> If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done due to free market forces.
This is a hypothetical but classic example of how regulation is required to support a free market.
<pedant>The predecessor of the Stafford Loan program was created in 1965, so it was like this for most of our parents.</pedant>
But, the cost of school has outpaced inflation for that period, making the situation worse. No question about that.
We'd probably all be better off if the government simply gave grants to students who meet some minimum threshold. Call it top 20% of class or thereabouts.
Most of those administrators are there for a reason. Regulatory compliance takes manpower (which costs money). Perhaps we regulating the wrong things, or doing too much of it. But, regulations rarely appear for no reason at all.
Some states are making efforts to curb the costs of textbooks and materials. I'm currently working on software to help CA schools roll out their ZTC programs.[1]
> This comment is an example of how any amount of problems caused by government intervention can be framed as a need for more government intervention.
And your comment is an example of assuming that government regulation is at best a necessary evil and something to be avoided if at all possible. Most of western Europe has has regulated university fees for decades, and by all accounts this works pretty well. Public opinion in the UK (even from a lot of the political right) is that the current 9k/year cap is too high if anything.
> And your comment is an example of assuming that government regulation is at best a necessary evil and something to be avoided if at all possible.
The role of government regulation is a separate question, but we're really jumping the shark when we can't even acknowledge basic cause and effect.
It's not surprising that government policy making tons of student loan money available led to more students being willing to take out bigger loans. This is like Markets 101.
It's tough to take opponents seriously when basic, predictable side effects of favored policies are ignored just to recommend heavier-handed policies of the same kind.
> It's not surprising that government policy making tons of student loan money available led to more students being willing to take out bigger loans. This is like Markets 101.
Totally agree with you on this.
> It's tough to take opponents seriously when basic, predictable side effects of favored policies are ignored just to recommend heavier-handed policies of the same kind.
It seems likely to me that the side effect wasn't ignored. Probably there was somebody proposing the "heavy handed" version of the legislation (which actually makes sense because it mitigates the side effect), but somebody else was opposing it because they don't like regulation. Thus, this problematic legislation emerged as a compromise.
Opposition to regulation often seems to be based on the idea that in practice regulation causes more problems than it solves. My observation is that regulation (esp. in the US) often does have this problem, but only because there is such opposition to regulation that it is almost impossible to enact the stronger and more sensible regulation that would actually work.
In short, it is often ideological opposition to regulation that causes it to fail, rather than the case that regulation in general doesn't work.
Sometimes it doesn't work just because it wasn't a good idea to regulate in that way. However there are countless examples of regulation that was crippled in the US, but that has a very successful (and generally stronger) counterpart in Europe.
Perhaps it's just that corporate interests have captured governments. But that too seems like a symptom of distrust in government leading to it being hamstrung and underfunded. I guess it's circular.
It sure wasn't like this for our parents. The UC system was close to free in the 60s. Portland State University's very first summer session was $50 for tuition and fees. Universities supported simply by taxes, not a byzantine system of public and private loans (still backed by the government, of course), like is common in other Western nations.
I'm 100% in on getting the government out of the lending business and back into the "higher ed is a public good" business. I'd rather they just return the actual sticker price to what it was a generation ago, and make it realistic for people to work student jobs to earn the cost of their tuition.
Government contribution made it possible to get my degree for free basically. We don't have a student loan bubble while still having a pretty high educational standard, even if that suffered in recent years.
We might not have the most tenured professors though, since those a drawn to centralize in institution with high prestige. But with the free flow of information today, this centralization of excellence becomes less important.
But anyway it probably isn't a problem with too much/too few government intervention and more of a problem of intervention being constructive or not. Bad intervention is probably worse than no intervention, I agree.
Perhaps, but some things are inherent to how markets work.
It's not surprising that by making a ton of student loan money available, that more students are more willing to spend more money, and thus prices rise.
Where's the free market here? As far as I know, student loans are guaranteed by the government so the universities are not incentivized to keep the cost down because no matter how much they charge, students can "afford" to pay.
A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets.
I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years.
Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of
That reminds me of the Paradox of the Court. Obviously not quite as straightforward but such a payment model does encourage at least some degree of sandbagging.
On another note the idea rubs me as immoral in ways that loans don't for reasons I am not quite able to articulate. Like viscerally seeming too far too similar to indenteture.
Indenture is loathsome because the person under it is compelled to work. That isn't so in this payment model - they're free to work or not as they wish, and they are free to choose the amount of work, and their own balance of pay vs working conditions, and so on.
I found a link but couldn't add it to my original comment. There is a 5% salary payment for 15 years once the student reaches $25k. Sandbagging is possible but it seems like students would start working against their own monetary self-interest pretty early (from a salary perspective at least; who knows, I'm sure there's other creative ways to game the system).
Australia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).
Student Loans in the UK can work like this - you repay, I think, 9% above £25,000, and it's wiped after 30 years, regardless of how much is left. Some details may be different depending on exactly when the loan was issued.
So if you have a huge loan but a small income, it's more like a 30-year graduate tax than a loan you expect to fully repay.
I think the difference (if I'm understanding the U.K. situation correctly) is that in the U.K. the loan can be paid off in full prior to the end of the term, correct?
In the situation above, it acts more like an investment rather than a loan. (i.e., there's no upper bound on the payment, outside of the 5%/15 year cap, so the student may pay back more than they receive)
That's entirely the point. Tuition would have to come down so it's actually affordable, or there would be less people attending. Businesses might actually foot the bill for tuition to train their people, because there would be a shortage of qualified applicants.
Is the regulation you're speaking of regulation that un-does the regulation that provides federal loan to anyone with a pulse who wants to major in journalism (or some other degree for a low paid field) and prevents borrowers from getting rid of said loans in bankruptcy?
Make no mistake, we regulated ourselves into this mess. Many people at the time predicted the current situation. More money chasing something drives up the price of that something. It's now pretty clear that we should have funded the schools instead of providing subsidized loans for the students.
This is a hypothetical but classic example of how regulation is required to support a free market.