Live data from Hacker News

How America's universities became debt factories

anandsanwal.me

131–140 of 564 posts

Re: How America's universities became debt factories

#131
The problem here is the time value of money. If the world is based on a production function of compound interest then in a world of finite resources what becomes cheaper over time are cell phones and what becomes more expensive are people's time, because the per unit cost of clean water and housing goes up and technology makes virtualizable goods cheaper.

This also has the added benefit of screwing with the Gini coefficient as returns to capital are always compounded where worker productivity at best goes up linearly.

So people mortgage their future in a bad Nash equilibrium in a competition to increase their productivity at a slightly faster linear rate than other workers, by taking money from financiers. The same financiers that see an exponential return and are incentivized to shrink labor costs to keep maximizing compound returns. So students are stuck in a system in which they're borrowing from their ideological competition.

It's not that universities are inherently evil or administrators are bad. It's a natural extension of how returns to investment work.

Now I'm not a Marxist, but that's the way the math works. The only solution I can see is a social system in which the wealthy form investment vehicles that run as cooperatives owned by the workers and flatten the Gini coefficient as much as possible. If students bought shares in a university that they then owned for life similar to bonds, then the university system itself would self correct.

Say you go to graduate school or had tenure - then you would have a higher share of bonds. You would no longer be paid in a linear way, but a compound one. If the returns didn't align with expected earnings the university would fail. Linear payments are essentially just an admittance of failure to believe that inflation won't destroy someone's earning potential unless they're able to become a shareholder faster than someone else. Which causes intergenerational disequilibria as we've seen where the old are incredibly wealthy and the young are too poor to start families.

Unless economics is willing to confront the social problem of compound interest in a finite world accelerationist capitalism will end up destroying society.

No, the solution is not to burn down academia. Ask the Cambodians how killing everyone with glasses worked out for them.

Re: How America's universities became debt factories

#132

1) Move most good careers that do not require a college degree out of the country for the benefit of shareholders 2) Tell everyone born between 1980 and 1995 that they'll be unable to compete in the global marketplace if they don't get at least some post-high school education, and imply that the mere presence of a degree will help instead of having a specific type of degree 3) Have next-to-zero standards for public f…

I would also add 5) Don't educate young people on what their degree would earn them. So many young people think their hobby can become their career and pay for a nice life style. Unfortunately, it's not the case for many majors.

Which is bad too because if you turn your hobby into your career, you end up not having a hobby anymore. In order to have a happy life, you have to have a vocation and an avocation that are separate from each other.

Re: How America's universities became debt factories

#133
post #62

As with other industries, there is a steady increase in demand but not enough supply. Make it easier for accredited universities to be setup and let the free market forces drive the cost of an undergraduate degree down.

I actually think we should be decreasing demand rather than increasing supply. Not every job needs a college degree, and allowing more people to avoid college altogether would naturally drive prices down from the demand side. The hard part is that I don't know how to make employers accept non-degreed applicants, outside of having Peter Thiel shout at them to do so.

I agree. At least in my country degrees are commonly used to filter applicants for jobs that could easily be done by someone with way lower level of education. That's not a healthy system. A degree should teach you skills that you need and can actually utilize in the work you will do.

Re: How America's universities became debt factories

#134

I don't know if this is some kind of heresy, but here we go. I don't think universities provide much value at all to the common student who is not going to be a PhD. I went to a very well-known institution known for putting the students in a room with the professors, maybe two or three students, to one professor. My economics professor taught me one on one. I still think, in the end, the work is mostly done alone, in…

Except for medical students, who require a teaching hospital and all its equipment.for their education Except for EE and other engineering students, who require lab and other equipment for their education Except for chemistry, biology, and other science students, who require chemistry equipment, etc. for their education. You get the idea. Even for fields that require no specialized facilities, frankly, I don't see an…

Most received the Fields Medal or Turing Award are not "the common student who is not going to be a PhD" so you and GP agree on the importance of universities in that regard. In general I read what they say as solely relating to what I'd categorize as "undergrad or non-specialized track students".

I agree with you there is a lot universities have to offer students though. Your examples of equipment are a great highlight. On the other hand I think when you weight the ever growing cost of attendance with the amount of unique values provided it has been shrinking quite a bit, in favor of the "not providing much value" side. This is especially true for the relative lack of unique values brought for the vast majority of students during the first ~2 years of general education. It's difficult or impossible to get many of these organizations to let you just jump in at that point though.

Overall I think, for many at least, the biggest value is an environment which helps guide them to doing the self learning. Many (most?) can't just sit down to write and then follow their own multi year study plan and end up with something comparable to what they'd get out of going to a university, even if they end up spending the majority of their time there self learning. GP may well not be part of that group but I'm not sure their conclusions apply to those who are.

Re: How America's universities became debt factories

#135
post #45

It's bizarre to me how accepting we are of the idea that higher education should cost anything let alone be mind-bogglingly expensive. This is wildly successful propaganda. Student loan debt was an explicit political goal [1]: > "We are in danger of producing an educated proletariat," announced Reagan advisor Roger A. Freeman during a press conference on Oct. 29, 1970. Freeman, an economics professor at Stanford, was…

Harvard's endowment is $50 billion, and its expenses in 2023 were $6.25 billion [1]. To fund that, the endowment will need 12.5% annual interest, which is impossible. Tuition revenue is not remotely suitable enough for Harvard's operational expenses.

Again, people don't understand how endowments work. When endows a specific program at Harvard, their money must be used for that program alone. The funds can't be sent to the general pool for the entire university.

There are many ways to criticize wealthy educational institutions, but calling them "hedge funds" makes no sense. Which hedge fund subsidizes their clients' expenses with donations?

1- https://projects.propublica.org/nonprofits/organizations/421...

Re: How America's universities became debt factories

#136

> Make student loans dischargeable in bankruptcy again. I would like to see the author back this up with more considerations. Bankruptcy disappears from all credit reports after seven years. The average age of first time home buyers is 35. So if a new grad’s credit is trashed from the age of 23-30, it makes no difference to them - they are not planning on using credit for anything substantial anyways. What is going t…

I would rather see us switch to an income based repayment schedule with discharge at 30 years, seems fair to the student and society.

Re: How America's universities became debt factories

#137
post #6

We 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

> I love a good market as much as anyone but there really are problems markets will never solve

The problem with student loans is that they are not driven by markets. If they were, absolutely nobody would give a loan to an 18 yo to spend 4 years and $160k to study psychology.

Re: How America's universities became debt factories

#138

1) Move most good careers that do not require a college degree out of the country for the benefit of shareholders 2) Tell everyone born between 1980 and 1995 that they'll be unable to compete in the global marketplace if they don't get at least some post-high school education, and imply that the mere presence of a degree will help instead of having a specific type of degree 3) Have next-to-zero standards for public f…

I mean for fucks sake we were pushing 18 year old teenagers into tens of thousands of dollars of debt! I dunno about most people but at 18 I had absolutely no clue about anything, especially the concept of money nor career. How the fuck does an 18 year old comprehend why taking $60,000 to get a degree in “Latin Dance” is not a good idea (and we all know many people who fall into this bucket too!). And yet parents, co…

You are being downvoted but that was exactly my experience. It wasnt hyperbole. I was told my entire time in k-12 you need to get a college degree by everybody. Parents, teachers, counselors. Additionally they said, with no exaggeration, to get any degree, at any school, and take out as many loans as you need. So yes an entire generation of kids were told the $60,000 in debt for a latin dance degree at a no-name school was better than no degree at all.

Re: How America's universities became debt factories

#139
post #110

1) Move most good careers that do not require a college degree out of the country for the benefit of shareholders 2) Tell everyone born between 1980 and 1995 that they'll be unable to compete in the global marketplace if they don't get at least some post-high school education, and imply that the mere presence of a degree will help instead of having a specific type of degree 3) Have next-to-zero standards for public f…

You forgot the most important part. The people agreeing to these debts, by definition , do not have an education in complex debt instruments that cannot be discharged. Taking our a vast loan to study English literature might seem unwise, but it’s something I could definitely see a starry eyed 17 year old deciding to do.

I took out around $20k in loans to study literature starting in 2001. Graduated in 2005. Rent was $150 a month. Played a lot of poker and disc golf. Studied and learned a bit. Had a 75% scholarship to help with tuition. Had a $300/semester book stipend as part of that and just bought penny books off Amazon (one of the benefits of an English degree) and pocketed the difference.

Basically for 5-8% or so of my (estimated) lifetime I was completely free to goof around. Great value for someone who dislikes working.

Consolidated the loans after I graduated at 1.5% interest. Finished paying them off in 2021 with the Biden Bucks.

Pretty sure that kind of deal doesn’t exist anymore.

Re: How America's universities became debt factories

#140
post #13

Seems 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…

Also people get their first loan when they’ve just been legally considered adults. Nobody knows for sure they’ll be able to start paying these back in five years.

You buy a car so you can work and eat. These are very straightforward causes and effects. No car no job. Buy car that costs << than job. Done. Buy an education and you get more bills, not more income, for years. You might not even finish.

Post reply on HN