College is expensive because so much money is available in the forms of subsidies and loans. If the federal government stopped guaranteeing loans, and cut back on other subsidies, the cost of college would be much much lower.
People call for X to be more affordable > government subsidizes X > X absorbs all subsidies and becomes even more expensive > people call for X to be socialized.
Maybe instead we should start to unwind student financing. For example: let students discharge student loans via bankruptcy. That would give financiers pause and would put an upper bound on what many universities could charge.
The problem is that government subsidizes loans. It doesn't do something like capped match. The government should just say, "We will cover your need-based education burden up to $20,000".
Something like this would make most state schools accessible to most kids and yet, put a big limitation on how much schools can raise tuition. Some schools will raise it up to 40k, others will keep it at 20k, both will try to maximize intake for their tuition.
Simply handing out unbounded, undischargeable loans is just crazy!
I had to pay first 15% from my account, they would pay the remaining 85%. Every semester, once I showed a receipt that I paid 15% to the university, that bank would wire the remaining 85% directly to that University.
What did this do to my decision making? I literally only chose universities for which I could afford the upfront 15% and the max of $30k. I chose this university even though I had admit from other universities which had higher tuition.
What impact does it have on universities? Universities with higher tuition start seeing a decline in enrollments. I got out with a max $30k debt, of which I paid 15% out of pocket already, per semester.
I could've dropped out of school and joined again a few years later but that loan would still be available to me for 7 years.
Ataturk's reply to this is dead below but I must agree with the (spirit of the) comment. While I support letting students discharge loans via bankruptcy, I VEHEMENTLY oppose making this applicable to loans already signed. This is absolutely ridiculous and anyone who supports this kind of position should be barred from public office on grounds of insanity.
EDIT: I also think income and means testing ought for any government program or service ought to be illegal. You cannot say "you must make below $n to be eligible for this government program". I know the economists in the audience will bellow and bicker and say that we have limited resources that we must allocate "logically" but guess what macroeconomics is nonsense anyway because out here in the real world people don't behave logically. We need to make it against the law to use income, means, or property testing for any government program or service. Can't afford to offer it to the entire population regardless of income? Either increase taxes or rollback the program. Can't have it both ways.
Yes. None of these programs should exist if we can't offer them to 100% of the population. Both Democrats and Republicans use these programs as a vote bank and it polarizes our public discourse.
Student loans have become incredibly predatory and the banks were the ones who had the information to realise these were bad loans, but they lobbied the government to make it so they had to do no due diligence. Now they've fucked up and unless something is done about the loans they are all going to start defaulting anyway.
The default rate is already growing[1]. Based on the number of people I know who are making minimum payments and waiting 20 years for the loans to be forgiven based on income levels, I expect a large portion of expected revenue on these loans is going to evaporate starting after 2028 when everyone who got bad terms and a shit job after the great recession start to become eligible.
It's already a house of cards and we should just deal with it instead of tying large portions of the population to these bad deals
[1]https://www.forbes.com/sites/zackfriedman/2017/10/06/student...
I guess the taxpayer is kind of screwed when it comes to Federal loans. I still think it is a bad idea to retroactively change laws even if the idea seems popular. As far as I understand, an individual's loan obligations don't automatically transfer to their surviving family members so if you have a massive student loan it will die with you.
If the loans were predatory, lets ban them going forward. If we find illegal activity and predatory behavior I am all for prosecuting bankers and throwing people in prison. In fact, I will go further and say we should rid of all the silliness of deductions and credits in income tax toward education loans as well.
New York made a good first step with its excelsior program. While I don't like the income ceiling for the program, I think overall this is the way forward. I think we should expand the program to allow people to go to school part time for free. Private schools can either compete with free public education or shut down.
> I'd say that a politician who stares at a problem head on and refuses to deal with it, because we didn't deal with it in the past, is the insane one.
I am all for dealing with the problem but I still firmly and politely OPPOSE any effort to make it easier to discharge existing loans with taxpayer money. I am not an expert on this matter though so I don't know much about it. All I know is we cannot give a handout to people who went to college by signing a loan letter and pay for it with resources that could have gone to people who didn't go to college.
I think the first good step is to make private education loans go away the same way as any other private loan going forward. I don't know how we can apply this to direct federal loans.
https://www.nolo.com/legal-encyclopedia/what-is-federally-gu... According to this web page:
> As of June 30, 2010, Congress stopped the guaranteed student loan program for newly issued loans.
> If a borrower defaults on a guaranteed loan, the federal government pays the bank and takes over the loan. The federal government pays approximately 97% of the principal balance to the lender. At that point the federal government owns the loan and the right to collect payments on the loan.
Yeah, no. If you have a guaranteed loan (which apparently you can't get anymore), I say you are on the hook for it for life especially if you start making money later.
For federal loans, the position the US is in with them needs to be unwound. It's not even a choice at this point, it's worse than how inflated the housing crisis happened and if we don't deal with it on our own, it's going to just show up as a surprise.
That's not to say we need to wipe the slate clean at once. We could just do a 10% or 5% haircut on all loans every year and treat it the same way as an entitlement. We will need to fund it of course, and it will not be painless, but that's the position the countries gotten itself into.
Not doing something to cut down the massive amount of debt that is already dealing with large amounts of defaults is just be willfully ignorant of the risks.
>Yeah, no. If you have a guaranteed loan (which apparently you can't get anymore), I say you are on the hook for it for life especially if you start making money later.
The only things we saddle people with life for are prison sentences for murder and rape. Student loan debt shouldn't be at that level of seriousness. Think about it. If you had a debt from the government that followed you _forever_, why even be part of the system anymore? You are incentivized to either not work, or work and hide every bit of income. If you don't give people a path out of an issue, they aren't going to play by the rules anymore
I said that because I assumed the government can afford to suspend payments if your income goes below a certain level. I doubt an ordinary person has the ability to work and hide every bit of income. The good people at IRS work hard and those (bastards over at) state departments of revenue work even harder.
In practice, you're right. The taxpayer has to eat the cost. And I am sure how things will eventually happen when things eventually need to happen. Politicians hate saying no to their voters. The Republican nominee for POTUS in 2012 was at a debate or a town hall before the election and I remember him going on a rant about simplifying the tax code to a round of applause. One woman got up and asked what about credits and deductions with contributions toward their child's college fund and the nominee didn't have the strength to say he wants them to go away. Guess what if we want to simplify the tax code, we have to get rid of credits and deductions. If you can't say that to people who just applauded to you saying simplify the tax code, it will never happen. No politician wants to do that because that will destroy their career.
This is just what I think. I have no realistic way of influencing public policy. (:
It would also limit the pool of people who could get a loan for college in the first place. Maybe we can take a page from other developed countries who don't seem to have the same problem.
It seems to be a pattern in America where we act like a problem has no answers, meanwhile the rest of the world contains many potential solutions to the problem.
1) The government pays the majority of it if you're poor, schools know you'll pay 2) If you're middle class your parents pay half of it, the government pays half of it, schools know they'll pay 3) If you're upper class, you might have a legacy admission and the school knows your parents will pay and probably donate to the school too
And very few people get government scholarships, most get loans which must be repayed: essentially an extra tax on the middle class.
And states only fund roughly half of school's out of their budgets and that number has decreased in recent years.
Untrue. Lots of people get Pell Grants, but the value of each is very small.
==dump money into an industry while increasing demand==
Did the money create the demand or are you saying they dumped the money while also creating demand?
==not changing supply==
Do public universities have the same number of available seats as they did in 1958? 1980? 2000?
[1] https://en.wikipedia.org/wiki/Student_loans_in_the_United_St...
[2] https://www.cnbc.com/2017/11/29/how-much-college-tuition-has...
> people call for X to be socialized
Alas it never gets to the final step: X is socialized.
This is a fine idea, but you have to recognize that this just means approximately no one gets student loans (and those who do get them don't need them). Think about it: if you come out of college with, say, $20k of debt (granting that this might bring down prices) and no assets, bankruptcy is a very tempting option. Student loans are just inherently problematic - the people who need them have no assets, and the thing they pay for can't be used to secure the loan.
Sure, prices would come down, but partially because so many people would be priced out and demand would drop. The solution has to involve more than that.
You actually have to convince a judge that's appropriate. And the court has a wide variety of tools at it's disposal to reach an equitable decision. From telling the petitioner to get stuffed all the way to telling the creditors to get stuffed.
Student loan debt is a particularly odious bit of neoliberal policy, forcing students to take on debt for something other societies provide for free, non dischargable and guaranteed by the state.
It's a government loan that anyone who goes to a HELP approved course can obtain (nearly all proper university courses) and it gets taxed out of your future earnings, and is indexed at (almost) CPI (e.g. this year it was indexed at 2%).
There is still argument here on whether it should be free (University used to be free in Australia) or a higher rate of repayment (the government tried to index it at the bond rate which would make it an indefinite tax on a high proportion of those with HECS debts...) but it does work in the sense that it doesn't drive anyone into the ground and allows anyone with high enough marks to go to uni without worrying about course fees - and it still will eventually be repaid.
Can someone with better knowledge on these areas than I tell me why a loan system like HECS would or wouldn't work in the US?
Among regular students, not as much, but discharging hundreds of thousands of dollars of debt for a few years of bad credit when you're making hundreds of thousands of dollars is a great deal. It was a rational decision to make.
The vast majority of student loan loans are issued by the federal government since private lenders are cut out of the federally-guaranteed Stafford loan program, so changing rules on discharge won't meaningfully effect loan issuance without some other federal policy change.
> Think about it: if you come out of college with, say, $20k of debt (granting that this might bring down prices) and no assets, bankruptcy is a very tempting option.
So make them hard, as they are now, to discharge for some period of years after they would regularly first enter repayment, and then subject to discharge like normal unsecured debt.
Or, just eliminate the federal student loan program and special bankruptcy treatment of student loans in favor of robust federal need-based and public-service-based grants.
This is a good point - I think of Stafford loans as inextricably tied to the no-discharge terms, but that's probably not the case. Perhaps cutting out the no-discharge terms would just be a backdoor to government-provided university-level education.
This is how health care and college subsidies work in my country. The government negotiates with the universities and medical industry what the price and the subsidy level will be. Schools and health care can opt out of the subsidy scheme and shrink their market to the rich or opt in and have lower margins with higher quantities. Most choose to opt in, even the top tier.
The trick is using the negotiating power of government, which is something U.S. politicians are unwilling to do.
yes the sorts of facilities that universities build for athletics are extravagant and many would say ridiculous, but they really don't have a bearing on the cost of tuition.
Just 23 of 228 (NCAA DIV 1 2013) athletic departments were profitable for their schools.
https://www.usatoday.com/story/sports/college/2013/05/07/nca...
Because students are not able to discharge their debt in bankruptcy, they constitute a riskless loan opportunity to the lenders, who throw money at them.
A sad side-effect of this as that the price inflation that this causes is forcing more and more students who might have otherwise been able to finance their tuition without loans, into needing loans also, thus dooming more and more of the next generation into huge debts that will effect their ability to buy houses, start families, and save for retirement.
Assuming 1 teacher making 100k teaching 20 students * 5 classes * 3 credit hour classes a semester ~= 333$ / credit hour. 128 credit hour degree ~= 43k over 4 years. And that's assuming relatively small average class size and ignoring adjuncts etc.
Yet, many schools are charging 4-10 times that much. The question becomes what are the 3+ other people doing if not teaching and can you get rid of that?
PS: And sure some professors make well over 100k and facilities are not free, but again many people even at expensive schools are pulling in less than that.
Assume a PhD student making a $35k stipend or a foreign grad student making $14/hr.
This covers a good 25%-40% of the curriculum, depending on the institution.
Plus, the nature of the subsidy is important. State-sponsored universities don't seem any more culpable than private ones in this mess.
I am not going to make the analysis for food stamps. Maybe some stores would have lower prices, no idea, as I don't know the model of issuing food stamps.
Think it like this: Alice comes to your store and says I am going to pay 50% of whatever Bob buys. Bob has spending power x. Now Bob, suddenly can buy 2x. However, Bob can buy that many stereos costing x (wlog) and is probably going to just spend x/2 and let Alice pay the other x/2.
Or you can say, well I am the only store in town selling stereos, so now stereos cost 2x, as I know you can afford them. Bob, as he has to buy the stereo, is going to pay x and the store owner is going to pocket an extra x, as it is a monopoly (or oligopoly) and thus can keep the prices high.
So, if you substitute Bob with an average student and Alice with the government, you will see that the student kept paying the same (at best -- you have to account for market pressures here, general currency inflation etc which cause more inflation) and the government has to keep paying now (or you know break the oligopoly; set different rules).
If we provided people with unlimited special accounts only good to buy food (with money, not food stamps), this would definitely affect prices in groceries.
Certainly factors into the cost, but seems unlikely it's the key factor in the rising costs.
> Interestingly, increased spending has not been going into the pockets of the typical professor. Salaries of full-time faculty members are, on average, barely higher than they were in 1970. Moreover, while 45 years ago 78 percent of college and university professors were full time, today half of postsecondary faculty members are lower-paid part-time employees, meaning that the average salaries of the people who do the teaching in American higher education are actually quite a bit lower than they were in 1970.
> By contrast, a major factor driving increasing costs is the constant expansion of university administration. According to the Department of Education data, administrative positions at colleges and universities grew by 60 percent between 1993 and 2009, which Bloomberg reported was 10 times the rate of growth of tenured faculty positions.
> Even more strikingly, an analysis by a professor at California Polytechnic University, Pomona, found that, while the total number of full-time faculty members in the C.S.U. system grew from 11,614 to 12,019 between 1975 and 2008, the total number of administrators grew from 3,800 to 12,183 — a 221 percent increase.
https://www.nytimes.com/2015/04/05/opinion/sunday/the-real-r...
But saying college is expensive because it's inefficient begs the question: why is it inefficient? I'm inclined to think that the amount of federal money available is, at least, a factor...
Imagine what they could be doing if more people were going to college.
https://msu.edu/~conlinmi/teaching/EC860/signallingscreening...
tl;dr: In markets where the cost of education is less than the increase in wages, the real cost of education isn't the fee, it's the relative effort of passing it.