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Why is this presumed to be a bad thing? College attendance and graduation rates are higher than at any point in the past, so the cost isn't actually keeping pe

Why is this presumed to be a bad thing? College attendance and graduation rates are higher than at any point in the past, so the cost isn't actually keeping people from going to college (or at least, isn't keeping people from going to college more than they were kept from going to it 50 years ago). In general, the income premium from a college education is much greater than the debt accrued to get that education, which is why people still take the deal. (There's people on the margins for whom that isn't true and I think most of the reform/bailout effort should involve them.) Is this actually something that needs to be "fixed"?

pc86 3y ago
For the sake of argument let's say college triples your income potential. To make the math easy, let's say instead of earning $1M over your life you'll now earn $3M. We shouldn't look at a school charging $400k and say "well you'll make more than that so it's a good deal." We should look at what you're actually getting. A cinder block dorm, mass-produced assembly line food, a professor making $80k a year telling you to write a paper on a book that's in the public domain. None of that is worth $400k.
- aleph_minus_one 3y ago
  > We shouldn't look at a school charging $400k and say "well you'll make more than that so it's a good deal." We should look at what you're actually getting. A cinder block dorm, mass-produced assembly line food, a professor making $80k a year telling you to write a paper on a book that's in the public domain. None of that is worth $400k. If passing this exercise in docility gives you the mentioned 2 million USD over life: why not?
- bandrami 3y ago
  > None of that is worth $400k Huh? You just said it gives you $2M over your life. That's obviously worth $400K.
  - pc86 3y ago
    Why just $400K why not $800K? Why not $1.6M? $1.99M? Why not just a contract that you pay the college 95% of whatever you make above the median HS graduate salary every year? I mean they're letting you keep 5% of the earnings you're only getting because of them, you should be happy with that, right? Just because $2M > $400K doesn't mean it's objectively worth that amount of money.
- TeaBrain 3y ago
  Neither my brother nor most of his friends at Vanderbilt were burdened by student loans. Most came from reasonable wealthy families that were able to pay the cost up front. Reasonably well-off families send their kids to Vanderbilt and other top schools because of the connections that can form and the reputation of the school. Everything else you mentioned comes second.
  - pc86 3y ago
    I'm not sure what point you're trying to make here tbh. Nobody is arguing that wealthy and connected individuals in part maintain those wealth and connections by going to elite schools. Legacy admissions all but guarantee that once you're a couple generations deep you'll be able to at least maintain your family's status. The question is whether a college charging $400K for what is probably closer to $70-80K of services is right.
    - TeaBrain 3y ago
      The point is that the parents who are paying for their kids to go to these schools have already put aside the money in a 529 or other account, and if their kids get admitted, there is no question of cost to put their kids a step ahead. Given this, exclusive universities know that they can charge prices that are relatively extreme, as they don't have any financial, moral or legal obligation to not do so. The question of cost compared to earnings that you raised is immaterial for these students, as the students will bear none of the cost.
gnicholas 3y ago
You don't seem to be concerned at all by the ballooning student loan debt. Also, it's not clear that the wage premium from attending college has to do with what is learned in college. Some scholars believe that it is largely a signaling device. Others believe that it is used as a proxy for general intelligence tests, which companies try to avoid using when hiring employees (due to a SCOTUS case from several decades ago, dealing with disparate racial impact). It may be true that the wage premium has outweighed the cost of attendance in the recent past, but this could easily change as tuition continues rising, and critically as interest rates are much higher than in recent years. The discount rate to which future earnings are subject is much larger than in the past 30 years, which means that the required wage premium has to be much larger than if the interest/discount rate were closer to zero. Basically, ZIRP was a boon for colleges, not just startups.
- bandrami 3y ago
  > You don't seem to be concerned at all by the ballooning student loan debt. I'm not, no. As long as the income premium exceeds the debt it doesn't really matter what the numbers involved are. > but this could easily change as tuition continues rising I mean, yes, if things were different they might be worse than they are. That's true of anything.
  - gnicholas 3y ago
    > if things were different they might be worse than they are. That's true of anything. Sorry for being too subtle. What I was pointing out is that the higher interest rates we are currently seeing, in combination with the ever-rising cost, could mean we're at (or even past) the tipping point now. This won't be apparent to many people until 10-15 years after the tipping point is reached, when people realize that the premium they thought they were getting is outweighed by their loan payments. But this is just the tail of the dog. The main point is that college is largely about signaling, which means that much of the value is in the acceptance letter, not the diploma. Why pay $400,000 to get the diploma if this is the case?

pc86 3y ago

For the sake of argument let's say college triples your income potential. To make the math easy, let's say instead of earning $1M over your life you'll now earn $3M. We shouldn't look at a school charging $400k and say "well you'll make more than that so it's a good deal." We should look at what you're actually getting. A cinder block dorm, mass-produced assembly line food, a professor making $80k a year telling you to write a paper on a book that's in the public domain. None of that is worth $400k.

aleph_minus_one 3y ago
> We shouldn't look at a school charging $400k and say "well you'll make more than that so it's a good deal." We should look at what you're actually getting. A cinder block dorm, mass-produced assembly line food, a professor making $80k a year telling you to write a paper on a book that's in the public domain. None of that is worth $400k. If passing this exercise in docility gives you the mentioned 2 million USD over life: why not?
bandrami 3y ago
> None of that is worth $400k Huh? You just said it gives you $2M over your life. That's obviously worth $400K.
- pc86 3y ago
  Why just $400K why not $800K? Why not $1.6M? $1.99M? Why not just a contract that you pay the college 95% of whatever you make above the median HS graduate salary every year? I mean they're letting you keep 5% of the earnings you're only getting because of them, you should be happy with that, right? Just because $2M > $400K doesn't mean it's objectively worth that amount of money.
TeaBrain 3y ago
Neither my brother nor most of his friends at Vanderbilt were burdened by student loans. Most came from reasonable wealthy families that were able to pay the cost up front. Reasonably well-off families send their kids to Vanderbilt and other top schools because of the connections that can form and the reputation of the school. Everything else you mentioned comes second.
- pc86 3y ago
  I'm not sure what point you're trying to make here tbh. Nobody is arguing that wealthy and connected individuals in part maintain those wealth and connections by going to elite schools. Legacy admissions all but guarantee that once you're a couple generations deep you'll be able to at least maintain your family's status. The question is whether a college charging $400K for what is probably closer to $70-80K of services is right.
  - TeaBrain 3y ago
    The point is that the parents who are paying for their kids to go to these schools have already put aside the money in a 529 or other account, and if their kids get admitted, there is no question of cost to put their kids a step ahead. Given this, exclusive universities know that they can charge prices that are relatively extreme, as they don't have any financial, moral or legal obligation to not do so. The question of cost compared to earnings that you raised is immaterial for these students, as the students will bear none of the cost.

gnicholas 3y ago

You don't seem to be concerned at all by the ballooning student loan debt. Also, it's not clear that the wage premium from attending college has to do with what is learned in college. Some scholars believe that it is largely a signaling device. Others believe that it is used as a proxy for general intelligence tests, which companies try to avoid using when hiring employees (due to a SCOTUS case from several decades ago, dealing with disparate racial impact). It may be true that the wage premium has outweighed the cost of attendance in the recent past, but this could easily change as tuition continues rising, and critically as interest rates are much higher than in recent years. The discount rate to which future earnings are subject is much larger than in the past 30 years, which means that the required wage premium has to be much larger than if the interest/discount rate were closer to zero. Basically, ZIRP was a boon for colleges, not just startups.

bandrami 3y ago
> You don't seem to be concerned at all by the ballooning student loan debt. I'm not, no. As long as the income premium exceeds the debt it doesn't really matter what the numbers involved are. > but this could easily change as tuition continues rising I mean, yes, if things were different they might be worse than they are. That's true of anything.
- gnicholas 3y ago
  > if things were different they might be worse than they are. That's true of anything. Sorry for being too subtle. What I was pointing out is that the higher interest rates we are currently seeing, in combination with the ever-rising cost, could mean we're at (or even past) the tipping point now. This won't be apparent to many people until 10-15 years after the tipping point is reached, when people realize that the premium they thought they were getting is outweighed by their loan payments. But this is just the tail of the dog. The main point is that college is largely about signaling, which means that much of the value is in the acceptance letter, not the diploma. Why pay $400,000 to get the diploma if this is the case?