Looks Like People Still Care!!

[Rob C]

The problem with examples is whether they are representative of the average. If white collar work pays less on average than blue collar work, then there is a significant disadvantage in getting education. Both for society as well as the individual. Clearly, this isn't the case (yet), although I readily agree that 1) the value of education is eroding fast for several different reasons some of which have already been pointed out, and 2) there is a significant influx of cheap blue collar labour because laundry still needs to be done and bedcare is desired when hospitalized etc.

We are apparently at the point where we do have the doctors but no longer the nurses. The question of course is whether we can afford to import those services. From an economical perspective the answer seems to be yes, but considering what is currently happening worldwide, from a social and cultural perspective the answer increasingly appears to be no.

My doctor granddaughter tells me that if the UK health service loses its foreign nurses due to Brexit, the goddam system will stop in its tracks. British doctors, too, are looking at far horizons, and many of the ones working in Britain come from abroad; a sort of skills replacement going down then, or change in national identity by default. This may sound heavy, but it's true: my mother-in-law had a hard time understanding some of the doctors in her local hospital because they were first-generation from Asia and hadn't acquired the language skills, though I guess they were still good doctors - it was accent that created the barriers. I find the same in Mallorca: some speak perfectly clearly and I understand them, whereas others, I have to look at the nurse for translation from whatever region they belong to; I find those from Andalucia most difficult. However, this seems a peculiarly male problem: I've not run into it with females. Thank God!

[D Fuller]

I noticed that no one bothered to discuss this. I am inviting you all, including Andrew, to poke holes in this analogy. Not because I think it is unassailable, but because I am genuinely interested in hearing counter-arguments.

To provide a personal perspective. My parent loan will probably end up being about $50-$60K in two years, when my daughter graduates. I recently bought a $34K car and took a loan for it. I am generally frugal, so I went for a lowly Camry. Just a slightly more prestigious brands would cost me easily those $50-$60K I am having in student loans.

So, why we do not even blink when we spend the same amount on a car, but complain bitterly about the education (I personally do not)?

Poke away.

Who buys a car every year for four or six years without tradint the prior one in?

[Slobodan Blagojevic]

Who buys a car every year for four or six years without tradint the prior one in?

Average student loan per year is not equivalent to the price of an average car. Average student loan in total, after graduation, is approximately equal to a decent new car. One source puts it at $28,650. Another source at $37,172.

https://www.insidehighered.com/quicktakes/2018/09/20/average-loan-debt-graduates-four-year-colleges-28650

https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/#1613bf567310

[rabanito]

Who buys a car every year for four or six years without tradint the prior one in?

Bad for business
Who would hire a photographer who drives a Camry?
Not me...

https://www.business.com/articles/the-top-10-cars-for-ceos/

[Slobodan Blagojevic]

Bad for business
Who would hire a photographer who drives a Camry?
Not me...

Thanks, my friend

[rabanito]

Thanks, my friend

Good one 

[Slobodan Blagojevic]

Back to serious business.

For those concerned about inequality in education in the "heartless, racist" America:

"A Tennessee valedictorian received more than $3 million in college scholarships—despite being homeless."

https://www.newsweek.com/tupac-mosley-raleigh-egypt-high-school-homeless-student-college-scholarship-1431303

Or:

https://www.nbcnews.com/nightly-news/video/student-accepted-to-over-100-colleges-offered-nearly-4m-in-scholarships-58747461940

Etc.

[LesPalenik]

I wouldn't be surprised if the numbers are similar in NL.

Since this is a Canadian site, I presume you meant Newfoundland. Or possibly Netherlands?

[Frans Waterlander]

Since this is a Canadian site, I presume you meant Newfoundland. Or possibly Netherlands?

NL stands for the Netherlands.

[D Fuller]

Average student loan per year is not equivalent to the price of an average car. Average student loan in total, after graduation, is approximately equal to a decent new car. One source puts it at $28,650. Another source at $37,172.

https://www.insidehighered.com/quicktakes/2018/09/20/average-loan-debt-graduates-four-year-colleges-28650

https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/#1613bf567310

And a young person graduating from college would be an idiot to borrow that for a car. Your number represents about $9,300 per year, which will buy a very decent used car. Every year.

So I repeat, who buys an new (used) car every year without trading the old one in? Your analogy is good propaganda, but it doesn’t scale to reality.

[Slobodan Blagojevic]

And a young person graduating from college would be an idiot to borrow that for a car. Your number represents about $9,300 per year, which will buy a very decent used car. Every year.

So I repeat, who buys an new (used) car every year without trading the old one in? Your analogy is good propaganda, but it doesn’t scale to reality.

Frankly, I do not get your point. Who says that the comparison I am having in mind involves a freshly minted graduate buying a new car? I can ask you an equally inane question: who drives a used car (or new) for 40 years? Are you also implying that no one buys a new car?

It is about a mental comparison between buying a new car and student debt, from a behavioral economics standpoint. Car is an expense and a total loss. Student debt is an asset that delivers tangible benefits over 40 years. Car expense is not only the purchase price but also insurance, gas, maintenance, etc. "Cost to Own" is much higher than a purchase price. For the simplicity sake, I am just taking into account the purchase price.

Who pays for education? Either parents or student or a combination of the two. As a parent, I just spent $34K on a new car. It is going to last me the next 10-12 years. When my daughter comes to me and ask me for an equivalent amount to help her with her education, am I supposed to be outraged by the amount and blame the society? In the next 40 years (hypothetically, of course) I would spend $136K buying a new car every 10 years.

Now, if student herself finances her education: in the next 40 years, are you saying she will never buy a new car? When she does, 5, 10 or 20 years from now, her mental comparison will be the same: my student loan debt is not such a big deal, it is just as much as this new car I just bought. The car that is going to disappear in 10 years and accumulate a ton in costs to own along the way, while my equivalent student debt is rewarding me with a higher salary over a 40 year period.

In summary, we do not even blink when buying a new car for ourselves, but are supposed to be outraged by the equivalent student debt?

[Robert Roaldi]

Ep. 377 of the Freakonomics podcast is all about the US student debt: http://freakonomics.com/podcast/student-debt/. I just came across it, haven't listened to it yet, but I just wanted to provide the link here before I forgot as it seemed to be on point.

[JoeKitchen]

Ep. 377 of the Freakonomics podcast is all about the US student debt: http://freakonomics.com/podcast/student-debt/. I just came across it, haven't listened to it yet, but I just wanted to provide the link here before I forgot as it seemed to be on point.

Thanks for posting this!  I found these podcast very informative and entertaining, but have fallen off listening to them lately. 

[LesPalenik]

Student loans, expensive medical care, and frivolous legal suits are all American inventions to channel funds from the poor constituents to special conglomerates and interest groups. Now we've learned that even Stormy Daniels was taken advantage of by her previous lawyer.
 

[Robert Roaldi]

Student loan issues are one aspect, but it seems to me that the bigger question that needs to be answered is why tuition has grown at a much more rapid pace than normal cost of living. What caused this? There should be enough data by now to have a reasoned analysis, beyond anecdotes and personal opinion. There has been cost cutting at the professorial level and increases in the number of students, so on the face of it there's no obvious need for higher tuition other than "they can". Seems like a misalignment of incentives.

[Alan Goldhammer]

Student loan issues are one aspect, but it seems to me that the bigger question that needs to be answered is why tuition has grown at a much more rapid pace than normal cost of living. What caused this? There should be enough data by now to have a reasoned analysis, beyond anecdotes and personal opinion. There has been cost cutting at the professorial level and increases in the number of students, so on the face of it there's no obvious need for higher tuition other than "they can". Seems like a misalignment of incentives.

Public universities that are in part dependent on state funding will need to adjust tuition based on how much is needed to augment the money received from taxpayers.  When I first started off at UC Santa Barbara in 1965, all UC campuses were tuition free.  Governor Reagan's administration imposed a $100/semester tuition and everyone was outraged and there was a march by students to Sacramento in protest.  Once tuition became the policy it only gradually increased as the state was still providing significant funds.  At UC out of state students paid markedly higher tuition rates and some have argued that today the system encourages such applications as it increases the revenue stream.

Private universities need to impose tuition for the majority of their operating expenses.  If they are a research university additional funding can come from alumni donations, Federal and private grants as well as income from research that gets commercialized (patent royalties).  Both of our daughters went to private universities on merit scholarships that were adjusted based on our income.  In one case the scholarship covered 20% of the first year tuition and in the second, 15%.  Neither scholarship was adjusted for inflation or tuition increase and we observed that tuition increased 5-8% each school year so that the value of the scholarship decreased.

One daughter went to University of Rochester which has a significant endowment.  Every year (2005-09) I would get a financial statement from the University that also showed royalty income from patents which was significant as several childhood vaccines were developed at the medical school and there was also a nice patent portfolio from optics research.  None of this income was used to defray tuition costs, rather it just went to build up the endowment.  Most of the Ivy League schools have much larger endowments and I think a couple of them could totally eliminate tuition for undergraduates just on the income from the endowment without affecting the principal.

The best way to minimize college costs is to spend the first two years at a community college and then move on to an in-state university for the final two. 

[JoeKitchen]

Student loan issues are one aspect, but it seems to me that the bigger question that needs to be answered is why tuition has grown at a much more rapid pace than normal cost of living. What caused this? There should be enough data by now to have a reasoned analysis, beyond anecdotes and personal opinion. There has been cost cutting at the professorial level and increases in the number of students, so on the face of it there's no obvious need for higher tuition other than "they can". Seems like a misalignment of incentives.

Aside from demand increasing at a rate that is higher then what supply is, which we all seem to agree on is one root cause but disagree on the reasons for why this is happening, I think we also need to look at student life. 

Dorms, food halls, support services, chaperoned activities, etc., have all increased in scope and quality.  This needs to be paid for as well, and surely adds to the increase in cost. 

[Alan Goldhammer]

Dorms, food halls, support services, chaperoned activities, etc., have all increased in scope and quality.  This needs to be paid for as well, and surely adds to the increase in cost.

True, but our experience was that tuition increases were higher YTY than dorm/food costs.  I don't remember either school having chaperoned activities.

[JoeKitchen]

True, but our experience was that tuition increases were higher YTY than dorm/food costs.  I don't remember either school having chaperoned activities.

Not so much activities, I should have used another term but not sure what.  Just the overall increase in the amount of staff present to assist students in college life outside of the classroom.  Good or bad, all these people need to be paid. 

[amolitor]

I think it's pretty well established where the money is going, the answer being "to all kinds of stuff"

Physical plant and infrastructure. Sporting facilities, newer fancier dorms, more amenities for students, and so on.

There is usually some expensive academic initiative in play, the school playing out its ambition to become a Premier Something Or Other to attract more grant money.

There are more administrators and support staff across the board, with salaries and other expenses (chairs, offices, phones, computers, and so on).

What we do not have a firm answer to is "why?"

You can point to the professional administrator class and argue that bureaucrats, unchecked, will always find ways to expand the departments and thus their budgets endlessly. This is probably not wrong.

You can point to the fact that a university education is routinely valued at some high number in terms of lifetime earnings. A number I have seen is a $2M bump in lifetime earnings, then one can argue that in an unfettered market the correct price for tuition is: $2M, perhaps corrected for the time-value of money.

You can point to the availability of student loans being a factor that permits prices to drift upwards.

All of these things, and more, are probably true to one degree or another. None of them is a simple, pat, "why" and none of them suggest a simple solution. Markets are complicated.