

Freakonomics: Why California’s Tuition Hike Might Be a Good Thing - cwan
http://freakonomics.blogs.nytimes.com/2009/11/23/why-californias-tuition-hike-might-be-a-good-thing/

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jadence
I read this article w/ very mixed reactions.

Part of me was all for the price discrimination to help "level the playing
field."

Another part of me just cringed. By making price discrimination like this the
norm, the incentive to work hard for your children is greatly diminished. I
know my grandparents scratched and clawed their way for every penny they could
earn/save to pay for my parent's/aunt's/uncle's educations. They in term did
the same for myself, my siblings, and my cousins. I am doing the same for my
future children (My friends often tell me to live a little and comment about
my dumpy apartment, my used furniture, etc while my savings and investments
grow. No, I never skip out on the bill, not chip in for drinks, group gifts,
etc)

If there is going to be price discrimination as described in the linked
article why should I live so frugally for my future childrens' education? My
future kids rich peers' parents will cover the extra expenses while I live
lavishly now! Why should I save now and be the sucker?

How can the system help those who are disadvantaged while not indirectly
encouraging people to be financially irresponsible? My gut reaction is to make
educational "cheaper" for the rich while still accessible to those who really
want it. Yes, I know this thought is antithesis to the linked article.

~~~
dagw
On the other hand if your grandparents and parents hadn't had to save so much
to send their kids to college, what else could they have done with the money?
Sure they might have "wasted" it on lavish living, but they might also have
invested in something (like starting a company) which could have grown and
given their children an even better future.

I don't buy that "forcing" people to work hard and live frugally if they want
to their kids to go to college is in any way a good thing.

~~~
jadence
Who said they didn't start their own companies? My grandparents did as did
several of my aunts and uncles, as did I.

And those who didn't start their own companies didn't simply throw money under
a mattress. The money was indeed invested w/ thw childrens' future as the
primary reason.

~~~
dagw
I think you missed my point. I'm all for investing for your kids future and
think it would be a lot easier and more efficient to do so if you didn't have
to save up to pay their exorbitant college fees as well.

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anigbrowl
It's true that UC provides financial aid for anyone coming from a household
with a total income of under $70,000, but on the other hand that single figure
takes no account of family size or the highly variable cost of living in
California. That cutoff might seem generous in, say, Eureka, whereas in San
Francisco a $70k household income is nothing to write home about.

Not that I think such financial aid programs are a bad thing, but there is no
getting away from the fact that UC fees have been vastly outpacing inflation
for a while, not just since the financial crisis struck. If you entered the UC
system in 2003, for example, by the time you graduated your annual tuition
would have almost doubled - not exactly helpful to financial planning.

    
    
      1999-2000  $3,429
      2000-2001  $3,429
      2001-2002  $3,429
      2002-2003  $3,384
      2003-2004  $4,984
      2004-2005  $5,684
      2005-2006  $6,141
      2006-2007  $6,636
      2007-2008  $7,126
      2008-2009  $7,788
      2009-2010  $8,958
      2010-2011 $10,302

~~~
dantheman
The common definition of inflation as used by most people is not correct,
inflation just means an increase in the money supply. It's actual effects on
prices are another due to many different factors. For instance, due to the
massive advances in computers and manufacturing we've seen prices drop or stay
level as the growth in the money supply has grown at a fast pace.

I agree that the actual cost of tuition has grown at an alarming pace, but we
need why. Where is the money being spent, in a lot of cases you'll see that
money is being spent on luxuries that are not needed in a university.

~~~
randallsquared
_For instance, due to the massive advances in computers and manufacturing
we've seen prices drop or stay level as the growth in the money supply has
grown at a fast pace._

While I agree that this is a significant part of the explanation for why the
money supply has been vastly expanded without much corresponding inflation,
it's really hard to show in a simple manner, and it's worryingly close to a
just-so story.

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jbert
> The Problem for Poor Students Is Low Financial Aid, Not High Tuition

Doing the sums after the fact discards the influences on the person making the
decision at the time. If you're able to take up the place and eligible for
financial aid, you need to be very sure that the level of aid won't decrease
(or associated costs increase) over that period.

The level of confidence a student with an income of $10k can have that ($101k
- $100k) dollars is affordable to them (and will remain so over 3 years) is
lower than whether ($11k - $10k) is affordable. Basically, they've got less
slack to pick things up if there is an error or alteration.

Prediction: I think a price hike (with a financial aid hike) would result in a
decrease in the likelihood of someone reliant on the aid taking up the place.

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asciilifeform
Financial aid (and other demand-side subsidies, such as scholarships and low-
interest loans) is how the costs grew to their present heights in the first
place.

If, say, Bill Gates routinely handed out $10K to every person who has just
bought a car, what do you think this would do to the prices of cars?

~~~
req2
You in no way respond to the point in the article, which is that price
discrimination (as enabled by high tuitions and generous financial aid) allows
you to extract more money from those able to pay more money (allowing generous
financial aid).

~~~
psranga
1\. Why is it a good thing to extract money from those "able" to pay more.
Because the money you are extract is necessarily paid by reducing the payer's
expenses elsewhere. Such a dysfunctional system already exists for healthcare.
Do you want to read about college-induced bankruptcies?

2\. Define "able". Are you really advocating for a situation in which middle-
class family routinely scrounge to save for college, or in which parents sell
their houses to pay for college?(Btw, some countries (e.g., India) have a
dowry system which requires parents of girls to save from the day the child is
born and obviously it sucks to be those parents).

3\. The original article seems to using the poor as a "human shield" to effect
an arbitrary hike in fees. The reason the universities are not supported well
is that govts are wasting money. I hope that resisting tuition fee increases
will also pressure govt to reduce waste.

~~~
req2
Your argument seems poorly aimed, as I merely pointed out how poorly aimed the
original comment was. I'll treat you as a top level post as a courtesy.

As you rightly acknowledge, "able" can hide a lot. I'm able to live several
days without food, but it's hardly a thing to aim for. The article explicitly
mentions "rich", and you should feel comfortable assuming that "rich" does not
mean "middle-class". Failing that definition, consider "able" to be taken from
"luxuries", rather than "necessities". You don't need to bring India into it.
Sufficient?

You'll have to explain further how the poor are being used as a human shield
here. Additionally, I'm not convinced that any protests based on increased
tuitions will have an effect on government waste. It seems like effort better
spent campaigning for reduced government waste (which is admittedly very
likely a waste as well).

~~~
psranga
The poor are used a human shield because if the article had said something
like:

    
    
      education is a good with almost-inelastic demand, hence
      we can raise prices arbitrarily and in addition
      eliminate government support for it :)
    

then they would not have been taken seriously.

Wrt "rich", other posts indicate that $70K/yr household income as the upper
limit for financial aid in CA. That's hardly "rich".

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blackguardx
The problem with this analysis is that most of this financial aid is based off
of FAFSA. If you happen to fall into a common circumstance, it probably works
for you, but there are many exceptions where FAFSA doesn't work out.

How does one define "rich." Sure, if your parents own a jet airplane, you are
probably rich, but there is much room between having a banker father and a
janitor father.

In my opinion, FAFSA doesn't adequately take into account household debt or
siblings' tuition costs.

~~~
req2
This sounds more like sour grapes and less like analysis. The article doesn't
even mention the FAFSA, but it does say that at UCB, "as tuitions have risen
this past year, those from the poorest families saw their financial aid
packages rise almost dollar for dollar". Do you have any _data_ on how the
FAFSA actually accounts for household debt or sibling tuition costs?

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Zot95
From the article: "while Berkeley charges $5,858 (per year in tuition and
fees)."

Where did he get that from? The Education Fee for the current fall semester
alone is $3,444. Berkeley, like the other UCs, comes out to about $10k per
year for state residents. (reference -
<http://registrar.berkeley.edu/Registration/feesched.html>).

~~~
adg
The author is quoting from an article he wrote in 2003.

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ericamzalag
There is something fundamentally flawed when we discuss a system where budget
cuts must be made because of gross misspending in other areas of the state
budget. The solution should be to attack the source and clean up California's
budget, not raise tuition fees and scare off potential students. With
California's (and the U.S') budget in such a deep hole, is it fair to rely on
the HOPE that a raise in tuition will be consistently matched with an
equivalent raise in financial aid? Poor decisions lead to more poor
decisions....

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adg
The article only talks about how tuition hikes affect the very poor and the
very rich. But what about the middle class?

If the distribution of parental household income is normal, then wouldn't
hikes significantly hurt a large portion of college students; i.e. the ones
who aren't receiving aid and whose parents aren't rich?

