12 ms·

Wow. That's neat. I once had a conversation with a state legislator where he argued it wasn't the responsibility of government to provide grant and loan opport

by alttag 14y ago

Wow. That's neat. I once had a conversation with a state legislator where he argued it wasn't the responsibility of government to provide grant and loan opportunities for higher education, and that by doing so, the federal government was disincentivizing saving and investing. Instead, he argued universities should be more market driven (which I will concede might introduce more price competition in the face of rapidly rising tuition rates). He was a firm believer that a university education should be something one works and sacrifices for. In my elected position with public education at the time, I disagreed (and still disagree) with some of his claims, believing a subsidized higher education experience for a expanded pool of people is a long-term net gain compared to crime/prison costs and the cost of government-funded social safety net programs. (Although, again, college-student families admittedly qualify for most government assistance programs already, but this is hopefully a short-term rather than lifetime dependence.) I'd love to see the long-term effects on the quality of life, debt, and employment prospects of these students.

quesera 14y ago
I respect your position, and agree with parts of it. But I am bothered by the vast amounts of grant and loan money that get absorbed directly by colleges, raising the cost for everyone and creating a positive feedback loop that requires endlessly more taxes and debt to sustain. I feel we've been sold a bill of goods ("opportunity through higher ed -- don't let your kids fall behind in the new global economy, etc etc") that is way past the point of rationality.
- chii 14y ago
  I think its a balancing act - but i guess grants is worse than loans. Granting "free" money will indeed cause problems, but a loan that is required to be repaid seems like the right way to go in the long term, provided that after the higher education is completed the individual in question is able to actually provide value.
  - luu 14y ago
    This has it exactly backwards. Consider this simple (and very simplified) example. The NPV of college is $100k. The marginal student can scrape together $10k to go to college. The marginal cost of a student is less than $10k for the college. How much will the college charge? $10k. What's the benefit to the student? $90k. What if an $89.9k subsidized grant is available? Now the college can charge $99.9k. What's the benefit to the student? Still $90k. Now lets say an $89.9k loan is made available. The college can still charge $99.9k. What's the benefit to the student? $.1k. This is actually happening (though it isn't quite so extreme). The existence of loans is allowing colleges to capture more of the value of college from student. The real world is actually worse than this simplified example in a lot of ways. Many degrees aren't worth it (from a purely monetary perspective), and the result is probabilistic, but student loans can't be discharged in bankruptcy, and payment is up front (w.r.t. a person's career), so the student takes on the risk, but the college gets the reward regardless.
    - droithomme 14y ago
      Also, considering all college students nationally, a minority of student loan recipients manage to graduate from college. Yet they are required to pay back the loans whether or not they graduated. Let's assume your value is correct, the NPV per graduate is $100k. Let's take a 50% graduation rate nationally for students admitted. Let's consider the college charges $99.9k over 4 years. We also know that students are taking 4-6 years to graduate and 4 year graduations are rare. If your chance of graduating in 4-6 years is 50%, it becomes not a $.1k average pay out, but on average, weighted for actual outcomes, an overall loss.
    - chii 14y ago
      lets assume the cost of educating a student is going to cost X. The colledge is going to get some percentage of X as profit, no matter what policy the gov't decides. Now, the question is, what party _should_ be covering for the cost X? In the grant scenario, it is society/tax payers who cover the cost of education. In the load scenario, it is the individual being educated that is covering the cost, deferred to the future. Either way, it is not the case that the college recieves less profit for the service of educating. To me, incentive alignment is critical to the success of a policy, and i feel that a loan tends to incentivize those who works ultra hard to make it, whilst a grant will not. Now, i m not saying all grants are bad, but grants should be based on academic results, as a reward incentive, where as loans should be made available to all who wants an education.
- 001sky 14y ago
  Earning enough to pay for 2 kids is almost getting impossible for the middle classes. Whatever you have saved will get "swept" by college when corrected for financial aid. Financial aid levels, in that context turns into an odd-kinda-wierd thing. A hybrid of forced donation to a charity and a stealth tax.
mhb 14y ago
The ready supply of student loans is the cause of the rapid rise in tuition. http://www.thedailybeast.com/articles/2012/09/10/the-cost-of-college.html http://www.thedailybeast.com/articles/2012/09/10/the-cost-of...
AJ007 14y ago
http://www.finaid.org/savings/tuition-inflation.phtml http://www.finaid.org/savings/tuition-inflation.phtml (those graphs don't really do it justice, but if you know your math you know what a difference being several point ahead of inflation for decades does to the difference in price.) Its a shame that an entire generation of educated Americans are being enslaved by an unparallelled level of debt so early in their lives. The NYTimes has had many articles that give a good idea of how deep the problem is: http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?pagewanted=all http://www.nytimes.com/2012/09/01/business/shedding-student-... http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?pagewanted=all http://www.nytimes.com/2012/09/09/business/once-a-student-no... I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap. There will be some ugly financial realities along the way. Private, public, not for profit, and for profit schools will go belly up along the way. Educators who teach things that can be taught online better will find themselves with no job market. Students whose defaulted $70k loan balloons to $200k because of non-payment will be at a tremendous financial disadvantage over the next generation of students with no debt. Kalamazoo makes for a warm feeling story. Reality is a lot more sinister. It is giving free weapons to one small group in an arms race. In this case, everyone else is getting killed with debt.
- rayiner 14y ago
  > I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap. You're presupposing that tuition has anything to do with the cost of providing education, and that tuition will go down if the costs go down. It doesn't. Skyrocketing tuition is the product of schools being non-fungible prestige goods. It's how the price of Prada handbags doesn't have anything to do with their manufacturing cost. College in the US isn't about education. It's about signaling. And the price of desirable signals, like Stanford or U Michigan, isn't going to go down based on competition from cheaper online educational institutions.
natrius 14y ago
"a subsidized higher education experience for a expanded pool of people is a long-term net gain" I agree with this. Some of the benefits of an individual's education accrue to society at large. However, the vast majority of the benefits of an individual's education accrue to the individual. Why not split the funding in a similar way? If the benefits aren't worth the cost to the individual, that's a good signal that the benefits may not be worth the cost for society to subsidize.
Vivtek 14y ago
More market-driven? It's only since people started arguing that colleges should be run like businesses that tuition has exploded. There are things that shouldn't be market-driven. Look at Germany for an example - no vouchers needed to go to college there because the government simply pays for everybody (even foreigners). And the economy is doing fine.
- cobrausn 14y ago
  Germany is a wonderful cherry-picked example, but it is hardly the only country in Europe to pay for higher education - many of the others aren't in such great financial shape. http://www.time.com/time/world/article/0,8599,1976724,00.html http://www.time.com/time/world/article/0,8599,1976724,00.htm... I would love to see higher education made accessible to everyone with the ability to do so, and would love to see college cost a lot less, even if it is too late for me (6 figures of student loan debt). But just saying 'the government should pay for it look at Germany' is a far too simplistic outlook, especially in the face of crippling yearly deficits that aren't showing any signs of going away under either party's 'leadership'.
  - eli_gottlieb 14y ago
    So what about Canada? France? Israel? Japan?
    - Vivtek 14y ago
      More cherry-picked examples! BELIEVE! Apparently, since there is only one dimension in this particular argument, cobrausn believes there is only one factor in economic results. Today, anyway.
JPKab 14y ago
As a guy who grew up in an impoverished, rural family and received Pell grants and federal loans for my college costs, can someone explain to me why articles like this talk about students not being able to go to college without the donation? Has something changed since 1999 when I, with zero money or savings in my family, was able to go to college on government loans/grants based on the fact that I got in due to good grades/etc? (IF SOMETHING HAS CHANGED, AND POOR KIDS WITH GOOD GRADES ARE UNABLE TO GET FEDERAL LOANS AND GRANTS, THEN I AM GOING TO DO WHATEVER I, AS AN AVERAGE MIDDLE CLASS CITIZEN, CAN DO TO FIX THIS.) I realize that we've had an economic collapse, and I think this is a fantastic program, but statements like those in the article distract from the fact that poor areas of this nation fail not because students can't AFFORD college, but because they can't GET IN, due to substandard educations and (to some degree) bad parenting. Regarding my comment on bad parenting, before people crucify me for blaming the victim, I assure you that a lot of poor, uneducated parents actively interfere (knowingly or not) with their children's educational chances. They do this mainly through ignorance (leaving TV on at night in child's room, never reading to them when they are young, not helping with homework, putting children to bed too late, etc.) I've watched this happen with most of my friend's growing up.
- SatvikBeri 14y ago
  Ramit Sethi argues that the belief that you can't go to college due to a lack of money is largely misplaced, at least in the USA. I'm sure there are edge cases where it really is impossible to get funding, but I know several people who went to very expensive schools and got it nearly all paid through various scholarships. NB: most of these scholarships were not granted by the college itself, but by an outside agency, whereas most people I know seem to only apply for scholarships through the college. 1: http://www.iwillteachyoutoberich.com/blog/college-at-stanford-is-now-effectively-free-so-whats-your-excuse/ http://www.iwillteachyoutoberich.com/blog/college-at-stanfor... 2: http://www.iwillteachyoutoberich.com/blog/some-people-think-theres-only-a-limited-amount-of-money/ http://www.iwillteachyoutoberich.com/blog/some-people-think-...
  - noahc 14y ago
    I wish someone would have told me about all this starting my freshman year of high school. Being from a poor rural family, I had no idea that these opportunities existed and the first thing I looked at was price of school over anything else. So, I only applied to one school which to be honest seemed unreasonably expensive at the time. I think a huge part of the problem is not so much the resources, but the mentality that surrounds the poor. Having grown up poor, I was focused on being cheap, not on value. Of course, no one every said, "Hey, with your 3.3 GPA maybe you should apply somewhere else". I also only took the ACT once after having been away at summer camp and only getting 3-4 hours of sleep each night for the past week, and no idea until later that people retook it. The other aspect, is that in small rural towns it has been my experience, that the guidance counselors who do the college admissions have no idea what to do with a student who doesn't want to go to the traditional schools, which in my case were the 3 nearest community colleges, the University of Nebraska, University of Iowa, or Iowa State. Ramit, would tell you that just because the information is out there, that isn't enough. In regard to this, it is absolutely true.

by alttag 14y ago

quesera 14y ago

I respect your position, and agree with parts of it. But I am bothered by the vast amounts of grant and loan money that get absorbed directly by colleges, raising the cost for everyone and creating a positive feedback loop that requires endlessly more taxes and debt to sustain. I feel we've been sold a bill of goods ("opportunity through higher ed -- don't let your kids fall behind in the new global economy, etc etc") that is way past the point of rationality.

chii 14y ago
I think its a balancing act - but i guess grants is worse than loans. Granting "free" money will indeed cause problems, but a loan that is required to be repaid seems like the right way to go in the long term, provided that after the higher education is completed the individual in question is able to actually provide value.
- luu 14y ago
  This has it exactly backwards. Consider this simple (and very simplified) example. The NPV of college is $100k. The marginal student can scrape together $10k to go to college. The marginal cost of a student is less than $10k for the college. How much will the college charge? $10k. What's the benefit to the student? $90k. What if an $89.9k subsidized grant is available? Now the college can charge $99.9k. What's the benefit to the student? Still $90k. Now lets say an $89.9k loan is made available. The college can still charge $99.9k. What's the benefit to the student? $.1k. This is actually happening (though it isn't quite so extreme). The existence of loans is allowing colleges to capture more of the value of college from student. The real world is actually worse than this simplified example in a lot of ways. Many degrees aren't worth it (from a purely monetary perspective), and the result is probabilistic, but student loans can't be discharged in bankruptcy, and payment is up front (w.r.t. a person's career), so the student takes on the risk, but the college gets the reward regardless.
  - droithomme 14y ago
    Also, considering all college students nationally, a minority of student loan recipients manage to graduate from college. Yet they are required to pay back the loans whether or not they graduated. Let's assume your value is correct, the NPV per graduate is $100k. Let's take a 50% graduation rate nationally for students admitted. Let's consider the college charges $99.9k over 4 years. We also know that students are taking 4-6 years to graduate and 4 year graduations are rare. If your chance of graduating in 4-6 years is 50%, it becomes not a $.1k average pay out, but on average, weighted for actual outcomes, an overall loss.
  - chii 14y ago
    lets assume the cost of educating a student is going to cost X. The colledge is going to get some percentage of X as profit, no matter what policy the gov't decides. Now, the question is, what party _should_ be covering for the cost X? In the grant scenario, it is society/tax payers who cover the cost of education. In the load scenario, it is the individual being educated that is covering the cost, deferred to the future. Either way, it is not the case that the college recieves less profit for the service of educating. To me, incentive alignment is critical to the success of a policy, and i feel that a loan tends to incentivize those who works ultra hard to make it, whilst a grant will not. Now, i m not saying all grants are bad, but grants should be based on academic results, as a reward incentive, where as loans should be made available to all who wants an education.
001sky 14y ago
Earning enough to pay for 2 kids is almost getting impossible for the middle classes. Whatever you have saved will get "swept" by college when corrected for financial aid. Financial aid levels, in that context turns into an odd-kinda-wierd thing. A hybrid of forced donation to a charity and a stealth tax.

mhb 14y ago

The ready supply of student loans is the cause of the rapid rise in tuition. http://www.thedailybeast.com/articles/2012/09/10/the-cost-of-college.html http://www.thedailybeast.com/articles/2012/09/10/the-cost-of...

AJ007 14y ago

http://www.finaid.org/savings/tuition-inflation.phtml http://www.finaid.org/savings/tuition-inflation.phtml (those graphs don't really do it justice, but if you know your math you know what a difference being several point ahead of inflation for decades does to the difference in price.) Its a shame that an entire generation of educated Americans are being enslaved by an unparallelled level of debt so early in their lives. The NYTimes has had many articles that give a good idea of how deep the problem is: http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?pagewanted=all http://www.nytimes.com/2012/09/01/business/shedding-student-... http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?pagewanted=all http://www.nytimes.com/2012/09/09/business/once-a-student-no... I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap. There will be some ugly financial realities along the way. Private, public, not for profit, and for profit schools will go belly up along the way. Educators who teach things that can be taught online better will find themselves with no job market. Students whose defaulted $70k loan balloons to $200k because of non-payment will be at a tremendous financial disadvantage over the next generation of students with no debt. Kalamazoo makes for a warm feeling story. Reality is a lot more sinister. It is giving free weapons to one small group in an arms race. In this case, everyone else is getting killed with debt.

rayiner 14y ago
> I'm an optimist. The problem will fix itself thanks to technology. Education in the future is going to be nearly free. I think it is going to happen a lot sooner than people realize. Runaway education inflation will make even the "expensive" solutions look dirt cheap. You're presupposing that tuition has anything to do with the cost of providing education, and that tuition will go down if the costs go down. It doesn't. Skyrocketing tuition is the product of schools being non-fungible prestige goods. It's how the price of Prada handbags doesn't have anything to do with their manufacturing cost. College in the US isn't about education. It's about signaling. And the price of desirable signals, like Stanford or U Michigan, isn't going to go down based on competition from cheaper online educational institutions.

natrius 14y ago

"a subsidized higher education experience for a expanded pool of people is a long-term net gain" I agree with this. Some of the benefits of an individual's education accrue to society at large. However, the vast majority of the benefits of an individual's education accrue to the individual. Why not split the funding in a similar way? If the benefits aren't worth the cost to the individual, that's a good signal that the benefits may not be worth the cost for society to subsidize.

Vivtek 14y ago

More market-driven? It's only since people started arguing that colleges should be run like businesses that tuition has exploded. There are things that shouldn't be market-driven. Look at Germany for an example - no vouchers needed to go to college there because the government simply pays for everybody (even foreigners). And the economy is doing fine.

cobrausn 14y ago
Germany is a wonderful cherry-picked example, but it is hardly the only country in Europe to pay for higher education - many of the others aren't in such great financial shape. http://www.time.com/time/world/article/0,8599,1976724,00.html http://www.time.com/time/world/article/0,8599,1976724,00.htm... I would love to see higher education made accessible to everyone with the ability to do so, and would love to see college cost a lot less, even if it is too late for me (6 figures of student loan debt). But just saying 'the government should pay for it look at Germany' is a far too simplistic outlook, especially in the face of crippling yearly deficits that aren't showing any signs of going away under either party's 'leadership'.
- eli_gottlieb 14y ago
  So what about Canada? France? Israel? Japan?
  - Vivtek 14y ago
    More cherry-picked examples! BELIEVE! Apparently, since there is only one dimension in this particular argument, cobrausn believes there is only one factor in economic results. Today, anyway.

JPKab 14y ago

As a guy who grew up in an impoverished, rural family and received Pell grants and federal loans for my college costs, can someone explain to me why articles like this talk about students not being able to go to college without the donation? Has something changed since 1999 when I, with zero money or savings in my family, was able to go to college on government loans/grants based on the fact that I got in due to good grades/etc? (IF SOMETHING HAS CHANGED, AND POOR KIDS WITH GOOD GRADES ARE UNABLE TO GET FEDERAL LOANS AND GRANTS, THEN I AM GOING TO DO WHATEVER I, AS AN AVERAGE MIDDLE CLASS CITIZEN, CAN DO TO FIX THIS.) I realize that we've had an economic collapse, and I think this is a fantastic program, but statements like those in the article distract from the fact that poor areas of this nation fail not because students can't AFFORD college, but because they can't GET IN, due to substandard educations and (to some degree) bad parenting. Regarding my comment on bad parenting, before people crucify me for blaming the victim, I assure you that a lot of poor, uneducated parents actively interfere (knowingly or not) with their children's educational chances. They do this mainly through ignorance (leaving TV on at night in child's room, never reading to them when they are young, not helping with homework, putting children to bed too late, etc.) I've watched this happen with most of my friend's growing up.

SatvikBeri 14y ago
Ramit Sethi argues that the belief that you can't go to college due to a lack of money is largely misplaced, at least in the USA. I'm sure there are edge cases where it really is impossible to get funding, but I know several people who went to very expensive schools and got it nearly all paid through various scholarships. NB: most of these scholarships were not granted by the college itself, but by an outside agency, whereas most people I know seem to only apply for scholarships through the college. 1: http://www.iwillteachyoutoberich.com/blog/college-at-stanford-is-now-effectively-free-so-whats-your-excuse/ http://www.iwillteachyoutoberich.com/blog/college-at-stanfor... 2: http://www.iwillteachyoutoberich.com/blog/some-people-think-theres-only-a-limited-amount-of-money/ http://www.iwillteachyoutoberich.com/blog/some-people-think-...
- noahc 14y ago
  I wish someone would have told me about all this starting my freshman year of high school. Being from a poor rural family, I had no idea that these opportunities existed and the first thing I looked at was price of school over anything else. So, I only applied to one school which to be honest seemed unreasonably expensive at the time. I think a huge part of the problem is not so much the resources, but the mentality that surrounds the poor. Having grown up poor, I was focused on being cheap, not on value. Of course, no one every said, "Hey, with your 3.3 GPA maybe you should apply somewhere else". I also only took the ACT once after having been away at summer camp and only getting 3-4 hours of sleep each night for the past week, and no idea until later that people retook it. The other aspect, is that in small rural towns it has been my experience, that the guidance counselors who do the college admissions have no idea what to do with a student who doesn't want to go to the traditional schools, which in my case were the 3 nearest community colleges, the University of Nebraska, University of Iowa, or Iowa State. Ramit, would tell you that just because the information is out there, that isn't enough. In regard to this, it is absolutely true.