We've also insulated everyone but the student from the consequences of the decision. Lenders, universities and counselors have zero exposure to students' lifetime earnings.

Making student loans dischargeable (and modifiable) in bankruptcy and requiring colleges who maintain an endowment to guarantee first losses on their students' loans would be good first measures.

(Uncomfortably, this will mean a liberal arts degree will become much more difficult to secure a loan for. It will mean fewer schools will be willing to print unlimited English degrees. This doesn't mean we don't need English majors. But if someone cares enough about the future of English majors, they should stand ready to hire them at a competitive wage.)

Or colleges might charge differently per credit hour depending on course and major. It's always seemed a bit ridiculous to me that a credit hour of American poetry and a credit hour of propulsion systems costs the same amount, considering the wildly different overhead and input costs. That's how it worked when I was a student in India.

Liberal arts, business, and law students are being ripped off right now - there's no way it actually costs that much to deliver most of those courses.

I do think you may be under-estimating the faculty cost on business/econ/law classes, specifically. Faculty in those disciplines tend to be relatively well-paid[0] to compete with lucrative alternative careers as leading lawyers/consultants/financiers.

Using UVA Law as an example because I found numbers quickly... avg faculty salary was $180k in ~2013 (so say, $200k today adjusting for inflation)[1]. Faculty-student ratio is 6.2:1 [2]. That's $32k/yr/student in direct faculty salary costs before paying for employee benefits, administration, facilities, etc. Against that backdrop, ~$65k/yr/student tuition [3] seems pretty reasonable.

[0] https://www.chronicle.com/article/Faculty-Salaries-Vary-by/1...

[1] https://abovethelaw.com/2013/04/how-much-does-your-law-profe...

[2] https://www.law.virginia.edu

[3] https://www.usnews.com/best-graduate-schools/top-law-schools...

(Facilities dropped, same cost per student on dorms + maintenance, building capex dropped)

You really need to do a per-student cost analysis - e.g. if there are 500 STEM graduates and 2000 liberal arts, the costs are not evenly spread across the non-academic staff, and you need to account for the separate facility costs (e.g. a computer/science lab is much more expensive to maintain and stock than an english classroom)

And There are also lots of intangibles to factor in -

-How many of the alumni contributing to the endowment and paying for academic buildings are STEM vs. liberal arts graduates

-How do graduation rates and job outcomes differ between STEM vs. liberal arts, and affect the college's KPIs (e.g. 95% graduate on time and 80% get a job within 6 months making a median $70k, for marketing)

Also presumably your school has an endowment and investment managers, which is the largest source of revenue for top tier schools (Yale's endowment of $27.2B returned 12.3% in 2018, the school spent $1.4B of that return on operating costs making up 34% of the university's net revenues [0])

So really in the grand scheme of things, most major universities are safe investment vehicles that are (1) extremely marketable to wealthy alumni (2) have great information networks and (3) generally enjoy major appreciation on their real estate value, making the comparison of STEM vs. liberal arts salaries pretty negligible

[0] https://news.yale.edu/2018/10/01/investment-return-123-bring...

Also, the poetry class is certainly taught by an adjunct.

Demand isn't related to cost, but supply certainly is. Lower costs mean greater quantity supplied at any price level.

https://en.m.wikipedia.org/wiki/Marginal_cost#Perfectly_comp...

like a cooking class with no kitchen time and no food prep or tasting...

Why is this? Isn't there a glut of qualified liberal arts post-grads and post-docs, compared to engineering?

Is it not like this already in the US?

In Canada my CS program cost ~100% more than an arts program at the same school. It was pure price discrimination based on expected earnings and willingness to pay -- I would be paying double even for the arts courses I was taking.

Wasn't the case at Georgia Tech. I assume it's similar everywhere.

I remember that (in a University in the USA) one credit hour of a real analysis course cost much less than one credit hour of a semiconductor fabrication course. The majority of the difference was in the "laboratory fee" which was several thousand dollars.

$10 says we see the 'more desired' courses (IE, STEM) go down to barely nothing per credit hour.

I studied marketing (which I don't regret), but that is not an expensive class to teach! You need some books, some computers and a lecturer and a TA. That's about it.

Studying something like Biology or Engineering or Comp Sci where you're actually consuming resources as you learn (be it dissecting frogs or cloud computing or 3d printing equipment), so you'd expect that there's a cost that business, law and arts courses don't really have.

The only consumable resources that I expended in my Comp Sci bachelor's degree was some person-hours of ass-in-seat, fiddling with hardware design software.

Everything else was done with off-the-shelf, typically free software, mostly on my personal laptop. If I didn't have one, I'd have done my homework in any of the general-purpose computer labs, also used by mathematicians, art majors, and medical students.

You don't need to piss away $5,000/term in cloud computing costs to get a good 4-year CS education.

I've never thought of it this way.

I wonder if in a future with more flexible financial systems (smart contracts, etc.) maybe we could pay with college via a percentage of future earnings for a fixed time.

So if you graduate with a doctorate then you owe 10% for 5 years, but a master's is 8% for 3. Or something.

I always find it curious how so many people are eager to advocate literally selling yourself into slavery for a college education, while being so outspoken against the word "slavery".

http://freakonomics.com/podcast/student-debt/

Technically, they are dischargeable. It's just really hard to do, much harder than other debts.

I’m confident that a fully private market would limit student loans to those with a positive ROI. Of course, that’s politically unpalatable in the US.

My favorite suggestion is to cap the repayments (of non-dischargeable loans) at something like 15% of income above poverty line, and time-limited to 20 years. And let lenders use all the information they can lay their hands on when making offers (schools, majors, test scores).

Then the offers made to 17-year olds will reflect pretty well the earning potential of different paths. Some luxury degrees will, like other all-expenses vacations, only be available to the wealthy, which is OK. In courses which represent a gamble (is that Spanish Lit. en route to the State Department or to Starbucks?), those who do well will subsidise (a bit) those who do less well, but nobody's payments will be unaffordable.

For example, we want lots of teachers and librarians, social workers and nurses. But if we only pay based on personal income, we'll get lots of people with low social value but high income. E.g., corporate lawyers, investment bankers, corporate raiders, advertising executives.

I think the better thing to do is publicly fund education and the have the government capture the gains via taxation. That's harder to tune, but I don't have reason to believe the outcome will be more lopsided than a purely market-driven approach, and has the big advantage of not funding a whole industry of student lenders.

This is my biggest fear with the current rise of progressive/socialist interest among young people. All they can see is the free stuff being promised, not the inevitable fallout down the road (the wealthy will be fine, they always are - it’s the young, poor, and disadvantaged who will be stuck with the bill).

EDIT TO ADD: Argentina, Brazil, Poland, Spain, Turkey, Panama, Kenya, Egypt and more [2]

[1] https://www.investopedia.com/articles/personal-finance/08061...

[2] https://www.edvisors.com/plan-for-college/money-saving-tips/...

In Poland's case, there are stupendously large numbers of people studying various branches of humanities (literature, psychology, pedagogy, law) which have poor job prospects in our country. After graduating, a lot of these people just work service jobs or emigrate to Western Europe (to work the same crappy jobs there, but for more money). It's an enormous waste of taxpayer's money, which is happening because the the students are spending out of somebody else's pocket.

Meanwhile, the governing parties eviscerated the trade schools, because "we need educated people", "we're entering knowledge economy" etc. The result being, a median plumber making more than a median law graduate.

This leads to an entirely different discussion about whether universities exist to educate the populace or to train future workers.

==The result being, a median plumber making more than a median law graduate.==

Which should entice more people into the trades. Is that happening?

Getting poor pseudo-education is perhaps more harmful than getting no education at all. People with no education are more likely to have some intellectual humility, while the "quarter-intellectuals" that took some low-effort third-rate humanities courses tend to fall victim to Dunning-Kruger more often, and offer simple solutions/explanations to overwhelmingly complex topics.

Are you sure you don't have some sort of bias here? In my experience humanities study involves lots of critical thinking and reasoning.

Wikipedia [1]: "The humanities use methods that are primarily critical, or speculative, and have a significant historical element —as distinguished from the mainly empirical approaches of the natural sciences, yet, unlike the sciences, it has no central discipline. The humanities include ancient and modern languages, literature, philosophy, history, human geography, law, politics, religion, and art."

People studying this would seem less likely to rely on simple solutions and fall victim to Dunning-Kruger.

Google ran a test of their employees skills and found that many humanities-based skills are more highly correlated with success than STEM skills [2].

"Project Oxygen shocked everyone by concluding that, among the eight most important qualities of Google’s top employees, STEM expertise comes in dead last. The seven top characteristics of success at Google are all soft skills: being a good coach; communicating and listening well; possessing insights into others (including others different values and points of view); having empathy toward and being supportive of one’s colleagues; being a good critical thinker and problem solver; and being able to make connections across complex ideas."

[1] https://en.wikipedia.org/wiki/Humanities [2] https://outline.com/TJAaaZ

I've never understood this argument. STEM requires far more critical thinking and reasoning than the humanities. The scientific, medical, and engineering achievements you use every single day stand as mute proof of that.

On top of that, the trade schools were criminally neglected over the past 20 years, so it's very possible to go there and not learn much practical skills...

In the US, there are thousands of community/local/junior colleges where people earn degrees for a fraction of the cost. This can easily be covered by govt if there was political will to do so.

Or companies may shift their workforce into higher-educated countries.

==Community college is junk, go to trade school or into a real profession and stop inflating entry-level job requirements at tax-payer expense.==

The idea that 2 years of post high-school education is "junk" is alarming. What is a "real profession" and who gets to define it? Wouldn't all the new trade school graduates just inflate entry-level job requirements in those fields and decrease wages?

Sometimes community college is worse than junk, it's downright harmful. The most-recommended method in the US to get an engineering degree is to transfer 2 years of core credits from an easy community college to a harder engineeering school. That cheapens the quality of the degree, as the resulting degree is the same. I've done it - physics at engineering school and physics at community college is night and day.

Apart from that, unless you're going to get a teaching certificate or something else in STEM, the resulting degree would not be in demand from private industry if they weren't so commonplace. Those kids would've been better off working for those 4 years or learning a trade. But instead we have people pushing to fund those 4 years completely at taxpayer expense further inflating the problem.

edit: Hell yeah wages in trades would decrease, they need to. Have you not paid a plumber or electrician lately? The guys going into plumbing right out of high school are a lot smarter than the history majors working at Starbucks.

==The guys going into plumbing right out of high school are a lot smarter than the history majors working at Starbucks.==

Based on what criteria? How much money they make today? How much money they make over their career? How happy they are? How much they contribute back to society? Who gets to choose which measure we use?

The thing that I'm worried about is the reaction of these all-inclusive countries once they see a rise in "education arbitrage": get your degree in Germany, then move to the US to pay less taxes (and make more money in case of CS) and optionally move back once you want/have children. On a long time scale that could bleed a country of resources. And I fear they could get the idea of making people stay somehow.

It's not free, it's financed by exorbitantly high tax rates, which in the long-run is arguably more expensive.

You mean like 35% Federal, 15% Payroll, 5-10% state? and then a 9% sales tax?

And then still "needing" to save 15% for retirement, company paying 15% for healthcare?

Seems pretty short sighted to be thinking other places having higher tax rates when the middle class top marginal is approaching 90%.

It's easier to do stuff for cheaper when you just provide less stuff.

https://www.thebalance.com/what-caused-the-subprime-mortgage...

In 1989, FIRREA strengthened the CRA by publicizing banks' lending records. It prohibited them from expanding if they didn't comply with CRA standards. In 1995, President Clinton called on regulators to strengthen the CRA even more.

But, the law did not require banks to make subprime loans. It didn't ask them to lower their lending standards. They did that to create additional profitable derivatives.

No. Nobody wants "free stuff." I see this all the time and all I can think is the right-wing media has really succeeded on this point. Are you also afraid of people who want "free roads" and "free police" and "free K-12 education"? What we want is for services like healthcare and education to be provided by the government, as it's clear the market cannot supply those needs in a way that serves everyone.

The current progressive plan being floated on the left (socialist is a scare word cooked up in the 1950s and still bandied about by conservatives who have no clue how outdated it makes them sound to younger voters) is to greatly increase taxes on the rich and use it to fund social services like college. So, by your own logic, this can work.

The federal tax code, at least, is already massively progressive, and the rich pay far above their share of the revenue already.

Not to mention Bezos and other billionaires keep getting richer even with a ʾmassively progressive' tax code. It's not progressive enough!

1) The wealthy have the resources to fight back against much higher taxation and play the long game. Even if a spate of progressive candidates are elected and drastically raise taxes, the wealthy will just wait until the political pendulum swings back and will get themselves a better deal than they had originally.

2) Even if higher taxes on the wealthy stuck, there is not nearly enough money there to fund every progressive pipe dream (education, healthcare, housing, environment, inequality, reparations, etc, etc). So once again, the working middle class gets stuck with the tax bill, just like every other time we’ve tried something like this.

And speaking about conservatives sounding outdated, there’s nothing that highlights the naivete of youth more than hearing them say “this time it’s different”.

You're also confusing various kinds of ROI here. Education generates both individual and societal ROI. Governments can capture part of theindividual ROI through taxation. And the whole point of government is to create societal ROI. But what a fully privatized educational funding system would be optimized for is lender ROI. As we see with student loans, and even more clearly with loan sharks, who are the true unregulated lenders, maximizing lender ROI is not great for the health of either the loan recipient or society at large.

FTFY

What kind of people will not be able to secure a private loan? The kind of person from a poorer family with bad/no credit, unable to find any acceptable cosigners for a loan.

Personally, I look at markets as tools for solving optimization problems, and I'm saying that one of the factors that makes that work well is missing here.

That was never the theory. The theory was that we decided we needed everyone to go to college. We realized that not everyone cold afford to go to college. Giving students loans is cheaper than paying tuition directly, because you'll get most of the money back, so the government flooded the market with no-credit-check student loans. Nobody involved was ever trying to create a functioning market, even an artificial market.

I also don't think it's true that "giving students loans is cheaper than paying tuition directly". Governments are in a unique position to capture broad societal gains through taxation. So I think the cheaper option is just to fund education, especially the sorts we think increase economic productivity, and then tax the resulting income.

That might well be the case. In my experience, people in countries where university is free frequently complain about life-long students ... people who enjoy being a student so much they basically never leave and live off of public subsidies forever, racking up pointless qualifications. I've met such people too. Countries where taking a course requires gaining a lot of debt don't seem to have that problem, or at least not to anywhere near the same extent.

Also, running an ad campaign is not usually considered "deeply embedded on the ... demand side". Coca-Cola has certainly run massive ad campaigns, but it would be weird to say they're running the demand side of the beverage market.

What are the odds the "loan market" will blow up and need a public bail-out, which will be turn out to be vastly more expensive for tax payers than the free fee and maintenance grants provided by other countries?

Virtually zero, because almost all student loan debt is already held by the Department of Education. There is no "loan market" to speak of.

That said I'm not sure how a loan writeoff is more expensive than just paying the fees outright. Presumably public subsidy is always going to be more expensive than a student loan system.

My major was a lucky whim.

And then everyone wonders why new engineers spend their first few jobs trying to design crap that's hyper optimized for what it does but can't actually be built within any reasonable set of constraints.

CS isn't quite so bad but you definitely get some profs with that same optimization worshiping attitude.

Use a crappy JS system that kills mobile devices but lets you deliver the widget in 3 days... and just ask users to upgrade often.

Note I said “assemble” not “solder”. At the time (‘80’s) wire-wrapping was a viable prototyping option. Once digital circuit speeds and complexity increased the option evaporated. I must have wire-wrapped thousands of feet of circuits, including a 6502-based multiprocessor robot controller.

You cant always rely on the technician remembering how ohms law works for you

As it is now, there is no up front penalty for choosing a major at a school that is so expensive the student may be in financial bondage for a significant portion of their career.

The problem is that actual humans are pretty different from homo economicus. Iterating on experience is most of how we learn. But people don't really iterate with education; as structured, it's way too big.

I think the way to solve it isn't some sort of system of up-front penalties. Personally, I think the problem is that education is treated as a one-and-done thing that happens at the beginning of our lives. But that's when we know the least about the world and ourselves. I think education should be an ongoing process mixed in with work.

[1]http://freakonomics.com/podcast/student-debt/

The fact that the value of this social signalling is diminishing is, in my opinion, a long term positive change. It does mean that some people who got degrees just for the sake of getting degrees are left out. But they aren't getting shafted by the market, they were put in this situation by skewed social norms around college education.