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Student Loan Crisis
Old 04-30-2019, 05:15 AM   #1
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Student Loan Crisis

A lot of news has been directed to the rising costs of colleges and level of student debt. When I graduated I think I had a total of $7,000 of loans, which was easily paid off once I started working. Now it seems not uncommon to hear of debts close to $100,000.

Once thing I think does not get discussed often is the correlation between these easy to get loans and the sky rocketing college costs. As students are able to easily acquire high student loans, colleges seem far too eager to raise prices to take advantage of the "easy" money. It would seem that if the student loans were reduced or limited colleges would be forced to bring tuitions more in line.

It reminds me of the housing bubble in the late 2000's. Banks were practically giving money away to people they knew couldn't afford it. As a result the housing prices sky rocketed in correlation to this easy money.
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Old 04-30-2019, 05:47 AM   #2
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Econ 101: Subsidizing a good increases demand and shifts the supply/demand intersection point resulting in higher prices.

This chart tells the story: https://www.aei.org/wp-content/uploa.../pricesnew.png
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Old 04-30-2019, 05:49 AM   #3
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Yes, some students are saddled by student loans. But if one got off one's high horse and hustled and made extra cash this would help pay off the loans faster. While I was in school, I worked as a janitor, washed dishes at the campus cafeteria ( and ate for free and the ARA manager allowed me to take back food to my residence that was going to be thrown out) , typed papers for friends for cash, was a bouncer/ doorman at fraternity parties, shoveled snow for peoples homes, to name a few of money making ventures. Perhaps I missed out on the sun and fun of students spending mommy's and daddy's money but I felt it was all worth it.
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Old 04-30-2019, 05:56 AM   #4
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I had NDSL back in the day. Like you the amount was more reasonable. However, don't forget what tuition was back then. Big difference back then and now. I borrowed a small fraction of tuition and books cost. People now are borrowing all tuition, books, living expenses. I worked 3 minimum wage jobs (approx 60 hr/wk) as an under grad. I did not try to fund a life style.

Go back to when the recent student loan issues started. There were many people warning about this problem early in it's existence. Yes loans were too easy to get. Too much money was available.

So I agree they made it too easy to borrow too much. This also allowed colleges to charge more since people could borrow it. This will be interesting to see how this unwinds.

I helped my kids get thru college without debt ...
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Old 04-30-2019, 05:57 AM   #5
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As an example of tuition inflation:
Northeastern University in Boston (my alma mater). Tuition only (I lived at home and commuted)
1973: $1,800/year
1978: $2,200/year

2018: $51,500/year

So, in 40 years (1978 to 2018) the price has inflated by a factor of 23. Meanwhile, general inflation has gone up 2.85x.

Something is definitely out of whack.
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Old 04-30-2019, 06:02 AM   #6
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Originally Posted by CardsFan View Post
As an example of tuition inflation:
Northeastern University in Boston (my alma mater). Tuition only (I lived at home and commuted)
1973: $1,800/year
1978: $2,200/year

2018: $51,500/year

So, in 40 years (1978 to 2018) the price has inflated by a factor of 23. Meanwhile, general inflation has gone up 2.85x.

Something is definitely out of whack.
I agree. When I hear most people talk about the problem, they seem to say that the rising tuition is causing the high student debt. I would argue it is the easy availability of high student debt that is causing the rise in tuition.
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Old 04-30-2019, 06:22 AM   #7
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Yes, some students are saddled by student loans. But if one got off one's high horse and hustled and made extra cash this would help pay off the loans faster. While I was in school, I worked as a janitor, washed dishes at the campus cafeteria ( and ate for free and the ARA manager allowed me to take back food to my residence that was going to be thrown out) , typed papers for friends for cash, was a bouncer/ doorman at fraternity parties, shoveled snow for peoples homes, to name a few of money making ventures. Perhaps I missed out on the sun and fun of students spending mommy's and daddy's money but I felt it was all worth it.
That was much easier 40 years ago. I worked a co-op job 6 months per year to pay tuition. A weekend job provided spending money.

And loans were much easier to pay back. My starting salary out of college was 8x my last years tuition.

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I agree. When I hear most people talk about the problem, they seem to say that the rising tuition is causing the high student debt. I would argue it is the easy availability of high student debt that is causing the rise in tuition.
I agree. Of course, it is supply and demand, and people are willing to take on that debt.
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Old 04-30-2019, 06:24 AM   #8
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Originally Posted by copyright1997reloaded View Post
Econ 101: Subsidizing a good increases demand and shifts the supply/demand intersection point resulting in higher prices.

This chart tells the story: https://www.aei.org/wp-content/uploa.../pricesnew.png
How is it cars "only" inflated 2.1% in price? How is that 2019 Honda Accord only 2.1% higher than the price of a new 1996 Honda Accord?
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Old 04-30-2019, 06:34 AM   #9
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Another look at that chart - almost everyone here complains, rightfully, about the rising costs of healthcare - and yet college has risen twice that.

No, you can't pay for anything close to your college costs by washing dishes. The math no longer works.

A 200% increase in 20 years. And the resulting first years salaries when you graduate have barely budged. It is a problem, and telling young folks "oh get a side job and man up" is not even close to a solution.
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Old 04-30-2019, 06:37 AM   #10
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Another look at that chart - almost everyone here complains, rightfully, about the rising costs of healthcare - and yet college has risen twice that.

No, you can't pay for anything close to your college costs by washing dishes. The math no longer works.

A 200% increase in 20 years. And the resulting first years salaries when you graduate have barely budged. It is a problem, and telling young folks "oh get a side job and man up" is not even close to a solution.
Point taken. But respectfully if one does not sacrifice and make efforts to pay down loans then it's just another problem down the road.
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Old 04-30-2019, 06:39 AM   #11
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Yes, a big part of the problem is that government policies plopped a big pile of easy money in front of these institutions, and naturally they took it.

See "rent seeking" - https://www.investopedia.com/terms/r/rentseeking.asp
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Old 04-30-2019, 06:55 AM   #12
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But yet, professors at local state university (15,000 undergrad) claim they don't make much. Some say that a full, tenured prof makes $60,000 to $80,000 whereas Associate Profs get $5,000 per course, no benefits. They could be lying to me but I have been to a number of their houses and they are not living a fantastic lifestyle. They claim that more and more classes are taught by Associate Profs.

Using some assumptions about average class size, benefits, etc, instruction would not be more than 50% of the cost. Would be considerably less.

Point is: Where is the money going?
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How much is that education really worth?
Old 04-30-2019, 07:01 AM   #13
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How much is that education really worth?

The value of a post secondary education has never been challenged, and only quantified in broad averages. Families and high schools have been conditioned to embrace the value without question, but also without actually quantifying it.

One of the most clever marketing ideas in our recent history was when University sposnsored lending to students was termed “financial aid”. Unlike banks with mortgages, the universities sponsor the lending but have no stake or liability in the outcome. If universities were required to accept some portion of liability for the lending supporting their attendance, my guess is enrollment would immediately decline.

There are hundreds of websites designed to assist prospective families and students to search for and select universities and look for funding but virtually no tools or methodology to systematically assess cost and expected future income and make rational, cost-effective choices about field of study, real affordability, and post-secondary options.
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Old 04-30-2019, 07:01 AM   #14
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But yet, professors at local state university (15,000 undergrad) claim they don't make much. Some say that a full, tenured prof makes $60,000 to $80,000 whereas Associate Profs get $5,000 per course, no benefits. They could be lying to me but I have been to a number of their houses and they are not living a fantastic lifestyle. They claim that more and more classes are taught by Associate Profs.

Using some assumptions about average class size, benefits, etc, instruction would not be more than 50% of the cost. Would be considerably less.

Point is: Where is the money going?
If you visit some of the athletic facilities in the SEC conference or ACC conference, the areas rival a few NFL facilities. There are big money boosters that fund their alma maters, but that's just a piece of the pie.
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Old 04-30-2019, 07:27 AM   #15
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But yet, professors at local state university (15,000 undergrad) claim they don't make much. Some say that a full, tenured prof makes $60,000 to $80,000 whereas Associate Profs get $5,000 per course, no benefits. They could be lying to me but I have been to a number of their houses and they are not living a fantastic lifestyle. They claim that more and more classes are taught by Associate Profs.

Using some assumptions about average class size, benefits, etc, instruction would not be more than 50% of the cost. Would be considerably less.

Point is: Where is the money going?
The money is mostly going to non-faculty administrators. From https://www.nytimes.com/2015/04/05/o...s-so-much.html

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By contrast, a major factor driving increasing costs is the constant expansion of university administration. According to the Department of Education data, administrative positions at colleges and universities grew by 60 percent between 1993 and 2009, which Bloomberg reported was 10 times the rate of growth of tenured faculty positions.

Even more strikingly, an analysis by a professor at California Polytechnic University, Pomona, found that, while the total number of full-time faculty members in the C.S.U. system grew from 11,614 to 12,019 between 1975 and 2008, the total number of administrators grew from 3,800 to 12,183 — a 221 percent increase.
I read recently that the University of California system has over 200 diversity administrators, with the diversity/inclusion Vice Chancellor making over $400K.
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Old 04-30-2019, 07:36 AM   #16
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Unlike banks with mortgages, the universities sponsor the lending but have no stake or liability in the outcome. If universities were required to accept some portion of liability for the lending supporting their attendance, my guess is enrollment would immediately decline.
.
But I suspect grades would also mysteriously improve dramatically.
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Old 04-30-2019, 07:41 AM   #17
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My starting tuition in 1968 was $117.50 per semester, and it went all the way up to $192.50 my senior year. Back then, we had the choice to either go to college--or go to Vietnam after being drafted. Needless to say what the preferable choice was.

I would have like to have gone into an electrician apprenticeship at the IBEW. But they were much more selective than the colleges at the time. And skilled apprenticeships didn't get the waiver from the draft.

I hate to see all the student loan debt outstandings, especially for majors for low paying professions. A physician buddy got his student loans paid when he was about 55 years old. Too bad that much of the paybacks were for food and living expenses for 4-5 years. If I had student loans, I'd live like a monk until they were paid in full.
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Old 04-30-2019, 07:53 AM   #18
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But yet, professors at local state university (15,000 undergrad) claim they don't make much. Some say that a full, tenured prof makes $60,000 to $80,000 whereas Associate Profs get $5,000 per course, no benefits. They could be lying to me but I have been to a number of their houses and they are not living a fantastic lifestyle. They claim that more and more classes are taught by Associate Profs.

Using some assumptions about average class size, benefits, etc, instruction would not be more than 50% of the cost. Would be considerably less.

Point is: Where is the money going?
Anecdotally I agree with you. I have seen this at the private university DW teaches at. She is an adjunct professor, and every year they try to get her to teach more classes, at $4K per course per term, no benefits. She refuses and only teaches what she is interested in and what amout of time she wants to give to teaching. In the 20 or so years she has taught, she has seen her department go from a minority of adjuncts to a majority. A "perk" of being a full professor seems to be having to teach fewer classes.

As was stated above, the majority of the money goes to administration... also to facilities. And, at least for state schools, the highest paid people in many cases are various coaches. The argument is that the sports brings in a lot of money and subsidizes other functions.

Also, there are now MANY more majors to choose from. At my Ivy League school, when I attended there was a choice of around 40-50 majors. Now they offer over 200. One can argue what benefit some majors are worth having, in light of their usefulness outside of academic realms.
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Old 04-30-2019, 08:16 AM   #19
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...

One of the most clever marketing ideas in our recent history was when University sposnsored lending to students was termed “financial aid”. Unlike banks with mortgages, the universities sponsor the lending but have no stake or liability in the outcome. If universities were required to accept some portion of liability for the lending supporting their attendance, my guess is enrollment would immediately decline....
Yes. And why touch the college’s endowment or its earnings (highlighted in a lot of college marketing) when you can have students borrow the money from other places (some of which doubtless are paying the college for referrals) and call it “financial aid” as you note?
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Old 04-30-2019, 08:19 AM   #20
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So I agree they made it too easy to borrow too much. This also allowed colleges to charge more since people could borrow it. This will be interesting to see how this unwinds.

I helped my kids get thru college without debt ...
+1 on all the above.

Helping one's children, or any person for that matter, to get a good education is the best gift we can give them.
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