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For the average college graduate, college is still a pretty good investment. I could write lots of comments about people without a college degree that live crap

For the average college graduate, college is still a pretty good investment. I could write lots of comments about people without a college degree that live crappy lives and have trouble finding good paying jobs, and people with college degrees that live well and make a lot of money. My prediction is that we'll see changes in the US system. The problem you're pointing out is the risk. Universities are the ones that IMO should be taking on the risk. If you graduate 3000 students a year, most will do okay and some won't, and that would be no big deal if college cost $800 a year. I predict that over the next couple decades we'll move to a system where you pay for college out of your earnings. This would clean up another issue (not pointing any fingers with this). Colleges would nudge students into careers with better prospects. If they'd get paid less from students in certain majors, there'd be fewer of those majors. I could even see a system where "you're on your own" if you major in certain limited prospect fields. Universities that align their interests with those of the students will be the ones that thrive. Disclosure: Professor for many years

vsareto 7y ago
No college is going to advocate for taking future income from students over government backed loans or a traditional loan. The former translates to less immediate income. Colleges had little reason to raise tuition since 2000 except for money, I don't see them suddenly moving to forward-thinking strategies.
- fossuser 7y ago
  They may if they face competition form Lambda School style ISAs (not necessarily just ISAs generally, but ones that are actually good for the student). As a bonus this would make universities better at education since the incentives would be aligned with the students. It would be helped though if the easily available government loans were not available, though with the generally bad politics from both sides on this, I find progress there unlikely.
  - ineedasername 7y ago
    You're assuming a lot of faith in market forces. In reality, the incentives should already be aligned with student interest: All of the information for it is already available. Retention & graduation rates are public knowledge, and you can easily find out if a school has job placement (and their rates) or merely a "career services" area that will help you write a resume and point you at some other resources. The fact is, the majority of students don't make their decisions of where to attend based on tangible metrics. They make their decision based primarily on the perceived "experience" they will have in college, and only after that do they filter their options based on other factors (if at all). The problem is less with the colleges, and more with the fact that attending college has become less about academics and much more about a stage of transition into adulthood (along with a sort of last "hurrah" farewell to the lesser responsibilities of childhood)
    - fossuser 7y ago
      It's not really the same when the school gets the money either way and it's not clear how the placement rates really translate to good outcomes (it puts the rationality burden on the students which is the wrong place for it and less likely to work for the reasons you describe). Schools are incentivized to not have students fail out and to select hard for students already likely to succeed during admissions, but that doesn't mean the students currently learn much from the school or that the schools should even make education their focus (as opposed to increasing their prestige via research or facilities to attract more students). If student failure to succeed in the market led to university failure we'd see a lot different behavior from universities. I don't think the universities are currently selling education, they're selling prestige and network access via credentials with some education on the side at inflated rates from easy access to government non-defaultable loans. This leads to weird behavior like all majors being the same cost and the same length along with lots of people employed by the university that don't know anything (career services where I went to school was a good example of this). There's also a lot of spending on facilities to lure students that is unrelated to education or success afterwards (since they have to compete with other universities for all of the free government loan money). If this free money was not available there would be a check on people getting loans for majors that are not economically viable. If school's offered ISAs then the school's would provide the check. As it is currently, the student carries the burden of evaluating all of this - it's not a surprise a lot of people fail this at 16. This incentive alignment issue is why people come out of universities and get destroyed by technical interviews, why a large amount of CS majors can't solve fizzbuzz and why people pay a lot for ultimately worthless degrees. I don't disagree with the cultural problems you describe, but I think if there's an ISA option vs. 100k in debt option more people will take the ISA option if the education actually works (and it will have to for ISA providers to survive). There's a way to fix the systemic incentive issues and place the burden of evaluating economic viability on systems better able to handle it. This would fix a lot of the problems, but it's hard to change from within the system with the current broken incentive structure. That's why I'm excited about the Lambda School approach - I don't think universities can dig themselves out of this and I don't think the necessary changes to government loans is politically viable. This is also why I think 'free college' is bad policy, it further prevents Lambda School like ISA approaches and cements in the current broken incentive structure.
- bachmeier 7y ago
  Actually, some schools do have versions in place already (I believe Purdue's engineering is one example). My opinion - not my area of research - is that the days of hiking tuition like they did year after year are over. Note that there's no reason this won't bring in money immediately. Students would essentially be doing an IPO and giving shares to the university. Those shares would have value to someone, and they could serve as collateral for a loan. And beyond that, there's no reason it has to be all or nothing. You could pay half tuition now and sign over a percentage of future earnings. There's no way colleges want to do this. It's unclear to me how long they continue to operate under the current system. They're going to have to innovate.
- khawkins 7y ago
  For this reason, I think instead of trying to force a new system, work within the reality that the federal government has a near-monopoly on student loans. Tie the amount of students that can get student loans at a particular college directly to the amount of money is being paid by students who have graduated. Also, cap the amount of money each student needs to pay back per year to their salary. The colleges will have no choice but to ensure their students have nice enough jobs to pay back the loans, and will quickly see attendance plummet if they can't get people in the door anymore. Remember that it's the government paying these colleges directly, not the students.
- rahimnathwani 7y ago
  "The former translates to less immediate income." Unless they sell bonds secured on the income streams.
- gen220 7y ago
  For schools in good financial states (they are few in number), I think they will actually trend in this direction. The most prestigious medical schools, engineering schools, etc. actually make a ton of money from non-tuition-based sources. Income from patent licensing, federal research grants, etc. dominate income from tuition. Some of these schools also have endowments that are absurd multipliers of their annual expenditures. For these schools, where the lack of tuition isn't such a near-term threat, they might actually realize that they can make more money in the long-term (and incentivize better education) by making tuition something more like an ISA. You've seen it already, where some schools are offering "free tuition", because the value of the labor they get from their students is already greater than the tuition they charge. There's also probably some good tax benefits to writing off the expense of education, in these scenarios. https://med.nyu.edu/education/md-degree/md-affordability-financial-aid/cost-attendance https://med.nyu.edu/education/md-degree/md-affordability-fin... Especially when you include the tax benefits, free tuition might actually be cheaper than an ISA, because enforcing an ISA requires operational overhead.
Barrin92 7y ago
>For the average college graduate, college is still a pretty good investment Evidence doesn't seem to bear this out. "The college income premium—the extra income earned by a family headed by a college graduate over an otherwise similar family without a bachelor’s degree—remains positive but has declined for recent graduates. The college wealth premium (extra wealth) has declined more noticeably among all cohorts born after 1940. Among non-Hispanic white family heads born in the 1980s, the college wealth premium is at a historic low; among all other races and ethnicities, it is statistically indistinguishable from zero [emphasis added]. Using variables available for the first time in the 2016 Survey of Consumer Finances, we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added by college and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment. We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education." particularly noteworthy: "[...]among all other races and ethnicities, it is statistically indistinguishable from zero[...]" https://marginalrevolution.com/marginalrevolution/2019/12/is-the-college-wealth-premium-zero.html https://marginalrevolution.com/marginalrevolution/2019/12/is...
- krastanov 7y ago
  I skimmed the paper. Figures 3, 4, 5, and 6 from the paper you linked seem to show that higher degrees correlate with higher net worth. Could you elaborate on what I am missing?

vsareto 7y ago

No college is going to advocate for taking future income from students over government backed loans or a traditional loan. The former translates to less immediate income. Colleges had little reason to raise tuition since 2000 except for money, I don't see them suddenly moving to forward-thinking strategies.

fossuser 7y ago
They may if they face competition form Lambda School style ISAs (not necessarily just ISAs generally, but ones that are actually good for the student). As a bonus this would make universities better at education since the incentives would be aligned with the students. It would be helped though if the easily available government loans were not available, though with the generally bad politics from both sides on this, I find progress there unlikely.
- ineedasername 7y ago
  You're assuming a lot of faith in market forces. In reality, the incentives should already be aligned with student interest: All of the information for it is already available. Retention & graduation rates are public knowledge, and you can easily find out if a school has job placement (and their rates) or merely a "career services" area that will help you write a resume and point you at some other resources. The fact is, the majority of students don't make their decisions of where to attend based on tangible metrics. They make their decision based primarily on the perceived "experience" they will have in college, and only after that do they filter their options based on other factors (if at all). The problem is less with the colleges, and more with the fact that attending college has become less about academics and much more about a stage of transition into adulthood (along with a sort of last "hurrah" farewell to the lesser responsibilities of childhood)
  - fossuser 7y ago
    It's not really the same when the school gets the money either way and it's not clear how the placement rates really translate to good outcomes (it puts the rationality burden on the students which is the wrong place for it and less likely to work for the reasons you describe). Schools are incentivized to not have students fail out and to select hard for students already likely to succeed during admissions, but that doesn't mean the students currently learn much from the school or that the schools should even make education their focus (as opposed to increasing their prestige via research or facilities to attract more students). If student failure to succeed in the market led to university failure we'd see a lot different behavior from universities. I don't think the universities are currently selling education, they're selling prestige and network access via credentials with some education on the side at inflated rates from easy access to government non-defaultable loans. This leads to weird behavior like all majors being the same cost and the same length along with lots of people employed by the university that don't know anything (career services where I went to school was a good example of this). There's also a lot of spending on facilities to lure students that is unrelated to education or success afterwards (since they have to compete with other universities for all of the free government loan money). If this free money was not available there would be a check on people getting loans for majors that are not economically viable. If school's offered ISAs then the school's would provide the check. As it is currently, the student carries the burden of evaluating all of this - it's not a surprise a lot of people fail this at 16. This incentive alignment issue is why people come out of universities and get destroyed by technical interviews, why a large amount of CS majors can't solve fizzbuzz and why people pay a lot for ultimately worthless degrees. I don't disagree with the cultural problems you describe, but I think if there's an ISA option vs. 100k in debt option more people will take the ISA option if the education actually works (and it will have to for ISA providers to survive). There's a way to fix the systemic incentive issues and place the burden of evaluating economic viability on systems better able to handle it. This would fix a lot of the problems, but it's hard to change from within the system with the current broken incentive structure. That's why I'm excited about the Lambda School approach - I don't think universities can dig themselves out of this and I don't think the necessary changes to government loans is politically viable. This is also why I think 'free college' is bad policy, it further prevents Lambda School like ISA approaches and cements in the current broken incentive structure.
bachmeier 7y ago
Actually, some schools do have versions in place already (I believe Purdue's engineering is one example). My opinion - not my area of research - is that the days of hiking tuition like they did year after year are over. Note that there's no reason this won't bring in money immediately. Students would essentially be doing an IPO and giving shares to the university. Those shares would have value to someone, and they could serve as collateral for a loan. And beyond that, there's no reason it has to be all or nothing. You could pay half tuition now and sign over a percentage of future earnings. There's no way colleges want to do this. It's unclear to me how long they continue to operate under the current system. They're going to have to innovate.
khawkins 7y ago
For this reason, I think instead of trying to force a new system, work within the reality that the federal government has a near-monopoly on student loans. Tie the amount of students that can get student loans at a particular college directly to the amount of money is being paid by students who have graduated. Also, cap the amount of money each student needs to pay back per year to their salary. The colleges will have no choice but to ensure their students have nice enough jobs to pay back the loans, and will quickly see attendance plummet if they can't get people in the door anymore. Remember that it's the government paying these colleges directly, not the students.
rahimnathwani 7y ago
"The former translates to less immediate income." Unless they sell bonds secured on the income streams.
gen220 7y ago
For schools in good financial states (they are few in number), I think they will actually trend in this direction. The most prestigious medical schools, engineering schools, etc. actually make a ton of money from non-tuition-based sources. Income from patent licensing, federal research grants, etc. dominate income from tuition. Some of these schools also have endowments that are absurd multipliers of their annual expenditures. For these schools, where the lack of tuition isn't such a near-term threat, they might actually realize that they can make more money in the long-term (and incentivize better education) by making tuition something more like an ISA. You've seen it already, where some schools are offering "free tuition", because the value of the labor they get from their students is already greater than the tuition they charge. There's also probably some good tax benefits to writing off the expense of education, in these scenarios. https://med.nyu.edu/education/md-degree/md-affordability-financial-aid/cost-attendance https://med.nyu.edu/education/md-degree/md-affordability-fin... Especially when you include the tax benefits, free tuition might actually be cheaper than an ISA, because enforcing an ISA requires operational overhead.

Barrin92 7y ago

>For the average college graduate, college is still a pretty good investment Evidence doesn't seem to bear this out. "The college income premium—the extra income earned by a family headed by a college graduate over an otherwise similar family without a bachelor’s degree—remains positive but has declined for recent graduates. The college wealth premium (extra wealth) has declined more noticeably among all cohorts born after 1940. Among non-Hispanic white family heads born in the 1980s, the college wealth premium is at a historic low; among all other races and ethnicities, it is statistically indistinguishable from zero [emphasis added]. Using variables available for the first time in the 2016 Survey of Consumer Finances, we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added by college and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment. We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education." particularly noteworthy: "[...]among all other races and ethnicities, it is statistically indistinguishable from zero[...]" https://marginalrevolution.com/marginalrevolution/2019/12/is-the-college-wealth-premium-zero.html https://marginalrevolution.com/marginalrevolution/2019/12/is...

krastanov 7y ago
I skimmed the paper. Figures 3, 4, 5, and 6 from the paper you linked seem to show that higher degrees correlate with higher net worth. Could you elaborate on what I am missing?