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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 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.
  - crabasa 11y ago
    Here's a study that puts it closer to $500 for women and $800k for men: https://news.ku.edu/2015/06/19/ku-study-gives-more-accurate-picture-value-college-education https://news.ku.edu/2015/06/19/ku-study-gives-more-accurate-... But these studies are all flawed because they are based on historical data when 4-year degrees were scarcer. In an era when many graduates can't get a job or end up with one that does not require a degree (i.e. barista) it's obvious that their ROI prospects are grim.
    - fancyketchup 11y ago
      Ok, that's fine. It's still within the range I mentioned above. But, I'll just note for the record that you rounded $587k down to $500k, and $840k down to $800k. > But these studies are all flawed because they are based on historical data when 4-year degrees were scarcer. In an era when many graduates can't get a job or end up with one that does not require a degree (i.e. barista) it's obvious that their ROI prospects are grim. I don't think that's at all obvious. We are rapidly approaching the moment [1] when over half of the U.S. population has some sort of college degree, and already 2/3rds have at least "some college" education. Applying to a front-line retail job with a Bachelor's degree no longer marks you as desperate and over-qualified. You are assuming that an employer will hire a person with only a high school diploma when she can just as easily hire a person with an associate's or bachelor's for the same wage. That will put downward pressure on wages for those without a college degree. It may very well be the case that sending "everyone" to college does nothing more than depress the wages of those with only a high school education. However, that is not an argument against the positive ROI of college. Spending $100k to avoid $200k in lost wages is still a positive return. Finding a job with a B.A. or B.Sc. may be difficult, but finding a job with only a high school diploma is even more so. [1] https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States https://en.wikipedia.org/wiki/Educational_attainment_in_the_...
api 11y ago
"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." That is by far the most concise summary I've ever read of the nature of the problem. Would you say that the same thing is true to a lesser extent in the housing market? It's not as bad, but there's a huge amount of loan subsidy there that's driving the price of housing crazy.
- crabasa 11y ago
  It's a nice analogy, but at least in the housing market you're equally likely to be a winner (sell before crash) as a loser (buy before crash).
  - api 11y ago
    Is there a general principle here? Do loan subsidies lead to a condition in which the loan recipients are able to reap the benefits intended for loan originators through progressive inflation and risk transfer?
    - noonespecial 11y ago
      I think what we've got here is a misalignment of the participants' roles courtesy of unintended consequences. The recipients have become the schools, deriving all of the benefits with no risk. The originators have escaped their traditional role as gatekeepers and risk takers. That leaves the students for all of the risk to concentrate on while they receive few of the benefits. Essentially becoming sharecroppers of their own minds.

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.
- crabasa 11y ago
  Here's a study that puts it closer to $500 for women and $800k for men: https://news.ku.edu/2015/06/19/ku-study-gives-more-accurate-picture-value-college-education https://news.ku.edu/2015/06/19/ku-study-gives-more-accurate-... But these studies are all flawed because they are based on historical data when 4-year degrees were scarcer. In an era when many graduates can't get a job or end up with one that does not require a degree (i.e. barista) it's obvious that their ROI prospects are grim.
  - fancyketchup 11y ago
    Ok, that's fine. It's still within the range I mentioned above. But, I'll just note for the record that you rounded $587k down to $500k, and $840k down to $800k. > But these studies are all flawed because they are based on historical data when 4-year degrees were scarcer. In an era when many graduates can't get a job or end up with one that does not require a degree (i.e. barista) it's obvious that their ROI prospects are grim. I don't think that's at all obvious. We are rapidly approaching the moment [1] when over half of the U.S. population has some sort of college degree, and already 2/3rds have at least "some college" education. Applying to a front-line retail job with a Bachelor's degree no longer marks you as desperate and over-qualified. You are assuming that an employer will hire a person with only a high school diploma when she can just as easily hire a person with an associate's or bachelor's for the same wage. That will put downward pressure on wages for those without a college degree. It may very well be the case that sending "everyone" to college does nothing more than depress the wages of those with only a high school education. However, that is not an argument against the positive ROI of college. Spending $100k to avoid $200k in lost wages is still a positive return. Finding a job with a B.A. or B.Sc. may be difficult, but finding a job with only a high school diploma is even more so. [1] https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States https://en.wikipedia.org/wiki/Educational_attainment_in_the_...

api 11y ago

"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." That is by far the most concise summary I've ever read of the nature of the problem. Would you say that the same thing is true to a lesser extent in the housing market? It's not as bad, but there's a huge amount of loan subsidy there that's driving the price of housing crazy.

crabasa 11y ago
It's a nice analogy, but at least in the housing market you're equally likely to be a winner (sell before crash) as a loser (buy before crash).
- api 11y ago
  Is there a general principle here? Do loan subsidies lead to a condition in which the loan recipients are able to reap the benefits intended for loan originators through progressive inflation and risk transfer?
  - noonespecial 11y ago
    I think what we've got here is a misalignment of the participants' roles courtesy of unintended consequences. The recipients have become the schools, deriving all of the benefits with no risk. The originators have escaped their traditional role as gatekeepers and risk takers. That leaves the students for all of the risk to concentrate on while they receive few of the benefits. Essentially becoming sharecroppers of their own minds.