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The College-Cost Calamity

economist.com

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Re: The College-Cost Calamity

#21

Post by pbiggar »

HCIdivision17 wrote: post #20
pbiggar wrote: post #12

Earlier quoted context omitted.

Indentured servitude (defined by the UN to be slavery) is nothing like taking on debt to go to college. Two components of indentured servitude is that they do not permit you to leave your work until you have paid the debt, and secondly that they charge you so that you can never escape your debt. A final onerous part of real indentured servitude is that debt can be passed to your children, and many generations can be…

While I certainly don't think college debt is quite indentured servitude (you certainly can leave work while still in debt), it's worth noting that US bankruptcy laws are specifically not generous with student loan debt. It's very rare to have it forgiven. Worse, if the loans have a cosigner, the debt can continue to harass them, and they'll typically be a family member. Of course, it's not going to follow for genera…

To say that it's the same is to say that any debt is indentured servitude.

Prisons making you borrow money would be indentured servitude. College loans is taking a loan.

There could be a case made for credit cards being indentured servitude, due to their unreasonably high interest rate and the fact that they entrap you by just issuing them. Far more so than college loans.

Re: The College-Cost Calamity

#22

Post by meric »

taligent wrote: post #11

I would be curious to know the costs and implications for adopting an Australian solution. Here in Australia everyone can go to college and what happens is that the tax office keeps track of the money you owe and then as you start earning money they pay the loan back through a tax increase. You also get a discount if you have the loan back quicker. It's all seamless and you can also add books/computer to the loan as…

We probably want to mention that there is a limit to how much we can borrow.

"The 2012 limits (indexed annually) are $89 706 for most courses and $112 134 for students undertaking a medicine, dentistry or veterinary science course" http://www.deewr.gov.au/HigherEducation/Programs/StudentSupp...

..which is hardly enough for many degrees in many universities in the US, where it can cost over $40k a year.

Of course, this is Australia and even if a student didn't make it to HECS-HELP where the government subsidies around two thirds of the cost of a degree, or for international students where government funding and lending isn't available, a degree can't cost more than $25k a year.

Re: The College-Cost Calamity

#23

Post by [deleted] »

dfc wrote: post #13
stevencorona wrote: post #9

The craziest part, IMO, is that I had to make a decision whether or not to take on $175,000 in debt (I went to RIT, it costs $44,000 per year) when I was 18 years old and had never handled more than $300. Sure! Sign me up! I couldn't even imagine what that much money would look like, let alone feel like to pay back- at that time, it was as equally mysterious as $10,000 or $1,000,000. Luckily, I left after my 2nd year…

Why did two years cost $50k but four years costs $175k? (2/4 != 50/175) As far as the $300 goes I take it you never worked in high school?

[deleted]

Re: The College-Cost Calamity

#24

Post by _delirium »

One thing missing in this analysis is the contribution of more stingy state funding to the decrease in affordability of public universities. For example, the University of California is actually cheaper per-student now to operate than it was in 1990, by about 25%: if you take the total budget, divide by total students, and adjust both numbers for inflation, the result now considerably lower. And that increased overall efficiency comes even despite an increase in administrators.

So if the per-student budget is lower, why are per-student fees much higher, rather than 25% lower? Well, the state portion of the funding has declined even faster: from $16,500 per student to somewhere in the $8-9k range in the upcoming budget (inflation-adjusted). So tuition has gone up to compensate.

The situation differs at different universities, but in the UC system it's close to being a dollar-for-dollar replacement of declining state funding by increased tuition.

Re: The College-Cost Calamity

#26

Post by yardie »

dfc wrote: post #13
stevencorona wrote: post #9

The craziest part, IMO, is that I had to make a decision whether or not to take on $175,000 in debt (I went to RIT, it costs $44,000 per year) when I was 18 years old and had never handled more than $300. Sure! Sign me up! I couldn't even imagine what that much money would look like, let alone feel like to pay back- at that time, it was as equally mysterious as $10,000 or $1,000,000. Luckily, I left after my 2nd year…

Why did two years cost $50k but four years costs $175k? (2/4 != 50/175) As far as the $300 goes I take it you never worked in high school?

Possibly the difference between the amount of subbed and unsubbed loans that you can take out as a freshman verses a junior. One of my friends (this was a decade ago) got a great financial aid package her freshman year at a private college. Then each year, as new levels of Stafford loans unlocked, the university replaced "freshman" scholarships with loans.

Still, a $75k jump is unheard of unless you're doing some sort of hybrid undergrad/med school program.

Re: The College-Cost Calamity

#27

Post by wisty »

taligent wrote: post #11

I would be curious to know the costs and implications for adopting an Australian solution. Here in Australia everyone can go to college and what happens is that the tax office keeps track of the money you owe and then as you start earning money they pay the loan back through a tax increase. You also get a discount if you have the loan back quicker. It's all seamless and you can also add books/computer to the loan as…

Because it's effectively a price control, and price controls are bad and communist and evil.

Re: The College-Cost Calamity

#28

Post by tsotha »

What can't go on, won't. There's no reason a college needs to charge $40k to an undergraduate. What's changed in the US over the last few decades is the ratio of administrators to students. I don't remember the exact numbers, but it went from something like 1 in 9 to 1 in 3. Colleges will simply have to make due without the third assistant to the vice dean in charge of diversity and lower the tuition they charge to new students.

Fewer people will get degrees, of course. Some courses of study are investment, and some courses of study are consumption. You'll see a drop in the consumption degrees, since those people could only get jobs by continuing on to get a law degree. There aren't any jobs for newly minted lawyers right now.

I would like to see the law changed so colleges can't ask about your family's finances. The kind of perfect price discrimination they practice would be flatly illegal in any other industry. Imagine going to a car dealer and having him tell you "Well, the list price for a new car is $100k. But if you turn over all your financial information, you know, how much your family's house is worth and how much your parents make, we'll adjust the price of the car so you can just barely afford it."

Re: The College-Cost Calamity

#29

Post by tsotha »

stevencorona wrote: post #9

The craziest part, IMO, is that I had to make a decision whether or not to take on $175,000 in debt (I went to RIT, it costs $44,000 per year) when I was 18 years old and had never handled more than $300. Sure! Sign me up! I couldn't even imagine what that much money would look like, let alone feel like to pay back- at that time, it was as equally mysterious as $10,000 or $1,000,000. Luckily, I left after my 2nd year…

Why in the world would you go to a college that costs that much if you weren't rich?

Re: The College-Cost Calamity

#30

Post by scottkduncan »

raverbashing wrote: post #25

Never underestimate the power of easy lending to the population. Especially if this lending will allegedly give more status/money to the person Housing bubble, Education bubble, Healthcare bubble

...VC bubble.

Ok, so I don't actually think it's a sector-wide bubble but I do think near-zero real interest rates and excess capital looking for a return can explain some of the excessive funding rounds and valuations that have at least temporarily prevailed in the last year.

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