12 ms·

Government-guaranteed loans are a fantastic way to force prices to spiral out of control. The way student loans were before income-based repayment, we'd have e

by readams 11y ago

Government-guaranteed loans are a fantastic way to force prices to spiral out of control. The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present. With income-based repayment, where your loan balance is forgiven after 20 years, there is no limit to how high it can go. Government-subsidized mortages and mortgage interest deductions have a similarly terrible effect on housing, a basic good that government policy should try to make as cheap as possible. Instead, government policy is to make it as expensive as possible.

rm_-rf_slash 11y ago
On the other hand, government guarantees expand the available credit to consumers who would be just as likely to be shut out of homeownership (for example) by higher interest rates, save for a thunderous government program to ensure housing for every citizen. With the exception of the subprime mortgage crisis, it is usually a good way to help people become homeowners without too much taxpayer burden or onerous bureaucratic micromanagement.
- readams 11y ago
  That's exactly the sort of thinking that leads to this sort of problem. When you consider only first-order effects, many very bad ideas seem like a good idea. When you consider that all policy choices have second-order effects and unintended consequences, you can make more intelligent policy decisions.
  - rm_-rf_slash 11y ago
    Any policy can result in negative n-order effects as time passes. Postwar housing policy mostly worked well (if you were white). The global population was smaller and the devastation of Europe and Japan made America the sole economic superpower. So what makes sense (and actually gets hammered out by perennially bickering politicians) in the 50s might make sense today, it might not. But nothing in politics is correct forever. Just saying "consider second-order effects" without concrete evidence or a plan to mitigate changes in technology/laws/markets/social norms doesn't really add value.
    - readams 11y ago
      You're making my point for me :-) It is vital to consider higher-order effects and unintended consequences if you want to make good public policy. And not just "prove there are negative consequences:" it is incumbent on policy makers to understand these effects before enacting policy. Consider price controls, such as rent control. Problem: prices are too high. Solution: legislate lower prices. First-order effect: prices go down. Hooray! Second-order effect: shortages. Third-order effect: decline in investment and maintenance. End result after many years can be disastrous. You get Venezuela.
      - rm_-rf_slash 11y ago
        In a scope of logic alone, yes, you are absolutely correct. An example I like to raise regularly is the farm subsidies put in place by the Roosevelt Administration to prevent overproduction. Was there a better way for farms to stay in business and for food to be affordable to consumers? Maybe. But this way worked to solve problems created by the Great Depression. Now I'm sure as you know, farm subsidies now are sweeter than high fructose corn syrup. There is even sitting republican senator who makes millions from the federal government paying him to not plant cotton. Few can argue this policy still works as intended, but it so politically locked-in that it's almost impossible to shake out. Same with the tons of unnecessary military hardware and property sitting around solely because representatives in those districts want to be re-elected by their core constituencies. To me the problem isn't about getting it right the first time, it's about changing something that has outlived its usefulness when powerful beneficiaries fight to keep the wasteful status quo. A metaphor: bandages are useful for flesh wounds, but after the wound has healed the bandage must be removed and the skin must be cleaned or it will rot.
        readams 11y ago
        It seems we are in violent agreement :-)
- rconti 11y ago
  How so? As far as I can tell, the mortgage interest tax deduction only "benefits" those buying houses expensive enough for the interest to exceed the standard deduction (or who itemize for other reasons). And it doesn't even benefit them, because all buyers in the market can afford x% "more house" and hence the housing gets bid up by exactly that amount.
- Kinnard 11y ago
  That doesn't account for the access driven by the decrease in the price of housing that comes from removing the artificial credit subsidy. What you might call a "second-order" effect, though because it's an effect of "doing nothing" it's both more natural and more efficient. If anything, driving up prices(by subsidizing credit) such that houses can only be bought on credit and not outright does the most to increase housing inequities! Cuz we all know how that shit works :/
jazzyk 11y ago
This, a thousand times. What a lot of people do not understand, is that when demand for an asset goes down, prices come down and adjust to market (although in real-estate, the process takes a bit longer). The best way to promote home ownership is to make sure people can get decent paying jobs. Promote economic growth and stop outsourcing jobs.
- toomuchtodo 11y ago
  Also, stop subsidizing low interest rates and the mortgage interest tax deduction. These are further distortions in the housing market.
  - jazzyk 11y ago
    Absolutely. Many of my friends look at me as if I just lost my mind - "but, but... low interest rates are good for everybody, right?". It is an uphill battle, but I keep at it :-)
  - tcbawo 11y ago
    By low interest rates, do you mean Federal Funds, or the bond market? My impression is that mortgage rates tend to track the 10 year bond rate, given most people refi/sell before then. These and long term rates have been on a multi-decade decline. I'm not sure how much influence recent policy has had.
    - toomuchtodo 11y ago
      Federal GSEs (Fannie, Freddie, FHA) and the Federal Reserve's QE activities (artificially propping up housing).
- readams 11y ago
  People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters. I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries. There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development, of which foreign investment is one of the best sources. I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US. Once this is accomplished (and the challenges in front of us for doing so are enormous!), outsourced jobs won't be a problem. Rather than being opposed to trade and globalization (which are, frankly, unstoppable) we should be focused on mitigating losses for those affected. Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.
lsc 11y ago
while what you say makes intuitive sense, at least for the schools I want to go to? Tuition is extremely cheap for what it is. http://financialaid.stanford.edu/undergrad/budget/ http://financialaid.stanford.edu/undergrad/budget/ Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas. And while I've never owned a Tesla (or a college degree) I do imagine an undergrad from Stanford would be more fun than two Teslas, and it would certainly impress people more. If you are an area computer nerd, even one without any degree at all, two teslas is a reasonable thing to own on what you can expect to get paid. Berkeley? If you are an Engineer with no business ambitions, it's very nearly as good as Stanford (and some would argue better, but the majority view seems to be 'very nearly as good but not quite') Berkeley is under $15K/yr http://financialaid.berkeley.edu/cost-attendance http://financialaid.berkeley.edu/cost-attendance I would be super happy to pay twice that, if they'd let me in. That's the thing, I don't qualify for either of those institutions; and I can't imagine anyone who could compete with me job wise having a hard time paying for either one. Of course, I understand that economics are vastly different outside of the computer industry, but I can't really speak to that, because I've never lived in that world. I also think that the balance gets way different as you move down the rankings; I think that most of the colleges that would accept someone like me aren't worth the opportunity cost of the time I'd spend not working, at least if we're talking about economics. People are going to be way more impressed by four years at google or facebook than they will be impressed by a degree from a mid to low end school.
- JonFish85 11y ago
  "Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas." This might be a nitpick, but this is a bad analogy. If you have $50k * 4 years sitting around to pay for it, sure, it's probably worth it. That's not how it works, though. You have a giant pool of 17-18 year old kids with 0 assets and minimal skills. These kids, in general, need to borrow to go to school. If they have to borrow $50k/year for 4 years, that's $200k in loans, plus they graduate with accumulated interest over those 4 years. The better analogy would be selling an 18 year old kid getting a loan for a $200k car that they get in 4 years. Where this isn't accurate is that after 4 years, you can repossess the car if they don't make payments. With a college degree, there is no tangible asset. If the kid decides after 4 years that he wants a bicycle, he can turn in the car. If after 4 years at Stanford, a person decides to do something that doesn't pay the bills, now what do you do? And, since the loan is up-front, all of this risk has to be accounted for. Right now it means saying that the loans can't (easily) be discharged. To me this seems somewhat fair, with the argument being that nobody forced the kid to go to Stanford (pay $200k for the Porsche), they could have gone to some state school (the used honda civic).
powertower 11y ago
Slightly tangential, but a good eye opener for me was the Cash for Clunkers program... To perform an average rebate of $4000 per car, cost the taxpayers and industry $24,000 per car. Anything the government gets into, with some notable exceptions (e.g., highway construction in the 60s), ends up with little net gains and usually a 5x overrun in costs.
- mywittyname 11y ago
  Citation for this because the analysis I read says that gap was ~$2000 per car but about $0.10 per job saved. http://web.archive.org/web/20090927101631/http://www.freep.com/article/20090924/BUSINESS01/909240380/1322/Vintage-rides-get-scrapped-for-cash http://web.archive.org/web/20090927101631/http://www.freep.c...
  - powertower 11y ago
    https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=cash%20for%20clunkers%20cost https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e... http://www.brookings.edu/research/papers/2013/10/cash-for-clunkers-evaluation-gayer http://www.brookings.edu/research/papers/2013/10/cash-for-cl... "Almost anything would have been better stimulus than 'Cash for Clunkers'." "Cash for Clunkers a near-total failure." "Obama's Cash for Clunkers harmed the industry it was meant to help." You have to take the overall effect into it. But that might not be the best of examples. I would have rather mentioned a more touchy subject (the ACA), but that has not gone well for me in the past here.
    - SteveLAnderson 11y ago
      Interesting quotations you included - where did they come from? I didn't find them in the report you cited. The following is from the conclusion of the Brookings report you cited, "The evidence suggests that the program did indeed incentivize the sale of more fuel efficient vehicles by pulling sales forward from the near-term future. This resulted in a small and short-lived increase in production, GDP, and job creation. However, the implied cost per job created was much higher than alternative fiscal stimulus policies. ... The CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol." They aren't saying it was great, but they are not saying it was a failure or that it harmed the industry.
specialist 11y ago
The way student loans were before... No. Tuition went up to compensate for the removal of state subsidizing tuition. Almost 1:1. In fact, with the removal of state support, we're merely seeing the true costs of school for the first time. Loans got nutty because of unnecessary privatization and deregulation. But rent seeking, so it was inevitable, right? Once tuitions were nutty, parents demanded value for their dollar, begatting grade inflation and transmuting dorms into resort hotels, fueling continued rising costs. Source: Worked in higher ed. This is common knowledge. (I don't know enough to explain the textbook racket. Collusion?) -- mortgage interest deductions have a similarly terrible effect on housing... No. Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning. Source: Help friends who work on affordable housing policy. This is common knowledge. -- In conclusion, yes, simplistic Freedom Markets (tm) explanations are seductive. But they're also mostly wrong. Tuition and loans went bonkers when government pulled out of the business, allowing the predators to take over.
- hardcandy 11y ago
  You're missing the forest for the trees. What are ''the true costs of school''? Someone who loves to teach sitting in a classroom teaching. It can be dirt cheap or it can be very expensive. Supply and demand sorts out the details. As more money flowed into the system, administration bloated and became its own entrenched interest group, with very little connection to actual education.[1] Does the UC system need 500 administrators making >$500k year each?[2] As it stands, college for most of my friends was a 4 year social safari interrupted by infrequent periods of intense cramming in between high school and joining the work force. Do you think the average 18-21 year old at a state school is a scholar passionately indulging their love of learning? Almost all education is self education at the end of the day. As soon as we solve for the credentialing/pedigree/signaling problem, online education will destroy a huge amount of offline education and rightly so. As for the mortgage interest deduction, how wouldn't it boost housing prices? It effectively lowers the mortage rate by your marginal tax bracket which is close to 50% in California. So instead of a 3.5% 30 year rate I'm now below 2%. Cheaper money stimulates borrowing. It doesn't matter how low NIMBYism pushes supply in the face of overwhelming demand, each individual still has a maximum price they can pay, and subsidized interest rates raise that price point. [1] http://reclaimuc.blogspot.com/2011/09/senior-administrators-now-officially.html http://reclaimuc.blogspot.com/2011/09/senior-administrators-... [2] http://www.latimes.com/local/education/la-me-uc-spending-20151011-story.html http://www.latimes.com/local/education/la-me-uc-spending-201...
kbenson 11y ago
> The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present. Given zero competition, maybe. With multiple schools all competing to be the ones to take your money, and also competing to get the most lucrative future alumni, you have a complex market where there exists downward price pressure. In the end, given two relatively equivalent schools the cheaper school will have a better pick of students.
- jessaustin 11y ago
  Market forces will intervene eventually, but in the subsidized-student-loan regime, that has been some time coming. ISTM the impasse won't be broken by cheaper colleges, but rather by private firms providing rigorous standardized testing. If a MOOC student feels her 18 months of online study is equivalent to a four-year degree, and has the test results that prove it, smart employers will embrace the future.
bitL 11y ago
I can't wait until somebody comes up with a lifetime subscription for higher education, observing where business everywhere is going...
tiplus 11y ago
I fail to understand the logic behind all of this. Why not give the money to the universities directly? It seems super inefficient to create a whole industry around funding university education. Even more so when this system needs to be backed by government bailout guarantees. With 'efficient' I mean converting a large percentage of high school kids into university degrees / or better a highly skilled work force. Handing >$10^6 in debt to these kids doesn't seem appealing at all. One might argue that the economic pressure of the debt increases the overall productivity of a workforce. However, doesn't it rather create a predominantly sad workforce?

by readams 11y ago

rm_-rf_slash 11y ago

On the other hand, government guarantees expand the available credit to consumers who would be just as likely to be shut out of homeownership (for example) by higher interest rates, save for a thunderous government program to ensure housing for every citizen. With the exception of the subprime mortgage crisis, it is usually a good way to help people become homeowners without too much taxpayer burden or onerous bureaucratic micromanagement.

readams 11y ago
That's exactly the sort of thinking that leads to this sort of problem. When you consider only first-order effects, many very bad ideas seem like a good idea. When you consider that all policy choices have second-order effects and unintended consequences, you can make more intelligent policy decisions.
- rm_-rf_slash 11y ago
  Any policy can result in negative n-order effects as time passes. Postwar housing policy mostly worked well (if you were white). The global population was smaller and the devastation of Europe and Japan made America the sole economic superpower. So what makes sense (and actually gets hammered out by perennially bickering politicians) in the 50s might make sense today, it might not. But nothing in politics is correct forever. Just saying "consider second-order effects" without concrete evidence or a plan to mitigate changes in technology/laws/markets/social norms doesn't really add value.
  - readams 11y ago
    You're making my point for me :-) It is vital to consider higher-order effects and unintended consequences if you want to make good public policy. And not just "prove there are negative consequences:" it is incumbent on policy makers to understand these effects before enacting policy. Consider price controls, such as rent control. Problem: prices are too high. Solution: legislate lower prices. First-order effect: prices go down. Hooray! Second-order effect: shortages. Third-order effect: decline in investment and maintenance. End result after many years can be disastrous. You get Venezuela.
    - rm_-rf_slash 11y ago
      In a scope of logic alone, yes, you are absolutely correct. An example I like to raise regularly is the farm subsidies put in place by the Roosevelt Administration to prevent overproduction. Was there a better way for farms to stay in business and for food to be affordable to consumers? Maybe. But this way worked to solve problems created by the Great Depression. Now I'm sure as you know, farm subsidies now are sweeter than high fructose corn syrup. There is even sitting republican senator who makes millions from the federal government paying him to not plant cotton. Few can argue this policy still works as intended, but it so politically locked-in that it's almost impossible to shake out. Same with the tons of unnecessary military hardware and property sitting around solely because representatives in those districts want to be re-elected by their core constituencies. To me the problem isn't about getting it right the first time, it's about changing something that has outlived its usefulness when powerful beneficiaries fight to keep the wasteful status quo. A metaphor: bandages are useful for flesh wounds, but after the wound has healed the bandage must be removed and the skin must be cleaned or it will rot.
      - readams 11y ago
        It seems we are in violent agreement :-)
rconti 11y ago
How so? As far as I can tell, the mortgage interest tax deduction only "benefits" those buying houses expensive enough for the interest to exceed the standard deduction (or who itemize for other reasons). And it doesn't even benefit them, because all buyers in the market can afford x% "more house" and hence the housing gets bid up by exactly that amount.
Kinnard 11y ago
That doesn't account for the access driven by the decrease in the price of housing that comes from removing the artificial credit subsidy. What you might call a "second-order" effect, though because it's an effect of "doing nothing" it's both more natural and more efficient. If anything, driving up prices(by subsidizing credit) such that houses can only be bought on credit and not outright does the most to increase housing inequities! Cuz we all know how that shit works :/

jazzyk 11y ago

This, a thousand times. What a lot of people do not understand, is that when demand for an asset goes down, prices come down and adjust to market (although in real-estate, the process takes a bit longer). The best way to promote home ownership is to make sure people can get decent paying jobs. Promote economic growth and stop outsourcing jobs.

toomuchtodo 11y ago
Also, stop subsidizing low interest rates and the mortgage interest tax deduction. These are further distortions in the housing market.
- jazzyk 11y ago
  Absolutely. Many of my friends look at me as if I just lost my mind - "but, but... low interest rates are good for everybody, right?". It is an uphill battle, but I keep at it :-)
- tcbawo 11y ago
  By low interest rates, do you mean Federal Funds, or the bond market? My impression is that mortgage rates tend to track the 10 year bond rate, given most people refi/sell before then. These and long term rates have been on a multi-decade decline. I'm not sure how much influence recent policy has had.
  - toomuchtodo 11y ago
    Federal GSEs (Fannie, Freddie, FHA) and the Federal Reserve's QE activities (artificially propping up housing).
readams 11y ago
People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters. I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries. There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development, of which foreign investment is one of the best sources. I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US. Once this is accomplished (and the challenges in front of us for doing so are enormous!), outsourced jobs won't be a problem. Rather than being opposed to trade and globalization (which are, frankly, unstoppable) we should be focused on mitigating losses for those affected. Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.

lsc 11y ago

while what you say makes intuitive sense, at least for the schools I want to go to? Tuition is extremely cheap for what it is. http://financialaid.stanford.edu/undergrad/budget/ http://financialaid.stanford.edu/undergrad/budget/ Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas. And while I've never owned a Tesla (or a college degree) I do imagine an undergrad from Stanford would be more fun than two Teslas, and it would certainly impress people more. If you are an area computer nerd, even one without any degree at all, two teslas is a reasonable thing to own on what you can expect to get paid. Berkeley? If you are an Engineer with no business ambitions, it's very nearly as good as Stanford (and some would argue better, but the majority view seems to be 'very nearly as good but not quite') Berkeley is under $15K/yr http://financialaid.berkeley.edu/cost-attendance http://financialaid.berkeley.edu/cost-attendance I would be super happy to pay twice that, if they'd let me in. That's the thing, I don't qualify for either of those institutions; and I can't imagine anyone who could compete with me job wise having a hard time paying for either one. Of course, I understand that economics are vastly different outside of the computer industry, but I can't really speak to that, because I've never lived in that world. I also think that the balance gets way different as you move down the rankings; I think that most of the colleges that would accept someone like me aren't worth the opportunity cost of the time I'd spend not working, at least if we're talking about economics. People are going to be way more impressed by four years at google or facebook than they will be impressed by a degree from a mid to low end school.

JonFish85 11y ago
"Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas." This might be a nitpick, but this is a bad analogy. If you have $50k * 4 years sitting around to pay for it, sure, it's probably worth it. That's not how it works, though. You have a giant pool of 17-18 year old kids with 0 assets and minimal skills. These kids, in general, need to borrow to go to school. If they have to borrow $50k/year for 4 years, that's $200k in loans, plus they graduate with accumulated interest over those 4 years. The better analogy would be selling an 18 year old kid getting a loan for a $200k car that they get in 4 years. Where this isn't accurate is that after 4 years, you can repossess the car if they don't make payments. With a college degree, there is no tangible asset. If the kid decides after 4 years that he wants a bicycle, he can turn in the car. If after 4 years at Stanford, a person decides to do something that doesn't pay the bills, now what do you do? And, since the loan is up-front, all of this risk has to be accounted for. Right now it means saying that the loans can't (easily) be discharged. To me this seems somewhat fair, with the argument being that nobody forced the kid to go to Stanford (pay $200k for the Porsche), they could have gone to some state school (the used honda civic).

powertower 11y ago

Slightly tangential, but a good eye opener for me was the Cash for Clunkers program... To perform an average rebate of $4000 per car, cost the taxpayers and industry $24,000 per car. Anything the government gets into, with some notable exceptions (e.g., highway construction in the 60s), ends up with little net gains and usually a 5x overrun in costs.

mywittyname 11y ago
Citation for this because the analysis I read says that gap was ~$2000 per car but about $0.10 per job saved. http://web.archive.org/web/20090927101631/http://www.freep.com/article/20090924/BUSINESS01/909240380/1322/Vintage-rides-get-scrapped-for-cash http://web.archive.org/web/20090927101631/http://www.freep.c...
- powertower 11y ago
  https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=cash%20for%20clunkers%20cost https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e... http://www.brookings.edu/research/papers/2013/10/cash-for-clunkers-evaluation-gayer http://www.brookings.edu/research/papers/2013/10/cash-for-cl... "Almost anything would have been better stimulus than 'Cash for Clunkers'." "Cash for Clunkers a near-total failure." "Obama's Cash for Clunkers harmed the industry it was meant to help." You have to take the overall effect into it. But that might not be the best of examples. I would have rather mentioned a more touchy subject (the ACA), but that has not gone well for me in the past here.
  - SteveLAnderson 11y ago
    Interesting quotations you included - where did they come from? I didn't find them in the report you cited. The following is from the conclusion of the Brookings report you cited, "The evidence suggests that the program did indeed incentivize the sale of more fuel efficient vehicles by pulling sales forward from the near-term future. This resulted in a small and short-lived increase in production, GDP, and job creation. However, the implied cost per job created was much higher than alternative fiscal stimulus policies. ... The CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol." They aren't saying it was great, but they are not saying it was a failure or that it harmed the industry.

specialist 11y ago

The way student loans were before... No. Tuition went up to compensate for the removal of state subsidizing tuition. Almost 1:1. In fact, with the removal of state support, we're merely seeing the true costs of school for the first time. Loans got nutty because of unnecessary privatization and deregulation. But rent seeking, so it was inevitable, right? Once tuitions were nutty, parents demanded value for their dollar, begatting grade inflation and transmuting dorms into resort hotels, fueling continued rising costs. Source: Worked in higher ed. This is common knowledge. (I don't know enough to explain the textbook racket. Collusion?) -- mortgage interest deductions have a similarly terrible effect on housing... No. Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning. Source: Help friends who work on affordable housing policy. This is common knowledge. -- In conclusion, yes, simplistic Freedom Markets (tm) explanations are seductive. But they're also mostly wrong. Tuition and loans went bonkers when government pulled out of the business, allowing the predators to take over.

hardcandy 11y ago
You're missing the forest for the trees. What are ''the true costs of school''? Someone who loves to teach sitting in a classroom teaching. It can be dirt cheap or it can be very expensive. Supply and demand sorts out the details. As more money flowed into the system, administration bloated and became its own entrenched interest group, with very little connection to actual education.[1] Does the UC system need 500 administrators making >$500k year each?[2] As it stands, college for most of my friends was a 4 year social safari interrupted by infrequent periods of intense cramming in between high school and joining the work force. Do you think the average 18-21 year old at a state school is a scholar passionately indulging their love of learning? Almost all education is self education at the end of the day. As soon as we solve for the credentialing/pedigree/signaling problem, online education will destroy a huge amount of offline education and rightly so. As for the mortgage interest deduction, how wouldn't it boost housing prices? It effectively lowers the mortage rate by your marginal tax bracket which is close to 50% in California. So instead of a 3.5% 30 year rate I'm now below 2%. Cheaper money stimulates borrowing. It doesn't matter how low NIMBYism pushes supply in the face of overwhelming demand, each individual still has a maximum price they can pay, and subsidized interest rates raise that price point. [1] http://reclaimuc.blogspot.com/2011/09/senior-administrators-now-officially.html http://reclaimuc.blogspot.com/2011/09/senior-administrators-... [2] http://www.latimes.com/local/education/la-me-uc-spending-20151011-story.html http://www.latimes.com/local/education/la-me-uc-spending-201...

kbenson 11y ago

> The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present. Given zero competition, maybe. With multiple schools all competing to be the ones to take your money, and also competing to get the most lucrative future alumni, you have a complex market where there exists downward price pressure. In the end, given two relatively equivalent schools the cheaper school will have a better pick of students.

jessaustin 11y ago
Market forces will intervene eventually, but in the subsidized-student-loan regime, that has been some time coming. ISTM the impasse won't be broken by cheaper colleges, but rather by private firms providing rigorous standardized testing. If a MOOC student feels her 18 months of online study is equivalent to a four-year degree, and has the test results that prove it, smart employers will embrace the future.

bitL 11y ago

I can't wait until somebody comes up with a lifetime subscription for higher education, observing where business everywhere is going...

tiplus 11y ago

I fail to understand the logic behind all of this. Why not give the money to the universities directly? It seems super inefficient to create a whole industry around funding university education. Even more so when this system needs to be backed by government bailout guarantees. With 'efficient' I mean converting a large percentage of high school kids into university degrees / or better a highly skilled work force. Handing >$10^6 in debt to these kids doesn't seem appealing at all. One might argue that the economic pressure of the debt increases the overall productivity of a workforce. However, doesn't it rather create a predominantly sad workforce?