7 ms·

The most earnest attempts to help are again struck down by the law of unintended consequences. From the article, for the 8 million people currently in default

by JackFr 10y ago

The most earnest attempts to help are again struck down by the law of unintended consequences. From the article, for the 8 million people currently in default the average outstanding balance is < $10,000. For the people enrolled in the income-based repayment plan the average outstanding balance is > $67,000. So it seems if the marginal cost of borrowing more is 0, people are going to borrow more. I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.

hash-set 10y ago
The whole mess that is higher education sickens me. The bankers did this. They colluded with susceptible financial aid officers and corrupted and victimized. Now the rest of us are left holding the bag, as usual. Socializing the losses. This is unacceptable. I still think the idiots who took out the loans need to repay them, not be let off. You might say it is akin to modern day slavery, and I get that, but the fact of the matter is, it is the bankers who are looking for the write offs because a) they still get paid and b) they need those same suckers to take on loads more debt buying houses.
- John23832 10y ago
  Modern investment banking seems to be at the root of a lot of society's ills.
- humanrebar 10y ago
  Bankers didn't raise tuition and pile on fees on top of that.
  - velodrome 10y ago
    Agreed. 1) The universities obtained massive loans to build fancy new buildings and that cost is simply being passed on to students. 2) The ease to obtain educational loans prevents universities from having any sort of revenue constraints. Constraints breed innovation. If there are no constraints, the universities have no incentive to reduce costs.
    - stinkytaco 10y ago
      I think some of that is certainly true. But it's also true that the costs of employing professional workers has increased, primarily in the guise of health care premiums. There are more parties involved in this chain than just a university and students. A health insurance company (or any service company) may be able to increase premiums knowing the university has access to easy money from students. And a public university (or any public institution) rarely has the option of laying people off and hiring ones with the right skills in order to maximize value. Universities are subject to so much political scrutiny that more popular options like hiring freezes or pay raise freezes are preferred, leading to this bizarre attrition that makes it difficult to get value out of your most expensive resource: faculty and staff.
      - velodrome 10y ago
        What about private institutions? Are they not subject to the same constraints? https://priceonomics.com/static/images/college-one/Yearly_Tuition_Resize.png https://priceonomics.com/static/images/college-one/Yearly_Tu... Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.
        stinkytaco 10y ago
        > What about private institutions? Are they not subject to the same constraints? They are not, but they offer a very different set of problems. In that situation buildings are not the issue, but inflated tuition before loans. I appreciated the government coming down on for profit institutions and would definitely like to see more scrutiny of private colleges in regards to loans. >Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not. That's just not true. Plenty of institutions are exploring these or using them, either to reach students that are not local or to teach local students. My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students). The other issue that comes up with MOOCs -- at least where I am -- is that students who might go to a local community college or small university are going to larger institutions in state because they can take courses online. That leads to a great deal of political hostility towards the large institutions.
John23832 10y ago
I agree. When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring.
- des429 10y ago
  They are private institutions. They can charge whatever they like. How about not providing easy money to absolutely anyone for a college degree?
  - John23832 10y ago
    >> When the government subsidizes student loans...there must be cost controls on the school (no NE private school art majors costing 100k+) I never said that they couldn't. I said that when the government pays for student loans they should enforce price controls and underwriting of the loans.
  - dexterdog 10y ago
    They are private institutions that ride on tons of government money because they are for some reason considered non-profit.
- koolba 10y ago
  > When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring. If the government really wants to get involved in this (which I really wish they didn't) they should build and operate more schools. Make them either at-cost, heavily subsidized, or (my preference) entirely free for anyone to attend. Forget income requirements, residency requirements, or anything else. Just make it entirely free to anyone that wants to show up and learn. This would force the private sector to actually compete against something meaningful and that would lead to lower prices. The current system of the government handing out loans to anybody for anything is what leads to $100K 4-year tuitions. We've already got a decent baseline of community colleges throughout the USA. If they closed off the student loan spigot and poured that same money into there we'd all be much better off. If someone wants to go to $EXPENSIVE_SCHOOL then fine, let them figure it out on their own or get the school to use their $N-billionaire dollar endowment to subsidize it.
jrs235 10y ago
> the value is being captured by the school, not the student Yup. That's also why so many for-profit schools popped up.
- dexterdog 10y ago
  All of the private schools are for-profit. They just have a scam going to call themselves otherwise.
saint_fiasco 10y ago
Also, government should not subsidize zero-sum games. More people go to college and suddenly a college degree is not a comparative advantage anymore, it becomes a baseline. Nobody benefits. http://slatestarcodex.com/2015/06/06/against-tulip-subsidies/ http://slatestarcodex.com/2015/06/06/against-tulip-subsidies...
- brianwawok 10y ago
  An educated population is NOT a zero sum game. The top thing the government can do for it's people is to keep them alive. (Free from invasion, murder, etc). The second thing the government can do for it's people is to keep them healthy. Access to health care, etc. etc. More of an offshoot of above, but for things deeper than alive. The third thing the government can do for it's people is to educate them. Not so that they can get "better jobs", but so they can be educated. The people around you vote just as much as you do. They decide the future of the country just as much as you do. Would you rather someone who never ever set foot in school helped elect your local government, or someone who has a PhD from a good college? Kind of a hierarchy of needs.. education doesn't matter if you aren't safe.. but once you are safe, it seems very important. Not at ALL a 0 sum game. You don't educate to give people better jobs, but to enable them to think critically. Which is why 4 year colleges do a lot more for the world than coding boot camps or trade schools.
  - saint_fiasco 10y ago
    The US has one of the best (albeit expensive) college education in the world. The primary/middle/high-school system is seriously under-performing, though. Couldn't those be improved instead? It would benefit everyone, not just the upper-middle classes that can afford college.
    - beefok 10y ago
      How do you increase the performance of the primary/middle/high-school system? To me, that means creating better and more educated teachers that can generate more 'performant' students!
KKKKkkkk1 10y ago
> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. But is this really an unintended consequence? Who has more lobbying power in Washington, students or Princeton and Yale?
- sopooneo 10y ago
  I hear your point, but neither Princeton nor Yale require students to get loans. Along with a number of other super-prestigious schools, they offer all students full grant coverage of all the cost they can't afford. "By committing to an admissions policy that does not consider a student’s ability to pay, and by meeting the full financial need of all admitted students (with no loans required), we ensure that Yale is accessible to the most talented students from around the world, regardless of their family’s income" http://admissions.yale.edu/financial-aid-prospective-students http://admissions.yale.edu/financial-aid-prospective-student...
zeveb 10y ago
> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. And thus it's in the academic class's self-interest to encourage both more lending and more debt forgiveness — and remarkably enough that's exactly what the academic class is arguing for. I don't think that they're acting in bad faith, just that there's little incentive for them to examine their assumptions. After all, from the perspective of a tenured professor or a university executive, higher education is an unmitigated good, his life's work.
eli_gottlieb 10y ago
>I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. Well, uh, yeah, what did people expect? This was a pretty deliberate policy shift. Public higher education used to be funded by per-student block grants at the state level, whose conditions said that tuition and fees had to be kept below some maximum level and could not rise faster than some maximum rate. Now it's mostly funded via subsidized loans. When you subsidize education-usury instead of education, you get more usury and less education, because that's what you paid for.

by JackFr 10y ago

hash-set 10y ago

The whole mess that is higher education sickens me. The bankers did this. They colluded with susceptible financial aid officers and corrupted and victimized. Now the rest of us are left holding the bag, as usual. Socializing the losses. This is unacceptable. I still think the idiots who took out the loans need to repay them, not be let off. You might say it is akin to modern day slavery, and I get that, but the fact of the matter is, it is the bankers who are looking for the write offs because a) they still get paid and b) they need those same suckers to take on loads more debt buying houses.

John23832 10y ago
Modern investment banking seems to be at the root of a lot of society's ills.
humanrebar 10y ago
Bankers didn't raise tuition and pile on fees on top of that.
- velodrome 10y ago
  Agreed. 1) The universities obtained massive loans to build fancy new buildings and that cost is simply being passed on to students. 2) The ease to obtain educational loans prevents universities from having any sort of revenue constraints. Constraints breed innovation. If there are no constraints, the universities have no incentive to reduce costs.
  - stinkytaco 10y ago
    I think some of that is certainly true. But it's also true that the costs of employing professional workers has increased, primarily in the guise of health care premiums. There are more parties involved in this chain than just a university and students. A health insurance company (or any service company) may be able to increase premiums knowing the university has access to easy money from students. And a public university (or any public institution) rarely has the option of laying people off and hiring ones with the right skills in order to maximize value. Universities are subject to so much political scrutiny that more popular options like hiring freezes or pay raise freezes are preferred, leading to this bizarre attrition that makes it difficult to get value out of your most expensive resource: faculty and staff.
    - velodrome 10y ago
      What about private institutions? Are they not subject to the same constraints? https://priceonomics.com/static/images/college-one/Yearly_Tuition_Resize.png https://priceonomics.com/static/images/college-one/Yearly_Tu... Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.
      - stinkytaco 10y ago
        > What about private institutions? Are they not subject to the same constraints? They are not, but they offer a very different set of problems. In that situation buildings are not the issue, but inflated tuition before loans. I appreciated the government coming down on for profit institutions and would definitely like to see more scrutiny of private colleges in regards to loans. >Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not. That's just not true. Plenty of institutions are exploring these or using them, either to reach students that are not local or to teach local students. My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students). The other issue that comes up with MOOCs -- at least where I am -- is that students who might go to a local community college or small university are going to larger institutions in state because they can take courses online. That leads to a great deal of political hostility towards the large institutions.

John23832 10y ago

I agree. When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring.

des429 10y ago
They are private institutions. They can charge whatever they like. How about not providing easy money to absolutely anyone for a college degree?
- John23832 10y ago
  >> When the government subsidizes student loans...there must be cost controls on the school (no NE private school art majors costing 100k+) I never said that they couldn't. I said that when the government pays for student loans they should enforce price controls and underwriting of the loans.
- dexterdog 10y ago
  They are private institutions that ride on tons of government money because they are for some reason considered non-profit.
koolba 10y ago
> When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring. If the government really wants to get involved in this (which I really wish they didn't) they should build and operate more schools. Make them either at-cost, heavily subsidized, or (my preference) entirely free for anyone to attend. Forget income requirements, residency requirements, or anything else. Just make it entirely free to anyone that wants to show up and learn. This would force the private sector to actually compete against something meaningful and that would lead to lower prices. The current system of the government handing out loans to anybody for anything is what leads to $100K 4-year tuitions. We've already got a decent baseline of community colleges throughout the USA. If they closed off the student loan spigot and poured that same money into there we'd all be much better off. If someone wants to go to $EXPENSIVE_SCHOOL then fine, let them figure it out on their own or get the school to use their $N-billionaire dollar endowment to subsidize it.

jrs235 10y ago

> the value is being captured by the school, not the student Yup. That's also why so many for-profit schools popped up.

dexterdog 10y ago
All of the private schools are for-profit. They just have a scam going to call themselves otherwise.

saint_fiasco 10y ago

Also, government should not subsidize zero-sum games. More people go to college and suddenly a college degree is not a comparative advantage anymore, it becomes a baseline. Nobody benefits. http://slatestarcodex.com/2015/06/06/against-tulip-subsidies/ http://slatestarcodex.com/2015/06/06/against-tulip-subsidies...

brianwawok 10y ago
An educated population is NOT a zero sum game. The top thing the government can do for it's people is to keep them alive. (Free from invasion, murder, etc). The second thing the government can do for it's people is to keep them healthy. Access to health care, etc. etc. More of an offshoot of above, but for things deeper than alive. The third thing the government can do for it's people is to educate them. Not so that they can get "better jobs", but so they can be educated. The people around you vote just as much as you do. They decide the future of the country just as much as you do. Would you rather someone who never ever set foot in school helped elect your local government, or someone who has a PhD from a good college? Kind of a hierarchy of needs.. education doesn't matter if you aren't safe.. but once you are safe, it seems very important. Not at ALL a 0 sum game. You don't educate to give people better jobs, but to enable them to think critically. Which is why 4 year colleges do a lot more for the world than coding boot camps or trade schools.
- saint_fiasco 10y ago
  The US has one of the best (albeit expensive) college education in the world. The primary/middle/high-school system is seriously under-performing, though. Couldn't those be improved instead? It would benefit everyone, not just the upper-middle classes that can afford college.
  - beefok 10y ago
    How do you increase the performance of the primary/middle/high-school system? To me, that means creating better and more educated teachers that can generate more 'performant' students!

KKKKkkkk1 10y ago

> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. But is this really an unintended consequence? Who has more lobbying power in Washington, students or Princeton and Yale?

sopooneo 10y ago
I hear your point, but neither Princeton nor Yale require students to get loans. Along with a number of other super-prestigious schools, they offer all students full grant coverage of all the cost they can't afford. "By committing to an admissions policy that does not consider a student’s ability to pay, and by meeting the full financial need of all admitted students (with no loans required), we ensure that Yale is accessible to the most talented students from around the world, regardless of their family’s income" http://admissions.yale.edu/financial-aid-prospective-students http://admissions.yale.edu/financial-aid-prospective-student...

zeveb 10y ago

> What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. And thus it's in the academic class's self-interest to encourage both more lending and more debt forgiveness — and remarkably enough that's exactly what the academic class is arguing for. I don't think that they're acting in bad faith, just that there's little incentive for them to examine their assumptions. After all, from the perspective of a tenured professor or a university executive, higher education is an unmitigated good, his life's work.

eli_gottlieb 10y ago

>I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student. Well, uh, yeah, what did people expect? This was a pretty deliberate policy shift. Public higher education used to be funded by per-student block grants at the state level, whose conditions said that tuition and fees had to be kept below some maximum level and could not rise faster than some maximum rate. Now it's mostly funded via subsidized loans. When you subsidize education-usury instead of education, you get more usury and less education, because that's what you paid for.