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It's crazy how this isn't more common knowledge that the Economist needs to write an article about it. We're also seeing the same thing recently with tuition p

by mattm 8y ago

It's crazy how this isn't more common knowledge that the Economist needs to write an article about it. We're also seeing the same thing recently with tuition prices. There is more money available for student loans so schools just jack up the tuition to meet the supply of money available.

Retric 8y ago
That’s not just a question of loans. Schools can always discount prices down to what people can pay. So, they charge families making twice as much more money each year.
- paulddraper 8y ago
  It's insane what schools can get away with for price discrimination. Remember the uproar over Orbitz (and others) price discrimination based on Mac/iOS usage? [1] Schools have been doing the same thing in broad daylight for years and years with far greater consequence, basing their price on your parent's income levels.* And near zero public blowback. It's confusing. * This is all done through school scholarships, but there's practical difference between that and a more direct price adjustment. [1] https://www.wsj.com/articles/SB10001424052702304458604577488822667325882 https://www.wsj.com/articles/SB10001424052702304458604577488...
  - closeparen 8y ago
    It’s an informal social program. The rich subsidize everyone else.
    - Retric 8y ago
      Not so much the rich as like social security the cost caps out fairly low. Save on the low end ~100$ to high end ~500$ a month from birth and collage is mostly paid for via compound interest. That’s expensive, but students with 100+k in debt mostly don’t go to affordable schools.
      - paulddraper 8y ago
        > ~500$ a month from birth That is literally half my mortgage. For a single child. For years.
  - AnthonyMouse 8y ago
    > And near zero public blowback. It's confusing. It seems like there should be a market opportunity for an above-median school that charges below-median tuition by just charging everyone the same amount, and then picking up slews of high quality middle class students. I suspect what's preventing it is the state universities. The states with large middle class populations also generally have above-median state schools with below-median tuition for in-state students, so the market is already served and the public universities out-compete the private ones without an existing endowment because they're subsidized with public money. It's also quite unfortunate because it locks everyone into the university of their own state, so they don't really have to compete with each other and the students in a state with a poor quality state university get the shaft. What the states could do to improve this is to separate "in-state tuition" from the state university -- if you qualify for in-state tuition then you get that much money toward your tuition no matter which school you attend. It would probably devastate the state universities (because they wouldn't be competitive if people had that choice), but if the replacement would be better and cost less...
  - loceng 8y ago
    When we're isolated and not shown the schematic of how money is distributed, incoming and outgoing - and it's planned complexity like planned obsolescence, a subtle yet powerful design - it is a purposeful state of chaos/confusion created that leads to something similar to, if not the same, as decision fatigue (and in most cases this would require a lot of individual research to understand the underlying structures); you either don't understand and buy into it out of necessity (you need a place to live, you need education), and you either can afford it or not (loan), or you don't understand and don't buy into it because you don't understand or can't afford it - but then you can't move forward in life, at least not in as comforting as a way the path that "everyone" is seemingly following, or at least that indoctrinated systems and structured paths, industrial complexes, and marketing/advertising tells us "everyone" is doing and are important to do/solves a problem for us. Society needs to decide that we want transparency, accountability/accounting, and I believe we need to focus on promoting a unit cost structure, so people can see the full relative cost; what are the different models, what ecosystems/cities are using which model, and how can I "vote" for that system model by spending/buying into the model that I want to be perpetuated?
  - snidane 8y ago
    Why isn't there any public blowback regarding unequal pricing for public goods and services? They are mostly funded from income taxes which are not proportional to the amount of service thr payer gets at all. Property taxes would actually be different. The more you own, the bigger the effort the state has to gear towards you to guarantee you your ownership. Laws, law enforcement, judges, fire department in case it catches fire etc. Income taxes are the largest most discriminating schemes ever.
    - paulddraper 8y ago
      IDK about "any public blowback"...income tax was and is very unpopular. It took an entire constitutional amendment before it was adopted in the U.S.
- Shivetya 8y ago
  imho the only way to correct the cost of higher education is to limit what the federal government will loan per credit hour by course. many don't seem to have a problem with government dictating how much a medical procedure will be paid so lets apply that to education. you can damn well bet you will entire degrees built around the limits if they were in place. put it down to this course is worth X per credit and this degree is worth X amount and requires a set of course credits that will have loan money available. as to the article in question, one variable was missing. buyers won't accept homes and features that they can easily afford but are influenced by TV and other forms of marketing let alone the old keeping up with the Jones
MrTonyD 8y ago
I read an article where they did a supply/demand analysis of tuitions, and found that tuitions might simply be responding to demand. Obviously, there are a lot of factors to consider. But they looked at broader economics for demand (jobs, unemployment) and existing college sizes (instructor and class volume) and found that pricing were correlated with supply/demand changes, with loans playing only a minor role in education costs. It wasn't definitive, but now I view the "loans raise tuitions" crowd as holding an overly simplistic ideological position.
- deleted 8y ago
  [deleted]
- fbonetti 8y ago
  That demand was artificially created by the government disallowing the discharge of student loan debt through bankruptcy.
  - MrTonyD 8y ago
    Ummmm...no, at least not according to the study I read. The study identified lots of reasons for demand. Mostly, it was the economic situation. When jobs get scarce, or people get fired, they often go back to school (or stay in school). That increases demand. And changes in population between areas also increases demand in particular regions. Demand also varies with percent of population at an age where they go to school. There was more to the study - but I read it a couple of years ago and never tried to memorize the details. I'm trying to be generous in my response, and assume that you aren't simply trying to justify a philosophical position.
Digory 8y ago
I think the US version of this discussion is usually about the extraordinary rise in SV, NYC and DC, even as the rest of the country shares low interest rates. True, prices will also fall when interest rates rise, but it’s been a generation since that’s been practical knowledge.
fbonetti 8y ago
It drives me crazy that people don’t see the very simple reason why tuition has risen so much: student loan debt is not dischargable through bankruptcy. Even if the student is run over with a bus the debt can be passed on to family members. The lenders that give out these loans therefore have essentially no risk and are highly incentivized to give out loans to any and every person that wants one, regardless of their creditworthiness or future earning potential. Universities have responded to this glut of money and demand by raising prices. The solution is to allow student loans to be discharged through bankruptcy. Banks will respond by properly evaluating the risk of each loan instead of giving them out like candy. This will result in less students going to college, but that’s a fair price to pay to correct this massive distortion in the market.
- WalterBright 8y ago
  I would expect that such rising demand would result in more universities being built, and big expansions of existing ones.
  - fbonetti 8y ago
    This will happen eventually, but it takes a massive amount of resources to build a university from scratch, and existing universities risk diluting their brand if they take on too many students.
- hueving 8y ago
  >Even if the student is run over with a bus the debt can be passed on to family members. No, debt is never inherited. The cases you are thinking of is where the family members are cosigners on the loan. Nobody's child/sibling/parent/grandparent is ever responsible for a loan they didn't sign.
- greglindahl 8y ago
  Student loan debt not being dischargable through bankruptcy is relatively recent; the increase in tuition has been going on for a lot longer than that. Even if the step you advocate is taken, US federal student loan guarantees will continue to have a large effect on tuition rates.
candybar 8y ago
The relationship between student loans and tuition prices has always been the other way around - schools are more expensive so people take out larger loans. Government subsidies for student loans are comically low compared to actual tuition these days and have barely been keeping up - private student loans have always been available and the limit has always been based on creditworthiness of borrowers as opposed to government policy. The idea that student loans leads to higher tuition prices has always been a politically motivated talking point from the right as opposed to something based in reality. Going to college or often going to as good a school as you can get into and afford is considered more important than ever before and disposable income and wealth among the upper middle class in the US have been going up significantly, not to mention among the global elites who see US colleges as status goods. On the supply side, prestigious institutions are hardly expanding their capacity for fear of losing prestige and school administrations are becoming increasingly market-savvy and less willing to charge less than below-market prices for otherwise wealthy students and their parents.
conanbatt 8y ago
Its just that that's not how markets work. Prices go down in a competitive market ,and they go down over time. Cases where it doesn't go this way are usually monopolistic/rentist positions.

by mattm 8y ago

Retric 8y ago

That’s not just a question of loans. Schools can always discount prices down to what people can pay. So, they charge families making twice as much more money each year.

paulddraper 8y ago
It's insane what schools can get away with for price discrimination. Remember the uproar over Orbitz (and others) price discrimination based on Mac/iOS usage? [1] Schools have been doing the same thing in broad daylight for years and years with far greater consequence, basing their price on your parent's income levels.* And near zero public blowback. It's confusing. * This is all done through school scholarships, but there's practical difference between that and a more direct price adjustment. [1] https://www.wsj.com/articles/SB10001424052702304458604577488822667325882 https://www.wsj.com/articles/SB10001424052702304458604577488...
- closeparen 8y ago
  It’s an informal social program. The rich subsidize everyone else.
  - Retric 8y ago
    Not so much the rich as like social security the cost caps out fairly low. Save on the low end ~100$ to high end ~500$ a month from birth and collage is mostly paid for via compound interest. That’s expensive, but students with 100+k in debt mostly don’t go to affordable schools.
    - paulddraper 8y ago
      > ~500$ a month from birth That is literally half my mortgage. For a single child. For years.
- AnthonyMouse 8y ago
  > And near zero public blowback. It's confusing. It seems like there should be a market opportunity for an above-median school that charges below-median tuition by just charging everyone the same amount, and then picking up slews of high quality middle class students. I suspect what's preventing it is the state universities. The states with large middle class populations also generally have above-median state schools with below-median tuition for in-state students, so the market is already served and the public universities out-compete the private ones without an existing endowment because they're subsidized with public money. It's also quite unfortunate because it locks everyone into the university of their own state, so they don't really have to compete with each other and the students in a state with a poor quality state university get the shaft. What the states could do to improve this is to separate "in-state tuition" from the state university -- if you qualify for in-state tuition then you get that much money toward your tuition no matter which school you attend. It would probably devastate the state universities (because they wouldn't be competitive if people had that choice), but if the replacement would be better and cost less...
- loceng 8y ago
  When we're isolated and not shown the schematic of how money is distributed, incoming and outgoing - and it's planned complexity like planned obsolescence, a subtle yet powerful design - it is a purposeful state of chaos/confusion created that leads to something similar to, if not the same, as decision fatigue (and in most cases this would require a lot of individual research to understand the underlying structures); you either don't understand and buy into it out of necessity (you need a place to live, you need education), and you either can afford it or not (loan), or you don't understand and don't buy into it because you don't understand or can't afford it - but then you can't move forward in life, at least not in as comforting as a way the path that "everyone" is seemingly following, or at least that indoctrinated systems and structured paths, industrial complexes, and marketing/advertising tells us "everyone" is doing and are important to do/solves a problem for us. Society needs to decide that we want transparency, accountability/accounting, and I believe we need to focus on promoting a unit cost structure, so people can see the full relative cost; what are the different models, what ecosystems/cities are using which model, and how can I "vote" for that system model by spending/buying into the model that I want to be perpetuated?
- snidane 8y ago
  Why isn't there any public blowback regarding unequal pricing for public goods and services? They are mostly funded from income taxes which are not proportional to the amount of service thr payer gets at all. Property taxes would actually be different. The more you own, the bigger the effort the state has to gear towards you to guarantee you your ownership. Laws, law enforcement, judges, fire department in case it catches fire etc. Income taxes are the largest most discriminating schemes ever.
  - paulddraper 8y ago
    IDK about "any public blowback"...income tax was and is very unpopular. It took an entire constitutional amendment before it was adopted in the U.S.
Shivetya 8y ago
imho the only way to correct the cost of higher education is to limit what the federal government will loan per credit hour by course. many don't seem to have a problem with government dictating how much a medical procedure will be paid so lets apply that to education. you can damn well bet you will entire degrees built around the limits if they were in place. put it down to this course is worth X per credit and this degree is worth X amount and requires a set of course credits that will have loan money available. as to the article in question, one variable was missing. buyers won't accept homes and features that they can easily afford but are influenced by TV and other forms of marketing let alone the old keeping up with the Jones

MrTonyD 8y ago

I read an article where they did a supply/demand analysis of tuitions, and found that tuitions might simply be responding to demand. Obviously, there are a lot of factors to consider. But they looked at broader economics for demand (jobs, unemployment) and existing college sizes (instructor and class volume) and found that pricing were correlated with supply/demand changes, with loans playing only a minor role in education costs. It wasn't definitive, but now I view the "loans raise tuitions" crowd as holding an overly simplistic ideological position.

deleted 8y ago
[deleted]
fbonetti 8y ago
That demand was artificially created by the government disallowing the discharge of student loan debt through bankruptcy.
- MrTonyD 8y ago
  Ummmm...no, at least not according to the study I read. The study identified lots of reasons for demand. Mostly, it was the economic situation. When jobs get scarce, or people get fired, they often go back to school (or stay in school). That increases demand. And changes in population between areas also increases demand in particular regions. Demand also varies with percent of population at an age where they go to school. There was more to the study - but I read it a couple of years ago and never tried to memorize the details. I'm trying to be generous in my response, and assume that you aren't simply trying to justify a philosophical position.

Digory 8y ago

I think the US version of this discussion is usually about the extraordinary rise in SV, NYC and DC, even as the rest of the country shares low interest rates. True, prices will also fall when interest rates rise, but it’s been a generation since that’s been practical knowledge.

fbonetti 8y ago

It drives me crazy that people don’t see the very simple reason why tuition has risen so much: student loan debt is not dischargable through bankruptcy. Even if the student is run over with a bus the debt can be passed on to family members. The lenders that give out these loans therefore have essentially no risk and are highly incentivized to give out loans to any and every person that wants one, regardless of their creditworthiness or future earning potential. Universities have responded to this glut of money and demand by raising prices. The solution is to allow student loans to be discharged through bankruptcy. Banks will respond by properly evaluating the risk of each loan instead of giving them out like candy. This will result in less students going to college, but that’s a fair price to pay to correct this massive distortion in the market.

WalterBright 8y ago
I would expect that such rising demand would result in more universities being built, and big expansions of existing ones.
- fbonetti 8y ago
  This will happen eventually, but it takes a massive amount of resources to build a university from scratch, and existing universities risk diluting their brand if they take on too many students.
hueving 8y ago
>Even if the student is run over with a bus the debt can be passed on to family members. No, debt is never inherited. The cases you are thinking of is where the family members are cosigners on the loan. Nobody's child/sibling/parent/grandparent is ever responsible for a loan they didn't sign.
greglindahl 8y ago
Student loan debt not being dischargable through bankruptcy is relatively recent; the increase in tuition has been going on for a lot longer than that. Even if the step you advocate is taken, US federal student loan guarantees will continue to have a large effect on tuition rates.

candybar 8y ago

The relationship between student loans and tuition prices has always been the other way around - schools are more expensive so people take out larger loans. Government subsidies for student loans are comically low compared to actual tuition these days and have barely been keeping up - private student loans have always been available and the limit has always been based on creditworthiness of borrowers as opposed to government policy. The idea that student loans leads to higher tuition prices has always been a politically motivated talking point from the right as opposed to something based in reality. Going to college or often going to as good a school as you can get into and afford is considered more important than ever before and disposable income and wealth among the upper middle class in the US have been going up significantly, not to mention among the global elites who see US colleges as status goods. On the supply side, prestigious institutions are hardly expanding their capacity for fear of losing prestige and school administrations are becoming increasingly market-savvy and less willing to charge less than below-market prices for otherwise wealthy students and their parents.

conanbatt 8y ago

Its just that that's not how markets work. Prices go down in a competitive market ,and they go down over time. Cases where it doesn't go this way are usually monopolistic/rentist positions.