I think colleges are doing these things because of federally guaranteed student loans, because of the following chain of events:
1. Students are price insensitive for college if they don't have to pay for it up front.
2. Banks are incentivized to loan unlimited money to students because the federal government guarantees the loans with zero exceptions-- the bank gets repaid no matter what, so it's very low risk.
3. Colleges and universities are incentivized to increase tuition, because the demand curve is almost completely flat because of 1 and 2.
The solution seems obvious to me: stop guaranteeing student loans, and stop subsidizing them. But nobody want to do it because it's political suicide.
> The solution seems obvious to me. But nobody want to do it because it's political suicide.
I like that this works for both readings.
If you say to yourself "Obviously the solution is to eliminate federally backed student loans" that's political suicide because it means most people can't have a tertiary education (even if at some future date this chance means the institutions charge less than today)
If you say to yourself "Obviously the solution is to make tertiary education free at point of use" that's political suicide because it means a big tax hike to pay for it, plus either an unprecedented interference by the state in the operation of non-state entities offering education OR the state builds loads of extra institutions in competition with those pre-existing non-state establishments.
Of course, never say never, twenty years ago who'd have guessed major US politicians would be saying actually maybe we should just have single payer healthcare?
Isnt there a middle ground? Like having tertiary education free for state/city/public universities to ensure the poor arent left without choice. And also eliminating federally backed student loans so eventually all schools normalize price and all schools become increasingly affordable?
Yes there is certainly a middle ground. The poor, middle, and upper class all have a GREAT choice available to them. Instead of spending 10, 20, or 30 years paying back your loans: spend 3 years working and have 0 loans.
Bonus points.. you learn skills/trades/work-ethic/survival-skills/basic-medical-training, and will be useful in an emergency for the rest of your life.
I'd like to eliminate federally backed student loans and replace that spending with federally backed student grants for the best students under a certain household income. That wouldn't make tuition rise in the same way, and it would still help poorer people go to college. AND they wouldn't have to pay back loans.
1. Students are price insensitive for college if they don't have to pay for it up front.
2. Banks are incentivized to loan unlimited money to students because the federal government guarantees the loans with zero exceptions-- the bank gets repaid no matter what, so it's very low risk.
3. Colleges and universities are incentivized to increase tuition, because the demand curve is almost completely flat because of 1 and 2.
The solution seems obvious to me: stop guaranteeing student loans, and stop subsidizing them. But nobody want to do it because it's political suicide.