House Republicans' Spending Bill for Remainder of 2011 Would Cut Pell Grant by 15%

Govt subsidies increase the cost of a college education? Please explain how that works.


Government has distorted the education market in a very similar manner that it did the housing market. There have been a great many commentaries and articles lately about the higher education bubble. I recall one very telling stat in one of them.

Up until the 1980s, the lifetime increase in income for having a BA degree was approximately $1M. IOW, if one had a BA, one would expect to earn an additional $1M of income over the course of one's career. The net present value of that $1M was $200K.

And now, BAs cost $200K at many universities, with no corresponding increase in lifetime earning power. The education industry has sucked out all of the financial returns. The money hasn't gone into improving class room instruction. It has gone into administration (compliance with Federal Regs) and lifestyle amenities (gyms, pools, fancy dorms).

How was this accomplished? By giving massive student loans to 18 year olds (who have no demonstrable ability to repay such loans) with the government making sure that such loans cannot be discharged in bankruptcy. The result: film and ethnic studies majors graduating with six figure debt, no real career prospects, a life time of making minimum payments with no way to save for a house, raise children, and prepare for retirements.

It's shameful.

Use a search engine and find some articles. There are quite a few.

http://washingtonexaminer.com/node/80276

http://chronicle.com/article/Will-Higher-Education-Be-the/44400

And it's not just in the U.S.

http://www.cnbc.com/id/41237865
 
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Sounds like a great idea to me. All government subsidies have done is increase the cost of higher education at more than 4X the rate of inflation.

Citation needed.

you need a citation for basic economics?



Of course he does. He's an idiot who clearly doesn't read anything. The business press has had frequent articles on this topic for the past few years.

With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable. According to the National Center for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent — more than four times the rate of inflation and almost twice the rate of medical care. Patrick M. Callan, the center's president, has warned that low-income students will find college unaffordable.

Will Higher Education Be the Next Bubble to Burst? - Commentary - The Chronicle of Higher Education
 
Govt subsidies increase the cost of a college education? Please explain how that works.

Absolutely. When you subsidize something you get more of it. Do you realize how much money you can get in student loans? I just finished my Master's Degree back in December and I owe $70k in student loans and I didn't even take near the maximum that I could.

Nothing is bringing down the cost of education because the government will lend you just about what ever you need to go. Hence, universities can and do continue to raise their tuition every year. Watch. College education will be the next housing bubble. I've already read more than a few articles over the past couple of years that the cost of a college education is nearing the point where the benefits are no longer worth it.

If the government would cut back on the amount of loans it will give, less people will be able to afford to go. That will cause the universities to start losing money so they will have to bring down the cost of tuition in order to increase their student body numbers again. Universities are no different than a business.

I dunderstand your angle but in business are things not cheaper in volume than smaller amounts?

the price of gas goes down as our consumption does?
The law of supply and demand is often violated.

also why do the smaller private colleges cost more than the larger state subsidized ones?
 
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Govt subsidies increase the cost of a college education? Please explain how that works.

Absolutely. When you subsidize something you get more of it. Do you realize how much money you can get in student loans? I just finished my Master's Degree back in December and I owe $70k in student loans and I didn't even take near the maximum that I could.

Nothing is bringing down the cost of education because the government will lend you just about what ever you need to go. Hence, universities can and do continue to raise their tuition every year. Watch. College education will be the next housing bubble. I've already read more than a few articles over the past couple of years that the cost of a college education is nearing the point where the benefits are no longer worth it.

If the government would cut back on the amount of loans it will give, less people will be able to afford to go. That will cause the universities to start losing money so they will have to bring down the cost of tuition in order to increase their student body numbers again. Universities are no different than a business.

So only rich people can go to school, then what is the incentive for a poor person to work hard if they can't afford a bachelors degree to make more money. So why try hard in school if they can't get any financial aid to support their education. Oh and yeah no defense spending cuts, even though we have enough weapons to blow up any country in 3 hours at worst. But NOOOOOO cut our people's means to better themselves.

So now people aren't making more money, meaning they spend less meaning business can't keep employees in their company, lays them off, more people become unemployed, can't afford to buy stuff, our economy collaspes.

People need to have the opportunity to have an education. Our economy depends on it. I mean its great for the republican party, its a known fact that less educated people vote Republican, but just like when you vote Republican, its very bad for our country's future.



I went to school without being rich. I worked at full and part time jobs, and paid for both my undergraduate and graduate degrees. I'm not unique in this regard - many people do this.
 
Govt subsidies increase the cost of a college education? Please explain how that works.

Absolutely. When you subsidize something you get more of it. Do you realize how much money you can get in student loans? I just finished my Master's Degree back in December and I owe $70k in student loans and I didn't even take near the maximum that I could.

Nothing is bringing down the cost of education because the government will lend you just about what ever you need to go. Hence, universities can and do continue to raise their tuition every year. Watch. College education will be the next housing bubble. I've already read more than a few articles over the past couple of years that the cost of a college education is nearing the point where the benefits are no longer worth it.

If the government would cut back on the amount of loans it will give, less people will be able to afford to go. That will cause the universities to start losing money so they will have to bring down the cost of tuition in order to increase their student body numbers again. Universities are no different than a business.

I dunderstand your angle but in business are things not cheaper in volume than smaller amounts?

the price of gas goes down as our consumption does?
The law of supply and demand is often violated.


You think gasoline is a Free Market?

Education is like health care. It's a service business. Tons of (deferred payment) money masks the cost to the student who is "counseled" by self-dealing educational institutions to take out massive loans because education is his "right" and he needs it to have a career. There is not cost benefit analysis provided to prove that there is any positive return on this. It's a shameful.
 
you need a citation for basic economics?

I need a citation to show your claim to be true instead of a speculative assumption. Can you show any evidence that actually links the cost of tuition to government education assistance made available to the public? Can you show any evidence that would rule out other possible causes for high education expenses, such as the operating costs it takes to provide education?
 
Govt subsidies increase the cost of a college education? Please explain how that works.


Government has distorted the education market in a very similar manner that it did the housing market. There have been a great many commentaries and articles lately about the higher education bubble. I recall one very telling stat in one of them.

Up until the 1980s, the lifetime increase in income for having a BA degree was approximately $1M. IOW, if one had a BA, one would expect to earn an additional $1M of income over the course of one's career. The net present value of that $1M was $200K.

And now, BAs cost $200K at many universities, with no corresponding increase in lifetime earning power. The education industry has sucked out all of the financial returns. The money hasn't gone into improving class room instruction. It has gone into administration (compliance with Federal Regs) and lifestyle amenities (gyms, pools, fancy dorms).

How was this accomplished? By giving massive student loans to 18 year olds (who have no demonstrable ability to repay such loans) with the government making sure that such loans cannot be discharged in bankruptcy. The result: film and ethnic studies majors graduating with six figure debt, no real career prospects, a life time of making minimum payments with no way to save for a house, raise children, and prepare for retirements.

It's shameful.

Use a search engine and find some articles. There are quite a few.

Glenn Reynolds: Higher education's bubble is about to burst | Glenn Harlan Reynolds | Op Eds | Washington Examiner

Will Higher Education Be the Next Bubble to Burst? - Commentary - The Chronicle of Higher Education

And it's not just in the U.S.

News Headlines


Many college students—especially dropouts—are burdened with debt accumulated from loans that could have been avoided or minimized by choosing other education and training options. Debt from student loans hurt those who never finish college. Most dropouts are left with big debts and mediocre job prospects.

It is estimated that 40% of college students will leave higher education without getting a degree, with 75% percent of these students leaving within their first two years of college. Freshman class attrition rates are typically greater than any other academic year and are commonly as high as 20-30%. These statistics show a need for colleges to do something about retention rates



Read more: College Drop Out Rates - Who's to Blame? - StateUniversity.com Blog College Drop Out Rates - Who's to Blame? - StateUniversity.com Blog
 
Up until the 1980s, the lifetime increase in income for having a BA degree was approximately $1M. IOW, if one had a BA, one would expect to earn an additional $1M of income over the course of one's career. The net present value of that $1M was $200K.

And now, BAs cost $200K at many universities, with no corresponding increase in lifetime earning power. The education industry has sucked out all of the financial returns. The money hasn't gone into improving class room instruction. It has gone into administration (compliance with Federal Regs) and lifestyle amenities (gyms, pools, fancy dorms).

Well this is interesting. The information you provide here draws me to the conclusion that instead of government financial aid, the institutions have made a point to try and capitalize on the value of education, while also adding additional, non-monetary appeals to attend their institution. That sounds an awful lot like the free market at work to me.

How was this accomplished? By giving massive student loans to 18 year olds (who have no demonstrable ability to repay such loans) with the government making sure that such loans cannot be discharged in bankruptcy.

Again, citation needed. You need to show some hard evidence that government aid is the cause of increasing college tuition, and you need some evidence to rule out other possible explanations. By your own admission operating costs must be going up. After all, it costs money to build and maintain gyms, pools, and fancy dorms.

The result: film and ethnic studies majors graduating with six figure debt, no real career prospects, a life time of making minimum payments with no way to save for a house, raise children, and prepare for retirements.

So in other words, some people make irresponsible decisions when pursuing their college career, in terms of the practical value of the education they are pursuing. So then, it seems that the reason tuition is increasing is similar to the reasons why 11 years ago I could buy my first cell phone, a decent instrument, for $95 with $30/month service, but today It costs me $400 just to buy a cell phone that is not even as good at its job, and $100/month service. Not because government is subsidizing the costs of phones or service plans, but because marketing has cultivated a public that paradoxically views cell phones as novelty toys (it's virtually impossible to find a phone that does not come "standard" with internet ability, a camera, texting ability, MP3 player, and other "improvements") and utter necessities all at the same time (try showing up to work 15 minutes late without calling, and see how much sympathy your boss has for your explanation that you were stuck in traffic. That cell phone is now expected, even at the lowest levels). The result in both cases is that what started as a valuable tool at a [presumably] somewhat reasonable price to increase a person's abilities has been morphed by the free market into a necessity that you are expected to obtain, which is the providers are able to use to hold you by the balls to cough up much more than you once upon a time needed to pay.
 
Again, citation needed. You need to show some hard evidence that government aid is the cause of increasing college tuition, and you need some evidence to rule out other possible explanations. By your own admission operating costs must be going up. After all, it costs money to build and maintain gyms, pools, and fancy dorms.
First of all, if you subsidize something you end up getting more of it...This is axiomatic. Since the number of colleges has remained pretty much static, it only makes sense that costs would go up.

Secondly, the way state-run institutions are operated, you don't get a bigger budget next year if you don't use up this year's money. That's how you "prove" that you need even more funding....This is how their budgetary models works.

If those two aspects of the way colleges are run don't artificially inflate costs, nothing will.
 
Secondly, the way state-run institutions are operated, you don't get a bigger budget next year if you don't use up this year's money. That's how you "prove" that you need even more funding....This is how their budgetary models works.

Then according to your theory, I would expect tuition to go down. With lower tuition, the institution can cite even greater need, and it will be even easier to "run out" of money on purpose to prove your need for the next year.

But ultimately, you seem to be committing fallacy of equivocation. Federal financial aid to students is not the same thing as direct support from state and local governments.
 
Secondly, the way state-run institutions are operated, you don't get a bigger budget next year if you don't use up this year's money. That's how you "prove" that you need even more funding....This is how their budgetary models works.

Then according to your theory, I would expect tuition to go down. With lower tuition, the institution can cite even greater need, and it will be even easier to "run out" of money on purpose to prove your need for the next year.
That would be wrong.

You don't get $150,000 next year if you don't use up your $125,000 this year...That's how it works.

But ultimately, you seem to be committing fallacy of equivocation. Federal financial aid to students is not the same thing as direct support from state and local governments.
Ultimately, the axiom doesn't change, no matter the source of the subsidy.
 
Again, citation needed. You need to show some hard evidence that government aid is the cause of increasing college tuition, and you need some evidence to rule out other possible explanations. By your own admission operating costs must be going up. After all, it costs money to build and maintain gyms, pools, and fancy dorms.
First of all, if you subsidize something you end up getting more of it...This is axiomatic. Since the number of colleges has remained pretty much static, it only makes sense that costs would go up.

Secondly, the way state-run institutions are operated, you don't get a bigger budget next year if you don't use up this year's money. That's how you "prove" that you need even more funding....This is how their budgetary models works.

If those two aspects of the way colleges are run don't artificially inflate costs, nothing will.

It's also a fine example of one of the big factors in the increase of health care costs... thank you HMO's and government subsidies. Like anything, remove market forces, throw somebody elss's money at it, it costs more.
 

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