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Comment by onwardly | Hacker News Reader

Because they still want people that can afford to pay $50k/year to pay it. Lowering tuition lowers it for everyone. If your parents make $300k+/year, then you'll still be paying full tuition. But as their income is lower, currently you'll get some need-based financial aid. The problem is that this aid is a combination of "scholarship" and "loans". The goal here is to remove the loan component.

The problem still is that middle-class families get stuck in a gray zone. I went to Brown, and my parents made enough (~$110k) that I didn't get financial aid but they also couldn't pay $40k/year.

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While the process sounds good in theory there is an ever increasing gap that people fall into between parents making too much money and parents not making enough. I'm bias because I fell right into the middle of the gap - my parents inherited an illiquid share of real estate that on paper is worth about a million dollars, in reality after taxes it yields maybe 40k/yr that my parents live off of (60+, no college). Because of this I was denied any form of financial aid and had to fend for myself.

Did you explain this to the financial aid office? Generally, elite schools are in the business of finding elite students first and then dealing with FA second. But you have to make your situation clear to them. They offered you admission or you wouldn't be dealing with FA. So they wanted you. But FA is a negotiation even especially if you're in the gap and then you have to negotiate hard because otherwise you pay sticker.

Often financial aid is given out to very needy students (don't even have anything as collateral for loan), and there's sometimes a quota.

There's no collateral on a student loan.

None is necessary since they are both Federally guaranteed and they can’t be discharged by bankruptcy (which is the epitome of stupidity). Indeed, that ‘bargain’ is why Brown is doing this thing.

No collateral is necessary for student debt since they can come after anything you or your cosigners have.

Someone will have to explain to me what is special about this debt that it gets this special treatment.

> None is necessary since they are both Federally guaranteed and they can’t be discharged by bankruptcy (which is the epitome of stupidity). Indeed, that ‘bargain’ is why Brown is doing this thing.

Just because they can't be discharged in bankruptcy doesn't they're actually repaid. Student loans can and do default - an average rate of 15% a few years ago, though some schools have students that default at more than twice that rate.

External guarantees on loans (in this case federal guarantees) doesn't address the same issue that collateral is typical used for: namely, it doesn't solve the moral hazard problem.

(It's not that Brown has solved the moral hazard problem itself; it's that Brown's able to take on that risk themselves, because it's an incredibly selective, incredibly competitive, and fairly small[0] school).

[0] We're talking specifically about undergraduates

> Just because they can't be discharged in bankruptcy doesn't they're actually repaid.

Exactly. So instead that’s an albatross to be hung around a young person’s neck for all of eternity. Bankruptcy would share the burden between lender and borrower.

What we have now is a system where loans are Federally guaranteed and then not dischargeable through bankruptcy. That leads to $100k cooking schools that promise to turn you into a pro-chef, just sign here, here and here and you can even get a Federally guaranteed loan, sign here.

Yup, and it leads to this perverse economic effect of middle class families that scrape together enough wealth to make a very positive situation, then get it all pulled back pretty hard because of outrageous tuition fees. Not that low-income students have it easy either. Sometimes it just feels like the rules of our society are lined up to keep the middle and lower classes in their place instead of supporting general prosperity.

That prosperity would detract from the wealth of the powerful, so they have incentive to avoid that.

Education is one of the biggest scams and it’s run 99% by the upper middle class. At elite universities, it’s upper middle class people fleecing upper middle class peoplle. At less elite universities, it’s upper middle class people fleecing middle and lower class people.

Yep. My wife would like to be stay-at-home-mom, but she works so we can save $2k/month for two kids college expenses, currently in elementary school. Goal is to have $160k over next 10 years. So by saving, I'm screwing myself. It's equivalent to another mortgage.

You're not screwing yourself, you're taking responsibility. Financial aid comes with strings as well as a highly invasive personal finance anal exam called FAFSA (which database I'm sure will get hacked and disclosed at some point, if it's hasn't already, as most other big government databases have).

If you can pay your own way you avoid all that.

That’s mighty puritanical thinking. When a family works their ass off to be denied financial aid and pay full freight for highly inflated university tuition, that’s not what I would call “taking responsibility” that’s just being taken.

College financial aid is just another policy in the pile of progressive taxation and needs-based benefit programs which conspire to enact a near 100% effective marginal tax rate on the middle class.

The gap is real, but parents with a million dollar house who aren't making enough while on retirement? That's most parents except for that huge asset. You're not in the gap in my view.

The difference is that some assets (in retirement accounts) are protected from financial aid inspection and inherited real estate is not. If that seems unfair, it is because it is.

Most parents aren't in retirement at that point, but yes, I see what you mean now. That is unfair.

>> Because they still want people that can afford to pay $50k/year to pay it.

That's not quite what I was getting at. My question is: Why are they making alumni find the $120M in grants, when they could just forgive the loan directly?

There's nothing that says a lender has to collect on its debt. It can choose to forgive the debt.

So it's possible for Brown to charge $50K/year generally, collect it from the rich kids, and then forgive the debt incurred by the poor kids.

But that's not what they're doing. They're keeping the money, and asking alumni and other charitable institutions to pay them.

> Why are they making alumni find the $120M in grants, when they could just forgive the loan directly?

They still want/need the money.

The loans don't actually come from the school- they are often government-sponsored, though those typically cap out at $12k a year or something. The rest you have to get through private loans, and the school has no way to forgive them- unless they want to write a check to my loan provider.

The truth is that they should evaluate need not based on your parents income, but on their net worth - the price of their home. If you struggled to make ends meet for 15 years at the beginning of your child life but then suddenly started making 200k a year, you likely don't have the savings you need to pay 200k over 4 years to send your kid to college.

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