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Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-educatio

Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. There other contributing factors as well; for example, the rise of the ridiculous requirement to have a college degree to get anything close to a decent job these days has created tremendous demand for degrees and allowed colleges and universities to raise tuition into the stratosphere.

speeder 13y ago
Here in Brazil at least that is true. The Brazilian boomers thought us that we needed college, period. Then lack of colleges happened, thus government started giving student loans, and private companies building colleges like crazy, and the government build at a more reasonable pace Now most people.of my age have a.degree that only proves you can wipe your ass with it, because most universities here have terrible quality, considering the amount of them grew much faster than we had teachers, and people.are terribly indebted. I pay for example permonth 2 times the minimum monthly wage. And most people stay stuck earning minimum wage until they retire. And I am not a exception, the only people I met that are below 28 and don't have absurd debts are dropouts or child of someone with net worth bigger than. 5 million. EDIT: In the fields I got my degrees, every year we have more students completing their courses than the total number of employees on those fields in the country... Or the one that is so absurd to the point of hilarity: Brazil has more law schools than the rest of the world summed, last time I checked in the justice department site, 5% of our population has a bachelor degree in law... (remember Brazil has a 200 million + population)
- thifm 13y ago
  I get almost 10 minimum wages with 24 and I think that I'm underpaid(and I am...). I was making WAY MORE money working as a freelancer than working for a company here but it seems that people(and the government) only respect who is employed by a company, otherwise I will never be able to buy a car or a house with a loan. Our government sucks. College on Brazil is alright, the problem is with research culture -- horribly bad. Teachers on universities are rated by how much shit they published instead of the quality of their work. The academic field is very bad for anybody wanting to study something advanced but at least in computer science, being a undergrad is just fine. You learn the same shit that the MIT does, the problem is 1. the people of your class, 2. your teachers don't do anything interesting to inspire you.
  - speeder 13y ago
    I guess you went to some expensive university or a federal one... I am talking here about the ones that majority of the population use, UNIP, Anhembi Morumbi, Anhanguera, that sort of stuff... Also, at 10 mininum wages, you are on the top 4% of the population in income (yes, it is that bad here in Brazil).
mjn 13y ago
That's true at some universities (especially private ones), but costs don't explain the results everywhere. In the University of California system, the per-student cost of providing education has actually gone down: total university-system expenditures divided by number of students produces a number about 20-25% lower today than it was in the '70s, in real-dollar terms. Why has tuition gone up, then? The state of California has cut its per-student funding to less than half of what it used to be, which leaves a substantial gap even after the cost improvements. Here are some funding numbers I compiled, via the rough-estimate method of taking the state allocation to the system and dividing by its undergraduate enrollment: http://www.kmjn.org/misc/uc_funding.txt http://www.kmjn.org/misc/uc_funding.txt
tokenizer 13y ago
Yup. Make it impossible for people to get this kind of money, and the schools will change to meet the new realistic tuition amount. People argue that this would mean only rich people would be able to go to college, but I think colleges would rather keep the number of students up high, and not become an extremely privileged institution.
nhebb 13y ago
The other half of the story is that even back in the 80's a summer job typically couldn't cover the cost of a school year. I started school in the fall of '82. Tuition was dirt cheap compared to today, but the cost of housing, food, etc. was still high enough that very few students I knew were able to pay for college via summer jobs alone.
VLM 13y ago
"when the government got involved in the student loan business." Its more general than that. System wide. Same scenario during the same timeframe in cost of housing, cost of day care, cost of automobiles... Anything involving loaning money from a bank and possibly paying it back, or anything where the .gov hands out money to certain favored groups. "the rise of the ridiculous requirement to have a college degree to get anything close to a decent job" At least in the USA there are fewer jobs every year. So its not ridiculous so much as market forces. Also note that society wide (ignoring the very narrow IT code monkey situation solely in NY and SF, I mean country-wide) we produce more college grads than we have job openings. This is kind of an important lesson for HN startups etc. Yes is it true there is a shortage of IT folks in NY/SF. But in the rest of the country, we're rapidly moving from merely needing any bachelors degree to be a receptionist or call center script reader, to perhaps needing a STEM degree for those kind of jobs. I know experienced and productive STEM people lucky to be working in call centers. The lesson is if you intend to scale your startup outside SF/NY you need to face jobforce realities outside SF/NY. For example say you create a startup to sell to education. Don't do your marketing plan aimed at Ed degree holders (maybe a .edu discount or some kind of viral marketing via sponsorship of alumni activities or something) because most of those grads are either working in the hospitality industry as waiters / bartenders unable to get a job, or got a teaching job and burned out in a decade and are already on their next career. So most Ed degree holders are going to be unable/uninterested WRT your startup. You could aim at people actually employed in the field, which will be a pretty small subset of those educated in the field. Its tempting, if you're in silicon valley, to try to scale, based on what works in silicon valley where you live. The rest of the country that you're trying to scale into is basically a different, failing economic model. Sometimes this is important when scaling, sometimes it isn't.
- yummyfajitas 13y ago
  At least in the USA there are fewer jobs every year. False. http://research.stlouisfed.org/fred2/graph/?s[1][id]=PAYEMS http://research.stlouisfed.org/fred2/graph/?s[1][id]=PAYEMS
  - specialist 13y ago
freehunter 13y ago
I'm one of the few who paid for his college tuition out of pocket. Not in the 80's; I graduate this December. I'm not rich, I live like a pauper. I've worked multiple jobs, I've done intense internships, and with the money I've made I've paid for as many classes as I could afford each semester. It's been 7 years now since I started college, and I'll be graduating after one more semester. I just recently found a company willing to hire me full time with just the promise that I will be a graduate in the near future. If I don't graduate in December, my salary gets cut (further limiting my ability to graduate). It's not good enough that I've been working in my industry for five years; I need a degree too. I feel that people who pay their college on student loans don't really feel the full impact of how much their tuition cost them until it's far too late. People like me feel it all too well. Most of my friends have graduated and have nice jobs, taking vacations in Europe, and going to see the doctor (what I wouldn't give for health insurance...). They criticize me for not having graduated yet. But we'll see which plan pays off in the long run.
- Roboprog 13y ago
  Congratulations on your coming finish line. Hard to say if the loans would have been worth starting higher paying work a few years earlier, or not, but at least you are doing it instead of giving up!
- glesica 13y ago
  Actually the loans may very well have been a better deal for you. You have sacrificed three years of income (assuming you finish in seven years instead of four). If you would have been able to command $50,000 per year, but instead made, say, $20,000 per year, then you've left $90,000 on the table. That is your opportunity cost (as the economists say) for being debt-free. So unless your loans would have been greater than that amount, you should have just borrowed the money and finished sooner, then lived cheaply and paid down your debt.
john_roberts 13y ago
Anyone who says it is easy to get loans for higher-education from the government must have never dealt with my school's Financial Aid office, or filled out a FAFSA. It might be easy to get private loans for higher education, as they are for profit and you can't bankruptcy out of them, but I was lucky enough to not need them.
narcissus 13y ago
So just upfront, I don't know what the 'average' cost of university is in North America. Having said that, people this way tend to argue about the cost of tertiary education a lot more than in Australia, for example, so I presume (quite possibly incorrectly) that it's cheaper in Australia. With that in mind, I wanted to just point out that in Australia, all student loans are done through the government and a quick search shows that the average cost of a degree ranges between about $5000 and $10000 a year. I don't know if that supports your statement about the government being "involved in the student loan business" but I figured it may be a helpful piece of data...
- jwoah12 13y ago
  For some perspective, my degree at a public state university in the US cost about $20,000 per year. That was almost 10 years ago. There are plenty of universities in the $40-50k per year range.
  - narcissus 13y ago
    That's amazing. Another quick search shows up to about $17,000 a year in Canada and as far as I can tell the loans are part government, part private (though rates etc. are set by the government). From all of that, then, while I can't argue that "The cost of higher-education skyrocketed when the government got involved in the student loan business" (from my original parent's comment) is incorrect, I don't think it's fair to infer that one is necessarily the fault of the other. Implicitly, of the course, if the underlying problem is more related to the "tuition skyrocketed with the suddenly available capital" comment, then it just comes down to 'greedy higher education' which is its own problem I guess.
lmg643 13y ago
Great point. I wonder how long it will be before we can publicly acknowledge the foolishness of these government subsidies. Efforts to improve college affordability created skyrocketing costs. Same story with housing affordability - an epic and damaging bubble. We can acknowledge wasteful subsidies for farmers, when we see food rotting in fields instead of being exported or consumed. And yet, the presence of millions of highly indebted, unemployed or underemployed college graduates and there's nothing to see here, please move along.
skwirl 13y ago
Strongly disagree. The example used in this article is the University of Washington. The government has always been involved in every facet of the University of Washington as it is run by the government. You seem to be claiming that because the government dropped their share of covering a student's tuition from 90% to 30% and allowed them to take out a loan instead, they were suddenly willing to pay a lot more money to go to school, which is absurd. You don't give nearly enough credit to what you call "other contributing factors." What happened was an economic sea change. Years ago upon graduating high school you had options. You could go get a job in manufacturing and make good money right away and live a solid middle class life. For many, college was an unattractive option. Today, our manufacturing base has been destroyed. When you graduate high school today, what options do you have besides go to college? There are simply not enough good paying jobs that don't require a college degree to go around. Not even close. I think ultimately you are mixing up cause and effect. The government is involved in the student loan business because college education has increasingly become the only path to a middle class life. Our education policy is reactive, not proactive. When the government plows the streets of snow it tends to be snowing. It doesn't mean the government caused the snow.
- danielweber 13y ago
  Today, our manufacturing base has been destroyed. The USA manufacturers more than it ever has. However, it does so with fewer workers, just like the agricultural revolution moved us from 90% of people needing to be farmers to 2%. When you graduate high school today, what options do you have besides go to college? There are simply not enough good paying jobs that don't require a college degree to go around. Not even close. I agree with these facts, but probably not your conclusion. A lot of jobs that supposedly require college education really don't require a college education at all. However, since so many people have a college education, employers are free to use the presence of a bachelor's degree as a test for your socioeconomic status.
  - waps 13y ago
    > The USA manufacturers more than it ever has. However, it does so with fewer workers, just like the agricultural revolution moved us from 90% of people needing to be farmers to 2%. I wonder who's next, then.
michaelochurch 13y ago
Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. We have the same upper class problem we had in the same 1920s-30s but they've replaced poverty with subordinacy. They've become more wily and would rather people fall into servitude than fail completely. When capitalism broke down in 1929-33, people actually died of starvation. Now they go into high-interest credit card debt. The same is happening in higher education. The need for widespread higher education is too strong for people to just not go, but the upper class isn't going to just give it away (even if there is benefit to them of an educated society). Thus, non-dischargeable loans have replaced taxpayer-funded grants, and college is just at the point of affordability where the upper class feels comfortable with the number of people who can go to school.
tzs 13y ago
> Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. This is very commonly asserted, but no one offers data to back it. Some try to argue it on general supply and demand principles (loans increase demand, supply does not increase as fast, so price goes up), but this fails because that theory predicts prices should rise to the point where supply and demand are equal, yet in fact prices are far below that.

Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. There other contributing factors as well; for example, the rise of the ridiculous requirement to have a college degree to get anything close to a decent job these days has created tremendous demand for degrees and allowed colleges and universities to raise tuition into the stratosphere.

speeder 13y ago

Here in Brazil at least that is true. The Brazilian boomers thought us that we needed college, period. Then lack of colleges happened, thus government started giving student loans, and private companies building colleges like crazy, and the government build at a more reasonable pace Now most people.of my age have a.degree that only proves you can wipe your ass with it, because most universities here have terrible quality, considering the amount of them grew much faster than we had teachers, and people.are terribly indebted. I pay for example permonth 2 times the minimum monthly wage. And most people stay stuck earning minimum wage until they retire. And I am not a exception, the only people I met that are below 28 and don't have absurd debts are dropouts or child of someone with net worth bigger than. 5 million. EDIT: In the fields I got my degrees, every year we have more students completing their courses than the total number of employees on those fields in the country... Or the one that is so absurd to the point of hilarity: Brazil has more law schools than the rest of the world summed, last time I checked in the justice department site, 5% of our population has a bachelor degree in law... (remember Brazil has a 200 million + population)

thifm 13y ago
I get almost 10 minimum wages with 24 and I think that I'm underpaid(and I am...). I was making WAY MORE money working as a freelancer than working for a company here but it seems that people(and the government) only respect who is employed by a company, otherwise I will never be able to buy a car or a house with a loan. Our government sucks. College on Brazil is alright, the problem is with research culture -- horribly bad. Teachers on universities are rated by how much shit they published instead of the quality of their work. The academic field is very bad for anybody wanting to study something advanced but at least in computer science, being a undergrad is just fine. You learn the same shit that the MIT does, the problem is 1. the people of your class, 2. your teachers don't do anything interesting to inspire you.
- speeder 13y ago
  I guess you went to some expensive university or a federal one... I am talking here about the ones that majority of the population use, UNIP, Anhembi Morumbi, Anhanguera, that sort of stuff... Also, at 10 mininum wages, you are on the top 4% of the population in income (yes, it is that bad here in Brazil).

mjn 13y ago

That's true at some universities (especially private ones), but costs don't explain the results everywhere. In the University of California system, the per-student cost of providing education has actually gone down: total university-system expenditures divided by number of students produces a number about 20-25% lower today than it was in the '70s, in real-dollar terms. Why has tuition gone up, then? The state of California has cut its per-student funding to less than half of what it used to be, which leaves a substantial gap even after the cost improvements. Here are some funding numbers I compiled, via the rough-estimate method of taking the state allocation to the system and dividing by its undergraduate enrollment: http://www.kmjn.org/misc/uc_funding.txt http://www.kmjn.org/misc/uc_funding.txt

tokenizer 13y ago

Yup. Make it impossible for people to get this kind of money, and the schools will change to meet the new realistic tuition amount. People argue that this would mean only rich people would be able to go to college, but I think colleges would rather keep the number of students up high, and not become an extremely privileged institution.

nhebb 13y ago

The other half of the story is that even back in the 80's a summer job typically couldn't cover the cost of a school year. I started school in the fall of '82. Tuition was dirt cheap compared to today, but the cost of housing, food, etc. was still high enough that very few students I knew were able to pay for college via summer jobs alone.

VLM 13y ago

"when the government got involved in the student loan business." Its more general than that. System wide. Same scenario during the same timeframe in cost of housing, cost of day care, cost of automobiles... Anything involving loaning money from a bank and possibly paying it back, or anything where the .gov hands out money to certain favored groups. "the rise of the ridiculous requirement to have a college degree to get anything close to a decent job" At least in the USA there are fewer jobs every year. So its not ridiculous so much as market forces. Also note that society wide (ignoring the very narrow IT code monkey situation solely in NY and SF, I mean country-wide) we produce more college grads than we have job openings. This is kind of an important lesson for HN startups etc. Yes is it true there is a shortage of IT folks in NY/SF. But in the rest of the country, we're rapidly moving from merely needing any bachelors degree to be a receptionist or call center script reader, to perhaps needing a STEM degree for those kind of jobs. I know experienced and productive STEM people lucky to be working in call centers. The lesson is if you intend to scale your startup outside SF/NY you need to face jobforce realities outside SF/NY. For example say you create a startup to sell to education. Don't do your marketing plan aimed at Ed degree holders (maybe a .edu discount or some kind of viral marketing via sponsorship of alumni activities or something) because most of those grads are either working in the hospitality industry as waiters / bartenders unable to get a job, or got a teaching job and burned out in a decade and are already on their next career. So most Ed degree holders are going to be unable/uninterested WRT your startup. You could aim at people actually employed in the field, which will be a pretty small subset of those educated in the field. Its tempting, if you're in silicon valley, to try to scale, based on what works in silicon valley where you live. The rest of the country that you're trying to scale into is basically a different, failing economic model. Sometimes this is important when scaling, sometimes it isn't.

yummyfajitas 13y ago
At least in the USA there are fewer jobs every year. False. http://research.stlouisfed.org/fred2/graph/?s[1][id]=PAYEMS http://research.stlouisfed.org/fred2/graph/?s[1][id]=PAYEMS
- specialist 13y ago

freehunter 13y ago

I'm one of the few who paid for his college tuition out of pocket. Not in the 80's; I graduate this December. I'm not rich, I live like a pauper. I've worked multiple jobs, I've done intense internships, and with the money I've made I've paid for as many classes as I could afford each semester. It's been 7 years now since I started college, and I'll be graduating after one more semester. I just recently found a company willing to hire me full time with just the promise that I will be a graduate in the near future. If I don't graduate in December, my salary gets cut (further limiting my ability to graduate). It's not good enough that I've been working in my industry for five years; I need a degree too. I feel that people who pay their college on student loans don't really feel the full impact of how much their tuition cost them until it's far too late. People like me feel it all too well. Most of my friends have graduated and have nice jobs, taking vacations in Europe, and going to see the doctor (what I wouldn't give for health insurance...). They criticize me for not having graduated yet. But we'll see which plan pays off in the long run.

Roboprog 13y ago
Congratulations on your coming finish line. Hard to say if the loans would have been worth starting higher paying work a few years earlier, or not, but at least you are doing it instead of giving up!
glesica 13y ago
Actually the loans may very well have been a better deal for you. You have sacrificed three years of income (assuming you finish in seven years instead of four). If you would have been able to command $50,000 per year, but instead made, say, $20,000 per year, then you've left $90,000 on the table. That is your opportunity cost (as the economists say) for being debt-free. So unless your loans would have been greater than that amount, you should have just borrowed the money and finished sooner, then lived cheaply and paid down your debt.

john_roberts 13y ago

Anyone who says it is easy to get loans for higher-education from the government must have never dealt with my school's Financial Aid office, or filled out a FAFSA. It might be easy to get private loans for higher education, as they are for profit and you can't bankruptcy out of them, but I was lucky enough to not need them.

narcissus 13y ago

So just upfront, I don't know what the 'average' cost of university is in North America. Having said that, people this way tend to argue about the cost of tertiary education a lot more than in Australia, for example, so I presume (quite possibly incorrectly) that it's cheaper in Australia. With that in mind, I wanted to just point out that in Australia, all student loans are done through the government and a quick search shows that the average cost of a degree ranges between about $5000 and $10000 a year. I don't know if that supports your statement about the government being "involved in the student loan business" but I figured it may be a helpful piece of data...

jwoah12 13y ago
For some perspective, my degree at a public state university in the US cost about $20,000 per year. That was almost 10 years ago. There are plenty of universities in the $40-50k per year range.
- narcissus 13y ago
  That's amazing. Another quick search shows up to about $17,000 a year in Canada and as far as I can tell the loans are part government, part private (though rates etc. are set by the government). From all of that, then, while I can't argue that "The cost of higher-education skyrocketed when the government got involved in the student loan business" (from my original parent's comment) is incorrect, I don't think it's fair to infer that one is necessarily the fault of the other. Implicitly, of the course, if the underlying problem is more related to the "tuition skyrocketed with the suddenly available capital" comment, then it just comes down to 'greedy higher education' which is its own problem I guess.

lmg643 13y ago

Great point. I wonder how long it will be before we can publicly acknowledge the foolishness of these government subsidies. Efforts to improve college affordability created skyrocketing costs. Same story with housing affordability - an epic and damaging bubble. We can acknowledge wasteful subsidies for farmers, when we see food rotting in fields instead of being exported or consumed. And yet, the presence of millions of highly indebted, unemployed or underemployed college graduates and there's nothing to see here, please move along.

skwirl 13y ago

Strongly disagree. The example used in this article is the University of Washington. The government has always been involved in every facet of the University of Washington as it is run by the government. You seem to be claiming that because the government dropped their share of covering a student's tuition from 90% to 30% and allowed them to take out a loan instead, they were suddenly willing to pay a lot more money to go to school, which is absurd. You don't give nearly enough credit to what you call "other contributing factors." What happened was an economic sea change. Years ago upon graduating high school you had options. You could go get a job in manufacturing and make good money right away and live a solid middle class life. For many, college was an unattractive option. Today, our manufacturing base has been destroyed. When you graduate high school today, what options do you have besides go to college? There are simply not enough good paying jobs that don't require a college degree to go around. Not even close. I think ultimately you are mixing up cause and effect. The government is involved in the student loan business because college education has increasingly become the only path to a middle class life. Our education policy is reactive, not proactive. When the government plows the streets of snow it tends to be snowing. It doesn't mean the government caused the snow.

danielweber 13y ago
Today, our manufacturing base has been destroyed. The USA manufacturers more than it ever has. However, it does so with fewer workers, just like the agricultural revolution moved us from 90% of people needing to be farmers to 2%. When you graduate high school today, what options do you have besides go to college? There are simply not enough good paying jobs that don't require a college degree to go around. Not even close. I agree with these facts, but probably not your conclusion. A lot of jobs that supposedly require college education really don't require a college education at all. However, since so many people have a college education, employers are free to use the presence of a bachelor's degree as a test for your socioeconomic status.
- waps 13y ago
  > The USA manufacturers more than it ever has. However, it does so with fewer workers, just like the agricultural revolution moved us from 90% of people needing to be farmers to 2%. I wonder who's next, then.

michaelochurch 13y ago

Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. We have the same upper class problem we had in the same 1920s-30s but they've replaced poverty with subordinacy. They've become more wily and would rather people fall into servitude than fail completely. When capitalism broke down in 1929-33, people actually died of starvation. Now they go into high-interest credit card debt. The same is happening in higher education. The need for widespread higher education is too strong for people to just not go, but the upper class isn't going to just give it away (even if there is benefit to them of an educated society). Thus, non-dischargeable loans have replaced taxpayer-funded grants, and college is just at the point of affordability where the upper class feels comfortable with the number of people who can go to school.

tzs 13y ago

> Sort of. The cost of higher-education skyrocketed when the government got involved in the student loan business. It became easy to get loans for higher-education and then tuition skyrocketed with the suddenly available capital. This is very commonly asserted, but no one offers data to back it. Some try to argue it on general supply and demand principles (loans increase demand, supply does not increase as fast, so price goes up), but this fails because that theory predicts prices should rise to the point where supply and demand are equal, yet in fact prices are far below that.