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Wait, the claim doesn't match the little data presented and the primary claim is not examined or supported. 1) The Omnibus bill passed in 1993, but from the gr

Wait, the claim doesn't match the little data presented and the primary claim is not examined or supported. 1) The Omnibus bill passed in 1993, but from the graph tuition was already increasing at 200% greater than inflation, and appears to have started in the mid 1980's; and 2) Why would the fact that the loans are now from the government mean that universities no longer had to compete on costs? The bill ultimately goes to the student in either case.

dragonwriter 4y ago
> The Omnibus bill passed in 1993, but from the graph tuition was already increasing at 200% greater than inflation, What, you don't like pre hoc ergo propter hoc argument?
dmitriy_ko 4y ago
> Why would the fact that the loans are now from the government mean that universities no longer had to compete on costs? The bill ultimately goes to the student in either case. Because 17 years old student taking out the loan is not financially experienced, so the issue of cost is often not properly considered.
- GlenTheMachine 4y ago
  The students were 17 before 1993, just like they are now. Maybe what you're trying to say is that the private lenders vetted their loans better than the government does. And that might be true, but nothing in the article backs it up. In addition, note that even before the Omnibus bill, the government still insured the loans. So private lenders had basically no risk, and hence no incentive to deny a loan.
ethbr0 4y ago
Furthermore, the rate of increase really picks up around 2002/3. What happened then? I'd assume universities didn't just take a decade to realize the implications of a 1993 law change.
bumby 4y ago
>Why would the fact that the loans are now from the government mean that universities no longer had to compete on costs? I think an economist would say that the loans increase the number of "customers" who could now afford to go to college. Accordingly, when the demand increases faster than the supply, an economist would say increases prices are the result. There's an old op-ed by former Education Secretary William Bennett that gave rise to the "Bennett Hypothesis", where he said, "If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase … Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible." However, I've casually seen a bit of research that refutes this claim and instead states the primary driver of tuition increases is reduced public funding.
- AbrahamParangi 4y ago
  Cheap capital raises prices everywhere- for homes, for equities, for land, and certainly for education. Student loans are cheaper than cheap, they are government subsidized and not even close to their appropriate cost.
  - GlenTheMachine 4y ago
    ...and always have been. So what changed?
    - bumby 4y ago
      One theory is that competing priorities have shifted public funds towards entitlements, especially healthcare, and away from public university. Tuition is then raised to compensate for the budget reduction. It's interesting to hear some cite that healthcare costs are the only sector that is outpacing college costs, which would explain why budgets are shifted towards it. As with any complex system, I doubt we can point to a single, simple cause.
  - wahern 4y ago
    > Student loans are cheaper than cheap, they are government subsidized and not even close to their appropriate cost. Interest rates on government-subsidized college loans aren't that cheap. Undergraduate loans are the cheapest. They were particularly cheap in the early 2010s and during the COVID pandemic. But over the past 20 years the rate has been ~4-5%, and generally greater than mortgage rates.[1][2][3] Subsidized graduate loans are in 6-7% territory (even 8+%), and always have been. Unsurprisingly, AFAIU the latter constitute a substantially disproportionate share of student debt--including, especially, debt that people are unable to climb out of due to compounding--relative to the number of students. [1] https://studentaid.gov/understand-aid/types/loans/interest-rates https://studentaid.gov/understand-aid/types/loans/interest-r... [2] https://educationdata.org/average-student-loan-interest-rate https://educationdata.org/average-student-loan-interest-rate [3] https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US

dragonwriter 4y ago

> The Omnibus bill passed in 1993, but from the graph tuition was already increasing at 200% greater than inflation, What, you don't like pre hoc ergo propter hoc argument?

dmitriy_ko 4y ago

> Why would the fact that the loans are now from the government mean that universities no longer had to compete on costs? The bill ultimately goes to the student in either case. Because 17 years old student taking out the loan is not financially experienced, so the issue of cost is often not properly considered.

GlenTheMachine 4y ago
The students were 17 before 1993, just like they are now. Maybe what you're trying to say is that the private lenders vetted their loans better than the government does. And that might be true, but nothing in the article backs it up. In addition, note that even before the Omnibus bill, the government still insured the loans. So private lenders had basically no risk, and hence no incentive to deny a loan.

ethbr0 4y ago

Furthermore, the rate of increase really picks up around 2002/3. What happened then? I'd assume universities didn't just take a decade to realize the implications of a 1993 law change.

bumby 4y ago

>Why would the fact that the loans are now from the government mean that universities no longer had to compete on costs? I think an economist would say that the loans increase the number of "customers" who could now afford to go to college. Accordingly, when the demand increases faster than the supply, an economist would say increases prices are the result. There's an old op-ed by former Education Secretary William Bennett that gave rise to the "Bennett Hypothesis", where he said, "If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase … Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible." However, I've casually seen a bit of research that refutes this claim and instead states the primary driver of tuition increases is reduced public funding.

AbrahamParangi 4y ago
Cheap capital raises prices everywhere- for homes, for equities, for land, and certainly for education. Student loans are cheaper than cheap, they are government subsidized and not even close to their appropriate cost.
- GlenTheMachine 4y ago
  ...and always have been. So what changed?
  - bumby 4y ago
    One theory is that competing priorities have shifted public funds towards entitlements, especially healthcare, and away from public university. Tuition is then raised to compensate for the budget reduction. It's interesting to hear some cite that healthcare costs are the only sector that is outpacing college costs, which would explain why budgets are shifted towards it. As with any complex system, I doubt we can point to a single, simple cause.
- wahern 4y ago
  > Student loans are cheaper than cheap, they are government subsidized and not even close to their appropriate cost. Interest rates on government-subsidized college loans aren't that cheap. Undergraduate loans are the cheapest. They were particularly cheap in the early 2010s and during the COVID pandemic. But over the past 20 years the rate has been ~4-5%, and generally greater than mortgage rates.[1][2][3] Subsidized graduate loans are in 6-7% territory (even 8+%), and always have been. Unsurprisingly, AFAIU the latter constitute a substantially disproportionate share of student debt--including, especially, debt that people are unable to climb out of due to compounding--relative to the number of students. [1] https://studentaid.gov/understand-aid/types/loans/interest-rates https://studentaid.gov/understand-aid/types/loans/interest-r... [2] https://educationdata.org/average-student-loan-interest-rate https://educationdata.org/average-student-loan-interest-rate [3] https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US