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Why Is College in America So Expensive?

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Re: Why Is College in America So Expensive?

#231

Post by RandomInteger4 »

frebord wrote: post #91
Domenic_S wrote: post #3

I didn't see this discussed in the article, but IMO the main driver is the availability of student loans. When the government guarantees loans, you can lend whatever you want! The price of a TRIPLE occupancy dorm + 7 day meal access is $14,813.29/YEAR at UC Davis. The "meals", if they haven't changed in the last decade, are Sodexo garbage. And don't forget a "year" doesn't count the summer, or winter break.

> Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities extract money from students because they can,” says Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” Why do people always reach for central control, when we have the ultimate mechanism of price control as a core part of our…

Actually we definitely need to go there, but cost regulations doesn't requires micromanagement of price controls. We already have a decent working example of some form of central control in the form of the fed bond rates; this is no different. Considering the fact that these are mostly public institutions, there should be a touch more public control in terms of the costs, because the end result of not controlling the costs centrally is a type of competition that we see now, which is to say universities taking on more and more debt for new buildings and other bullshit, knowing that they can account for the burden of that debt on tuition increases and unnecessary.

This is not a hard problem and it's vastly different than central planning with respect to prices of toilet paper or other stuff that shouldn't be centrally planned. Don't conflate these contexts and assume that they're all the same with respect to price regulations, because they're not. It's either lazy or intentionally disingenuous on your part to do so.

Fostering competition while ensuring that students are not taken advantage of is equally as complex if not more so than centralized cost regulation in the form of restrictions for institutions that accept federal loan monies. That's something I often see unaddressed with comments like yours. Unregulated competition is not a magic wand that solves all problems. Treating it as such is ignorant.

Re: Why Is College in America So Expensive?

#232

Post by fouc »

quiq wrote: post #195
fouc wrote: post #186

College is expensive because people still pay that price. People pay that price because they have easy access to student loans. So if we get rid of student loans, colleges would be forced to change their pricing. If governments still want to encourage students to go to college, then perhaps non-price based methods would help. Scholarships could move away from being a monetary amount, to being a fixed amount of semest…

Naively, wouldn't a blank check for a semester ecourage universities to raise prices even higher?

Yeah, seems hard to make scholarships/student loans work without putting upward pressure on college pricing. Perhaps not possible.

Re: Why Is College in America So Expensive?

#233

Post by mbrumlow »

kingaillas wrote: post #145
mbrumlow wrote: post #99

Earlier quoted context omitted.

There was before the government got its hands in it. Before guaranteed loans students had to be verified based off their merritt to get a loan. Lenders took a real risk and had incentives in the person being successful so they would have hopes of the loan being paid back. This was near perfect as schools could not not charge more than lenders would risk. Thes solution in this case is to remove the government guarante…

Another solution would be to let students discharge their debit via bankruptcy. Surely you wouldn't want that terrible government distortion to the free market remain in place? This system is also near perfect as lenders would evaluate their risk and have incentives in the person being successful. This works very well, as we saw from how mortgage lenders and credit rating agencies worked 10 years ago. >let the free m…

> Another solution would be to let students discharge their debit via bankruptcy.

So you are going to force loaners to loan to people that can simply discharge it?

I am not sure you understand how a loan works. Somebody risk their money for the chance to get the original amount back plus some. If the institutes making loans can't recoup at what they put in then they too will also go bankrupt. And if they can't make any profit then there is no incentive to loan the money.

> Education (and healthcare for that matter) are NOT free markets.

They most cerentety are. And them being part of a free market where people can make money has also allowed it to give humanity some of the best healthcare ever.

> Which is not acceptable for education or healthcare.

You are right, education is free, pick up a book at your local library. There is nothing stopping the masses from learning the same subjects today. On the other hand attending private institute that offers assistance in learning is not a right. Every time these free collages ideas come about it irks me so much because you have every right and means to educate yourself on a topic.

> Maybe that's fine in some circles but a modern wealthy superpower should be able to do better than throw some percentage of its own citizens in the trash because they can't afford education.

No, instead we can just trash the entire country because of feels.

In any case, put your money where your mouth is. Let me pick at random somebody applying for a loan today and let me fund their schooling with your money. If this person becomes successful they will pay you back. If they find it is too much of a burden, or they don't finish school you lose your money and never see it again.

Re: Why Is College in America So Expensive?

#234

Post by throwawayjava »

mr_tristan wrote: post #196

> Still, the return varies wildly depending on the college one attends. One in four college grads earns no more than the average high-school graduate. I found this shocking: 25% of _graduates_ are in a significantly worse financial position after college? They're not only getting zero monetary benefit for their degree, they've forgone 4 years of experience. And I'd bet that most of them are adding significant student…

TBF these numbers can be... messy.

For example, at least one statistic is based on earnings 5 years out of school.

5 years out of school I was making less than 30k as a research assistant. A few months later I was making easily 100k+ more than most senior SDEs, and doing exactly what I would be doing if I had a trust fund to pay the bills.

Many of my classmates who became doctors were in similar situations -- working through residencies at T+5 years but setting themselves up for mid 6-low 7 salaries in the near future.

So earnings over even a medium-term time horizon can be extremely misleading. You really need that 35-45 year career to get the full picture. Any college grad salary number with less than a 6 or evne 10 year time horizon is going to be a poor representation of what's really going on.

Re: Why Is College in America So Expensive?

#235

Post by rossjudson »

throwawayjava wrote: post #182
dragonwriter wrote: post #163

Earlier quoted context omitted.

> I actually think that the debt above 15k (or whatever) should be shifted back to the school Shifted back to the school, not the lender? Or are you assuming that the school is the lender?

I think he meant "the school must pay back the lender if the student can't pay back the loan after ten years" I.e., our institutions of higher education should be forced to bail out our banks when the banks issue risky loans that don't pan out. This is definitely good idea because divorcing banks from the downsides of their risky loans has worked out so well this century /s

Yes. Apparently I'm having trouble writing today.

Re: Why Is College in America So Expensive?

#236

Post by mrep »

jiveturkey wrote: post #8

TLDR: > Ultimately, college is expensive in the U.S. for the same reason MRIs are expensive: There is no central mechanism to control price increases. “Universities extract money from students because they can,” says Schleicher at the OECD. “It’s the inevitable outcome of an unregulated fee structure.” In places like the United Kingdom, the government limits how much universities can extract by capping tuition. The s…

> Federal student aid has ensured that the cost of education grows to meet the amount of loan money available.

Yes, tuition prices are somewhat limited by the amount of loan money available. However, please stop this nonsense that "the cost of education grows to meet the amount of loan money available". I went to a public state school and most people there went there to minimize their debt because they paid in state tuition which is much cheaper. Most of the out of state people went there because it was a good school and they got decent scholarships and thus didn't have to pay full price. The rest willingly chose the higher out of state fees but they could have gotten into an in state school or one that gave them a scholarship. Private schools are similar except they only give "discounts" (scholarships) to people who need it but anyone going there can choose a state school if they want.

TLDR: In classic American economics, schools price discriminate and charge the highest prices they can based on how good they are, how good the student is, and the students willingness to pay.

Re: Why Is College in America So Expensive?

#237

Post by diogenescynic »

blairbeckwith wrote: post #47
Domenic_S wrote: post #3

I didn't see this discussed in the article, but IMO the main driver is the availability of student loans. When the government guarantees loans, you can lend whatever you want! The price of a TRIPLE occupancy dorm + 7 day meal access is $14,813.29/YEAR at UC Davis. The "meals", if they haven't changed in the last decade, are Sodexo garbage. And don't forget a "year" doesn't count the summer, or winter break.

Am I the only one who doesn't think this is that bad? Living on campus is a privilege, not a right. Students probably can live off-campus for less, but paying $1800/month (guessing that "a year" is ~8 months) for accommodation + food... Really doesn't seem that bad. It's certainly a premium, but it's an entirely optional one and doesn't seem like an extreme one. Add on administration overhead for dorms, etc. Proximit…

You must live in a bubble. $15k in living expenses is a lot of money for even middle class families—$15k is like $25k pre-tax and that’s more than about 40% of Americans even make in a year...

Living expenses like dorms/meals are also why so many kids end up taking out student loans and have so much debt. How is that productive for society? It seems like Americans have a very weird attitude towards certain fundamental things like healthcare and education where they prefer to privatize those commodities rather than make them cheaper for all to benefit from. I think it’s bad for society for people to be putting 17 year olds into debt for degrees and then ripping people off for 20-40% of their incomes for healthcare. It would be a major stimulus for the economy if Americans paid what Europeans do for education and healthcare. I don’t understand the conservative argument at all. We get worse results for higher prices. The only people who benefit from our system are the ultra rich.

Re: Why Is College in America So Expensive?

#238

Post by RandomInteger4 »

mbostleman wrote: post #92
kfoley wrote: post #79

Earlier quoted context omitted.

It's not even necessarily cheap debt. A lot of my undergraduate loans were at rates of 6.8% which I consider somewhat high. The problem is it's easily accessible debt to people who have no concept of what tens of thousands of dollars is really worth. You see the amount you're borrowing on the form and it's really nothing more than a number.

Exactly. Ask high school graduates and the vast majority of their parents to explain the cost of capital and show the projected return on the college tuition (as well as the 4 years of lost opportunity not participating in the market) and you just get blank stares. They're way too focused on the social rituals of move in day and fraternity/sorority rush.

Being shown the projected return on the degree is exactly why students take on debt, because we were given assurances that the job market for this or that degree is great along with indicators of starting salaries that seem to tell you "You can afford to go into debt for this or that, because the job you'll have" (haha, good one!) "right after college will make it possible to pay off."

Re: Why Is College in America So Expensive?

#239

Post by mcguire »

bhupy wrote: post #119
fzeroracer wrote: post #107

Earlier quoted context omitted.

I don't see a statistic or actual citation there other than an issue with potentially out of date laws. How are you quantifying American Healthcare as being one of the least free markets? And how does it compare to other countries? I don't see anyone ever actually quantify how 'free' a market is; people only ever argue that if a market is not working therefore it's not free enough, which means we must make it free. A…

Sure - in America, healthcare is far from a free market because: 1) We don’t pay our own healthcare bills, we pay for our healthcare through insurance. As a result, there isn’t a pricing system in place, much like there is for other critical goods and services with price-inelastic demand like food and housing. This is caused by regulations that require employers to provide health insurance for their employees, and mo…

Your fourth paragraph describes the US prior to the 70s and 80s and the HMO (https://en.wikipedia.org/wiki/Health_maintenance_organizatio...).

What happens is that no one visits the doctor for preventative care, with the result that many cases were not diagnosed until it was very expensive to treat. (Have you had your blood pressure checked recently?)

In practice, Erlichmann was right about HMOs.

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