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Why has college gotten so expensive in the last 30 years? A blank check in 1993

• fatnoah 6y ago
  Is this surprising to anyone? Colleges battle each other to provide amenities, loans are easy to come by, and the colleges have nothing to lose when the students default. I remember my first day of college (in 1993!) and remember part of registering was signing all of these forms where my options were a) take out loans and go to school or b) don't take out loans and don't go to school. I had no idea what it meant to carry debt. As it turns out, I was fortunate to only have $30k of debt and interest rates that eventually went down to 2%. Between then and now, the "all-in" cost of attending my college has increased 200%.
  • bitwize 6y ago
    Yeah, 50k of debt here, still paying it but it's doable on a programmer salary. Don't know what kids these days will do.
    • troughway 6y ago
      OnlyFans, apparently.
  • vonmoltke 6y ago
    > Is this surprising to anyone? Yes. Most people here who actually post in US college cost discussions seem to think the federal government is still only in the business of guaranteeing loans. As this article indicates, when the federal government is making these loans and owning them from start to finish it changes the dynamics considerably. > I remember my first day of college (in 1993!) ... I was fortunate to only have $30k of debt Where did you go? The on-campus sticker price on my state universities (Florida International and Florida Atlantic) was only about $35k (all-in) for the period of 1998-2002 (I didn't have to pay any of it).
    • fatnoah 6y ago
      Private Engineering-focused college in the Northeast. All-in annual cost was listed at $24k for tuition, room, board, fees, etc.
      • vonmoltke 6y ago
        That's about what Rose-Hulman quoted me before aid. I would have had to borrow or work for about $12k/year if I had gone there.
        • fatnoah 6y ago
          Ironically, my state's University ended up being my most expensive option since it was the only school I was accepted to that offered zero scholarships.
      • kevin_thibedeau 6y ago
        Sounds like WPI. I wouldn't want to attend at current tuition rates.
        • fatnoah 6y ago
          Good guess! One has to look at the actual cost of anywhere you go, which will take into account any financial aid. Regardless, that does become part of figuring out if you're getting your money's worth out of your education.
          • kevin_thibedeau 6y ago
            I was also there in 93 so the tuition sounded about right.
  • sp332 6y ago
    An article doesn't have to be "surprising" to be with writing, or reading. It even says "unsurprisingly" right in it.
    • KoftaBob 6y ago
      In the commenters defense, I think they mean that the outcome shouldn't be surprising once we really dig into the underlying causes. I was surprised to learn that the federal government were the ones now directly making the loans, and I'm sure many others are too. I had to do quite a bit of research to come to the conclusion that this was causing tuition increases. It's rarely ever talked about for some reason.
  • hinkley 6y ago
    Also students are not yet used to thinking about debt, or how things are paid for really, which means that the whole practice is predatory. Those perks are paid for from imaginary money as far as they're concerned. I know some trade schools have attempted instead to do a risk sharing model where they are entitled to some fraction of your income for n years after graduation, but I don't think people are comfortable with that, especially at that age. They still imagine they will be millionaires by 32 and that means the school may get several times what you would owe with just normal loans. Also you'd probably see more people getting paid under the table.
    • throwaway0a5e 6y ago
      >Also students are not yet used to thinking about debt, or how things are paid for really And why politicians want to see them in the voting booths so badly.
      • hinkley 6y ago
        Touché.
  • mcguire 6y ago
    That's kind of surprising. Bachelors, Masters or Phony-Doctor? "Among borrowers of all ages [1/3 of adults under 30] with outstanding student loan debt, the median self-reported amount owed among those with less than a bachelor’s degree was $10,000 in 2016. Bachelor’s degree holders owed a median of $25,000, while those with a postgraduate degree owed a median of $45,000." And that's in 2016 https://www.pewresearch.org/fact-tank/2019/08/13/facts-about-student-loans/ https://www.pewresearch.org/fact-tank/2019/08/13/facts-about...
  • deleted 6y ago
    [deleted]
• CincinnatiMan 6y ago
  Isn’t there some self-incentive for the federal government to increase loan sizes as well? I forget what it was but remember seeing some flowchart about it. I’d say we let the private market handle school loans. Certainly wouldn’t be a perfect system in regards to access, but I feel it’d be better than current state because there’d be somebody involved deciding if a college loan is worthwhile.
• disown 6y ago
  No, the real reason was that country wasn't producing enough jobs for the expanding labor force so we artificially created a new requirement to keep young people out of the job market for an additional 4+ years. Credentialism is a tool governments/businesses use keep control of the labor situation. The college tuition fiasco is a private/public creation. Now who wears the pants in the private/public relationship, that's up to you to decide. Did businesses decide to require college degrees for entry level positions and the government react to that? Or did the government decide to get people into colleges and the businesses react to that? If businesses stop requiring college degrees, then college enrollment will drop significantly. If government stops guaranteeing student loans, college enrollment will drop significantly. Who truly runs this country?
  • CincinnatiMan 6y ago
    I don’t know that there’s any groups deciding on something but rather individuals acting in their best interest, getting a degree, that ruins it for everybody else. An arms race among individuals.
    • dnautics 6y ago
      > I don’t know that there’s any groups deciding on something Credentialism is exactly that. If in the pre-covid era you went to Washington, DC, you will see huge illuminated ads in the metro stations for companies, for example "graduate school" (literally the name of one company I saw) which offer super sketchy master's degrees. This is because if you have a master's degree, you get a mandated pay bump in your salary as a civil servant.
      • veilrap 6y ago
        That sounds like bad regulations and bureaucracy more than credential-ism, but I agree that is horrifying. A blanket pay bump for "Master's" degrees written into the code? Clearly that's going to be gamed. If any auditing actually went into the source and value of the credentials then they could be appropriately valued or ignored, depending on the case.
• pnw_hazor 6y ago
  For undergrad I used Army money and was poor enough for Pell grants after that ran out. I got out with $12K in loans. Much later in law school I was shocked how my first financial aid award letter (I can't remember if it was for one semester or one year) offered $80,000 in loans even though I had an $18000 tuition grant/waiver. I met younger students who had close to $200,000 debt before starting law school. It is too easy to take the loans, it is no wonder that so many kids or their families get buried in debt. I got out of LS with $27K or so in debt from interest deferred federal loans that charged around 2% interest. Now, 14 years later, that same Tier 2/3 school charges more than double what I paid. I would not have gone at that price.
  • spaetzleesser 6y ago
    At least lawyers and doctors are smart enough to keep their rates high enough so they can repay their loans. A while ago I was looking for a lawyer and it was surprising that there were no freelance lawyers that changed maybe 80 dollars per hour. They all wanted 250 and more.
    • pnw_hazor 6y ago
      Maybe true for MDs. But many lawyers, especially solo firms struggle to get by. I did some low-fee legal for awhile part-time because I was still programming after I got my JD. I think I charged $250/hr or flat fees but I did a lot of free/contingency cases too. As a solo you rarely bill 8-hours a day. Between running around to meet clients or driving to different courts in the area some days you are lucky to bill a few hours. One guy got angry at me because I wanted $250 (or something like that) "just to read" his DIY complaint before he filed it. "Just to make sure everything looked okay..." He didn't realize that he would be establishing an attorney client relationship with me that would obligate me to give competent legal advice that put my license on the line. That is way beyond just reading his complaint. The same goes for reviewing contracts, non-competes, etc. I eventually read the complaint he had prepared since he sent it to me earlier, boy I dodged a bullet on that one. It would have taken a ton of work to get it even close to ready for filing. I did some low-fee family law stuff too -- one client thought I was taking the side of her ex, because I didn't raise her legally irrelevant complaints in court. I still got her more money than any other family lawyer would have done for the small fee she paid. I think I charged her a flat $1100. In a low stakes employment discrimination case, my client had been rejected by multiple attorneys before she ran into dumb me. I took the case and got the client a six figure settlement. Client promptly took me to arbitration because she thought my share to was too high even though it was well below industry standard. Eventually I got tired of this crap and sold out and went corporate.
• jefftk 6y ago
  > the feds should handle student loans the same way they handle medicaid/medicare reimbursement. I'm not sure how anyone looks at our health care reimbursement system and the decides that's the approach to apply to fix anything else? Personally, I'd like to see: * Employers are allowed to test students to see what they can do, but not evaluate them based on whether they went to school or where. * Make student loan debt dischargeable in bankruptcy. Lenders will be much less willing to pay high tuitions in cases where students are unlikely to be able to pay it back, and if the lender guesses wrong and it does come to bankruptcy then the student is no longer encumbered. (I wrote more along these lines: https://www.jefftk.com/p/fixing-student-loans https://www.jefftk.com/p/fixing-student-loans)
  • koolba 6y ago
    The fix for both is the same. Get the government out of the demand side and, if anything, only work on the supply side. Want lower doctor and hospital prices? Try competing against a “free but you have to wait” government option. Budget $X million dollars per year to put some primary care doctors on retainer. Want lower private school tuition? Try competing against a free (or at least low cost) government / public option. If you boost the demand side then the market will suck up any money thrown at it. Loans and subsidies going are the worst approach as they encourage price increases. This works with housing too! Stop subsidizing rents (increasing demand) and build more houses (increase supply).
    • Ericson2314 6y ago
      I would not make "Get the government out of the demand side" a rallying cry because UBI is the huge counter-example of something governments should be doing. Better to say governments should do, not fund, on the institutional level (run the school, run the hospital, like you say), and fund, not do, in the individual level (UBI not SNAP).
      • shkkmo 6y ago
        UBI doesn't manipulate the demand for specific markets, it is more of a monetary policy that has only an indirect impact on demand.
• pnutjam 6y ago
  Colleges already make the large majority of their money from international students. I'm not sure closing the door on low income students is the way to go. There are literally thousands of universities in the U.S. The Federal system was (pre-trump) getting pretty aggressive about cutting loans to bottom of the barrel universities. This needs to keep happening, and there needs to be guarantees of credit transfer. That would make a much bigger difference and allow competition to keep costs under control.
  • asciident 6y ago
    I believe you've been misled about "large majority of their money from international students" and am curious where you got this information from. From the data I've looked at, the net revenue a vast majority of colleges make are under 2% from international students. For R1 universities (the national ones you've heard of), it's still under 10% , and finally even if you look at undergraduate tuition only (ignoring graduate students, ignoring other sources of revenue), it's still not the majority.
    • bachmeier 6y ago
      "Most profitable" would be correct for most universities.
    • throwawaygh 6y ago
      Look at the bottom line, not the top line. PhD students are incredibly cheap and do a lot of the revenue-generating work; namely, classroom teaching and research. PhD students earn between $20K/yr and $30K/yr in stipend. For the university, that is damn close to the ALL-IN cost! The university pays no FICA taxes and does not contribute to retirement for these employees. For this reason, in high-demand fields like Computer Science, 60+% of PhD students are foreign nationals. And the domestic students are often over-represented at top-tier universities. So there are lots of CS departments where the majority of the revenue-generating employees are foreign nationals making $20K/yr all-in. A PhD student instructing or leading recitations for university courses makes less than 1/2 of what a first year high school teacher makes. A PhD student doing research is bringing in typically $100K - $200K in grant money but only receiving about $30K of that. Also, again, the "2x multiplier" used to calculate the total cost of a normal employee doesn't apply here because the university does not pay FICA taxes, doesn't contribute to retirement, and often gets great tax breaks and gifts to cover things like real estate (=office space). For universities the "total cost of a PhD student" multiple is more like 1.2x salary. Professors are managers. Deans and so on are executives. PhD students are the "bread-and-butter" employees of the university. They are the ones who do the bench work/coding and the vast majority of face-to-face teaching. Without international PhD students, universities' total cost of operation would skyrocket.
• bachmeier 6y ago
  How did this hit the front page of HN? There's literally no analysis in a piece on a topic that has been analyzed to death. The hypothesis is that increased availability of loans in 1993 is responsible for the rise in tuition between 2010 and 2020. Just stated as a fact, with nothing to back it up. Okay. The most obvious answer that is cited by literally everyone that looks at this topic is that it's partially caused by cuts in state funding. Nope, let's just dismiss that, it was the one-time change in the availability of loans. I don't see anything wrong with having a discussion, but there's not even anything to discuss, because it's just a statement that a change 27 years ago explains everything. HN can do better.
  • apsec112 6y ago
    Cuts in state funding don't explain the rapid tuition increases at private universities.
    • throwawaygh 6y ago
      I know first-hand that this is not how pricing decisions work at regional private colleges/universities. The process regional private colleges go through is as follows: 1. List a set of "peer institutions", usually with the primary input coming from admissions. Here, "peer" means "competes for the same set of students we're after". Almost always the region's public colleges and universities will be on this list. 2. Set prices relative to these "peer institutions". If Local State College charges $X, then most (read: non-elite) regional private colleges can get away with charging after-discount-factor $(X+Y) for some relatively modest Y < X. Increasing $X also increases $(X+Y). Cutting state subsidies will lead to higher prices and private institutions. 100% probability. I've seen the exact process by which it happens.
      • graeme 6y ago
        Yeah but this only works if students have the money to pay for it. The loans ensure they do.
      • rbarnes01 6y ago
• typedef_struct 6y ago
  So, Universal Basic Income....
  • PeterStuer 6y ago
    Why? Keeping afloat a system that siphons all the fruits of progress to the 0,01% by throwing just enough trickles to the bottom so they don't revolt?
    • rayiner 6y ago
      The top 0.01% earns 5% of all income. The top 1% (which includes many Facebook engineers, doctors, etc.) earns 20%. The vast majority of the "fruits" of the system go to normal people.
      • zadkey 6y ago
        Citation needed. I recall the top 1% earning 50% of all income.
        • guerby 6y ago
          I didn't check this specific claim but there's lots of available data in the World Inequality Database: https://wid.world/ https://wid.world/
        • rayiner 6y ago
          https://www.cbpp.org/distribution-of-income-before-and-after-federal-transfers-and-taxes-2016 https://www.cbpp.org/distribution-of-income-before-and-after...
• noetic_techy 6y ago
  "The question then becomes a matter of how we fix this without diminishing access to a college education." This is the crux of it that everyone needs to get over. Universality, High Quality, Low Cost. Pick two. By letting the government meddle you have guaranteed no one can afford college and will be long in debt to a loan they cannot discharge in bankruptcy. I'd rather have cheap college then universal access for every single person who wants a English Literature or Anthropology degree with low ROI. Colleges are now awash in money and they pump it into newer and fancier campuses to attract more of that government backed debt from all the masses, driving up cost significantly. Or how about breaking the degree monopoly with something like equivalent certification programs and let private companies fill the gap. Similar to what Google is doing with its certificate program they are rolling out. 4 years for a piece of paper that includes 2 years of general education classes for "well roundness" is starting to look more and more ridiculous considering the cost of that "well roundness" is years of non-dis chargeable debt weighing you down during your best decades.
  • vondur 6y ago
    Too many people are enrolling in College, and this is a problem. The end result in many cases has been lower the standards to get students to graduate. More people need to be geared towards trades and manufacturing jobs. The Covid Pandemic has shown us what happens when you put all your manufacturing in one country.
    • lotsofpulp 6y ago
      People will naturally go towards trades and manufacturing once the present value of expected future cash flow reaches equilibrium with alternatives and damage to their body. There’s a reason plumbers and electricians would rather their kid be a white collar worker. I just had a former carpenter come over to do some work and saw me in running shorts and said he wished he could still do physical activities, but the years of carpentry work have ruined his joints. He was only upper 40s.
      • AdrianB1 6y ago
• btilly 6y ago
  The problem with the government regulation solution is that the universities will be motivated to get their people into the position of being regulators, so that they can have the government guarantee them as much money as possible. A much simpler solution is to say that every year the most expensive 10% of schools are denied federal loans, with a sliding cap on loans over the next 30% down to unlimited loans to 60% of schools. Students will have access to loans based on the status of the school when the student started. And let students know what that status will be before the school is chosen. Create a market incentive to deliver school more cheaply than its competitors, and see how long it takes them to figure out what a doable price point is.
  • ntsplnkv2 6y ago
    The reality is people will take out more private loans to attend these institutions.
• biophysboy 6y ago
  I've heard several hypotheses at this point: 1. gov loans 2. administration 3. Baumol effect (skilled labor $ goes up fast) 4. reduced public funding 5. demand inelasticity (cultural expectations to follow your passion and find your crowd, etc) 6. labor oversupply & elite overproduction (see Turchin) How would you all rank these? Any others you would add?
• zadkey 6y ago
  I don't think this explains everything about why college tuition in America has increased. And what It did explain could have done a little bit better job.
• monadic2 6y ago
  I'm hard-pressed to see why you would attend a private college these days without ambitions of entering politics or some other power-hungry career.
  • kube-system 6y ago
    The sticker prices might be high, but there also a lot of scholarship and grant money out there for those who can get it.
• nickpinkston 6y ago
  I'd blame it more on giving colleges a blank check without tying payback to income outcomes - using an ISA (income share agreement) type of structure would better align costs with real returns.
• fastaguy88 6y ago
  It is difficult to overstate how mistaken this article is. College has mostly gotten more expensive because state support for public universities has dramatically decreased, from over 80% in the 1970's to less than 20% now. Since the taxpayer no longer pays for public higher education, the student does. The logic of this made some sense at the time; very high tuition subsidies were a gift to the upper middle and upper class -- few poor students went to college back when subsidies were high. Ideally, states would have continued to fund higher education, and the increased tuition would be used to support lower income students. But the states took the money away from their universities in bad times, and did not replace it -- in my state (Virginia) it went to prisons and medicaid. There are lots of other problems with student loan statistics -- it is true that the current student loan program has been a tremendous boon to for profit colleges and trade schools, which is where most of the default occurs. And the media likes to publicize the outliers; the average debt at public universities is about $26K, at private non-profits $31K. But the overall cost of higher education has only slightly beaten the cost of living (and has certainly increased less than health costs); the price has gone up because students are responsible for more of the cost.
  • twic 6y ago
    Has the inflation-adjusted cash value of that support decreased, or the fraction of the costs it covers? "80%" and "20%" makes it sound like the latter. Because if it's the latter and not the former, the cause isn't declining support, it's increasing cost.
    • ummonk 6y ago
      The latter. We've seen an increase in cost of education (as evidenced by private school tuitions, which have gone up and never had taxpayer support). In addition to this, student enrollment has increased, so per-student taxpayer funding has not kept pace even as taxpayer funding for public universities has gone up relative to the overall population.
      • mjn 6y ago
        In some state university systems the inflation-adjusted total funding has actually decreased. For example, the University of California system was budgeted about $2.1 billion in state money in 1990, which is $4.3 billion in 2020 dollars. At the time, there were 9 campuses, serving 125,000 undergraduates, in a state with population 30 million. Fast-forward to 2020, and the system is budgeted $3.9 billion in state funds, which have to cover 10 campuses, serving 225,000 undergraduates, in a state with population 39.5 million. If state funding had kept pace solely with inflation and state population, not taking into account any above-inflation cost increases, or the increase in percentage of high-school students who go to college, the budget in 2020 ought to be $5.6 billion instead of $3.9 billion, about 45% higher. If it had kept pace with both the number of students and inflation (but still no cost increases), it'd be $7.7 billion, or almost double. My read of why it's been cut isn't that CA politicians really think the UC isn't worth funding in 2020 like it was in 1990, but more that it's been a victim of convenience in fiscal crises. CA has had a few state budget crunches over the past 30 years, and the annual UC budget is "discretionary spending" and not locked in, so is procedurally easy to cut. It was slashed significantly during both the dot-com crash and the 2008-2012 budget crisis, leaving us with today's lower level of support.
• rllin 6y ago
  yep demand side subsidies do not have good outcomes supply side are a bit better wrt cost disease see how milk has remained the same price for decades
• jimhefferon 6y ago
  I found https://www.mercatus.org/system/files/helland-tabarrok_why-are-the-prices-so-damn-high_v1.pdf https://www.mercatus.org/system/files/helland-tabarrok_why-a... enlightening. (Not an economist, just a person who wonders why college costs so much compared to cars.) I am a prof in a SLAC and I can assure you that I am not floating in money, nor is the college.
  • davidw 6y ago
    I was pleased to read about his paper. He's a somewhat libertarian leaning economist, and came into his research with some notions about what was driving costs. What he found did not match his earlier ideas. He wrote about what he did find. That's how things ought to be.
• jweir 6y ago
  Look at Perdue University - no change in tuition in 9 years. What are they doing right? https://www.purdue.edu/newsroom/releases/2020/Q1/purdue-announces-9th-consecutive-tuition-freeze.html https://www.purdue.edu/newsroom/releases/2020/Q1/purdue-anno...
  • relscholar 6y ago
    The approach you’re taking by inviting us to ask “What is Purdue doing right” is the exact methodology evangelized in the book “The Power of Positive Deviance.” Essentially, find the successful outliers, and see if you can apply the success technique elsewhere. The book mentions that one of their difficulties (in using their approach) is that other people and organizations don’t often want to adopt the success technique for various reasons. They found that by encouraging the successful people and organizations to spread the message as peers (or even bottom up) it worked better than trying to coach others into success (from the top down). Thanks for highlighting Purdue!
  • rbarnes01 6y ago
    You'll enjoy this https://www.theatlantic.com/magazine/archive/2020/04/mitch-daniels-purdue/606772/ https://www.theatlantic.com/magazine/archive/2020/04/mitch-d...
• darth_avocado 6y ago
  Why not move from a pre-paid to a post-paid system? The government stops writing blank cheques. The students enroll for free, signing a 30-year mortgage like contract, that would say pledge 1% of your post tax earnings to the school/university you went to. Universities will then have incentives to remove the programs that don't have as much of a use in the modern day and age, and add the ones that are needed. The government can then use all that money saved to fund programs that don't bring as much revenue to the university but are necessary for the country. I mean imagine graduating debt free and instead, just paying a small extra tax. People would be able to focus on creating more wealth instead of being underemployed so that they can pay their bills.
  • choward 6y ago
    Wouldn't all colleges just become trade schools at that point?
    • sbierwagen 6y ago
      Yes.
    • darth_avocado 6y ago
      And what's wrong with that? I mean what values do colleges bring?
  • the_af 6y ago
    > Universities will then have incentives to remove the programs that don't have as much of a use in the modern day and age Out of curiosity, can you name some examples of programs that in your opinion don't have much of a use today?
    • darth_avocado 6y ago
      Say a degree in English. The point is not that it's not relevant in this day and age. The point is that we don't want as many people graduating with the degree. There's an estimated 1.5M people with that degree out there in the world, with about 60k new graduates being added to the pool every year. If the college has to choose between 1% of the salary of a doctor or say 1% of the salary someone who works in retail, the college would choose the former. Not all colleges would cull their programs, because there would still be a need for that degree in certain professions. It would just better align colleges with the market, ensuring you have a quality ROI if you choose to go for a college degree.
• SomewhatLikely 6y ago
  The government gives away money for food, no repayment necessary. If government intervention were an explanation by itself you'd have trouble reconciling that. Food prices don't outgrow inflation because of a very competitive market for commodities where one apple is about as good as another apple. Car makers, furniture sellers, etc. often offer zero interest loans with little effect on price growth. If one university or community college diploma was as good as any other you'd see low prices caused by competition. But everyone wants to go to the best university that will accept them, price be damned. And the data likely shows it's the right move. More respected universities lead to higher incomes that exceed the tuition costs.
• nitwit005 6y ago
  I'm puzzled by the basic premise here. Having a bank as an intermediary or not doesn't seem relevant to the incentives. It was still the student picking which university they wanted to attend. The reason for eliminating the banks as middle men was just to save money. They weren't taking on any of the risk, or doing anything particularly useful for the government. I'd agree with the more general premise that easily obtainable loans should push prices upward.
• CobrastanJorji 6y ago
  I feel like when you make an argument about how a thing that happened on a specific date in 1993 is the dominant reason for why a value that was low in the past is now high, you are more or less obliged to include a graph of average college cost over time and include a big marker for when your proposed change occurred. Not including that graph is suspicious because if it would have helped your case, you would have included it.
• stakkur 6y ago
  It's a factor, but I disagree that it's the root cause. That distinction goes to the quiet destruction of aid by Ronald Reagan. The rapid shift towards loan-based support is directly linked to Reagan's targeted policies--and that shift led to a well-documented explosion in tuition costs. And Reagan's legacy didn't just affect higher ed--it put public K-12 on the path to the financial and 'common core' shitshow that it is today.
  • stakkur 6y ago
    I'm honestly baffled by the downvotes. Do readers not know that what I described is what led to what the article claims as the cause? To simplify: it wasn't who guaranteed the loans that was the problem, it was the expansion of loans and their general replacement of grants that led to cost inflation and the resulting crippling debt. Here's just one of hundreds of explanations of how Reagan fucked higher ed. It's not a theory--it's a very basic and well-documented fact. https://www.theatlantic.com/education/archive/2019/09/college-cost-indebted-zaloom/597181/ https://www.theatlantic.com/education/archive/2019/09/colleg... From that article: "The shift began in the 1980s, in terms of a changing political philosophy. President Ronald Reagan’s budget director, David Stockman, said in 1981, “If people want to go to college bad enough, then there is opportunity and responsibility on their part to finance their way through the best way they can.” When those who argued that college is a private benefit framed it like that, it became logical to say that education should be paid for by the people that it benefits. And so in the 1990s, the vast expansion of loans for higher education began." And you can track--with plentiful data--the rise of college costs in direct parallel to this shift, year over year.
• kolbe 6y ago
  "Unsurprisingly, this decision lead to exactly what the Bennett Hypothesis predicted in 1987, that “colleges will raise tuition when financial aid is increased” in order to capture as much of that government money as possible. In essence, the feds handed colleges a blank check, and the result is just as expected for a decision like that." That's a feature, not a bug.
• lifeisstillgood 6y ago
  My view is fairly simple - the median school leaving age has simply moved from 18 to 21. My father left school at 14, and many of my friends left at 16, and around only 1/4 of us went on to university. Today 1/2 pupils will attend university - to all intents and purposes their full time education continues from 5-21.
• eggy 6y ago
  The Student Loan Reform Act of 1993 was under Clinton and sponsored by Democrat Robert E. Andrews of NJ. The gist was to smooth the delivery of funds to the colleges, but per the article it failed since colleges then raised their tuition to get more from the government, and students then started owing larger amounts directly to the government as a lender. This is another example of good intentions that allow for playing the market instead of leaving it alone. That's my read on it, but I would like to hear others opinions on this statement.
• wwarner 6y ago
  I'll grant that some people overpay for some types of education because of loans that shouldn't be available. But it could be simpler still. Contrary to the typical contrarian viewpoint, a college education costs a lot because it is very valuable. American schools are filled with excellent foreign students that pay the premium rate, and receive no state support. Why? Because it's a great value. Technology has created a two tier economy, hollowed out in the middle. If you don't get a good degree, you'll just free fall down to whatever happens to be left in your region, and you'll still be biting your nails every day waiting for technology to make your skills obsolete. I think @pmarca's admonition to build, build and build some more is part of the solution. We have to find technological applications besides building a monopoly and taking over an industry. There's really a lack of imagination on our part.
  • darkerside 6y ago
    How much of that value is entry into the world's most powerful country?
• bonoboTP 6y ago
  It's expensive because people can pay for it and we know they can because they do. All this talk about debt is mostly a non issue in real life but generates a lot of heat online. American jobs pay vastly more than any other country on the planet and paying back the debt is quite easy. Otherwise people wouldn't keep enrolling. From a European point of view, US taxes are low, salaries for professionals are sky high, utilities (gas, electricity) are cheap, consumer goods are cheap. Of course, you'll have difficulties if you majored in art history or archeology, but that's also true everywhere.
  • kovek 6y ago
    I have a friend in France who is getting an art education for free. Is she going to be in debt for her whole life? I don’t think so. Yes, some jobs pay very well in the US, but not all of them. Average job often pays enough for rent and living expenses plus a little bit. Student debt has interest and people end up paying that interest for many many years. I’m writing in the declarative, affirmative tone, but it is only my understanding.
    • s3r3nity 6y ago
      > I have a friend in France who is getting an art education for free. Unpopular to admit: we need doctors / engineers / farmers more than we need another art major. As a US taxpayer, I wouldn't want to subsidize just anyone's education. I'd rather incentivize and subsidize engineering / STEM / agricultural science. You don't get to just get a free education regardless of what you want to study - different work/study has different value to society.
      • bonoboTP 6y ago
        Even in free-tuition countries, there are caps on the number of students admitted to various study programs under state subsidy. The government can incentivize more productive degrees by allocating more spaces to them.
    • bonoboTP 6y ago
      > Is she going to be in debt for her whole life? No, but she's probably going to pay way more taxes for everything, including income tax, VAT, taxes on petrol, electricity and will earn less. People who complain about it are concentrated in threads like this, but all real life Americans I've talked with (whom I know for different reasons) said the debt may be annoying psychologically but at the end of the day, white collar professionals can easily pay it. However, it may be the case that more people go to college in America due to marketing and other influences than actually should. Also, students tend to get pushed through the system and are pampered and have an entitled customer attitude and the colleges have a service provider attitude. The end result may be that even people with bad job prospects move through the system and then get surprised at the end. In Europe, universities quickly fail these students and push them out of the system so the students face reality earlier. Also, Americans seem to value the "service provider", "resort" type college, with all kinds of non-academic services, personal mentoring, sports stadiums and teams etc. compared to the bare bones approach of European universities. EDIT: just saw it's an art degree in question. Spending years on studying art has always been the luxury of wealthy people at all times, in all places. You'll have difficulties finding a job (assuming no connections) anywhere with an art degree. The meme of having to work at McDonald's is also alive and well in European countries.
• guyzero 6y ago
  Yeah, as many others have pointed out this analysis is facile verging on just wrong. Do universities not compete for students? Why have costs gone up so much faster than inflation? It's not just a question of there being a huge pool of money, you can buy a car with loans and car prices haven't skyrocketed. The answer is that education is a weird "good" that's probably a Veblen good, among a lot of other reasons.
  • j15t 6y ago
    >It's not just a question of there being a huge pool of money, you can buy a car with loans and car prices haven't skyrocketed. The obvious difference is that car loans are not Federally issued and defaults are possible. Hence creditors have to issue loans in a prudent manner or else they will incur a loss. Not everyone is able to acquire a car loan, and interest rates can be very high. These incentives do not exist in the student loan market and thereby subsidizing demand. Students become price inelastic.
• elil17 6y ago
  Not to be another commenter claiming to know the real reason college costs so much but... The real reason college costs so much is that the price of all services provided by people with doctorate Or professional degrees has risen. The cost of higher education has risen at the same rate as the cost of dentist services and legal services. See: https://image.slidesharecdn.com/disruptiveinnovationinhighereducationudemyv5-160129191225/95/disruptive-innovation-in-higher-education-full-course-slides-25-638.jpg?cb=1454095471 https://image.slidesharecdn.com/disruptiveinnovationinhigher... Archibald and Feldman, 2010 The reason the cost of all services provided by people with doctorate or professional degrees has risen is complicated and could arise from many factors. For instance, it could be that there’s more industry demand for highly educated labor. The rise in college costs relates primarily to overall changes in labor costs, not to anything wrong with the education system in particular.
  • darkerside 6y ago
    A very specific type of labor costs, what I would call "non-essential services". These are the types of jobs where, now that we've grown the economic pie such that everyone can get what they need, increasing resources are devoted to "fairly allocating" those resources, via politics and legal actions, with the rest spent on objects of status.
  • xupybd 6y ago
    One other factor is the cost of educating the work force has increased. This might not be due to an increase in the education requirements of the job market. If degrees are common place they get used as a proxy metric for who is capable and who is not (while this is often not the case). This means it's hard to measure the effectiveness of the current student load system. Is the investment increasing productivity? Or just creating another hurdle for people to jump over to get a good job?
  • mulcahey 6y ago
    Perhaps part of the reason those professionals are more expensive is that their degree programs saddle them with debt! It’d be somewhat of a feedback loop
  • 6y ago
• darkerside 6y ago
  This is an incredibly straightforward identification of the problem and a beautifully elegant solution.
• rlanday 6y ago
  I don’t understand this argument here: > Up until 1993, the federal government merely guaranteed/backed student loans that private lenders gave. This meant that only in the case of someone defaulting on their loan would the government be on the hook, stepping in and paying the college what’s owed. > This amendment completely overhauled that system, making it so that for the vast majority of student loans, the federal government directly made the loans to students. More specifically, the federal government pays the universities/colleges up front, and the student then owes the government that money. What’s the difference between the federal government directly making a loan and a private lender making a loan and immediately pawning off all the risk on the federal government? Either way the lender does not care if the borrower will be able to pay it back. It sounds like the problem predates the Student Loan Reform Act of 1993.
  • chemag 6y ago
    I had the same thought. My hunch is that the difference is friction. In both cases, there's money going from the Feds to the University (100% probability) and money going from the student to the Feds (<100% prob). <1993: there's a bank in the middle. If the student cannot pay, the bank has to do the paperwork to get paid by the Feds. Note that the profit for the bank is limited. >1993: no bank in the middle. University gets paid right away. Zero risk for them
    • mixmastamyk 6y ago
      Yes, presumably Uncle Sam cares less about making a sound loan in the first place. It is also able to create money out of thin air—in other words, (symbolically) infinite resources. Getting paid upfront, instead of years later after tons of paperwork, can only accelerate the process.
  • deleted 6y ago
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• scorecard 6y ago
  It is not the case that free universities are necessarily 2nd tier. QS World Univerity rankings puts ETH Zurich, a free university, as #6 overall. Times Higher Education world ranking lists ETH Zurich as #13 overall. The other Swiss flagship university, EPFL, which is also free, is ranked #14 overall in the QS world ranking. https://www.topuniversities.com/university-rankings/world-university-rankings/2021 https://www.topuniversities.com/university-rankings/world-un...
  • tropdrop 6y ago
    What is this ranking site (QS world)? Not to dismiss it outright, I'm just usually suspicious of any rankings aggregator of universities at this point.
• dpc_pw 6y ago
  Lending with interest (Usury) creates systemic instability, in a similar way that Dollar Auction scheme does. There's no way to have stable financial system in the presence of wide-spread usury. This fact has been known to ancient cultures, which routinely banned usury or counter-acted by having an universal debt-jubilees. https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Dollar_auction https://en.wikipedia.org/wiki/Dollar_auction https://en.wikipedia.org/wiki/Debt_jubilee https://en.wikipedia.org/wiki/Debt_jubilee
• fortran77 6y ago
  We need to immediately stop Government-back student loans that can't be discharged in a bankruptcy. Then tuition will drop like a rock. I would never support student loan forgiveness until the Government stopped the loans!
• akeck 6y ago
  An analysis in Time Magazine in 2001: http://content.time.com/time/magazine/article/0,9171,137412,00.html http://content.time.com/time/magazine/article/0,9171,137412,...
• thinkski 6y ago
  The same happened with home prices.
• petre 6y ago
  The Clinton administration made a change in 1998 that cut back on student debt relief, incentivizes high university bills and has driven student debt to over $1T. That might explain the "why" part. https://thehill.com/blogs/congress-blog/economy-budget/283625-how-the-clinton-administration-made-it-harder-on-student https://thehill.com/blogs/congress-blog/economy-budget/28362...
• thordenmark 6y ago
  I was in college when this was enacted. I noticed immediately that college tuition increased and matched exactly the maximum standard amount you'd get in student loans.
• ineedasername 6y ago
  This is not the only reason. There are at least 4 other major reasons: 1) Future debt is irrelevant: The US has a culture of "having the college experience". Easy loans facilitates this, but they would never be made without families ignoring their future debt in favor what has become less about education and more about a right of passage. For many, economics is not part of the fundamental decision making process. 2) Demand. High demand means there's little need to compete on price. Enrollment spiked up during the Great Recession as people went to retool for job changes, and while it's come down since then, it's still at historic highs compared to pre-recession enrollment. This might change over the next decade as the %of HS grads entering college has been relatively flat the past few years, and # of total graduating seniors is on a slight downward trend, projected to continue for the next decade. 3) Reduced State Funding: Many states have been systematically reducing their funding to public colleges & universities for a few decades. Right after the Great Recession, higher ed was low hanging fruit for cash-strapped state budget cuts, and dropped another 17% 4) Institutional Debt: With high demand eliminating much need to compete on price, institutions have to compete on amenities & facilities. Beautiful new dining halls, recreation facilities, dorms, academic buildings. Universities borrow, build, and bill the students.
• peter303 6y ago
  Various tax breaks introduced in the past 30 years contributed. Direct tax breaks like cost and loan credits. Plus indirect breaks like tax-advantaged savings plans like 529. A similar thing has happened in housing. Various tax breaks introduced in the past 30 years allow people buy a much higher list price of house (in terms of annual salary multiples) than 30 years ago.
• nvahalik 6y ago
  Maybe I'm missing something here: the bill he linked to in the article (https://www.congress.gov/bill/103rd-congress/house-bill/2055 https://www.congress.gov/bill/103rd-congress/house-bill/2055) doesn't show as passed. How did a bill that didn't pass end up impacting things?
• jesstaa 6y ago
  This is what we do in Australia. Government supported places in courses have a price cap, loans are CPI indexed and paying back the loan is scaled to your pre-tax income. If you earn more then you're required to pay back your loan faster. If you earn less than $40K, you're not required to pay back any of the loan.
• calimac 6y ago
  Thank Clinton and JP Morgan Chase
• wbillingsley 6y ago
  What the article proposes (the government setting the maximum level of loan it will provide for a course) is essentially the Australian system. The other aspects in the Australian system, though, are a "Commonwealth contribution" (part that the student does not have to pay back), an institutional maximum on how much the government will fund / underwrite that's dependent on institutional performance metrics (e.g. student employment rate on graduation), and that they alter how much students can be charged and how much the government will contribute depending on the subject area. It gets very political and there are perverse incentives hidden in the detail. (There's a couple of controversies in Aus higher ed at the moment. One is a lot of downsizing due to Covid affecting the international market. The other is proposed changes to the fee structure for particular courses and universities from the government.) However, it does get universities to respond to government strategy, so I expect the people in government who run it are probably very happy. Within government, I think they see university funding as also being one of the levers the government has to influence economic growth. For example, directing student places to a particular institution brings university jobs, students, and the students' living expenses into that university's town to grow it. By giving incentives for particular courses, they can feed particular industries with graduates, etc. So you'll hear universities and government talk about "creating job ready graduates" (they've always talked about this), but also "creating graduate ready jobs" (universities as a mechanism for growing parts of the economy in an area)
• brownbat 6y ago
  The roi was also high during that period. The price of services relative to goods has also trended strongly upwards during that period due to increased trade. Urbanization and increased cost of living in some areas could be pushing up averages in costs. Nobody pays the sticker price. A lot of colleges are subsidized by a small slice of wealthy and/or foreign students, so to maximize differential pricing, universities raise prices, and simultaneously offer larger tuition grants for need or merit. There are a dozen reasons. Student aid is probably one of them too, absolutely. I just worry about someone saying 'x' is the reason for some complex social or economic changes decades in the making. The interesting question to me is how to weight all these influences.
• Beldin 6y ago
  There was a video on social media of a former student with 80 k$ in debt. After 10 years of payments, amounting to ... (forgot exact number, but way over 10 k$, vaguely recall it being over 50k), she still owed 76 k$. Probably so "low" due to her downpaying 6k last year - that is, she seriously believed it would have been higher otherwise. I am absolutely convinced you could attend most universities in Northwestern Europe & live there for less than what this student has already paid + currently still owes. Including interest on a loan - as long as you don't get it from the US loan sharks involved in college loans.
• jlebar 6y ago
  The central claim in TFA is that when the government gives out loans directly, instead of guaranteeing loans made by banks, it's easier for students to get student loans, and therefore college prices go up. a) Zero evidence is provided in TFA that it is in fact easier for students to get loans under the government program. I could make an equally compelling argument and say, when the private sector provides loans guaranteed by the government, private sector has a monetary incentive to seek out students and pile them high with loans that they can't afford. The loans are guaranteed by the government, so more loaning is direct upside. In contrast, the government has no incentive to partake of predatory lending! Its incentives are aligned -- and not just on the monetary angle, but also, the government does not succeed if students are stuck in debt forever. Therefore when government gives the loans, incentives are aligned and lending goes down. I've provided just as much evidence as Andrew. I'm not saying I'm right, but how do we know he is, either? b) Andrew who? c) TFA neglects to mention that you can take out up to $5500-7500 in government loans per year as an undergrad. https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized https://studentaid.gov/understand-aid/types/loans/subsidized... If they had, you might have doubted their claim that this is the reason that college costs $50+k/yr. We are already under this dude's system of "government offers a small, fixed amount in loans and students have to figure it out". Prices are still high and increasing. It turns out that the high cost of college doesn't have a simple explanation or solution. Who knew.
  • deleted 6y ago
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  • bjt 6y ago
    > the government does not succeed if students are stuck in debt forever. Therefore when government gives the loans, incentives are aligned and lending goes down. That's a double edged sword. Yeah, the government doesn't have the profit motive that predatory lenders do, but they also lack the incentive to say no to students who are borrowing money to study things that won't do much to help them pay it back. Politicians don't get re-elected on a platform of "let's reduce student loan amounts" or "let's give less money to students who are studying subjects that won't help them earn much". And the bureaucrats running the program don't have the power or the incentive to impose discipline here either.
• deevolution 6y ago
  Rising college tuition is clear evidence of runaway fiat currency inflation. As soon as the US severed the peg to gold, prices have done nothing but inflate. I think colleges have figured out people are willing to take on increasing amounts of debt. The cost of loaning / creating money to pay for college is zero, so the tuition price ceiling is effectively infinite.
  • adventured 6y ago
    The inflation is also of course simultaneously blatant in healthcare, many prominent commodities, housing, vehicles, and so on. We could easily restrain the cost increases - which has far exceeded the rate of fiat destruction - by changing wildly irresponsible Federal loan backing. It wouldn't take much to begin tipping the cost inflation backwards, we could roll it back gently and it'd make a big difference over time versus continuing the upward climb. We could flatten it and let inflation chew it up over time in real terms. We don't have any politicians that are intelligent (wise?) enough or brave enough to do it. Most politicians are cowards. Good luck finding one willing to step in front of the higher education train (everyone must get a four year degree in their Cracker Jack box). Suddenly all the headlines would be that Joe Politician doesn't want little Johnny to go to college, Joe Politician is depriving our children of access to college, Joe Politician is stealing our children's futures! And so on. The triggered propaganda flood would instantly drown anyone that dared to go near it. The US only has two primary political types on this topic: those that ignore the problem, not wanting to go near it for the political consequences; or those that are only capable of arguing in favor of a lot more spending as a solution (as though the US can afford that, especially when the problem is that costs are already far out of line with peers around the world).
• stjohnswarts 6y ago
  The claim in the article is unfounded. Prices have increased due to states cutting way back on funding, because of easy of getting loans (just one prong of the problem), need to have a college degree just to get your foot in the door (demand), and mismanagement by school management to build facilities students can't afford.
• bhawks 6y ago
  Actual data showing that nothing significant happened to the tuition trendline on/around 1993: https://usafacts.org/articles/college-tuition-has-increased-but-whats-the-actual-cost/ https://usafacts.org/articles/college-tuition-has-increased-... Usafacts.org is a trove of data that is useful to have discussion around - op (and folks in this thread ;) ) don't need to rely on their gut feelings. In addition to 1993 being boring, the majority of expenses are far and away instruction related versus student services (the luxury college memes folks are taking about isn't strictly true). I think the most interesting point is that over the past 40 years, all types of expenses continue to grow at the same rate. (Inflation adjusted of course) There doesn't seem to be any ceiling in sight or any meaningful changes in what colleges will spend money on. Naturally tuition costs are on similar upward trend to balance this - and folks still somehow find the finances to pay for it. This doesn't seem sustainable but it also doesn't seem to be stopping any time soon. Too many students trying to do 'the right thing' are being sucked into this meat grinder.
  • dragonwriter 6y ago
    > I think the most interesting point is that over the past 40 years, all types of expenses continue to grow at the same rate. (Inflation adjusted of course) There doesn't seem to be any ceiling in sight or any meaningful changes in what colleges will spend money on. Naturally tuition costs are on similar upward trend to balance this - and folks still somehow find the finances to pay for it. I think you have it backwards: the increasing ability to extract tuition is driving total spending up, because once you have the money, you are going to spend it, not expenses going up an dragging tuition with it.
    • bhawks 6y ago
      How do you demonstrate that one is causing the other? Based on my baised observation of the local UC system I just don't see the types of personalities working there thinking about how to extract the last dime from students. What I do see though is very lax fiscal discipline and the inability to make even easy cost management choices. In this environment everyone just expects budgets to increase by x% each year. Then each year they realize - omg we have to increase tuition why does this keep happening? I can not rely prove my idea - can you prove yours?
• Markoff 6y ago
  cost about same here in Europe, it was zero 30 years ago, it is zero in 2020 you should better ask, why students have to pay for education in developed country
• aj7 6y ago
  In pricing solar installations, it was obvious that prices rose as vendors attempted to capture virtually all of federal and state subsidies.
• dailygrind___ 6y ago
  Because education is a lucrative business.
• soapboxrocket 6y ago
  The blank check is ultimately the problem. I say remove the blank check and then let colleges figure out the rest. I look to the UK as an example. The government only guarantees $10,000 in student loans so most programs coincidentally cost less than $10,000. Are there exceptions? Yes, but for the most part this holds true. Not a complete solution but does significantly help to address the blank check issue.
• jrphenow 6y ago
  Am I misreading the govtrack link? It looks like this particular bill somewhat promptly died in congress.
• lcall 6y ago
  For what it may be worth, I am aware of a couple of thriftier, high-quality, sustainable, (edit: also online,) alternatives: BYU Pathway Worldwide and associated programs. It requires a "close tie" (i.e., family, close friend, attendance...) to the sponsoring Church but not necessarily membership. Tuition is lower (especially if you take the year of English etc first) and varies by country; bachelors programs (like IT, business, others) are available; programs excellent; and it is also suitable for those who need to first become qualified for entering a university (edit: i.e., learning English which is used in curriculum, and other basic skills), then provides that university. More info is in Wikipedia and I have gathered a bit of info including linking to a news article that explains it well I think, here: http://lukecall.net/e-9223372036854578440.html http://lukecall.net/e-9223372036854578440.html . And: https://www.wgu.edu/ https://www.wgu.edu/ (also mentioned in wikipedia): state aid available from multiple states it seems (per wkp). Others have commented about it in other HN discussions.
• pedro1976 6y ago
  It is IMHO completely insane that we limit a virtual good of zero marginal cost like knowledge in a physical way. People could be educated/manipulated in a way to appreciate knowledge over materialistic thing, which would have an ecological impact of almost zero. And that is just one advantage.
• eatmyshorts 6y ago
  I've got some news for the author of this article. University cost inflation started well before 1993. The chart here (https://www.edvisors.com/plan-for-college/saving-for-college/tuition-inflation/ https://www.edvisors.com/plan-for-college/saving-for-college...) shows that the divergence in university cost inflation and the greater economy's inflation started in the early 1980s. I know that my university education went up 4x in the 5 years (yes, 400% in 5 years, which equates to 32% CAGR) that I attended college, and that predates this 1993 date in the article.
  • JJMcJ 6y ago
    A number of things have lead to this. * Student loans detaching cost from time of service, similar to insurance and medicine * Diminishing support for public colleges. In California UC and CSU schools were essentially free to Cal redidents until mid 60s. * Metastatic administrations, partly for compliance and partly because the money is there. It sure isn't going to faculty.
    • eatmyshorts 6y ago
      Take a look at overhead costs as a percentage of the total budget for universities. You'll see that administrative costs have ballooned, while the size of faculty and student bodies have remained relatively constant. That certainly was the case at my university. Here's another article about the issue: https://www.forbes.com/sites/carolinesimon/2017/09/05/bureaucrats-and-buildings-the-case-for-why-college-is-so-expensive/#5b2adc04456a https://www.forbes.com/sites/carolinesimon/2017/09/05/bureau...
• thewileyone 6y ago
  I remember basic tuition cost increase 3x from 500-1500 between 1990 and 1994, while I went to University of California. Didn't understand why at that time, but this would explain it.