

NYU Neatly Embodies Everything Wrong With Higher Education in America - jseliger
http://www.slate.com/blogs/browbeat/2013/06/18/nyu_loans_for_summer_homes_ny_times_story_about_university_pay_for_john.html

======
joonix
NYU is a school for rich kids. It's a vacation for students who want college
fun, but prefer it to be in an urban setting like NYC (and the best part of
NY, to be sure), rather than in a small college town with its frat parties and
beer pong. IMO, it's not the ideal place to study at all. Too many
distractions. If you're a liberal arts student you can probably take advantage
of all the events, museums, intellectual stuff surrounding you, but there's no
way I would want to study pre-med or engineering or the like there (even if
disregarding the costs).

If you go to a $50,000 per _year_ university for four years in the most
expensive area of the most expensive city in the country and come out
surprised by all the student debt you have, then you're an idiot and your
degree should be withdrawn.

Shame on the federal government for providing easy credit for those wanting a
luxurious four year vacation.

~~~
mtsmith85
Did you go to NYU, or are you just out to insult those who did?

I went to NYU. I credit it with developing a lot of the skills that have
gotten me to where I am today. This comes with a very clear understanding that
my degree, while not directly related to what I do for a living, is still
hugely useful in my day-to-day life.

I have a substantial amount of debt; most college kids do, anyhow. I credit
NYU with giving me the opportunity to leave rural Pennsylvania and helping me
into a salary bracket five times higher than my parents ever were in. For me,
the cost of 3 years (after scholarships) bought this opportunity.

NYU isn't a "luxurious four year vacation." It's one of the higher ranked
schools in America. It has professors who are leaders in their fields. It is
rigorous and challenging.

------
rossjudson
Any government backed student loan should have a simple repayment schedule --
a maximum of 15% of your earnings for 10 years following graduation. At the
end of 10 years, the loan is considered fully paid and any balance, if
remaining, forgiven. The _institution_ eats the cost of forgiving the balance.

So if you're an institution providing an expensive but worthless education,
you aren't going to get paid for it.

Let's treat universities the same way we treat teachers -- let's assess the
results.

~~~
mseebach
Even simpler: Don't have the government involved in student loans at all, and
let the market price loans for different degrees for different students
freely. Those institutions that can convince lenders that graduates will be in
a position to pay back the loans quickly will be able to offer lower rates to
students, and thus attract more and better students.

Those out to study degrees that don't offer great employment opportunities
will be offered more expensive loans which will curb demand for such degrees
which will depress the cost of the degrees. It will also make sure that fewer
people will go to a party college and study an easy degree (or, at least, that
those that do aren't subsidised by tax-payer underwritten credit).

Extra bonus: All those companies that clamour for STEM grads have a very
simple avenue for putting their money where their mouths are: Simply go out
and underwrite some cheap loans. (And no, indentured servitude is still
illegal - companies underwriting student debt shouldn't be allowed to change
the terms of the loan if the student comes to work for them).

~~~
xiaoma
That's simpler, but worse. Education is a text-book example of a good with
positive externalities and it's worth subsidizing, especially for poorer
people.

~~~
mseebach
To an extend yes. Absolutely true up to and including high school, but at some
point diminishing returns kick in.

The idea that _all_ education at any cost carries positive externalities is
exactly what got us into the mess that is education today.

Edited to add: Also, my proposal isn't incompatible with neither financial aid
nor grants to institutions. But like underpriced mortgages caused a housing
bubble, underpriced student loans is causing an education bubble.

~~~
cinquemb
I think it might be the time to buy CDS backed by securities on student
loans[0]...

Time for me to find some investors and pull my own Kyle Bass :P

[0]: [http://m.washingtonpost.com/business/economy/sallie-mae-
to-s...](http://m.washingtonpost.com/business/economy/sallie-mae-to-split-
into-two-companies/2013/05/29/de0eb5c8-c88d-11e2-9f1a-1a7cdee20287_story.html)

------
rayiner
As a general rule, I think there is an counter-productive reaction among
people to the idea of paying high salaries to people working in non-profits.
At the end of the day, good people are willing to take a pay cut to work at an
organization they perceive to be socially beneficial, but only so much of one.
Their kids still have to go to college, after all. And if the organization can
raise the money, why object to its paying what it needs to attract good
people? After all, NYU is in a location where you just can't buy a reasonable
apartment on a professor's salary. That's why it goes to such lengths to offer
housing options to professors (it's the largest land owner in lower Manhattan,
IIRC).

Now, the problem in this particular case, however, is that there is a massive
market distortion in play: federal student loans. Because federal student
loans are guaranteed up to the cost of attendance with almost no credit check,
schools can raise prices to whatever they want with almost zero impact on
demand. If students could only get loans based on parental credit, tuitions at
places like NYU would collapse.

~~~
roc
I'm not even sure parental credit would slow things down. That might send more
of the less-privileged students to smaller universities and community
colleges, but I'm not sure they constitute a large fraction of major
university students in the first place.

And for those students whose parents credit _would_ justify a 60k loan, how
many of those couldn't also get an 80k loan, on student loan terms (rates and
repayment schedules)? I think all you'd do there is make it increasingly
harder for parents of college-age children to get any further credit and draw
down their consumption as college prices continued to grow. (Surely they'll
rank co-signing Junior's college loans as more important than a cottage or
condo in the sunshine belt.)

I think the bigger problem is that the degree and institution aren't
considered in the loan process. I don't know how you'd even begin to structure
an objective analysis, but it seems fundamentally wrong that the government
will guarantee an 80k loan today for a degree that cost 60k yesterday, even
though the market for that degree hasn't moved and the program itself is
largely undifferentiated from what it was yesterday, let alone from competing
universities charging 40k or less for substantially the same program.

~~~
danielweber
I think it should be dependent on the credit of the _students_. And, yes, this
is almost none.

Furthermore, make the students able to declare bankruptcy to escape student
debt.

The reaction from the schools would be to make sure their students don't end
up more than (very roughly) $10,000 in debt.

~~~
roc
If they can discharge student debt on bankruptcy, wouldn't that just normalize
the process of: 1. take on loans 2. go to college 3. declare bankruptcy 4.
enter jobs market?

Or are we counting employers continuing/extending their discrimination against
candidates with 'bad credit' ? And would that hold up in a tighter jobs
market?

~~~
danielweber
It would definitely limit the loan size. Someone with $50,000 in debt will
default at the drop of a hat, and so they will never be extended $50,000 worth
of debt, and so schools will need to charge less for their service.

Someone with $4,000 worth of debt probably will not default, because the hit
to their credit isn't worth it.

------
mathattack
I'm not sure I agree with all the scandal. To me it's more a legal
technicality.

Schools should be allowed to pay whatever market salaries they must to keep
their heads. If students don't like it, they can choose to apply to other
schools. If alums don't like it, they don't need to donate. If faculty are
jealous, they can work elsewhere.

The argument only breaks down when these schools get non-profit benefits. So
why not just be done with it and take away the non-profit status? And then
perhaps spread the big research dollars to true non-profits. But - unshackle
the schools.

To me the bigger scandal is how much the head coaches get paid. That's truly
the sign of a for-profit enterprise, and the athletes frequently are required
to go to college to get to the pros.

~~~
minikites
The NCAA is pretty scummy:
[http://www.theatlantic.com/magazine/archive/2011/10/the-
sham...](http://www.theatlantic.com/magazine/archive/2011/10/the-shame-of-
college-sports/308643/dmg) but what pro sport requires a college degree?

~~~
loganfrederick
The NFL does not require a degree, but does have an age requirement which
occasionally comes up as a hot debate point: "The NFL Eligibility Requirements
NFL rule requires a player to either be out of high school for three years or
have finished three college football seasons before joining the league.
(Lupica, M. 2004) The NFL is the only major professional sport that prohibits
the drafting of players who have not completed three college seasons or who
are not three years removed from high school graduation (Gehring, 2004;
Nieporent 2004). The NFL claims that this rule is in the athlete's best
interest. The NFL argues that this rule protects player’s physical safety.
However, the NFL and the NCAA benefit by capitalizing on amateur athletes."

[http://www.thesportjournal.org/article/age-requirement-
profe...](http://www.thesportjournal.org/article/age-requirement-professional-
sport)

------
j_s

       > building itself less like a university and more like a for-profit corporation
    

This concept was discussed recently on the EconTalk podcast
[http://www.econtalk.org/archives/2013/06/pallotta_on_cha.htm...](http://www.econtalk.org/archives/2013/06/pallotta_on_cha.html)

"The way we think about charity is dead wrong"
[http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...](http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html)

Uncharitable: How Restraints on Nonprofits Undermine Their Potential
[http://www.amazon.com/dp/1584659556/](http://www.amazon.com/dp/1584659556/)

~~~
joonix
Charity is very profitable for many elites especially in places like NYC and
DC. Just because they don't distribute dividends doesn't mean they don't
distribute salaries. Most "connected" people here come out of school and get
hired by their friends at non-profits. They sit around, raise money, and don't
do much with it other than pay themselves.

~~~
rossjudson
Sadly, I have seen this myself. Expensive "gifts" for doing odd jobs for
charities (that far exceed the value of the task), first-class travel plans
and ludicrously expensive hotels...it's sad, really.

Of course this was a while ago. I don't know if the tax laws have changed to
make these sorts of things more difficult to do.

------
cinquemb
Interesting how this was flagged to death... Maybe comparible to the same
sentiment that was present in the housing market in 2007: most dreaming of
their "rainbows and unicorns" blind to the chains they just wrapped their
necks...

