It's not the interest, it's the principal. And I don't understand how the principal got so high.
Is calculus ten times more expensive to teach than it was thirty years ago? Is Shakespeare? Supply is totally inelastic, because it's almost impossible to get a new college accredited (for profit schools all started with an already accredited school and expand them). Same with demand - not having a college degree puts you on a lower track that's almost impossible to break out of, and the connections, etc. mean that MOOC's aren't a good substitute for undergraduate education, while the professions all require specialized schooling afterwards.
So where does all the money go? At a non profit university it goes to faceless, non-teaching administrators to play the school prestige game, and maybe a little research.
A generation is broke because they're not paying for education, they're paying for education that can't be unbundled from empire-building.
Empire-building is correct though in the sense that public institutions are the ones raising their tuition costs by so much (78%!), and a big reason for this is do to college's building new infrastructure, which often times they have no need for. Take SF State University who I used to work for, they built a brand new gymnasium and a brand-new library at a cost of over a billion dollars for a student population in which 78% are commuter students who hold down part-time jobs and spend no time on campus. It just doesn't make financial sense. That said, faculty costs are still the primary problem and why community colleges get the taxpayer a much better bang for the buck. See http://www2.ed.gov/about/bdscomm/list/hiedfuture/reports/dic...
Though I agree cancerous physical plant growth is an issue, a couple of additional points:
1) Spending on non-faculty salaries have gone through the roof with the exponential growth of well paid but educationally marginal deanlets, deanlings, and administrators.
2) Although total salaries for the tenured professoriat hasn't necessarily exploded, salary per classroom-student hour has as tenured professors have seen their teaching requirements fall, and as large lectures are increasingly taught by poorly paid adjuncts.
A generation ago a 3-3 or 4-4 was typical for a tenured liberal arts or social sciences professor, and most freshmen seminars were taught by full faculty. Today many teach 2/2 or even 2/1, and they might well be all be graduate / upper class seminars and supervising student research.
You have some good points, but you also neglect the massive spending cuts on education that have happened throughout the country. While there are many public schools that do buy into this notion of trying to compete on prestige with the well known private schools (and proceed to try to buy their way into the respected club), public school tuition increases in the last decade are very much tied to funding cuts.
Understatement of the year. At my institution administrator hiring has been on the rise for the last ten years and funding for professors and new hires has been declining. Our institution also has a huge surplus of unallocated funds (literally just sitting around) that they refuse to devote to education or research.
The principal got so high because higher education has turned into a market, and the people they hire to run schools are business people. All they care about are profits.
University tuition going up faster than general inflation is due in part to Baumol's cost disease[1] which cannot be avoided without structural changes like MOOC's.
So some people wring their hands, say "can't be helped", and walk away. But I believe that the causes that you and others have noted are more prominent.
Much of the increase is driven by the government. In the last thirty years the ratio of administrators to students has gone from 9:1 to 3:1, and it's nearly all in response to extra government rules and paperwork.
This is an interesting NPR Planet Money podcast where they try to break down why Duke's tuition costs $60,000/yr (and Duke claims that the actual cost of a student is really $90,000/yr).
One of the most interesting points is that colleges are in a unique inverted position when it comes to price vs. demand. Cutting their tuition price would actually decrease the perceived value of the degree, and thus lower the demand for their product.
You can grind your teeth at the rest of the podcast where the administrators claim a lot of this cost is building amenities and facilities that students now expect out of a high-tier college like all-single dorms, a myriad of cafeteria options, and 24/7/365 library and IT staffing. I'll go back to my lawnchair now.
> You can grind your teeth at the rest of the podcast where the administrators claim a lot of this cost is building amenities and facilities that students now expect out of a high-tier college like all-single dorms, a myriad of cafeteria options, and 24/7/365 library and IT staffing.
I've seen a fair number of universities in the U.S. and other similarly developed countries, and one of the most striking differences I've noticed is that U.S. university physical plants tend to be really nice — super well-maintained and frequently renovated, "deluxe" feeling — whereas even top-tier universities in other countries often feel a bit threadworn and sometimes even kind of run-down, even if they have beautiful old buildings. The latter function perfectly well as universities, mind you, but the impression is that they're being pretty careful with their maintenance budget....
> Cutting their tuition price would actually decrease the perceived value of the degree, and thus lower the demand for their product.
Even if you accept this as true (which is interesting but is also a bit of a stretch), it certainly doesn't explain why tuition consistently rises at a rate several times that of inflation. The latter items certainly do.
Customers (students) have been allowed easy access to student loans, which makes them less picky about price differentials and closes the loop. Closing the loop allows it to accelerate beyond the scope of inflation.
The issue is even worse than this article suggests. The article focuses on graduates. But students who fail to graduate, for whatever reason, are even worse off. They usually can't payoff their debt, so they go into default and have their credit destroyed for the rest of their lives. They can't try to go back to school later because they can't get new loans, and, with the latest laws, can't even transfer the credits they had. It becomes a catch-22 and downward spiral.
The (usually Libertarian AFAIU) Library of Economics and Liberty isn't my usual stomping grounds, but Bryan Caplan writes well there on just that aspect in "What Bad Students Know that Good Economists Don't"
The college premium skyrocketed over the last three decades. B.A.s now out-earn high school grads by 70-80%. College graduation, in contrast, barely rose. In econospeak, the supply of college graduates looks bizarrely price-inelastic.
Over the last two months, I've read virtually everything ever written on this puzzle. All of the compelling stories converge on a single factor I've emphasized for years: The return to trying to get a degree is far lower than the return to successfully getting a degree. Why? Because marginal students routinely fail to graduate. The single best paper on this theme: "The Education Risk Premium" by Janice Eberly and Kartik Athreya.
For various reasons, I've been saying for a year or so now that "we're not going to educate our way out of this mess". Education helps, yes, but it's also pretty distinctly limited, and I'm seeing increasing evidence that there's only so much potential among most students. Though there are notable exceptions: see "Stand and Deliver".
Currently, if you have no income you are harassed to get into the payment by income program but that program requires you to make payments on previous loan payment program to become fully qualified for that lower payment plan.
So guess what happens? Congress in their wisdom limited said plan to one try. That is right most of the people on that default list could have been avoided if the limit income plan was implemented properly.
Soon we will start seeing news of young graduates committing crime to pay off their student loans. Heck, it would be interesting to see a movie with this plot line.
I don't know how it works for dentists, but my understanding is that for doctors we've essentially given the doctors' guild the ability to legally dictate how many medical graduates they will allow, making them the envy of unions around the world (and schools, who are very happy with an arrangement that allows them to auction off a restricted supply of meal tickets). Sometimes you'll hear the AMA blame congress because they've gotten congress to pay for part of the education process and it hesitates to periodically increase the handout, but the reality is that they could change things tomorrow if they wanted to. Which they don't, because they rather enjoy the sky-high salaries that come from the artificial scarcity they've created.
The market is slowly working around this constraint by allowing nurses to train and take on some of the responsibilities that were previously subject to the artificial labor scarcity.
Unfortunately this only represents about ~1/3 of the problem with our medical industry by market share. The other two thirds come from drug price overruns (US drug buyers pay twice as much as single-payer countries which have much more size = bargaining power) and the medical insurance industry (a textbook case of "costs of competition" dramatically exceeding the benefits in a measurable way).
> The other two thirds come from drug price overruns (US drug buyers pay twice as much as single-payer countries which have much more size = bargaining power)
As an infuriating elaboration on your point, the United States has a huge single payer in Medicare that is by law prevented from effectively negotiating drug price.
Medicare isn't allowed to negotiate, but it automatically gets the average selling price, inclusive of all discounts. Disproportionate share hospitals get 23.1% discount. It's not like the US gov't isn't extracting it's share.
Medicaid IS allow to negotiate and has federally mandated discounts. Medicaid covers more people in the US than ANY of the Canadian provinces who do negotiate. What does that tell you?
> the manufacturer’s “average sales price” means ... sales to all purchasers ... in the United States ... divided by the total number of such units
So it looks like the ASP is fixed to the shit price that results from fragmented bargaining by US companies. A 23% discount on a 100% markup = drug companies laughing all the way to the bank.
As for Medicaid, I'm not familiar enough to answer. Do they get decent prices or is there similar corruption at play?
The top 3 insurers (who negotiate these prices) in the US cover nearly 100 M people. Medicare gets those discounts included as well.
As for Medicaid, it often pays the lowest price of all purchasers in the US. For many doctors, Medicaid reimburses them so little, they lose money on drugs. That's why many doctors don't want to take Medicaid patients.
Medicaid does get decent prices, but providers may refuse to accept Medicaid. So some people have no access to affordable care, despite having Medicaid, because none of the providers within a reasonable distance accept Medicaid.
Last I heard, the pharmaceutical companies had come up with various ways of artificially manipulating the price they officially sold drugs for in order to take advantage of this, such as making direct offsetting payments to hospitals rather than discounting the prices.
Providing rebates after purchase is pretty common in the pharmaceutical industry and yes, they are included in ASP.
There was some manipulation of the ASP back in the early 2000's, but those companies were charged under the False Claims Act and paid a pretty significant penalty. I don't think there is widespread manipulation at this point.
Well, I wish it was insanity. It's actually cold and calculated exploitation. This is why we need campaign finance reform. Under the current system, politicians don't have the freedom to reject bribe money even if they want to. What a mess.
I think that is the point, they cannot easily make back the $400k
I have to go to the dental college because I do not have insurance, it is impossible to go to a dentist without insurance these days. I usually am seated among many other people at the college who actually have insurance, it is just their deductible is far too high unless they go to the dental school for work.
Exactly my thought when I read that. $400,000 for dentist? Heck some people don't even give them as much respect as they give to other kind of doctors. Some say they aren't even doctors.
No wonder people go to India or Eastern Europe to get their teeth replaced.
Yes, they aren't MDs. But they are Doctors. Personally, I have more respect for the average dentist than for the average GP. They put in tons of physical effort in their work. Lawsuits (or the threat thereof) are constant. Their board exams cover a lot of the same material as MDs. My personal experience is that the average dentist brings more relief to humanity (ever had dental pain?) than the average GP.
To further support your point, I read somewhere that dental pain was the leading cause of suicide, pre-1900 or so, which I find very easy to believe. Dentistry (along with sewage systems) is responsible for more quality of life than almost anything else.
There are "Doctors" of everything. Psychologists, nurse practitioners, audiologists, veterinarians, optometrists, pharmacists, chiropractors, and podiatrists hold professional medical doctorates. They aren't "Doctors." In the United States when people refer generally to "doctors" they mean physicians and surgeons with a Doctor of Medicine or Doctor of Osteopathic Medicine degree who are licensed to practice medicine.
When people say "Is there a doctor on the plane?" after someone has a hear attack they aren't looking for dentists or audiologists are they?
Actually, in many ways they are. They dissect cadavers as part of education. Some schools have dental students and regular medical students take the same classes for the first two years.
You can't train overseas and "just" get a license in the USA. Even if you've been practicing as a dentist in another country, to practice in the USA one must attend dental school in the US and pass the board licensing exams. It may be that some states allow taking only 2 years of dental school instead of the normal 4 if one has been a dentist elsewhere.
I've found that many people are surprised when they discover that dentists in the USA are medical doctors and have a similar education.
Heck, I was born overseas and go back to visit twice a year. That's when I get my health-related stuff done. Not only is it ridiculously cheap (sometimes even fully covered by my parent's insurance, even though I'm almost 30), but it's also very high quality.
Healthcare in the US is an absolute joke. It makes me sad.
One of my wife's friends is attending a college in Ireland. The cost of flying to Ireland and back twice a year, room and board, books, and tuition is roughly the same as they would have paid for tuition at their local state university.
The root of this problem is that the liberals have been paddling relatives good sounding notions such as "everyone needs to go to college" thing and the subsequent government moves to ensure that every tom dick and harry can go to college.
Australia has been through the "everyone needs to go to college" phase, and what we ended up with was a shortage of tradesmen, not a massive student loan debt. 'Having everyone go to college' doesn't mean you need to have these ridiculous loans.
It doesn't automatically follow that a bolus of tertiary eduction has to result in that much debt.
"everyone needs to go to college" phase can lead to many problems depending upon various factors and the kind of government intervention we see for that purpose. In case of US the gov tried to reduce the friction in credit lending to achieve the said objective leading to a student debt crisis.
I think everybody benefits from more education. And public higher education should be a cornerstone of a developed country. But sadly it appears that the USA does not agree.
I don't think it's fair to say that. We have a highly partisan divide right now that causes crippling inaction on some of our biggest problems (including the cost of education), but if you removed that partisan political framing and nailed down most American on the issue directly, I think you'd get an opinion that is in-line with what you said.
America's problem is that we treat our political parties like our favorite sports team, and the parties themselves react accordingly favoring electoral dominance over policy achievements. Case: health-care -- polling shows that most Americans are in favor of the sort of things that the Affordable Care Act basically accomplishes (universal coverage, everybody pays something, subsidization for poorer people). When it's framed as Obamacare or a Democratic Party program, the numbers change to reflect the partisan divide.
It's still stupid, but it's not the same thing as not wanting it.
Seems to me the root of the problem is conservative state governments cut education spending in order to cut taxes. It's a win-win, they get to say they balanced their state budget at the same time that they make their state's citizens more likely to vote for them because of a lack of proper education.
What's your alternative? We always hear this type of complaint from people who take issue with sending masses to college that a information economy requires, but it seems like they never explain their alternative vision for society.
Not the OP. I would role more into high school, maybe extend it by a year, and fund more schools at the federal level to even the playing field. College loans would be available only for careers with higher than average employment availability, and I'd replace unemployment insurance with retraining/relocation insurance and loans.
The gas tax doesn't fully fund road construction and maintenance. Those of us who don't own automobiles or buy gas are still paying our "share".
BTW, road maintenance costs are mostly due to heavy vehicles such as trucks (and weather). Cars cause negligible damage. So though truckers complain about high taxes, they're actually still paying less than a "fair" amount. So says my transportation professor, anyway.
At what point do these students realize the cost indicates they should stay from that school? Like, "Oh wait, even though X is a better school than Y, it will cost 5x more, and my starting salary will only be 5% less." Is that happening? It just seems some of these people are naive. Another example is ones that are unaware of the economy of the city they aspire to live in, and get a degree with little value in that city. And then they're unemployed...
Now that doesn't mean the college system isn't flawed or unfair. I think that it is. But some of the discussion should be on how we tell young adults to best navigate their way through the system, as it exists at present. Picking your dream school, a "good" school, whatever, should not be independent of some analysis on what the return on investment is. For students that can do that, there are still opportunities out there... I say that because I've made decisions where I got in but didn't go to my dream school. It sucks. But the extra value from the quality of the education didn't seem worth $100k in debt once I get on the job market.
Anecdotes ahead, proceed with caution:
Very average PA public school; had a "home ec" course, in which we did hilariously outdated calculations on things like interest vs compound interest. Not a single mention of what I'd call "practical economics"; e.g. actually balancing a real budget (which, FWIW, I've heard is becoming more a thing in certain districts), calculating the costs of goals, and perhaps touching on long term financial planning. When I first had to handle retirement fund options; you could have handed me a live squid for all I knew what to do with it. I got _lucky_. I had parents who filled in many of the gaps, and were willing to be a resource as I got older, as well as some more informed friends; but I worry about how people with less might have gotten by.
Oh, you mean the people who the banks gave giant loans to that it turned out nobody could afford and put everyone into foreclosure? Or their kids, who signed their life away to bankruptcy-proof loans on a degree they never finished, and can't get a job good enough to pay it back?
Have you seen what passes for a parent?
Yes, let's have those people teach their kids personal financial management.
My high school counselors frequently came by classes and spoke about college---while they didn't talk about the financials in detail, they easily could have. It'd be as simple as doing a quick calculation on the board of how long it will take to pay off some amount of debt. Now whether that advice would stick in the students' heads, I don't know, but they should at least try. There's also high school economics classes that should be discussing this. I was required to take one and my teacher actually did a better job of explaining the cost of college than the counselors.
Now whether that advice would stick in the students' heads
Certainly not all, by a long shot. Here in Australia, you get a couple of grand to help you out when you have a baby, helping cover various initial costs, purchasing prams or whatever.
A friend of mine mentioned that he'd heard his 17-year-old daughter talking with her friends about having a baby because then you get that baby money. They saw it as a huge windfall and don't understand that all that money and more is needed to set yourself up for a child, nor that a child significantly changes your lifestyle and activity choices, especially for someone around 20.
It's not to say that everyone at that age has no forethought, but as a demographic, they're not good at long-term planning.
It's always amazed me that some people get to pick which colleges to go to. I never had that option. Until I turned 24, the maximum financial aid available to me was a measly $5,000 stafford loan. There aren't many places you can attend with only $5,000. That won't even pay for an in state public university in virtually every state. The colleges I spoke with told me that if I didn't have the money, I should wait until I turned 24 and try again. That was a long half decade wait.
You have to have a rich relative available to cosign for all those private loans--federal loans for dependents are capped at about $5,000/year, and independents get about $10,000/year. The total lifetime amount is capped at about $60,000, which is why I'm sometimes skeptical of "I have $200,000 in student loan debt! I'm so poor and oppressed!" stories. It's very likely that these people are just fine because their family will eventually bail them out no matter how many bad choices they make--they're legally obligate to. Student loan companies don't loan money to people without collateral.
So stop letting the government guarantee the loans. Watch how the prices fall once only a small fraction can afford to take a $200,000 loan to pay for their college, afterwards. US colleges have been spoiled. That's why prices are so high.
I go to a research university so there are 4 main sources of funding in no particular order:
1) State funding (public tax dollars)
2) Student tuition
3) Research Grants
4) Alumni donations
State funding is down, research grants are down, and alumni donations are down. The autonomous costs of a university don't decline, so that loss in revenue needs to be made up elsewhere, thus it comes from student tuition.
More likely, you will just see the proportion of foreign students increase dramatically. College these days is already mostly made up of semi-rich kids from America and actually-rich kids from China. With loans at least some middle class American kids get a shot.
Meh. This is (mostly) the students' and the families' who abet their stupid decisions fault.
If you go to an in-state community college and then matriculate to an in-state university in my state the total cost of college is (~$4500 for 2 years of CC living at home + ~$25000 for 2 years of closest to home in-state school) ~$30000 + the cost of living at home.
Meanwhile people continue to whine about sending their kids to school in places where they wrack up that much in debt per academic year before accounting for housing and travel expenses.
If you don't want to be in debt and you aren't rich or dirt poor make reasonable decisions and stop whining. If you can afford to replace your mini-van with a Prius, you can probably afford to send your child to college, especially if you save the difference during the CC years.
The real issue is that people feel entitled to the best schools and will so make absurd decisions to enable it regardless of what their child is studying or how well they actually do in college.
And all of the above said, I do agree that college is increasing in price more than it should. I think it's because research and lifestyle costs are getting pushed into tuition combined with state legislatures who don't want to support colleges in their state budgets that are really doing it. This has many pernicious effects, like transforming the college meal plan into a clone of your closest mall's food court.
Wow. I like you blamed this entire mess on students and parents.
>>The real issue is that people feel entitled to the best schools and will so make absurd decisions to enable it
Nonsense. People want to send their kids to the best schools because the best schools are the gatekeepers to the upper class. Someone who graduates from an Ivy League school gets to build a network with affluent alumni and has a high chance of landing a job that pays six-figures right off the bat. Someone who goes to a merely good state school though? There is a very good chance they won't even find a job after graduation.
You exaggerate. Mostly it's people who don't do well at their colleges that have trouble. At Ivy Leagues it's fewer people because they have the worst grade inflation and don't accept many borderline students.
For state schools there are lots of people at the margin - IE they don't do well enough to really reap a benefit from their degree.
Maybe getting good grades at a public won't get you 6 figures in your first job, but in most fields you aren't going to get that from an Ivy League, either.
But if you do well or choose a good major your in state school will be fine - you'll get a job, and it'll pay alright.
This is 3 or 4 times as true if you're planning on being something like a Nurse or a Teacher and less true if you're planning on being a hedge fund manager, but frankly if I were a student I'd be happy for the future hedge fund managers of the world to go somewhere else.
I have a degree from a cow college. I'm very good at what I do. But I'm at a disadvantage: my network doesn't include people who are valuable to know. The dudes who started Dropbox are dudes friends of mine knew in college. People like that aren't in my rolodex. That's what these colleges are for: social entry into that class of mover shaker, be it MIT for tech or an Ivy for politics. This stuff is the difference between having doors open to you and needing a crowbar to get anywhere. I happen to be both good enough to demand attention and savvy enough recognize when there's an opening, but I get that getting where I am now has been a luck-based thing.
And that's a tech degree, mind. I get the feeling you really have no idea how hard it is to find a livable-wage job if aren't in tech or cleaning bedpans. The idea that fundamentally irrational people - teenagers! - should be expected to make decisions to actively limit their upside based on a downside risk they literally cannot contextualize is a failure to understand humans.
I think it's fine to expect teenagers to make decisions.
The real problem is that we enable them with low expectations. Give students high expectations and teach them how to evaluate their options instead of giving them tripe, rule of thumb, and aspiration without realism or planning.
(Also, I do know people who've gotten 4 year degrees and then done things like become correction officers or pharmacy technicians (which don't require degrees).)
That said, there is something to be said for luck. And paying for entry isn't the only way to make connections. It's just the most disgusting, and part of the reason people think certain things resemble giant fraternities.
Hope is not lost in this situation - you just have to work at it more. I'm a stellar mind who also went to public schools for undergrad and grad, but I focused on self-development and networking after.
I went from $50k a year to likely over $120k (that is in negotiation) in the span of 1 1/2 years of hard effort &learning.
I too racked up lots of debt from school, about $200k total. I am forced to focus on money because of this. I made the decision to go all in on developing my career & making the decisions I deferred until after grad school.
> Someone who goes to a merely good state school though? There is a very good chance they won't even find a job after graduation.
You can't underestimate the psychological value people put on attending even just good colleges in your state, even when doing so isn't financially sound.
"Someone who graduates from an Ivy League school gets to build a network with affluent alumni and has a high chance of landing a job that pays six-figures right off the bat"
Absolutely not the case
So if I graduate anything from an Ivy League I'm getting a 6 figure job? No. Especially when fresh out of the school.
This is an idealization of schools in detriment of personal effort.
After some years of experience SCHOOL DOESN'T MATTER It doesn't. Really
A better school certainly helps in that initial step but it is more clear than ever it's not worth it
>>There are always places that won't hire you because of your school, that's usually a red flag.
The point is that there are many more places who will hire you simply because you have an Ivy League degree than there are places who won't even consider you because you are Ivy League. Whereas the exact opposite is true for local schools and community colleges.
Heck, forget the USA. Having a degree from a place like Harvard will pretty much guarantee you at least an interview anywhere in the world.
>Nonsense. People want to send their kids to the best schools because the best schools are the gatekeepers to the upper class. Someone who graduates from an Ivy League school gets to build a network with affluent alumni and has a high chance of landing a job that pays six-figures right off the bat. Someone who goes to a merely good state school though? There is a very good chance they won't even find a job after graduation.
If this is the case then these people need to quit whining. It's their choice - this is like saying that you need to mortgage your house to join a yacht or country club so you can make connections. Some people just have to work harder than others to make it, life isn't fair cry me a river. Many people from cheaper institutions are better at making connections because they excel in the personality and charm dept (thus they have the advantage). Is that fair? Many poorer people make it big because they are smarter or luckier... Is that fair? Your argument just shows how blatantly ridiculous this is.
People are complaining that education is so expensive and yet they are going to the most expensive school is ridiculous. This is like complaining that your Mercedes was too expensive when you could have bought a more reliable and efficient car for less money.
You are absolutely right about the relative value of community college, but you pointed out the major problem: community colleges are not thought of highly at all, even though 2 years of CC credited to a bachelor's degree at a more prestigious university counts just the same.
I'm not sure how CC's get over the stigma attached to them, but it really needs to happen. They are good value.
Because when there are fewer jobs than candidates, artificial distinctions are used to judge them, and rent seekers exploit that to extract all the economic surplus.
This is basic stuff, people. If everyone is going to college, everyone should know this.
> Because when there are fewer jobs than candidates, artificial distinctions are used to judge them, and rent seekers exploit that to extract all the economic surplus.
But that isn't what is happening in this situation. If Candidate A attends 2 years of community college and then transfers those credits to State College, his resume will still say "Bachelor's Degree - State College" the same as Candidate B who attended State College for a full 4 years.
It doesn't have anything to do with job candidates, it is purely the psychological aspect of not attending a big state uni for your first two years in college.
> This is basic stuff, people. If everyone is going to college, everyone should know this.
I'm not sure if this is snark, but is it really basic stuff for people coming out of college to know about rent seeking? I guess in an ideal world...
Maybe the community colleges in your area are different. I attend a state run college which gets a number of these types of transfer students from a few nearby community colleges. Even at my school the standard of education is not particularly high but the transfers from community colleges regularly drop out or need remedial classes because they paid half the price and got one tenth the education.
It depends a lot on the field. At my community college, the STEM classes had standards. Totally incompetent people disappeared after a semester or two of going up the coursework chain. Meanwhile, the liberal arts professors had to deal with people that couldn't write a coherent sentence if their life depended on it, even in advanced classes. However, I constantly read similarly demented and completely mangled english sentences written by graduates of the local public four year university.
I can't really recommend community college for STEM, since at least in my original state, you had to start as a freshman at university even if you had an associate's degree in science that was "guaranteed" to transfer for credit. (The engineering department's justification was "we'll accept your credits, but you still have to take everything over again.") It's a good way to get screwed, and community colleges offer very few second year science and math classes. (The liberal arts people had much less difficulty transferring.)
However, I did learn my calculus and sciences very well because I had excellent teachers that I could ask questions of if I needed to. My physics professor had been teaching for over four decades--and with a small class size of around ~20, I had plenty of opportunity to absorb the material and understand it completely. As a result, I now find myself tutoring my buddy at a $60,000/year private tech college, because my knowledge of the subjects is sound and the quality of the teaching at his school is completely terrible. Interestingly, the homework assignments and test questions are near identical in terms of subject matter covered and difficulty--the main difference is that the private tech college curves, which my professors at my community college were explicitly forbidden from doing.
In my state the universities must accept equivalent course credit from in-system community colleges. And within my own city it's widely accepted that 1st and 2nd year calculus classes at community college will have vastly better quality of teaching than you'd get taking them at the 4 year. (This reputation doesn't apply to other subjects.)
Makes it a lot easier to get personalized letters of recommendation, too. My first year science and math professors all remember me, since the class sizes were small and enthusiastic students are easily noticed. I doubt that would have been the case at a university, where I'd have been crammed in with several hundred people.
It probably isn't obvious from my original post, but I agree with you.
In my community college, there were a number of professors with incredibly low standards for academic work. However, I tend to think this is a reflection on the level of preparedness of students coming out of high school.
The issue is, and maybe it is sad that it is this way, but it is probably better for people to end up with 1/10th of the education at 1/2 of the price and end up with less debt overall due to what they end up doing with their degrees.
And if you apply yourself, you'll learn no matter where you go. Heck, you'll find plenty on YC who advocate skipping school entirely, so community is a step up from that.
Also, most people at my school are either really wealthy or really poor. This is because the middle class isn't poor enough to get financial aid, but not rich enough to pay tuition.
Are you arguing that it would be a good thing to limit the best education to the richest elite? Coming from a free education country this sounds like a very strange idea...
No. I think private schools are destructive to the fabric of democracy. I also think the 'best education' line is a fallacy propagated to serve the interests of the rich elite and resolve their cognitive dissonance.
All I can hope is that more universities follow what GA Tech started. I'm doing an MSc in CS for less than 7,000$. This is the total cost, not per year.
They did get 2 million $ from AT&T and close partnership with Udacity in the making, but still if they eventually manage to make this program break even and even profit (which no one knows for sure yet) then this should be the start of a movement that demands other top ranked universities to offer low cost MOOC versions as well. (there is also the aspect that GA Tech is a public university, but I don't think this matters. Profit is profit, and the costs are the same costs, or am I missing some basic difference?)
p.s. The main fear of "why would students want to take our 40-60K$ on-campus program if we offer the same degree online for a fraction of the price" is being put to a test here. So far I didn't see evidence that the number of on campus GA Tech graduate students decline, but I don't know for sure, time will tell.
Future will tell if this model works (I realy hope it does), but if one university can do it, others can as well.
How much of a typical student loan is tuition and books, and how much of it is room, board, computers, Starbucks and partying?
I know tuition and books have skyrocketed but at the same time I know people who spent student loan money on flat screen televisions, computers, spring break trips, and used cars.
This is the "poor people have refrigerators" thinking writ large. Tuition and room and board can easily crack $100k at the schools that are social gatekeepers for the upper class (that people want to go to for that reason).
> When I asked my stepson, who graduated last winter, if he knew of kids using their student loans for non-school-related purchases
Might as well ask your stepson if he knew anyone doing drugs instead of going to class. It's a drug pandemic! Do you know anyone who has cheated on a test? It's a cheating pandemic! Do you know anyone that sleeps around? Promiscuousness pandemic!
People love to gossip, and they love telling stories about outliers. Asking directly for stories that stand out is about the worst kind of "informal" research you can get.
College tuition is the perfect alignment of the stars, economically speaking. There's no new supply of public universities. Reputations are extremely sticky. A college degree is often a job requirement.
The highest paying jobs mostly recruit out of the top universities, so students are extremely price inelastic at certain levels. The government subsidizes student loans at artificially low rates. More and more foreign students want to attend US universities. Etc.
Hell, it's almost a surprise that college tuition hasn't grown at an even faster pace. In ten years this is going to become a serious national issue and I think you'll see the federal government step in to cap the tuition increases. It's gonna happen.
On the plus side, more students than ever before are attending college, which is a certainly a good thing, as van der Klaauw points out, even if it is a contributing to factor to overall debt increasing. A degree is usually worth the cost of college, even if the price tag is increasingly tough to bear.
It's not clear to me that 'a degree is usually worth the cost' but even if it were the case that going to college were the optimal decision for each individual who chooses to go, this locally optimal decision doesn't mean that it's good that 'more students than ever before are attending college'.
A college credential could have a positive NPV for each person thinking of getting one, but still be negative for the group overall. For each individual it's rational to participate in the credentials arms race only because if they don't, but everyone else does, they will be at a disadvantage.
(I acknowledge that many people get more from a college degree than just credentials.)
I'm always amazed that all these articles seem to miss the fact that the dept of education is the one who decides loan caps for federally backed student loans. Its easy to see that the increase in tuition is directly related to those increases when you're in, say, medical school. Its not so easy to see tuition increases when you're at a 4 year school with many disciplines to obfuscate the increases. The only question I have is why does the government believe that so many of these fields have graduates seeing 300% increases in salary? No number I've seen even remotely suggest the rate that they're approving things. So why are they doing it?
That is the question journalists should be asking.
it's not just the principal, it is the interest: loans get up to 6.8 and 8.0 percent. still subsidized rates, but much higher than less valuable investments like houses.
Rates are also fixed with no possibility to refinance. you have to make other decisions, like buying a house and borrowing extra to pay off your student loan. this could have other repercussions and is not very "free market."
but in the end, the degree itself is supposed to be worth about a million in lifetime earnings. for professional degrees it is multiple millions. maybe it is all worth it anyway and the price of education is still too low.
My father was an economics prof at a Canadian university. In canada a large part of the tuition cost is the actual professors. What the student pays doesn't even cover the professor salaries, the rest is made up by the government.
Consider that a tenured prof makes about 120k and teaches only 2 courses per semester, 2 semesters per year, while an undergraduate might have 6 courses per semester and pay 6-10k. My faculty had 2400 undergraduate students and while some classes in first year had 100 students, most were 20-30 students per class.
Outside of a few programs most tenured profs dont make anywhere near 120k. In my area, UMich is 80-100 and 2nd tier schools like Eastern Michigan pay 50-70. Getting a phd in most liberal arts fields does not pay, even if you manage to avoid adjunct hell.
I have question how young students can give legal consent for such loan? Most teenagers can not legally drink or have a sex, but they can agree to this sort of commitment?
by the time he graduates in 2016, he’ll face $400,000 in student loans
Why choose to study in New York? I imagine one could train to be a dentist for ~30% of that cost (including living expenses) in Central Europe or in India. Perhaps you'd need to do an extra exam before being licensed to practice back home, but avoiding that doesn't seem worth a > $200k premium.
whenever something starts to get paid by loans, the prices rise. fractional reserve banking means loans are created almost out of thin air, it's the fiatest of fiat money, and it creates a push to increase prices. banks constantly need a sure thing, something to actually create the value to back that money. and when they all start jumping on a bandwagon, the wheels eventually break. i hope something will be done here, but if recent history has taught us anything, US government will pay most of the bills, saving the banks, and then be heavily attacked for - being in debt! the economic scene today is a bad joke.
Why are student loans so high, the market so ridden with defaults, and the price of education so high? I think (well, I'm a little more certain than that) the answer is basic economics. Here's my take:
You (America) have a government that offers discount loans - i.e. loans with poor prospects/low interests rates - in the hope of driving a higher allocation of capital to education than would occur in a pure private lending market (i.e. the government takes risks with the taxpayers' money that private lendors would not take with their own.) (Also, might be worth noting the psychological effect of borrowing from the government - I think people tend to feel safer doing this than borrowing from an obviously competitive private firm. If you read the article, the casual attitude of student debtors to defaulting on their loans shows this - the government has no teeth. The private firm goes bankrupt if it doesn't get a return on investment. The government just devalues the dollar if it gets in a tight spot.)
The justification here would be that the positive externalities of education are high, and an equilibrium capital allocation following purely upfront costs would be suboptimal.
However because humans are humans, the availability of below-market price loans means that people are willing to spend more on education than they would if they were forced to pay a market price. And again, because humans and humans, colleges, which in America have little government oversight as to pricing, raise their pricing. Why? Because people will still pay it. For whatever reason, colleges are able to bank on their prestige and identity, on the promise of access to important social circles, and so pure pressure for price is diluted.
Forget all the shit about increasing salaries for professors, or construction frenzies. Basically the final equilibrium price for a college is the price that they can get away with charging. And this price happens to be far higher than it would be in a purely private education market. Because students can gamble with taxpayers' money. And the universities can sense that there's cash on the ground - and if they don't rush for it, another will just take it. This is why your institutions glorify the most profligate administrators - the ones with the most grandiose investment schemes, the ones who can create an appearance of money well spent - because the best administrators help draw in as much cash as possible.
So the result is that what started as an incentive to encourage education actually creates a toxic market with widespread debt defaults. Instead of more education, you just wind up enriching university administrators (definitely) and professors (maybe) and creating way more university facilities than private demand would have ever warranted. So congratulations: as a country, you've just spent XX billion building a shitload of luxurious dubiously-useful education infrastructure. Because as a country, you shoulder the cost - through your government's wasteful allocation of capital.
Congratulations. The whole country just gave a shitload of money for nothing to university administrators and contractors. You wanted to push capital into educations, but instead you got rich universities. Well done eh?
See, this is why America's model of mixed-capitalism is so poisonous. If you want to give cheap loans for education, you need to control prices at the institutions where they're valid. Though even that doesn't work - you'll find state-controlled institutions in countries that practice this still constantly pushing for the maximum tuition increase every single year, using every excuse they can.
The better solution is probably no public loans or grants whatsoever. Though that doesn't address the positive externality of education (which I do believe in.)
"the psychological effect of borrowing from the government - I think people tend to feel safer doing this than borrowing from an obviously competitive private firm. If you read the article, the casual attitude of student debtors to defaulting on their loans shows this - the government has no teeth. The private firm goes bankrupt if it doesn't get a return on investment. "
All of the above is incorrect.
(a) Student loans in the US are mostly not from the government in the first place, they are from private investors or banks that the schools have made deals with. The USG role is guaranteeing them.
(b) Generally, in classical capitalism, firms will go bankrupt if they don't get adequate returns on investment - but this situation has been distorted by the government guarantees. They get reimbursed if the debtor defaults, and carry on. By exploiting this subsidy they make big profits, that's why they're in it.
(c) I don't know about student-loan-borrower attitudes, but their debt and enforcement of it are not casual. The GSLs are not dischargeable in bankruptcy, so they are basically a lifelong burden unless paid off. And defaulters are subject to wage garnishment and other onerous court judgments.
> (a) Student loans in the US are mostly not from the government in the first place, they are from private investors or banks that the schools have made deals with. The USG role is guaranteeing them.
Your information is several years out of date. Prior to July 2010, the bulk of student loans were made through the Federal Family Education Loan Program (FFELP) which were as you describe. But that program was eliminated in the Health Care and Education Reconciliation Act of 2010. Since then all Stafford, Perkins, and PLUS loans (i.e. the lion's share of all student loans) are made directly by the federal government.
Only non-program student loans are no made by private banks, and they are not government guaranteed -- though they are still non-dischargeable in bankruptcy. Such loans only accounted for only around 5% of the total borrowed last year.
In addition, many of the loans issued privately prior to July 2010 made their way into the government's hands during the financial crisis, so that of all outstanding student loan debt around 85% of it is currently held by the government.
Thanks for the clarification, but it sounds like the net effect is exactly the same: bad loans are made, money is lost, the taxpayer is forced to subsidise the indiscriminate purchase of education.
As always with such schemes, there is an ongoing push to implement them in as complicated and opaque a fashion as possible, to try and hide the naked fact of what is going on. So no one will admit "we take money from taxpayers and make loans no sane private investor would ever consider," they'll just talk about FDCRP-approved rates this and Fannie Mae-that and fiduciary-backed iron bond multiplexing high-yield 7.5% rederived blahblahblah.
Same bullshit that happens when bank deposits are federally insured.
It seems to me that you have a-priori decided to whip a particular horse regardless of the context/relevance. Not arguing that particular horse should not be whipped, but its not the main horse in the race that is being discussed.
Sorry, I have no idea what you're talking about. I've simply been trying to show that these allegedly disconnected economic phenomena (government lending, high fees, high students loans, defaults, political pressure to drop interest rates) are actually all the result of a single misguided policy direction.
I agree with what you said about the toxic market and the poisonous blend of state and capitalism - I'm a moderate libertarian, but the evidence overwhelmingly indicates if you're not going to have genuine capitalism in a sector, you are actually better off with honest socialism like we have in Europe than with pretend capitalism which gives you the worst of both worlds.
I must, however, take issue with your last sentence. That is, I agree education has benefits, but the current school/college system is hardly at all about education and mostly about potlatch: burning away some of the best years of your life in an attempt to obtain relative status. Sure, a college degree might improve your chances of getting a good job, but in most occupations that only means you got the job at someone else's expense; it's a negative sum game.
Proposed practical solution: outside fields like law and medicine (where college actually provides necessary training, albeit in a very inefficient way), make it illegal for hiring to discriminate on the basis of college degree.
If we were to combine this and the gp's system, won't we get into a situation where it is best to burn your degrees and just claim you know phd's worth of stuff? And then sue if someone with a degree got the job.
I have no idea what you're talking about. You can't analyze the current situation while ignoring the past and the changes (privatization) that have happened.
Tuitions went up in the US because the govt has progressively withdrawn subsidies.
Student loans amounts grew to match. Also, student loan writing was privatized, and collections have been given real teeth.
I work in higher ed at a "public" university, which is quickly becoming a private institution, meaning that the admin is planning to be 100% tuition supported within a few years. So now we're "competing" for the best (highest tuition paying) students.
This is exactly the kind of bubble (price inflation running ahead of real value) that occurs when public goods are privatized.
> This is exactly the kind of bubble (price inflation running ahead of real value) that occurs when public goods are privatized.
What public goods are being privatized? Student loans? Universities?
Diploma Mills like University of Phoenix and a million other clones started flourishing as gov student loans became widely available. That is what you're competing with.
> And again, because humans and humans, colleges, which in America have little government oversight as to pricing, raise their pricing. Why? Because people will still pay it. For whatever reason, colleges are able to bank on their prestige and identity, on the promise of access to important social circles, and so pure pressure for price is diluted
Harvard could double its price, and still have no trouble filling every available seat. Same goes for the rest of the Ivy League, and also MIT, Stanford, Caltech, and other top non-public schools. How do your theories explain their costs being so much lower than what the market would bear?
Furthermore, these schools have been increasingly replacing loans with grants. Stanford has gone so far as to waive tuition for students whose families have income under $100k, and to also waive room and board for those whose families make under $60k. If you theories were correct, wouldn't Stanford be telling those students to get loans? That would make more money for Stanford.
Top tier institution get a significant amount of their funding from alumni donations. Their motivation is to identify top tier students, provide them with a network of other top tier students, who when they graduate will become leaders in their respective fields.
Many of these top tier universities have endowments large enough that they don't need to collect tuition from the students. In fact, many of these universities allow free or reduced tuitions for low income students. (http://www.admissionsconsultants.com/college/ivy_league_fina...)
Here's the top 5 (per student)
University Endowment / Student Endowment Total Enrollment
1 Princeton University $1,857,040 $14.05 billion 7,567
2 Yale University $1,436,384 $16.65 billion 11,593
3 Harvard University $1,304,492 $27.56 billion 21,125
4 Franklin W. Olin College of Engineering $1,096,595 $335.6 million 306
5 Pomona College $942,490 $1.46 billion 1,548
The motivation for alumni to contribute to the endowment after graduation is that the value of their degree is correlated to the ranking/reputation of the university. By contributing to the university, you not only help the university by help yourself.
So the economics for top tier universities are not similar to the rest of the colleges.
> How do your theories explain their costs being so much lower than what the market would bear?
All those schools could surely fill their seats entirely if they doubled price tomorrow. But there would be a social backlash. They still consistently raise prices faster than inflation.
How many of Stanford's class of 2018 qualifies for that free room-and-board because the families are in the bottom half of families? Since financial aid is just price-discrimination, Stanford isn't leaving that much money on the table.
Universities are run by people driven by a mixture of economic and ideological goals. I'm not saying they're purely in it for the money. I'm sure there are a lot of people involved who are genuinely passionate and excited about education.
But most people have a hard time saying no to a fancier car, house, and more holidays.
Alternatively, if you can get as much money out of your rich students/the government as possible, that's more money for grants for superstars from poor backgrounds.
Charles W. Calomiris and Stephen Haber made a similar point in a recent EconTalk interview discussing their book Fragile by Design. When the US government wants to promote a populist cause (college, home ownership, farms), it is easier to do so off balance sheet by reducing interest rates rather than giving a straightforward subsidy. Thus, we trade economic risk for a reduced federal deficit.
If anyone in the private sector used the type of accounting that the government uses for loans, people would be lead away in handcuffs. Here's the somewhat understated footnote in the CBO report that underlies that news article.
"CBO’s calculations of subsidy costs for student loans follow the procedures specified in the Federal Credit Reform Act of 1990 (FCRA). Under FCRA, the discounted present value of expected income from federal student loans made during the 2014–2024 period is projected to exceed the discounted present value of the government’s costs. (Present value is a single number that expresses a flow of current and future income or payments in terms of an equivalent lump sum received or paid today; the present value depends on the rate of interest—known as the discount rate—that is used to translate future cash flows into current dollars.) Credit programs that produce net income rather than net outlays are said to have “negative subsidy rates,” which result in negative outlays. The original subsidy calculation for a set of loans or loan guarantees may be increased or decreased by a “credit subsidy reestimate” in subsequent years, on the basis of updated valuations of the present-value costs of the cash flows associated with the outstanding loans and loan guarantees.
FCRA accounting, however, does not consider some costs borne by the government. In particular, it omits the risk taxpayers face because federal receipts from interest and principal payments on student loans tend to be low when economic and financial conditions are poor and resources therefore are more valuable.
Fair-value accounting methods account for such risk and, as a result, the program’s savings are less (or its costs are greater) under fair-value accounting than they are under FCRA’s rules."
1) Is that the most money they could have made with these loans? Are they getting a market return on investment? If not, then they're wasting the country's money. It doesn't matter if it's still "profitable." A lot of shit investments still make money - just less than they could have if they were better invested.
2) Are the loans profitable at market rates? Then why have students taken on seemingly such high debtloads? Ah, because everyone knows that with governments, unlike private lendors, you get this:
>"I think they should break even, but it's just wrong that they are making money on it."
>"This is obscene. The government should not be making $66 billion in profits off the backs of our students,"
>Warren and eight other U.S. senators committed to wring government profits out of student loans and address the $1.2 trillion in outstanding student loan debt they say is crushing families and putting a strain on the economy.
>"It's time to end the practice of profiting from young people who are trying to get an education and refinance existing loans."
Great, look forward to any at-market performance of your loans being shredded through political pressure. Another way of saying that your government just threw away your money.
If you think that, I think you didn't read both of my posts carefully enough.
First I argued that the government was making bad loans. The respondent replied that they were making profit (implying they were good loans.) Then I noted that that doesn't necessarily mean the government made the most profit possible with the loans - I didn't say that was definite, just possible.
And then I showed how political pressure is mounting for even this meagre profit to be slashed to cost price. Because that's the great thing about borrowing from the government. If enough people do it, you can bank on political pressure to hamstring any honest attempt to get a market return. So you wind up with a distorted allocation of capital to this market (student loans.)
PS. If anyone remembers, this is exact same mistake which drove the 2008 recession - the American government's junk home loan program. Exact same high ideals - help people get into homes! - exact same result - people went for bigger homes than they would have otherwise - savvy hedge fund managers smelled the free money and pounced. And we all know how that turned out.
Yes. People like Thomas Sowell have been arguing that endlessly. I dont think there are any "two way" of understanding debt crisis than this one. But Omaba and the left wingers have their own agenda to push.
> government that offers discount loans - i.e. loans with poor prospects/low interests rates - so that there is a higher allocation of capital to education than would occur in a pure private lending market
This is not nearly the full extent of the problem, just look at the housing market. Through credit, banks have been able to completely erode the concept of ownership and turn it into just another form of renting (except for those rare few with fuck-you money that we all dream of being)
1. Every loan is subsidized by virtue of any bank being able to effectively conjure money out of thin air. Giving out a loans would normally affect the backing of the depositor's accounts, but they have absolutely no concern due to FDIC insurance. So the only checks on how much a bank will loan out are the reserve requirement, and how accurately their own accounting model reflects what could go wrong (eg a massive drop in housing prices making all of that on-paper "collateral" worth less).
2. Overly strong enforcement of collateral, through both modern tracking technologies and a government that facilitates efficient repossession of property as if the debtor does not actually own it.
3. AFAIK student loan debt is not even discharageable in bankruptcy. (It is amazingly automatically discharged at time of death, but presumably private creditors are paid by the government when this happens, yet another subsidy).
4. The ridiculous overemphasis on credit scores, and how people are indoctrinated to constantly worry about them, and believe they will fail at life if they do not suck up to the rating companies.
5. People have been led to believe that failing to pay back a (good-faith-taken) loan is immoral, and that debts are absolute. Bankruptcy has been made to seem like a game-over death-equivalent where you've fallen off the path of a respectable life.
The systematic overemphasis on credit over assets has made it so that most people have a high monthly burn rate. Of course they take on more debt on non-capital expenses like new cars and further the cycle - they're no longer in control of their life, so they might as well enjoy what they can. Which then makes it so they always have to be working a full time job (and squirreling away a tiny amount with the idea of maybe not having to work when they're old and achy).
But this is happening concurrently with massive ongoing efficiency gains, so many of these jobs actually no longer need to be done! Due to a wider advertising/logistics reach, there are fewer market winners, thus less competition so companies have more surplus resources to employ these unnecessary people, who just end up being a detriment to the functioning of the organization. So with the current trends, we've got a future where robots are producing everything, but all the humans are essentially doing busywork (while completely stressed out as they believe they're not) just for access to the basic necessities of life.
By the time we reform government lending to "fix" this, education will already be disrupted with MOOCs and other internet tools. I am talking about 5-10 years from now.
The problem isn't with fields like comp sci or history where people don't need a degree to work as professionals. The problem is with institutions with guilds like like American Bar Association and American Medical Association. You need a license to practice, and almost everyone only gets that after spending over $100,000 on accredited schools. (Are there exceptions?)
Soooo ... the price of education in every OTHER field will go down, but not med schools or law schools or other schools which prepare you for licensing.
I am a firm believer that basic medical insurance and education should be collectively bargained by the government. And we do - most libertarians and republican fiscal conservatives are clamoring for vouchers over public schools. But vouchers are the same kind of sigle payer system they find so distatesful in medical insurance. It's really funny, really! American political views, like many others, are influenced more by media rhetoric and culture than logic.
Basic education and medical safety nets are something everyone in civilized society has come to expect. I think this should extend to basic courses online such as MOOCs on history and other "core" curricula. The government should switch from subsidizing community colleges with professors teaching 50 students at a time and slowly shift to subsidizing online universities and MOOC initiatives. Colleges subsidized by the government should be required to invert their classroom and prepare students to learn online, instead of spending so much $$ on traditional formats from 100 years ago.
On the other hand how many doctors and lawyers do we need? We don't know. The market needs to determine this. If the government subsidizes THESE professions, it will distort the market.
"The whole country just gave a shitload of money for nothing to university administrators and contractors."
Probably not. It is entirely possible that the shitload of money did improve standards of education and did benefit students, just not proportionally to the actual amount of money spent.
I get what you're saying. But, in a market-based system, where universities are highly profitable, we would expect that there would be an enormous influx of capital in to create more universities. But, we don't see that. There are very few new entrants into the university education space.
Because it's easier to compete with pre-existing universities. Better to spend $100 million on new facilities at an old university than $1 billion building one from scratch.
There is really three simple reasons that we have this 'problem' today.
1. People who cannot afford it are choosing very expensive universities.
2. The government is giving money away like candy, there is a definite bubble here because this money will be defaulted on. I know a professor at an art school who says his students easily get $150k to go study art. Many won't even get a degree with that money. Getting a degree or being on a path to get a degree in x years is not a requirement of getting the money. He says that these students will graduate and be lucky to go on to make $25-30k a year. That is pretty rough. This also drives tuition way up because schools know they can just charge more and the thanks to the govt. students and money will still funnel in by the truckload.
3. Students with student loan money live like rock stars. These are teenagers here. They suddenly have a bunch of money. do you thing that they are carefully considering that every dollar they spend will have to be paid back with interest? Teenagers... I have seen this over and over again personally. Luxury apartments, nice cars, buying, spending... "A part time job? are you kidding? who has time for that, I've got to focus on my party life.. Errrr studies".
>* $400,000 in student loans. “If the money weren’t a problem I would live on my own,” says Rong. “My debt is hanging over my mind. I’m taking that all on myself.”*
How typical, someone complaining that education is so expensive and yet they are going to the most expensive school. This is ridiculous. This is like complaining that your Mercedes was too expensive when you could have bought a more reliable and efficient car for less money.
The article states that the average year at college today costs $18,497, yet this guy is going to rack up $400k in dept over 6 years? by my math that is $111k. This guy is spending 4 times the average and crying foul.
I personally know a dentist who worked part time all through school, he went to community college, state university, private grad/dental university and has the same diploma that this guy will have on his wall... The difference - the guy I know only had $40k in debt upon exiting school. He paid it off in two years (by the time he was 26). I'd say he did things the right way.
Is calculus ten times more expensive to teach than it was thirty years ago? Is Shakespeare? Supply is totally inelastic, because it's almost impossible to get a new college accredited (for profit schools all started with an already accredited school and expand them). Same with demand - not having a college degree puts you on a lower track that's almost impossible to break out of, and the connections, etc. mean that MOOC's aren't a good substitute for undergraduate education, while the professions all require specialized schooling afterwards.
So where does all the money go? At a non profit university it goes to faceless, non-teaching administrators to play the school prestige game, and maybe a little research.
A generation is broke because they're not paying for education, they're paying for education that can't be unbundled from empire-building.