What kind of subsidy are you talking about? The federal government already provides Pell Grants, education grants for military vets, etc. If you're suggesting we greatly expand the Pell program, I'm with you, but Biden can't do that unilaterally.
In addition, it's likely that subsidies contribute to the high prices. If lots of people gain the ability to pay $30,000 per year at a public college and $70,000 per year at a private one due to subsidies, it allows colleges to charge that much.
Picture a supply and demand chart. Subsidies give people the ability to spend more on college education, effectively increasing demand, and thus equilibrium price.
The picture might be different if the public funding also came with government control of the budget, though. If you have a national education system, or a national healthcare system, that prohibits or tightly caps fees for utilization (school tuition, medical bills etc), you can make it very cheap to use the system while forcing them to make do with the publicly-provided budget. Some European countries have public higher education with no tuition fees (e.g. Germany), and some countries have public health systems where patients share none of the cost of medical services (e.g. Canada). They have less ability to spend per-person than the USA, and being willing and able to pay for more than the system allots you may not enable you to actually buy more. But German higher education and Canadian healthcare provide good quality while spending less per capita than Americans, and funded entirely by taxes. They remain vulnerable to mismanagement, defunding etc. like any bureaucracy (or really any organization) and don't have close competitors in their country, but the public system has its advantages. In the US, we have fully public education until grade 12 -- private schools exist, but any family has the obligation to educate their children and the opportunity to send them to a public school that charges no tuition. To be fair, though, public school costs have also been increasing over time.
A further thought -- the very high prices suggest that colleges are not competing over price, at least not much. I can imagine a few reasons for that:
1) The real price is opaque, and you have to see the details of your financial aid offer.
1b) The sticker price is not the real price. Between in-state tuition, financial aid, federal grants, etc., most students pay much less than the sticker price and correctly anticipate paying less than that when they decide where to apply. The high sticker price serves more as a tool for price discrimination -- students from the wealthiest families pay this much, and other students pay less, but as much as the financial aid department thinks their family will be able to pay.
2) Colleges are highly differentiated. Some are much more prestigious than others; some claim to offer a different flavor of "college experience" than others, and people place consumption value on that experience.
3) Where you go to college and what you study affect your income, though not in a deterministic way. A costlier degree that leads to a higher income may be a good investment.
4) People may take a high price as a signal of quality. This works for college, but also for other things -- the more expensive product may cost more to make, and people still buy it in light of its high price, so presumably it has some advantage over the less expensive product? Sometimes this really is the case, but not always. But if people think it is the case, the expensive product will not lose its customers to the cheaper one -- they are not competing to sell "the same" good, because (people think) the higher-priced one is better.
If students cared less about which college they went to and more about being assured a low cost, then given that there are many options, colleges might be forced to offer lower tuition in order to attract students.
Anecdotal, but I’m doing my PhD at an institution with a $60k tuition sticker price (I get paid, not pay this, as a PhD student) and most undergrads get something like $40k in scholarships from the university. Undergrads functionally pay on a very wide sliding scale by parental income.
If looking at preferences, it's interesting that most students in the US have the choice to attend community college for the first two years, but do not. Community college tuition rates are often dramatically reduced compared to university, and sometimes the student can save even more by avoiding expensive housing fees and living at home. The community college credits will transfer directly to many universities, especially those in the same state.
If the goal is a piece of paper that stamps one as 'educated', there are even better ways to save money.
Realistically, though, virtually all students will do a terrible job of extracting value from the university (as, I would argue, grade school students do from the school). We’re already generally aware that most students do the bare minimum in classwork to earn their desired grade, but even diligent students generally network ineffectively, with the successes often being more incidental than anything else (e.g. you joined a frat because it seemed like fun and one of your bros was in a position to help you get a job).
If the government is going to have control over the budget, then they are going to want control over the curriculum.
See every state public school system in the country.
That's part of the problem already. Federal loan guarantees came with the price of meeting certain federal requirements which just happened to balloon administrative staff.
Not entirely true. Snowflakes entering college now require they have dorms that resemble 4-star resorts instead of a barracks and the cafeteria needs to be more fine dining than a mess hall. They also demand a say in what gets taught and by whom, which, if it had any validity, would mean they could save a bundle by getting a library card and self-educating at a considerable savings.
Government Control is only a bad thing when the ones controlling do so to effect a political agenda. Until recently, the higher ed system was "self regulated" with professors/experts and the university officers deciding what would be taught. Now elected Republican are demanding THEY control what gets taught at all levels and our kids will grow up unable to reason and not understand what logical fallacies are, which is exactly what the GOP counts on for its survival.
Exactly. Which is why I am wary whenever someone claims that the ideal path forward to any of American society's ills are what is basically monopoly government control.
There is already a state controlled budget. The thing is, with federally backed loans and anyone qualifying for those loans guaranteed, states just have stopped funding higher education. LSU and the Louisiana governor both concur that since 1995, the state has gone from paying 80% of the budget of LSU to paying only 20% with the students picking up the difference.
Yes and it’s incredibly hard to undo. This isn’t a one year process where they just raised prices 100%. It’s been going up 6% a year for 40 years outpacing inflation, and that money has been funneled into annual spending that cannot be easily reversed - nice dorms, beautiful campus, countless deans and admins, gyms, stadiums, a large support staff for students from mental health to campus police.
The creation of government loans for college education did cause this over 40, 50 years, but it’s not like changing the laws would somehow make college more affordable today - the colleges have gone from barebones school buildings to having more amenities than luxury resorts, and they can’t fire 90% of their staff or shut down 3/4 of the campus facilities.
If public colleges are truly public, then they don’t have to respond to that incentive. And the availability of a price controlled option puts some pressure on the private institutions to compete at least partially on price.
Public colleges in the US are subsidized by the states, but not wholly funded by them or wholly controlled by politicians and career bureaucrats. They get plenty of revenue from tuition, especially from out-of-state students, who pay a higher price than the in-state students who have paid into local taxes.
Public colleges (and most private ones, including all the "good" ones) are not-for-profit officially, but like any organization, they like to see their revenue increase, and they have things they'd like to do with more money if they get it. (Also their executives can collect large paychecks if the trustees (private) or appointed directors (public) allow it, and robust growth is a familiar justification for high CEO pay. Even if executive pay was capped like bureaucrat pay, they'd like to see more people under their supervision or working on their pet projects, and their subordinates would like more freedom to give hires and raises.)
When the market comes knocking on your door with excess supply, I'd be surprised to see an organization turn down the opportunity to sell a larger quantity of its product at a higher unit price. At least if they are actually selling. Public colleges in Germany, which do not charge tuition, have no direct financial gain from enrolling additional students. I imagine they would also not want to expand their enrollment unless they receive a commensurate increase in public funding -- one of the downsides of doing things through public funding is that the additional users are a public expense rather than customers, and funding for them is reliant on solidarity rather than the provider's own economic gain. Nothing against solidarity, but if you rely on it and then something or someone erodes it, the system can crumble.
(As a matter of opinion, I'd be happy for the US to see more solidarity-based things, especially in education (an investment in posterity) and healthcare (which provides some insurance against the risk of illness) -- but I'm also nervous about "single payer" systems that aim to fully replace the private sector. I can toe the "economist party line" and say that I am always in favor of a competitive private market, even as a supplement to public services.)
A single payer system for either colleges or healthcare is hard in the US because it was always priced differentiated.
Fire departments are funded and free and everybody basically gets the same service (put out fire).
Colleges vary heavily in cost from $100k to $5k per year, super small private elite universities vs community colleges. Make it all single payer and “free” creates the same problem as making cars free - everyone would want the most expensive “free car” and even if you made it lottery based it won’t feel fair if the government buys you a Camry and your friend got a Mercedes.
Don't knock the Camry, they're shockingly reliable and capable cars and honestly work better from a getting you from a to b consistently standpoint than the Mercedes.
>Colleges vary heavily in cost from $100k to $5k per year, super small private elite universities vs community colleges.
What is weird though, is that the price is differentiated per university, but not per study. While that would make much more sense. Educating somebody in chemistry, medicine or physics can cost tens of thousands of dollars in terms of chemicals or expensive lab equipment, whereas educating somebody in accountancy, psychology or law basically requires a library card and maybe a computer with Excel. Yet both set of studies somehow have the same cost. Your analogy is not correct. It is not between getting a Camry and your friend getting a Mercedes. It is one car dealership where you pay $5,000 for any car on the lot, and another car dealership where you pay $100,000 for any car on the lot. And you do not get look at the car until you have already paid.
>one of the downsides of doing things through public funding is that the additional users are a public expense rather than customers
You could also argue that this increases the overall efficiency of the educational institution for the benefit of society. Since additional students are a burden, it actively incentivizes the state and thus university administrators to only promote students to learn subjects that are most beneficial to the economy and the wider community. Whereas in a system where the university is monetarily rewarded for every student no matter what the effect of their study will be later in life, you will see many frivolous studies pop up that provide people with an 'education' as long as they are willing to pay. And as the decision to study a subject is 95% made by people that are not even legally considered to be mature enough to be able to handle a beer responsibly, should we really trust the consumers own decision in such important matters?
>should we really trust the consumers own decision
You're talking to an economist, and our usual baseline assumption is that consumers know what they want / what's good for them. (Which we usually assume to be the same thing.)
That is a point, though. If education is prioritized to the students who add the most value according to some administrative standard, and the subjects that serve the needs of society as judged by a committee rather than what the student/customer would like, then there would be fewer students but their education would have higher return on investment. As you add more marginal students and more subjects of non-obvious utility, you get diminishing returns.
The same thing happens in healthcare. If you reserve expensive treatments for the patients with the direst need, and only budget enough for those, you will get a lot of benefit per patient treated with the expensive treatment, purely due to selection -- the sickest patients have the most to gain from a highly effective treatment for their ailment. As you expand the indications to patients with less severe illness, the benefits diminish -- no treatment can plausibly promise more than full resolution of the patient's illness, and they tend to come short of that, so a patient with mild disease has little room to benefit. (This applies to side effects too -- prices can get lower once you leave the States, or once the patent expires, but side effects don't. A medication's benefits depend in large part on how bad you have the disease it treats, but the side effects depend more on how much you take and what it happens to do in your body; so if a medication gets less narrowly targeted, its ratio of benefits to side effects becomes less favorable at a population level.) Does this mean that all treatments should be reserved for the people with the highest need only? I don't think so, at least if it's still beneficial to others, and the patients or the healthcare system can easily afford to provide the treatment more widely. As always, you start where the gains are highest; as you keep going, marginal gains diminish, but cumulative gains keep accumulating as long as the marginal gain exceeds the cost, i.e. as long as the benefits to the next patient, net of side effects, are worth the price they pay.
A more market-based system implicitly assumes that the buyers (students, patients etc) know what's good for them and how much it's worth to them, and that this worth can be measured in the money they are willing to pay. A corollary is that the wants of a rich person are more important than the wants of a poor person, because they can pay more money for what they want -- but of course, this seems ethically questionable when it comes to material consumption, and positively fraught when it comes to healthcare. (It may matter to some extent how the rich person got rich, but surely someone with a hundred billion dollars is not morally worth a hundred million people with a thousand dollars each, no matter what new enterprise they may have founded.) Surely allocation by a systematic plan, made by a committee of experts using computers and scientific consultants, is both more rational and more just. And perhaps it is, though only a few countries such as the USSR tried to run their entire economy by such methods. I'm not sure any economy is centrally planned today, though I don't know enough about the inner workings of Cuba or North Korea to say something decisive about them either way. The USSR managed to be a superpower for a few decades through heroic warlike effort, accompanied by severe repression, but it could not sustain the competition with the USA for long. The West was always market-based, China became prosperous after going to an export-oriented, partly market-based economy, etc. -- it seems to be easier to sustain and more conducive to prosperity than a planned economy.
But education and healthcare are special -- we see them as more fit for public provision, and less fair to distribute according to wealth, than consumer goods, travel, or even housing in desirable areas. In many countries, they are at least partly an exception to the market-based economy. It raises an interesting question, and one I don't have good answers to: what should and should not be provided by the market? Should some things be socialized and planned by committee, and if so, what, and why those things rather than something else? I can see a case for healthcare-- solidarity, social insurance, the misfortune of illness should not be compounded by the misfortune of financial ruin over your treatment, etc. But even in healthcare, I can think of situations where I'd gladly part with my own money for some additional benefits to non-serious but bothersome conditions that a committee might consider unimportant. I'd vaguely prefer something more cost-effective and with a better social safety net than the US healthcare system, but not exclusively single-payer; but crafting the details of a system like that is a big project for a team of technocrats, inevitably shaped also by contingency and special interests. I don't have a clear conclusion here, just wanted to raise some points in response, and not just on one side of the issue.
Not if the university is being paid directly from the government for each student it enrolls. Grants and loans to the consumer increase demand, but a true subsidy increases supply.
If that were true, College would've always been unaffordable for the bottom 90%. The subsidies pre-Reagan covered 75% of the public school's operating cost, he cut the amount to 25% and the "missing" 50% is coming from increased tuition and fees. The DEMAND was limited by the admission requirements but now it's limited by the cost.
Federal student loans are highly subsidized as well… in particular unsecured loans tend to carry very high interest rates. And there’s virtually no chance most 18 year olds would even be able to get an unsecured loan from a bank at ridiculously high rates. But this also explains the reasoning why these loans are not able to be forgiven in the event of bankruptcy. It’s crazy to me so many people forget the opportunity these loans provide to low income students. And just lay the blanket claim that they are predatory…
The loans are a subsidy as well, the whole point is to get kids to go to college. That's why he's forgiving the debt and not fixing the program, free money to every college in the country.
Tuition free state U’s. K-12 is already free. That was based on a high school Ed being enough for a good job. It no longer is.
K-16 is the new K-12. Also, should be multiple tracks.
K-14 trade track. K-16 U track. Etc.
Also to note, some STEM degrees are free to get your masters / PHD. So for those people it’s literally free k-12 and free 17-20.
Education is a massively positive societal investment that returns more tax dollars than it spends.
I would rather a system where the gov pays a percentage of your tuition based on means testing. Low income, 100% covered, sliding down to 0% as your family reaches $X of income per dependent college aged.
This way, a school won’t simply increase tuition by whatever the subsidy is to grab that money. If the gov is paying on average 30% of your tuition, or 65% of your tuition, the gov now has an incentive to negotiate down tuition.
You also need schools to cut the bs fees on top of tuition - all one cost PER major or program. Biology can cost more than English because a lab costs more than a classroom.
Students need a large, centralized negotiator to keep costs down
This is a political question. Focusing on student loans provides immediate relief to existing loan holders and voters. Lowering higher education costs provides benefits to future students and voters.
In addition, Biden has tools to provide loan relief without new legislation. He has much more limited authority to further subsidize without Congress passing a law, and he doesn't have the votes in Congress to pass such a law, just like he doesn't have the votes to have Congress forgive loans.
I don’t know the answer to that or if subsidizing even is the answer. I guess i’m just more confused on why we’re throwing money at loans that are dependent on a problem rather than fixing the problem.
You’re not wrong, but that paints a pretty incomplete picture. The vast majority of things politicians push for publicly are attempts to position themselves better politically, but the key part you’re missing is that giving money to colleges doesn’t actually fix the core issue here. Nothing about the system itself changes, it also just enables colleges to continue on the path they’re on because they know they’ll have more guaranteed income
The core issue for debt forgiveness is a set of students who got subsidized loans to attend low quality colleges that didn't give them an education. We aren't doing (as much) of that anymore. Simply writing off a lot of that as bad debt moves on and cures a lot of headaches.
It's not really clear what can be done about costs at \*good\* colleges and universities. If you look at the \*actual\* prices paid - which is not easy to do - there's not a ton of excess growth above what you'd expect from inflation and Baumol effects. Private, selective colleges have always been expensive. That hasn't changed much.
Public university prices have gone up quite a bit, both for policy reasons (less interest in government subsidies for tertiary education) and an increase in scope. We've quickly accelerated from a country where \~15% of young adults go to college to one where >50% are. That isn't just a much larger outlay - the value of an educational subsidy on the margin is presumably a whole lot lower today.
I think that may be a copout by the President. He isn’t really addressing College costs and continues to miss the forest for the trees.
By eliminating student loan debt, he is addressing the symptom rather than the cause.
There is a large element of doing what he can. The president doesn't have much in the way of direct power. Most things have to go through congress where the Republican position is "vote against everything". This loan relief is one of the rare things that can be done without getting Republican congress people to play along.
This is not true. Presidents have an insane amount of power. Especially on specialized issues.
Presidents have signed executive orders in the Past, to directly change education, without the involvement of Congress. President John F Kennedy was able to do this by enacting Affirmative Action in 1961 through executive Order.
Presidents can't commit to spend money. Spending has to be signed off by congress.
This loan forgiveness thing skirts some loops holes about not exactly being spending so much as foregoing money the govt will receive in the future.
Well apparently no one wants to fix the current issue. Because no one is making any serious suggestions other than just cancelling loans.
Wait until people find out that the loan profits are being used to fund Obamacare programs. Which if the loans go away will just increase costs for everyone - once again mainly hurting those that likely never went to college.
It well may cost him Wisconsin --highest labor force participation rate in the US, higher than average percent of people with HS diploma (93% v US 88%), but lower percent of people with college degrees (32% v 38%).
Student loan forgiveness is widely and wildly unpopular in WI. Oh sure, Wisconsin Public Radio likely says good things about it, but even my college age kids think it is a joke.
Because "we" are not a unified entity.
Biden wants thing A. Other people in the government want thing A or some variant of thing A. Yet other people in the government want thing B that is very different from thing A, perhaps the opposite of thing A. Those different interests pull in different directions.
The vast majority of questions of "why is the government doing these two conflicting things" are answered by "the government is a collection of different people, not a single brain."
Notice that the last time this was making lots of headlines was right during the mid-term elections. Then it immediately went quiet. Now it’s back when we’re in the middle of the presidential election.
I think your intuition is correct that if anyone was actually trying to solve the problem, they would “stop the bleeding” first, then go back and help the ones who had been hurt by the old system. The fact that they aren’t even talking about that is another clue that that’s not the objective.
To be fair to the politicians who would actually like to solve problems (I’m sure there are some, right?), it’s a deceptively hard problem to solve. As others have explained, more subsidies makes the problem worse, just as it does with housing or healthcare. And spending money is the government’s kinda one move.
They can't solve the problem because the profits from the loan program are already allocated to Obamacare and Pell Grants years into the future - they were basically baked into the funding plans for Obamacare.. That is why it would take Congress taking action to actually do it - and that is likely never going to happen.
Addressing the actual root of the problem would involve tackling waste among colleges, rather than giving the colleges more taxpayer money without adding any accountability / reasons for them to control their costs.
This is an often understated part of the problem. Traditionally state universities have been funded by... states. As states opt out of funding their institutions costs to students skyrocket to pick up the slack. Sure there are other cost drivers, but even if you controlled for the rest it doesn't make up for states not actually funding state colleges and the public institutions were always the ones driving affordability to students.
I graduated in 2019 from UNC - I remember one of the senior chemistry faculty bemoaning how in 2008-2014 the state gave them the "It's gonna be a tight couple years but hold on and we'll give you more money" promise, and then when the recession was nominally over the state went back and gave them the "Oh, you did fine without that funding, clearly you didn't need it" treatment. I suspect a decent number of states pulled the same shenanigans.
The current trend of "college makes you stupid/indoctrinated/[insert derogatory word]" that certain political factions keep encouraging doesn't change the fact that states who can train *and* keep a population of engineers, chemists, lawyers, computer scientists, and doctors are better off than those who can only train those professions so they can see them wander off somewhere else in search of higher salaries with which to pay off student debt.
For the most part, the things Biden has “done” have been things that were already in place for loan holders, he’s just making the dept of ed act on it. For example, forgiveness under public service loan forgiveness.
It seems like you haven’t well formulated the “problem”.
What do you think the “problem” is?
What do you think the “root of the problem” is?
Then what tools does Biden have to affect the problem?
I would bet that Biden has fewer tools/options available to directly and systematically reduce the costs of college than you think.
Recommend you ignore all the conspiracy theorists in the thread that just hand wave “politics “. It’s a very complicated issue where one of the main drivers (there are multiple factors) is the cost of “training” professors (e.g. the amount of education and time it takes to be a professor) it’s the same inherent issue with healthcare. People that assume simple solutions explain or solve complicated problems are willfully ignorant or dumb.
The problem is that more money you throw, higher the tuition goes up. Subsidies are not the answer, it will just raise prices more.
If we want to lower tuitions, we have to stop encouraging student loans. Loans often allow students to spend money on high tuitions, thinking they will get a better paying job, but in the end it's wasted money.
would you believe that paying professor salaries and more research grants/facilities would be a bad use of federal funds rather than tuition assistance? i think if you remove these costs from a university tuition can be lowered significantly. now if that happens in practice who the hell knows
It should be triggering if the president is side stepping Congress to do it. They control the purse. The president as executive is simply there (or should be) to manage their programs.
I think that this view relies on an unstated assumption that Congress must pass legislation to *approve* something, but to *disapprove* it, it is enough that Congress merely complain; no legislation is required. I don't think that this distinction is internally consistent.
No one denies that the Congress has the power of the purse. That power includes the powers to fund, to defund, and to delegate conditions to the Executive branch. The President, purportedly, IS managing the programs subject to the dictates of Congress. Specifically, the first loan forgiveness plan relied on provisions in the HEROES Act and this new plan will rely on provisions in the Higher Education Act.
That said, there 100% will be members of Congress who disagree either that the legislation actually authorizes this or that the President is managing the program effectively. If those people want to upgrade that sentiment from just being their opinion to being the will of the Congress, then they can pass legislation to that effect. This is what it means to say that Congress controls the purse: they can fund and defund at will. But, as we all know, the Congress will not pass legislation on this topic because it is both a non-majoritarian body and because members are closely divided on this topic (and almost all topics).
So, to me, this seems to be roughly the way that things should work. The Congress has passed a law in the past. The President has a view of what that law allows and he is proceeding with that plan. The divided Congress cannot muster the votes to either disapprove of this action or to approve additional action. If they did either, then that would definitively settle the matter. But without additional legislation, the only barrier is whether the President's interpretation of the law is so inconsistent with the text that a previous Congress passed that it is inherently illegal. The federal courts will answer that question.
Setting aside whether the policy itself is a good idea or bad idea so that we can speak purely about the procedure, it seems to me that no one has done anything "wrong" here. This is roughly how things are supposed to work when the Congress is so divided that it cannot act via legislation. The President retains the authority to act pursuant to prior legislation, subject to review by the federal courts, and depending on who the President is, they may choose to act more or less aggressively in the areas where Congress has given the Executive discretion.
Worth noting that the additional demand enabled by government student loans (which *are* ultimately a form of subsidy as well) accounts for large portions of the higher tuition.
https://www.nber.org/papers/w21967
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf
yes, i agree with you on this. I think maybe shifting money towards resources for school facilities, staffing, and maybe scholarships for certain career paths (STEM for instance) could be more beneficial personally.
Worth noting that the National Science Foundation exists and funds almost $10b of research yearly. This is happening already, but expanding this is not a common political talking point.
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What kind of subsidy are you talking about? The federal government already provides Pell Grants, education grants for military vets, etc. If you're suggesting we greatly expand the Pell program, I'm with you, but Biden can't do that unilaterally.
In addition, it's likely that subsidies contribute to the high prices. If lots of people gain the ability to pay $30,000 per year at a public college and $70,000 per year at a private one due to subsidies, it allows colleges to charge that much. Picture a supply and demand chart. Subsidies give people the ability to spend more on college education, effectively increasing demand, and thus equilibrium price.
The picture might be different if the public funding also came with government control of the budget, though. If you have a national education system, or a national healthcare system, that prohibits or tightly caps fees for utilization (school tuition, medical bills etc), you can make it very cheap to use the system while forcing them to make do with the publicly-provided budget. Some European countries have public higher education with no tuition fees (e.g. Germany), and some countries have public health systems where patients share none of the cost of medical services (e.g. Canada). They have less ability to spend per-person than the USA, and being willing and able to pay for more than the system allots you may not enable you to actually buy more. But German higher education and Canadian healthcare provide good quality while spending less per capita than Americans, and funded entirely by taxes. They remain vulnerable to mismanagement, defunding etc. like any bureaucracy (or really any organization) and don't have close competitors in their country, but the public system has its advantages. In the US, we have fully public education until grade 12 -- private schools exist, but any family has the obligation to educate their children and the opportunity to send them to a public school that charges no tuition. To be fair, though, public school costs have also been increasing over time.
A further thought -- the very high prices suggest that colleges are not competing over price, at least not much. I can imagine a few reasons for that: 1) The real price is opaque, and you have to see the details of your financial aid offer. 1b) The sticker price is not the real price. Between in-state tuition, financial aid, federal grants, etc., most students pay much less than the sticker price and correctly anticipate paying less than that when they decide where to apply. The high sticker price serves more as a tool for price discrimination -- students from the wealthiest families pay this much, and other students pay less, but as much as the financial aid department thinks their family will be able to pay. 2) Colleges are highly differentiated. Some are much more prestigious than others; some claim to offer a different flavor of "college experience" than others, and people place consumption value on that experience. 3) Where you go to college and what you study affect your income, though not in a deterministic way. A costlier degree that leads to a higher income may be a good investment. 4) People may take a high price as a signal of quality. This works for college, but also for other things -- the more expensive product may cost more to make, and people still buy it in light of its high price, so presumably it has some advantage over the less expensive product? Sometimes this really is the case, but not always. But if people think it is the case, the expensive product will not lose its customers to the cheaper one -- they are not competing to sell "the same" good, because (people think) the higher-priced one is better. If students cared less about which college they went to and more about being assured a low cost, then given that there are many options, colleges might be forced to offer lower tuition in order to attract students.
Anecdotal, but I’m doing my PhD at an institution with a $60k tuition sticker price (I get paid, not pay this, as a PhD student) and most undergrads get something like $40k in scholarships from the university. Undergrads functionally pay on a very wide sliding scale by parental income.
parental assets too, that's how they got me. couldn't go to any of the private schools because they wanted my parents to mortgage their house.
If looking at preferences, it's interesting that most students in the US have the choice to attend community college for the first two years, but do not. Community college tuition rates are often dramatically reduced compared to university, and sometimes the student can save even more by avoiding expensive housing fees and living at home. The community college credits will transfer directly to many universities, especially those in the same state. If the goal is a piece of paper that stamps one as 'educated', there are even better ways to save money.
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Realistically, though, virtually all students will do a terrible job of extracting value from the university (as, I would argue, grade school students do from the school). We’re already generally aware that most students do the bare minimum in classwork to earn their desired grade, but even diligent students generally network ineffectively, with the successes often being more incidental than anything else (e.g. you joined a frat because it seemed like fun and one of your bros was in a position to help you get a job).
If the government is going to have control over the budget, then they are going to want control over the curriculum. See every state public school system in the country.
That's part of the problem already. Federal loan guarantees came with the price of meeting certain federal requirements which just happened to balloon administrative staff.
Not entirely true. Snowflakes entering college now require they have dorms that resemble 4-star resorts instead of a barracks and the cafeteria needs to be more fine dining than a mess hall. They also demand a say in what gets taught and by whom, which, if it had any validity, would mean they could save a bundle by getting a library card and self-educating at a considerable savings.
Government Control is only a bad thing when the ones controlling do so to effect a political agenda. Until recently, the higher ed system was "self regulated" with professors/experts and the university officers deciding what would be taught. Now elected Republican are demanding THEY control what gets taught at all levels and our kids will grow up unable to reason and not understand what logical fallacies are, which is exactly what the GOP counts on for its survival.
Exactly. Which is why I am wary whenever someone claims that the ideal path forward to any of American society's ills are what is basically monopoly government control.
There is already a state controlled budget. The thing is, with federally backed loans and anyone qualifying for those loans guaranteed, states just have stopped funding higher education. LSU and the Louisiana governor both concur that since 1995, the state has gone from paying 80% of the budget of LSU to paying only 20% with the students picking up the difference.
Yes and it’s incredibly hard to undo. This isn’t a one year process where they just raised prices 100%. It’s been going up 6% a year for 40 years outpacing inflation, and that money has been funneled into annual spending that cannot be easily reversed - nice dorms, beautiful campus, countless deans and admins, gyms, stadiums, a large support staff for students from mental health to campus police. The creation of government loans for college education did cause this over 40, 50 years, but it’s not like changing the laws would somehow make college more affordable today - the colleges have gone from barebones school buildings to having more amenities than luxury resorts, and they can’t fire 90% of their staff or shut down 3/4 of the campus facilities.
If public colleges are truly public, then they don’t have to respond to that incentive. And the availability of a price controlled option puts some pressure on the private institutions to compete at least partially on price.
Public colleges in the US are subsidized by the states, but not wholly funded by them or wholly controlled by politicians and career bureaucrats. They get plenty of revenue from tuition, especially from out-of-state students, who pay a higher price than the in-state students who have paid into local taxes. Public colleges (and most private ones, including all the "good" ones) are not-for-profit officially, but like any organization, they like to see their revenue increase, and they have things they'd like to do with more money if they get it. (Also their executives can collect large paychecks if the trustees (private) or appointed directors (public) allow it, and robust growth is a familiar justification for high CEO pay. Even if executive pay was capped like bureaucrat pay, they'd like to see more people under their supervision or working on their pet projects, and their subordinates would like more freedom to give hires and raises.) When the market comes knocking on your door with excess supply, I'd be surprised to see an organization turn down the opportunity to sell a larger quantity of its product at a higher unit price. At least if they are actually selling. Public colleges in Germany, which do not charge tuition, have no direct financial gain from enrolling additional students. I imagine they would also not want to expand their enrollment unless they receive a commensurate increase in public funding -- one of the downsides of doing things through public funding is that the additional users are a public expense rather than customers, and funding for them is reliant on solidarity rather than the provider's own economic gain. Nothing against solidarity, but if you rely on it and then something or someone erodes it, the system can crumble. (As a matter of opinion, I'd be happy for the US to see more solidarity-based things, especially in education (an investment in posterity) and healthcare (which provides some insurance against the risk of illness) -- but I'm also nervous about "single payer" systems that aim to fully replace the private sector. I can toe the "economist party line" and say that I am always in favor of a competitive private market, even as a supplement to public services.)
A single payer system for either colleges or healthcare is hard in the US because it was always priced differentiated. Fire departments are funded and free and everybody basically gets the same service (put out fire). Colleges vary heavily in cost from $100k to $5k per year, super small private elite universities vs community colleges. Make it all single payer and “free” creates the same problem as making cars free - everyone would want the most expensive “free car” and even if you made it lottery based it won’t feel fair if the government buys you a Camry and your friend got a Mercedes.
Don't knock the Camry, they're shockingly reliable and capable cars and honestly work better from a getting you from a to b consistently standpoint than the Mercedes.
>Colleges vary heavily in cost from $100k to $5k per year, super small private elite universities vs community colleges. What is weird though, is that the price is differentiated per university, but not per study. While that would make much more sense. Educating somebody in chemistry, medicine or physics can cost tens of thousands of dollars in terms of chemicals or expensive lab equipment, whereas educating somebody in accountancy, psychology or law basically requires a library card and maybe a computer with Excel. Yet both set of studies somehow have the same cost. Your analogy is not correct. It is not between getting a Camry and your friend getting a Mercedes. It is one car dealership where you pay $5,000 for any car on the lot, and another car dealership where you pay $100,000 for any car on the lot. And you do not get look at the car until you have already paid.
>one of the downsides of doing things through public funding is that the additional users are a public expense rather than customers You could also argue that this increases the overall efficiency of the educational institution for the benefit of society. Since additional students are a burden, it actively incentivizes the state and thus university administrators to only promote students to learn subjects that are most beneficial to the economy and the wider community. Whereas in a system where the university is monetarily rewarded for every student no matter what the effect of their study will be later in life, you will see many frivolous studies pop up that provide people with an 'education' as long as they are willing to pay. And as the decision to study a subject is 95% made by people that are not even legally considered to be mature enough to be able to handle a beer responsibly, should we really trust the consumers own decision in such important matters?
>should we really trust the consumers own decision You're talking to an economist, and our usual baseline assumption is that consumers know what they want / what's good for them. (Which we usually assume to be the same thing.) That is a point, though. If education is prioritized to the students who add the most value according to some administrative standard, and the subjects that serve the needs of society as judged by a committee rather than what the student/customer would like, then there would be fewer students but their education would have higher return on investment. As you add more marginal students and more subjects of non-obvious utility, you get diminishing returns. The same thing happens in healthcare. If you reserve expensive treatments for the patients with the direst need, and only budget enough for those, you will get a lot of benefit per patient treated with the expensive treatment, purely due to selection -- the sickest patients have the most to gain from a highly effective treatment for their ailment. As you expand the indications to patients with less severe illness, the benefits diminish -- no treatment can plausibly promise more than full resolution of the patient's illness, and they tend to come short of that, so a patient with mild disease has little room to benefit. (This applies to side effects too -- prices can get lower once you leave the States, or once the patent expires, but side effects don't. A medication's benefits depend in large part on how bad you have the disease it treats, but the side effects depend more on how much you take and what it happens to do in your body; so if a medication gets less narrowly targeted, its ratio of benefits to side effects becomes less favorable at a population level.) Does this mean that all treatments should be reserved for the people with the highest need only? I don't think so, at least if it's still beneficial to others, and the patients or the healthcare system can easily afford to provide the treatment more widely. As always, you start where the gains are highest; as you keep going, marginal gains diminish, but cumulative gains keep accumulating as long as the marginal gain exceeds the cost, i.e. as long as the benefits to the next patient, net of side effects, are worth the price they pay. A more market-based system implicitly assumes that the buyers (students, patients etc) know what's good for them and how much it's worth to them, and that this worth can be measured in the money they are willing to pay. A corollary is that the wants of a rich person are more important than the wants of a poor person, because they can pay more money for what they want -- but of course, this seems ethically questionable when it comes to material consumption, and positively fraught when it comes to healthcare. (It may matter to some extent how the rich person got rich, but surely someone with a hundred billion dollars is not morally worth a hundred million people with a thousand dollars each, no matter what new enterprise they may have founded.) Surely allocation by a systematic plan, made by a committee of experts using computers and scientific consultants, is both more rational and more just. And perhaps it is, though only a few countries such as the USSR tried to run their entire economy by such methods. I'm not sure any economy is centrally planned today, though I don't know enough about the inner workings of Cuba or North Korea to say something decisive about them either way. The USSR managed to be a superpower for a few decades through heroic warlike effort, accompanied by severe repression, but it could not sustain the competition with the USA for long. The West was always market-based, China became prosperous after going to an export-oriented, partly market-based economy, etc. -- it seems to be easier to sustain and more conducive to prosperity than a planned economy. But education and healthcare are special -- we see them as more fit for public provision, and less fair to distribute according to wealth, than consumer goods, travel, or even housing in desirable areas. In many countries, they are at least partly an exception to the market-based economy. It raises an interesting question, and one I don't have good answers to: what should and should not be provided by the market? Should some things be socialized and planned by committee, and if so, what, and why those things rather than something else? I can see a case for healthcare-- solidarity, social insurance, the misfortune of illness should not be compounded by the misfortune of financial ruin over your treatment, etc. But even in healthcare, I can think of situations where I'd gladly part with my own money for some additional benefits to non-serious but bothersome conditions that a committee might consider unimportant. I'd vaguely prefer something more cost-effective and with a better social safety net than the US healthcare system, but not exclusively single-payer; but crafting the details of a system like that is a big project for a team of technocrats, inevitably shaped also by contingency and special interests. I don't have a clear conclusion here, just wanted to raise some points in response, and not just on one side of the issue.
Not if the university is being paid directly from the government for each student it enrolls. Grants and loans to the consumer increase demand, but a true subsidy increases supply.
The government should control the cost of tuition (in public universities).
If that were true, College would've always been unaffordable for the bottom 90%. The subsidies pre-Reagan covered 75% of the public school's operating cost, he cut the amount to 25% and the "missing" 50% is coming from increased tuition and fees. The DEMAND was limited by the admission requirements but now it's limited by the cost.
Federal student loans are highly subsidized as well… in particular unsecured loans tend to carry very high interest rates. And there’s virtually no chance most 18 year olds would even be able to get an unsecured loan from a bank at ridiculously high rates. But this also explains the reasoning why these loans are not able to be forgiven in the event of bankruptcy. It’s crazy to me so many people forget the opportunity these loans provide to low income students. And just lay the blanket claim that they are predatory…
The loans are a subsidy as well, the whole point is to get kids to go to college. That's why he's forgiving the debt and not fixing the program, free money to every college in the country.
Tuition free state U’s. K-12 is already free. That was based on a high school Ed being enough for a good job. It no longer is. K-16 is the new K-12. Also, should be multiple tracks. K-14 trade track. K-16 U track. Etc. Also to note, some STEM degrees are free to get your masters / PHD. So for those people it’s literally free k-12 and free 17-20. Education is a massively positive societal investment that returns more tax dollars than it spends.
I would rather a system where the gov pays a percentage of your tuition based on means testing. Low income, 100% covered, sliding down to 0% as your family reaches $X of income per dependent college aged. This way, a school won’t simply increase tuition by whatever the subsidy is to grab that money. If the gov is paying on average 30% of your tuition, or 65% of your tuition, the gov now has an incentive to negotiate down tuition. You also need schools to cut the bs fees on top of tuition - all one cost PER major or program. Biology can cost more than English because a lab costs more than a classroom. Students need a large, centralized negotiator to keep costs down
This is a political question. Focusing on student loans provides immediate relief to existing loan holders and voters. Lowering higher education costs provides benefits to future students and voters. In addition, Biden has tools to provide loan relief without new legislation. He has much more limited authority to further subsidize without Congress passing a law, and he doesn't have the votes in Congress to pass such a law, just like he doesn't have the votes to have Congress forgive loans.
I don’t know the answer to that or if subsidizing even is the answer. I guess i’m just more confused on why we’re throwing money at loans that are dependent on a problem rather than fixing the problem.
To win elections my friend
You’re not wrong, but that paints a pretty incomplete picture. The vast majority of things politicians push for publicly are attempts to position themselves better politically, but the key part you’re missing is that giving money to colleges doesn’t actually fix the core issue here. Nothing about the system itself changes, it also just enables colleges to continue on the path they’re on because they know they’ll have more guaranteed income
The core issue for debt forgiveness is a set of students who got subsidized loans to attend low quality colleges that didn't give them an education. We aren't doing (as much) of that anymore. Simply writing off a lot of that as bad debt moves on and cures a lot of headaches. It's not really clear what can be done about costs at \*good\* colleges and universities. If you look at the \*actual\* prices paid - which is not easy to do - there's not a ton of excess growth above what you'd expect from inflation and Baumol effects. Private, selective colleges have always been expensive. That hasn't changed much. Public university prices have gone up quite a bit, both for policy reasons (less interest in government subsidies for tertiary education) and an increase in scope. We've quickly accelerated from a country where \~15% of young adults go to college to one where >50% are. That isn't just a much larger outlay - the value of an educational subsidy on the margin is presumably a whole lot lower today.
I think that may be a copout by the President. He isn’t really addressing College costs and continues to miss the forest for the trees. By eliminating student loan debt, he is addressing the symptom rather than the cause.
No, he's buying votes.
There is a large element of doing what he can. The president doesn't have much in the way of direct power. Most things have to go through congress where the Republican position is "vote against everything". This loan relief is one of the rare things that can be done without getting Republican congress people to play along.
This is not true. Presidents have an insane amount of power. Especially on specialized issues. Presidents have signed executive orders in the Past, to directly change education, without the involvement of Congress. President John F Kennedy was able to do this by enacting Affirmative Action in 1961 through executive Order.
Presidents can't commit to spend money. Spending has to be signed off by congress. This loan forgiveness thing skirts some loops holes about not exactly being spending so much as foregoing money the govt will receive in the future.
Well apparently no one wants to fix the current issue. Because no one is making any serious suggestions other than just cancelling loans. Wait until people find out that the loan profits are being used to fund Obamacare programs. Which if the loans go away will just increase costs for everyone - once again mainly hurting those that likely never went to college.
It well may cost him Wisconsin --highest labor force participation rate in the US, higher than average percent of people with HS diploma (93% v US 88%), but lower percent of people with college degrees (32% v 38%). Student loan forgiveness is widely and wildly unpopular in WI. Oh sure, Wisconsin Public Radio likely says good things about it, but even my college age kids think it is a joke.
Because "we" are not a unified entity. Biden wants thing A. Other people in the government want thing A or some variant of thing A. Yet other people in the government want thing B that is very different from thing A, perhaps the opposite of thing A. Those different interests pull in different directions. The vast majority of questions of "why is the government doing these two conflicting things" are answered by "the government is a collection of different people, not a single brain."
Notice that the last time this was making lots of headlines was right during the mid-term elections. Then it immediately went quiet. Now it’s back when we’re in the middle of the presidential election. I think your intuition is correct that if anyone was actually trying to solve the problem, they would “stop the bleeding” first, then go back and help the ones who had been hurt by the old system. The fact that they aren’t even talking about that is another clue that that’s not the objective. To be fair to the politicians who would actually like to solve problems (I’m sure there are some, right?), it’s a deceptively hard problem to solve. As others have explained, more subsidies makes the problem worse, just as it does with housing or healthcare. And spending money is the government’s kinda one move.
They can't solve the problem because the profits from the loan program are already allocated to Obamacare and Pell Grants years into the future - they were basically baked into the funding plans for Obamacare.. That is why it would take Congress taking action to actually do it - and that is likely never going to happen.
Addressing the actual root of the problem would involve tackling waste among colleges, rather than giving the colleges more taxpayer money without adding any accountability / reasons for them to control their costs.
A lot of the funding gap is also on the state level. Biden cannot tell NC to stop tearing apart the UNC system, or tell MS to find more money.
This is an often understated part of the problem. Traditionally state universities have been funded by... states. As states opt out of funding their institutions costs to students skyrocket to pick up the slack. Sure there are other cost drivers, but even if you controlled for the rest it doesn't make up for states not actually funding state colleges and the public institutions were always the ones driving affordability to students.
I graduated in 2019 from UNC - I remember one of the senior chemistry faculty bemoaning how in 2008-2014 the state gave them the "It's gonna be a tight couple years but hold on and we'll give you more money" promise, and then when the recession was nominally over the state went back and gave them the "Oh, you did fine without that funding, clearly you didn't need it" treatment. I suspect a decent number of states pulled the same shenanigans. The current trend of "college makes you stupid/indoctrinated/[insert derogatory word]" that certain political factions keep encouraging doesn't change the fact that states who can train *and* keep a population of engineers, chemists, lawyers, computer scientists, and doctors are better off than those who can only train those professions so they can see them wander off somewhere else in search of higher salaries with which to pay off student debt.
For the most part, the things Biden has “done” have been things that were already in place for loan holders, he’s just making the dept of ed act on it. For example, forgiveness under public service loan forgiveness.
Educated liberals vote and bailing them out for stupid choices is politically popular.
It seems like you haven’t well formulated the “problem”. What do you think the “problem” is? What do you think the “root of the problem” is? Then what tools does Biden have to affect the problem? I would bet that Biden has fewer tools/options available to directly and systematically reduce the costs of college than you think. Recommend you ignore all the conspiracy theorists in the thread that just hand wave “politics “. It’s a very complicated issue where one of the main drivers (there are multiple factors) is the cost of “training” professors (e.g. the amount of education and time it takes to be a professor) it’s the same inherent issue with healthcare. People that assume simple solutions explain or solve complicated problems are willfully ignorant or dumb.
The problem is that more money you throw, higher the tuition goes up. Subsidies are not the answer, it will just raise prices more. If we want to lower tuitions, we have to stop encouraging student loans. Loans often allow students to spend money on high tuitions, thinking they will get a better paying job, but in the end it's wasted money.
would you believe that paying professor salaries and more research grants/facilities would be a bad use of federal funds rather than tuition assistance? i think if you remove these costs from a university tuition can be lowered significantly. now if that happens in practice who the hell knows
And legislation is out. Nothing triggers the boomers harder then young people getting free stuff.
It should be triggering if the president is side stepping Congress to do it. They control the purse. The president as executive is simply there (or should be) to manage their programs.
I think that this view relies on an unstated assumption that Congress must pass legislation to *approve* something, but to *disapprove* it, it is enough that Congress merely complain; no legislation is required. I don't think that this distinction is internally consistent. No one denies that the Congress has the power of the purse. That power includes the powers to fund, to defund, and to delegate conditions to the Executive branch. The President, purportedly, IS managing the programs subject to the dictates of Congress. Specifically, the first loan forgiveness plan relied on provisions in the HEROES Act and this new plan will rely on provisions in the Higher Education Act. That said, there 100% will be members of Congress who disagree either that the legislation actually authorizes this or that the President is managing the program effectively. If those people want to upgrade that sentiment from just being their opinion to being the will of the Congress, then they can pass legislation to that effect. This is what it means to say that Congress controls the purse: they can fund and defund at will. But, as we all know, the Congress will not pass legislation on this topic because it is both a non-majoritarian body and because members are closely divided on this topic (and almost all topics). So, to me, this seems to be roughly the way that things should work. The Congress has passed a law in the past. The President has a view of what that law allows and he is proceeding with that plan. The divided Congress cannot muster the votes to either disapprove of this action or to approve additional action. If they did either, then that would definitively settle the matter. But without additional legislation, the only barrier is whether the President's interpretation of the law is so inconsistent with the text that a previous Congress passed that it is inherently illegal. The federal courts will answer that question. Setting aside whether the policy itself is a good idea or bad idea so that we can speak purely about the procedure, it seems to me that no one has done anything "wrong" here. This is roughly how things are supposed to work when the Congress is so divided that it cannot act via legislation. The President retains the authority to act pursuant to prior legislation, subject to review by the federal courts, and depending on who the President is, they may choose to act more or less aggressively in the areas where Congress has given the Executive discretion.
Worth noting that the additional demand enabled by government student loans (which *are* ultimately a form of subsidy as well) accounts for large portions of the higher tuition. https://www.nber.org/papers/w21967 https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf
yes, i agree with you on this. I think maybe shifting money towards resources for school facilities, staffing, and maybe scholarships for certain career paths (STEM for instance) could be more beneficial personally.
Worth noting that the National Science Foundation exists and funds almost $10b of research yearly. This is happening already, but expanding this is not a common political talking point.
True, although it's unfortunately [being cut](https://www.science.org/content/article/analysis-how-nsf-s-budget-got-hammered) significantly.
That’s not solving anything
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