Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

The reason for this explosion in cost, is the Feds began fully subsidizing the cost of a college education. Colleges then had the green light to perpetually raise prices - even in the depths of the great recession - they knew Uncle Sam would cover the bill. Education costs have had no connection to reality because you could get a government backed loan for it. When you see an entire industry, with plenty of competition amongst schools, disconnecting from reality, you can almost always bet the government is involved in the cost inflation.

Colleges then took that massive influx of government sponsored cash and put it to work funding their bureaucracies, building an endless parade of buildings they didn't actually need, significantly boosting professor pay, and accumulating substantial endowments.

Meanwhile the actual education - their product - did not get more valuable. At a time of terrible economic performance, with 14% real unemployment, falling incomes, and lack of jobs post graduation, clearly the cost of an education should have fallen by quite a lot. It didn't because of a guaranteed loan back stop.

There is talk now that students should pay the same low interest rates on their debt that banks pay when they borrow money. If that is put into effect, all it will do is accelerate the debt accumulation. It'll enable students to borrow more, and colleges will accordingly charge more. This government fueled scheme can only end in tears (bailouts).

I loathe the trite "citation needed" when challenging disagreeable opinions. Especially when statements are so easily fact checked.

However, your thesis of more federal funding leading to raising prices doesn't square with my experience, what I understand of the current situation, and many of the sourced comments below. (I currently work in higher ed; funding, tuition, loans, worth of degrees are discussed ad nauseum. Though I sling code, many friends and coworkers deal with the money, budgets, and legislature.)

By "federal funding", do you mean research grants? I dimly recall that during my father's generation, Sputnik motivated huge influx of cash into both K-12 and higher ed. Also, my grandfather's generation benefitted from the GI Bill. Those initiatives lowered student costs.

It's accepted wisdom that our tuition has risen in direct proportion to the withdrawal of state funding. We're currently funded at 9%. It's completely, sadly accepted that we'll eventually be fully tuition funded.

I can't speak to the student loan gouging. Prior generations of students had very low interest rates with lenient payback enforcement. So your point seems counterfactual, leaning on some libertarian "free market" worldview.

Thank you for challenging this idiotic conservative bullshit! College was largely subsidized for decades before the 80s, and only when the legs got kicked out from under the tax base did the tuition costs go up.

Damn you, Ronald Reagan, and your ilk. Policies as demented as he was...

The rise of private loan originators for education loans is largely to due with 1) reduced availability of assistance programs (esp. state run ones) and 2) federal guarantee to private loan originators of payment if a borrower is unable to repay.

OP is mistaken about publicly originated loans and assistance programs, those have been under constant political attack for some time and haven't changed much outside of payout amounts, interest rates, and number of loans made.

I'm curious: does state funding apply to out-of-state students? When I went to college in the 90s, out-of-state tuition was about 3x as much as in-state, a ratio that seems to have held to today--at least for my school. I would have expected the ratio to decrease as in-state students presumably received less state funding, but both have risen equally about 300%.

(I worked at the cashier's office, so historical tuition prices are still in my memory, but I have no other schools to base this on.)

Good question.

We recently talked about that. I was surprised to learn that in-state tuition discounts were subsidized by the state. I had always assumed out-of-state students were charged a premium.

I'm told that, in my state, community college students will (likely) continue to get subsidized, whereas university students won't.

While I agree with you that the excess spending of higher education institutions has been a primary driver of cost growth, I would contend that decreasing state spending has had a greater impact on these rising prices than federally backed student loans. The market demand for a college educated workforce has exacerbated this price pressure to cause the 5-10% year/year increases.

For example, the University of Washington has sustained a state funding decrease of nearly 50% since 2009. In 1990 the funding per student was $17,000 with 82% paid by the state and the remainder by the student, in 2013 the state pays 29% and the student 71%.

The demand for a college educated workforce has also increased since 1990, with the majority of middle class occupations requiring a four year degree. This demand is inelastic, and while it is true that federal student loans make up nearly 90% loans, if supplanted by private loan bodies at higher interest rates it is unlikely that the market demand would decrease.

Citation please !

Guaranteed loans means students can borrow almost as much as they care to (how else does one borrow $60,000 without the prospect for a job, in a disastrous economy), and accordingly universities can perpetually raise prices as they know the Feds will just keep guaranteeing the loans via Mr Printing Press. It's quite a simple equation in fact.

If you wanted to solve the education cost spiral, the Feds need merely begin reducing the guaranteed funds, stop guaranteeing loans, or strictly lock down the guaranteed loan sums. Colleges would be forced to adjust to that new reality, in which they don't get perpetually increasing tuitions.

And if you want to check the concept, look up how much of a college education is subsidized by government loans today, versus 30 or 40 years ago - personally I think the general answer is obvious.

Don't condescend. The logic you've spelled out above is far from an obvious conclusion - and even if it were, we make decisions on good data, not just how much a reasoning makes you nod.

> "And if you want to check the concept, look up how much of a college education is subsidized by government loans today, versus 30 or 40 years ago"

Graph the price of gold vs. number of sea pirates in the world and you'll also get a correlation. The explosion of loans is highly correlated with rising tuition - the citation part needed is the causal link.

I wasn't trying to be condescending, so I adjusted my response. I think the link is obvious, you don't.

I think that anytime the Feds provide blanket guarantees for loans that can easily be taken advantage of by tens of millions of people, you tend to get substantial price inflation. Particularly when there are no checks on the loans that connect to the real economy.

An alternate way is to let people declare bankruptcy to get out of student debt.

I agree schools only let students get $100,000 into debt because someone will lend the money. However, if the markets for loaning money to students dried up, schools would finally face some price pressures.

Maybe I just don't understand the drawbacks, but why wouldn't a student then immediately declare bankruptcy after college? They likely have no assets, etc.

If the student only has (say) $3000 worth of debt, then the student would be stupid to have a bankruptcy on their credit report.

But if they had more than (say) $20,000 in debt, that is exactly what they would do.

Therefore, no school would let a student get significantly in debt.

Therefore, the school would have to lower prices.

The fear back in the day was that, without some way of holding students to loans, that the students wouldn't be able to get credit, and college would become a rich person's paradise.

I can understand where they were coming from when they were thinking that, but what we've actually gotten seems a much worse disaster than the one they were trying to avoid.

As a dependent student, I couldn't get anyone to loan me $60,000. :( As a freshman at 18, they'd only offer me something like $4500 in student loans, and I ended up not being able to go since I had no access to enough money to cover a $20,000/year in state public school. As an independent student, the most I can get is something like 13K in federal loans (and maybe a 5K pell grant). I can't get anyone to give me a private loan since I have no collateral, even though I have good credit.

The Stafford loan program is capped at just over $30,000. Direct PLUS loans have larger amounts, but can only be made to employed parents with good credit scores, not to students.

If you see a student with $60,000 in debt, thank the glorious free market. A good chunk of that was lent by a private financial institution.

Supply and demand.

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