19 ms·

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying

• taeric 3y ago
  Worse than just "backed by the federal government," the loans are basically protected by the government. Being one of the small list of things you can't bankrupt out of, the risk in giving out the loans has been fully pulled from the lenders. It is frustrating to hear the discourse over the inappropriate students that are taking on too much debt, all the while ignoring the lenders that are taking on too much risk. At least, they would be taking on too much risk, if they hadn't captured the market so effectively.
  • GartzenDeHaes 3y ago
    > lenders that are taking on too much risk The lenders are taking no risks since these loans cannot be discharged through bankruptcy. There are also very large late fees and penalties that can triple (or more) the amount owed.
    • chiefalchemist 3y ago
      In other words, the government gave the leaders license to do "predatory".
      • pclmulqdq 3y ago
        In other words, the government has become a predatory lender with some intermediaries.
        • pixelatedindex 3y ago
          Which I find really weird, they take this stance against education but businesses don’t have to deal with such predatory loans - in fact govt loans for businesses tend to have low interest rates, or forgiven like the PPP loans. Why do we take anti-individual stances, but pro-business stances? Is that a byproduct of capitalism, or am I misreading the world?
          • mistrial9 3y ago
            you are right basically -- with the caveat that "business has shown the ability to be responsible with money" while individuals fail at this for a large variety of reasons. However, in many societies past and elsewhere, not every single individual adult has to manage money like a business. Zoom out a bit and you might imagine that government now treats corporations as a person, and persons like they have to behave like a business.
            • taeric 3y ago
              In what world have businesses shown the ability to be responsible with money?
              • mistrial9 3y ago
                I did put is quotes !! .. meaning that it is something that has been said, not something that is true in itself.
                • taeric 3y ago
                  Fair! I wrongly read that as an endorsement of the idea.
          • nightski 3y ago
            PPP loans weren't really loans. It was known they would be forgiven before taking them out. If that had not been the case, most businesses would not of participated. I believe they were structured as loans providing a mechanism for congress to pass the aid immediately. Actual business loans require assets/collateral, even those from the SBA. At least this has been my personal experience with my businesses. You can't get a loan with no credit or assets (like a student can).
      • prepend 3y ago
        Comically, the government is the direct lender and is charging “predatory” rates. My loans are all through DEd. At time of issuance, they were double the 30 year mortgage and many multiples of prime. My payments go directly to the governments payment processor (AidVantage/Navient) and on to DEd.
    • taeric 3y ago
      Right, this is what I meant by them having captured the market.
      • kortilla 3y ago
        But your comment seems to blame them for taking on risk, which they aren’t. Maybe reword it?
        • taeric 3y ago
          I can see that read. I meant that we should not have built a situation where lending money is risk free. It is a perverse incentive to do more lending, and ignores the actual risks that people will be unable to repay.
    • TheRealDunkirk 3y ago
      Now I read that Wall Street is creating CDO's based on these loans, like they (continue to) do on mortgages. Some people die "early" without paying back these loans, and sometimes, they will owe more than they took out. Given the mounting problems with the numbers here, it seems a whole generation of people in the middle of this bubble are going to go to the grave while still owing on these loans. What happens to these CDO's? Are we headed for a smaller "meltdown?" I went to school from 87-91. I could already see the problem starting. I was hoping this bubble would burst before my own children went to school. Two of three have gone to public schools so far, and we've paid through the nose for it. We are pushing our third towards some sort of trade school.
      • Xeronate 3y ago
        Seems wrong to influence your son's decision based on your financial situation rather than his desires/passions. Of course if he's naturally interested in the trades then sure.
        • willcipriano 3y ago
          Most people desire not being poor over most other things.
          • Xeronate 3y ago
            There are a lot of ways to make money. Picking a job based on money is a good way to be absolutely miserable. My parents pushed me towards making money my entire life and there is nothing I regret more than following that advice. Every day I wake up dreading going to work and it seeps into every aspect of my life.
            • deleted 3y ago
              [deleted]
            • pixelatedindex 3y ago
              Presumably you have enough money now to switch to something that makes you happy? Personally, if you’re going to be miserable anyway (as most Americans are these days), it’s probably better to be miserable with money than without money, lol
    • tylerhou 3y ago
      Student loans can be discharged through bankruptcy, if you pass hardship requirements. - https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy https://studentaid.gov/manage-loans/forgiveness-cancellation... - https://www.consumerfinance.gov/about-us/blog/busting-myths-about-bankruptcy-and-private-student-loans/ https://www.consumerfinance.gov/about-us/blog/busting-myths-...
      • taeric 3y ago
        I'd love to see numbers on how many are actually discharged. My understanding is this is almost as akin to saying that the lottery does, in fact, pay out.
        • gen220 3y ago
          There's more paths to discharging than bankruptcy. Somebody I know had a medical emergency while in their repayment period. They were unable to work and went on to disability insurance, and eventually had their loans forgiven. I think they had to be on disability for a certain period of time (measured in years, iirc) before they were discharged. Eventually, they recovered sufficiently to be able to return to the work force debt-free. I'm not sure if the hurdle for loan forgiveness ought to be "you have to basically die", but it's at least that high for now. There's also the well-known "public servant" path. I'm sure there's some ironic joke to be made comparing the two.
          • gorjusborg 3y ago
            Thanks for sharing the anecdotes. Doesn't it seem like a society shouldn't encourage people to financially self-immolate in order to start their adult life? I mean, giving the self-immolators some tweaky hacks to prevent being lit on fire is not really the best solution.
            • gen220 3y ago
              I totally agree, I think most level-headed people do. It's a tricky problem. We want people to have equal opportunity to pursue college, even if their parents can't afford it. But at the same time, we don't want to subsidize cost creep. Clearly the current solution doesn't work. Alas, we're deeply invested in it (literally), and each passing year the entanglement grows. I think you can make a strong case for govt-funded tuition at public universities. But I don't know how to get to there from here without making a handful of people very unhappy.
    • SoftTalker 3y ago
      I mean, you can't get blood out of a turnip. If the borrower has no money to pay, they aren't going to pay, bankruptcy or not.
      • jrockway 3y ago
        Since there is pretty much no social safety net, people are probably going to find some sort of work even if they have a lot of student loan debt. And, the debt servicer can garnish those wages. You are essentially selling yourself into slavery if you take a student loan! (And the reasoning is so weird to me; I went to a state school and tuition was $750/semester. Why are people paying more unless they are extremely gifted and they want to go into a highly regulated field like civil engineering or medicine?) Student loans not being dischargeable through bankruptcy creates a moral hazard, much like bailing out banks. Banks will lend an infinite amount of money for student loans, because there is no risk to them. Creating free money always devalues it; if you have to work for your money, an education is priced $X because that's the maximum people will pay. If everyone gets unearned money to pay for education, it becomes worth $X + $Y. This is just the SaaS model for people. (Consider AWS; "oh you want to make money selling a SaaS service? we'll take 10% of your revenue for servers." Student loans are the same thing, "oh, you want to go into a high-earning field? we'll take 30% of your income for the next 10 years.") Compare this to things where banks could lose money, like mortgages. If you bid $1,000,000 on a property that's worth $200,000, the bank will simply require a down payment of $840,000. They have no interest in your starry-eyed games. If you walk away, they can close out your loan by selling the property at the appraised value, and they're happy. Banks have the right amount of paranoia about lending for this kind of purchase; their goal is to never lose money. Student loans should be no different; current grades and expected job prospects should play heavily into the decision as to whether or not to lend money. This will reduce the cost of education because selling a $600,000 art history degree to straight-C students won't be viable in the market anymore. (Universities will fight hard against this, because the degrees are cheap and everyone pretends they have some value. If people realize degrees don't have much value, the cash cow dries up. But we have to kind of look at the effect on society as a whole and realize that work experience is actually what we value. After the first 4 years of your career, nobody cares about your GPA or where you went to school anymore. And incidentally, 4 years is exactly how long college takes!)
    • bryanrasmussen 3y ago
      I believe that was the posters original point, because the lenders have no more risk it means that the market solution has been put out of balance, and the current situation is arguably a logical consequence of that imbalance.
    • 015a 3y ago
      And yet, some lenders (Navient is the big one) have now lost so much money due to COVID forbearance that they've exited that industry entirely. There's inherent risk to everything, everywhere. Making the loans undischargable in bankruptcy doesn't negate the risk of non-repayment; it just hides it. Until, eventually, all the band-aids fall off, reality bares its ugly head, and we all wish we hadn't-a done that. Yet, in thirty years we'll forget about it and do it all over again, in some new, crazy, way.
    • milsuj2 3y ago
      Just because the loan cannot be discharged doesn't mean there are no risks. The money doesn't just appear out of nowhere if the borrower doesn't already have the money.
  • rayiner 3y ago
    What "lenders," and what "market" are you talking about? 92% of all student debt was issued by the federal government. As a matter of social policy, the government does not meaningfully consider credit risk when issuing student loans.
    • mistrial9 3y ago
      where does that exact figure come from?
      • rayiner 3y ago
        https://www.bestcolleges.com/research/average-student-loan-debt/ https://www.bestcolleges.com/research/average-student-loan-d... Look at footnotes 1 and 3, which rely on the Department of Education’s and the Fed’s own numbers. $1.64 trillion/1.77 trillion = 92.6%.
    • FormerBandmate 3y ago
      The government taking credit risk into account would have such regressive results it would be hilarious. The cost of college would dramatically plunge for kids from rich families taking CS and finance classes and skyrocket for everyone else
      • peanuty1 3y ago
        That would be great if cost of college plunged for CS and finance students.
      • imtringued 3y ago
        You're saying this as if it hasn't happened already. Less money for borrowing means students can only afford lower tuitions and colleges are incentivized to efficiently use your money.
  • hospitalJail 3y ago
    The first I had heard about this was from libertarians complaining about the government backing causing the tuition increase. This was among a debate where people were asking for more federal and state funding. Its crazy to see this point become so mainstream. I suppose it was inevitable if it was the truth.
    • kalleboo 3y ago
      From an outside point of view, it looks like just another problem of the duality of the American self-image. "We want everyone to have a chance at school, but public schools are government indoctrination so we'll just make sure people are in un-releasable debt to private companies." "We don't want to see people dying in the streets, but universal health care is "socialist", so we're create these convoluted insurance systems, but still require hospitals to provide free ER care (that has to be covered by everyone else in the end)." "We're afraid of immigrants, but our agricultural industry is dependent on their cheap labor, so we'll make legal immigration difficult, and keep pretending that we're going to restrict illegal immigration, but never actually do anything effective to curb it." (I also want to add that mentalities like this are not at all exclusive to the US - you can find similar inconsistencies in every countries self-image, the US just seems to have them in more fundamental issues that other countries made a decision on long ago)
      • imtringued 3y ago
        Germany does this with their export policy. The country exports products to Greece which can only be financed by cheap loans from Germany and then when Greece can't pay they turn around and chastise it for buying German products.
  • tempsy 3y ago
    Eh I think the impact of the federal government on undergraduate costs is largely overstated. The limits for dependent students, which is most undergrads, is really small over 4 years. https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized https://studentaid.gov/understand-aid/types/loans/subsidized... You can only borrow $31k over 4 years. That isn't a lot at all.
    • macdaknife 3y ago
      I would disagree that 31K is not a lot of money, but then again, maybe it is not a lot of money and my opinion is warped. I think if the government took a few points off for performance as a preferred return on the massive endowments, all of this would go away.
      • tempsy 3y ago
        it's $8k a year. that wouldn't even cover rent for a school year at this point. i think a lot of people seem to believe that the federal government is handing out $50k+ a school year when theres a very small limit. people who need to borrow likely have to tap private lenders.
        • kortilla 3y ago
          Please stop. You’re completely misinformed here on how much is available for students to loan. I know multiple people that took out massive PLUS loans from the government that carry interest, are not discharged in bankruptcy, and far exceeded the limits you are talking about ($70k a year for grad schools).
          • macdaknife 3y ago
            I would also add that a lot of loans end up rolled up into a package, which you are given no forbearance.
      • deleted 3y ago
        [deleted]
  • wdb 3y ago
    Aren’t they government issued loans? That’s how it worked over here
    • adventured 3y ago
      Yes. It's not the bankers doing it, it's the US Government - the Feds are the market, they own 93% of student debt. What a coincidence they dictate whether you can discharge the debt too, not too difficult to spot the gigantic conflict of interest. It's designed by the US Government to bring in massive, on-going funding to help fill in the red ink in the entitlement programs now that those are no longer funding sources to steal from (entitlements used to produce persistent surplus funding the politicians used to steal from for decades). That's why they'll never allow it to be dischargeable. Their margin on the loans is de facto 100%: it's all magic printed dollars or otherwise taxpayer dollars (makes no difference to them).
      • brightlancer 3y ago
        > It's designed by the US Government to bring in massive, on-going funding to help fill in the red ink in the entitlement programs Massive? Even before COVID and the lockdowns (and the pause on repayment), the student loan program was operating at a _loss_. The Dept. of Education has presumed (because they're incompetent AND corrupt) the program would be net positive but only to $114B over 25 years -- that's an average $4.5B per year. In 2019, the federal government spent $4.4T, so the _expected_ return from student loans would have only been 0.1% of the federal budget. That money couldn't fill squat. ---- "From 1997 to 2021, the Education Department estimated that payments from federal direct student loans would generate $114 billion for the government. But the GAO found that, as of 2021, the program has actually cost the government an estimated $197 billion. "A percentage of that shortfall, $102 billion, stems from the unprecedented federal student loan payment pause that began under the CARES Act in 2020." https://www.npr.org/2022/07/29/1114560119/student-loan-program-cost https://www.npr.org/2022/07/29/1114560119/student-loan-progr... https://en.wikipedia.org/wiki/2019_United_States_federal_budget https://en.wikipedia.org/wiki/2019_United_States_federal_bud...
      • wdb 3y ago
  • adventured 3y ago
    > all the while ignoring the lenders that are taking on too much risk. At least, they would be taking on too much risk, if they hadn't captured the market so effectively The lenders? Risk? 93% of all student loan debt is owned by the US Government. What risk? How is it everybody pretends it's the Big Evil Bankers making all the money on this racket? It's equivalent to the false narrative about private prisons driving the high US incarceration rate (when in fact it was over 95% government prisons across the decades that the rate was skyrocketing). It's a government replacement funding system for the entitlement programs that are bleeding out. They had to find a new funding source as entitlements dipped red, so they're strapping young people with massive debt (forever rising interest payments) they can't discharge and that derives from magic fiat dollars the US Government 'prints' at will. This is another case of the government abusing the population. Anti abortion laws? Government. Anti gay marriage laws? Government. Anti trans laws? Government. Segregation laws? Government. The war on drugs? Government. The war on terrorism? Government. Foreign adventurism wars? Government. Vast illegal domestic espionage? Government. Non-existent social security 'lock box' (not filled with $10+ trillion like it should be; should be the world's largest sovereign wealth fund)? Government theft. How many examples do you all need?
    • zeroonetwothree 3y ago
      People hate Comcast for raising their rate $10/month but when the government prints trillions causing you to lose 20% of your income and assets to inflation it’s not a big deal.
      • roamerz 3y ago
        It’s easy to miss the connection between printing money and the affect of printing money since there is always a time period between cause and affect. The example of comcast raising hour bill is immediate. Well comparatively. Eventually and hopefully people will wise up.
        • imtringued 3y ago
          It is easy to miss because there is hardly any money printing going on. Physical cash is nowadays pretty insignificant.
  • colordrops 3y ago
    It's maddeningly frustrating to see such short-sighted greed dragging down the class of people meant to lead the future.
  • Consultant32452 3y ago
    The simple solution is to remove student loans from that small list you mentioned. But then, how do you secretly replace the billions in bribes to your friends in the universities?
  • lr1970 3y ago
    > Worse than just "backed by the federal government," the loans are basically protected by the government. It is really strange that government does not constrain tuitions of the colleges participating in the loan program. Currently, Universities have no incentives to control costs in any way.
    • jjoonathan 3y ago
      Well yeah, the problem is never that prices are too high and always that customers can't afford it so therefore they need more debt to help them! (This message brought to you by people-with-thing-to-sell.)
    • imtringued 3y ago
      Literally all they have to do is limit the maximum loan size. Max $50k per year. Anything beyond that is not subsidized or requires proof of academic performance or ability to repay.
      • hoosieree 3y ago
        How about a tuition capped at the median salaries of its graduates?
        • sudobash1 3y ago
          There goes philosophy, music, and many other liberal arts degrees.
          • leesalminen 3y ago
            There would just be fewer students in this major, they wouldn’t disappear entirely.
            • sudobash1 3y ago
              Sorry, my comment was more snark than content. If tuition was limited to student income the universities would be incentivized to cut departments that don't produce high-income graduates.
  • tejohnso 3y ago
    >It is frustrating to hear the discourse over the inappropriate students that are taking on too much debt, all the while ignoring the lenders that are taking on too much risk But as you point out, the lenders are not taking on risk. The only ones who are silly in the deal are the students. The system is really messed up. But when it comes to your individual student making that deal, it's often a dumb idea.
  • singleshot_ 3y ago
    Curious for your opinion: do you think it’s really hard to discharge a student loan in personal bankruptcy in the US, or impossible?
  • thatfrenchguy 3y ago
    The loans are mostly owned by the government too :)
  • paulddraper 3y ago
    > lenders AFAIK virtually every financial institution has been pulled from student loans. The U.S. government is now the only major lender.
  • ShadowBanThis01 3y ago
    It's also frustrating to see politicians trumpeting efforts to help Americans pay rip-offs like health insurance and tuition, instead of putting a stop to the rip-offs themselves. It's hugely wrong-headed and makes the problem worse. I went to a major private university, and several years after I graduated they raised the tuition 24% in one shot. When asked why, they basically answered, "Everyone else did it." It's time to revoke universities' tax exemptions when they pull shit like this, or are rolling in massive endowments, windfalls from sports programs, whatever. The regression of education in the USA at all levels marks the continuing decline of our society. We've gone back to book-burning in some areas. Now college is unreachable or a crushing burden. WTF.
  • 8note 3y ago
    They are and they aren't. Student loans can also be forgiven once you've paid them for a long enough time
  • musicale 3y ago
    It makes little sense to treat student loan dollars differently from regular dollars.
  • captaincrisp 3y ago
    Some of the interest rates I've seen on federal student loans - 7+% - seem exorbitant in general but particularly because the lender takes no risk. 7% interest on a loan in a year with 3% inflation (the real cost of having money that year) that is guaranteed to be repaid seems like evidence of corruption to me. But maybe I think too simplistically.
    • loeg 3y ago
      It's not true to say the Federal government does not take on risk loaning to students. Students are frequently unable to pay. 7% probably does not cover costs.
    • imtringued 3y ago
      8% is the usual rate for a "qualifiziertes Nachrangdarlehen" in Germany which is an equity based loan that is paid out only when the company is profitable. So you are right. The interest rate is too high.
• basisword 3y ago
  If only governments could make…laws to restrict the price of University. Or…could limit the maximum loan size thus encouraging Universities to not charge more than that.
  • dantheman 3y ago
    They could easily limit the loan size...
  • treeman79 3y ago
    Proper solution is government to stop guaranteeing the loans and to allow people to put them in bankruptcy. Prices will collapse to what people are willing to pay in real time, or save up for.
    • rayiner 3y ago
      The government cannot and will not do that, because such a policy would have racially disparate impacts.
      • DesiLurker 3y ago
        Govt can totally do that. but you are right in that only congress can do that via legislation. every policy that effects poor has racially disparate impact so that argument can rally be applied anywhere.
      • philipkglass 3y ago
        There are many things that the government doesn't guarantee loans for. Why is not-guaranteeing for higher education more of a racially disparate action than not-guaranteeing for e.g. vehicle loans?
      • dragonwriter 3y ago
        The government actually can do, and often does, policy with racially disparate impacts. Disparate impact is not a Constitutional limit on government discrimination, its a judicially-created rule in the application of certain statutory anti-discrimination laws. (And the disparate impact rule is politically and legally unpopular with the same faction that currently dominates the Supreme Court and whose members on the Court have shown an unusual willingness to discard precedent, so its quite likely it won’t be a limit on discriminatiom under those statutes much longer, either.)
• dpierce9 3y ago
  Private high school costs have also gone up astronomically and there are no federal loans for them. [0] https://educationdata.org/average-cost-of-private-school https://educationdata.org/average-cost-of-private-school
  • hospitalJail 3y ago
    Where does it say that? Btw private school looks quite affordable. I used to think my neighbor was rich, they were, but for only $20k/yr you can send 2 kids to private school? That is cheaper than daycare.
    • Sivart13 3y ago
      Daycare is considered by many to be very expensive and a lot of parents would prefer not to (or can't!) pay daycare prices until their kids leave the house.
    • thebradbain 3y ago
      Depends on the city… in Los Angeles private schools can push $70k/yr/student easily; In the Bay Area I would imagine even higher. In Dallas, where I grew up and went to the same school for much less, tuition is now around $40k/student/year for top private schools.
      • eitally 3y ago
        The highest I've found in the bay area are a small handful of residential private schools (e.g. Athenian is $82k for boarding students). Most of the top private day schools are still <$50k/yr, but I strongly suspect they top that once fees & "discretionary" expenses are added.
    • dpierce9 3y ago
      There is a chart at the bottom. Costs doubled over twenty years since 1999, directly comparable to the college rate over the same period and well above inflation.
• anthlax 3y ago
  This theory makes sense but since the loan is essentially risk free, why are private student loan interest rates roughly 10%?
  • jedberg 3y ago
    Those are the private loans not backed by the government. The government ones are basically at the prime rate or less to fund the administration of the program.
• Night_Thastus 3y ago
  It's unfortunate, but to me this feels like half of the root of the problem. One half is easy access to loans, the other half is student debt relief programs. Between the two, colleges know they can charge absurd prices and pocket the money. It's awful, and I wish someone was doing something to stop this. It cannot go like this forever.
  • somewhat_drunk 3y ago
    >the other half is student debt relief programs ...which student debt relief programs? Afaik there are no widely used student debt relief programs.
    • rayiner 3y ago
      https://www.consumerfinance.gov/ask-cfpb/what-is-pay-as-you-earn-paye-how-do-i-know-if-i-qualify-en-1555/ https://www.consumerfinance.gov/ask-cfpb/what-is-pay-as-you-...
    • nieksand 3y ago
      It's buried in Excel sheets, but looks like quite a few folks: https://studentaid.gov/data-center/student/loan-forgiveness/pslf-data https://studentaid.gov/data-center/student/loan-forgiveness/...
    • ilikehurdles 3y ago
      Work for a public organization or certain non-profits while making 10 years of regularly scheduled payments and you may be qualified for student loan forgiveness. Lots of physicians I know took advantage of this since most of their training is at public academic institutions, and I believe many teachers do as well.
      • diob 3y ago
        Do you have data on how many take advantage of it? My anecdotes are that everyone who tries this gets trapped in some bureaucratic hell hole that tends to prevent it from actually being used.
• chiefalchemist 3y ago
  The loans: 1) Increased demand. 2) Increased what the market could bear. The result is Economic 101. There are no surprises here. p.s. Note: Roughly the same applies to mortgages. The idea that more affordable mortgages (i.e., 30 yr) was going to make homes more affordable, is comical at best. With a relatively fixed supply, increasing demand is only going to have one effect on price. And the solution? The 40 yr or 50 yr mortgage. Round and round we go.
  • somewhat_drunk 3y ago
    Agreed. The real question is: do they produce a net positive effect for society?
    • chiefalchemist 3y ago
      If the government needing to grant mass amnesty from loans / loan payment then that's a net positive, yes? Lol
  • anonzzzies 3y ago
    That is obvious, but it used to be that admission needed some tests which most people simply cannot get past. Colleges lowered the bar of entry to make more money and that caused your point 2 and as well massively lowered the quality of the education making the diplomas not very worthwhile (known exceptions are there of course). Keep the bar to entry very high and you cannot have a reason for upping prices. Get a loan when you are actually really good and otherwise don’t get in, even if your parents have billions.
    • chiefalchemist 3y ago
      An economist would say the bar lowered to meet the demand. Demand that was willing to bear a higher and higher and higher price.
• fredgrott 3y ago
  false narrative, two counter points: 1. State govs have reduced funds to all public colleges. 2. Fed gov has refused to increase grants such as Pell on inflation basis. And that is way before the other forces of price increases and demand increases.
  • eschulz 3y ago
    You're right that state govs have definitely reduced funding in many places for public colleges. And although this started decades ago in some cases, it is significantly exacerbated by the size of loans that students can easily access (due directly to federal backing of such loans). Therefore, states can reduce spending on colleges with the knowledge that the colleges can easily increase tuition to make up the difference.
• mola 3y ago
  More likely cause is the mentality that says universities are a for profit institutions That should squeeze as much as possible. Instead of "socialist" subsudised school, you give loans...
• za3faran 3y ago
  I hope to see the day where interest bearing loans are recognized by the rest of the world as the evil they are. Muslims and Jews know this fact quite well.
  • SamBam 3y ago
    Serious question: what would incentive anyone to lend to people who have any risk at all (i.e. everyone)?
    • timfsu 3y ago
      The same incentive you'd have to do something for someone without receiving payment - a desire to help. I'd imagine the fact that people in that time had stronger familial ties to others in their village also helped increase payback rates.
      • ars 3y ago
        And both religious created a way to indirectly pay interest by turning it into a business partnership. i.e. when you are helping someone (a friend, relative) you don't pay interest. But when it's a business loaning the money that desire to help doesn't exist, and it becomes a business partnership instead. https://en.wikipedia.org/wiki/Loans_and_interest_in_Judaism https://en.wikipedia.org/wiki/Loans_and_interest_in_Judaism specifically: "Heter iska". And https://en.wikipedia.org/wiki/Murabaha https://en.wikipedia.org/wiki/Murabaha for Muslims (I think there are other forms as well). A copy of a Heter Iska: http://www.jlaw.com/Forms/iska_d.html http://www.jlaw.com/Forms/iska_d.html
        • OkayPhysicist 3y ago
          You're supposed to use Mudarabah[0] preferentially, which is dramatically less of a lazy hack around usury rules than Murabaha. (Also as a English speaker, those words are very hard to distinguish.) [0] https://en.wikipedia.org/wiki/Profit_and_loss_sharing https://en.wikipedia.org/wiki/Profit_and_loss_sharing
    • 3y ago
• patrickthebold 3y ago
  "Able to pay", but where is the "Want to pay?" I feel you also need to argue: "18 year olds don't realize they are being ripped off", or "college is actually worth that much". It's probably a different answer for different students.
  • mrguyorama 3y ago
    Society is better off as a whole with a well educated populace. We shouldn't optimize for college only for kids who can learn to program or whatever. Most other developed nations manage to send every smart kid to college for ten thousand dollars per kid or less. Once again, it is only the US that thinks it is a special butterfly that can't somehow manage to give kids college. Sure, most European colleges don't spend one billion tax dollars on a football stadium, but that is also a good thing. And no, those sports complexes largely DON'T pay their own way. A significant amount of college sports don't make much money, and don't give it back to the campus as a whole, and that's WITH literal free labor of NCAA athletes.
    • SoftTalker 3y ago
      The education needed for a functioning society should be delivered by the end of high school. A few generations ago it was delivered by the end of 8th grade. And yes, college sports on the whole does pay for itself. Those stadiums are built by donated money, and revenue from ticket sales. Yes taken in isolation there are a lot of sports that don't make money, but they are subsidized by those that do (chiefly football and basketball). Sports stadiums are not the reason tuition has inflated by 700%. They are two separate pools of money. If you got rid of sports entirely it would not affect the finances of the academic side of the university at all.
      • janalsncm 3y ago
        It’s a question of what kind of “functioning society” you want to have. Those 8th grade education jobs still exist, but they’re in China, Bangladesh and other developing economies. And no offense to those people either. A lot of manufacturing depends on them. Those are certainly “functioning societies” but their economies are much less advanced than in the US. It’s not realistic to say that an advanced economy can get by with education ending at age 18.
• stcroixx 3y ago
  Also helps to drop standards like SAT/ACT. If you don't need grades or money to get into school, well, that includes just about everyone.
• thedangler 3y ago
  I've been saying this for a while and no one has ever agreed. They are always like you think they are that greedy. YES I DO. It's not complicated. If one can get bailed out, one can do what ever they want.
• eslaught 3y ago
  This is a common theme on HN, but it's not obvious to me if it reflects this entire period we're talking about here. Were government loans growing from 1980 to 2000? I know they have been in the last 20 years, but tuition was clearly growing before that (as you can see for yourself in the graphs of the original article).
• stingraycharles 3y ago
  Purely out of interest: what do they do with all that money? Does it increase the quality of education and/or research?
  • prepend 3y ago
    Administration. There’s a growth in admin [0] that I think is the proliferation of the most bullshit of bullshit jobs. It’s weird that I think the issue is much worse by basically funding all these admin positions that pay more than actual instructors and researchers yet I’m not sure what they really do. I’d like to see universities advertise low admin:student and admin:instructor as measured of quality. [0] https://yaledailynews.com/blog/2021/11/10/reluctance-on-the-part-of-its-leadership-to-lead-yales-administration-increases-by-nearly-50-percent/ https://yaledailynews.com/blog/2021/11/10/reluctance-on-the-...
    • rovolo 3y ago
      Yale is not a representative college. It makes 4x the income from its endowment than from tuition, room, and board. It also has multiple research labs and a hospital. They don't break down the staff (admin) by department, but 2/3 of all faculty are in the school of Medicine, most on the clinical side. I would assume most of the staff (admin) are also working at the hospital. https://oir.yale.edu/data-browser/faculty-staff/faculty/faculty-headcounts/university-faculty-rank-and-department-w054 https://oir.yale.edu/data-browser/faculty-staff/faculty/facu... Universities are not just educational institutions. You can't just compare students numbers to employee numbers without also examining what the university does.
      • prepend 3y ago
        Of course Yale isn’t representative, it’s just one data point in a national trend. I don’t understand your point. Do you dispute that admin staff have grown at a high rate? My point is that universities have too much admin and that it’s growth quickly. I think it’s perfectly reasonable to compare this trend without knowing exactly what specific universities do. I agree that comparing medical system admin staff wouldn’t make sense, and the article I linked excludes medical system and other non-university staff.
• rgrieselhuber 3y ago
  And I assume there is nothing preventing this student-loan backed tuition money from funding university endowments.
• FlyingBears 3y ago
  Another problem with student loans is that they are frequently issued for way more than bare minimum required to pay tuition and study materials. This extra amount just exacerbates the problem and gives universities room to get to that money via tuition increases. Students may legitimately use that extra cash for living expenses, but most of the time it is just fun money expense.
• indymike 3y ago
  > Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan This is the exact problem. Whoever makes the loan has an incentive for eternally increasing prices.
• janalsncm 3y ago
  It only makes sense if you believe education is just like any other commodity whose price should be driven by market forces. Should government have any say in whether its citizenry gets educated? Is there a public interest in it? I can’t think of an easier way for e.g. China to win the 21st century. American undergrad enrollment is already down. As the world gets more technical, that is not a good sign. When an entire generation of Americans are priced out of higher education, who is going to develop the technologies of tomorrow? Should we assume foreign students will always want to come to our schools and stay to work in our companies? It’s not sustainable.
  • zdragnar 3y ago
    The rise in prices has largely been driven by schools going on real estate binges and bloating administrations. Right before I graduated, my school decided to build a new football stadium, because they decided using the city's stadium wasn't attractive enough for students. They promised tuition wouldn't be used to pay for it, and it wasn't. We just got something like $500 added to student "fees" instead. I have no sympathy for universities and colleges in the US, only for the students who were duped into thinking they didn't have another choice.
    • Clubber 3y ago
      When I went to school ages ago when it was reasonably priced, they did a breakdown of the tuition. Half of it was stupid bullshit the student government voted on over the years. "Too many piglets, not enough tits" -AL
    • janalsncm 3y ago
      Ultimately it doesn’t matter if the cause is administrative bloat, government-backed student loans that can’t be defaulted on, or space aliens. What is not debatable is that higher education is necessary in an advanced economy, and starving the job market of highly skilled workers is a fast track to companies shifting to other places where they are more abundant. Either the US will figure it out like every other developed nation has seemed to do, or there will be grave geopolitical consequences. Whether the US political/economic machine can figure it out is a question that only time can answer.
• gaoshan 3y ago
  If that's the case, that the federal government backing the loans is what permits the increases, then why not just have the federal government pay up front and cut out the loan portion? Might give them more power to negotiate lower prices. Though I suppose the loan industry wouldn't like getting cut out of their middleman position, eh, and politicians probably wouldn't stand for that egregious cutting of profits.
• leshow 3y ago
  You're missing another driver of the growth in tuition though: many colleges are only superficially "not for profit" and in reality are being run as profit maximizing institutions.
• ch4s3 3y ago
  It's worth mentioning that degree granting institutions numbered ~3500 in 1980 and total enrollment was almost 10 million, and in 2022 there were just over 4000 such institutions serving 17 million students, and that number of institutions is actually declining from its peak in ~2016. This alone is bound to drive up prices.
• soundslikeapop 3y ago
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• dauertewigkeit 3y ago
  Easy access to credit is a good thing. I cannot believe I am saying this on HN. The problem as I see it, as a non-American, is that university in the US is a business trying to turn a profit. Even if most universities are technically non-profits, they are managed like businesses by MBAs. In the EU many countries offer guaranteed loans for Uni education, but this has not spiked the cost of education because Universities are not run with the aim to turn a profit. IMHO, easy access to credit is one of the best things about the American economy, and hiring MBAs to manage things that aren't for profit corporations, one of its worst aspects.
  • brightlancer 3y ago
    Not-for-profit businesses in the US are not legally allowed to turn a profit. There are no financial owners to be paid a profit. So, everything you wrote about that is BS. Not-for-profit businesses are still businesses; they need to take in as much as they spend, whether it's through fees for service (e.g. tuition) or donations. Colleges and universities in the US spend a lot of time begging alumni to donate money. And yes, there is education and training specific to running a not-for-profit _business_, and many GOOD leaders have MBAs. I have watched a lot of them fail because the folks at the top did not manage money well.
    • pwpw 3y ago
      I think you and the GP may be getting tripped on word choices. Most private universities in the US are organized as 501c3 organizations. There are numerous requirements[0] to be a 501c3. This however does not prevent a non-profit from being run like a for-profit business. One of the most crucial components of operating a 501c3 is the financial statements reporting requirements[1]. From an accounting perspective, the organization cannot keep retained earnings (owner’s equity) balance at year end since there are no owners. Rather than having retained earnings, 501c3s deal with net assets, which no person can have ownership of. The crucial thing here is that the business does not retain profits at the end of the accounting period. However, it can earn what we would call profit in a non-501c3 scenario and then use that money for business activities, paying employee wages, investing, etc. Accordingly, a 501c3 can take in more than it needs to spend. It just has to properly handle that excess money to meet the accounting standards. See the Wikimedia Foundation’s financial statements[2] for a great example. They spend a minuscule amount of their net assets on actual business expenses. They spend quite a bit on wages, travel and conferences, and various other things that are arguably unnecessary to serve their core mission. However, they follow all of the accounting guidelines and are therefore granted reasonable assurance that they are fairly representing their financials according to KPMG. Back to the initial topic, it’s now clearer to see why and how a university such as Harvard can be a 501c3 and bring in exorbitant amounts of “profit” that probably do not better serve their core mission as an education center. However, it’s all about following rules and how you spin it. Harvard isn’t begging alumni for donations because they need it. They had $61B in net assets at year end[3]. I think it’s completely fair to argue that Harvard doesn’t need that much money while they deliberately stay at their current size. In fact, I would argue one step further that they have so much money on hand, they shouldn’t even be charging tuition. Their $59B investment portfolio makes up the bulk of their net assets. From a book perspective, they are essentially an investment fund with a university attached. Looking at a public university, the University of Texas ended the year with a $66B net position[4]. They paid their football coach over $5[5] from their massive pool of assets and are still paying their former head football coach tens of millions of dollars. I would be interested in hearing if there are universities in Europe that operate like this. Quickly looking up the aggregated statement of financial activities for all Oxford colleges[6], I see that they had a 63M£ expenditure (loss) but carried forward 1.35B£ to end the year with positive funds carried forward of 1.36B£ (after a prior year funds adjustment). That’s incomparable to Harvard. As a CPA (who is not an expert on UK tax law), Oxford’s financial statement appears much more inline with the spirit of what I imagine a non-profit university should be. Harvard and the University of Texas look like two of the most successful companies in America to me. [0] https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations https://www.irs.gov/charities-non-profits/charitable-organiz... [1] https://www.fasb.org/document/blob?fileName=ASU_2016-14.pdf https://www.fasb.org/document/blob?fileName=ASU_2016-14.pdf [2] https://upload.wikimedia.org/wikipedia/foundation/2/26/Wikimedia_Foundation_FY2021-2022_Audit_Report.pdf https://upload.wikimedia.org/wikipedia/foundation/2/26/Wikim... [3] https://finance.harvard.edu/files/fad/files/fy22_harvard_financial_report.pdf https://finance.harvard.edu/files/fad/files/fy22_harvard_fin... [4] https://www.utsystem.edu/sites/default/files/documents/report-state/2023/consolidated-annual-financial-report-fy-2022/ut-system-audit-afr-2022.pdf https://www.utsystem.edu/sites/default/files/documents/repor... [5] https://www.texastribune.org/2021/02/22/steve-sarkisian-salary-ut-austin/ https://www.texastribune.org/2021/02/22/steve-sarkisian-sala... [6] http://d307gmaoxpdmsg.cloudfront.net/collegeaccounts2122/aggregated.pdf http://d307gmaoxpdmsg.cloudfront.net/collegeaccounts2122/agg...
• no_wizard 3y ago
  Two things you have to do to keep tuition costs down nowadays, by my estimation, unless you get a full ride scholarship or accepted by the an Ivy League: - Do your first two years at community college. A lot of states have zero tuition costs for community college credits. I think in all 50 states its the absolute cheapest way to do get your first two years done - Enterprising students may realize that if you're married, FAFSA (which is used to compute both federal and state aid) will use your married income and not your parents. Most students make little to money while in school. This automatically games the algorithm in your favor. Tricky to manage socially.
  • ytdytvhxgydvhh 3y ago
    Agreed about community college. It’s unfortunate though that, like so many things, it’s essentially a lottery on where you’re born. Some community colleges are wonderful, others not. I’ve heard of other FAFSA games as well - last I heard the parents’ cars and primary residence were excluded from the FAFSA expected contribution calculation so middle class folks with a fat savings account might decide to buy new cars or pay off the mortgage or do something similar to make the cash “disappear”. Deferred compensation plans are used along the same lines for income. The fact that such games are viable is a shame but probably unavoidable unless we have government foot the bill for college.
    • WkndTriathlete 3y ago
      That's not the worst part. Rich families had their kids legally emancipated prior to age 16 so that the kids could legally show zero income and zero family net worth on their FAFSA applications. The FAFSA is such a load of horseshit I don't even know where to begin with it.
  • OkayPhysicist 3y ago
    2+2 plans are really, really questionable in my observation. Most students I know ended up doing either 2+3 or 3+3, which since as you pointed out CC are so, so, so much cheaper than university did save them money none the less. However, if you're going into a field that has any kind of improved earning potential from a degree, you have to look at the opportunity cost, taking into account the fact that if they had just gone straight to a 4 year they would have had an extra 1-2 years of making substantially higher wages than they could before they graduated. If you have a kid who doesn't really know if they want to, say, be an engineer, then a 2+2 plan that they realize they aren't cut out for during the cheap years probably is a huge price save. But for the kid with the tools to succeed in school, a passion for a field that pays well, and the opportunity to get into a 4 year, they should absolutely just go for it off the bat. The other problem with the 2+2 is that you're sacrificing 2 years of one of the biggest advantages of going to competitive universities: meeting other students who could get into competitive universities. I met most of my friends I made in college in the first 2 weeks, freshman year. It's probably the single easiest time in anyone's life to make new friends and acquaintances. And those friends, beyond being invaluable to me for social and romantic reasons, also have benefited me financially: one friend's dad got me an internship, which I was able to leverage into my first job. I got my second job by no small part thanks to the recommendation of another friend who already worked there. Looking back in time, the ROI on the bottle of vodka I brought to the dorm nextdoor move-in weekend is likely in the ~10,000,000% range. Transfer students get a greatly diminished version of that opportunity. By their upper-division levels, most students are spending a lot more time on school work, and much less time randomly meeting their dorm-hall mates. It's still possible to meet people, and my high-school friends who did the transfer route did meet some people, but there's a much greater than 50% loss in networking opportunity.
• godelski 3y ago
  This is not wrong (despite being common and the de facto explanation) but it isn't complete either. The reason I say this is because people that often say this (or read this) also conclude that the way to fix this is to just get rid of government backed loans. The issue is that this model doesn't question why the government backed loans in the first place. How they were seen as an investment in the people, as higher education was already prohibitively expensive. The solution failed because it did not account for a feedback loop, relying on competition to keep prices low rather than implicit coordination (sometimes explicit collusion). Mostly being due to momentum and prestige having an ineffable market value. So we need to resolve that issue as well if we're to stop federally backed loans. There's more things at play as well and the convoluted mess is the real reason we haven't solved the problem. Realistically, this is probably true about most of the larger issues we face. I'm concerned that over simplifying the problem statement results in an over simplification of the solution and it just causes us to argue (which can be supported by evidence) or take ineffective/theatrical action rather than actually resolving the problem (meeting the intended goals (plural)). We can keep having this conversation over and over, but it has happened for well over a decade now and no real progress has been made. We gotta start looking at the actual complexity of the situation as first order modeling isn't good enough.
• deleted 3y ago
  [deleted]
• doalldrugs 3y ago
  So the easier solution then since the government is effectively already paying for anyone who doesn't pay back their loan (a dead person for example) then is to just pay for everyone's college education (Public Universities).
• tzs 3y ago
  > Makes sense when you have student loans backed by the federal government. Everyone says that, but I've not seen much actual evidence. I tried to find evidence, by looking for tuitions of various major universities over time and seeing if there was any clear difference in the tuition growth rates before Federal loans and after. I know the data is available. Most schools list tuition in their catalog, and have their old catalogs in their library, but it wasn't turning up in. Google searches. I was only able to find historical data for Stanford, giving tuition by decade, and one big state school whose name I don't remember. Here's a graph of log10(Stanford_tution) over time [1]. I don't have a copy of the graph for the other school but recall it was similar. It looks like it has been growing about the same for a century. I also remember comparing tuition rate increases to inflation, and found that tuition has grown pretty consistently at roughly 2x inflation both before and after Federal backed loans. [1] https://imgur.com/fXnjDNn https://imgur.com/fXnjDNn
• KoftaBob 3y ago
  https://shrewdcuriosity.medium.com/why-has-college-gotten-so-expensive-in-the-last-30-years-3505af9aded8 https://shrewdcuriosity.medium.com/why-has-college-gotten-so...
• samtho 3y ago
  I cannot imagine a more sinister, callus, and destructive way to punch down on some of the most vulnerable people. 18 year olds did not elect any of the people making these laws, every adult before them parrots “go to college”, financial aid offices don’t care what people do as long as they pay tuition, etc. But grants, you say! We can avoid loans. Not so fast. If your parents made a certain amount, they are fully expected to pay a certain amount for their now adult children to go to college. To qualify for any aid, you need your parents’ income, demanding that A middle class family may still be fully expected to pay multi-thousands of dollars. The student must then take out loans to pay for the rest, which might be the full amount. This is certified, nonsensical, bullshit. No credit system in history has been given the grace to royally fuck over generations of students, saddling them with loans that cannot be discharged, whose amount is effectively dictated by the institution that is charging tuition. This is a scam at the highest level, sanctioned by the federal government, and perpetuated by every adult figure in the students’ life.
  • hibikir 3y ago
    True, although I expect that the US healthcare system is more than competitive if we consider its bad outcomes and overall inefficiency per dollar spent. Systems where there is competition, but where efforts are made to make the service providers not really have big advantages for cutting costs, will get you bad outcomes. It's just unfortunate that avoiding needing healthcare, or going into many careers without paying for the very expensive college degree, is such a big gamble. A fully public system would be very different. An unsubsidized market system would also be very different. Either one would be dramatically cheaper than what we have, which gives us the worst incentives of both worlds.
    • samtho 3y ago
      I’m very pro-free market but I would be happy to see this structure replaced with almost anything else. We chose the worst possible combination/bastardization of systems: colleges are given a massive amount of funding by the federal government and the same government guarentees student loans via a debt shackle, lenders are incentivized to lend to students, colleges are incentivized charge exactly what the market will “tolerate” which is horribly skewed due to the abundance of money available to be loaned. This is a losing system for students, even for those who don’t take on debt are spending an absolute insane amount tuition, books, housing, and other living expenses.
• ma34esense 3y ago
  [flagged]
• 1vuio0pswjnm7 3y ago
  This was predicted by the then Secretary of Education in 1987. https://www.nytimes.com/1987/02/18/opinion/our-greedy-colleges.html https://www.nytimes.com/1987/02/18/opinion/our-greedy-colleg... Here is something interesting: https://www.ed.gov/category/keyword/borrower-defense https://www.ed.gov/category/keyword/borrower-defense
• jwestbury 3y ago
  The reality in many cases is that total cost per student has actually decreased; meanwhile, governmental funding of universities has flatlined for decades. If enrolment doubles and funding remains stable, there's only one solution: Increased tuition. Easy access to loans may create large amounts of debt, but increased tuition fees are mostly -- though I admit my research isn't exhaustive -- a function of an effective decrease in governmental funding per student.