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Tuition is rising because loans are heavily-subsidized by the government, and universities (especially for-profit universities) are taking advantage. It's a si

Tuition is rising because loans are heavily-subsidized by the government, and universities (especially for-profit universities) are taking advantage. It's a simple business model - spend a ton on ROI-positive marketing (especially online CPA marketing), get people who can't really afford it to take out huge student loans which they only qualify for thanks to Title IV, get the vast majority of your revenue directly from the government. Saddled with massive debt and useless degrees, the students increasingly default, but that's not the universities' problem - the risk lies solely with the students and the government. If you want to short education, you could short companies like Apollo Group and ITT Educational Services, as well as the online marketing companies that service them, like Quinstreet. But this is risky, because the bubble's only going to burst when the government gets around to changing policies.

byrneseyeview 16y ago
Steve Eisman has written a very compelling presentation on why for-profit schools will likely have a sudden, drastic loss in earnings due to new government policies: http://www.marketfolly.com/2010/05/steve-eisman-frontpoint-partners-ira.html http://www.marketfolly.com/2010/05/steve-eisman-frontpoint-p... But the risk is priced in. What's not properly priced is the risk that for the average person getting a marketing degree from Local State U, it would have been a better use of their time to work in retail or something.
rdtsc 16y ago
> But this is risky, because the bubble's only going to burst when the government gets around to changing policies. Out of curiosity, how would the govt change their policy to improve the situation? Should they just stop subsidizing the loans? Or should they let students declare bankruptcy if their promised dream job doesn't matterialize when they graduate? I think regulating the deceptive marketing should also be considered. There is a huge discrepancy between the advertised ROI and actual ROI. People should be made aware of the actual ROI of a college degree. Then a lot less will be willing to spend $100K to get a piece of paper after 4 year that turns out not to help them much after all.
- yummyfajitas 16y ago
  Out of curiosity, how would the govt change their policy to improve the situation? Not subsidizing the loans would be a good idea. Another proposal would be enforcing some transparency/separability. For example, the govt could demand that colleges break down there costs more granularly than they do - $X for instruction, $Y for the gym, $Z for student activities, etc. They could also demand that all such fees (besides instruction) are optional to the student, and that subsidies only apply to instruction. Colleges waste a LOT of money on irrelevancies, and such a mechanism could reduce some of the waste.
  - tokenadult 16y ago
    For example, the govt could demand that colleges break down there costs more granularly than they do The government already does do this, in mandatory reports to the federal IPEDS database. And a private foundation has published the information on a user-friendly website, so that even if colleges don't report to the public directly how they spend their money, discerning members of the public can find this out by looking it up. Compare http://www.collegeresults.org/search1b.aspx?institutionid=182290 http://www.collegeresults.org/search1b.aspx?institutionid=18... to http://www.collegeresults.org/search1b.aspx?institutionid=166027 http://www.collegeresults.org/search1b.aspx?institutionid=16... for example.
    - yummyfajitas 16y ago
      Nice database, but not remotely as granular as what I'm proposing. I want colleges to break down all the excludible services and students can pick and choose among them. I.e., a menu of some sort: Class/credits $x Computer lab access $? Yacht Club $? Student Theatre $? Intramural sports $? Latino Center $? Annual Rock Concert $? (Not made up) Career services $? The govt should subsidize only class/credits, and any colleges accepting subsidies must allow students to pick and choose among the rest. I.e., if you don't want to use computer labs or the gym, you don't have to pay for them. A lot of the cost of college is caused by colleges wasting money on unnecessary frills, and the system I propose would create a downward pressure on the cost of frills. (Another major component of cost is waste/fraud/abuse/administration, but I don't see an easy way to eliminate that.)
dgallagher 16y ago
PBS's Frontline did a report in May 2010 called College, Inc., detailing some of the ups and downs of for-profit colleges and universities: http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/?utm... It's about 45-50 minutes long. Worth the watch. If you're having trouble viewing it in Safari, try Firefox.
- jerf 16y ago
  Also available in Netflix Streaming, if you happen to have that and can't get to that site, which is showing difficulties for me.

byrneseyeview 16y ago

Steve Eisman has written a very compelling presentation on why for-profit schools will likely have a sudden, drastic loss in earnings due to new government policies: http://www.marketfolly.com/2010/05/steve-eisman-frontpoint-partners-ira.html http://www.marketfolly.com/2010/05/steve-eisman-frontpoint-p... But the risk is priced in. What's not properly priced is the risk that for the average person getting a marketing degree from Local State U, it would have been a better use of their time to work in retail or something.

rdtsc 16y ago

> But this is risky, because the bubble's only going to burst when the government gets around to changing policies. Out of curiosity, how would the govt change their policy to improve the situation? Should they just stop subsidizing the loans? Or should they let students declare bankruptcy if their promised dream job doesn't matterialize when they graduate? I think regulating the deceptive marketing should also be considered. There is a huge discrepancy between the advertised ROI and actual ROI. People should be made aware of the actual ROI of a college degree. Then a lot less will be willing to spend $100K to get a piece of paper after 4 year that turns out not to help them much after all.

yummyfajitas 16y ago
Out of curiosity, how would the govt change their policy to improve the situation? Not subsidizing the loans would be a good idea. Another proposal would be enforcing some transparency/separability. For example, the govt could demand that colleges break down there costs more granularly than they do - $X for instruction, $Y for the gym, $Z for student activities, etc. They could also demand that all such fees (besides instruction) are optional to the student, and that subsidies only apply to instruction. Colleges waste a LOT of money on irrelevancies, and such a mechanism could reduce some of the waste.
- tokenadult 16y ago
  For example, the govt could demand that colleges break down there costs more granularly than they do The government already does do this, in mandatory reports to the federal IPEDS database. And a private foundation has published the information on a user-friendly website, so that even if colleges don't report to the public directly how they spend their money, discerning members of the public can find this out by looking it up. Compare http://www.collegeresults.org/search1b.aspx?institutionid=182290 http://www.collegeresults.org/search1b.aspx?institutionid=18... to http://www.collegeresults.org/search1b.aspx?institutionid=166027 http://www.collegeresults.org/search1b.aspx?institutionid=16... for example.
  - yummyfajitas 16y ago
    Nice database, but not remotely as granular as what I'm proposing. I want colleges to break down all the excludible services and students can pick and choose among them. I.e., a menu of some sort: Class/credits $x Computer lab access $? Yacht Club $? Student Theatre $? Intramural sports $? Latino Center $? Annual Rock Concert $? (Not made up) Career services $? The govt should subsidize only class/credits, and any colleges accepting subsidies must allow students to pick and choose among the rest. I.e., if you don't want to use computer labs or the gym, you don't have to pay for them. A lot of the cost of college is caused by colleges wasting money on unnecessary frills, and the system I propose would create a downward pressure on the cost of frills. (Another major component of cost is waste/fraud/abuse/administration, but I don't see an easy way to eliminate that.)

dgallagher 16y ago

PBS's Frontline did a report in May 2010 called College, Inc., detailing some of the ups and downs of for-profit colleges and universities: http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/?utm... It's about 45-50 minutes long. Worth the watch. If you're having trouble viewing it in Safari, try Firefox.

jerf 16y ago
Also available in Netflix Streaming, if you happen to have that and can't get to that site, which is showing difficulties for me.