I’m confident that a fully private market would limit student loans to those with a positive ROI. Of course, that’s politically unpalatable in the US.
My favorite suggestion is to cap the repayments (of non-dischargeable loans) at something like 15% of income above poverty line, and time-limited to 20 years. And let lenders use all the information they can lay their hands on when making offers (schools, majors, test scores).
Then the offers made to 17-year olds will reflect pretty well the earning potential of different paths. Some luxury degrees will, like other all-expenses vacations, only be available to the wealthy, which is OK. In courses which represent a gamble (is that Spanish Lit. en route to the State Department or to Starbucks?), those who do well will subsidise (a bit) those who do less well, but nobody's payments will be unaffordable.
For example, we want lots of teachers and librarians, social workers and nurses. But if we only pay based on personal income, we'll get lots of people with low social value but high income. E.g., corporate lawyers, investment bankers, corporate raiders, advertising executives.
I think the better thing to do is publicly fund education and the have the government capture the gains via taxation. That's harder to tune, but I don't have reason to believe the outcome will be more lopsided than a purely market-driven approach, and has the big advantage of not funding a whole industry of student lenders.
This is my biggest fear with the current rise of progressive/socialist interest among young people. All they can see is the free stuff being promised, not the inevitable fallout down the road (the wealthy will be fine, they always are - it’s the young, poor, and disadvantaged who will be stuck with the bill).
EDIT TO ADD: Argentina, Brazil, Poland, Spain, Turkey, Panama, Kenya, Egypt and more [2]
[1] https://www.investopedia.com/articles/personal-finance/08061...
[2] https://www.edvisors.com/plan-for-college/money-saving-tips/...
It's easier to do stuff for cheaper when you just provide less stuff.
In Poland's case, there are stupendously large numbers of people studying various branches of humanities (literature, psychology, pedagogy, law) which have poor job prospects in our country. After graduating, a lot of these people just work service jobs or emigrate to Western Europe (to work the same crappy jobs there, but for more money). It's an enormous waste of taxpayer's money, which is happening because the the students are spending out of somebody else's pocket.
Meanwhile, the governing parties eviscerated the trade schools, because "we need educated people", "we're entering knowledge economy" etc. The result being, a median plumber making more than a median law graduate.
This leads to an entirely different discussion about whether universities exist to educate the populace or to train future workers.
==The result being, a median plumber making more than a median law graduate.==
Which should entice more people into the trades. Is that happening?
On top of that, the trade schools were criminally neglected over the past 20 years, so it's very possible to go there and not learn much practical skills...
Getting poor pseudo-education is perhaps more harmful than getting no education at all. People with no education are more likely to have some intellectual humility, while the "quarter-intellectuals" that took some low-effort third-rate humanities courses tend to fall victim to Dunning-Kruger more often, and offer simple solutions/explanations to overwhelmingly complex topics.
Are you sure you don't have some sort of bias here? In my experience humanities study involves lots of critical thinking and reasoning.
Wikipedia [1]: "The humanities use methods that are primarily critical, or speculative, and have a significant historical element —as distinguished from the mainly empirical approaches of the natural sciences, yet, unlike the sciences, it has no central discipline. The humanities include ancient and modern languages, literature, philosophy, history, human geography, law, politics, religion, and art."
People studying this would seem less likely to rely on simple solutions and fall victim to Dunning-Kruger.
Google ran a test of their employees skills and found that many humanities-based skills are more highly correlated with success than STEM skills [2].
"Project Oxygen shocked everyone by concluding that, among the eight most important qualities of Google’s top employees, STEM expertise comes in dead last. The seven top characteristics of success at Google are all soft skills: being a good coach; communicating and listening well; possessing insights into others (including others different values and points of view); having empathy toward and being supportive of one’s colleagues; being a good critical thinker and problem solver; and being able to make connections across complex ideas."
[1] https://en.wikipedia.org/wiki/Humanities [2] https://outline.com/TJAaaZ
I've never understood this argument. STEM requires far more critical thinking and reasoning than the humanities. The scientific, medical, and engineering achievements you use every single day stand as mute proof of that.
In the US, there are thousands of community/local/junior colleges where people earn degrees for a fraction of the cost. This can easily be covered by govt if there was political will to do so.
Or companies may shift their workforce into higher-educated countries.
==Community college is junk, go to trade school or into a real profession and stop inflating entry-level job requirements at tax-payer expense.==
The idea that 2 years of post high-school education is "junk" is alarming. What is a "real profession" and who gets to define it? Wouldn't all the new trade school graduates just inflate entry-level job requirements in those fields and decrease wages?
Sometimes community college is worse than junk, it's downright harmful. The most-recommended method in the US to get an engineering degree is to transfer 2 years of core credits from an easy community college to a harder engineeering school. That cheapens the quality of the degree, as the resulting degree is the same. I've done it - physics at engineering school and physics at community college is night and day.
Apart from that, unless you're going to get a teaching certificate or something else in STEM, the resulting degree would not be in demand from private industry if they weren't so commonplace. Those kids would've been better off working for those 4 years or learning a trade. But instead we have people pushing to fund those 4 years completely at taxpayer expense further inflating the problem.
edit: Hell yeah wages in trades would decrease, they need to. Have you not paid a plumber or electrician lately? The guys going into plumbing right out of high school are a lot smarter than the history majors working at Starbucks.
==The guys going into plumbing right out of high school are a lot smarter than the history majors working at Starbucks.==
Based on what criteria? How much money they make today? How much money they make over their career? How happy they are? How much they contribute back to society? Who gets to choose which measure we use?
It's not free, it's financed by exorbitantly high tax rates, which in the long-run is arguably more expensive.
You mean like 35% Federal, 15% Payroll, 5-10% state? and then a 9% sales tax?
And then still "needing" to save 15% for retirement, company paying 15% for healthcare?
Seems pretty short sighted to be thinking other places having higher tax rates when the middle class top marginal is approaching 90%.
The thing that I'm worried about is the reaction of these all-inclusive countries once they see a rise in "education arbitrage": get your degree in Germany, then move to the US to pay less taxes (and make more money in case of CS) and optionally move back once you want/have children. On a long time scale that could bleed a country of resources. And I fear they could get the idea of making people stay somehow.
https://www.thebalance.com/what-caused-the-subprime-mortgage...
In 1989, FIRREA strengthened the CRA by publicizing banks' lending records. It prohibited them from expanding if they didn't comply with CRA standards. In 1995, President Clinton called on regulators to strengthen the CRA even more.
But, the law did not require banks to make subprime loans. It didn't ask them to lower their lending standards. They did that to create additional profitable derivatives.
No. Nobody wants "free stuff." I see this all the time and all I can think is the right-wing media has really succeeded on this point. Are you also afraid of people who want "free roads" and "free police" and "free K-12 education"? What we want is for services like healthcare and education to be provided by the government, as it's clear the market cannot supply those needs in a way that serves everyone.
The current progressive plan being floated on the left (socialist is a scare word cooked up in the 1950s and still bandied about by conservatives who have no clue how outdated it makes them sound to younger voters) is to greatly increase taxes on the rich and use it to fund social services like college. So, by your own logic, this can work.
1) The wealthy have the resources to fight back against much higher taxation and play the long game. Even if a spate of progressive candidates are elected and drastically raise taxes, the wealthy will just wait until the political pendulum swings back and will get themselves a better deal than they had originally.
2) Even if higher taxes on the wealthy stuck, there is not nearly enough money there to fund every progressive pipe dream (education, healthcare, housing, environment, inequality, reparations, etc, etc). So once again, the working middle class gets stuck with the tax bill, just like every other time we’ve tried something like this.
And speaking about conservatives sounding outdated, there’s nothing that highlights the naivete of youth more than hearing them say “this time it’s different”.
The federal tax code, at least, is already massively progressive, and the rich pay far above their share of the revenue already.
Not to mention Bezos and other billionaires keep getting richer even with a ʾmassively progressive' tax code. It's not progressive enough!
You're also confusing various kinds of ROI here. Education generates both individual and societal ROI. Governments can capture part of theindividual ROI through taxation. And the whole point of government is to create societal ROI. But what a fully privatized educational funding system would be optimized for is lender ROI. As we see with student loans, and even more clearly with loan sharks, who are the true unregulated lenders, maximizing lender ROI is not great for the health of either the loan recipient or society at large.
FTFY
What kind of people will not be able to secure a private loan? The kind of person from a poorer family with bad/no credit, unable to find any acceptable cosigners for a loan.