As such, the private student-loan sector in the US is no longer a going concern, and no student loans accurately price risk - a neat little wealth transfer to buy votes from students. It's also a scary credit bubble; apparently we learned nothing from FMAE and FMAC and just blamed big evil banks for following the perverse incentives. Hilarity ensues.
One thing the government does that the private sector won't is prioritise the needs of society over financial results. Say, for instance, that "teachers" and "nurses" were underperforming groups of student-loan takers. Private sector would say "OK, stricter controls on student-loans for those!" Meanwhile the government would say "OK, but we really need more teachers and nurses in society, so we'll keep giving them student loans like today." This is of course a fictional example, but you get the point.
But to give an example: lots of people in lots of countries traditionally get support from their families for education and are expected to help out their parents financially later in life. This kind of financing never even hits the markets---but on the other hand, parents are probably the people knowing their kids the best.
Getting young people into more debt does not prioritize the needs of society.
If you want to prioritize the needs of society, provide young people a tuition free, or at least very low cost, education. Current system only really benefits scam operations like ITT.
Even though MS is significantly less risky you need to factor in the huge gap between value of that in money in USA v/s India.
Market signals works pretty strong here. Stanford can charge you whatever they want while the F1 visa factory college charge a modest 10K for a 2 year M.S.
The "invisible hand" is not what should be guiding society. The "invisible hand" has declared that it's more worthwhile to be a Kardashian than it is to be a teacher or nurse.
What you propose is to guide society by deliberately lowering the pay of teachers and nurses even more. So are you saying that the invisible hand is right? That a Kardashian should be expensive (which reduces how many are available) and that teachers should be cheap (meaning we can afford more of them)?
No, I'm not. So your response has lost all credibility right there.
If you want more teachers, you can either increase budgets to pay them more, or you can use some artifice to increase the supply of teachers so that wages get suppressed. You implied having more teachers would be nice, with your comment about Kardashian. So your own views here are self-contradictory.
Look, teacher pay is in control of the government, not the market. And nurse pay and nursing demand has already had demonstrable impact on students' selection of what to study. (You can observe this by looking at the real world.)
Is there a particular hypothesis that you're arguing against? Is it that increasing pay won't attract students to the line of study? Do you disagree with the equation (Teaching Budget) = (Teacher Pay) * (Number Of Teachers) in a material way?
In fact I ... wait a second.
Me: > I proposed increasing their pay,
You: > No, you didn't.
Me (upthread): > let their salaries increase.
Well now, looks like I did. (You can observe this by looking at the real world.)
The response to your "let their salaries increase" pointed out that there are districts (and counties and states) where this simply does not and can not happen given how government policies are structured. Much of that the result of quite deliberate "starve-the-beast" anti-tax policies, but also frequently a simply quite inadequate economic base.
In the deep south of the US, say, the state of Mississippi, you have a de-facto segregated school system. Whites, even poor whites, attend private schools, largely religious, known as "Segregation Academies". Public schools are almost wholly the domain of blacks.
http://www.theatlantic.com/national/archive/2012/12/in-south...
https://en.wikipedia.org/wiki/Educational_segregation_in_Sun...
https://en.wikipedia.org/wiki/Segregation_academy
Markets don't exist independent of power constructs, a fact explicitly recognised by Adam Smith: "Wealth, as Mr Hobbes says, is power." Much of Smith's Wealth of Nations is about those dynamics.
This thread reads as if two ideological agendas are being pushed on the other, rather than some seeking of greater truth. I'm finding your line of argument the less pesuasive and less sincere.
We need lot of teachers and nurses and that is possible only if they are cheap. If the teachers and nurses are expensive we will have few of them making education and healthcare more expensive.
The probability that some celebrity would earn disproportionately more than a conventional career will always be 1 in a fairly free society. Even in sports like say sprinting 1 player often is far better than rest of others.
And I don't. The invisible hand has said that the Kardashians are more valuable than teachers. So to me, any argument that says the "invisible hand" should be used is completely invalid.
What would the criteria be to determine loan eligibility for a student fresh out of high school?
Of course, none of this is as accurate an indicator as a FICO score which is why student loans are federally guaranteed, otherwise who would offer them?
All of this goes to underscore just how destructive the "college for everyone" concept is. The government is making junk loans so that naive young people can pursue useless degrees and graduate directly into crippling debt servitude. Consequently, colleges have transformed into bloated profit machines, happily ratcheting up tuition in response to this inflated demand.
Sadly, reform will only happen once this system collapses in on itself.
What is inaccurate about your FICO score? Maybe it results in false negatives (meaning your score is low when it should be high), but if the opposite was true across the board (bad borrowers getting high scores) then the credit industry would collapse.
My credit report often has accounts that aren't mine listed. Balances can be wrong for months. Accounts occasionally show late payments that were on time. The dates are often wrong (sometimes by years) for items, and then little things that are used to verify my identity by many companies can be quite wrong, like past addresses.
Colleges aren't really "profit machines" though, and growth in tuition hasn't paced enrollment increases, so it is more likely that aid levels are being increased in response to rising tuition, rather than tuition being raised due to increased aid. Interestingly, one of the dominant factors in the growth of personnel costs for colleges is healthcare for employees.
Between 1975-2004, enrollment increased by 65% in four-year colleges while cost increased by almost 200% over the same period. [1][2] It's not really a demand-driven phenomenon because colleges have capacity to support the number of students attending, so the marginal cost of accepting additional students is low. The more likely cause is that loans (private or public) turn students into consumers, forcing colleges to compete with each other to attract paying customers. Look at the facilities and amenities provided at German universities (which are 100% publicly funded) compared to public universities in the US. We spend tremendous amounts of money for health centers, gyms, sports, clubs, etc., that require increased spending on construction and administrative support staff. [3]
[1] http://nces.ed.gov/programs/digest/d15/tables/dt15_302.60.as...
[2] https://trends.collegeboard.org/college-pricing/figures-tabl...
[3] http://www.demos.org/publication/pulling-higher-ed-ladder-my...
It's Keynesian demand-side stimulus at its core. With the national dialogue focused on how college should be available to everyone, along with unlimited, federally guaranteed student loans, demand skyrockets and prices rise to meet them.
This is categorically false. Schools would maintain whatever price point achieved equilibrium with the market's ability to pay. It would not necessarily require any school to reduce their prices.
> ...demand skyrockets and prices rise to meet them.
But that doesn't make any sense in the context of the higher education market..."supply" is neither fixed, nor constrained (within reason). Schools could easily expand their supply to accommodate additional students because there is actually an over-abundance of adjunct labor (rather than full-time faculty) in most fields that are trained and available to teach classes now, at much lower costs than traditional tenured faculty. The costs of providing education have actually fallen during the same period that the costs of running a college have risen. It's not being driven by "demand" from prospective students -- cost growth is being driven by competition between schools.
Schools also can't choose to compete on price because the availability of "free money" in the form of loans makes students less price sensitive. Instead, schools end up competing based on maximizing overall "quality of life" factors within a fixed price.
No, it shows how destructive the US policy response to that concept is, not how destructive the concept itself is.
Neither difficult-to-discharge loans without substantial cost or quality controls, nor an extensive role for private, for-profit institutions are demanded by the "college for everyone" concept.
> Consequently, colleges have transformed into bloated profit machines, happily ratcheting up tuition in response to this inflated demand.
I don't think its true that "colleges have transformed into bloated profit machines", so much that "colleges that are bloated profit machines have expanded and taken a larger market share".
Then, the California state government banned all new student enrollment at ITT campuses in California.
The problem here is with the government instead of ITT in my opinion. If you are lending money to someone who is taking significantly more risk it is your fault if the person fails to pay it back and not of the consumer or the business selling the service.
In fact it makes sense for the government to do better credit risk analysis for every college-course-student instead of providing loans for any student, college course. The private banking industry already has this system and it makes sense for government to just leverage that.