Tuition costs have risen 710% since 1983 • Hacker News Board

Re: Tuition costs have risen 710% since 1983

#41

Post by codegeek » Mon, Jul 10, 2023, 5:28 PM UTC

It is free money for lenders because backed by the Govt AND protected against bankruptcy. It is Free money for colleges because they know they will get paid regardless.

Remove this "free money guarantee" and watch how market corrects itself. When students can file for bankruptcy and/or the debt is not guaranteed by Govt, lenders would now use the same criteria they use to issue credit cards to 18 year olds. Hint: It's tough to get your 1st credit card if you have no credit history in the US and most lenders will not even entertain that idea. Some will do if you put in a collateral like $500 of actual cash deposit to guard against the default risk.

When lenders stop lending or get strict, colleges will have to consider how quickly and by how much they keep raising costs.

Re: Tuition costs have risen 710% since 1983

#42

Post by NoMoreNicksLeft » Mon, Jul 10, 2023, 5:28 PM UTC

asow92 wrote: post #7

Won't it go up more if colleges can be assured that students will be bailed out?

You're confused. Colleges and universities have made (poor) decisions that have increased their cost, ostensibly to attract enrollment because of all the tuition/fee dollars out there for the taking.

If those tuition/fee dollars dry up, then that money isn't out there floating around to chase after with poor decisions.

However, all the previous poor decisions were still made, and they're still paying for all the extra buildings and gardens and resort spa dorms thinking they'd have time to pay them off. Not to mention the absurd increases in (non-faculty) staff levels... those people might be looking at unemployment.

But, and this is the most important point: allowing bankruptcy is never a bail out. It's the acceptance of reality. Yeh, "loan forgiveness" is sort of screwed up, but why has bankruptcy been denied these people? Why is education debt such an important kind of lending that we must make an exception for it and allow the lender to do what we allow no other lenders to do?

Re: Tuition costs have risen 710% since 1983

#43

Post by lr4444lr » Mon, Jul 10, 2023, 5:28 PM UTC

dpierce9 wrote: post #29

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

Private high school costs have also gone up astronomically and there are no federal loans for them. [0] https://educationdata.org/average-cost-of-private-school

This is really interesting, but has it outpaced inflation ? Did not see that skimming the site.

Re: Tuition costs have risen 710% since 1983

#44

Post by jurassic » Mon, Jul 10, 2023, 5:28 PM UTC

Government lending and a lack of price controls are the ultimate root cause. The government extends near-unlimited credit to student borrowers that goes way beyond their credit-worthiness, academic performance, graduation rates for the school, prospects for employment based on field of study, etc. And universities have clued into the fact that students who can pay any price, will pay any price. The ceiling of what students will pay, if they have sufficient access to credit, to join or maintain their status in the middle class is very very high. So universities hike the price year after year with little resistance because the availability of government borrowing takes the sting out and shifts the pain years or decades into the future of those students' lives.

I think some major force is needed to counter-act the runaway price growth without cutting off borrowing for students from low-income families. I think university prices should be capped by law at the inflation rate.

Think rent control for tuition.

Re: Tuition costs have risen 710% since 1983

#45

Post by tempsy » Mon, Jul 10, 2023, 5:28 PM UTC

taeric wrote: post #24

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

Worse than just "backed by the federal government," the loans are basically protected by the government. Being one of the small list of things you can't bankrupt out of, the risk in giving out the loans has been fully pulled from the lenders. It is frustrating to hear the discourse over the inappropriate students that are taking on too much debt, all the while ignoring the lenders that are taking on too much risk. At…

Eh I think the impact of the federal government on undergraduate costs is largely overstated. The limits for dependent students, which is most undergrads, is really small over 4 years.

https://studentaid.gov/understand-aid/types/loans/subsidized...

You can only borrow $31k over 4 years. That isn't a lot at all.

Re: Tuition costs have risen 710% since 1983

#46

Post by treeman79 » Mon, Jul 10, 2023, 5:29 PM UTC

basisword wrote: post #26

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

If only governments could make…laws to restrict the price of University. Or…could limit the maximum loan size thus encouraging Universities to not charge more than that.

Proper solution is government to stop guaranteeing the loans and to allow people to put them in bankruptcy.

Prices will collapse to what people are willing to pay in real time, or save up for.

Re: Tuition costs have risen 710% since 1983

#47

Post by anthlax » Mon, Jul 10, 2023, 5:29 PM UTC

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

This theory makes sense but since the loan is essentially risk free, why are private student loan interest rates roughly 10%?

Re: Tuition costs have risen 710% since 1983

#48

Post by hospitalJail » Mon, Jul 10, 2023, 5:29 PM UTC

dpierce9 wrote: post #29

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

Private high school costs have also gone up astronomically and there are no federal loans for them. [0] https://educationdata.org/average-cost-of-private-school

Where does it say that?

Btw private school looks quite affordable. I used to think my neighbor was rich, they were, but for only $20k/yr you can send 2 kids to private school? That is cheaper than daycare.

Re: Tuition costs have risen 710% since 1983

#49

Post by Night_Thastus » Mon, Jul 10, 2023, 5:29 PM UTC

eschulz wrote: post #10

Makes sense when you have student loans backed by the federal government. If an 18 year old with no money and no credit history gets accepted into a qualifying university, she will be able to receive a loan since the bank knows that the government will protect their investment if she fails to pay them back. So now young people have this easy access to credit, and universities can greatly increase tuition and fees wit…

It's unfortunate, but to me this feels like half of the root of the problem.

One half is easy access to loans, the other half is student debt relief programs.

Between the two, colleges know they can charge absurd prices and pocket the money.

It's awful, and I wish someone was doing something to stop this. It cannot go like this forever.

Re: Tuition costs have risen 710% since 1983

#50

Post by dpierce9 » Mon, Jul 10, 2023, 5:29 PM UTC

londons_explore wrote: post #3

Main cause: Government-backed student loans. While it is technically the student paying, in reality the money is going (indirectly) from the federal reserve to the universities. Everyone loves free government money... The fact the student may never pay off those loans (and hence the government foots the bill) is the cherry on top.

I will say it again:

Private high school costs have also gone up astronomically and there are no federal loans for them.

[0] https://educationdata.org/average-cost-of-private-school