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This article hints at schools inability to justify their ever increasing prices. Why is tuition continuing to rise so much faster than inflation? Is this simple

This article hints at schools inability to justify their ever increasing prices. Why is tuition continuing to rise so much faster than inflation? Is this simple supply and demand? Government backed loans create infinite supply to anyone who wants them? How can not for profit schools justify gauging their students?

crabasa 11y ago
1. Infinite supply of loans. Dept of Ed isn't even allowed to deny a loan to a person. 2. Culture since the Clinton era of "everyone should go to college". Massive cultural stigma for those who don't. 3. Colleges continue to justify costs based on lifetime earnings delta of people with degrees. Sadly, this data is backwards-looking and not indicative of what today's students should expect. The most heinous thing though is that student loans are exempted from American bankruptcy laws. The gov't will give you a loan, without doing any diligence on your ability to repay, but make it impossible to discharge your debt if you go bankrupt.
- blisterpeanuts 11y ago
  +1 for the role that guaranteed, subsidized student loans play. University financial counselors are very well versed at helping students obtain the maximum amount of loans, along with an obligatory brochure cautioning them not to over-borrow.
- jenshoop 11y ago
  Spot on. There's also been an increasing competitive push between universities to deliver "country club-esque" experiences to students, which further drives up cost. (Separately, let's not forget about the chaos of the educational publishing industry and the insane price points they command for modestly updated editions each year.) But I think items 1 and 2 above -- and a lack of education about what loans are and the value of a higher ed degree to the potential student -- are the true culprits here. There's a cultural expectation that all students will matriculate to college, and many high schools measure their success in terms of college attainment. Meanwhile, there's a lack of counseling/education for students, so few know that they're expected to repay loans and fewer explore the options (college and non-college) in front of them, and counselors would be working at cross-purposes with the secondary institution's goals if they advised against attending college. As demand for higher ed continues to grow, for-profit higher ed institutions continue to spring up to suck up federal loans and lower acceptance standards.
  - deleted 11y ago
    [deleted]
  - at-fates-hands 11y ago
    >> let's not forget about the chaos of the educational publishing industry and the insane price points they command for modestly updated editions each year.) I had a friend of mine who I knew when I was working at Thomson Reuters back when they still had their educational publishing wing of the company. He was in sales and said educational publishing is one of the biggest rackets nobody has heard of. He said he would do his due diligence and meet with professors and educators regularly during the year and let them know what the publishers were doing, but in the end, he said it was always a 50/50 roll of the dice if a professor or school bought the books he had been pitching them since they got the last version of the textbooks they ordered. He said it mainly came down to name recognition, and Thomson had that - but he also said it was similar to how agents woe professional athletes. Lots of perks, free dinners and baseball tickets to the professors making the decisions. He said as a sales person, they had a "client account" card where they could wine and dine clients and had a monthly stipend between 5K-10K specifically for this purpose. He said you'd be surprised how greedy these professors get once they know they can influence what books are going to be purchased for the following year and from what company.
  - zo1 11y ago
    >"There's also been an increasing competitive push between universities to deliver "country club-esque" experiences to students, which further drives up cost." That was my impression of University/College. Having only experienced what was shown in movies and the media, I was under the impression that college meant getting your own "apartment with a roommate". Unfortunately, in the non-US university I attended, it meant "4x6" meter room, two beds, two cupboards, two desks, and two-roommates. Then again, the entire year's tuition did only cost about $3500, about 9 years ago.
    - meric 11y ago
      I thought the same too. I didn't even have a room, and travelled to class by train from home.
- devbug 11y ago
  One argument I've encountered that holds water, at least with regards to being unable to discharge student debt: you can't repossess someone's mind. (Technically you can, but that'd be a messy affair.)
  - blisterpeanuts 11y ago
    Not yet, anyway.
  - commandar 11y ago
    That could be said for any form of unsecured debt.
  - crabasa 11y ago
    That's a terrible argument that I've never heard an actual policy-maker or politician make. Besides, unsecured debts are all around us, credit cards being the most common.
    - slg 11y ago
      But it is much harder to get other forms of unsecured debt. An 18 year old with no job and no credit history is going to have a hard time getting a credit card with a $5k limit let alone a $100k loan. The lack of being able to discharge the loan in bankruptcy needs to go hand in hand with the guaranteed availability of the loan. Instead of changing one of those things, we are are better off coming up with a new system like no upfront tuition and income based repayment plans.
      - crabasa 11y ago
        > An 18 year old with no job and no credit history is going to have a hard time getting a credit card with a $5k limit Wow, citation please? Credit card companies set up pop-up stands and give away free t-shirts to students who apply for their credit cards. The VAST majority of the applications are happily approved. Update: excellent citation kileywm. I guess my perception was a bit dated.
- landonshoop 11y ago
  Hear, hear. Agreed on point 2. I believe we are seeing this stigma evolve right before our eyes. College has been improperly marketed. I've mentioned this on other threads, but my view is that college should be used as a forum to learn, not a means to get a job. The reality though is the opposite. The pressure against this reality is mounting. I feel we're nearing the point where one is better off going straight into the workforce to receive on-the-job training instead of pursuing a college degree. In other words, the market forces are starting to take effect. But do we need to fast track this shift in mentality? If so, how? How much do we leave up to the invisible hand to flesh this issue out and how much should the onus lie on third parties (e.g. the end of federal government loan subsidies, corporations, etc)?
- eanzenberg 11y ago
  >> The gov't will give you a loan, without doing any diligence on your ability to repay, but make it impossible to discharge your debt if you go bankrupt. No due diligence.. guaranteed loan.. cannot be discharged in bankruptcy. Makes sense to me. If the gov't could discriminate on who it loans to for risk assessment then that's a different story.
  - Shivetya 11y ago
    that plus they don't necessarily restrict the loans with regards to the education you are receiving. it is one thing to go into a field that is experiencing good growth it is another to enter one that is saturated or quickly saturating. It has always been my belief that if government is going to provide loans it should set limits on the cost of the education it is taking the risk for. It already sets limits on medical care through reimbursement rates, how hard would it be to limit course costs? The means test should be on what you are receiving, not necessarily who is receiving it.
    - kuschku 11y ago
      In Germany, it’s simple: 1. If your parents earn enough to finance you studying, you won’t get a loan 2. The loan is limited to 800$ a month 3. If you fail too many courses, the loan is cancelled. But: 4. You only have to pay back in months in which you earn over 30k€ per year This allows the loans to be a lot less risky. I’d argue this is a much better system than what I read about the US tuition system, especially for the students. (Obviously, the large supply of free governmentally paid universities help drive the price down, too.)
      - jimbokun 11y ago
        "I’d argue this is a much better system than what I read about the US tuition system, especially for the students." As an American, it would be difficult to engineer a worse tuition system than ours.
        kuschku 11y ago
- noonespecial 11y ago
  The loans are the key to the whole mess. So long as the loan is guaranteed to all and non-dischargeable through bankruptcy, the cost will tend to rise to match the total expected lifetime earnings the education enables. In short the loan system is transferring the benefits of the education away from the students and allowing the institutions to take it for themselves instead.
  - crabasa 11y ago
    The cost will tend to rise to match the total expected incremental lifetime earning, discounted to the present value. Personally, I think we've already passed that point. Would love to see some more research here.
    - fancyketchup 11y ago
      Wait, really? The incremental lifetime earning from a Bachelor's degree is something like 0.5 to 1.5 million dollars[1]. The cost of attending college could double at least once before the ROI goes negative. [1] https://cew.georgetown.edu/wp-content/uploads/2014/11/collegepayoff-complete.pdf https://cew.georgetown.edu/wp-content/uploads/2014/11/colleg...
      - neil1 11y ago
        You're forgetting about opportunity cost and the salary plus job advancement that you could achieve in the time you are in college
        fancyketchup 11y ago
        The page I cited actually breaks down lifetime earnings by age (a.k.a. "annual income"). It's true that non-college graduates get an earlier start on savings, but the overall trend is that their annual income starts to decline as they get closer to retirement age (they peak in their mid to late 40's). You have to assume totally unrealistic investment gains in the first four years to make up for the $500k less total income.
- zxcvvcxz 11y ago
  > 3. Colleges continue to justify costs based on lifetime earnings delta of people with degrees. Sadly, this data is backwards-looking and not indicative of what today's students should expect. Not only that, it's downright bullshit. I remember seeing once a comparison. Non college degree average salary: let's say it's 30K. College degree: 40K. Instead of college, take those 4 years and at least $50K of educational expenses and invest in the S&P 500. Do nothing. Earn more over your lifetime that the more sophisticated 40K college graduate. Or better yet, take that 50K, use the plethora of free online learning resources and become an entrepreneur. For a large portion of the population, college is simply not worth it.
  - Retra 11y ago
    What 50K? Are you telling me I could've applied for 50K in government-issued student loans and then turned around and spent that on a free online school and started a business?
  - CognitiveLens 11y ago
    Actual data from the US: https://cew.georgetown.edu/cew-reports/goodjobsareback/ https://cew.georgetown.edu/cew-reports/goodjobsareback/ of the 2.9 million "good jobs" (i.e. full-time, high paying with benefits) created since 2010, 2.8 million have gone to people with college degrees. It fun to say that you don't need a degree to get a good, high-paying, satisfying job, and there are plenty of anecdotal examples to reference, but the data clearly indicate that the odds are not in your favor if you choose an alternative path, at least in the US. I suspect that software engineering and some related industries might be a little more degree-agnostic, but that's far from the norm.
- tn13 11y ago
  I totally understand this aspect but what I do not understand is why anyone would ever pay $150K for a media studies degree or a degree in baking. Are Americans that stupid to pursue meaningless education at such price ?
- deleted 11y ago
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seibelj 11y ago
I went to Boston University for my undergrad degree, one of the most expensive schools in the USA. Current tuition / room / board is $63k, and another $3k is estimated for expenses [1]. If you could lock in these rates, a 4-year degree would be $264k. But that is assuming a lock-in. Costs increased 3.7% this year [2]. If there was a 3.7% increase every year during your 4 years, you would pay $279k for a 4 year degree. This is a $15k increase over 4 years. What's even worse, because of the magic of compound interest, only 9 years after you graduate, yearly costs would be $102k per year. I personally see this as insanity. It will have to self correct itself, because no one can afford those fees. So how does BU get away with it now? Primarily through allowing any foreigner with the ability to pay in, regardless of their educational merits. BU has a massive amount of Asian, Indian, Eastern European, and Middle Eastern students who pay the full costs. Anecdotally, a man in my freshman dorm was the young scion of a wealthy family from Dubai, worth over $100 million. US students rarely pay the full tuition, which is why the outrage isn't so large. [1] http://www.bu.edu/admissions/admitted/tuition-and-fees/ http://www.bu.edu/admissions/admitted/tuition-and-fees/ [2] http://www.bu.edu/today/2015/bu-tuition-and-fees-to-increase-3-7-percent/ http://www.bu.edu/today/2015/bu-tuition-and-fees-to-increase...
- roymurdock 11y ago
  BU class of 2018 is only 22% international [1]. Although it is true that most foreign students are wealthy and pay full tuition, [2] I think you're discrediting how much rich American parents (78% of population) are willing to pay to get their children a good undergrad degree. Would be interested to see stats on how many American students receive aid, and what the average and median aid packages are. [1] http://www.bu.edu/admissions/about-bu/ http://www.bu.edu/admissions/about-bu/ [2] http://www.bu.edu/finaid/apply/international/ http://www.bu.edu/finaid/apply/international/
twoodfin 11y ago
It's important to realize that true out of pocket costs for the median student have not grown nearly as fast as "sticker price" tuition[1]. That being said, easy government loan money and a growing pool of students demanding a much-slower-growing number of slots at "well regarded" private universities has made it easy to keep ramping up the price. [1] http://www.nytimes.com/2014/07/29/upshot/how-the-government-exaggerates-the-cost-of-college.html?_r=1 http://www.nytimes.com/2014/07/29/upshot/how-the-government-...
marcoperaza 11y ago
Administrative bloat is the culprit on the spending end. You'd think that the increased spending would go to hiring professors and improving academic life. But instead, the administrative bureaucracies are sucking up all of the money and wasting it on pet projects and excess labor. Basically, all of the mismanagement that people associate with government applies to colleges as well. They have guaranteed revenue, so they have no incentive to control costs. Project planning and approval are more about politics than about cost and value. Leadership is weak and more interested in covering their own asses than in making the right decisions. There's constant mission creep, with colleges strangely obsessed with running all aspects of students' lives. Adding new spending is easy, but eliminating existing programs is near-impossible. The workers are unionized, and are often able to recruit naive students to their protests against any cost-control measures. At my college, there was an administrative department for every kind of minority, each with its own budget and staff. What goes in inside of these departments is its own scandal. Some were far-left outfits that spread the toxic identity politics that's been in the news lately. That's not the kind of instruction that parents think they're paying for. The government needs to stop its irresponsible loan and grant programs. Colleges need to refocus on academics and basic services for students. The only way they will do that is if they are forced to justify their costs on the market.
tzs 11y ago
> Why is tuition continuing to rise so much faster than inflation? Is this simple supply and demand? Government backed loans create infinite supply to anyone who wants them? I'm not convinced government backed loans have much to do with it. Here's a table comparing Stanford tuition growth to inflation over periods of 10 years. Each row represents the 10 years ending in the year given in the first column. Second column is how much inflation multiplied prices over that 10 years. Third column is how much Stanford tuition multiplied over that 10 years. Final column is the ratio of the Stanford column and the inflation column. Year Inflation Stanford Ratio 1930 0.8 2.5 3.0 1940 0.8 1.2 1.4 1950 1.7 1.9 1.1 1960 1.2 1.5 1.2 1970 1.3 2.4 1.8 1980 2.1 2.6 1.2 1990 1.6 2.3 1.4 2000 1.3 1.7 1.3 2010 1.3 1.6 1.3 Government backed student loans didn't really start taking off until the mid '60s, so maybe some of the Stanford spike in the 10 years ending in 1970 can be attributed to that, but after that it falls back to its "normal" faster-than-inflation rates. It would be interesting to compare to other schools, in particular to other top private schools, top state schools, and other private and state schools, because it is quite possible that factors that can affect tuition affect it differently at different kinds of schools. My Googling only found sufficient historical tuition data for Stanford which is why that's the only one I was able to compare against inflation. Inflation data: http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ http://www.usinflationcalculator.com/inflation/historical-in... Stanford tuition data: http://facts.stanford.edu/administration/finances http://facts.stanford.edu/administration/finances
- crabasa 11y ago
  You've picked a very unfair data set. Stanford is one of the top universities in the country and has a $22B endowment [1]. The could choose to simply make tuition free if they really wanted to. Stanford optimizes everything they do (including pricing) to attract the best and brightest. You're also only looking at cost, which is only half of the equation. You also need to scrutinize lifetime earnings of graduates. For Stanford, this metric would obviously be excellent (see: endowment). For many of the mediocre to bad universities in the United States, this metric is likely terrible. [1]: http://facts.stanford.edu/administration/finances http://facts.stanford.edu/administration/finances
ThrustVectoring 11y ago
There's several overlapping causes. 1. Services in general don't benefit from productivity improvements like goods do. As productivity goes up, services tend to get more expensive in terms of physical goods. Education is a service (as is health care, which is also out-pacing inflation). 2. Saving is extraordinarily difficult on a national and generational scale. Outside of saving easy-to-extract natural resources (oil) for later, basically the only other option is to make the next generation promise to make things later. This is why the lending standards are like they are for student and home loans - the economic pressures of retirement planning demand it. 3. Education is a positional good - you only need a degree for entry level jobs because you're competing against degree holders. Since we're getting better at providing absolute goods for our society, more resources are getting freed up to chase positional goods. 4. A good chunk of the price increases are getting made up with corresponding scholarships and need-based awards. Universities are less trying to gouge all their students, and more realizing that they can pull much more money from higher-income students. This is especially true for Ivy League and other prestigious schools.
- humanrebar 11y ago
  > Services in general don't benefit from productivity improvements like goods do Very not true. Productivity for paralegals, accountants, and programmers has certainly risen over the decades. We could define education as "person at chalkboard talking about things to other persons sitting at desks", which probably doesn't scale well. There's no reason to think that, in abstract, distributing information won't scale well. > Saving is extraordinarily difficult on a national and generational scale. Exactly. Leaving money to the next generation without getting a huge tax hit is non-trivial. If I got cancer tomorrow, I'm not deciding between leaving my daughter a college fund or going through chemo to eke out five more years. I'm "not paying" for the healthcare, so I'll spend whatever I can on lasting a couple extra months. I certainly can't opt to forgo treatment to leave $250k to my grandkids.
  - ThrustVectoring 11y ago
    I may have used the wrong phrasing for generational - I meant it much less in terms of inheritance, and more in terms of "doing things now that mean I have food on the table forty years from now." Like, if you want to do things now so that someone staffs your nursing home when you're old, the net effect is that you're trading real goods and services for "I will do valuable things for society later, such as staffing a nursing home." If you aren't trading current goods for future promises of them, then you're doing things like building machines and roads that deprecate and require maintenance, or growing crops that rot, or otherwise making stuff that won't be very helpful when you're older. And since a lot of people want to be taken care of when they're older, and they're making tons of things that people today want, there's absolutely zero surprise that they're extending shitloads of credit (especially to young people, and college/housing in particular).
muzz 11y ago
Actual amount paid is very different from sticker price. It's basically sliding-scale ie wealthy students pay full price to and poor students pay very little.
curun1r 11y ago
I see it as the natural consequence of the shift in mindset as to the primary beneficiary of a college education that happened during the Reagan era. It may seem bizarre to us now but, prior to that, students having a college education was viewed as being beneficial to society first and to the student second. And the funding model where states paid for almost everything followed from that. But once you make the mental leap from it being about a public good to it being about an individual good, the arbitrage starts, just as it does for any item where the cost is significantly below its value. Colleges would have faced a massive backlash if they'd tried to just adjust directly to the point of equilibrium, so they've been moving to that point over the past ~30 years.
jimbokun 11y ago
"How can not for profit schools justify gauging their students?" In the U.S. everything is for profit. It's just that some of the for-profits find it beneficial to file as a non-profit for the benefits it confers. Look at just about any big American university or hospital. You have marketing, customers, revenue maximization, ruthlessly driving down labor costs, and as much cash as possible captured by the CEO (er, president) and other high level executives. The great thing about running a business like this, is how the U.S. government earmarks massive amounts of the national GDP, which can only be used on your product. School loans, as others have mentioned, and Medicare/Medicaid for health care.
asolove 11y ago
Students are advised by parents and counsellors whose experience is one generation behind but believe they are current. My wife teaches high schoolers and a huge percentage of their parents think admission to an out of state private school guarantees a solid career. She (an older millennial) is often the only voice in favor of a strong in state public school or picking a major that actually leads to a job. Prediction: the problem gets worse until the leading edge of millennials have high schoolers of their own.

crabasa 11y ago

1. Infinite supply of loans. Dept of Ed isn't even allowed to deny a loan to a person. 2. Culture since the Clinton era of "everyone should go to college". Massive cultural stigma for those who don't. 3. Colleges continue to justify costs based on lifetime earnings delta of people with degrees. Sadly, this data is backwards-looking and not indicative of what today's students should expect. The most heinous thing though is that student loans are exempted from American bankruptcy laws. The gov't will give you a loan, without doing any diligence on your ability to repay, but make it impossible to discharge your debt if you go bankrupt.

blisterpeanuts 11y ago
+1 for the role that guaranteed, subsidized student loans play. University financial counselors are very well versed at helping students obtain the maximum amount of loans, along with an obligatory brochure cautioning them not to over-borrow.
jenshoop 11y ago
Spot on. There's also been an increasing competitive push between universities to deliver "country club-esque" experiences to students, which further drives up cost. (Separately, let's not forget about the chaos of the educational publishing industry and the insane price points they command for modestly updated editions each year.) But I think items 1 and 2 above -- and a lack of education about what loans are and the value of a higher ed degree to the potential student -- are the true culprits here. There's a cultural expectation that all students will matriculate to college, and many high schools measure their success in terms of college attainment. Meanwhile, there's a lack of counseling/education for students, so few know that they're expected to repay loans and fewer explore the options (college and non-college) in front of them, and counselors would be working at cross-purposes with the secondary institution's goals if they advised against attending college. As demand for higher ed continues to grow, for-profit higher ed institutions continue to spring up to suck up federal loans and lower acceptance standards.
- deleted 11y ago
  [deleted]
- at-fates-hands 11y ago
  >> let's not forget about the chaos of the educational publishing industry and the insane price points they command for modestly updated editions each year.) I had a friend of mine who I knew when I was working at Thomson Reuters back when they still had their educational publishing wing of the company. He was in sales and said educational publishing is one of the biggest rackets nobody has heard of. He said he would do his due diligence and meet with professors and educators regularly during the year and let them know what the publishers were doing, but in the end, he said it was always a 50/50 roll of the dice if a professor or school bought the books he had been pitching them since they got the last version of the textbooks they ordered. He said it mainly came down to name recognition, and Thomson had that - but he also said it was similar to how agents woe professional athletes. Lots of perks, free dinners and baseball tickets to the professors making the decisions. He said as a sales person, they had a "client account" card where they could wine and dine clients and had a monthly stipend between 5K-10K specifically for this purpose. He said you'd be surprised how greedy these professors get once they know they can influence what books are going to be purchased for the following year and from what company.
- zo1 11y ago
  >"There's also been an increasing competitive push between universities to deliver "country club-esque" experiences to students, which further drives up cost." That was my impression of University/College. Having only experienced what was shown in movies and the media, I was under the impression that college meant getting your own "apartment with a roommate". Unfortunately, in the non-US university I attended, it meant "4x6" meter room, two beds, two cupboards, two desks, and two-roommates. Then again, the entire year's tuition did only cost about $3500, about 9 years ago.
  - meric 11y ago
    I thought the same too. I didn't even have a room, and travelled to class by train from home.
devbug 11y ago
One argument I've encountered that holds water, at least with regards to being unable to discharge student debt: you can't repossess someone's mind. (Technically you can, but that'd be a messy affair.)
- blisterpeanuts 11y ago
  Not yet, anyway.
- commandar 11y ago
  That could be said for any form of unsecured debt.
- crabasa 11y ago
  That's a terrible argument that I've never heard an actual policy-maker or politician make. Besides, unsecured debts are all around us, credit cards being the most common.
  - slg 11y ago
    But it is much harder to get other forms of unsecured debt. An 18 year old with no job and no credit history is going to have a hard time getting a credit card with a $5k limit let alone a $100k loan. The lack of being able to discharge the loan in bankruptcy needs to go hand in hand with the guaranteed availability of the loan. Instead of changing one of those things, we are are better off coming up with a new system like no upfront tuition and income based repayment plans.
    - crabasa 11y ago
      > An 18 year old with no job and no credit history is going to have a hard time getting a credit card with a $5k limit Wow, citation please? Credit card companies set up pop-up stands and give away free t-shirts to students who apply for their credit cards. The VAST majority of the applications are happily approved. Update: excellent citation kileywm. I guess my perception was a bit dated.
landonshoop 11y ago
Hear, hear. Agreed on point 2. I believe we are seeing this stigma evolve right before our eyes. College has been improperly marketed. I've mentioned this on other threads, but my view is that college should be used as a forum to learn, not a means to get a job. The reality though is the opposite. The pressure against this reality is mounting. I feel we're nearing the point where one is better off going straight into the workforce to receive on-the-job training instead of pursuing a college degree. In other words, the market forces are starting to take effect. But do we need to fast track this shift in mentality? If so, how? How much do we leave up to the invisible hand to flesh this issue out and how much should the onus lie on third parties (e.g. the end of federal government loan subsidies, corporations, etc)?
eanzenberg 11y ago
>> The gov't will give you a loan, without doing any diligence on your ability to repay, but make it impossible to discharge your debt if you go bankrupt. No due diligence.. guaranteed loan.. cannot be discharged in bankruptcy. Makes sense to me. If the gov't could discriminate on who it loans to for risk assessment then that's a different story.
- Shivetya 11y ago
  that plus they don't necessarily restrict the loans with regards to the education you are receiving. it is one thing to go into a field that is experiencing good growth it is another to enter one that is saturated or quickly saturating. It has always been my belief that if government is going to provide loans it should set limits on the cost of the education it is taking the risk for. It already sets limits on medical care through reimbursement rates, how hard would it be to limit course costs? The means test should be on what you are receiving, not necessarily who is receiving it.
  - kuschku 11y ago
    In Germany, it’s simple: 1. If your parents earn enough to finance you studying, you won’t get a loan 2. The loan is limited to 800$ a month 3. If you fail too many courses, the loan is cancelled. But: 4. You only have to pay back in months in which you earn over 30k€ per year This allows the loans to be a lot less risky. I’d argue this is a much better system than what I read about the US tuition system, especially for the students. (Obviously, the large supply of free governmentally paid universities help drive the price down, too.)
    - jimbokun 11y ago
      "I’d argue this is a much better system than what I read about the US tuition system, especially for the students." As an American, it would be difficult to engineer a worse tuition system than ours.
      - kuschku 11y ago
noonespecial 11y ago
The loans are the key to the whole mess. So long as the loan is guaranteed to all and non-dischargeable through bankruptcy, the cost will tend to rise to match the total expected lifetime earnings the education enables. In short the loan system is transferring the benefits of the education away from the students and allowing the institutions to take it for themselves instead.
- crabasa 11y ago
  The cost will tend to rise to match the total expected incremental lifetime earning, discounted to the present value. Personally, I think we've already passed that point. Would love to see some more research here.
  - fancyketchup 11y ago
    Wait, really? The incremental lifetime earning from a Bachelor's degree is something like 0.5 to 1.5 million dollars[1]. The cost of attending college could double at least once before the ROI goes negative. [1] https://cew.georgetown.edu/wp-content/uploads/2014/11/collegepayoff-complete.pdf https://cew.georgetown.edu/wp-content/uploads/2014/11/colleg...
    - neil1 11y ago
      You're forgetting about opportunity cost and the salary plus job advancement that you could achieve in the time you are in college
      - fancyketchup 11y ago
        The page I cited actually breaks down lifetime earnings by age (a.k.a. "annual income"). It's true that non-college graduates get an earlier start on savings, but the overall trend is that their annual income starts to decline as they get closer to retirement age (they peak in their mid to late 40's). You have to assume totally unrealistic investment gains in the first four years to make up for the $500k less total income.
zxcvvcxz 11y ago
> 3. Colleges continue to justify costs based on lifetime earnings delta of people with degrees. Sadly, this data is backwards-looking and not indicative of what today's students should expect. Not only that, it's downright bullshit. I remember seeing once a comparison. Non college degree average salary: let's say it's 30K. College degree: 40K. Instead of college, take those 4 years and at least $50K of educational expenses and invest in the S&P 500. Do nothing. Earn more over your lifetime that the more sophisticated 40K college graduate. Or better yet, take that 50K, use the plethora of free online learning resources and become an entrepreneur. For a large portion of the population, college is simply not worth it.
- Retra 11y ago
  What 50K? Are you telling me I could've applied for 50K in government-issued student loans and then turned around and spent that on a free online school and started a business?
- CognitiveLens 11y ago
  Actual data from the US: https://cew.georgetown.edu/cew-reports/goodjobsareback/ https://cew.georgetown.edu/cew-reports/goodjobsareback/ of the 2.9 million "good jobs" (i.e. full-time, high paying with benefits) created since 2010, 2.8 million have gone to people with college degrees. It fun to say that you don't need a degree to get a good, high-paying, satisfying job, and there are plenty of anecdotal examples to reference, but the data clearly indicate that the odds are not in your favor if you choose an alternative path, at least in the US. I suspect that software engineering and some related industries might be a little more degree-agnostic, but that's far from the norm.
tn13 11y ago
I totally understand this aspect but what I do not understand is why anyone would ever pay $150K for a media studies degree or a degree in baking. Are Americans that stupid to pursue meaningless education at such price ?
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seibelj 11y ago

I went to Boston University for my undergrad degree, one of the most expensive schools in the USA. Current tuition / room / board is $63k, and another $3k is estimated for expenses [1]. If you could lock in these rates, a 4-year degree would be $264k. But that is assuming a lock-in. Costs increased 3.7% this year [2]. If there was a 3.7% increase every year during your 4 years, you would pay $279k for a 4 year degree. This is a $15k increase over 4 years. What's even worse, because of the magic of compound interest, only 9 years after you graduate, yearly costs would be $102k per year. I personally see this as insanity. It will have to self correct itself, because no one can afford those fees. So how does BU get away with it now? Primarily through allowing any foreigner with the ability to pay in, regardless of their educational merits. BU has a massive amount of Asian, Indian, Eastern European, and Middle Eastern students who pay the full costs. Anecdotally, a man in my freshman dorm was the young scion of a wealthy family from Dubai, worth over $100 million. US students rarely pay the full tuition, which is why the outrage isn't so large. [1] http://www.bu.edu/admissions/admitted/tuition-and-fees/ http://www.bu.edu/admissions/admitted/tuition-and-fees/ [2] http://www.bu.edu/today/2015/bu-tuition-and-fees-to-increase-3-7-percent/ http://www.bu.edu/today/2015/bu-tuition-and-fees-to-increase...

roymurdock 11y ago
BU class of 2018 is only 22% international [1]. Although it is true that most foreign students are wealthy and pay full tuition, [2] I think you're discrediting how much rich American parents (78% of population) are willing to pay to get their children a good undergrad degree. Would be interested to see stats on how many American students receive aid, and what the average and median aid packages are. [1] http://www.bu.edu/admissions/about-bu/ http://www.bu.edu/admissions/about-bu/ [2] http://www.bu.edu/finaid/apply/international/ http://www.bu.edu/finaid/apply/international/

twoodfin 11y ago

It's important to realize that true out of pocket costs for the median student have not grown nearly as fast as "sticker price" tuition[1]. That being said, easy government loan money and a growing pool of students demanding a much-slower-growing number of slots at "well regarded" private universities has made it easy to keep ramping up the price. [1] http://www.nytimes.com/2014/07/29/upshot/how-the-government-exaggerates-the-cost-of-college.html?_r=1 http://www.nytimes.com/2014/07/29/upshot/how-the-government-...

marcoperaza 11y ago

Administrative bloat is the culprit on the spending end. You'd think that the increased spending would go to hiring professors and improving academic life. But instead, the administrative bureaucracies are sucking up all of the money and wasting it on pet projects and excess labor. Basically, all of the mismanagement that people associate with government applies to colleges as well. They have guaranteed revenue, so they have no incentive to control costs. Project planning and approval are more about politics than about cost and value. Leadership is weak and more interested in covering their own asses than in making the right decisions. There's constant mission creep, with colleges strangely obsessed with running all aspects of students' lives. Adding new spending is easy, but eliminating existing programs is near-impossible. The workers are unionized, and are often able to recruit naive students to their protests against any cost-control measures. At my college, there was an administrative department for every kind of minority, each with its own budget and staff. What goes in inside of these departments is its own scandal. Some were far-left outfits that spread the toxic identity politics that's been in the news lately. That's not the kind of instruction that parents think they're paying for. The government needs to stop its irresponsible loan and grant programs. Colleges need to refocus on academics and basic services for students. The only way they will do that is if they are forced to justify their costs on the market.

tzs 11y ago

> Why is tuition continuing to rise so much faster than inflation? Is this simple supply and demand? Government backed loans create infinite supply to anyone who wants them? I'm not convinced government backed loans have much to do with it. Here's a table comparing Stanford tuition growth to inflation over periods of 10 years. Each row represents the 10 years ending in the year given in the first column. Second column is how much inflation multiplied prices over that 10 years. Third column is how much Stanford tuition multiplied over that 10 years. Final column is the ratio of the Stanford column and the inflation column. Year Inflation Stanford Ratio 1930 0.8 2.5 3.0 1940 0.8 1.2 1.4 1950 1.7 1.9 1.1 1960 1.2 1.5 1.2 1970 1.3 2.4 1.8 1980 2.1 2.6 1.2 1990 1.6 2.3 1.4 2000 1.3 1.7 1.3 2010 1.3 1.6 1.3 Government backed student loans didn't really start taking off until the mid '60s, so maybe some of the Stanford spike in the 10 years ending in 1970 can be attributed to that, but after that it falls back to its "normal" faster-than-inflation rates. It would be interesting to compare to other schools, in particular to other top private schools, top state schools, and other private and state schools, because it is quite possible that factors that can affect tuition affect it differently at different kinds of schools. My Googling only found sufficient historical tuition data for Stanford which is why that's the only one I was able to compare against inflation. Inflation data: http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ http://www.usinflationcalculator.com/inflation/historical-in... Stanford tuition data: http://facts.stanford.edu/administration/finances http://facts.stanford.edu/administration/finances

crabasa 11y ago
You've picked a very unfair data set. Stanford is one of the top universities in the country and has a $22B endowment [1]. The could choose to simply make tuition free if they really wanted to. Stanford optimizes everything they do (including pricing) to attract the best and brightest. You're also only looking at cost, which is only half of the equation. You also need to scrutinize lifetime earnings of graduates. For Stanford, this metric would obviously be excellent (see: endowment). For many of the mediocre to bad universities in the United States, this metric is likely terrible. [1]: http://facts.stanford.edu/administration/finances http://facts.stanford.edu/administration/finances

ThrustVectoring 11y ago

There's several overlapping causes. 1. Services in general don't benefit from productivity improvements like goods do. As productivity goes up, services tend to get more expensive in terms of physical goods. Education is a service (as is health care, which is also out-pacing inflation). 2. Saving is extraordinarily difficult on a national and generational scale. Outside of saving easy-to-extract natural resources (oil) for later, basically the only other option is to make the next generation promise to make things later. This is why the lending standards are like they are for student and home loans - the economic pressures of retirement planning demand it. 3. Education is a positional good - you only need a degree for entry level jobs because you're competing against degree holders. Since we're getting better at providing absolute goods for our society, more resources are getting freed up to chase positional goods. 4. A good chunk of the price increases are getting made up with corresponding scholarships and need-based awards. Universities are less trying to gouge all their students, and more realizing that they can pull much more money from higher-income students. This is especially true for Ivy League and other prestigious schools.

humanrebar 11y ago
> Services in general don't benefit from productivity improvements like goods do Very not true. Productivity for paralegals, accountants, and programmers has certainly risen over the decades. We could define education as "person at chalkboard talking about things to other persons sitting at desks", which probably doesn't scale well. There's no reason to think that, in abstract, distributing information won't scale well. > Saving is extraordinarily difficult on a national and generational scale. Exactly. Leaving money to the next generation without getting a huge tax hit is non-trivial. If I got cancer tomorrow, I'm not deciding between leaving my daughter a college fund or going through chemo to eke out five more years. I'm "not paying" for the healthcare, so I'll spend whatever I can on lasting a couple extra months. I certainly can't opt to forgo treatment to leave $250k to my grandkids.
- ThrustVectoring 11y ago
  I may have used the wrong phrasing for generational - I meant it much less in terms of inheritance, and more in terms of "doing things now that mean I have food on the table forty years from now." Like, if you want to do things now so that someone staffs your nursing home when you're old, the net effect is that you're trading real goods and services for "I will do valuable things for society later, such as staffing a nursing home." If you aren't trading current goods for future promises of them, then you're doing things like building machines and roads that deprecate and require maintenance, or growing crops that rot, or otherwise making stuff that won't be very helpful when you're older. And since a lot of people want to be taken care of when they're older, and they're making tons of things that people today want, there's absolutely zero surprise that they're extending shitloads of credit (especially to young people, and college/housing in particular).

muzz 11y ago

Actual amount paid is very different from sticker price. It's basically sliding-scale ie wealthy students pay full price to and poor students pay very little.

curun1r 11y ago

I see it as the natural consequence of the shift in mindset as to the primary beneficiary of a college education that happened during the Reagan era. It may seem bizarre to us now but, prior to that, students having a college education was viewed as being beneficial to society first and to the student second. And the funding model where states paid for almost everything followed from that. But once you make the mental leap from it being about a public good to it being about an individual good, the arbitrage starts, just as it does for any item where the cost is significantly below its value. Colleges would have faced a massive backlash if they'd tried to just adjust directly to the point of equilibrium, so they've been moving to that point over the past ~30 years.

jimbokun 11y ago

"How can not for profit schools justify gauging their students?" In the U.S. everything is for profit. It's just that some of the for-profits find it beneficial to file as a non-profit for the benefits it confers. Look at just about any big American university or hospital. You have marketing, customers, revenue maximization, ruthlessly driving down labor costs, and as much cash as possible captured by the CEO (er, president) and other high level executives. The great thing about running a business like this, is how the U.S. government earmarks massive amounts of the national GDP, which can only be used on your product. School loans, as others have mentioned, and Medicare/Medicaid for health care.

asolove 11y ago

Students are advised by parents and counsellors whose experience is one generation behind but believe they are current. My wife teaches high schoolers and a huge percentage of their parents think admission to an out of state private school guarantees a solid career. She (an older millennial) is often the only voice in favor of a strong in state public school or picking a major that actually leads to a job. Prediction: the problem gets worse until the leading edge of millennials have high schoolers of their own.