It sucks knowing you're intelligent but not having a college degree. I feel kind of judged a lot of the time.

Who's making the judgments against you?

Employers.

Well, that's the obvious answer, but I inferred from Nate's post that there's more than that. Of course, I could be wrong.

As a republican leaning voter, I can only comprehend the obvious answer.

My peers, mostly. It's not an obvious thing but just a very slight shift. I don't know, I could be totally imagining it. I'm also the only person in my family without one so that kinda sucks.

http://www.bloomberg.com/news/2011-12-09/u-s-universities-feast-on-federal-student-aid-virginia-postrel.html


U.S. Universities Feast on Federal Student Aid
By Virginia Postrel Dec 8, 2011


The public is in a foul mood over increasing college costs and student debt burdens. Talk of a “higher education bubble” is common on the contrarian right, while the Occupy Wall Street crowd is calling for a strike in which in which ex-students refuse to pay off their loans.

This week, President Barack Obama held a summit with a dozen higher-education leaders “to discuss rising college costs and strategies to reduce these costs while improving quality.” The administration plans to introduce some policy proposals in the run-up to the presidential campaign.

Any serious policy reform has to start by considering a heretical idea: Federal subsidies intended to make college more affordable may have encouraged rapidly rising tuitions.

It’s not as crazy as it might sound.

As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay: “There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.”

It’s a phenomenon familiar to economists. If you offer people a subsidy to pursue some activity requiring an input that’s in more-or-less fixed supply, the price of that input goes up. Much of the value of the subsidy will go not to the intended recipients but to whoever owns the input. The classic example is farm subsidies, which increase the price of farmland.

Increasing Salaries

A 1998 article in the American Economic Review explored another example: federal research and development subsidies. Like farmland, the supply of scientists and engineers is fairly fixed, at least in the short run. Unemployed journalists and mortgage brokers can’t suddenly turn into electrical engineers just because there’s money available, and even engineers and scientists are unlikely to switch specialties. So instead of spurring new activity, much of the money tends to go to increase the salaries of people already doing such work. From 1968 to 1994, a 10 percent increase in R&D spending led to about a 3 percent increase in incomes in the subsidized fields.

“A major component of government R&D spending is windfall gains to R&D workers,” the paper concluded. “Incomes rise significantly while hours rise little, and the increases are concentrated within the engineering and science professions in exactly the specialties heavily involved in federal research.”

The study’s author was Austan Goolsbee, then and now a professor at the University of Chicago but until recently the chairman of the president’s Council of Economic Advisers.

Goolsbee did similar research, with similar results, on the effects of investment tax credits for capital equipment. Much of the benefit of such subsidies, he found, goes not to the company buying the new equipment but to the manufacturers who make it. A 10 percent investment tax credit raises equipment prices by 3.5 percent to 7 percent.

Like the scientists and engineers who benefit from R&D subsidies, the workers who make capital equipment also capture many of the subsidies’ benefits. Their wages go up, Goolsbee found, by 2.5 percent to 3 percent on average and as much as 10 percent, depending on the workers’ particular characteristics.

Goolsbee declined a recent request to comment on the subject, but the parallels to higher education are hard to miss.

In the short-term, the number of slots at traditional colleges and universities is relatively fixed. A boost in student aid that increases demand is therefore likely to be reflected in prices rather than expanded enrollments. Over time, enrollments should rise, as they have in fact done. But many private schools in particular keep the size of their student bodies fairly stable to maintain their prestige or institutional character.

Soaring Enrollments

The new breed of for-profit institutions has grown much faster than its nonprofit competition. Traditional private colleges expanded their enrollments 27 percent from 1999 to 2009, an increase of about 664,000 students, while for-profit private colleges grew 478 percent, by almost a million students.

Figuring out exactly what’s going on is tricky, because colleges price discriminate, offering steep discounts to some students while charging list prices to others. Treating published tuition as the real price of a college education is like believing the sticker price on a used car.

Some of the most elite schools, which could theoretically jack up their prices the most, face the most pressure from alumni and others to use their ample financial resources to extend more student aid.

At the most selective private schools, as defined by the College Board, federal grants and tax benefits for the average student are indeed lower than at less-selective schools, both as a percentage of all aid and in absolute dollars. These selective institutions’ own grants to students are much larger than elsewhere. Yet even after all this aid, they have the highest net prices: an average of $16,577 net tuition and fees (not including room, board and other expenses), compared with $10,823 for moderately private selective schools.

On the whole, it seems that universities are like the companies making capital equipment. If the government hands their customers the equivalent of a discount coupon, the institutions can capture at least some of that amount by raising their prices -- especially when demand for their product is increasing independent of aid, because a college degree promises to pay off in higher wages. They can then pay their employees more or simply not economize as they might otherwise have to do. Federal aid may also allow institutions to shift fundraising efforts away from drumming up scholarships and toward raising money for buildings, new programs or big-name professors.

Inflated Prices

This doesn’t mean that colleges capture all the aid in higher tuition charges, any more than capital-equipment companies get all the benefit of investment tax credits. But it does set up problems for two groups of students in particular. The first includes those who don’t qualify for aid and who therefore have to pay the full, aid-inflated list price. The second encompasses those who load up on loans to fill the gaps not covered by grants or tax credits only to discover that the financial value they expected from their education doesn’t materialize upon graduation.

That’s the situation many young people find themselves in today, which is one reason for their anger. The other is a widespread feeling, which the recession has intensified, that higher education is unfairly insulated from the everyday competitive pressures most people have to cope with. Instead of having to find ways to operate more efficiently and deliver ever-more value without raising costs, the way private-sector managers do, college administrators seem able to pass higher and higher bills on to their customers and the public.

A good chunk of the educated public has decided that college educators are decadent and lazy. Many are positively lusting to see higher education get its Detroit-style comeuppance.

This attitude is unfortunate and often unfair, but it’s the direct result of decades of federal policies. Any strategy to reduce college costs needs to look beyond traditional subsidies to remove some of the insulation that stifles innovation and feeds public resentment.

Ahh, the sweet stench of politicization of analysis.

Without massive federal backed student aid, I wonder if colleges could sustain thier current model.

Much like healthcare I disagree that the cost is even slightly close to worth it.

I think part of the reason there is no progress in this area is because we, as a society, refuse to question whether or not that model is worth keeping.

I think we've been doing that as a society on a variety of fronts for quite a while now. We seem to be unwilling to address these topics as if congress is any indication

Selling a piece of your future

A UNIVERSITY education costs a fortune. Student loan debt in America has been rising rapidly in an effort to keep up with the expense. According to the 2007 Survey of Consumer Finance 8.9% of households had student debt in 1989, averaging $8,700. In 2007, by contrast, the share had risen to 16%, holding an average of $21,500 in debt. To make matters worse new graduates face a slack job market which could depress their earnings for decades. But what choice do they have? The cost of forgoing university may be even larger.

Students in California have a proposal. Rather than charging tuition, they'd like public universities in California to take 5% of their salary for the first twenty years following graduation (for incomes between $30,000 and $200,000). Essentially, rather than taking on debt students would like to sell equity in their future earnings. This means students who make more money after graduation will subsidise lower-earning peers.

It is not clear if this will provide adequate revenue for the university. It also means the university bears more risk, because the tuition it will ultimately receive is uncertain. But the proposal will benefit some students and the principle is not so ridiculous. American universities already practice price discrimination based on parental income. The more money your parents have the larger your tuition bill; richer families already subsidise poorer ones. Why not price discriminate based on future income of the student rather than the current income of the parent?

It also means, in many cases, that degrees that command a higher value in the labour market, like engineering or computer science, will cost more than other degrees, like theatre arts. But if an engineering degree is worth more shouldn’t it cost more? If you think of a degree as an asset which pays dividends in future wages, the asset with a bigger expected pay-out should cost more. Faculty in high-value fields tend to get paid more. Perhaps some of that cost should be passed along to the students.

Incentives would also change; maybe university departments would become more invested in producing sucessful graduates. But might this undermine the mission of American universities, which is (or is often assumed to be) to provide a well-rounded liberal arts education? If universities become more income focused, will low-yielding, but socially valuable fields like philosophy wind up short of resources? To some degree, the university-for-all model already undermines our idyllic version of university. As more of the population goes to university, and must pay for it, more esoteric subjects naturally become less popular.

A trickier concern may be what happens if this approach is not implemented everywhere? If you know you will study engineering and earn a high salary wouldn’t you then opt for a school with a fixed, up-front cost—assuming that means you’ll come out ahead? Then would all the talented engineers go to other universities and potentially undermine California schools?

Still, it's an interesting proposal to address the rising cost of higher education.


http://www.economist.com/blogs/freeexch ... /education

What are tuition rates in the US like right now?

the giant flaw in this debate that's been going on these past couple years is that the point of college is not training students to become employable functioning members of the labor force. the point of college is to graduate enlightened citizens, who are wholly necessary to the success of any democratic society. If all you get out of college are skills to do a job, you've missed the point.

Based on the rapidly increasing rates of tuition, I'm not so sure that that is the point of colleges...

they're not charities, don't expect them to act like it. they'll charge what they can/

I generally agree with you on the first part, but why do you need college to become an enlightened citizen?

That's crazy.

you don't, and especially if you're having the typical modern college experience, you're not. college is an idiotic method of training for job skills, it's only justifiable purpose is in the enlightenment stuff, and traditionally this is what colleges were. The purpose of the undergraduate years has been diluted by research and the idea that college should position you to earn money.