4 ms·

> The student loan system will cost the government $170 billion in losses over 10 years I don’t doubt this, but it’s a statement that focuses only on losses an

by dahart 7y ago

> The student loan system will cost the government $170 billion in losses over 10 years I don’t doubt this, but it’s a statement that focuses only on losses and completely ignores the economic benefits of the educated workforce. $170 billion over ten years is on the order of 1% of education spending. Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively, the extra income taxes paid by the non-defaulting group of college graduates alone makes the loan forgiveness losses a drop in the bucket, the income makes up for the losses many times over.

rossdavidh 7y ago
Once the job market got better a couple years ago, the percentage of job postings which required a college degree dropped. In other words, the "requirement" was mostly a way of filtering, not something that actually increased productivity. Speaking as a person with two degrees myself, I can say that non-degreed programmers seem to be just as productive as those with degrees. In fact, CS majors in particular have a problem just solving the problem in front of them, and often want to over-engineer things using the techniques and patterns they learned in school that are applicable to huge systems, whereas non-degreed programmers often just solve the actual problem they have without trying to justify (in their own minds) years spent learning other techniques. I am not at all convinced that a college-educated workforce is more productive, for more than half the jobs in which it is required.
- dahart 7y ago
  Productivity isn’t the metric that determines whether the government recoups student loan defaults, income is. And the income of graduates is still multiples that of non-graduates, as shown by the data in this article.
  - malvosenior 7y ago
    Correlation does not equal causation. There's a very broad spectrum of people who do not have degrees. It's very likely that if you took those same people earning degrees and had them enter the workforce instead, they'd have equal or greater pay.
    - dahart 7y ago
      That isn’t supported by the data we actually have. Please take a look at Figure 3 on page 39.
      - malvosenior 7y ago
        That data doesn't reference the point I'm making. What I'm saying is that it's very possible that if the same people that got bachelor degrees instead entered the workplace, they'd have equal or greater lifetime earnings. To put it another way, earnings are correlated with an individual's talent and drive. Currently, many of those people end up getting degrees. It's a correlation, it's not the degrees that are causing the jump in earnings, it's the individual's skills.
        dahart 7y ago
        You’re right, figure 3 doesn’t answer your question. But your point/topic is not addressing my original point. My point above was that income before taxes alone is what you need to evaluate whether the student loan program offsets the student loan default rate. The financial return on investment of the student loan program is determined solely by the increase in income, not the wealth premium. To address your separate point directly, there are studies that attempt to directly answer the question you’re asking. For example: http://conference.iza.org/conference_files/CoNoCoSk2011/gensowski_m6556.pdf http://conference.iza.org/conference_files/CoNoCoSk2011/gens... However, your conclusion isn’t shared by the authors. They show a positive return on college degrees, it’s just smaller than the unadjusted difference in income. One probable factor for this is cultural bias toward giving jobs to people with degrees, and paying employees more who have degrees. Individual skills alone do not explain the difference in earnings, so despite the fact that talent correllates with income, the correlation is not 1, and thus it is not likely that the same people earn equal or greater without a degree than with. It is likely that the same person without a degree will earn less than with a degree, on average.
      - rossdavidh 7y ago
        That doesn't say anything about which is cause and which is effect, which is what is relevant for an increase in college education to make a more productive workforce. In fact, the labor productivity growth rate does not seem to have significantly changed at all, even as the percentage which is college educated has gone up a lot: https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH
  - rayiner 7y ago
    Individually, yes. But that doesn’t mean that people are making more money in the aggregate by more people going to college. If the government subsidizes college and that results in more people going to college, but employers just respond by taking previously non-college jobs and making them require college degrees, there isn’t actually more money in the economy as a result to justify the government expenditure.
    - dahart 7y ago
      You’re moving your own goal post. You complained about the government’s relatively small outputs from the student loan program, which is absolutely recouped many times over by today’s income premium, in the form of income taxes, regardless of whether the economy grows. Your hypothetical isn’t the way things are actually playing out, so I don’t feel like it needs to be argued. Degree holders are generating value on average, so the economy does, in fact, have more money as a result of education. And the government also makes money on it’s investment in education on top of that.
      - Akababa 7y ago
        I feel like you're talking past a lot of the other commenters in this thread. I'll try to frame it another way: Generating value is synonymous with growing the economy and being more productive. You can't inflate incomes without either increasing productivity or printing money. If degree holders command higher incomes without offering higher productivity, it comes at the expense of non-degree holders earning lower wages than they would have without the degree holders around. In my opinion, much of the income premium comes from employers using degrees as a filter (similar to a standardized test). Doing well on the SAT doesn't make you more productive, but does give you a leg up over your peers.
        dahart 7y ago
        I totally agree that a big factor in income differences is due to cultural biases that favor degree holders. I don’t think degrees are economically zero value though, for example patents are primarily held by inventors with postgraduate degrees, and more businesses are started by degree holders. I’m not really sure how to answer your first part, I’m not trying to talk past anyone, but I feel like people are responding to my point that the income premium is what matters to the student loan program by repeating the conclusion of the paper that the wealth premium is going to zero. The income premium and the wealth premium in this paper are two different things, and even though people with degrees might end up having net zero additional wealth accumulation at the end of their lives, that doesn’t mean the student loan program is also net zero, or that people with and without degrees have the same lifestyle. The student loan program gets to make it’s money back before degree holders get to save the money, so the income premium matters to the government more than the wealth premium, when figuring out whether forgiving loans is worth it or not.
xyzzyz 7y ago
> Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively The original paper that this whole discussion is happening in the context of literally says that the college premium is very low, and for non whites practically zero. The whole issue is that society-wide, college education doesn’t increase the wages of people. Yes, the college educated people make much more than those without a degree, but the question is how much they’d make on average if those same people didn’t get a degree, and as the paper argues, only a little less if at all.
- dahart 7y ago
  No, income taxes are extracted before the premium is calculated. I’m not talking about the wealth premium that a degree gives you, I’m talking about the income taxes that the government extracts from people who have degrees, which is completely unaffected by the recent downward trend in the wealth premium that this paper is calculating. This is a case where the absolute, uncontrolled data is very important to differentiate from the adjusted, controlled data.
  - sokoloff 7y ago
    What the “other” side is arguing is that if you’re using these income taxes as justification for the government backed loans because those loans allow the attendance of college, then it matters whether or not those same people going directly into the workforce, starting working 4 years earlier, and using their talent and ambition would end up paying a similar or greater amount of income tax. In short, you’re saying only the outcome matters and they’re saying the outcome might not be caused by college attendance.
    - dahart 7y ago
      I’m not saying that only the outcome matters, I’m saying that the government’s financial investment on the student loan program is seeing high positive returns right now, despite the default rate on those loans.
      - 7y ago

by dahart 7y ago

rossdavidh 7y ago

Once the job market got better a couple years ago, the percentage of job postings which required a college degree dropped. In other words, the "requirement" was mostly a way of filtering, not something that actually increased productivity. Speaking as a person with two degrees myself, I can say that non-degreed programmers seem to be just as productive as those with degrees. In fact, CS majors in particular have a problem just solving the problem in front of them, and often want to over-engineer things using the techniques and patterns they learned in school that are applicable to huge systems, whereas non-degreed programmers often just solve the actual problem they have without trying to justify (in their own minds) years spent learning other techniques. I am not at all convinced that a college-educated workforce is more productive, for more than half the jobs in which it is required.

dahart 7y ago
Productivity isn’t the metric that determines whether the government recoups student loan defaults, income is. And the income of graduates is still multiples that of non-graduates, as shown by the data in this article.
- malvosenior 7y ago
  Correlation does not equal causation. There's a very broad spectrum of people who do not have degrees. It's very likely that if you took those same people earning degrees and had them enter the workforce instead, they'd have equal or greater pay.
  - dahart 7y ago
    That isn’t supported by the data we actually have. Please take a look at Figure 3 on page 39.
    - malvosenior 7y ago
      That data doesn't reference the point I'm making. What I'm saying is that it's very possible that if the same people that got bachelor degrees instead entered the workplace, they'd have equal or greater lifetime earnings. To put it another way, earnings are correlated with an individual's talent and drive. Currently, many of those people end up getting degrees. It's a correlation, it's not the degrees that are causing the jump in earnings, it's the individual's skills.
      - dahart 7y ago
        You’re right, figure 3 doesn’t answer your question. But your point/topic is not addressing my original point. My point above was that income before taxes alone is what you need to evaluate whether the student loan program offsets the student loan default rate. The financial return on investment of the student loan program is determined solely by the increase in income, not the wealth premium. To address your separate point directly, there are studies that attempt to directly answer the question you’re asking. For example: http://conference.iza.org/conference_files/CoNoCoSk2011/gensowski_m6556.pdf http://conference.iza.org/conference_files/CoNoCoSk2011/gens... However, your conclusion isn’t shared by the authors. They show a positive return on college degrees, it’s just smaller than the unadjusted difference in income. One probable factor for this is cultural bias toward giving jobs to people with degrees, and paying employees more who have degrees. Individual skills alone do not explain the difference in earnings, so despite the fact that talent correllates with income, the correlation is not 1, and thus it is not likely that the same people earn equal or greater without a degree than with. It is likely that the same person without a degree will earn less than with a degree, on average.
    - rossdavidh 7y ago
      That doesn't say anything about which is cause and which is effect, which is what is relevant for an increase in college education to make a more productive workforce. In fact, the labor productivity growth rate does not seem to have significantly changed at all, even as the percentage which is college educated has gone up a lot: https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH
- rayiner 7y ago
  Individually, yes. But that doesn’t mean that people are making more money in the aggregate by more people going to college. If the government subsidizes college and that results in more people going to college, but employers just respond by taking previously non-college jobs and making them require college degrees, there isn’t actually more money in the economy as a result to justify the government expenditure.
  - dahart 7y ago
    You’re moving your own goal post. You complained about the government’s relatively small outputs from the student loan program, which is absolutely recouped many times over by today’s income premium, in the form of income taxes, regardless of whether the economy grows. Your hypothetical isn’t the way things are actually playing out, so I don’t feel like it needs to be argued. Degree holders are generating value on average, so the economy does, in fact, have more money as a result of education. And the government also makes money on it’s investment in education on top of that.
    - Akababa 7y ago
      I feel like you're talking past a lot of the other commenters in this thread. I'll try to frame it another way: Generating value is synonymous with growing the economy and being more productive. You can't inflate incomes without either increasing productivity or printing money. If degree holders command higher incomes without offering higher productivity, it comes at the expense of non-degree holders earning lower wages than they would have without the degree holders around. In my opinion, much of the income premium comes from employers using degrees as a filter (similar to a standardized test). Doing well on the SAT doesn't make you more productive, but does give you a leg up over your peers.
      - dahart 7y ago
        I totally agree that a big factor in income differences is due to cultural biases that favor degree holders. I don’t think degrees are economically zero value though, for example patents are primarily held by inventors with postgraduate degrees, and more businesses are started by degree holders. I’m not really sure how to answer your first part, I’m not trying to talk past anyone, but I feel like people are responding to my point that the income premium is what matters to the student loan program by repeating the conclusion of the paper that the wealth premium is going to zero. The income premium and the wealth premium in this paper are two different things, and even though people with degrees might end up having net zero additional wealth accumulation at the end of their lives, that doesn’t mean the student loan program is also net zero, or that people with and without degrees have the same lifestyle. The student loan program gets to make it’s money back before degree holders get to save the money, so the income premium matters to the government more than the wealth premium, when figuring out whether forgiving loans is worth it or not.

xyzzyz 7y ago

> Since graduates and postgraduates are earning, on average, roughly 2x and 3x non-graduates respectively The original paper that this whole discussion is happening in the context of literally says that the college premium is very low, and for non whites practically zero. The whole issue is that society-wide, college education doesn’t increase the wages of people. Yes, the college educated people make much more than those without a degree, but the question is how much they’d make on average if those same people didn’t get a degree, and as the paper argues, only a little less if at all.

dahart 7y ago
No, income taxes are extracted before the premium is calculated. I’m not talking about the wealth premium that a degree gives you, I’m talking about the income taxes that the government extracts from people who have degrees, which is completely unaffected by the recent downward trend in the wealth premium that this paper is calculating. This is a case where the absolute, uncontrolled data is very important to differentiate from the adjusted, controlled data.
- sokoloff 7y ago
  What the “other” side is arguing is that if you’re using these income taxes as justification for the government backed loans because those loans allow the attendance of college, then it matters whether or not those same people going directly into the workforce, starting working 4 years earlier, and using their talent and ambition would end up paying a similar or greater amount of income tax. In short, you’re saying only the outcome matters and they’re saying the outcome might not be caused by college attendance.
  - dahart 7y ago
    I’m not saying that only the outcome matters, I’m saying that the government’s financial investment on the student loan program is seeing high positive returns right now, despite the default rate on those loans.
    - 7y ago