3 ms·

The worst part of this thing is that students loans do not need to be that high because college costs should not be that high. Student loans are artificially hi

The worst part of this thing is that students loans do not need to be that high because college costs should not be that high. Student loans are artificially high because of two reasons: 1. Government subsidies 2. Increasing college costs Government subsidies are there because the government knows that a kid who goes to college will be able to give a better return on it 'public' investment, since lifetime earnings for a college educated individual are about 50-100% higher than a high school one. This will make them pay more taxes etc. The schools on the other hand are taking the subsidized college loans in the form of tuition and fees and using them not to increase educational standards, but rather, invest in extracurriculars, building etc. The government does not tie college loan financing to college performance at all, so effectively it just subsidizes the borrowing costs for school in the form of cheap college loans. (shameless plug) I wrote a blog post about this if anyone is interested to read more: https://medium.com/i-m-h-o/35d383a4fbad https://medium.com/i-m-h-o/35d383a4fbad

muzz 13y ago
1. Government profits from student loans. I.e., it does not subsidize them as a whole-- rather, it makes money off them. 2. In theory, colleges compete on cost as well as other factors. There exist private colleges and even for-profit private colleges (although the data shows us that for-profit private colleges often have the worst outcomes). It's easy to blame government for problems. Easy, but not always correct.
- ahsanhilal 13y ago
  Government subsidies towards student loans is a well known fact. Just like government subsidized the cost of borrowing for mortgages, so has it inculcated a perverse system of college financing. Evidence of this can be seen in the largest increase in student defaults since 1990 at around 9.1%. whereas car, mortgage and credit card default rates are around 1-4%. That is called adverse selection run by a government system that is incentivized to give out bad loans due to the profit it sees in the long term. Colleges, in a theoretical free market might compete on cost, but in real-life they actually are competing on providing amenities and extra curriculars, not in any way associated with how well kids are educated. College prices, inflation adjusted, have gone up by 120-130% in real terms, while median family income is stagnant. Most of the increase in Net revenues in colleges is NOT spent on paying educators since their wages and teacher/student ratios have been increasing linearly. The rise is mostly attributed to budgetary items for Other Employees, coaches adminstrators etc and large infrastructure funding.

muzz 13y ago

1. Government profits from student loans. I.e., it does not subsidize them as a whole-- rather, it makes money off them. 2. In theory, colleges compete on cost as well as other factors. There exist private colleges and even for-profit private colleges (although the data shows us that for-profit private colleges often have the worst outcomes). It's easy to blame government for problems. Easy, but not always correct.

ahsanhilal 13y ago
Government subsidies towards student loans is a well known fact. Just like government subsidized the cost of borrowing for mortgages, so has it inculcated a perverse system of college financing. Evidence of this can be seen in the largest increase in student defaults since 1990 at around 9.1%. whereas car, mortgage and credit card default rates are around 1-4%. That is called adverse selection run by a government system that is incentivized to give out bad loans due to the profit it sees in the long term. Colleges, in a theoretical free market might compete on cost, but in real-life they actually are competing on providing amenities and extra curriculars, not in any way associated with how well kids are educated. College prices, inflation adjusted, have gone up by 120-130% in real terms, while median family income is stagnant. Most of the increase in Net revenues in colleges is NOT spent on paying educators since their wages and teacher/student ratios have been increasing linearly. The rise is mostly attributed to budgetary items for Other Employees, coaches adminstrators etc and large infrastructure funding.