Staredit Network > Forums > Lite Discussion > Topic: Higher Education
Higher Education
Aug 30 2012, 3:33 pm
By: Sacrieur
Pages: < 1 2 3 >
 

Sep 9 2012, 6:05 am Centreri Post #21

Relatively ancient and inactive

Quote from Sacrieur
Sure.

Very well. You've shown that a significant number of students are surprised by the conditions of their student loans. Nevertheless, I don't think that the solution to stupid teenagers not looking at what they're buying is to remove the choice. Perhaps establishing offices in high schools to aid in the process, if this is not already a thing, would be a better solution.

Quote from Sacrieur
Not exactly. Those scholarships are often limited to a certain number of recipients. There is no universal scholarship system in place, at least not one I am aware of and on the scale needed.

Harvard pays for nearly all of the student's costs for attending. So does MIT. However, at MIT, only 29% of students come from families with an income less than $75k, which is disproportionate.

This is not to mention the incredible academics required to attain enrollment in those schools (even a 4.0 and perfect extremely high standardized test scores doesn't guarantee entry). They deserve accolades, but it is only benefiting the cream of the academic elite.
Pretty sure that the only fundamental difference between the current system and what you want is that the current bar is set too high for your liking. I'm sure that MIT and Harvard and such would increase the number of full-tuition scholarships if more geniuses start popping up, so I'm not convinced by the "limited to a certain number of recipients" bit.



None.

Sep 9 2012, 7:40 am Lanthanide Post #22



Quote
Centreri -- Not quite sure that Lanth has much of a position apart from "1 trillion is bad".
That is my position. You said that $1 trillion is debt was no big deal. So I replied with multiple sources questioning whether the student loan debt would be the next economic bubble. But you couldn't actually be bothered reading any of the information I provided, so continued to argue as if that amount of debt is not a problem and is sustainable based on nothing more than you own ill-informed assertion that there is no problem with that level of debt (for an intangible asset).

The point is, especially in the current economic climate, many students are taking out debt that they will have little hope of repaying, through lack of jobs and strong competition in the jobs marketplace. This is exacerbated by profligate lending on the part of banks and others who lend money to students, thereby letting universities charge whatever price they want for the education they're providing (because students have easy access to cash and are socially motivated to get a degree because they "need" one to succeed). The end result is a lot of people saddled with debt they can't repay, which in turn creates a drag on the economy - people who have large amounts of private debt have trouble getting mortgages, leading to less demand for housing, which leads to falling house prices and everything that goes with that. I'm sure you'll have some inkling with what can happen in the economy if you've been paying attention to headlines over the last 5 years.

I'm not saying I have a solution to this, because really it is a huge complex problem (primarily the economy needs to be creating more jobs than it is and no one has really found an effective way to do that), but just sticking your fingers in your ears and going "la la la there's nothing wrong" like you're doing is the sort of behaviour that led to the 2007 financial crash in the first place.

In short, the lending around student loans that is going on is unsustainable, just like the lending on houses was unsustainable.

Post has been edited 2 time(s), last time on Sep 9 2012, 7:46 am by Lanthanide.



None.

Sep 9 2012, 4:27 pm Centreri Post #23

Relatively ancient and inactive

The model that you're using to conclude that the current system is unsustainable doesn't take into account certain factors, and leads to you drawing a flawed conclusion. You're taking into account two major factors, which together create a positive feedback loop: Increasing tuition increases the loans which increases tuition which increases the loans. However, you're not taking into account, for example, the presence of the public university system. It's partially subsidized by the government, and it creates competition for the private universities, which stops them from raising tuition too high. It gives people an option to get a good education without taking out an undroppable loan of $200,000.

Thus, our system is partially public, providing competition to private universities and stopping them from raising tuition prices too high even as our students have the option to take out huge student loans. And our system is partially private, to a greater extent than most other Western nations, which leads to greater efficiency.

Beyond that, it's up to the students. You're right, of course, that many students are taking out debt that will hurt them. They made the wrong decision. They take out the loan and get a degree that won't allow them to pay back the loan quickly. What of it? All students have many options to sustainably get a degree. We have a shitload of merit-based programs to allow the brightest to go to school for free. Those further down always have the option of taking out a much smaller student loan and attending a public university. That some people, at 18, don't consider the ramifications of their actions, is not an indictment of our system, and even then, very few of those people end up unable to sustain themselves with their debt.

Post has been edited 1 time(s), last time on Sep 9 2012, 4:50 pm by Centreri.



None.

Sep 9 2012, 7:16 pm Vrael Post #24



Quote from Centreri
partially private, to a greater extent than most other Western nations, which leads to greater efficiency.
I'd like to point out that the convergence of a market to a given efficient equilibrium is only assumed to happen in the long run. A powerful statement, but one which can hardly be used to describe the current state of things. Private is not automatically more efficient, a public system may in fact end up being more efficient than a private one due to perturbations in the market which prevent the "long run" private market from reaching its equilibrium, where the public system may be resistant to such perturbations and such retain its greater (if sub-optimal) efficiency.



None.

Sep 9 2012, 8:14 pm Fire_Kame Post #25

a left leaning coexistence nut

Key words to Vrael's post is that it may be more efficient and that it is a long term goal. The reason why many social programs in America fail is because federal politicians force them to align with their four (or eight) term limits. Politicians push programs that can be achieved quickly (such as tax breaks) then leave the next politician in line to clean up the mess (such as when the tax break period ends), which has the dual purpose of serving to make them look good and the next guy look worse. To go off on a tangent, I think this is why the healthcare act Obama pushed through came as such a surprise to many people; given the built in inefficiency of democracy it is very hard to imagine such an important topic being pushed through as quickly as it was. Which of course is another subject entirely. State level, however, usually face very different restrictions. Senators serve six years and can serve unlimited terms. As for governors and senators, your mileage may vary, depending on what state you are in. this map illustrates pretty well the different from state to state. You take an increase in term limits and a decrease in population and you can start to see why state level programs are put into play very quickly and efficiently. In fact, one of the reasons I don't think I could ever leave Colorado is because they have two beautiful education assistance programs: the College Opportunity Fund and gtPathways. Both of these support lower income level students, with students going to public colleges receiving double what those electing to go to private colleges receive. Unfortunately, that stipend has dropped drastically over the past eight years...but I can't be too surprised by that. It was a very expensive program, and after the economic bubble burst I think too many people flooded into the system, much like social security. As for gtPathways...it's a transfer program; students can earn their first 60 credits at a cheaper community college and the state guarantees to transfer every one of those 60 credits to a four year or private institution in the state of Colorado.

My point behind this is that the reason these programs are so accessible is because by the nature and climate of where the decision took place, it was easier to implement and design. Doing so on a federal level not only draws in more likes of bureaucracy but also more people to account for. As the term limits graph above shows, no two states have the same laws, and so the federal level has to combat with state level laws (and state rights) on top of all of this. It's a wonder anything gets done in a democracy. The reason that communist systems 'worked' for as long as they did - such as the USSR - was by eliminating term limits. Of course, this dictator-like approach came back and bit them later on, but they were able to industrialize the USSR very quickly and bring about a lot of social progress first.


Quote from Centreri
You're right, of course, that many students are taking out debt that will hurt them. They made the wrong decision. They take out the loan and get a degree that won't allow them to pay back the loan quickly. What of it? All students have many options to sustainably get a degree. We have a shitload of merit-based programs to allow the brightest to go to school for free. Those further down always have the option of taking out a much smaller student loan and attending a public university. That some people, at 18, don't consider the ramifications of their actions, is not an indictment of our system, and even then, very few of those people end up unable to sustain themselves with their debt.

I agree with this, but I throw the ball back in the court of the parents or student. One of the things that makes us a democracy is our ability to choose between two choices freely - do I go to art school or law school? Do I become an engineer or an author? Students are pressured from the beginning to go off into college and you can bet that high schools use this to make them look better, so of course they force the issue without asking Johnny whether or not he really needs or wants to go to college, or whether going to Juliard to learn piano will help or hinder his future performance. And parents are just as gleeful to brag to other parents about what schools their son attends, or if they've graduated, or how special they are. Just going off to college, regardless of college, looks great - going to a private school in a ritzy neighborhood sounds even better. In the end the schools and the parents are just using their kids as pawns to make themselves look better. No one really advocates for Johnny what might be best for him.




Sep 9 2012, 9:32 pm Lanthanide Post #26



Quote from Centreri
The model that you're using to conclude that the current system is unsustainable doesn't take into account certain factors, and leads to you drawing a flawed conclusion. You're taking into account two major factors, which together create a positive feedback loop: Increasing tuition increases the loans which increases tuition which increases the loans.
Or we could look at the evidence:


See that little correction in the house prices in 2007 - 2009 that caused such a massive problem for the economy? I just don't think you realise the size of the problem.

Quote
However, you're not taking into account, for example, the presence of the public university system. It's partially subsidized by the government, and it creates competition for the private universities, which stops them from raising tuition too high. It gives people an option to get a good education without taking out an undroppable loan of $200,000.
Giving an example of one moderating factor doesn't somehow overrule the actual evidence that tuition prices are rising unreasonably fast. It just means that without the moderating factor you highlighted, things would be even worse than they are.

Quote
Beyond that, it's up to the students. You're right, of course, that many students are taking out debt that will hurt them. They made the wrong decision. They take out the loan and get a degree that won't allow them to pay back the loan quickly. What of it? All students have many options to sustainably get a degree.
It's not just taking out "a degree". It's degrees that have historically produced people in high demand in the marketplace, who simply cannot get jobs. People doing english degrees have always had trouble getting jobs; it's new that people doing engineering and science degrees are having such trouble.

Quote
That some people, at 18, don't consider the ramifications of their actions, is not an indictment of our system, and even then, very few of those people end up unable to sustain themselves with their debt.
So your system is built up that allows some people to fail (I dispute your "very few" qualification) and clearly there's nothing wrong with it. As you've highlighted, a lot of universities are publicly funded. It seems like taxpayers should want their money being spent on things that will return a benefit to society, so would therefore want to minimize the amount of money being spent on people who ultimately won't benefit from the degree they get (or worse, drop out and end up with no degree and debt).

We have the same problem in NZ at the moment, as our tertiary education system is largely publicly funded - tuition is generally $4-5k per year but almost everyone is eligible to get an interest-free student loan which is provided by the government. We have a situation where tertiary providers advertise heavily on TV about how if you go to their training centre you'll be on the fast track to a great career, but the sorts of jobs you end up with from these entry-level courses is working in a call-centre for an ISP. But it's not in the tertiary providers interests to accurately depict the outcomes of their courses, or turn 80% of people away as being unsuitable, because that is how they make their money. In the end we get corporations providing mostly worthless qualifications and false hope to people who end up being saddled with debt that they have to slowly chip away as they work in their low-paid jobs. Ultimately this is a huge drag on the economy: the money spent by the government could have been better spent on other initiatives.



None.

Sep 9 2012, 10:27 pm Centreri Post #27

Relatively ancient and inactive

Quote from Vrael
I'd like to point out that the convergence of a market to a given efficient equilibrium is only assumed to happen in the long run. A powerful statement, but one which can hardly be used to describe the current state of things. Private is not automatically more efficient, a public system may in fact end up being more efficient than a private one due to perturbations in the market which prevent the "long run" private market from reaching its equilibrium, where the public system may be resistant to such perturbations and such retain its greater (if sub-optimal) efficiency.

This is a very vague statement, and I don't believe your point applies to the situation at hand. What perturbations in the market could happen in education?

Furthermore, I'm not convinced that the idea applies in general, either. There are certainly situations where complete privatization is stupid, such as when it comes to the military or the education system. There may also be problems where government intervention is necessary, such as monopolization. However, I can't think of an example of, specifically, "perturbations" that would make private less efficient than public.

Quote from Fire_Kame
The reason that communist systems 'worked' for as long as they did - such as the USSR - was by eliminating term limits. Of course, this dictator-like approach came back and bit them later on, but they were able to industrialize the USSR very quickly and bring about a lot of social progress first.
I don't believe this is accurate. My personal model for the success of the USSR in certain areas states that the USSR sacrificed luxuries for progress. For example, in the US, a person would do his work, get paid, and use half the paycheck on luxuries, and the other half on necessities. In the USSR, the person would do his work, and get paid half the amount, which went towards necessities, with the state reinvesting the other half into further development. This is, of course, a gross oversimplification to convey the general idea of what I believe occurred. Such a system of reinvestment at the cost of luxuries would've overcome some of the inefficiencies of the Soviet system, though it wasn't enough.

Quote from Fire_Kame
I agree with this, but I throw the ball back in the court of the parents or student. One of the things that makes us a democracy is our ability to choose between two choices freely - do I go to art school or law school? Do I become an engineer or an author? Students are pressured from the beginning to go off into college and you can bet that high schools use this to make them look better, so of course they force the issue without asking Johnny whether or not he really needs or wants to go to college, or whether going to Juliard to learn piano will help or hinder his future performance. And parents are just as gleeful to brag to other parents about what schools their son attends, or if they've graduated, or how special they are. Just going off to college, regardless of college, looks great - going to a private school in a ritzy neighborhood sounds even better. In the end the schools and the parents are just using their kids as pawns to make themselves look better. No one really advocates for Johnny what might be best for him.
I'd say that this is a very wishy-washy interpretation. You're assuming that a teenager out of high school knows what's better for him better than his parents do. No one knows what is best for someone (as we cannot see the future), but at that point in someone's life, college is one of the things likely to lead to the most happiness. You can try pointing at different alternatives, but few of them are attractive. Trade school saddles you with the skills for only one job, and most trade jobs involve enough physical labor to discourage people from continuing doing them into old age. No college sets you several years behind your peers, if you ever get above the minimum wage at all. Etc.



Quote from Lanthanide
Quote from Centreri
The model that you're using to conclude that the current system is unsustainable doesn't take into account certain factors, and leads to you drawing a flawed conclusion. You're taking into account two major factors, which together create a positive feedback loop: Increasing tuition increases the loans which increases tuition which increases the loans.
Or we could look at the evidence:


See that little correction in the house prices in 2007 - 2009 that caused such a massive problem for the economy? I just don't think you realise the size of the problem.
If you want to claim that the world economic crisis was started by a slight blip in housing prices, you're going to need more evidence. And if you want to claim that something is unsustainable, you're going to need more evidence as well. As it is now, it's sustained. Private universities can set their tuition to a million dollars if they want, it doesn't have a negative effect on the economy as long as public universities are there to provide an alternative. A nice little chart is not enough to prove unsustainability.

Quote from Lanthanide
Quote
However, you're not taking into account, for example, the presence of the public university system. It's partially subsidized by the government, and it creates competition for the private universities, which stops them from raising tuition too high. It gives people an option to get a good education without taking out an undroppable loan of $200,000.
Giving an example of one moderating factor doesn't somehow overrule the actual evidence that tuition prices are rising unreasonably fast. It just means that without the moderating factor you highlighted, things would be even worse than they are.
You haven't shown that tuition is rising unreasonably fast. You've shown that tuition is rising faster than other things in the economy. That's a very limited data set. What if the percentage of students receiving financial aid had increased by a similar amount, meaning that rising tuition has enabled universities to give more financial aid to students who can't afford to attend but need it? What if the true cost of education has increased, as the amount of material to be taught has? What if universities started counting food and housing into their tuition figure more and more as time went by?

In short, you lack evidence.
Quote from Lanthanide
Quote
Beyond that, it's up to the students. You're right, of course, that many students are taking out debt that will hurt them. They made the wrong decision. They take out the loan and get a degree that won't allow them to pay back the loan quickly. What of it? All students have many options to sustainably get a degree.
It's not just taking out "a degree". It's degrees that have historically produced people in high demand in the marketplace, who simply cannot get jobs. People doing english degrees have always had trouble getting jobs; it's new that people doing engineering and science degrees are having such trouble.
A lot of the world is still feeling the aftereffects of the financial crisis. This entire phenomenon can be explained away by poorer economic conditions than in the past.

And I'd say that any engineers that are unable to find employment are pretty bad engineers. Well, or in a not-in-demand field of engineering, I suppose.
Quote from Lanthanide
Quote
That some people, at 18, don't consider the ramifications of their actions, is not an indictment of our system, and even then, very few of those people end up unable to sustain themselves with their debt.
So your system is built up that allows some people to fail (I dispute your "very few" qualification) and clearly there's nothing wrong with it. As you've highlighted, a lot of universities are publicly funded. It seems like taxpayers should want their money being spent on things that will return a benefit to society, so would therefore want to minimize the amount of money being spent on people who ultimately won't benefit from the degree they get (or worse, drop out and end up with no degree and debt).
I don't disagree with this. What's your point here?

Quote from Lanthanide
We have the same problem in NZ at the moment, as our tertiary education system is largely publicly funded - tuition is generally $4-5k per year but almost everyone is eligible to get an interest-free student loan which is provided by the government. We have a situation where tertiary providers advertise heavily on TV about how if you go to their training centre you'll be on the fast track to a great career, but the sorts of jobs you end up with from these entry-level courses is working in a call-centre for an ISP. But it's not in the tertiary providers interests to accurately depict the outcomes of their courses, or turn 80% of people away as being unsuitable, because that is how they make their money. In the end we get corporations providing mostly worthless qualifications and false hope to people who end up being saddled with debt that they have to slowly chip away as they work in their low-paid jobs. Ultimately this is a huge drag on the economy: the money spent by the government could have been better spent on other initiatives.
Again, I don't disagree with this. American for-profit colleges have a very bad reputation as well, and those graduating from them are considered to be below par. I don't know whether the government provides any sort of subsidies for these programs, though. And if it did, I would assume that it would make sure that the college turned out quality graduates first. So I don't think there's anything really to be done there.

Post has been edited 2 time(s), last time on Sep 9 2012, 10:48 pm by Centreri.



None.

Sep 10 2012, 12:30 am Fire_Kame Post #28

a left leaning coexistence nut

Quote from Centreri
I'd say that this is a very wishy-washy interpretation. You're assuming that a teenager out of high school knows what's better for him better than his parents do. No one knows what is best for someone (as we cannot see the future), but at that point in someone's life, college is one of the things likely to lead to the most happiness. You can try pointing at different alternatives, but few of them are attractive. Trade school saddles you with the skills for only one job, and most trade jobs involve enough physical labor to discourage people from continuing doing them into old age. No college sets you several years behind your peers, if you ever get above the minimum wage at all. Etc.

I'm not saying the teenager knows either. What I'm saying is that the people who are in a position to help them make a decision are unreliable and carry their own agendas. School councilors want a higher graduation to college rate. Parents want to brag about their children's success. College entrance councilors want their money. Military personnel have a recruitment quota. Friends want drinking/party buddies. But there isn't anyone who will sit down with Johnny, unless they have a really good parent and say "look, here are your options, what do you think?" and then to talk to them about it. The student lacks proper representation from someone without bias, and they lack someone willing to sit down with the student and say "okay, so you want to study acting? Then what? And then what?" Because even though their end destination could be eight years off it helps to look at it from the beginning, and I think having a general one, even one you end up editing and changing and reassessing every year, it gets you in the right mode of thought.

Quote from Centreri
I don't believe this is accurate. My personal model for the success of the USSR in certain areas states that the USSR sacrificed luxuries for progress.
Term limits causing inefficiency in our system is a theory of mine, which is why I supported it otherwise with more data. Even if the USSR took the money from luxuries and processed it, if they had term limits they would have met the same infighting that all political systems with term limits do. It doesn't matter if they come from the same party, even - Stalin and Lenin were both socialist but their policies were incredibly different.




Sep 10 2012, 1:01 am Lanthanide Post #29



Quote from Centreri
If you want to claim that the world economic crisis was started by a slight blip in housing prices, you're going to need more evidence.
I never claimed that. I merely pointed out that the dip in housing prices caused many problems. Maybe you weren't paying attention to news headlines for the past several years about people being underwater on their mortgages, bank foreclosures and construction workers losing their jobs because there was no demand for new houses etc.

Quote from Centreri
And if you want to claim that something is unsustainable, you're going to need more evidence as well. As it is now, it's sustained.
Funny how things are "sustained" right up until they aren't. Just like how the world's financial system was "sustained" up until it wasn't. When someone says something is "unsustainable" it means that they think that things cannot continue on as they are indefinitely and that some things will have to change significantly in some way to get the system back into balance. Exactly what sort of change is required are generally unspecified. It usually doesn't take a genius to spot a problem, but it may take a genius to solve it.

Quote from Centreri
Private universities can set their tuition to a million dollars if they want, it doesn't have a negative effect on the economy as long as public universities are there to provide an alternative. A nice little chart is not enough to prove unsustainability.
Pity you didn't actually read any of the evidence I already linked you to.

Quote from Yahoo news story
Tuition and fees at both public and private universities have been steadily increasing and some higher education institutions are cutting financial aid, reducing class offerings or even freezing enrollment at campuses because of state and federal funding shortfalls. California State University, for example, announced in March that it was not accepting new students at 15 of its 23 campuses for the spring 2013 semester and will wait-list all applicants the following Fall after a $750 million funding cut.

Seems I'm not the only one that thinks the cost of college education is unreasonable:
Quote
President Obama wants to overhaul the college education system and proposed a new financial aid program during his State of the Union address in January, saying higher education isn't a luxury. Rather, Obama says "It's an economic imperative that every family in America should be able to afford." In a recent speech at the University of Michigan, he told students that colleges were being put on notice. At the heart of the problem: "If you can't stop tuition from going up, then the funding you get from taxpayers each year will go down," he says.

Quote from Market Oracle
What are not oftentimes mentioned in the statistics are the implications of defaults on student loans as well. For all intent and purposes they might as well be taxes. They cannot be discharged through bankruptcy proceedings like most other types of debt, and are unsecured as well. The bank (now the government) can’t repossess your other belongings to satisfy student loan debt. It is literally an albatross that cannot be escaped. Defaulting will make it much more difficult to get other types of credit too – at least at a reasonable rate. And the interest rates on certain types of student loans can be upwards of 15% if a parent or guardian isn’t willing to cosign the note.
So if high taxes are bad for the economy, then a student loan that acts like a tax (when there is no commensurate increase in salary to go with the debt) must also be bad, right?

Quote from Huffington Post
A new report from the Pew Research Center released Thursday found the employment rate for young adults at a 60-year low. In addition, fewer parents are now expecting their children to be fully independent by age 22, making it even more difficult to pay off those student loans.

Quote from Huffington Post
"Student-loan debt has ballooned and may turn into a bubble," the S&P said, as reported by Bloomberg. "There are more defaults and downgrades for some student-loan asset-backed securities."

S&P joins a growing chorus of economic observers warning that student-loan debt could become a significant albatross on the overall U.S. economy.

In 2011, Moody's Analytics issued a similar warning. In a report, Moody's concluded, "The long-run outlook for student lending and borrowers remains worrisome. Unlike other segments of the consumer-credit economy, student loans have not demonstrated much improvement in performance despite some improvement in the broader economy. ... [T]here is increasing concern that many students may be getting their loans for the wrong reasons, or that borrowers -- and lenders -- have unrealistic expectations of borrowers' future earnings."
You know how the financial crisis was (in part) about banks taking sub-prime mortgages that were unlikely to be paid back, wrapping them up into AAA-rated securities and selling them as investments to various institutions like hedge funds and 401K retirement plans? Then when the mortgages went sour, those hedge funds and 401K retirement plans lost a lot of money? Exactly the same thing could happen again with student loans. That's why the $1 trillion figure is bad.

Quote from Centreri
You haven't shown that tuition is rising unreasonably fast. You've shown that tuition is rising faster than other things in the economy. That's a very limited data set. What if the percentage of students receiving financial aid had increased by a similar amount, meaning that rising tuition has enabled universities to give more financial aid to students who can't afford to attend but need it? What if the true cost of education has increased, as the amount of material to be taught has? What if universities started counting food and housing into their tuition figure more and more as time went by?

In short, you lack evidence.

Quote from CNBC article
Initially, Fuller wanted a school in New York (Columbia University was one) and Pennsylvania, but with many programs topping $30,000 per year for tuition alone, she decided on a more affordable option—The Netherlands. A comparable degree in health economics cost less than $17,000 for a one-year program.

To finance her education at Erasmus University in Rotterdam, Fuller took out a $30,000 loan through her mother’s home equity line of credit, which covered tuition and fees, as well as air travel, an apartment in Amsterdam, and living expenses for her year abroad.
....
The cost may be lower, but is the quality of education overseas is just as good as an American university?

Jessica Fuller says in her case, yes: she landed a consulting job with Marsh Inc. as an International Knowledge Manager shortly after she graduated from Erasmus University, and says that the university – and its location – were definitely a factor.
Seems other countries can do it much cheaper than the US can.

Quote from Market Oracle
Simply put, we have a society that by and large feels a college education is both a necessity and an entitlement. This creates a huge demand. However, much of that demand would not be satiated were it not for government. The idea of guaranteed student loans has monetized virtually all of the demand. This guarantees income for universities and they similarly behave as if their cash stream is not dependent on performance, market factors or anything else. They treat their cash flows as an annuity in perpetuity. And unfortunately, we’ve taught them that they can raise their tuition at double or even triple the rate of the cost of living and all the seats will be full at the start of each year.
This clearly links the student loan scheme to the ramp up in prices, as I've suggested. The graph also shows the cost of tuition - we should assume therefore that it is talking about tuition, and not tuition + any other number of things.

Quote from Centreri
A lot of the world is still feeling the aftereffects of the financial crisis. This entire phenomenon can be explained away by poorer economic conditions than in the past.
Of course. Yet the price of tuition keeps rising when on average people are clearly receiving less benefits from getting educated and racking up the debt. Why bother getting a $30k student loan if you end up working at burger king next to someone else who didn't go to college at all?

Quote from Centreri
And I'd say that any engineers that are unable to find employment are pretty bad engineers. Well, or in a not-in-demand field of engineering, I suppose.
Or, maybe the jobs just aren't there. Maybe they are perfectly fine engineers, but are competing with people that have 5 years experience for the same entry-level job, just as Kame above said she'd experienced.

Quote from Centreri
I don't disagree with this. What's your point here?
You're saying there's no problem with the cost of tuition and the loans wracked up, and I gave an example of why it's a problem and you agree with it. Seems a bit contradictory.

Quote from Centreri
Again, I don't disagree with this. American for-profit colleges have a very bad reputation as well, and those graduating from them are considered to be below par. I don't know whether the government provides any sort of subsidies for these programs, though. And if it did, I would assume that it would make sure that the college turned out quality graduates first. So I don't think there's anything really to be done there.
Except that this in itself is a problem:
Quote from CNBC article (Secretary of Education Arne Duncan)
“Where we have huge concerns is where you have for-profits that are misrepresenting the facts, who aren’t being straight, who are piling up students with debt that they can never begin to repay and we’re going to challenge that status quo very clearly,” Duncan said.


Post has been edited 2 time(s), last time on Sep 10 2012, 1:14 am by Lanthanide.



None.

Sep 10 2012, 4:07 am Vrael Post #30



Quote from Centreri
Quote from Centreri
And our system is partially private, to a greater extent than most other Western nations, which leads to greater efficiency.
Quote from Vrael

I'd like to point out that the convergence of a market to a given efficient equilibrium is only assumed to happen in the long run. A powerful statement, but one which can hardly be used to describe the current state of things. Private is not automatically more efficient, a public system may in fact end up being more efficient than a private one due to perturbations in the market which prevent the "long run" private market from reaching its equilibrium, where the public system may be resistant to such perturbations and such retain its greater (if sub-optimal) efficiency.
This is a very vague statement, and I don't believe your point applies to the situation at hand. What perturbations in the market could happen in education?
I am no economist, but to name a few:
The 2008 housing bubble collapsing
inflation
the greek eurozone crisis
China's emerging economy
The war in Iraq
The war in Afghanistan
The 16 trillion U.S. debt
fluctuations in the NASDAQ index
fluctuations in the DOW JONES index
the high U.S. unemployment rate


I hope the context of your claim about efficiency has clarified the vagueness in my own response. I assumed you were familiar with the economics behind the ideal free market and how it relates to "greater efficiency," and I apologize if this wasn't the case.



None.

Sep 10 2012, 9:26 am Sacrieur Post #31

Still Napping

Quote from Centreri
Very well. You've shown that a significant number of students are surprised by the conditions of their student loans. Nevertheless, I don't think that the solution to stupid teenagers not looking at what they're buying is to remove the choice. Perhaps establishing offices in high schools to aid in the process, if this is not already a thing, would be a better solution.

They're called financial aid offices, every college has one. As we have just learned, they don't seem to be working. Even websites like ASA aren't enough. And as all of us have gone through the whole college orientation ordeal, we should know that high schools don't exactly hit the financial side of things as hard as they should. My high school economics class did nothing to talk about loans, scholarships, or anything that may prepare them for the future. It was instead a bunch of nonsense about the differences and similarities between capitalism, socialism, and communism. Which, while interesting, is of little practical use to a prospective college student.

Education would be a large key to remedying this problem. However, even educated individuals have to find a way to pay.


Quote
Pretty sure that the only fundamental difference between the current system and what you want is that the current bar is set too high for your liking. I'm sure that MIT and Harvard and such would increase the number of full-tuition scholarships if more geniuses start popping up, so I'm not convinced by the "limited to a certain number of recipients" bit.

I don't think very many people are ready for the shift to college. It's such a sudden, dramatic change that it probably leaves people confused and some people left in the dust, wondering how to make sense of it all. At worst, people make horrible choices, unprepared for the level of responsibility college requires to do well. Autonomy is a powerful thing, and it may be that society is putting it on them without the proper preparation. So falling back on loans for easy money now, using rationalizations as an excuse why to get them. Then they graduate and reality hits them like a brick wall. They're oodles in debt and suddenly have this big hole of finances to take care of.

Kame said that there's a mistaken belief that a college degree equates to a job with a ludicrously high paying entry job, and that they'll be set up once they graduate. Which isn't the case, as we know. While people should be what they want to be (and not force themselves to be engineers or programmers, or something that makes money) there should be realistic expectations for that. Want to be an actor or dancer? Do it, but be prepared to serve as a waiter and that student loans are going to be a real burden. The only real solution in the scenario described is to continue living with a relative or parents or find a group of people to live with -- whereas an engineer making a fair $25/hour entry will be able to afford his own place.

I have poured some thought into this, so I've come up with two needed solutions:

1) Lower the financial burden on students.

2) Educate prospective students properly.


---

Harvard and MIT are extremely competitive. The number of geniuses would not largely influence the number of people attending. The smartest and brightest will get the spots, leaving those at the back of the genius bus left to turn elsewhere.



None.

Sep 10 2012, 3:03 pm Fire_Kame Post #32

a left leaning coexistence nut

Quote from Sacrieur
Quote from Centreri
Very well. You've shown that a significant number of students are surprised by the conditions of their student loans. Nevertheless, I don't think that the solution to stupid teenagers not looking at what they're buying is to remove the choice. Perhaps establishing offices in high schools to aid in the process, if this is not already a thing, would be a better solution.

They're called financial aid offices, every college has one. As we have just learned, they don't seem to be working. Even websites like ASA aren't enough. And as all of us have gone through the whole college orientation ordeal, we should know that high schools don't exactly hit the financial side of things as hard as they should. My high school economics class did nothing to talk about loans, scholarships, or anything that may prepare them for the future. It was instead a bunch of nonsense about the differences and similarities between capitalism, socialism, and communism. Which, while interesting, is of little practical use to a prospective college student.

I'm glad to see you took my scholarship advice in the shoutbox to heart, young padawan. :P

High School already comes under fire for "teaching for the test" instead of actual teaching. And what you're talking about is not economics - or if it were, it would be on such a grand scale that students would feel more hopeless than they do already; even filing it under microecon is a stretch. And thank you, I liked econ. Why can't we remove a useless class, like chemistry? That didn't help me at all in the real world. The sort of class you are talking about is personal finance. I took it in high school as an elective but in it I learned loans/bonds mature, how to do taxes, how to balance a checkbook (which my third grade teacher taught as well, lol) and we even got to play a stock market game, the one that circulates around SEN every now and then, for the entire semester. Making a personal finance class compulsory is something that I can agree with, but there are already a lot of requirements. The way colleges get around the gtPathways thing to still make money is by requiring specific classes all of their students attend; at the first four year I went to it was a freshman seminar class, and then at the last one I graduated from it was a couple of Cultural-something classes. And look at how much of a pain that is; you're spending more time fulfilling the college's requirements over actually learning things. Luckily, smart students choose electives that fit their major or intended field of work, but many do not.

As I've said before, though, what students need is an advocate. A simple service that a third party charity - separating them from the schools and government - could provide until that charity become horribly corrupt and tied down with bureaucratic red tape. The advocate can help them see how much loans cost and what it will take to pay it off and the real world ramifications for this, and remind them that even in the 90s most people still started in retail/food service/customer service positions until they landed their first job, and that students needed to plan for that phase. (which I believe is the purpose of the six month grace period on government loans).


EDIT:
Also as I've said before, education is surprisingly affordable, but private institutions are not. State level colleges, instate level colleges, are very affordable and have very good scholarship programs. You can't eat your cake and have it too; many people (like me, cough,) made sacrifices to get affordable education and to not be overwhelmed in debt later in life. Harvard and more expensive institutions are a double edged sword; it can be very difficult to land a job after attending Harvard because it is Harvard. That's the only real reason; employers believe it is too expensive. Truth be told Sacrieur, I bet you could do just as well at a state college as you would at MIT. I don't think you need to go to MIT, other than you want to say you went to MIT - which is really no better than the corporate bozos who say you need to go to their college. Stop feeding their propaganda.

Again you really need an advocate to sit down and be frank with you about these things; do you need to go to MIT, or can you go to a state college and receive the same ends? Will you be able to pay your loans off in a timely manner? What are the best loans available to you? What grants and scholarships are available? Should you get a technical degree, a certification, and associates, or a bachelor's degree? Should you enlist or should you wait until after you get a degree and try to become an officer? get a degree and What are your life goals? Career goals? Social goals? There are cases in all ends of this, there is no one right or wrong answer for this. All these things matter.

Post has been edited 1 time(s), last time on Sep 10 2012, 3:13 pm by Fire_Kame.




Sep 10 2012, 11:50 pm Centreri Post #33

Relatively ancient and inactive

Quote from Vrael
Quote from Centreri
Quote from Centreri
And our system is partially private, to a greater extent than most other Western nations, which leads to greater efficiency.
Quote from Vrael

I'd like to point out that the convergence of a market to a given efficient equilibrium is only assumed to happen in the long run. A powerful statement, but one which can hardly be used to describe the current state of things. Private is not automatically more efficient, a public system may in fact end up being more efficient than a private one due to perturbations in the market which prevent the "long run" private market from reaching its equilibrium, where the public system may be resistant to such perturbations and such retain its greater (if sub-optimal) efficiency.
This is a very vague statement, and I don't believe your point applies to the situation at hand. What perturbations in the market could happen in education?
I am no economist, but to name a few:
The 2008 housing bubble collapsing
inflation
the greek eurozone crisis
China's emerging economy
The war in Iraq
The war in Afghanistan
The 16 trillion U.S. debt
fluctuations in the NASDAQ index
fluctuations in the DOW JONES index
the high U.S. unemployment rate


I hope the context of your claim about efficiency has clarified the vagueness in my own response. I assumed you were familiar with the economics behind the ideal free market and how it relates to "greater efficiency," and I apologize if this wasn't the case.

How have these events affected the education sector in a way that may have made private less efficient than public?



None.

Sep 11 2012, 12:24 am Sacrieur Post #34

Still Napping

Quote from Fire_Kame
Again you really need an advocate to sit down and be frank with you about these things; do you need to go to MIT, or can you go to a state college and receive the same ends? Will you be able to pay your loans off in a timely manner? What are the best loans available to you? What grants and scholarships are available? Should you get a technical degree, a certification, and associates, or a bachelor's degree? Should you enlist or should you wait until after you get a degree and try to become an officer? get a degree and What are your life goals? Career goals? Social goals? There are cases in all ends of this, there is no one right or wrong answer for this. All these things matter.

MIT's financial aid package is calclated by an equation:

Student Expense Budget - EFC = Self-Help + MIT Scholarship.

For 2012, the SEB would is $57 010, my EFC would be $1900, and self-help is $6000.

This means I would be given 49 110 in an MIT scholarship. The EFC is earned through summer work (apparently), and the self-help is earned through work during school or loans/scholarships/grants.

Since I qualify for the full amount of the Pell Grant, that's $5500 deducted straight out of my $6000 self-help, leaving $2400 remaining for me to cover. This could easily be covered with a stafford loan or otherwise. If I were to attend four years ($1900 × 4 + $1500) then I would be paying $9100 in EFC total + $2000 for the left over self-help, yielding a total attendance cost of $11 100.

Going to MIT would be cheaper for me than any other university without the aid of a large scholarship, since they would paying my full tuition and then some.

As for a degree from MIT? It's not that big of a deal, takes smarts and drive to get into the program (I guess if you're low income like me), but beyond the hype it's just slightly harder coursework. The "real world" doesn't see it that way though, and the average entry salary for someone with a degree from MIT is 60k a year. So there's a definite benefit to going.

In addition, they do produce a lot of high quality research and have great opportunities there.



None.

Sep 11 2012, 12:28 am Centreri Post #35

Relatively ancient and inactive

This might help make your point: http://online.wsj.com/public/resources/documents/info-Salaries_for_Colleges_by_Type-sort.html .

And these are medians, not means. I'd expect the differences in means to be significantly higher, as engineer undergraduates are among those with the most opportunities to become rich by going into law, finance, entrepreneurship, etc, which schools like MIT help foster more than most.

Post has been edited 1 time(s), last time on Sep 11 2012, 12:34 am by Centreri.



None.

Sep 11 2012, 12:41 am Vrael Post #36



I think you would agree that any of the factors I listed will perturb the markets.

When a market is perturbed, the equilibrium between supply, price, and demand may move, depending on the nature of the pertubation. The war in Iraq, for example, or the 2008 housing bubble collapse, would both perturb the markets more than 1% inflation, just as an example. The idea that any given market will reach an efficient equilibrium is always in the long run. The question becomes, how long is the long run? 6 months? 5 years? A centreri? I mean century**?

Lets pretend the price of a college education was close to its equilibrium in 2007, just prior to the housing collapse. When the housing collapse occured, this moved money all over, stocks dropped, people held on to their money when they would otherwise have spent it, investors stopped investing, we had an economic stimulus/bailout, shit hit the fan. Now, the convergence of the college education market is ruined, and it needs to re-converge. Its been 4 or five years (its 2012 now), but over that time span the price has only increased. The next question becomes, has the value of that education increased with the price, or is the price moving higher than the value of the education (i.e. above the long-term convergence equilibrium price)? If the price has gone up but the value hasn't, we can expect that the market will eventually correct this -- in the long run. It may take 15 or 20 years to correct this, or miraculously it could correct it tomorrow. Or, we might end up with a cyclical imbalance, 5 years from now the price may be too low, then 10 years from now it might be too high again, etc etc.

The public model can be more efficient during the time when the market hasn't converged. Lets say the real value of a college education is $20,000. For the next 20 years, the public price is going to be $23,350 for an education, because we all know it takes congress about 20 years to pass a bill. Obviously, the public model isn't perfect, its off by $3350. However, the private model can be even worse. Private companies might be charging $30,000 for the next 5 years, then $25000 for the next 5, then $21000 for the next 5, then $20000 the next 5. In this particular case, the public model was more efficient than the private model for 10 of those 20 years. And if we calculate the total error over that 20 year period for both models:
3350*20 = 67000 (public error)
10000*5 + 5000*5 + 1000*5 + 0*5 = 80000
it turns out the public model was more efficient over the whole time period. Obviously after the first 15 years the private one was better, but if we apply this to the 2008 credit crisis, you can see how this basic public model is resistant to the kinds of error that the private one isn't.

Of course this can work in reverse too, say the value of the education goes up to $40,000, because of the breakthrough technology of the WhiteBoard or some shit lets us learn 2x as much in the same amount of time, and the stupid government keeps their price at 23350 for 20 years. The private model will have a better efficiency the entire time, something like 30,000 for 5 years, then 35000 for five years, 38000 for five years 39000 for five years. Then the government subsidized colleges will be underfunded and get shitty while the private ones get better because they're getting the value they deserve.

My whole point is that you have to consider the private market more efficient in the long run, like the theory says. No one can just say "its private, therefore more efficient." That's straight bullshit. It's like saying "The limit of 1/x as x -> infinity = 1/2" because you're looking at 1/x when x=2.



None.

Sep 11 2012, 12:50 am Centreri Post #37

Relatively ancient and inactive

I think we have conflicting ideas on efficiency. When I think of efficiency in this context, I look at factors like students going to college who wouldn't have gone otherwise, just because the price is artificially deflated by the government. I pretty much assume that private is going to maximize efficiency, because that's the nature of something being unsubsidized. The cost of the education is presented up front, giving the students the choice of the best way to spend the money. When it comes to public, the cost is hidden, and while the students themselves are paying less, society is actually paying more (in most cases) because of the tax money that goes into the subsidies of the public school.

I'm also not convinced that something like this can magically shift so far from equilibrium to overcome the innate inefficiency of public systems. Some colleges can go under in bad times, sure. Not a lot, as we can see. Some may lose some of their money. They may end up charging more, slightly shifting it. But I just don't see the effects of these perturbations being significant. Though it's theoretically possible, I don't believe this is a very practical problem.

Furthermore, assuming that universities play these financial games and can thus be hurt by these perturbations, we can conclude that these financial games are, overall, helpful to their finances. If we make public schools exempt from these perturbations, we can assume that they don't have the added bonuses of the financial games. Therefore, over the long run, this adds another factor towards private efficiency. The very thing that you claim makes private universities more vulnerable during times of trouble makes them more efficient over the long haul (beyond the sort of efficiency I was talking about before). This is similar to what you're saying, but as we can see by the lack of private universities going bust, this compensates for any vulnerability to perturbations.



None.

Sep 11 2012, 1:07 am Vrael Post #38



Quote from Centreri
I think we have conflicting ideas on efficiency.
And I think you ought to explain what you mean by these things next time before I take the time to write out a long post illustrating my ideas. :P



None.

Sep 11 2012, 1:19 am Centreri Post #39

Relatively ancient and inactive

My efficiency is fairly direct - the different prices shift the decisionmaking of the students because for public universities, there's a hidden cost. Your efficiency is odd. In your model, universities are arbitrarily pushing up prices. If they're pushing up prices, it means that the money they get from the extra tuition outweighs the negative aspects of it, like fewer applicants. I'm not quite sure that what you're talking about is exactly "efficiency".

Post has been edited 1 time(s), last time on Sep 11 2012, 1:28 am by Centreri.



None.

Sep 11 2012, 1:39 am Vrael Post #40



I was talking about the classical model from your basic Econ 001 type classes based on the work of Adam Smith and the like. I assumed you were too, but clearly you're not, you have your own ideas on what makes up efficiency and that's fine. If you're not familiar with this I encourage you to read about it, because it forms the basis of many economic arguments in politics in modern times.



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