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> ...there may be no reliable price signal about the long-term financial risks inherent in different courses of study. So credit availability and interest rate

by ibejoeb 15y ago

> ...there may be no reliable price signal about the long-term financial risks inherent in different courses of study. So credit availability and interest rate is going to be directly related to what other people ahead of you studied in school and how well they settled the debt. Also: > Educational institutions may have incentives to funnel students into areas that do not maximize students’ future incomes or employment prospects. I guess they do. Unfortunately, the instituions are not even a factor. As far I can tell, the proposed solution is to deprive the student of the opportunity to get involved in that "low-value" field. Then, indirectly, we punish the institution by reducing revenues. Interesting. It's an interesting read.

ams6110 15y ago
I didn't read past the abstract, but it seems that fair risk assessment would have to include not only the potential income from the intended course of study but also likelihood of completing the course and overall credit history of the borrower (actually his/her parents, as most students won't have a credit history yet). Easy credit for tuition has no doubt contributed to increases in tuition that are way out of line compared to overall inflation. This works to the detriment of everyone pursuing higher education, as you (or more likely your parents) are either spending a lot more than the education is really worth, or you're ending up deep in debt as you start your professional life. As far I can tell, the proposed solution is to deprive the student of the opportunity to get involved in that "low-value" field. Then, indirectly, we punish the institution by reducing revenues. Institutions need some price pressure. Tuition costs are out of control. Even state institutions are regularly raising tuition every year by the maximum allowed by their legislatures, and tacking on various other "fees" to raise the overall costs even more.
robrenaud 15y ago
I've heard an even crazier idea. Have colleges charge a percentage of a student's future income. This aligns economic incentives for the student and the college.
- dangrossman 15y ago
  What if I just want to take a few foreign language classes? Does a percentage of my income as payment make sense? Or I'm self employed and want to get another degree at night just because I can. Does a percentage of my income as payment make sense? What if I studied art history, but the side project I was working on after classes was acquired by Google for $30 million and now they're paying me $200k/year as part of the deal. Does a percentage of my income as payment make sense?
  - learc83 15y ago
    You're arguing with a straw man. Nothing about that plan precludes a fixed fee option in situations where a future percentage doesn't make sense.
    - randomdata 15y ago
      > Nothing about that plan precludes a fixed fee option in situations where a future percentage doesn't make sense. That doesn't really answer his questions though. Professionally, I work as a software developer and a farmer. If I had taken the percentage of future income option while receiving my CS degree thinking that's all I'd ever do, would the school be entitled to the profits from my farm too? I didn't even consider farming until I was 26, so it's definitely in the realm of possibility.
      - philwelch 15y ago
        I'm massively curious about how you got into farming and how you do that alongside software development.
        randomdata 15y ago
        I grew up on a farm, so I was not without connections, but it was actually on the suggestion of my father that I got started down that path. I knew pretty early on that programming was my thing. That was where I put all my focus, getting my first part-time dev job in high school. Farming wasn't even a consideration in my mind. It was only after working full-time in the software game for a few of years, dad approached me and suggested that I take some of the money I had earned, find some land to rent, and buy some crop inputs with it. I agreed that it sounded like a good plan, and he helped me put it in motion. My farm is strictly cash crop, so the work is highly seasonal. Right around this time in the spring and later in the fall there is a lot of work to do, but the rest of the year is fairly light on the time required of me. The second thing that made it work is that I was already telecommuting and my hours were flexible. There have been days where I've been in the field all day and working on code all night. Additionally, it's not completely unheard of to find me writing code from the seat of the tractor. Mobile internet access has been a lifesaver. I hadn't really considered this to be an interesting topic to the HN crowd, but maybe I should write up a more detailed blog post about it?
protomyth 15y ago
I wonder if the institutions would drop the price on credits in "low-value" fields and move away from one $ per credit rate?
dlitwak 15y ago
Disagree, if a student wants to pursue computer science he/she should have a lower interest rate than a philosophy major. There is a much higher likelihood that the CS major will pay back the loan soon. There is a bit of a naivete among college students, that having any degree from "X prestigious university" is enough for the big boys to respect them and give them a high paying job. As a consequence I know many graduates who end up working as waiters etc. Perhaps had this tradeoff been made more evident from the beginning, they would have made different choices. The student isn't deprived of their opportunity to get involved in low-value fields, but that low value is more apparent, which should help their decision process. And more high value graduates, with higher incomes and a better ability to donate back to the university would probably increase revenues in the long run.

by ibejoeb 15y ago

ams6110 15y ago

I didn't read past the abstract, but it seems that fair risk assessment would have to include not only the potential income from the intended course of study but also likelihood of completing the course and overall credit history of the borrower (actually his/her parents, as most students won't have a credit history yet). Easy credit for tuition has no doubt contributed to increases in tuition that are way out of line compared to overall inflation. This works to the detriment of everyone pursuing higher education, as you (or more likely your parents) are either spending a lot more than the education is really worth, or you're ending up deep in debt as you start your professional life. As far I can tell, the proposed solution is to deprive the student of the opportunity to get involved in that "low-value" field. Then, indirectly, we punish the institution by reducing revenues. Institutions need some price pressure. Tuition costs are out of control. Even state institutions are regularly raising tuition every year by the maximum allowed by their legislatures, and tacking on various other "fees" to raise the overall costs even more.

robrenaud 15y ago

I've heard an even crazier idea. Have colleges charge a percentage of a student's future income. This aligns economic incentives for the student and the college.

dangrossman 15y ago
What if I just want to take a few foreign language classes? Does a percentage of my income as payment make sense? Or I'm self employed and want to get another degree at night just because I can. Does a percentage of my income as payment make sense? What if I studied art history, but the side project I was working on after classes was acquired by Google for $30 million and now they're paying me $200k/year as part of the deal. Does a percentage of my income as payment make sense?
- learc83 15y ago
  You're arguing with a straw man. Nothing about that plan precludes a fixed fee option in situations where a future percentage doesn't make sense.
  - randomdata 15y ago
    > Nothing about that plan precludes a fixed fee option in situations where a future percentage doesn't make sense. That doesn't really answer his questions though. Professionally, I work as a software developer and a farmer. If I had taken the percentage of future income option while receiving my CS degree thinking that's all I'd ever do, would the school be entitled to the profits from my farm too? I didn't even consider farming until I was 26, so it's definitely in the realm of possibility.
    - philwelch 15y ago
      I'm massively curious about how you got into farming and how you do that alongside software development.
      - randomdata 15y ago
        I grew up on a farm, so I was not without connections, but it was actually on the suggestion of my father that I got started down that path. I knew pretty early on that programming was my thing. That was where I put all my focus, getting my first part-time dev job in high school. Farming wasn't even a consideration in my mind. It was only after working full-time in the software game for a few of years, dad approached me and suggested that I take some of the money I had earned, find some land to rent, and buy some crop inputs with it. I agreed that it sounded like a good plan, and he helped me put it in motion. My farm is strictly cash crop, so the work is highly seasonal. Right around this time in the spring and later in the fall there is a lot of work to do, but the rest of the year is fairly light on the time required of me. The second thing that made it work is that I was already telecommuting and my hours were flexible. There have been days where I've been in the field all day and working on code all night. Additionally, it's not completely unheard of to find me writing code from the seat of the tractor. Mobile internet access has been a lifesaver. I hadn't really considered this to be an interesting topic to the HN crowd, but maybe I should write up a more detailed blog post about it?

protomyth 15y ago

I wonder if the institutions would drop the price on credits in "low-value" fields and move away from one $ per credit rate?

dlitwak 15y ago

Disagree, if a student wants to pursue computer science he/she should have a lower interest rate than a philosophy major. There is a much higher likelihood that the CS major will pay back the loan soon. There is a bit of a naivete among college students, that having any degree from "X prestigious university" is enough for the big boys to respect them and give them a high paying job. As a consequence I know many graduates who end up working as waiters etc. Perhaps had this tradeoff been made more evident from the beginning, they would have made different choices. The student isn't deprived of their opportunity to get involved in low-value fields, but that low value is more apparent, which should help their decision process. And more high value graduates, with higher incomes and a better ability to donate back to the university would probably increase revenues in the long run.