Human capital contracts are another partial solution that flips the incentives: instead of using loans to pay tuition up front, institutions are paid a % of your income for a fixed period of time, after which any remaining amount is forgiven. Typically this only applies to income over a base amount (such as 10% of income above a 40,000 base). Naturally this works great in fields with strong employment outcomes and terribly everywhere else.
How America's universities became debt factories
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Re: How America's universities became debt factories
#22John Oliver discusses how so many people have come to take on student loan debt, why it’s so hard to pay off, and what we can do about it [1].
Re: How America's universities became debt factories
#23We should be way more willing to straight up kill multi-billion dollar industries. Without that willingness, most modern problems are impossible for governments to solve, and such industries and even their potential competitors are incentivised mostly to exacerbate the problem. I love a good market as much as anyone but there really are problems markets will never solve
Multi-billion dollar industries represent jobs, stocks, and campaign contributions. The US government is not designed to beat those forces. It's the same reason we'll never see universal healthcare unfortunately.
Re: How America's universities became debt factories
#24- the government should not be guaranteeing these loans
- they should be dischargeable in bankruptcy
That’s it.
Re: How America's universities became debt factories
#25Meanwhile, I know of German and Dutch peers of mine who upon completing their masters in Europe, enrolled in California to do a second Masters ( at the time I believe they paid in the range of $100k) for the VISA and internship opportunities. And IIRC, the bet paid off because they all found employment in California, with salaries 3x to 4x what they could get here.
Re: How America's universities became debt factories
#26We should be way more willing to straight up kill multi-billion dollar industries. Without that willingness, most modern problems are impossible for governments to solve, and such industries and even their potential competitors are incentivised mostly to exacerbate the problem. I love a good market as much as anyone but there really are problems markets will never solve
We shouldn't see the government as solution to too many problems. If we overdo on it, we get socialism. And we know how it always ends.
Let the market forces decide. Eventually people will realise college doesn't work and will stop going there. Seriously problem is that too many people think they are smart and can benefit from a degree, when most can't. If 10% top graders go to college from school as it was in the boomers' era, ROI of higher education will be enormous (as there won't be an oversupply of useless graduates), and costs will be low (as low demand always reduces prices).
We shouldn't punish people who take the money because people are willing to pay it. Who's fault it is that they are dumb? Do we see much say, annoying advertisement to the tune of "go study X with us, you'll be rich and women will love you"? No. People are doing it because they are dumb. If we try to build a system that prevents smart people from taking money put on the table by dumb people, we will make the whole system dumber by incentivising dumbness.
Re: How America's universities became debt factories
#27All other unsecured debt disappears after what seven years but this university debt is somehow guaranteed?? That’s why this happened.
Re: How America's universities became debt factories
#28Seems like a good overview, but I do find this bit unclear: "But why don’t market forces correct these issues? The answer lies in the unique shield that non-dischargeable student loans provide to educational institutions and lenders. In a normal market, if a product consistently fails to deliver value, consumers stop buying it. Producers either improve or go out of business. But in the world of higher education, this…
I don't know about nationally but my local universities are having year over year enrollment decreases. I think there are some market forces in play, but they aren't reducing tuition, just making the universities ask for more state or local tax money.
Re: How America's universities became debt factories
#29It is genuinely insane that US Colleges are basically holdings companies at this point. They priority is investments. It seems hostile to the goal of students
Re: How America's universities became debt factories
#30It's somewhat besides the point of the piece and might be unfair, but I can't help to feel an immediate sense of distrust for any piece of writing that uses AI images.
Anyways, tying lending terms to the value of the degree sounds like a horrible idea, because how do you even determine that?
Seems to me the big issue is A) that the loans are managed b private companies with ridiculous terms and that even public state universities can basically behave like private companies by increasing prices this much.
Why can't the government not just radioactive prices for their own universities