P&L center. There are bound to be departments that are important but perennially loss-making and knowledge shouldn't be reduced to just dollars and cents. But there does need to be more fairness in the money charged to students. The alternative is that humanities students (with lower earning potential) are subsidizing STEM students (higher earning potential). I know which one I prefer from a fairness point-of-view (speaking as a former STEM student).

Why are we considering universities in terms of the earning potential of their graduates? University is not job training. If anthropology students are being encouraged to continue in academia, it's because that's the purpose of that institution. From a "fair" point of view, the industries trying to hire engineers should fund education. Since that is unrealistic, the ultimate solution would seem to be making higher education free, like the rest of the civilized world. What you probably shouldn't do is admit that it doesn't make sense to try to compare the economic value of knowing Milton vs Maxwell, and then suggest doing so anyway.

> From a "fair" point of view, the industries trying to hire engineers should fund education.

At least at some points in the past, this was a significant funding source for universities. (In the US, not sure about outside of it.) The number of engineering schools founded by American industrialists is probably not coincidental, either.

That companies no longer feel the need to invest in universities in order to ensure a steady supply of workers suggests one of two things: (1) either the planning horizon of private companies has contracted to such an extent that they are no longer willing to make such a long-term investment, or (2) they believe they can just hire sufficiently skilled graduates without investing in the "supply chain" that produces them.

Argument 1 is largely a financial question, because it hinges on the long term discount rate; Argument 2 is essentially political, in that it assumes the ability to hire graduates from a large, slack labor pool outside of its immediate community in which it might otherwise invest. My guess is that both of these have played a role in declining private-sector funding of educational institutions vs. the early 20th century and prior.

> From a "fair" point of view, the industries trying to hire engineers should fund education.

They do, in a way, by paying higher salaries for the graduates they really want. Some companies also pay tuition for employees going to school.

> Since that is unrealistic, the ultimate solution would seem to be making higher education free, like the rest of the civilized world.

Great Britain doesn't have free higher education.

"Make higher education free" is certainly a worthy goal. But there needs to be some debate for how to get there. "The government pays your tuition" is unlikely to find much support outside of a certain age bracket.

Something to consider: German universities are free to everyone who passes an entrance exam [1]. But German universities also spend half the amount per student per year as US universities[2]. $10,164 vs $23,064. They also spend more on R&D proportionally, and in absolute terms per student-year.

1. https://en.wikipedia.org/wiki/Education_in_Germany#Tertiary_...

2. https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf (page 215)

> They do, in a way, by paying higher salaries for the graduates they really want.

Seriously?

> "The government pays your tuition" is unlikely to find much support outside of a certain age bracket.

"I've got mine, fuck you Jack" is a popular sentiment across all age brackets, but charity and compassion are also not age-restricted.

>For example, at my public university, STEM students were charges several thousand dollars a year more than humanities students. STEM programs also did their best to discourage enrollment. Meanwhile the anthropology department is literally begging students to stay and get a masters or phd with them.

BUT you need also to compare what the labour market (outside the University) offers to a professor level mathematician, engineer or technologist and what it offers to a brilliant anthropologist.

Also, try remembering last time you saw an ad where someone was looking to hire an anthropologist (or an archeologist, a literature major, etc.).

Why should this be the case? They offer a service with hundreds of competing options (other schools), so it's hard to argue they're not offering market rate.

I think the infinite access to loans is destroying any connection between market pricing and desirability. People at the age of 17 or 18 when they're going into college tend to have minimal to no knowledge of the workforce, and tend to be completely unrealistic about their own probable outcomes. More than 50% [1] of Americans under the age of 30 expect to become what they consider "rich." That was from 2003, but it was repeated in 2010 and yielded near identical results. [2] What does an extra $20k/year in debt matter if you're going to be a millionaire in a decade anyhow? When people's views of the value of something is completely out of touch with reality, they are rarely going to be incentivized to make logical decisions.

This feature also makes the entire for profit education industry quite predatory. I realize public institutions are ostensibly not for profit. At the same time, when you have higher executives taking salaries in the millions of dollars, and layer upon layer of redundant administrators with comparably bloated salaries, that they then regularly adjust upwards as "their revenue" increases, that belies the intuition of 'not for profit.' So forgive my colloquial nature.

[1] - http://news.gallup.com/poll/7981/Half-Young-People-Expect-St...

[2] - http://www.bankrate.com/banking/savings/do-you-think-you-wil...

The market is much smaller than you think especially for public universities because of the huge difference between in and out of state student rates. That means most students can only really consider in state schools where there's at most a handful and generally they've each got a few things they're known to be 'the good one' for that subject/field.

Do they though? Do public universities really have competition? Maryland has College Park and not much else. All the other public schools are much much smaller, and generally lower quality.

This isn't the 1850s, UMD essentially competes with at least the other east coast public schools. So you have Penn State and UVA, as well as UD, Va Tech, GA Tech, UNC, etc.

Add to that the negligible degree to which attending "the best school" effects your outcomes (spoiler: virtually not at all. Being in the top 25% at your school far outweighs how good your school is) and you'll realize that they compete heavily. This totally leaves out all the private schools with which they compete in the DC area.

Except not really because the cost for going to an out of state public school is much larger for a student so any given school has a large leg up on cost in competing for students in their state.

Except not really because most State schools on the East coast will give you in-state tuition after you live in said State for one year. Take a year off after highschool, make some money, then get in-state at whichever school you chose.

Source: many of my friends graduated college a year behind me after doing exactly what I'm suggesting.

Some vacation companies advertise that people should take loans to go on vacation. Should they be held accountable when it turns out that adding that you went on a cruise to your resume is just as useful as adding that you got a useless degree? In fact some colleges advertise their college as you would advertise a vacation. They use terms like "college experience".

No,but the government isn't also paying employees to tell people in schools and since they were children that they _need_ to go to on a cruise or be doomed to a life of mediocrity/poverty. Our college system in the US is having a similar problem as our healthcare. We've decided everyone needs it badly and it's better for all of society to have it, but we leave it up to corporations to serve that need when they will take advantage of the extremely inelastic demand.

It's like having an open wound next to a hungry tiger and being surprised when they try to eat you. The government should be setting price ceilings on schools that take Federal loans if we as a society have agreed that it's such a worthwhile goal as to ensure everyone can go and that we will pay for it

At some point they do start garnishing your wages, so that's not a long-term strategy

From the article: "Department of Education ticked up to 18.8 percent as of June 30, up from 18.6 percent the same time last year, new federal data show."

There's your answer - 0.2pp is totally insubstantial, which makes the title borderline clickbait. The economy doesn't uniformly grow or distribute wealth, so a change so small could just be from the distribution of college leavers in a particular year being overindexed towards sectors that aren't growing.

Further to that point, it typically takes years for people to adjust their majors towards sectors of the economy that are particularly productive, so we shouldn't expect to see such a quick change in the numbers.

I wouldn't say it's totally insubstantial. The economy is growing at some of the fastest rates we've seen since the beginning of the 21st Century. At the same time, delinquency rates are continuing to rise. If young people are still falling behind when times are "good" what happens to them during the next recession?

Here are more depressing statistics:

https://www.cbpp.org/research/state-budget-and-tax/funding-d...

tl;dr: States have been cutting back on funding public education even as it's gotten much more expensive every year.

This. States slashed higher education spending during the recession, and it's not coming back. At the same time, federal grant money got tighter.

Student tuition is literally the only dial left that can be moved.

Have you considered that universities might be able to operate more cost efficiently? Purdue University has manged to freeze tuition for the past 5 years for example.

https://www.purdue.edu/newsroom/releases/2016/Q2/purdue-plan...

To add to your point. Schools have massive expenditures on things that have nothing to do with learning _and_ do not bring in money. Its one thing to spend money on something like basketball if you are UCONN and you routinely bring in enough revenue to cover the costs or even post a profit.[1] Its another thing to keep spending millions on your football team that does not bring in that much money[1] These are just one example in a school system. There's similar waste everywhere, like redoing the landscaping every few months so prospective students always see a fantastic looking campus, or the massive increase in administrative staff. The schools don't try to be more efficient because they don't have to be. They don't have legally set budgets and everyone can get students loans since they cannot be discharged so they can just dial up tuition.

Our whole financial system is built around accurately accessing the risk that an investment will be paid back and charging an interest rate commensurate to that, but its thrown out the window once you can try and convince the least experienced adults in the country to sign on the dotted line.

Until banks stop getting paid whether or not they made a good bet on someone's college expenses, or the schools are given a limit on what they can spend, its not going to change. My fear is that this won't happen in any way but a massive amount of defaults that cause the whole system to collapse unexpectedly and cause add on pain to the rest of the economy

[1]https://www.cbsnews.com/news/the-financial-impact-of-champio...

I know the university I'm at has been holding the line in my college as long as it could, and its finances are screaming. And it's done a great deal of trimming along the way.

Purdue also has a $2.443 billion endowment. The university I'm discussing is a public university with maybe a sixth of that after a major capital campaign.

But what actually happened? It's state allotment got slashed in half, capital improvements are no longer covered, and the per-capita payment per student has stalled while we've admitted more students.

There are at a minimum two dials they can turn, the other being lowering costs. Less palatial dorms, cheaper food, cheaper coaches, lower faculty salaries to name a few. They could do these things, it's just that higher prices is easier to get past their faculty committees.

1. You'd be surprised at how vocal faculty committees can be about opposing raising tuition. Either because they care about their students and their futures, or more mercenarily, because it means supporting graduate students eats up more of their grant funding when tuition goes up.

2. We've already lowered faculty salaries - why do you think so much is done now by adjuncts that are pretty universally regarded as underpaid?

3. Student amenities have been shown not actually to be all that significant a contributor to rising costs, especially compared to the slashed state and federal budgets to support universities.

Many universities have already done a great deal to lower costs - putting aside needed infrastructure investments, not replacing both staff and faculty when they retire, the aforementioned reliance on adjuncts, and in some cases cutting or merging whole departments.

And more: http://www.nber.org/papers/w23843

> Small business lending by the four largest banks fell sharply relative to others in 2008 and remained depressed through 2014. We explore the dynamic adjustment process following this credit supply shock. In counties where the largest banks had a high market share, the aggregate flow of small business credit fell, interest rates rose, fewer businesses expanded, unemployment rose, and wages fell from 2006 to 2010. While the flow of credit recovered after 2010 as other lenders slowly filled the void, interest rates remain elevated. Although unemployment returns to normal by 2014, the effect on wages persists in these areas.

Banging my head against the table.

Wages and benefits are too low, tuition is too high, cost of living is too high, and student loans are a scam. Tuition is a scam.

http://studentdebtcrisis.org/

The rent is too damn high! ;)

It's a rentier economy, by and for. Just don't actually tell anyone or you'll be labeled a crank.

Due to government involvement, there is a lack of a true market pressure when student loans are underwritten. Not surprising in the least that this bubble is starting to pop.

This is such a silly meme. Its not "due to government involvement." Its "due to the manner of government involvement."

Loans that are guaranteed by the government, for all students, that can't be discharged by bankruptcy, is an idea clearly put together by lenders.

If we wanted government subsidies for private education, there are plenty of alternatives. Here's one: government guaranteed loans for all students; but repayment of those loans is capped as a percentage of the person's income, and interest rate is capped well beneath that. This would allow the government to subsidize students to go to college, while providing market pressure against universities raising their tuition yearly. It would also allow students who went to expensive institutions to pursue careers that aren't at the top of the financial spectrum, like, say, teaching.

If we want government subsidies for private education, why don't they subsidize private education, not private education loans. (Incidentally, public schools have a lot of loans too)

This is the same probably I have with the affordable healthcare act: it started off about healthcare, but became about healthcare insurance.

Or we could make public college free, just like we did with high school.

Maybe the real problem is that we've developed this caste system over the last 50 years where people who don't get college degrees are excluded from careers that can sustain a middle class lifestyle. What if free college just moves the goal post and in a couple more decades nearly everyone has a Master's degree and you need a PhD to earn a decent living? What happens if the most talented segment of our work force ends up spending their most creative years trying to achieve meaningless credentials instead of actually contributing to the GDP?

(Preemptive Edit: I know they have free college in some European countries, but maybe they have the same problem.)

Well, the point of college isn't to do job training. There are trade skills for that. College exists in the exact state high school did before it was made free for everyone. It is a barrier for entry into "good" jobs and the middle-upper class. It is simultaneously a way for people to learn and become informed citizens, to get some context for the world around them and how it operates, to learn economics and philosophy and mathematics and physics and computer science if they are interested in it.

After a while we said "no, everybody should go to high school and learn civics and math even though they aren't necessary for most specific jobs". Before that, we had the poor starting manual labor or apprenticeships at 12, never learning anything beyond their specific skill, while actually becoming educated and a citizen was reserved only for the rich. We decided to make our workforce and citizenry more thoughtful and educated and improved society as a whole significantly.

It's time to do it again. Our world is much more complicated now, human knowledge has expanded vastly. College education is now the baseline for 'educated person' and that's okay. It's great, even. Thanks to free high school the poor can study math and history. If there were free college, the poor could study economics and philosophy and computer science too.

How many talented people do we lose by shunting the poor (who are, in capitalism, always the vast majority of the population) into non-education job training when they are young because they can't afford to learn about the world?

Honestly we need to completely rid ourselves of the notion that education should be preparation for a job and instead looking at it as a betterment of society in general.

Free college doesn't necessarily mean that everybody gets to go though.

Interesting, if you think that education is a race to the bottom in credentialling though, what is your solution? If you were running a business wouldn't you prefer a PhD to a MS to a BS holding everything else equal?

I think it really depends on the job. I've managed people who were in entry level software jobs who had PhDs, and having the higher degree didn't translate into better performance.

Yeah but that's what I'm saying, once you've hired them then you might find out different but purely within the hiring process a PhD is preferrable to a BS. And the predicament may be tough but if there is no solution to it, why even take it into consideration? That's why I asked what you would do about it.

"All things being equal" is a very contrived situation. I think a better question is whether you'd pick a PhD candidate over a BS who, for example, could code a little bit better. (And for me the answer is I'd probably pick the BS, but I'd have to justify it to the people above me, which could be a challenge.)

Well sure but "all thing being equal" is what someone who is considering whether to go for further schooling is considering. I'm me, I have all my qualities, would I be more likely to be hired (and get a higher wage) w/ a BS or w/ a PhD? That's why I pose it that way and that's why I ask for what your answer to this problem is, it's not about who you would pick, it's about what drives people to "overachieve" in their credentialling in the first place.

That's exactly what's happened and what will happen - setting goalposts and then moving them. In Europe, specifically Germany and France, it's common for people to go for a Bachelor's and Master's back-to-back since there aren't any student loans to worry about.

While the lack of student debt from studying so much sounds all nice, the reality is you get a bunch of 26-28 year olds graduating with Master's degrees and ZERO working experience, bar some internships which may or may not be useful.

There are two sub-problems here: "Free" education (not actually free when you see how much taxes are) allows Europeans to take their sweet time in graduating, so it's common for people to be done with their Bachelor's at 24 or 25, while their American counterparts graduate at 22/23 because of the (financial) pressure to finish on time. A combination of high taxes, encouragement from peers/uni to "study abroad" instead of work and from companies to keep their student status to stay interns, means there's also not much motivation to transition to full-time work.

Make no mistake about education quality here, it's not better than America, in fact it might be worse. The population here complains a lot on their local education quality (though you'll rarely ever hear it on the Internet - see last paragraph on why). A lot of memorization from books for things you'll rarely, if ever, use after graduating, lots of partying and bumming around. "Study abroad semester" is nothing more than a proxy term for "4 month vacation for sex, drinking, parties and roadtrips while the taxpayer takes care of the host country's evil out-of-state tuition (usually US, Canada or Australia)" - see for yourself with those "Erasmus" (exchange) students from Europe doing their exchange program in America.

There's a misconception commonly spread in Germany that staying as a student to work means you pay less taxes - kinda true, but technically it's because you get paid so little, you stay in the non-taxable <9000 EUR/year bracket - so you have people postponing graduation or enrolling in a new university without taking any courses after graduating to keep their student status.

Student/internship wage exploitation is turning into an epidemic because of the large student population that remain students for such a long time paired with legal loopholes that allow many companies to get away with hiring a bunch of cheap students instead of one full-time employee.

I've been living in Europe for a few years and they are not immune to the problems that Americans complain about. They do a good job complaining about America on the Internet while downplaying their own problems and spreading positive vibes (cough propaganda cough) on how Europe is superior/more human/ethical than America though.

Your view, accurately portrays the deeply problematic issue that is inherently intertwined with education - namely real life.

Human beings are not studying machines.

Fail a course, and the response is not "re-booting, preparing trial N+1", the response is usually discouragement.

With free courses, good material, always on, and self selected motivated students - MOOCs were supposed to change the way we studied.

They had % completion rates in the single digits.

---

In every education system, there will be an issue.

The american system did very well - as long as there were jobs for high school students.

The fact is that most people are not cut out for college.

AS your (or any) society, starts forcing more and more people into higher education, because it becomes an unoffical pre-req for employment, you end up with many third order problems.

Firstly - testing.

In a class of 5 students, a teacher can test a students knowledge with detail.

With a class of 50 students, a teacher who has to grade submissions cannot afford the time to grade all of them.

This results in a drive for uniformity of answers - the removal of subjective answers from students, in favor of multiple choice.

The other way to enforce uniformity is to have a set of acceptable answers, so any deviation from it can just be identified and removed.

Since more students are now entering higher ed because its a pre-req for a job, they don't care about the subject. They care about the cert.

That means they will cheat, or memmorize the answers, and get on their merry way. Not everyone understand the humor in chemicals, or math. Nor do they care.

This is a process - and once started it grates at the old education system, till all of its higher purpose is eroded, and it streamlines itself to become a certification system. Buy your degree, or memmorize your way to do it.

This brings us to the next problem - not enough work even for degree holders.

The creation of more degree holders doesn't resolve the inherent jobs problem.

It just creates more supply, which drives certificate inflation, and wage stagnation.

Higher degrees are meant to indicate a level of mastery and capability on a topic. After a few cycles of degradataion, it just means that the end product is someone with the capability of passing an exam. Not necessarily that they can create new and novel works in their field.

And all the while, life goes on. These students are usually young human beings, who have varying levels of motivation, maturity and experience - they will go on holidays, take breaks, fail, succeed gloriously, do stupid things and so on.

TLDR: What you have described are epi-phenomena. The issue is jobs. The input cost of production from blue collar labor has been going down over years.

Unless there is meaningful work, for people who were never meant to be ... data scientists, or comp sci engineers - you will always have a problem.

That is absolutely correct. If we were to drill deeper down, the purpose of 'education' and the certificates it brings for most jobs is extremely questionable. I'm an advocate for education for highly skilled jobs where lives are at stake, such as doctors and civil engineers.

But it's hard to see and justify the same need for typical white collar jobs where college is mostly a repetition of high school and employers train you/indoctrinate you with their koolaid anyway once you're done showing them you have a Bachelor's/Master's.

The same applies for comp sci/developers where a lot of the talented ones tend to enjoy writing code or playing around with tools like web APIs or their Android SDK way before they went to college anyway. It seems a lot of people who weren't passionate in the tech field before, but majored in the T part of STEM in college basically forced themselves into it for the money. They end up graduating with the same certificates anyway, but the forced-non-passionate ones use the cert only for getting their foot in the door while still lacking critical thinking and have little interest in improving/enhancing their skill set (See: majority of developers from India).

And don't even get me started on lower-tier majors like communications, history/librarian, arts, basic design, etc where little more than basic hands-on training would be adequate to get people on their feet to do their jobs, versus spending a ton of time and money on 4 to 8 years of 'higher education'

And when public college becomes the new high school continue to add layers of education as needed.

Nah, we just realize that we're demanding an excessive amount of education for most jobs because employers can demand it with no cost to themselves, forcing an entire generation to take on a debt burden their parents did not have to because the cost of education had not become overly inflated yet.

The fix for this can be realized with a tax that funds education; if you need someone with a bachelors, you pay X as a tax. If you need someone with a masters, you pay 2X. A PhD? 4X. If the position doesn't require a degree and you train them, you pay no tax (ie journeyman or apprenticeship).

Are you arguing against public high schools? I don't understand.

Not at all, I'm just pointing out that many jobs that only required a high school degree now require a college degree without the job fundamentally changing all that much. More people attending college would likely worsen that trend to the point where "College 2" (whatever it would be called) would then be required to stand out.

And we would have educated our citizenry and let millions of people learn about the world and the expanses of human knowledge instead of just the rich for nothing, since those citizens wouldn't be able to generate extra wealth for their bosses. What a nightmare.

Your view comes from a very simplistic model of the world without an understanding of the limited resources we are working with. The internet empowered individuals to engage in self directed learning that was impossible a generation ago, virtually anything you wish to know or understand is a google search away. If you personally require someone in a sweater vest to stand in front of you and speak in order to learn it is not my job to subsidise that activity or his salary.

Resources are not limited at all, we have more resources today in the US than any group has ever had in all of human history. We just choose to allocate them on things that are bad, like bombing hospitals or buying tanks for police departments or jailing millions for nothing or corporate welfare, and not things that are good, like learning or healthcare. In the golden age of prosperity for the US, the highest tax bracket was 94%. We tax nothing and demand nothing because we have been trained to think we deserve nothing; through no fault of your own, you have been tricked into accepting this status quo as 'necessary' when it is anything but, it is explicitly contrived and enforced by wealth to keep wealth in the hands of the wealthy at the expensive of the lives and livelihood of everyone else.

Self-directed learning is great, but if you've ever been a teacher or a student in a genuinely difficult subject you know autodidactism is VERY limited and works for a tiny few on a tiny number of subjects. Autodidacts generally have an oversimplified understanding of a subject they think they know because they lack the social engagement in the topic and deep understanding that comes from engaging with true expertise. They think they know far more than they do, nearly every single time in my experience interacting with them. Which is not bad, as a teacher this is an excellent place to have your students start because you can quickly disabuse them of this notion and they become eager to learn more.

> If you personally require someone in a sweater vest to stand in front of you and speak in order to learn it is not my job to subsidise that activity or his salary.

Even if one didn't require that many employers require exactly that from you in the form of a diploma or some other authority vouching for your claimed expertise and skills.

If your very expensive proposal doesn't end up in someone generating additional wealth that can be taxed or donated or given in loans and so on, how are you going to fund your utopia?

It is not very expensive. It is not a utopia, it is a tiny but meaningful increase in quality of life for the vast majority of citizens and society as a whole. And your question is fundamentally ideologically flawed: were you concern trolling about how we were going to fund the bombs we dropped on weddings last year? How did we fund the Saudi Arabian genocide in Yemen? What taxes did we raise to give them this money?

Corporate taxes basically don't exist in the US. Taxes on the wealthy barely exist compared to the most productive period in US history, when they were 94%. Your question reveals more about its asker than the subject. The whole point of having a country is so that the resources we generate together can be used to help the country, not so that a tiny wealthy oligarchy can siphon off all our resources and leave us to die, then when we ask to live, say "how will you pay for it?" [because I, after stealing your money, obviously won't give any of it back to you]

Of course I was concerned about how to fund the wedding bombs. The fact that government is spending money on something stupid is no reason to be less concerned and skeptical about new expensive government initiatives.

Nobody is going to say "sure the deficit is increasing even more, but at least the spending is consistently wasteful instead of only wasteful towards rich people".

So... generic and not leading to a job?

The problem is the proliferation of degrees, and thinking that hasn't caught up with the new reality (e.g. "getting a degree is good" -> "getting the RIGHT degree is good").

Not sure it gets better in a global world, where the vast majority of high IQ people live outside the west, and intelligent jobs not based on local legislation (like lawyers) can move easily internationally.

That's far too direct and obvious, we prefer expensive, obfuscated "solutions" here.

"Free" is covered by taxes already paid. So making university "free" would be an additional tax. But instead of the attendees paying for them directly, the pay would be spread out. Also, it would change the dynamic of which school you could attend. High School is covered based on taxes in the town paid for by property owners. Some university programs are subsidized by state taxes (like SUNY for New York) and are discounted for residents of the state. This would likely just extend these kinds of programs with a higher state tax.

We just spent $80bil on the military. Free college is estimated at $65-75bil, so we just take that money, and move it over here and blammo. Free public university for everyone. (:

With that amount of money, can't you just end poverty directly? Why do so many people treat college like a terminal, intrinsic good?

>With that amount of money, can't you just end poverty directly?

Actually I don't know. If it is then that's certainly a good use of it and I agree that college is not an intrinsic good but ending poverty is. I suppose it's really a two-pronged problem. (1) We want to raise everybody up out of poverty. (2) We want people to be economically mobile, aka even in the case of UBI no-one wants to be a serf on the CEO's plot.

How would you propose to "end poverty"? Paying all the debt of the poor? But that wouldn't solve the actual problem, only a symptom.

Some view better education as a potential solution because poverty is often directly correlated with the level of education.

To quote Dave Barry, from 1982 but still relevant:

"Now the problem poor people have is obvious: they don't have enough money. They can't afford food, housing, or medical care. The simple, obvious, efficient way for the government to help them is to give them money so they can buy these things. So that is not how the government does it."

This is basically the libertarian argument for a basic income: if we're going to have an expensive welfare state, it should be efficient and it should actually accomplish its stated goals.

poverty is often directly correlated with the level of education.

It's even more directly correlated with the level of money.

Poverty is correlated with education because education is expensive. If the causation doesn't go in the direction you expect, solving poverty with free college might be like solving poverty with free yachts and free diamonds.

One can only dream!

No, "Free" is covered by printing money which the government does all the time (where does it get money for billions of dollars in military increases? It just appears out of nowhere, handed to military contractors). Taxes are to manage the amount of US dollars in circulation and to constantly create demand for them after the services are created and money is printed.

You need to remember what country "we" are discussing, and adjust your expectations accordingly.

Why would we?

> but repayment of those loans is capped as a percentage of the person's income,

Depending on what you mean by this, it could be either a good idea or nothing would change. So can you clarify?

If you simply mean that the students would only have to pay back a portion of the loan, but the government would still have to fund the rest to the university, then nothing would change from how things work right now. The universities would keep raising the prices.

I meant as in, student loans (whether private or public) have a maximum mandatory monthly repayment rate of, say, 10% of the individual's monthly income.

So let's say I took in $1000 before taxes this month. The highest my minimum monthly payment can be on my student loans (total) is $100.

That puts pressure back on the university to keep their tuition rates in line with what can actually be repaid, ie, the actual financial value of the degree itself.

Not saying this is the ideal solution, it just shows how much of a canard the parent poster's answer is. There are plenty of solutions to this issue, depending on what we want to do.

This puts zero pressure on the actual university to do anything with tuition. The universities aren't the ones loaning the money or counting on your repayments. That's handled by private or government subsidized lenders. It's not a solution at all.

Perhaps we misunderstand each other. The vast majority of people who take out federal financial aid, also take out private loans, because it is very difficult (if even possible anymore) to cover tuition costs with federal loans.

If private loan repayment rates were capped, then private institutions would have a very, very strong incentive not to loan student loan rates larger than a certain amount to students, depending on the major and university. Quite frankly, a student asking for 200k for an english degree at Drexel would be denied. Why? Because Drexel isn't known for its english program. Average salary of a Drexel graduating English major is, let's guestimate, 50k a year for the majority of their lifetime. At 50k a year, at a 10% rate, the bank isn't going to get its funds back for 40 years, before interest. If the average age of death/retirement in this country is in the early 70s, the student will literally die of old age or retire before finishing repaying the loan.

Now students will be unable to attend financial unviable options. The university will understand that if it raises its tuition beyond a certain level, it will be unable to support its english department, because no sane bank would back the loans required to graduate.

Again, the above is a very contrived example with BS numbers. And I'm not suggesting that the above is the way we would want to fix the issue. But it could work, and it certainly puts pressure on the universities.

It seems like an even better solution then would be if there were no private or government lenders and the universities themselves had to write the loan. There would certainly be an incentive to only give loans that would be repayed. Also if loans were not repayed the university could simply rescind the degree.

Is it possible that some graduates are realizing that for all that money, their education was not what they were promised, and a bit of resentment has led them to make the decision not to pay?

I feel like it might actually be somewhat socially related as well. If people see that their friends/coworkers with large student loans are simply deciding not to pay and nothing horrible is happening to them while at the same time they are living more extravagant lifestyles with the student loan money they're not paying, that's an encouragement to not pay yourself as well. Pair this with the last administration taking steps to limit student loan repayment responsibilities (William D. Ford Direct Loan program), and it starts looking like maybe not paying your loans off is a pretty decent option.

I don't know man?

Social pressures are more complicated than that, and they come from many different directions. I mean, in the hip-hop world, "I Finished Paying Sally Mae Off!" is one of the top rated songs right now. And listening to that song, it's clear that the rapper had fallen behind on his loans from time to time.

So if that "pay it off" attitude has made it down to the hip-hop world, it must be prevalent in the larger society as well. And that's just one "for instance" when you're talking about social pressures around student loans other than the desire to walk away from them.

I hate to be pedantic, but think calling "I finished paying Sallie Mae Back" a top rated songs in Hip Hop right now(or ever) is a big stretch. It's over a year old, and its mainly just a good goof of a song that people shared around on Facebook last year. I don't think I ever knew anyone who listened to it outside of that context.

Having read the lyrics for the song, I'm not sure that the song is encouraging at all, on the payback perspective. Talking about having two jobs and destroyed credit seems to me more like having the loans paid off is more like getting out of some kind of imprisonment (I do not want to disparage how terrible imprisonment is in the US, but I couldn't think of something better).

I would argue that this song is more an anthem for those who understand how hard it is to live under the weight of these loans, and perhaps if you are fortunate enough to pay them off, it is a time of celebration, as you might be able to quit that second job.

Thought this was a joke, but it's not.

https://m.youtube.com/watch?v=JqbXQa05Z6c

Alternatively, perhaps fully paying off your loans has become such an unusual thing that it has joined the ranks of "things rappers brag about in their lyrics"

> Pair this with the last administration taking steps to limit student loan repayment responsibilities

Are you referring to the efforts to correct down on Navient actively and often deceptively steering people into higher-cost paths when better existing legal options were availablel, or it's crackdown on predatory loans by fraudulent institutions? Or something else?

Extravagant? Is this related to avocados?

I repaid, but the Equifax information is wrong.....

It is possible, but it seems unlikely that resentment is the primary reason graduates fail to pay down their student loans.

It's possible Betsy Devoss has something to do with it; students always knew they were giving an incomprehensible amount of money to monstrous vultures by paying back their loans, but this time it's impossible to ignore that fact with her at the head of dept -- millennials loathe her.

Perhaps more and more students are simply refusing to pay, taking the free college they should have been given by economic force.

As this other Bloomberg piece notes [1], it's probably useful to break out the type of school and degree when looking at debt. It's not clear that basic undergraduate degrees are an issue with ballooning debt as much as for-profit schools and graduate degrees that don't do much for employment prospects. (The latter not just being a case of "useless" degrees but professional degrees like MBAs and JDs from low-tier or even just non-top-tier schools.)

[1] https://www.bloomberg.com/view/articles/2017-09-27/it-should...

>unemployment is low

Yes, but many people have been designsted as "having stopped looking for work", which means the statistic doesn't count them.

Additionally, those who are employed perhaps are underemployed, working as an Uber driver or bartender or chipotle or etc.

>the economy has improved

For the top 6% of Americans that are millionaires, it absolutely has improved. Most of their income is from capital gains, dividends, and business equity.

The average person with student loans has almost none of these things. They are relying on a wage from a job that requires them usually to pay rent, own a car, buy a monthly transport card, and so on.

When you are only making $1400-2000 per month after tax, and $1,000 of that is out the door on work-related expenses alone (rent, transport, insurance, phone), there isn't much left over for a $300 per month student loan payment.

Disclaimer: Don't shoot the messenger. These are merely my thoughts on what is happening. Please reply with criticism.

The amount of people I know with degrees who work in retail, or something completely unrelated is staggering. From my observations, I'd guess "underemployment" is the biggest contributor to the late payments.

This is just another example of why I urge any young people I know (high school age) to think long and hard before choosing to go to a 4 year college. When I graduated high school in 99', we were primed to think "college degree == good job". Of course, that is anything but the truth. And, it only serves to put someone in serious debt without any guarantees.

Hands on technical jobs like electrician, plumber, welder, are many times more lucrative than some bullshit business degree. A friend of mine's son is 22 or 23, and making a hell of a living welding. Granted, he's exceptional at it. But, that doesn't change the fact that his 2-year trade school investment was a good one.

Or, teach yourself a skill. Like lots of us on here, I'm a self taught programmer. It took years of doing small projects in the evenings, but I make a living from it now with $0 in student loan debt.

The key is a marketable college degree. In fields such as aerospace and defense where the credential is the key to open the door, get the credential as cheaply as possible. Do a couple of years at a community college and then finish at a state school. Name-brand degrees bring no extra value. Oh yeah, and get your master’s while you’re still in the zone.

The idea that trade school somehow is lower tier or oppressive is a staggering disservice. Just like every college-bound high schooler is not med school material, not every high schooler is college material. Put a wrench or saw or blowtorch in the hands of a doctor or engineer, and crummy is the likely result. Skilled trades are an honorable, respectable way to earn a good living. Forcing people into tracks for their own supposed good but where they feel hopeless is horrible social engineering.

There are plenty of fields where name-brand degrees mean a crap ton starting out, e.g. finance, law.

In fact, the conventional wisdom these days seems increasingly to be that you should go to a top-tier law school or just not bother. And that seems to be becoming fairly common advice for MBAs as well, although that's not as cut and tried because MBAs cover a wider range of programs than law degrees do.

Law is not a guaranteed payout. The competition is incredible, and if you don't get into those firms, there's a big drop off in what you're likely getting paid. $30k a year jobs for those that didn't make it into the prestigious firms (or start their own practice) is fairly common.

Those are on the higher end of risk (and upside potential). Would only do it if some else foots the bill, eg parents.

Granted. My comment was in the context of aerospace and defense.

Not only what you said, trades can also lead you down a path of owning your own business. If that is the direction you go often you can exceed the incomes of the college educated quite handily.

Great point, but for some reason union-protected professional educators who hold degrees from accredited institutions and who control state education monopolies are hostile to this worldview and deride it as “demeaning.”

think long and hard before choosing to go to a 4 year college

A college degree is still worth a considerable bump in lifetime earnings.[1] Perhaps you should revise your advice to "think long and hard before choosing to go to an expensive 4 year college" or "consider spending the first two years of college at a local community college."

1 - https://trends.collegeboard.org/education-pays/figures-table...

One question I have regarding spending the first 2 years in a CC is how does this impact your ability to get admitted to a 4-year school later on, particularly a top-tier (say top 50) university? Are these schools less likely to admit students who will only spend a couple of years there vs students entering straight out of high school, all other things being equal? I don't know the answer, but given my son is on a track to gain admission to a top university, I would hate to give advice that could hurt him in the long run.

My state has multiple public universities which regularly appear on top 50 lists and for many in demand fields in the top 5 or 10. The CC systems have agreements with the state public universities guaranteeing admission after 2 years attending CC. There are of course requirements that must be met during the 2 years. They vary from school to school, so you do need to target a specific school while attending CC. These requirements generally involve minimum GPA, credit hours earned and required courses. Since the requirements can vary so greatly between schools many of the CCs have counselors dedicated to working with students to make sure they meet the requirements of the specific 4 year school they would like to attend.

The universities were required to enter these agreements by state law. In an attempt to bring in more out of state tuition dollars some have started to voluntarily enter similar agreements with CC systems in other states.

Do some research and see if there are similar arrangements between CCs and public universities in your state or with out of state universities.

tssva is correct, most states have matriculation agreements between the CC system and state college system. So, at worst, you finish your degree at your home states flagship state university (obviously, those vary, but generally, each state has at least one well respected institution). If you're in VA, you "hit the jackpot" and have many choices (UVA, W&M, VT, plus a half-dozen other solid choices).

Locally (VA), students are guaranteed admission to the state university system if they meet a published GPA threshold. That threshold varies by school. The one big caveat - students are not guaranteed placement within specific programs. So, at GMU, an overall GPA of 2.85 is required to transfer, however that is might not be high enough to guarantee placement in their Computer Science program (which is highly competitive and close to fully enrolled).

I don't know how this applies to transferring to an Ivy (or other top-tier private). For the Ivies, I assume the caliber of student who can gain admission is going to figure out the finances (for better or worse). I also assume (big assumption here) that even a "useless" liberal arts degree from Harvard makes one employable at a reasonable salary (vs the same degree from a 2-tier school).

Edit - one "local" private school (Shepherd U, WV) also has a guaranteed transfer program from the local (Northern VA) CC system. They offer a tuition discount to those transfers. http://www.shepherd.edu/nova-transfer-admissions/

Unfortunately, my state's universities are decidedly mediocre. Both flagships sit outside the top 100 nationally. Bordering states do have strong public universities, so I will have to see if there is any reciprocity. Otherwise, it looks like we'll have to do a lot of close examination of the total financial packages being offered when the time comes.

I graduated in the mid-90s with $20k in debt. That wasn't fun but it was manageable. I can't imagine graduating with a mortgage's worth of debt.

VA also has a private college subsidy (effectively brings most private college tuition down near state-tuition rates). Maybe your state offers something similar? And, check other in-state privates, maybe they offer something like Shepherd U.

I would be very, very careful making the conclusion college degree leads to lifetime earnings, it's possible that a third (or forth, or fifth, ...) factor that makes people more likely to earn a college degree is what leads to the bump in lifetime earnings.

It is also completely useless to lump together all college degrees from all schools.

Sure, it's a massive generalization. But, no more so than "college is an over-priced waste of time," which is a claim I see repeated on HN and other tech-centric forums.

This, exactly. I don't know why you're getting down-votes. It's indisputable that both (1) the economy improving on average and (2) the distribution of those gains is highly skewed to the right-side of the income/wealth table.

Stories based on average numbers lose a great deal of the details that matter.

Completely agree, especially when the USA has nearly 330 million people!

Last year according to credit Suisse, the median wealth of the typical American actually /decreased/! And if I remember correctly, it was by quite a sizeable chunk, from 49,000 usd to 45,000 usd.

And the median excludes children, so it is adults only.

I have all the statistics in the world to back up what I'm saying, but even more important for me is anecdotal stuff that inspires me to dig deeper.

When you see the sheer number of young kids working chipotle or retail; when you see the demographics of uber drivers vs big 5 software engineers; when you realize that so much of the wealth in the US is old money that continues to centralize, pool, and grow (much like gravity);

when you realize all that, at the very least, it makes you say "hmmm... I need to rethink and dig deeper into this topic on my own".

Besides all that, I'd add that the unemployment rate is an aggregate measure. There's no guarantee that the unemployment rate for arbitrary subsets of the population (e.g. college graduates) is the same as the aggregate unemployment rate defined over the whole population. So, supposing that college educated workers actually were more likely to be unemployed than the average worker (they aren't), looking at the national unemployment rate would be just ... looking at the wrong place.

But here's a "nice" graph (the graph is nice, but the trend is worrying): https://fred.stlouisfed.org/series/LNS11327662. Labor force participation for college educated workers fell by 3.9 percent points since 2009. This is rather massive compared with the actual unemployment.

I really wish the people at statistics offices would come up with some new measure of unemployment. Sometimes I feel a scalar doesn't cut it.

Well put.

It's always nagged me how we can say the economy has improved without taking the distribution into account. It's like saying one person gained five bucks and three people lost a dollar. Sure there is two more dollars but the community/society isn't necessarily better for it.

It used to be that when someone at the top got a bit richer, they would invest that money. Which meant opening up a factory, creating jobs as a side effect. Now, it seems the better investments happen to be things that don't create as much jobs.

> Yes, but many people have been designsted as "having stopped looking for work", which means the statistic doesn't count them. Additionally, those who are employed perhaps are underemployed, working as an Uber driver or bartender or chipotle or etc.

Yes. In most countries I know of, employment statistics are more about making economy/government look good and hitting targets, and less about giving any real numbers that people can use to understand the big picture.

Those numbers are all computed, and they've all been getting better as core unemployment has (that is, they are trending together). The only number that is getting worse is the number of people retiring out at 65/67.

I do agree that we have to look more at wealth equality to see what's going on.

> which means the statistic doesn't count them

They do, they're called "not in labor force" [0]

If you include the unemployed as well as those who want a job but aren't actively looking, it's around 5% which is considered low.

But the point of the article is that the unemployment rate is moving in the opposite direction to the arrears rate. Unless the basis for these figures has changed recently, this would require that an abnormal number of graduates aree becoming less emlpoyed while an abnormal, and larger, number of grads are becoming employed. Seems unlikely.

> ...perhaps are underemployed

Are you sure? I'm not totally familiar with the exact counting mechanism in the US but, in the UK, if someone is in part-time work but is looking for more hours or full-time work, then they count as unemployed, not employed.

[0] https://www.bls.gov/cps/cpsaat35.htm

For further reading on this, look to articles about how the Phillips Curve (the theoretical link between inflation and underemployment) is broken (if it ever worked).

e.g. http://www.cbc.ca/news/business/inflation-canada-outlook-1.4...

The Phillips Curve, at least in it's older formulations, was just a description of a certain regularity in the data. So it isn't a "theoretical" link, strictly speaking.

TFA mentions that underemployed people can get income based payments matched to their earnings.

The share of Americans at least 31 days late on loans from the U.S. Department of Education ticked up to 18.8 percent as of June 30, up from 18.6 percent the same time last year

Is this newsworthy?

The uptick isn't. But if 1/5 student loans are more than 30 DPD, that will be a problem.

Honest question: why is 1/5 that much more of a problem than 18.8%?

~18.8% is roughly 20% or every fifth student loan in the country. If 20% of your portfolio can't repay it's debt that's usually a bad portfolio.

In a simplified model : Assume you give 100 dollar to five people with the intent to earn 5 dollar on interest of each (total 25 dollar interest income.) If now one of them can't pay back the 100 dollar you lose the 100 dollar and the five dollar interest income. So instead of 25 dollar income you get (20-100-5 = -85 dollar). To avoid this situation you start calling the guy (collections activities). Effecting your earnings again.

Of course one months in arrears is not immediately the road to immediate doom, but it is an early warning indicator. Especially if you look into trends to understand the behavior of the portfolio.

In this case the early-stage delinquencies have been improving since 2014 and starting 2017 reversed that trend. So if the trend continues this portfolio segment will grow again leading to more losses and collection activities.

Just for some perspective mortgage delinquency rages (90+ days overdue) were highest at 11.5%[1]. But there's a lot of factors to consider, so I wouldn't necessarily say this is the sign that the bubble is going to pop soon.

[1] https://fred.stlouisfed.org/series/DRSFRMACBS

Tie student loans to educational institutions where the study takes place.

If the student fails to repay, a %age of the student loan debt should be paid for, by the edu institution where he/she graduated from.

Would be great if it is 50%. Even if university doubles the price, demand/supply economics will ensure universities cannot bump fees up at will.

Without holding the educational institutions and the students as equally responsible for the debt, edu institutions have no incentive to not-ripoff students.

Factor in the repayment history by graduates of a program at an institution to decide the percentage of debt the university is liable for.

If STEM grads are having lesser default, the school is responsible for 10% of the debt.

If a grads of <some esoteric program> have a higher default rate, school owes closer to 50%

I've never thought of it that way. I don't know if there wouldn't be some second or third order issues from something like this, but at first glance this seems like a good idea.

Why shouldn't the school take on some of the risk?

The schools would undoubtedly respond that in doing so, they would necessarily have to stop educating people from anything less than the most privileged (and thus low-risk) backgrounds.

You'd need to cook up some sort of risk-pooling scheme if you wanted schools to extend that credit to anyone coming from a background that made payment statistically less-likely. And once you started doing that you'd have to be careful not to distort the market so much that the original intent -- to allow market forces to have more say on what majors college students go into, and who (and how many people) colleges admit -- would be totally lost.

It's a difficult problem and I don't know if it's better to have the schools/colleges trying to underwrite the loans. It might be better to leave that to specialists rather than force it onto schools (though forcing schools to release the data that an underwriter would need to rationally price loans for students to go there would be good).

If you didn't have the government backstopping student loans, and in some cases making them non-dischargeable in bankruptcy, that would probably have much the same effect. The government backing and unique legal treatment are what makes a "student loan" different than a giant personal loan. The justification has always been that without this treatment and guarantee, nobody would make a $100k+ personal loan to an 18-year-old, which is probably true. But I think we're starting to see the other side of the coin, which is that maybe there are some good reasons why that's the case.

Indeed. The university where I'm currently faculty views it's mandate as making college more accessible to the state's population and supporting first generation college students.

If they're going to be left holding the bag for that, they're going to stop.

And to address the poster who thinks we can blind universities to a potential student's financial background...we have a very good statistics and computer science departments, and a massive data set of all our students. We can probably come up with a classification scheme in short order, "blinding" or not. Hell, I'm pretty sure you could get pretty far just from "What high school did you go to?" and the classes you took there.

not sure where I mentioned it should be tied to the "student's financial background". In fact it can be irrelavant. By the time student graduates, parents can say 'you are on your own', and the debt is still dangling.

The only deciding factor needs to be the outcome which is the employability or ability to make money to repay debts.

If the Outcome Rating for a program at a university is high, it means lower risk, and the university is responsible only for, say 10% of unpaid debt.

If the Outcome Rating for a program at a university is low, it means higher risk, and the university takes a much higher responsibility for ~ 50% of unpaid debt.

Because the "Outcome Rating" of a program is not independent of financial status.

For example, the use of Classics as a major for many people who go into banking as essentially a status signifier. That only applies to some classics majors.

Find some way of blinding schools from the individual financial background of applicants.

You could do that, I suppose, but the ability to pay back the loan and the downstream income potential of the graduate are likely to be very strongly correlated to the student's financial background (really, their family's financial background).

If you're wealthy enough, it basically doesn't matter what you major in while in college. But if you don't have a rich family, then it matters a hell of a lot. Students seem to already know this; at least when I was in school last, there weren't a lot of first-generation college students or immigrants in the liberal arts programs; the kids who were betting everything on their education were in the business or engineering schools, mostly. (Or sometimes preprofessional programs, pre-med was a big one.)

trouble is, academic performance is (strongly?) correlated with wealth.

The schools could decide to take that as justification for jacking up course rates and only taking on students who can bring some assets as collateral for the loan.

Or are they in any way incentivized to take on financially less-well-off students? I'm pretty sure they'd always find some way to outsource any costs/risks like that straight back to the students.

Also: It's not that much of an open market, schools work very much on prestige, certain fields are de-facto monopolized by certain schools, it isn't an "open market" where some startup can just start a school and hope to have a meaningful impact in any short time.

"jacking up course rates and only taking on students"

That is totally fine. If student loans become hard to get, students and universities will take prudent decisions, which means, there wont be a bubble effect because of super easy / free availability of loans.

Basically, student loans in US is similar to mortgage crisis in 2008.

US will be better off with unemployable people with no degrees and no debt, than unemployable people with a useless degree and debt.

Without a feedback mechanism for universities to feel the effects of the job market on its graduates/alumni, there's no incentive for university to admit students into its "sub prime programs".

Let the government fund those esoteric programs that have no job prospects. That way the spending on those education programs is visible to the tax payer.

"not well off students" can always have the university take a bigger chunk of the responsibility. While ensuring that there is no bias in admissions, universities will have an even bigger incentive to ensure the success of this 'not well off' student. Such success rates can be tied to the Universities' credit rating. Higher the rating, lower %age risk the edu institution needs to take.

Serious question: Who loses out if all the student debt got canceled? Not the colleges, I assume, because they already got the tuition. And not the students. So would it be loan companies and the US government? Would such an action be catastrophic?

I think the "cancelling" action you're saying would be some way to pay the loan companies off with US govt funding. So, as a US taxpayer who is almost done paying his student loans, I lose out. Twice, i think.

I think this is kind of a nonsensical question but please feel free to correct me if I'm wrong.

Imagine you and I agree to a deal, both verbally and contractually (i.e. on paper). I give you 10 euros and you pay me back 11 euros in exactly 1 year.

Now 6 months into the deal you suddenly ask yourself: "Well who would lose out when this debt gets cancelled?"

Do you see now why I think it is a nonsensical question?

Sure, it would seem obvious that the loaner is the one to lose out. The things it, I'm not sure who all the various loaners are these days or how much the economy itself would be affected by these people suddenly not having $1.3 trillion (or whatever the figure is these days) coming to them.

The question is can future students get any loans to finance their studies then (or at what rates/conditions? Good chance they would lose out too.

What happened if you sold the default risk as a swap to a 3rd party. Who loses now?

The gov't loses the repayment, since student loans are federally backed. Though the fed is double dipping on the student loans: they get interest back on the loans while also getting higher tax revenue from higher incomes.

Someone still has to pay the debt. Though many times the (defaulted) debt can be bought for pretty cheap. It's complicated, but in the end somebody pays it.

Debt is an asset to the lender, and in case of default (and no hope of renegotiation) the asset is written off. Whether this is "someone paying it" is like asking whether the owner "pays for" a truck that's struck by a meteorite and totally destroyed. Your total claims on stuff (i.e., capital) have gone down, and you might even journal the destruction of the truck as an "expense" (which is, itself, nothing more than a change in capital), but I'd still be wary of saying it's "paid for." Obviously this does mean that having enough assets get struck by enough meteorites can throw you into insolvency.

(In this thought experiment we're ignoring insurance. Or you could imagine an uninsured asset being destroyed.)

Let's take a simple example. I loan you $10k to buy a truck. Not too long after you get it, a meteorite hits you and your truck. Disintegrating both completely. You have no money in the bank, insurance, or anything for me to get my $10k back.

The truck (or student loans) was still paid for. I thought I'd get my money back, but I didn't and that is a risk in loaning money. I can write that off as a loss in my taxes, and recuperate some of the losses, but definitely not all.

So in our student loan case somebody still has to pay off that debt. Either it is by a massive loss to the companies that loaned the money (let's ignore the possibility of them being in the green) or the federal government purchases the loans and writes them off. And if the loan companies are forced to write them off then that is written off as an expense and can greatly change how their taxes are calculated (see Trump). Which the "pays for" is that purchase or tax deduction/rebate. And now the entire tax paying population pays for (which tbh I'm personally okay with). But it still gets paid by somebody. Somebody "loses" (maybe not in the long run, but in our short game).

Student loans are mostl federally backed, so the US taxpayers would lose out.

With constantly rising real estate prices, this is hardly surprising. Rent is crazy.

Time to switch to free high education system.

You don't even need it to be free if you fix the loans. In my country student loans are interest free but indexed with CPI and compulsory repayments are only taken from your tax once your income is above about 42k USD. Even then, the compulsory repayment amount is based on how much you're above the threshold. No-one really even notices that they're repaying their loans.

But if they're interest free then you can't bundle them and sell them to investors (Student Loan Asset Backed Securities). The whole point of rising tuition and private student loans seems to be to transfer wealth to endowments and investors.

Real estate prices aren't rising everywhere. The problem is that our economy is increasingly based on knowledge workers, who benefit from clustering together in densely-populated areas with certain cultural amenities, jobs, and opportunities to meet people and share knowledge. That drives a great disparity in both housing costs and opportunities by region.

Are there any recent studies that crunch the numbers on how much that would cost? Because as a debt free college grad earning ~16000 pre tax I'm still willing to commit a fair amount, call it 500 a year? but I have no idea if that's even close to enough if we assume it's progressive at the same rate as income tax.

Most of the time people calculate it as if all the current cost were just transferred to the state.

But of course in reality, when universities were free in the past they weren't allowed to just raise their prices to whatever they felt like charging, as they basically do now.

I'd be interested in that too. There are countries which implement it effectively.

It depends on how many people you let go to college.

it may cost more than just dollars and cents. I worry that the adage of "you get what you pay for" may start to apply.

I don't know if there are many countries with fully subsidized college but there are at least a few who don't seem to see any worse outcomes than the US's existing partial subsidization by loans and grants.

those countries typically also have entrance requirements to college that would not sit well with the US, which values the perception of egalitarianism.

Many students aren't getting what they pay for now. Better to be debt free.

We just need price controls. School expenses are insanely out of control. Handing them a blank check is folly.

How would free college affect rent prices?

Because instead of people being debt-slaves their whole lives they'd have that money to pay rent.

wouldnt people be paying higher taxes in order to pay for others to go to college?

That won't be as high as their debts.

seems pretty easy. Why not make rent free too? And put price controls on food? seems like that would make everything a lot easier.

A couple of question with answers we'll never get:

- What is the breakdown across for-profit vs traditional school graduates? Are University of Phoenix grads defaulting at the same rate as ivy league grads? (obviously no, but the disparity would be good to know)

- What are the statistics if you include SoFi (and other similar refinancers that cherry-pick borrowers most likely to repay) borrowers that get removed from the public numbers?

The reason is that people have been spending absurd amounts of money on worthless degrees and can’t afford to pay them back.

Would be interesting to see a breakdown of repayment rate by major

And also graduation rate.

There are some pretty hostile laws against borrowers. A relatively recent one caps the tax write-off on interest at $2,500. Anyone who went to a private or out of state college will hit that cap easily.

Have they actually investigated? I see a lot of speculation in this article, but if it's actually important to know, shouldn't they go find out?

All good points, but the only real answer is... Paying for an education is a gamble and gambling with our future is dumb. If we pay taxes for anything, anything at all the number 1 priority should be to provide an education to anyone. That doesn't mean pay for their housing, or anything else. One has to invest their time into an education, its already very expensive.

A few reasons I can think of:

* Wage garnishment is limited, maybe the ruined the credit score and the max % of garnished monthly paycheck (%15) is less than what they are already paying?

* The type of majors and students background who graduated changed. Maybe universities 4 years ago decided to accept more students into majors which are having a hard time finding employment. Universities don't care, they just want more students with 6 figure approved loans to roll in.

* It is possibly there was a hint or signal of debt forgiveness being implemented. It doesn't have to be true, just a rumor but it can start to self-perpetuate because people really want to believe it.

* Also everyone is pretty connected these day via social media so maybe if someone bragged about not paying and "look a few months later, nothing happened to me" others might start thinking, hmm, well maybe it's ok. Certainly nobody wants to be left still paying like a fool if all their cool friend stopped and they still seem to be doing ok, kind of attitude.

Purely anecdotal but I have several friends who have told me they don't worry about paying their student loans on time due to the fact that they feel like they'll never go away. They feel like they'll never pay them off, and they can never get them discharged. So there's no motivation for them to pay them off.

I will forever wonder why Americans don’t go to Europe to study higher education. I heard its much cheaper, if not free, there.

Take Finland, a country has free education. Entering a university from the total beginning in Finland requires taking a highly competitive entrance exam, and the exam is in Finnish. How many 18-year-old Americans do you think can manage that?

Is it really cheaper or free for non-Europeans? (http://exchangestudentworld.com/student/costs/) Can it be easily done without going through an exchange service? Anyway, some other possible factors for why more Americans don't do it: not many European schools actually wanting them for various reasons (such as academic performance (or as sibling notes there may be an entrance exam), they're full enough with the locals, or would rather have non-American foreign exchange students), most Americans don't know a foreign language very well (and those that do are most likely to know only Spanish), most Americans stay in the same state of their birth, and lots of college students like being able to visit friends and family from their original location and that's a lot more difficult with an ocean in the way -- flights are expensive.

My sister did this. Not cheaper. Or at least St. Andrews wasn't :)

This one is easy. People are buying things that they can't afford. Throwing it into a loan and then partying their way through school. Since that worked out so well, then they do that with their car, house, furniture, cell phones, and car rims.

You aren't entitled to 100,000 dollar education.

You aren't entitled to go down to Mexico every spring break.

you aren't entitled to eat pizza and hit the bar every weekend.

You aren't entitled to a college education.

Go learn a trade, get scholarships, join the military, work for a company that will pay for your education, start your own business.

Instate tuition at VA Tech is 13k for the year, if you live in Texas, UT is 4-5k a semester. While not cheap, this is far from unaffordable.

I have zero sympathy for junior who goes to some 150,000 a year liberal arts college and gets a degree that makes no money or requires another 2-4 years of school.

This line of thinking doesn't make sense. The zero-sympathy-no-exceptions attitude comes from lacking context of the problem, so hopefully I can help.

> You aren't entitled...

While the person you describe probably exists, it's not all 18% of students struggling with payments. I'd just like to say that being aggressive helps nobody.

> Instate tuition at VA Tech is 13k for the year, if you live in Texas, UT is 4-5k a semester. While not cheap, this is far from unaffordable.

Are the people born away from the coasts out of luck then? There are dozens states in the Midwest with cheap tuition, but after graduation there aren't any jobs waiting.

The quality of education is usually poor when professors teach subjects for fields that they've never been a part of.

Students know these things, and feel it's worth taking on debt to get a better education and live somewhere with opportunities.

> Go learn a trade, get scholarships, join the military, work for a company that will pay for your education, start your own business.

I'm assuming you work in tech. Would your employer hire someone in their 30's with no relevant work history? I've worked at two of the large tech companies and two smaller companies, and I know they wouldn't consider it.

Apprenticeships are disappearing - low skill work gets automated now. Medium skill jobs are being outsourced or given to contractors. What you're suggesting isn't realistic.

> I have zero sympathy for junior who goes to some 150,000 a year liberal arts college and gets a degree that makes no money or requires another 2-4 years of school.

An 18 year old assured by their parents this is the "right" move deserves sympathy when it all blows up in their face 150k down the road.

My Mother told me she would throw me out of the house if I took a job rather than going to graduate school. She also said all the loans I took out for undergrad that she claimed she'd pay she'd stop paying if I got a job rather than going to grad school.

The reality is some parents are so damn convinced that education is the magical key to a good life they'll go to some pretty intense lengths to get you to sign on the dotted line.

Our federal government is $20 trillion dollars in debt. We are trillions more on debt from every level from local to federal. Most of the states are on the verge of bankruptcy, if not bankrupt already (like Illinois). Countless millions who depend on pensions and other promised benefits from states and municipalities are about to be in for a rude surprise. Despite this crushing debt, we continue to spend trillions of dollars to bomb and invade countries around the world.

Blaming entitled kids for our debt-laden society and failed economy is not smart or useful. The truth is that there aren't enough jobs (let alone decent-paying jobs) for 1/4 of the tens of millions of kids who enter college every year. These kids weren't the ones who mismanaged society so that property taxes, mandated healthcare premiums, income taxes, and rents are so high.

Correlating government debt (which is primarily owed back to it's citizens) to household debt is extremely disingenuous.

>Correlating government debt (which is primarily owed back to it's citizens) to household debt is extremely disingenuous.

That's false for several reasons. First, government debt impacts citizens directly through higher taxes (income, property, sales, and others), fees, deprivation of services, ect. Second, government debt is not primarily owed back to it's citizens. The biggest holder of government debt is the Federal Reserve, which is a collection of private banks. The vast majority of debt not held by the federal reserve is held by banks, financiers, and the ultra-wealthy. Third, working people and those on fixed incomes are crushed by ZIRP (zero interest rate policy), which has been implemented by the FED in an effort to prevent the mountains of debt load on every governmental level from exploding. What it has done instead is prevented people from saving (since artificially low interest rates that don't match the rise in cost of living mean treasuries and savings accounts lose value) and further inflate the riches of the ultra-wealthy who borrow at 0% and buy stocks.

This doesn't even touch on the fact that millions of people who have worked their whole lives for pensions are about to get the shaft and become destitute when states and municipalities are overcome by their crushing debt and default on their payments.

Tho, pointing out how they both are running rampant, ain't that disingenuous, it's merely stating the obvious.

Pretty much the whole world economy is built on debt and creating more of it, that's because there is no such thing as "money" without debt, especially not with the US$ as the de-facto world currency.

In that regard, it's disingenuous to claim the whole problem only boils down to a couple of kids living above their standards, it's way more systemic than that.

Yes, entitlement is the problem:

You aren't entitled to having a loan repaid if the interest rate is too high.

...or if you loan too much money to someone who won't be able to afford it.

...or if you expect someone in a lower income bracket to pay more than X% of their income.

Common-sense laws that loosened bankruptcy and regulations on repayment amounts would fix student loans, credit cards, bad mortgages, and payday lending. Why do we always blame the person taking out the loan? The lender should have the expertise to know if a person is capable of repayment and should bear the burden of making predatory loans.

Two things you miss:

1/ Student loans are not dischargeable in bankrupty.

2/ Today, the government IS the lender.

The government has created a system of incentives (even before the student loan industry was nationalized) that encourages lending large amounts of money to anybody by eliminating the risk on the part of student loan lenders.

People can basically never get out of the debt, so you can lend arbitrary sums of money to Feminist Dance Theory majors and other sorts of poor-ROI nonsense.

"Predatory loans" is a misnomer. Predatory government is far more accurate.

What fraction of the 18.8% delinquent loans are held by people like those your describe? If you can't answer that you're only saying these things to disparage others to make yourself feel superior. You might as well have been complaining about avocado toast.

>I have zero sympathy for junior who goes to some 150,000 a year liberal arts college and gets a degree that makes no money or requires another 2-4 years of school.

Then you're an asshole. Young people with zero real world life experience make poor choices often. Sometimes critically poor choices. It's a part of growing up to fail and the fact that you can't squeeze together an ounce of sympathy for these folks suggest you have a lot of growing up to do yourself.

Everyone knows deep down you are right.

Just like we know diamonds have no real value, and you shouldn't go into debt to buy an engagement ring or have a big wedding.

But try offering your fiance a $5,000 bond instead of a fancy ring. It doesn't go well.

Social pressure is a real thing, and colleges are taking advantage of all of us by setting up expectations for normal that we just can't afford.

This is why I never really got behind Bernie's free college plan. We don't need the government to help make college free. We need to change why these costs are getting so out of control in the first place.

How are people spending over 50k in the first two years of undergrad? Basically wherever you go the core requirements that first year or two are the same before you pick your major. We need to be leveraging the best teachers and online classes to bring these costs down, especially for your basic "Philosophy 101" class that you are just taking to test the waters.

"These people it's no mystery where they come from. You sharpen the human appetite to the point where it can split atoms with its desire.

You build egos the size of cathedrals.

Fiber-optically connect the world to every eager impulse.

Grease even the dullest dreams with these dollar-green gold-plated fantasies until every human becomes an aspiring emperor becomes his own god.

Where can you go from there?

As we're scrambling from one deal to the next who's got his eye on the planet? As the air thickens, the water sours, even bees' honey takes on the metallic taste of radioactivity and it just keeps coming, faster and faster. There's no chance to think, to prepare. It's buy futures, sell futures when there is no future. We got a runaway train, boy." 'The Devils Advocate'

You are entitled to go on Github, contribute to an open source project widely in use, and start gaining experience for free. Nobody is going to say "oh this guy doesn't have a degree so we won't accept their contribution," although if it sucks you might get some good critique, and can add to the resume that way without a degree and looks impressive to prospective employers.

You make it sound so easy to get into VT..

>You aren't entitled to a college education.

But you are. We have a right to an education. My parents paid literally $0 for their education, because university was free, in a time with much lower productivity and less wealth. The state could afford it then, so it can certainly afford it now.

Thanks, dad.

I firmly believe that university is way, way overpriced in a world of free, high quality MOOCs. It just makes zero economic sense and I believe the market will correct this sooner or later. Think about how utterly inefficient it all is: you have hundreds of professors around the world, each mechanically teaching the same subject semester after semester to new students (I know, they do a bit more than that). Some will say it is about signaling but in a free market, smart companies will eventually start to pick up on better signals. People who attempt to justify the cost of university really just seem unimaginative.

Christ, I've been struggling with this all month.

I finished college in 2014, worked in industry for three years, then came back to school for a PhD. I am now completely shocked that these undergrads are paying $60k/year to come here to listen to the same cookie-cutter lectures that are being given at thousands of other institutions across the country.

I almost feel embarrassed for the professors as well, having to act like they're doing something useful or valuable by giving this lecture, when in reality its just a mechanical performance.

I feel like you need 20-30 different MOOCs for each class. You need a tier 1 (MIT etc) level difficulty Physics I class, then a tier 2 class, and so on.

This would even be advantageous for students at 'top' schools (if they still exist), as it would be easier for a physics major to acquire cs skills if they don't have to go through their schools theoretically biased curriculum.

Its completely insane...

Yep, agreed. It's not really that universities are bad, just that they're outrageously overpriced and inefficient. And from my personal experience, most professors don't seem that passionate about educating (many of them rightfully think their time would be better spent elsewhere). I think the two missing pieces for university alternatives to pick up steam are industry acceptance and a more curriculum based format (vs single courses).

Quite the opposite!

> According to a visualization of MOOC completion rates assembled by Katy Jordan (2013), the 50 investigated MOOCs have generated 50.000 enrollments on average, with the typical completion rate hovering below 10%. Put it somewhere around 7.5%, or 3.700 completions per 50.000 enrollments. Meyer (2012) reported that the dropout rates of MOOCs offered by Stanford, MIT and UC Berkley were 80-95%. For example, only 7% of the 50.000 students completed who took the Coursera-UC-Berkeley course in Software Engineering. There is a similar reported dropout rate in Coursera’s Social Network Analysis class where only 2% of participants earned a basic certificate and 0.17% earned the higher level programming with distinction certificate.

MOOCs are not the solution.

Matter of fact, MOOCs turned out to be the counterfactual that clearly illustrate the depth of problems we have with education - and more importantly re-training.

MOOCs are in so many ways ideal. When Khan academy lectures were first made available online, I had huge hopes for the future of education and therefore humanity.

Education/re-training is a critical lynch pin of the modern model of economic development.

Innovation -> job loss -> retraining -> people return to well paying jobs.

But it turns out, that this was not happening, and that education and training is a lot harder than anticipated.

MOOCs had it all - convenience (always on the net), not time constrained (you can read/watch classes whenever), accessible (taught by the good teachers), high quality (same teacher, able to use visual and other aids) and self-selected by people who wanted to finish the course.

They should have been a massive success.

The self-selected, interested student part should alone, have resulted in large numbers of newly trained students.

It hasn't. Which meant the importance of those factors in educational results was overstated.

This also means, that our current education system, may well be the better state of the art option we have.

OR worse, a large chunk of humanity may not be able to transition to new subjects, and therefore new roles.

This is a huge bloody problem, because that means if coal miners lose jobs, the economy will stall.

This in turn puts huge political pressure to avoid following economics, and instead fight for protectionism, which also doesn't work.

----

Side note/silver lining: Perhaps the intransingence of education is a good thing.

If it becomes easier to teach a person how to learn X details, perhaps it can become a lot easier to also indoctrinate a person in Y religion, or belief.

In the end, a technique which has a high success rate in teaching students X subject, could easily be used to teach any subject.

The difficulty in teaching people could well be a natural impediment to mass scale conversion, or invasion of ideas/propaganda.

I don't know, a similar argument could have been made about Amazon not overtaking retail in 1999. I'm not saying the MOOCs market we have today is mature enough to fully replace university but I'm convinced technology will eventually reduce costs massively.

It’s not a tech issue. What tech will get more information into a brain?

This is a people issue.

Why have MOOCs provided no real competition?

Because universities are mostly about class signaling. Peter Thiel talks about it at length.

Turns out that accountability is easier on a campus than remotely.

Well, that and the fact that the lower barrier to entry might incentivize trying-out of subjects. I know I have.

They are starting to. GaTech's OSMCS program cost (~$8k total) a fraction of the on campus (~$30k year in-state). With any entrenched system it takes a while to see change. Especially something like Education that is afraid of change and is very slow to change existing ways.

I even wonder if much will change with colleges and higher education by the time I have kids and they then are college age. A lot will change from now until ~20 years when my potential kids will be college bound. However, I'll definitely be looking at biggest potential on ROI for tuition costs etc.

Because they don't have a sales team.

Have they looked at the ACA and people having to pay a lot more for insurance now? And service industry moving more towards part-time jobs since they don't deal with full-time employees given the push towards increasing hourly wages to $15?

They probably still have the latest Apple gear though.

They are busy paying their bills to netflix, amazon prime and other distractions

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