

What's rising faster than health care? College costs - chailatte
http://lifeinc.today.com/_news/2011/08/11/7349127-good-graph-friday-whats-rising-faster-than-health-care-college-costs

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marknutter
Blame cheap, easy loans from the US Government combined with the cultural
belief that a college degree will guarantee a living wage. The colleges should
be issuing the loans. I can bet that if they did, they'd be a heckuva more
selective about who attended and have a much larger vested interest in making
sure their students became successful financially after graduation.

~~~
Homunculiheaded
Based on the Bureau of Labor Statistics 2010 data[1] the average college
graduate has nearly double the weekly wages of someone with only a hs diploma
($1038 vs $626/week) and is nearly half as likely to be unemployed (5.4% vs
9.2%)

So I think it's a bit unfair to say that this is merely a 'cultural belief'.
Do you have any data to support that dramatically improved salary and
employment rate is just a myth?

I do agree with the points on students loans, but I just hear way too often
how "college isn't worth it" without any data to back this up what-so-ever

[1] <http://www.bls.gov/emp/ep_chart_001.htm>

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ellyagg
I can assure you there are correlation/causation issues with those stats. I
come from a demographic and gene pool of people likely to hold degrees--aside
from me everyone in my 6 person family has at least a bachelors and my
girlfriend has a masters. However, despite no degree, I had no trouble
obtaining a lucrative career as a developer.

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golfstrom
College costs are just like any other bubble: they rose and continue to rise
due to the ease of financing. Why we allow 18-year olds to blissfully sign up
for a lifetime of crippling six-figure debt is beyond me. At least make them
get an engineering or business degree from a public college. In-demand
colleges can keep raising tuition because students will just get bigger loans
to get the name on the degree.

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watty
They're adults and aren't being forced to sign up for an out of state private
school that costs 40k a year. Intelligent adults will pursue scholarships and
go to school in state for for a reasonable price.

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tghw
While it is true that they are (or almost are) adults and should be able to
make their own decisions, I think you'd be hard pressed to say that there is
nothing wrong with a bank giving a $200,000 dollar loan to someone with
absolutely no income.

Because you can't get out of student debt, the banks are more than happy to
make loans to people who shouldn't really be taking them. Eventually, the bank
will get its money back. For the education bubble to be popped, there's going
to have to be a change in legislation allowing people to be protected from
student loans if they go into bankruptcy.

Once that's the case, banks will start being more careful with the loans they
make, there will be less cheap money available, and people will have to start
making more rational decisions about which college they attend.

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gte910h
>change in legislation allowing people to be protected from student loans if
they go into bankruptcy.

I think there is a balance there, but that is the huge deal: no one should be
able to co-sign, and you should be able to go into bankruptcy after a long
period of trying to make it work and drop the student loan dept too.

I don't want to swing the other way and see chapter 7 bankruptcies right after
school driving rates up to absurd levels.

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orangecat
Government policy: everyone should have as much health care as they want.
Result: health care prices soar. Government policy: everyone should own a
home. Result: home prices soar. Government policy: everyone should go to
college...

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tghw
What "government policy" are you referring to exactly?

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Game_Ender
Medicare/Medicaid, Fannie Mae & Freddie Mac, and government gauntness of
student loans.

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DanielBMarkham
I hate histrionics, but I feel compelled to connect the dots here.

Colleges charge more and more -- the growth rate is way above anything most of
us would consider reasonable. Why? Because the feds guarantee loans for kids
attending. That is, the person directly paying is not the person receiving the
benefit. In fact, for many people the goal is to have the feds completely pay
for education using loans, thereby giving everybody the chance to make an easy
trade: take on some debt which you will have to pay many decades from now, and
in return you get a few years of attending a super cool school, learning
incredible stuff, and making new friends.

Except, you can never default on these loans. Once you make them, you are
stuck with them for life. And those things you choose to study? Many of those
will never offer you the chance to make the money you need to pay the loans
back.

So now you're out of college with a degree that doesn't offer the income
potential you need to pay for all those loans you signed for.

So how is this any different from indentured servitude? It's not to a
particular person, but to society at large. We give you a piece of paper, you
sign it, you have fun and work hard for a few years, and then you're in such
bad financial straits that you'll have to take anything you can find that
makes money in a sad attempt to ever get even again. How many PhDs are waiting
tables in college towns? Does this appear to be a functional system achieving
necessary societal goals?

There's a big discussion over whether college is necessary. No clear answers
there. But there is also a discussion over whether the money trades that we
make as a society are actually doing any good. We keep paying more and more,
getting lots of good folks in debt, and when we ask if college is supposed to
help them pay these loans back, we get a speech about how college is a special
time in a person's life and shouldn't be related directly to money. It seems
fine to relate it directly to money when the kid is signing his life away for
a vague promise, but when we ask where the payoff is we're told we're being
crass. It's about more than money. It's about the experience.

That might be true, but there are a lot of special times in a person's life.
Why are we letting people trade a few good years when they're young in order
to limit their options for decades afterwards? Where's the sense in that, not
to the person involved necessarily, but to the rest of us?

~~~
angdis
Depending on the job market, college grads may or may not have a hard time
find a job to get on track to pay off their loans quickly, so what? Everyone
has a rough patch, some more than others.

The high school student who chooses NOT to go to college might be better off
for a few years after high school, but on average, their LONG TERM economic
future is not as bright as that of a college grad-- even if the college grad
has a rough time find settling into a career after graduation.

This is perhaps more clear if you look at people in their 30's and 40's. The
college grads are, I think, generally better off (modulo some outliers).

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nostromo
Correlation or causation? It seems to me colleges often accept people who are
already poised to be successful.

Imagine if a university decided to randomly pick people to educate. (Not
randomly pick among the applicants -- randomly grab people off the street.) Do
you think those students would be very much better off after being educated?

(Btw, yes, I'm very happy I went to university.)

~~~
angdis
It depends. I think there are lots of folks who would excel but do not make it
to college simply because of economic conditions or low familial expectations
holding them down. There's also many without intellectual talent who get into
college simply because a parent held their nose to the grindstone for years
and forced every available opportunity onto them.

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tokenadult
Colleges vary quite a lot in terms of how much spending they do that can
reasonably be accounted for as spending on student instruction, and spending
on all aspects of care of students. At some colleges, the list price for the
students who pay most out of pocket is BELOW the spending per student. That's
because those colleges have sources of income (e.g., endowment income and
direct grants to the institution) other than tuition income.

[http://www.collegeresults.org/search1b.aspx?institutionid=13...](http://www.collegeresults.org/search1b.aspx?institutionid=130794)

(Check the Finances and Faculty tab shown for the college comparison linked
above, and then sort by Instructional Expenditures / Total FTE column.)

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cma
Colleges are engaged in a destructive "fanciest buildings" arms race.

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angdis
Yes, I see a lot of that. Virtually every university I come across has
recently completed or in the middle of some huge sprawling campus expansion.
It is hard to fathom that the growth from increased tuition aren't directly
funding such building projects.

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antidaily
Remember when middle class parents could afford to pay for their kids'
undergrad education?

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Nicknameless
I think you need to qualify your point a little..

 _American_ middle class parents. Middle class parents don't have any problem
doing so in plenty of other countries.

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Nicknameless
Why the down vote? The education bubble is not a global phenomenon, and there
are plenty of great working educational models in other countries that the US
could look to (even if it would be branded as 'socialism' etc).

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larrik
There's interesting comment after the article about why this may actually be
very misleading:

Public college costs used to be covered more by the state, whereas now the
states are cutting and cutting and raising tuition and fees dramatically. This
raises student's tuition at a much faster rate than the total tuition rate is
actually rising.

Worth considering?

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lawn
I'm a 22 year old university student in Sweden (starting my 2nd year now) and
I find it hard to imagine life with school costing a fortune like this.

Sure I, and most students in Sweden, take loans to pay for food, rent and
books but the school itself is free - even now! We're also getting a good low
rent loan with a part allowance. No wonder we're having so many foreign
students. That's going to change from next year though when the foreigners
will get charged.

~~~
jpadkins
your school itself is not free, the costs are just hidden from you. You will
pay much more in taxes over your lifetime than the college costs cited this
article.

There is no free lunch.

~~~
lawn
But of course you're right.

I still find it a bit hard to imagine, where would I be now if I had loan a
lot more. I might be studying the same but I surely would work harder, both in
school and during the summer.

On a related note things like medical care and laws sometimes makes me feel
the same.

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druiid
Well I have to ask if anyone actually thinks this system of student loan debt
and increasing student loan debt, is sustainable? I personally see it coming
to a bubble state at some point in the future and with the debt being
basically impossible (except for a slim set of cases) to remove in
bankruptcy... what are we going to do about it?

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pnathan
What's the breakdown in average college cost rise as per Ivies vs. state
universities?

The numbers I hear quoted for an Ivy education is usaully 1 order of magnitude
higher than I hear quoted for a state U.

~~~
watty
Here's a recent article that ranks schools on cost vs salaries:
[http://www.smartmoney.com/borrow/student-loans/which-
college...](http://www.smartmoney.com/borrow/student-loans/which-colleges-
help-their-grads-get-top-
salaries-1312402692380/?link=SM_mag_inside#article_tab_article)

~~~
aantix
Malcolm Gladwell examined the so-called "advantages" of going to an Ivy League
school in his piece "Getting In".
<http://www.gladwell.com/2005/2005_10_10_a_admissions.html>

From the article...

"As a hypothetical example, take the University of Pennsylvania and Penn
State, which are two schools a lot of students choose between," Krueger said.
"One is Ivy, one is a state school. Penn is much more highly selective. If you
compare the students who go to those two schools, the ones who go to Penn have
higher incomes. But let's look at those who got into both types of schools,
some of whom chose Penn and some of whom chose Penn State. Within that set it
doesn't seem to matter whether you go to the more selective school. Now, you
would think that the more ambitious student is the one who would choose to go
to Penn, and the ones choosing to go to Penn State might be a little less
confident in their abilities or have a little lower family income, and both of
those factors would point to people doing worse later on. But they don't."

~~~
pnathan
My _personal_ opinion is that Ivies bang-for-the-buck is in the networking
possibilities. There usually is _some_ cool research, but high-grade official
research isn't usually at the undergraduate level these days.

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sliverstorm
I'm curious- if all schools were run like businesses on the open market, is
there anything stopping tuition from reaching an equilibrium price close to
the value of the degree (in terms of wages)?

It seems like folks will likely continue paying more to go to college so long
as the boost in income is worth it, and colleges will continue to increase
tuition until they can no longer get away with it, so it seems like that's
where we could be headed.

Why it didn't happen before, I figure could be due to public schools setting a
very low bar and private schools had to remain at least somewhat nearby. But
as the government continues to pull funding from public higher education, it
becomes more and more private, i.e. driven by the market.

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maxxxxx
How can you determine the value of the degree? The only thing you know for
pretty sure is that without degree you will have a massive problem on the job
market.

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knieveltech
With any number of arts degrees, you've still got a massive problem on the job
market and now you're saddled with debt.

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maxxxxx
Good point! I should have phrased it "the right degree". I could have added
"from the right school" too.

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gte910h
You want to make college costs come down? Make college loans dischargable in
chapter 13 bankruptcies after 7 years of the date of graduation, or 12 years
from date of first attendance

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walkon
Wouldn't that just make the cost of borrowing go up?

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gte910h
Only for majors that don't pay worth crap.

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chopsueyar
What a thorough article.

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william42
I'm disappointed in you, HN. Not a single one of you mentioned Baumol's cost
disease.

