50 years ago, if you wanted to go to college, you went, and the prices were reasonable because people could not afford a lot of money for it, and no one would lend it to them.

There is almost no downward price pressure on college costs, and there is upward price pressure: since the students don't care about the price, they always want the school with better and more modern facilities, which cost money.

1) You have capital seeking a return.

2) There exists a basic need that can be facilitated by the application of capital (a degree for a "good job").

3) You remove all the risk out of providing capital for filling the need through government guarantees.

4) You provide a rate of return that is higher than the government guaranteed rate on their own capital instruments (treasury bills).

#4 there, which gives you higher returns on low risk investments, creates a demand for those instruments. And that demand causes a supply of instruments to be created. And the regulation on that supply is minimal.

The result is you get financial institutions giving loans to students for useless degrees at inflated cost institutions knowing that the government has made defaulting nearly impossible (hence the low risk) and they can offer better rates than t-bills.

Students are being exploited exactly like unqualified home buyers were being exploited in the mortgage fiasco of 2008.

What annoys me about the journalistic coverage is that the 'rage views' are "Students are graduating with few prospects from college and a mountain of debt" whereas the bigger story is that "Rich people demanding higher returns, enslave unsuspecting youth through their loan seller proxies."

What's even worse, is that the money just goes right to the colleges inflated overheads. No student ever "sees" the money from the loans. In this case, the cost of the schools just keeps going up so that the loans remain ~80pc of the cost of a degree. Now, how much money is in the Harvard Endowment? Stanford? Princeton? Massive amounts growing far in excess of inflation, and all Tax free. Why are these places even allowed to charge fees for tuition??

What's UC tuition nowadays? $3700 for resident tuition. $4900 when you include all the fees (which my $1000 figure did). Push everything forward 20 years and my parents would have no expectation to be making much more money now than they did then. I would be carrying more debt.

Pick your narrative for explaining what happened in the meantime. "Rich people demanding higher returns, enslave unsuspecting youth through their loan seller proxies" works for me.

This stands in contrast to virtually every kind of loan out there, which can be discharged (written off). As a result, there is less risk for the lender to give a loan to any old fool out there, regardless of the major they choose, regardless of the quality of school they go to, etc. anything that might correlate with the ability to pay it back.

you might say, great, they don't discriminate against liberal arts students at no-name schools. and that might be something that suffers if reforms were made. but perhaps that student might be better served if funding were hard to come by. complain now versus complain more later, kind of thing.

the great sin in the student loan market is the online degree mills, which target relatively vulnerable segments of the population, all funded by loans. for example: did you know that online universities cost almost the same as physical ones? that makes absolutely no sense when you think about it, but i don't think many of their students do. online only should be a fraction of the rate.

Perhaps the online university is a market to be disrupted. not unstructured MOOCs, but credentialed degree schools that are a fraction of the cost of current ones. i can see the ycombinator startup already.

and student loans should be dischargeable. it's the only fair thing to do.

So... your prediction is wrong.

There are way too many factors that cannot be ignored, but that you choose to ignore. You need to look at the interest rate environment (which determines the cost of capital), banking regulations (which have changed dramatically in the past several years), the unemployment rate (you might have noticed we're in the slowest "recovery" since the Great Depression) and inflation-adjusted wage growth (hint: there basically is none), amongst other things.

Finally, you fail to note that the federal government was a participant in the student loan market well before 1996, so you cannot look at the history of private student loans without understanding that the government has influenced the market to varying degrees for some time.

If you want to assume that private lenders would rush to provide student loans at low rates at the same pace the federal government has in this economic environment and without the discharge restrictions currently in place, I'd love to introduce you to someone looking to sell you his 100 year J.C. Penney bonds. They yield over 11% and you can buy them at ~70 cents on the dollar - a great deal!

Good.

Then people will stop lending students tens or hundreds of thousands of dollars. Then schools will lower their prices.

Let's make your comment a little more accurate:

Then the federal government, which is responsible for ~85% of the student loan market, will have to stop lending students tens or hundreds of thousands of dollars, and there will be no end to the cries that millions of young Americans are being denied a college education by well-to-do politicians who are out-of-touch with the economic realities of the average American.

You don't make society's huge education bills go away just because the government is paying for them.

We're in a lose-lose situation here. If student loans are plentiful, tuition costs rise and the debt must be secured by laws preventing discharge in bankruptcy, which leads to complaints about the cost of an education and debt levels. If student loans become less plentiful, the complaints will shift to focus on lack of access to education. Even if costs decrease substantially from today's levels, there is sadly a sizable market of would-be students who simply don't have the funds to go to college. Telling them they can't go to college and major in [insert wacky subject here] is political suicide for politicians.

I'm not convinced it would happen as you say, since the crippling burden of college loan debt described in this article is increasingly familiar to many Americans. Once it begins affecting us personally, it becomes significantly harder to sweep these things under the rug.

No doubt, they would try their best, perhaps suggesting that reduced loans will result in higher taxes for average Americans and will shift the financial burden onto the older generations. That would be much easier (and more desirable, to special interests) than attempting to tackle the underlying issues that have resulted in hyperinflated tuition costs.

If only there were a way to broadcast the views of an intelligent, non-partison, and informed demographic to the average American household. Though I'm not sure anybody would tune in, as people find Fox News' fear-mongering and political divisiveness so entertaining.

What, don't you want to become a botanist???

As I noted in another comment, one in five federal student loans outstanding is already in default or delayed default, and that number does obviously not include the number of loans that are in deferral still accumulating interest. Put simply, there are a lot of people out there who likely could and would consider filing for bankruptcy if it allowed them to discharge this debt.

We can't have it both ways: if you want everybody who wants a college education to be able to obtain one, the federal government has to be in the lending business and it has to be all but impossible for borrowers to discharge their debt.

Not only will this necessarily force lenders to increase the cost of these loans to borrowers, a lot of folks apparently don't understand that the biggest lender in this market is the federal government. Of the more than $1 trillion in student loans outstanding, about 85% have been provided by the federal government. Just over one in five federal student loans is already in default or delayed default. If the law is changed to permit discharge of these loans in bankruptcy, Student Loan Debt will become Mortgage Market 2.0.

if loans are able to be discharged the federal government wouldn't be handing them out like free candy to anyone that wants it.

It's exactly that there is no downside for the government that the situation is the way it is.

But the problem is bigger than the trillion dollars in debt you and I are already on the hook for. A lot of people like free candy, and if you take it away here, we'll go from "Tuition costs are too high, and I have too much debt!" to "Washington politicians are denying me an education!" The education lobby is strong and too many people are dependent on federal student loans for this to be "fixed" in a logical fashion. Everybody has been sold the idea that a college degree is a prerequisite for access to the middle class, and government-subsidized student loans are practically seen as an entitlement.

As much as one can hope for a better system, it isn't likely to come. We're well beyond the point of no return.

Well, in so far as the people (and our government) who are already in debt, I can't disagree. We're in bad shape.

However, I do have hope. The online instruction revolution is still in its infancy, and I have much hope that quality education will be spread far and wide (at low cost). And that anyone with a reasonable amount of motivation can learn and grow and become more productive and wealthy as a result.

I believe part of this is the convenience issue. I finished my MBA 4 years ago, and at the time the school was pushing online classes pretty hard. And the online classes cost more than regular classes.

(Faculty also commented that they were pressured to give higher grades than they believed were earned because of the profit component, and few argued they learned better online. But they sure can be convenient.)

The question "What makes a degree valuable?" is at the heart of its success. All these companies that demand a four year degree - what are their criteria? When they see that someone got their degree at a very inexpensive online school, will that hurt the perception of value?

Some doctors graduated from med school with $100ks in loans. So they immediately filed for bankruptcy and cleared the debt. After a few years of work they were back in the bucks and debt-free.

The loan industry had congress write some new laws (was it 2008 ish?). The package clamped down on debt-collectors calling at all hours. It also eliminated clearing college loans with BK.

The loan industry celebrated - nothing like sure bet! Indentured servitude - Yahoo! They started giving away loans like candy.

Then the schools noticed all the free-flowing money and joined the party.

Doesn't seem to be unintended consequences at all.

"Where the supply curve is more inelastic than the demand curve, producers bear more of the tax and receive more of the subsidy than consumers as the difference between the price producers receive and the initial market price is greater than the difference borne by consumers." [1] http://en.wikipedia.org/wiki/Effect_of_taxes_and_subsidies_o...

"Part of the reason," yes, but take a look at Why Does College Cost so Much? by Archibald and Feldman (http://www.amazon.com/Why-Does-College-Cost-Much/dp/01997445...). Their short answer is "Baumol's cost disease. The long answer is the book.

Think of it as a perverse incentive for collusion between the schools and finance providers to milk the students through the mechanism of easier credit.

In some countries, like mine (Uruguay) university-level education is free :) (though postgraduate studies are paid).

I think China is the biggest example of free university education. EDIT: I was wrong, about U$ 2000/year and rising apparently.

At least our bazillion psychologists and communication majors (equivalent to the dreaded "English majors" in the U.S.) are not saddled with debt, though a non-specialist psychologist can expect to earn less than a store clerk or McDonald's employee.

Continuing edit: Sweden and other countries also have "free" college education:

http://www.theatlantic.com/international/archive/2013/05/the...

http://en.wikipedia.org/wiki/Free_education

List of countries with free post-secondary education (from Wikipedia)

Algeria

Argentina

Bhutan

Cuba

Denmark

Egypt

Estonia

Finland

France

Greece

Italy

India

Malta

Mauritius

Morocco

Norway

Oman

Pakistan

Russia

Saudi Arabia

Scotland

Spain

Sri Lanka

Trinidad and Tobago

Turkey

Barbados

Kenya

United Arab Emirates

Uruguay

I was wrong about China, but apparently it is free in India.

One major difference is that here in Uruguay you don't have entrance exams, and it's free for foreigners (we get several Chilean students, where it is not free).

However, the rich still benefit from the system. Here's how it works:

1) Kids with money go to the best prep-schools and get in the public universities through hard entrance exams. 2) Kids that can't get in the public system, but still have money, can pay for medium-level education. 3) Kids with no money due to poor basic education can't get into a public university and can't afford a private alternative.

Yeah, if you can get into the limited government education programs. Most people pay oodles of money to be educated in private colleges 'affiliated' to universities.

Let's take the example of Tamil Nadu (a prosperous Southern state in India). Compare the colleges that comprise Anna University (http://en.wikipedia.org/wiki/Anna_University#Campus_and_coll...) and the colleges _affiliated_ to Anna University (http://en.wikipedia.org/wiki/List_of_Colleges_%26_Institutio...).

Education is NOT free in India, has never been. This is exactly why Wikipedia should not be a citation source. Anyone can edit wrong information and it never gets corrected, perpetuating wrong information. Here are better links to newspaper articles: * http://www.indianexpress.com/news/from-unemployment-to-innov... * http://www.thehindu.com/opinion/open-page/who-should-be-ente... * http://www.thehindu.com/news/national/financial-muscle-buys-... * An earlier HN thread "Students are the victims and culprits of India’s broken higher education system", https://news.ycombinator.com/item?id=5756142 , http://qz.com/86903/students-are-the-victims-and-culprits-of... * An Open Letter to India’s Graduating Classes, By MOHIT CHANDRA, http://india.blogs.nytimes.com/2012/05/23/an-open-letter-to-...

In India, some government education institutes are heavily subsidized (think IIT and the state REC's) but the rest of the private colleges you have to BUY seats - so your parents financial clout decides if you get to study at a good university or NOT.

Edit: Ironically, Wikipedia has a page on Capitation fees in India: https://en.wikipedia.org/wiki/Capitation_fee#Capitation_fees...

(And I imagine money can be used to "open" a spot, but that won't appear in tuition summaries.)

Education has NEVER been free in India. You have to pay a lot of money at the University level. Almost all education is now privatized.

Germany, OTOH, has FREE education upto the PhD level and it does not figure on the Wikipedia page - This is exactly why Wikipedia should not be a citation source. People submit wrong information and it never gets corrected, perpetuating lies.

I'm 100% sure we don't have tuition here in Uruguay, and poorer students get state help.

However, five years after you graduate, you have to pay a mandatory special "university graduate tax" called "Fondo de Solidaridad" which helps pay for the poorer students, etc., so I guess it is a form of debt :) .

It's about U$ 200 every six months currently.

> I'm not sure which evil is worse, but I'm damn glad I was offered those loans.

You are stacking only two options against each other. There are countries where there are no schools and countries where school is being paid by the community via taxes.

Of course between no school and school with loans the choice is clear (in an (post-)industrialized country, mind you).

Doesn't always seem clear to me. The whole point of the article was that you could be saddled with loan payments for a very, very long time with little to no improvement in job prospects.

Yes it is because grand-parent stated he wanted to go to school (that's how I read it) and that statement of mine is a follow-up to that train of thought where I pointed there are more than 2 options.

The choice between no loans or bad loans is fallacious.

I was a grad student there in 1999-2000, and the tuition for the year was only a little over $4,000. It's much higher than that now, about $15,000 for the year. That's still relatively low, assuming that you're an academic student. Professional schools can charge what they like ("data science" is 60K!)

It's still possible to get an excellent education for less money. Part of this is that we need a cultural shift as well as an institutional one. Four years of cal is now very expensive (about 60K in tuition). But a lot of immigrants (many in my neighborhood) go to 2 years of community college (while living at home to keep costs down), finish at a UC, and study something with good job prospects. That's not reading poetry by the the leafy glen next to a beautiful old building, but at least it is affordable. I suppose I shouldn't just say "immigrants", I do know california natives who do this to, plenty of them, but it doesn't really fit the traditional middle class notion of "4 years of college, away from the parents".

Also - Cal has a good name, but rankings like US News and World Report haven't helped either. They reward colleges for everything that costs money, but they don't reward colleges for keeping costs under control or for enrolling low income students. Not a single public institution in the USNWR undergrad top 20, including UC Berkeley.

Bill Bennet, the republican and quite conservative former secretary of Education, made some very good points about this in a recent book "is college worth it". His take on it is, if you get into stanford, go. If you are inclined to study petroleum engineering, go (PE used as a stand-in for highly employable majors), even if you go to a small college in South Dakota (though if it's engineering you're studying, state schools are often more prestigious than their private counterparts, especially in the western states).

The danger is in between. Don't go to an unknown third tier school and run up a huge debt studying liberal arts - or, if you do, make sure you double major with something that will lead to better employment.

One thing - I don't want to give the impression that I think a cultural shift is all that is needed. Students do need to turn away from the high-cost model, but the government did play a role in this problem. Unfortunately, making loans available wasn't helpful to many students. By guaranteeing the loans, the government made it possible for students to borrow far more than a private lender would have considered prudent. By changing the bankruptcy laws around student loans, the government created a far more poisonous form of debt for students. And then lastly, by making the money so freely available, the government allowed institutions to raise their prices - so even if students wanted to "just say no" to high prices, institutions knew they could charge this cause someone would take out the loan. In short, the gov't may have ensured that the low cost education that would have been demanded never emerged.

That's inherently unfair. It may sound reasonable to ask wealthy families to pay more in order to subsidise poor families, but there's no reasonable method to actually determine a family's wealth.

The usual practice is to look at the parents' savings. If a family has saved $200,000, they will be asked to pay a higher tuition rate than a family that only saved $20,000. But that's crazy: it penalizes families that save for higher education.

That's particularly harmful to middle class families. If you don't have any money, then you can go to an Ivy League school for free (via financial aid). If you have a great deal of money, then you can pay the full tuition rate and still have assets left over. But if you only have some savings, then a college bill can easily wipe out everything you have.

We hate it when the auto dealer tries to extract as much as we can afford from us, but for some reason people are happy to let the schools do it.

That's because in some countries you won't be paying more than 5k to go to a decent college.

Either you have parents who can help, then it doesn't really matter whether we are talking about 5k, 25k or 50k (from a structural perspective), or you don't. If you don't have anybody who can help, it doesn't matter whether you cannot come up with 5k, 25k or 50k.

One of the reasons German students protested 600€ a term (1200€ a year) fees was that it furthered the divide between people who could afford university and those who needed loans or other money. If you could already afford it either way, 1200€ didn't make much of a difference either. If you already struggled massively to keep yourself afloat before that, coming up with 1200€ more was sometimes quite impossible.

If you cannot take out a loan (any form of loan), then you are screwed unless you are already privileged enough to study. If you are, 5k, 15k or 50k make little actual difference.

There are, in my opinion, two possible ways: no fees & affordable student loans for living cost OR no loans, and in the latter case, you already exclude based on wealth, so you might as well just charge whatever it is you want or whatever artificial treshhold you would like to enforce.

And you would be earning a fraction, say $120 per month, that automatically makes the 5k college dream, a dream.

That's impossible, because around here the minimum wage for an adult working a full time job is around 10x that figure.

This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. I'm not going to be the one that screws an entire generation out of a worthwhile education in the name of "loans are bad!"

Loans absolutely are at the root of the problem. Not the abstract concept of loaning money, but the current implementation.

The student loans legally allowed today are borderline usary. They provide a convenient way for lenders to sidestep bankruptcy protection. This leaves students with exact same problems society had before bankruptcy: it's far too easy for the unwary to sign their life away to crushing debt. They essentially become an indentured servant for the rest of their life, destined to die in poverty.

These issues are a practically daily occurrence on r/personalfinance [1]. I personally know several people in this situation. Naive kids get too far over their head in debt, and the traditional protections for that situation have been taken away from them.

Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. That's the only way I can imagine tuition levels reverting to a sane level.

1. for a recent example, see http://redd.it/1kavq7

> Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid.

I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the same trap most solutions do, though. What's "a reasonable expectation," and who decides it?

That's just blatantly wrong. The easy availability of student loans is what's driving education costs. The fact that lenders are willing to lend enormous amounts of money to people who may not be able to pay them back, tells you right there that there is quite a bit of market-distortion going on. Couple this with a natural tendency to not consider future-risk by an 18-year old, strongly implies that colleges would be incentivized to exploit this, and in fact they do! I've read countless articles on private colleges charging insane amounts for tuition whose middle-class graduates end up with thousands in debt and no reasonable chance of making a salary to pay off those loans.

Think about it this way, in a normal reality, there is no chance a responsible bank would lend a middle-class kid $100,000-$200,000+ to do a 4 year liberal arts degree.

Lots of sources down at the bottom.

EDIT: Also, I've yet to actually see any study that concludes direct causation between availability of loans and tuition prices. Yet somehow the burden of proof is on the naysayers?

Here's what paints a picture for me:

- Tuition since the 1980s has increased by an order of magnitude. Out pacing inflation, cost of living, and medical costs (http://en.wikipedia.org/wiki/College_tuition_in_the_United_S...)

- Federally backed student loans are non-dischargeable and are available to nearly all students (regardless of credit score or financial issues).

- Student loans total around $1.2 trillion dollars (50% increase from 2008!)

- US has the highest tuition costs in the developed world.

Whether or not you think tuition is too high or is correlated to federal aid is almost incidental to the issue. There's a big fuckin problem with the amount of student loan debt out there, and if the federal government isn't to blame for this with the way they structure student aid (i.e. guaranteed, non-discharable loans to anybody that wants one), who the hell is? It's also hard to imagine that this much available cash for post-secondary education wouldn't have an affect on demand.

I have no idea who's to blame. I think part of it is institutions adding several layers of bureaucracy is one part. Institutions expanding resources is another (justifiable) increase in cost. Most importantly, a simple increase in demand: Students need to do something to give them an edge in the job market. The safest way to do that is still, by far, to go to college. Just because it's less safe than it used to be doesn't mean it's more irresponsible than, say, dropping out and hoping you're Zuckerberg/Gates/Jobs 2.0

If you're fast and loose with stats and terms you can prove anything. As I read the post, I was struck by the way the writer weaved in disparate studies, terms, and references. I'm very sure there is quite a bit nuance in her claims and because this was written by someone with such a huge conflict of interest (her position literally exists to further private college interest and would she would never, ever argue something that would be counter to those interests), I have to ignore it. There's only 24 hours in a day, and because I don't have the energy to fact check her, I have to dismiss it.

>Most importantly, a simple increase in demand: Students need to do something to give them an edge in the job market. The safest way to do that is still, by far, to go to college.

That's your guess??!?!?! Of course kids want to go to college, just like all kids want a luxury car and fly first class everywhere, so no, demand isn't a great answer. If tuition is high, and you don't have money and you can't get a loan, you don't go to college. Responsible lenders certainly wouldn't lend to everybody, regardless of credi score or repayment ability, but they do. Does that not sound like it could be a problem?

What I don't understand from your perspective is how you can not even imagine that $1.2 trillion in outstanding federally back loans (with around half of it NOT being repaid) would not contribute to the increased tuition costs?!? That's over a trillion dollars that may otherwise have been available if the private lenders had to take on all the typical lending liabilities. That's over a trillion dollars to divvy up between all the colleges and universities (and lenders)! It's insane that tuition outpaced all other costs, including medical costs which are crazy. It looks clear as hell that there is a huge market distortion happening.

Okay, forget I linked to the blog post. Here are sources.

U.S. Department of Education National Center for Education Statistics, Dec. 2001, Study of College Costs and Prices 1988-89 to 1997-98, Vol. 1

National Commission on the Cost of Higher Education, February 1998, Straight Talk about College Costs & Prices

Government Accountability Office, May 2011, Federal Student Loans: Patterns in Tuition, Enrollment, and Federal Stafford Loan Borrowing Up to the 2007-08 Loan Limit Increase

Sandy Baum, Policy Analyst for the College Board, New York Times, Feb. 3, 2010

Bridget Terry Long, Education Economist, Harvard University, Testimony, Senate Finance Committee hearing “College Tuition Pricing and Federal Financial Aid: Is There a Connection?” Dec. 5, 2006

What I don't understand is how you think it matters what I "can imagine." It doesn't. You're hounding me for an answer that I never said I have. You are way too eager to find conclusions which may not even exist. You don't have evidence to back those conclusions. You don't want to find evidence to back them up. You don't read evidence that conflicts with your conclusions. And then you act like I'm stupid for not arriving at a conclusion (because, spoiler alert: there isn't one, yet).

I never said it "doesn't sound like a problem." I said that there's no evidence that availability of funding increases tuition. Until you provide something beyond gut feeling, to combat the statistics that contradict you, it's not worth talking about.

That blog post, by the way, the source of the quote that Taibbi references in TFA. It's not even an op-ed, it's a guest post written on one individual WaPo blog.

I'm aware of what it is. That's why I didn't tell you to read the blog post. I told you to go to the sources.

Did you read the article? It provided a fairly sound argument supporting the conclusion that the availability of student loans and the price of tuition are quite related.

You're missing the point. The overspending is a direct result of the lending problem. Lending is the root cause of the overspending problem. Students choose schools with lots of amenities because it's so easy to get loans, so why not? Because of this, schools have to continue to build plush dorms and state of the art fitness centers in order to keep their enrollment up. This, of course, drives up costs, which is passed on to students via tuition, who just continue to pay for it all with more readily available loans.

A particular university can't just cut spending, because it would put them at a huge competitive disadvantage with everybody else. Only by reigning in lending will costs stabilize.

Sure. And the bubble in home prices was a purely secular affair, with no correlation to the introduction of option ARMs, low doc/no doc loans and subprime credit availability.

One simple change that would have drastic effects is modifying the forgiveness timeframe on income based repayment (IBR) for student loans. Right now, the expiration time is 25 years [1]. In other words, 99% of all kids going to college are on the hook for paying loans for longer than they have been alive.

I think the government should shorten that period down to fifteen or even ten years for any loan that is not dischargeable in bankruptcy. Correspondingly, it might be a wise idea to up the current reduced payment amount from 15% of AGI [2] to maybe 25-50%. I'm throwing out numbers here, clearly some careful study would be warranted if this idea was seriously considered.

This would probably mean a corresponding increase in loan forgiveness for public servents (teachers, firefighters, public defenders, etc). I'm not opposed to such an idea prima facie.

My expectation is this will drastically reduce the availability of certain types of degrees. The upside is we won't have a ton of young kids floating around with degrees they can't use and loan burdens they can't meet.

1. http://studentaid.ed.gov/repay-loans/understand/plans/income... 2. http://en.wikipedia.org/wiki/Student_loans_in_the_United_Sta...

EDIT: one more thing I forgot to mention: I think that, like many social systems with complex feedback, you cannot reduce this problem to "too much loans" or "too much spending". It's difficult to delineate cause from effect, but it's indisputable that the easy availability of credit has at least enabled recent skyrocketing tuition.

With IBR they can do even better. Instead of charging everyone the average, they can charge each and every person his/her exact wage premium.

And it's all backed up by the IRS enforcing collection, too.

I can see why schools would freaking love this. Why would any one else?

Secondly, there's a lot of sources at the bottom of this. http://www.washingtonpost.com/blogs/answer-sheet/post/the-ur...

If the government is giving out $800 billion/yr, there are MANY people with the incentive to see that continue and grow.

Loans for the sake of loans seem to be the key problem here: If students who intended to get a "degree in bullshit" at a gussied up diploma mill faced difficulty finding a loan for that purpose, they might reevaluate their decision.

And besides: Who's seriously advocating for the total elimination of student loans?

Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation.

We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.

1. Useful degrees from good universities will be easy and cheap for good students to fund.

2. Everything else will get harder/more expensive to fund, in proportion to its statistical returns.

That's all you really need to fix the system.

But if you move the risk of default onto the "market" via private lenders, then, the theory goes, the rates a student can expect will be swamped by other factors than the value of their prospective education, notably whether they have a sufficiently credit-worthy parent to cosign.

Maybe the best bet is to have market rates that are "cushioned" by the Feds in a need-based scheme.

If you're a responsible lender, you sure as hell should look at the risk profile of the borrower. If the borrower is asking $200,000 to go to a private college for a liberal arts degree, you may want to assign a higher risk to him, then if he was going to Med school. In other words, you may want to go through the same exercise you go through to approve small business or real-estate loans. The problem is that you don't need to be a responsible student loan lender since the federal government will just guarantee you the loan anyway.

High-tier school with a degree that has great employment potential? Throw a loan at that kid, that is a good investment.

High-tier school with a degree that has great employment potential... but the program has a 99% dropout rate? Think twice about throwing a loan at that kid, if he is in that 99% then you will have a hard time getting your money.

Shit school with a vanity degree? Tell that kid to get lost. If he wants a vanity degree, he can pay for it himself.

But the schools are profiting immensely from the difference between the perceived value of a degree and the actual value. They'll never get into the loan business without being forced.

But I agree they should have some skin in the game. My favorite idea on that end is students should be able to partially default on loans, and the schools should be required to share the loss with taxpayers.

A couple of points:

First I don't think such a school would remain the best very long. There was a time when CCNY and the CUNY system in general had a fantastic reputation largely because it served an immigrant population that the Harvards of the world refused to take on as students or faculty. CCNY's fortunes turned around for many reasons, but one of them was that the traditional top schools dropped their racial/ethnic quota systems and introduced aggressive need based scholarships.

Second, I think we a society need to move away from the idea that 18-22+ year olds are still members of their parents' economic unit. In Sweden college tuition is free, yet the percentage of students taking out loans is higher than the US because there is no expectation that parents will pay living costs. Perhaps banning co-signers for such student loans is going too far, but perhaps not.

I don't think the choice is "lend the kids a whole bunch of money to let them in" vs "don't let them in at all."

It's "lend the kids a whole bunch of money" vs "don't lend them a bunch of money, and still let them in."

It's possible I'm wrong about this, but we've definitely went too far in the other direction.

But for the many excellent schools without massive endowments, the risk of letting in more qualified "Caa3" applicants over "Aaa" applicants could make a substantial difference on the margins.

Surely this isn't that difficult a problem to solve. President Obama thinks his administration could start to address it:

http://www.insidehighered.com/news/2013/02/13/obama-calls-mo...

When they went to college it was inexpensive enough to work your way through and most of the faculty was full time moderately paid professors. Now tuition at many places is more than the national median household income, and the most of the faculty is made up of very poorly paid adjutants with a thin gerontocracy layer of tenured professors taking up most of the faculty salary pie. And they're all loaded to the gills with deanlets and deanlings.

When 1) employers are allowed to discriminate against the non-college educated, 2) going to college becomes the default instead of the exception, and 3) there is no downward price pressure on educational costs, I think the results are inevitable.

Here is something really shocking we could do: make education something that most employers are not allowed to consider, like marital status or a handful of other things. (They mostly cannot consider IQ, because of Griggs v Duke, but they can use your degree, which uses an IQ test (the SAT) to decide if you get in.)

Who then? Boomers have had all of the political power for the last thirty years. They will probably hold it for another decade.

As the article points out, all those new buildings they're always building aren't free and the posh dorms are unnecessary. But everyone is paying for them anyway, because why not?

But more to the point, the problem is pretty much the opposite of what you describe. Since money for education comes from taxes, education doesn't get nearly as much money as it does in the US. Some buildings are in a pretty lousy state, and teachers don't get paid much. The private sector sometimes invests in universities that will prepare people for the jobs they need, but even that is sometimes protested by the faculty and students since it can be seen as influencing in the curricula. Not to say it's all bad. We certainly could use more money, but we are still giving some of the best education this country offers, for free. In a lot of fields, the only reason to go to a private college is because it's easier to graduate.

I know a few baristas in their 30s with six figure loans. Similar story for all of them. Barely 18, pressure to go to a good college, parents proud of their kid who encourage it more, who themselves are not the most financially savvy either. Throughout their college years, school administration makes it very easy to help them request another 10k or so at a time. Between parents, loan officers, and school administration, everyone is just whisking them through to sign and the money is theirs. Since it seems so normal and unquestioned, by people who are supposed to be providing guidance, many kids don't seriously consider the feasibility of the whole thing.

I'm a believer in personal responsibility, but I think when it becomes adversarial and systemically designed to provide all the rope necessary to hang themselves, it's hard to put the blame on some of the kids.

A good solution is making loans optional like in Scandinavia. Universities are pretty much free, but some students take loans to get by.

I agree. I think we all would. But how? Loans are already very optional - that's a nonsolution.

Indeed.

If, for example, Rolling Stone were to approach this story as others have approached stories about the high cost of healthcare in America, i.e., by comparing the costs there with the costs in other countries with similarly high standards of living, it might produce a more interesting perspective. Readers might see that there are students in certain other countries who are having their educations financed under far more financially-friendly terms than those now presented to American youths.

When a journalist shows the reader the healthcare costs in her country compared to those in other comparable countries, maybe it sends a powerful message to the reader. Journalists covering education costs should perhaps consider this approach.

I went to one of the most expensive private not-for-profit schools in the US (top 20 net-cost, going by http://collegecost.ed.gov/catc/#) and had exactly fuck-all for scholarships. I didn't shell out anywhere near $250k.

Are you assuming med school or something? As far as I can tell, the median debt for med school grads from private schools is barely half of $250k. The most expensive I can find still falls short (barely, to be fair): http://grad-schools.usnews.rankingsandreviews.com/best-gradu...