5 ms·

There is a rather simple way of stopping the ever growing tuition bubble, one that is employed in the Netherland, but I feel like it won't be popular in the US:

There is a rather simple way of stopping the ever growing tuition bubble, one that is employed in the Netherland, but I feel like it won't be popular in the US: Cap the tuition a college is allowed to charge and restrict them from charging additional fees.

ashelmire 8y ago
Actually, the simplest way to put downward pressure on tuition in the US is to allow the loans to be dischargeable in bankruptcy.
- p1esk 8y ago
  Why?
  - ashelmire 8y ago
    See the other comment: Banks will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.
    - prklmn 8y ago
      The govnement is the creditor, not the banks like they would be for a traditional loan.
      - ashelmire 8y ago
        Hmm, I didn't realize that federal loans were the overwhelming majority of the student loans (I guess the pseudo-governmental status of Sallie Mae and getting federal loans serviced by banks was a bit confusing). That does complicate matters, and suggests that universities are enjoying the government guarantee of funding to increase costs. Making them dischargeable in bankruptcy would mean the programs would have to change.
- TrinaryWorksToo 8y ago
  Won't people then plan to go bankrupt? Although perhaps that will allow a better equilibrium.
  - iguy 8y ago
    Here's another idea for a better equilibrium: Cap non-dischargeable loan payments at (say) 15% of taxable income, written off after 20 years. Then they can never become an impossible burden, and lenders will become very picky about what kinds of study they wish to fund. Which will in turn provide more useful information to those applying, instead of just glossy brochures.
  - hn_throwaway_99 8y ago
    No, being bankrupt is definitely not an enjoyable state to be in, even is your debts are discharged, though. What is does mean, however, is that no sane entity will then continue giving out loans for someone to go $75k in debt to go to cooking school.
    - hobo_mark 8y ago
      You mean culinary science !
  - ashelmire 8y ago
    Yes, which is exactly the point; so banks/gov will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.
  - AngryData 8y ago
    It works for our president, maybe the government will learn something when not only the wealthy can get away with it.
  - sillyguy123 8y ago
    Probably - it would change the dynamics between pricing , companies providing the financing and universities. How I’ve no idea. Right now it’s kinda risk free to give loans out so that would change. Maybe then less cash is made available and universities have extra capacity.
- jogjayr 8y ago
  I agree, but I don't think it should be retroactive i.e. only new loans are covered. Banks will start pricing them like personal loans if they're dischargeable in bankruptcy, so it would not be fair that people with more favorable terms obtained earlier are able to take advantage.
- TheSoftwareGuy 8y ago
  Maybe make them dischargeable 10 years after graduation/disbursement? This might help avoid people from planning to declare bankruptcy immediately out of college to get rid of the debt, and 10 years later most people would have some assets to go after during bankruptcy proceedings The upside is that lenders would still have to consider whether the borrower is actually likely to be able to pay back their loan
- groestl 8y ago
  Yes, or, if you want to go even further, introduce a special bankruptcy after X years, just for tuition debts. Which is effectively the idea of the IBR (income-based repayment) scheme, as I understand it (I'm not US-American).
wutbrodo 8y ago
I think part of the reason that the US is hesitant to take approaches that constrain universities' ability to operate based on other countries' actions is that no country has as many universities of as high quality as the US does, to the massive benefit of both the country and the world. There's undoubtedly tons of waste in universities' functioning, but I don't blame policymakers for treading lightly when it comes to constraining their operations in any significant way for fear of killing the goose that lays the golden eggs, as opposed to simply the baseline ideological skew towards less direct regulation of businesses.

ashelmire 8y ago

Actually, the simplest way to put downward pressure on tuition in the US is to allow the loans to be dischargeable in bankruptcy.

p1esk 8y ago
Why?
- ashelmire 8y ago
  See the other comment: Banks will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.
  - prklmn 8y ago
    The govnement is the creditor, not the banks like they would be for a traditional loan.
    - ashelmire 8y ago
      Hmm, I didn't realize that federal loans were the overwhelming majority of the student loans (I guess the pseudo-governmental status of Sallie Mae and getting federal loans serviced by banks was a bit confusing). That does complicate matters, and suggests that universities are enjoying the government guarantee of funding to increase costs. Making them dischargeable in bankruptcy would mean the programs would have to change.
TrinaryWorksToo 8y ago
Won't people then plan to go bankrupt? Although perhaps that will allow a better equilibrium.
- iguy 8y ago
  Here's another idea for a better equilibrium: Cap non-dischargeable loan payments at (say) 15% of taxable income, written off after 20 years. Then they can never become an impossible burden, and lenders will become very picky about what kinds of study they wish to fund. Which will in turn provide more useful information to those applying, instead of just glossy brochures.
- hn_throwaway_99 8y ago
  No, being bankrupt is definitely not an enjoyable state to be in, even is your debts are discharged, though. What is does mean, however, is that no sane entity will then continue giving out loans for someone to go $75k in debt to go to cooking school.
  - hobo_mark 8y ago
    You mean culinary science !
- ashelmire 8y ago
  Yes, which is exactly the point; so banks/gov will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.
- AngryData 8y ago
  It works for our president, maybe the government will learn something when not only the wealthy can get away with it.
- sillyguy123 8y ago
  Probably - it would change the dynamics between pricing , companies providing the financing and universities. How I’ve no idea. Right now it’s kinda risk free to give loans out so that would change. Maybe then less cash is made available and universities have extra capacity.
jogjayr 8y ago
I agree, but I don't think it should be retroactive i.e. only new loans are covered. Banks will start pricing them like personal loans if they're dischargeable in bankruptcy, so it would not be fair that people with more favorable terms obtained earlier are able to take advantage.
TheSoftwareGuy 8y ago
Maybe make them dischargeable 10 years after graduation/disbursement? This might help avoid people from planning to declare bankruptcy immediately out of college to get rid of the debt, and 10 years later most people would have some assets to go after during bankruptcy proceedings The upside is that lenders would still have to consider whether the borrower is actually likely to be able to pay back their loan
groestl 8y ago
Yes, or, if you want to go even further, introduce a special bankruptcy after X years, just for tuition debts. Which is effectively the idea of the IBR (income-based repayment) scheme, as I understand it (I'm not US-American).

wutbrodo 8y ago

I think part of the reason that the US is hesitant to take approaches that constrain universities' ability to operate based on other countries' actions is that no country has as many universities of as high quality as the US does, to the massive benefit of both the country and the world. There's undoubtedly tons of waste in universities' functioning, but I don't blame policymakers for treading lightly when it comes to constraining their operations in any significant way for fear of killing the goose that lays the golden eggs, as opposed to simply the baseline ideological skew towards less direct regulation of businesses.