New York has cheap in state tuition at the SUNYs. Binghamton considered the top SUNY has a tuition of $8,619. The statistic for what each high school student costs in New York is around $18,000 per year. It’s cheaper to pay for tuition for a college student then it is to pay for a high school student in New York.
If you think they’re wrong, why don’t you address the merits of their argument instead of calling them uneducated?
Saying Sanders should learn from the Laffer Curve is absurd. That’s taught as nonsense even in Econ 101.
And, yes, the economics discourse here is simplistic.
Supporting higher education as a social good yields a stronger economy. Just look at the impact of the GI Bill after World War II.
For all the doubters and naysayers on the thread that subsidies are the problem, it looks like the Federal government finally acknowledges what any clear-thinking economist knew was going on, but now there are actual numbers that quantify the scope and damage of the subsidies:
And for all the people who thinks these loans are a boon to lower income students and really helps in the inequality gap or whatever it is called these days:
And the major hit for the middle class when taking loans is something I am sure many on CC are aware of:
And before everyone keeps blaming the for-profit schools for being the nexus of the tuition hikes, take a good look at why they price hike - simply, the government subsidies pays them to do it, just like the non-profit colleges and universities:
Bolded emphases above are mine.
This is why my Dad explained to me in 1980 that if he could not afford my college and grad school (he could, but he was explaining the economics of loans to me), he said he would not allow me to take out education loans and would have made me work through school, finishing in 6 years instead of 4. When he did the payment math out, the education loans were the equivalent of buying three cars (over 18 years) and a house, as opposed to taking another two years to finish school with no debt and having the three cars and a house. A no-brainer, if I had to take that choice.
Agreed.
I assume it was a joke to say Sanders needs to learn about the Laffer curve. The theory is incorrect. It led to big deficits under Reagan, so he reversed course and raised taxes. And it’s destroying Kansas.
Those claims about subsidies are nonsense. The models are a disaster and have been widely debunked. The empirical data is a mess.
Pell grants have gone down in inflation adjusted terms, not up. Tuition costs have gone up in state schools due to cuts in state appropriations.
Hum…the new study referred to in my Post #103 was released / printed last month, July 2015.
Therefore, I would think it rather false to say the models therein have been declared a disaster and have been debunked already, and the empirical data is a mess. I admit I may have missed this debunking. Was this comprehensive discrediting done in the past 4 weeks since the study came out?
You do seem very confident that this study has been proved erroneous. So, please show where this new study has been debunked in other economic literature of similar rigor, not layman’s articles, which addresses this particular new study. Given the certitude of your statement, you must be aware of a study that has an abstract, which presents the opposite to the below.
Thanks - for I would feel silly giving out an already debunked economic study from last month.
You completely miss the fundamantal point of the study.
Both things are very true - state cuts causing tuition increases. However, the point of the study is someone still has to pay the tuition increase for the increases to continue. Meaning that, tuition increases can only exist and continue, if the tuition continues to be paid, irrespective of why the tuition were raised. The question the study addresses is where is the bulk of the money coming from to pay the tuition increase because it is clearly not the students paying directly, as the students and their parents are not making more money relative the rate of tuition increases.
The researchers are simply stating that students afford the majority of tuition hikes because of the loans. Or better said in producer terms, colleges feel fee to increase tuition because they know students can afford the increase with more education loans. Without education subsidies, colleges would not have this price increase freedom, as the discretionary income is not there to pay for continual increases. It does not matter if the loans are increasing less than the rate of inflation because they are still a subsidy and the schools still raise tuition, as much as they can, based on whatever amount the subsidy is.
In real monetary terms, adjusting for inflation, the study is saying that without government subsidies, college tuitions would be 40 to 50% of what they are today, if schools had to price according to what families could pay without subsidies.
Basic math here - cannot stay in business if you charge what people cannot afford to pay. So, the natural move is to adjust prices where one continues to have customers. Subsidies distort the price point adjustment and make it so the price is higher than the natural market price, thus the consumer pays a artificially-inflated price.
And since neither the Pell Grant nor Direct Loans have gone up how have they paid for the Tuition Increase? They haven’t. It’s loans cosigned or taken by the parents which were always on option.
Anything that is subsidized, increases. Tuition is no exception. This is not a difficult concept to understand.
A guy who knows how to make real money speaks…
Again, you miss the point - no one said that cosigning for loans were not always options or not contributing to the problem - the point is that education loans are subsidized, across-the-board. The basic fact is that lower borrowing standards and making it easier to be awarded education loans, in general, are what is the problem.
When the private banks were doing education loans, they had little incentive not to award them because repayment of principle and even some profit on the loss were guaranteed by the Federal government (in fact, a loan origination fee, i.e., an advance on profit, was made to the bank immediately after the loan was made) - all of these are subsidies. No matter if the parents co-signed, banks knew they would get their money because the government guaranteed it. In contrast, getting true private education loans, i.e., not backed by the federal government, were and still are rather difficult to get.
Bottom-line is singling out Pell Grants and Direct Loans misses the entire underlying premise that even the other types of educations loans were subsidized by the government, and banks were paid by the government to make those loans.
What the study shows is that even Pell Grants and Direct Loans have a tuition increase effect; it did not say those two loan types are the only loans, which contribute to the tuition increase effect.
And the feds know where the money is, as the feds took the education loans away from banks and linked the student loan program to help fund Obamacare at a tune of $8B+a year. Therefore, the government will continue to make sure loans are easy to get across the board, and tuition will continue to go up, because they need kids in debt to pay for their ill-spending.
The perverse thing is students and parents do not understand the connection that the government now needs them in education loan debt paying interest in order to fund government. Therefore, as long as government needs said interest payment money, education loans will be easy to get, co-signed or not, and college tuition will never go down to match its true value relative the potential income of students. It is coming so that most students are never going to get out of education debt.
Question - why do you think government made it so student education loan debt cannot be discharged in bankruptcy? Answer - the government, since it subsidized the loans across-the-board, are not going to let students get away without paying. This is unlike a true private loan where the company would have to eat it in bankruptcy court.
Cuban nails it, just like @Requin - easy money (subsidies) for any product means price increases for that product. Real simple.
The cost of any subsidized product increases to account for the subsidy. You may have encountered this live and in person if, like most American adults, you have employer-provided health insurance, and you have been in the hospital lately and seen $10 Band-Aids on your EOB.
A very plain illustration of this fact in the undergraduate-tuition context comes from Hillsdale College, which accepts no federal student loans or other federal or state financial aid. (College grants and private market-based lenders only.) 2015-16 tuition, room, and board at Hillsdale is roughly $35,000, or about 40% less than the $60,000 sticker price of comparable small liberal-arts colleges (including, alas, the Requinette’s).
How they manage to pull that off is left as an exercise for the reader.
Actually, Hillsdale’s $35k COA isn’t that out of line—the $60k ones get the headlines and attention, but there are a good number of bargains out there, including among those that take federal or state aid.
I’m not talking about “bargains.” The key word is “comparable.” This chart gives a useful, and sortable, comparison of costs: http://www.kiplinger.com/tool/college/T014-S001-kiplinger-s-best-values-in-private-colleges/index.php
Based on that chart, the next few least expensive general, private, non-sectarian liberal arts colleges that I’d consider comparable (academically, reputationally, etc.) to Hillsdale would be Mount Holyoke,at $56,000, Grinnell, at $57,000, or Richmond, at $58,000. You can quibble with my particular selections but no non-sectarian college below $50,000 in that list is remotely in the same league.
(1) You clearly have a differing opinion, but I wouldn’t put Hillsdale nearly in the same league as Mt Holyoke or Grinnell or such. Seriously, you need to be looking way down the reputation scale for Hillsdale.
(2) Sticker price ≠ what nearly anybody actually pays.
True…my sticker price is 47k but I didn’t pay a single cent to my school this semester XD
However, someone did, somehow, because it was not free.
The only thing is that you are separated from the event and thus powerless to affect the price - alas, this is what is happening with colleges and the current education loan third party subsidized system.
The part I find most interesting about this thread is how so many do not realize that having a third party pay something for you completely takes away your pricing power, as a consumer. When you give away your pricing power, you are doomed to be the one paying higher prices all the time.
Before my dad set out to run his own company, as president of another one, he negotiated that he get no company health insurance and no other company benefits, such as no company car - he requested it pay him the cash instead. The results were amazing - he found a a better health policy for the family for less. And, the use of his own car was a boon because he had to pay for it anyway, and it would depreciate pretty much the same regardless if used a few more miles. Therefore, in real terms, the company ended up paying him to drive his own car than docking him in salary to drive theirs.
By the time he left a few years later, it was something over $30K after taxes that he pocketed, while having a better health insurance plan and driving a much nicer, high-end car than the company fleet cars. But, it was really more, because he had invested the money along the way, so it was like double the $30K by then. And best of all, he got paid more each year with salary increases (cause he got the additional cash increase of the benefits, along with the standard salary increase), and still had better healthcare and car etc. than the other executives.
The only thing he did that too many people do not do is he refused to give away his power to pay the price he wanted for services. Therefore, a third party (the company) could not just keep accepting price increases for benefits and taking it out of his pay (without his permission), which is what happened to the other executives - they got lower salary increases because the annual differential increase in benefits were taken out of their salary. Dad did much better and actually got paid to do it to boot.
AW- sometimes it works and sometimes it doesn’t. We’ve got former employees who stay on COBRA after they leave because they discover that there is just no way they can replicate our health insurance at the cost they pay at the employee rate once they go out and try to price a policy on their own. We’ve seen policies that former employees have been quoted (depends on many factors of course- size of family, age, etc.) which are close to double to the cost of their company insurance (adding up both what the company pays and the employee contribution) and sometimes with much worse coverage.
So your example is an “it depends”. Big companies can often negotiate health insurance for employees that an individual has a tough time replicating, no matter how gifted a negotiator you are.
@blossom - Agreed. I should have made clear I was talking about my Dad some 42 years ago when healthcare policies were a much simpler issue with less red tape AND less government intrusion. I was using it only as an example of how people need not give away their power of the purse by having a third party pay for things.