4 ms·

It seems like a chicken or egg problem. If there were no student loans beyond what you could get from a bank or friends and families, fewer people could afford

It seems like a chicken or egg problem. If there were no student loans beyond what you could get from a bank or friends and families, fewer people could afford current tuition costs and colleges would be forced to lower them to attract new "customers". It's Keynesian demand-side stimulus at its core. With the national dialogue focused on how college should be available to everyone, along with unlimited, federally guaranteed student loans, demand skyrockets and prices rise to meet them.

cgearhart 10y ago
> ...colleges would be forced to lower them to attract new "customers". This is categorically false. Schools would maintain whatever price point achieved equilibrium with the market's ability to pay. It would not necessarily require any school to reduce their prices. > ...demand skyrockets and prices rise to meet them. But that doesn't make any sense in the context of the higher education market..."supply" is neither fixed, nor constrained (within reason). Schools could easily expand their supply to accommodate additional students because there is actually an over-abundance of adjunct labor (rather than full-time faculty) in most fields that are trained and available to teach classes now, at much lower costs than traditional tenured faculty. The costs of providing education have actually fallen during the same period that the costs of running a college have risen. It's not being driven by "demand" from prospective students -- cost growth is being driven by competition between schools. Schools also can't choose to compete on price because the availability of "free money" in the form of loans makes students less price sensitive. Instead, schools end up competing based on maximizing overall "quality of life" factors within a fixed price.

4 ms·

It seems like a chicken or egg problem. If there were no student loans beyond what you could get from a bank or friends and families, fewer people could afford

by cloakandswagger 10y ago

cgearhart 10y ago
> ...colleges would be forced to lower them to attract new "customers". This is categorically false. Schools would maintain whatever price point achieved equilibrium with the market's ability to pay. It would not necessarily require any school to reduce their prices. > ...demand skyrockets and prices rise to meet them. But that doesn't make any sense in the context of the higher education market..."supply" is neither fixed, nor constrained (within reason). Schools could easily expand their supply to accommodate additional students because there is actually an over-abundance of adjunct labor (rather than full-time faculty) in most fields that are trained and available to teach classes now, at much lower costs than traditional tenured faculty. The costs of providing education have actually fallen during the same period that the costs of running a college have risen. It's not being driven by "demand" from prospective students -- cost growth is being driven by competition between schools. Schools also can't choose to compete on price because the availability of "free money" in the form of loans makes students less price sensitive. Instead, schools end up competing based on maximizing overall "quality of life" factors within a fixed price.