
Student Loans May Be Driving the Tuition Explosion - adventured
http://www.bloomberg.com/news/articles/2015-07-09/why-is-college-tuition-rising-blame-student-loans-fed-says
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ams6110
_The surging cost of U.S. college tuition has an unlikely culprit: the
generosity of the government’s student-aid program_

Unlikely?? Are you kidding me? Did we learn nothing from the 2008 housing
bubble?

~~~
adventured
The only people that still consider this unlikely, or otherwise try to hide
from the obvious government inflation cause, are those with a vested stake in
the status quo. That includes an awful lot of people, from university
employees, to general educators, to most people on the left politically, to
the US Government that prints $50 billion a year in profit from the debt
scheme, to anyone connected to the college book industry, to anyone working in
student loans in the private sector - millions of people have their
livelihoods directly tied to perpetual government education cost inflation.

~~~
_red
Corrupt regimes always get the intelligentsia on its side either via threat or
in this case bribery.

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LyndsySimon
You don't say. This seems readily apparent to me.

~~~
vehementi
I thought I misread the title or something and that this might be some novel
thing. Isn't this basically established fact & common knowledge?

~~~
cmdrfred
I call this 'the treadmill'. I don't know if its intentional or just a by
product of greed but pretty much all 'gatekeeper' industries have financing
the raises the end price of a product (Don't have car, can't get to work.
Don't have an education, can't get a job. Don't have a house, live on the
street). If this sort of loan was much more difficult to obtain imagine the
change in the end cost of these items.

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thadd
Government guaranteed loans driving a bubble?!

Good God, this man may be on to something.

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cletus
I wonder if the root cause here isn't the almost unlimited availability of
government student loans but how we're raising children.

Particularly in the developed world the trend seems to be that we raise
children telling them the whole way that they're smart, they're amazing and
they are entitled to pretty much everything.

The problem is we're complementing what children (ostensibly) _are_ rather
than what they _do_. This is really damaging:

[http://nymag.com/news/features/27840/](http://nymag.com/news/features/27840/)

I remember seeing this:

[http://money.cnn.com/2015/03/24/pf/college/student-
debt-1000...](http://money.cnn.com/2015/03/24/pf/college/student-debt-100000/)

Here's an example:

> Salvagin dreamed about being an actress, and even studied to be one. But she
> has put aside her dreams, and has taken on two jobs -- as an executive
> assistant at an advertising agency and at a nonprofit doing events -- to pay
> off her debt load.

> She's managed to lighten it a little -- Salvagin graduated with $95,000 of
> debt.

What possessed anyone (who obviously can't afford it) to spend ~$100k at a
_private school_ to study _acting_?

Louis CK talks about entitled 20 year olds:

[https://www.youtube.com/watch?v=LTaZkf4dih8](https://www.youtube.com/watch?v=LTaZkf4dih8)

> You know why, because you're 20. That's why. Because you're a 20 year
> ____and you have no idea how the world works. Because you think you deserve
> better. You think you 're too interesting a person to have a shitty job.
> Every 20 year old that I encounter behind the counter gives me that look.
> "This job sucks." Yeah, that's why we gave it to you. Because you're 20,
> which is a mathematical guarantee that you have no skills and nothing to
> offer anybody in the world. You're 20. For 2 decades you've been taking and
> sucking up. Education and love and food and ipods. Just sucking it up and
> judging it.

Is it really any wonder that no thought goes into how much earning potential
you have before spending 6 figures on a private school to study art history?

~~~
littletimmy
It is depraved and cynical to suggest that the purpose of a college should be
job-training. This is a wholly american idea, and a shitty one at that.

The purpose of college is to make one educated. If one wants to study art
history, then one should study art history. One can easily build up skills on
the side to complement one's education (I did programming on the side with my
philosophy major and have a great job).

Ideally (and as it happens in civilized countries) the state should be paying
for an education, and students should study just whatever they damn please.
College shouldn't cost 6 figures in the first place.

~~~
todd8
I see things a bit differently, I feel that we don't have a god given right to
study whatever the hell we want and require other people to pay for it.

I understand that some people have no interest in being productive members of
society, and I don't own them; they own themselves and can make their own
decisions and choices about their lives.

I'm happy that there is art in the world, and I support artists by buying art,
and I think it is a shame that art isn't valued by society enough to provide a
really outstanding living for all but a select handful of artists. However,
that's the world we live in. I like to read science fiction novels
occasionally. Should I expect others to pay me to do that? Of course not, I
consider that my own choice and I limit how much I do of that to what I can
afford to pay for out of my own resources.

Artists and art historians don't have a right to make me work to support them
simply because the choices they make don't result in the life or education
that they want. If they believe they can write a book or produce a piece of
music that I will purchase more power to them. However, people (and
universities) shouldn't go around saying "follow your bliss" or "study
whatever looks like fun" and mislead them about where that course of action
will end up.

A mathematician says "How do I prove that?", a scientist says "How do I
investigate that?", a businessman says "How do I produce that?" and an art
history major says "Do you want fries with that?".

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danieltillett
Basically the excess profit obtained from a university degree is now being
captured by external agents rather than the individual student. We should
expect this to happen in any market which has reached maturity after a period
of rapid expansion which higher education experienced from 1950 to 2000.

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smil
It is the same mechanism as the mortgages that created the housing bubble --
an almost limited amount of credit with a 0% risk (in theory, not practice as
we will soon see).

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w4
I can't wait for Bloomberg's next expose, "Water May Be Wet."

But seriously, how can this be a surprise to anyone? Easy credit = increased
demand (since people who otherwise would be unable to pay for the good can now
afford it) = increased prices. This is an _obvious_ result of generous access
to student loans, not a surprising one.

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todd8
Having spent many years attending universities and now sending two kids to
university I observer that colleges and universities realize that tuition
costs are no longer a major factor in students choosing one university over
another. Cost is no longer a factor in the competition between colleges; they
compete on amenities.

The universities have new luxurious dorms, outdoor swimming pools that look
like Vegas resort pools with lounge chairs for sunning, large new fitness
centers with indoor tennis courts, elaborate climbing walls, yoga and spin
classes, etc. The universities simply raise their tuition to cover these
expensive facilities. It's kind of like visiting one of the best health clubs
you could imagine, except filled with beautiful people all your age and all
looking for new relationships (or looking to hook up) and not having any
parents around and having a free, really great cafeteria, and being told that
being a member there for four, five, or even six years is going to be really
fun (football games and parties, yay!) and finally being told that its not
going to cost anything right now you can _just pay for it later_. During the
sales pitch, you're told how good for you it will be and how you will come out
knowing how to think and being given examples of all the people that were
members of this club in the past and went on to do great things.

The evolution of universities into playgrounds for young adults has also had
an impact on the educational choices begin offered. For example, universities
now support large fine arts programs where students can work for years on
majors where most will have no hope of obtaining meaningful employment in the
field once they graduate.

I've been to a large "job fair" kind of event, except for there being no jobs,
given by a very large university's college of Fine Arts--I went with a friend
that was already a freelance musician at the professional symphony level who
was going back to work on a graduate degree in oboe. The final, most
memorable, talk was given by an alumnus of that college of Fine Arts which
spoke about how one gets a job with a degree in music. The speaker related how
difficult it was living in a shitty apartment in New York while playing jazz
in clubs and how he finally after a few years started making a reasonable
living by switching from playing bass to web-design. This was the best example
the Fine Arts department presented of a "successful" graduate. By the way, my
friend, the amazing oboe player, years later ended up selling her oboe in
disgust and never played again.

All the schools are expensive now. With an exception of in-state schools,
tuition at almost every university each of our kids considered was both high
and practically the same across the board. Finally, although slightly off-
topic, in my neighborhood children attend one of the very best public high
schools in the country so the excellent and less expensive state university
here is actually too hard to get into because admission there is based on
class rank and doesn't take into account how much harder it is to be in the
top 7% at the local public high school vs almost every other public high
school in the state. It's possible to be admitted to Stanford but not make the
7% cutoff to get into the state University.

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vishalzone2002
i think correlation not causation

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charlieflowers
In other news, gravity might be causing those apples to fall down.

------
dilap
duh.

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michaelochurch
I think that what's driving "the tuition explosion" is the declining demand
for labor due to technological unemployment as it meets the social demand that
people participate in paid work. It's not going to go away. Basic income would
improve the situation, but we're still a generation away from attitudes
changing.

The fact is that it's socially unacceptable to be unemployed for more than a
few months, and so people who can't find jobs are then told to go back to
school. This would be basically OK (with me, at any rate; but I have a
stronger-than-average work ethic) except for the fact that, for some of them,
it's on their fucking dime that they don't fucking have.

The price of social acceptability and the difference between having a chance
at a career versus being written off as a loser forever is going to be very
high, and will increase without bounds if the availability of credit increases
in tandem.

A major part of the problem is that universities are no longer non-profit in
any meaningful way. They have top administrators making high-six and seven-
figure incomes, they evaluate professors based on their fundraising ability
rather than their teaching or their contribution to the community, and the
cling to the prestige of their non-profit status in order to keep for-profit
education a ghetto because if it weren't that way, the likeness of movements
on stage would embarrass them.

I don't know how to solve this. The demand for labor is so low in this world
(or, perhaps, the supply is too high because society mandates that people work
to have an income, being averse even in most liberal countries-- and not for
bad reasons-- to redistribution) that people are now expected to do years of
preparatory labor at negative pay.

~~~
csense
Consider a profitable business. Its workers need X dollars to survive, and the
company can sell goods for Y, where Y > X. If there are a lot of workers and
they all negotiate individually with the company, standard competitive market
theory says that they will end up charging about X for their services, as any
worker will eventually be displaced by someone who is willing to accept a tiny
bit less pay.

If the workers form a cartel, their rational policy is to charge about Y --
they cannot charge more than that without driving the company out of business.

Labor unions are basically such a cartel. When they were ascendant in the
mid-20th-century, the American middle class was vibrant, there were lots of
low-skill jobs which provided good income.

With globalization, the business can now simply move its operations to a
country where workers are poorer, regulations on environmental and workplace
conditions are laxer, and organization is illegal. This has two effects: X
gets smaller, and wages become close to X.

Globalization has some good effects -- increasing the world's total wealth by
letting countries specialize in what they're good at, and reducing the
probability of conflict by making countries more interdependent.

But the part few people in our corporate-owned governments want to talk about
is that the price of these good things is, in effect, redistributing much of
the wealth generated by companies from workers to owners.

~~~
csense
I do think that eventually automation will become the bigger threat. The end-
game will be a point where robots and completely automated systems create all
the food, clothing and shelter needed for all of humanity, and nobody _needs_
to work in order to maintain the infrastructure to provide for everyone's
physical survival and a basic modern lifestyle.

In order to get to the end-game where nobody works, we will have to pass
through a point where, say, 50% of the people have to work -- and it seems
like determining which half works, and what sort of accounting is used to
justify the non-working half's resource consumption, is a recipe for
revolution. Because it's a point that's so far away from what our institutions
and culture have been set up to deal with.

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stevewilhelm
Student loans might be enabling the tuition explosion, but the need to have at
least a masters degree to ensure a middle class lifestyle is driving the
tuition explosion.

~~~
w4
> _need to have at least a masters degree to ensure a middle class lifestyle
> is driving the tuition explosion_

This is actually a function of student loans. Because higher education is
accessible to a much larger portion of the population than it otherwise would
be via easy credit, a bachelor's degree is no longer a differentiator. Hence
the need for more advanced degrees to set oneself apart from other job
candidates.

