why not allow them to operate instead of force them out--make them pay for all defaulted loans above 8% -- that might make them work harder to get their students gainfully employed so they can cover their loans. -- not that I like ITT, I abhor them, and think that Bootcamps are WAY better in terms of quality education and quality of job prospects.
I wouldn't go as far as saying bootcamps are better.
My experience with Bootcamp grads has been pretty lackluster to say the least. They get taught the absolute basics with a "guarantee" for employment after, but not many tech companies will take someone with no education, no experience, and only a light grasp on the basics of programming.
My town has been getting a lot of Bootcamp grads lately applying for jobs in the tech sector. According to a friend, his company interviewed a bunch of them and didn't find any of them met their requirements in the least.
My opinion of bootcamps is that they are little better than something like ITT. High cost, very little reward. You'd be better off teaching yourself.
The problem here is with the government instead of ITT in my opinion. If you are lending money to someone who is taking significantly more risk it is your fault if the person fails to pay it back and not of the consumer or the business selling the service.
In fact it makes sense for the government to do better credit risk analysis for every college-course-student instead of providing loans for any student, college course. The private banking industry already has this system and it makes sense for government to just leverage that.
This is in part because the federal government has decided that student loans from private banks were too expensive and so the government themselves should offer them cheaper, for great justice.
As such, the private student-loan sector in the US is no longer a going concern, and no student loans accurately price risk - a neat little wealth transfer to buy votes from students. It's also a scary credit bubble; apparently we learned nothing from FMAE and FMAC and just blamed big evil banks for following the perverse incentives. Hilarity ensues.
Can you point out a country where a private student-loan sector is working well?
One thing the government does that the private sector won't is prioritise the needs of society over financial results. Say, for instance, that "teachers" and "nurses" were underperforming groups of student-loan takers. Private sector would say "OK, stricter controls on student-loans for those!" Meanwhile the government would say "OK, but we really need more teachers and nurses in society, so we'll keep giving them student loans like today." This is of course a fictional example, but you get the point.
Working well can also mean that the sector doesn't exist when it shouldn't.
But to give an example: lots of people in lots of countries traditionally get support from their families for education and are expected to help out their parents financially later in life. This kind of financing never even hits the markets---but on the other hand, parents are probably the people knowing their kids the best.
"One thing the government does that the private sector won't is prioritise the needs of society over financial results."
Getting young people into more debt does not prioritize the needs of society.
If you want to prioritize the needs of society, provide young people a tuition free, or at least very low cost, education. Current system only really benefits scam operations like ITT.
India. A hell lot of Indians (29K last year) come to USA for their Masters degree. These kids borrow loans from Indian banks at 10% to 12% APR do their M.S. and then pay that loan back quickly.
Even though MS is significantly less risky you need to factor in the huge gap between value of that in money in USA v/s India.
Market signals works pretty strong here. Stanford can charge you whatever they want while the F1 visa factory college charge a modest 10K for a 2 year M.S.
If we need these people in society, let their salaries increase. There is no reason to prefer debt ridden graduates paying higher interest rates at lower salaries with government soaking up the cost of defaults to the benefit of employers and their direct customers.
Yes, because everyone has that perfect negotiating power to do so. There are no school districts that are struggling or can only afford to pay so much for teachers, and hospitals that can't afford higher salaries for nurses.
The "invisible hand" is not what should be guiding society. The "invisible hand" has declared that it's more worthwhile to be a Kardashian than it is to be a teacher or nurse.
> The "invisible hand" has declared that it's more worthwhile to be a Kardashian than it is to be a teacher or nurse.
What you propose is to guide society by deliberately lowering the pay of teachers and nurses even more. So are you saying that the invisible hand is right? That a Kardashian should be expensive (which reduces how many are available) and that teachers should be cheap (meaning we can afford more of them)?
I proposed increasing their pay, or letting it increase, and you disagreed, so how are you not proposing to lower their pay?
If you want more teachers, you can either increase budgets to pay them more, or you can use some artifice to increase the supply of teachers so that wages get suppressed. You implied having more teachers would be nice, with your comment about Kardashian. So your own views here are self-contradictory.
The text you're quoting is nowhere in this thread...
Look, teacher pay is in control of the government, not the market. And nurse pay and nursing demand has already had demonstrable impact on students' selection of what to study. (You can observe this by looking at the real world.)
Is there a particular hypothesis that you're arguing against? Is it that increasing pay won't attract students to the line of study? Do you disagree with the equation (Teaching Budget) = (Teacher Pay) * (Number Of Teachers) in a material way?
In fact I ... wait a second.
Me: > I proposed increasing their pay,
You: > No, you didn't.
Me (upthread): > let their salaries increase.
Well now, looks like I did. (You can observe this by looking at the real world.)
The response to your "let their salaries increase" pointed out that there are districts (and counties and states) where this simply does not and can not happen given how government policies are structured. Much of that the result of quite deliberate "starve-the-beast" anti-tax policies, but also frequently a simply quite inadequate economic base.
In the deep south of the US, say, the state of Mississippi, you have a de-facto segregated school system. Whites, even poor whites, attend private schools, largely religious, known as "Segregation Academies". Public schools are almost wholly the domain of blacks.
Markets don't exist independent of power constructs, a fact explicitly recognised by Adam Smith: "Wealth, as Mr Hobbes says, is power." Much of Smith's Wealth of Nations is about those dynamics.
This thread reads as if two ideological agendas are being pushed on the other, rather than some seeking of greater truth. I'm finding your line of argument the less pesuasive and less sincere.
You are basing your theory of ideological agendas on the other guy's histrionics. I don't think the question, "Should we pay teachers more, or should we instead trick more teenagers into taking loans," is one that involves debating whether or not you believe in capitalism, or that needs you posting a bunch of links about segregation all of the sudden.
Perhaps you might care to revisit your comments above then and clarify what it is you're arguing for, rather than simply against others' statements or views. Because I'm not getting that, and I'm apparently not the only one.
You said, "let their salaries increase". HOW? If the district doesn't have the budget, the salary isn't going to increase. Just like any business, they're not going to be able to pay out money they don't have. So no, you did not propose increasing their pay.
Invisible hand is something I trust far more than anything else to guide the society.
We need lot of teachers and nurses and that is possible only if they are cheap. If the teachers and nurses are expensive we will have few of them making education and healthcare more expensive.
The probability that some celebrity would earn disproportionately more than a conventional career will always be 1 in a fairly free society. Even in sports like say sprinting 1 player often is far better than rest of others.
"Invisible hand is something I trust far more than anything else to guide the society."
And I don't. The invisible hand has said that the Kardashians are more valuable than teachers. So to me, any argument that says the "invisible hand" should be used is completely invalid.
Why the downvotes? It seems perfectly sensible that the government should be selective about who it loans money to. Even more so than private industry, considering the money they're handing out is from a deficit that productive peoples' taxes pay for.
I'll entertain the notion, because I have questions and reservations of my own (powered by certain built-in and historical baisies as an American...infer if you will):
What would the criteria be to determine loan eligibility for a student fresh out of high school?
GPA, extra curricular activity, criminal record, intended major, savings, jobs worked and the duration they were held, etc.
Of course, none of this is as accurate an indicator as a FICO score which is why student loans are federally guaranteed, otherwise who would offer them?
All of this goes to underscore just how destructive the "college for everyone" concept is. The government is making junk loans so that naive young people can pursue useless degrees and graduate directly into crippling debt servitude. Consequently, colleges have transformed into bloated profit machines, happily ratcheting up tuition in response to this inflated demand.
Sadly, reform will only happen once this system collapses in on itself.
A FICO score is pretty meaningless for someone just graduating high school. They likely don't even have a credit card yet. And for those who do have a FICO score, what if the very reason they're applying to ITT tech is the same reason their score is bad? You also want to avoid "discrimination."
Any data on how good FICO scores are at predicting default rates? In my limited experience, my own credit report is rarely accurate... and from what I understand, that is quite common. So I wonder how a score calculated on inaccurate information could possibly be a great indicator of default rates?
No data except to postulate that if FICO scores had no correlation to default rates then the entire credit industry would fail.
What is inaccurate about your FICO score? Maybe it results in false negatives (meaning your score is low when it should be high), but if the opposite was true across the board (bad borrowers getting high scores) then the credit industry would collapse.
I'm not sure there is 'no correlation'. But I don't trust the credit industry to not do stupid things...
My credit report often has accounts that aren't mine listed. Balances can be wrong for months. Accounts occasionally show late payments that were on time. The dates are often wrong (sometimes by years) for items, and then little things that are used to verify my identity by many companies can be quite wrong, like past addresses.
> colleges have transformed into bloated profit machines, happily ratcheting up tuition in response to this inflated demand
Colleges aren't really "profit machines" though, and growth in tuition hasn't paced enrollment increases, so it is more likely that aid levels are being increased in response to rising tuition, rather than tuition being raised due to increased aid. Interestingly, one of the dominant factors in the growth of personnel costs for colleges is healthcare for employees.
Between 1975-2004, enrollment increased by 65% in four-year colleges while cost increased by almost 200% over the same period. [1][2] It's not really a demand-driven phenomenon because colleges have capacity to support the number of students attending, so the marginal cost of accepting additional students is low. The more likely cause is that loans (private or public) turn students into consumers, forcing colleges to compete with each other to attract paying customers. Look at the facilities and amenities provided at German universities (which are 100% publicly funded) compared to public universities in the US. We spend tremendous amounts of money for health centers, gyms, sports, clubs, etc., that require increased spending on construction and administrative support staff. [3]
It seems like a chicken or egg problem. If there were no student loans beyond what you could get from a bank or friends and families, fewer people could afford current tuition costs and colleges would be forced to lower them to attract new "customers".
It's Keynesian demand-side stimulus at its core. With the national dialogue focused on how college should be available to everyone, along with unlimited, federally guaranteed student loans, demand skyrockets and prices rise to meet them.
> ...colleges would be forced to lower them to attract new "customers".
This is categorically false. Schools would maintain whatever price point achieved equilibrium with the market's ability to pay. It would not necessarily require any school to reduce their prices.
> ...demand skyrockets and prices rise to meet them.
But that doesn't make any sense in the context of the higher education market..."supply" is neither fixed, nor constrained (within reason). Schools could easily expand their supply to accommodate additional students because there is actually an over-abundance of adjunct labor (rather than full-time faculty) in most fields that are trained and available to teach classes now, at much lower costs than traditional tenured faculty. The costs of providing education have actually fallen during the same period that the costs of running a college have risen. It's not being driven by "demand" from prospective students -- cost growth is being driven by competition between schools.
Schools also can't choose to compete on price because the availability of "free money" in the form of loans makes students less price sensitive. Instead, schools end up competing based on maximizing overall "quality of life" factors within a fixed price.
> All of this goes to underscore just how destructive the "college for everyone" concept is.
No, it shows how destructive the US policy response to that concept is, not how destructive the concept itself is.
Neither difficult-to-discharge loans without substantial cost or quality controls, nor an extensive role for private, for-profit institutions are demanded by the "college for everyone" concept.
> Consequently, colleges have transformed into bloated profit machines, happily ratcheting up tuition in response to this inflated demand.
I don't think its true that "colleges have transformed into bloated profit machines", so much that "colleges that are bloated profit machines have expanded and taken a larger market share".
If the payment has no causal relation with the services acquired via the loan, yes. Unfortunately what we seem to have here is a company selling the means to pay the loan one needs to take to pay for those means and, considering the reports on the quality of the services rendered, those means are being fraudulently misrepresented.
That is an incredibly clever solution. Could you go a step further and reward schools who have a lower default rate as well? Having an institutions incentives aligned with the students sounds like the first step to solving this.
In economic policy, the Federal Reserve has as its mandate controlling inflation and unemployment. Inflation is exogenously measurable, but unemployment isn't. Rather than have the Fed measure unemployment, a seperate government agency, the Burea of Labor Statistics, does. Hence: the Fed doesn't measure what it manages.
Forbidding ITT from pursuing collections, leaving that to an industry which has experience with loans (banks), and instead, leaving it to modify what it can control -- the control, the recruitment of students and instruction standards -- might result in a successful incentives alignment.
You'd have to police and very heavily penalise any kickbacks or covert communications between ITT and lenders.
Maybe? But I'm not sure what good it'll do them. When someone can't get a job they're not exactly going to be paying back debt faster, even if they wanted to. I can't see how them being more aggressive could really help the situation much if at all.
If most of their income is from guaranteed loans, then they are likely considerably less aggressive right now than they could be. Debt collection can also lead to wage garnishments. Never underestimate the desire to extract as much blood from a turnip as possible.
