Another way to finance studies

[Aimless]

This sort of scheme has come up before, but I can't recall having discussed the pros, cons and possible improvements on this forum.

So:

http://www.fixuc.org/




Very briefly: pay fixed percentage of salary (or other income?) for a couple of decades rather than having to rely on loans and financial aid right from the start. I'm trying to figure out if this may be an approach Sweden should consider

[wiggin]

I think that's a good way to subsidize useless educations. Since people won't have as strong of an incentive to get an education that will result in a salary that can pay for it, they'll be more inclined to stick with sociology or English lit or whatever. It's just an extension of current federal income-based repayment schemes, of course, but I'm not a huge fan of those either.

[Loki]

That only makes sense for people who aren't likely to get high-paying jobs. In the end, this scheme will lose money because it won't be able to get many people on whom it could make a profit.

This is fairly similar to what the British government does by the way.

[Aimless]

Would this make life any easier for eg. certain ethnic groups/classes/genders?

[Loki]

Are certain ethnic groups/classes/genders not able to get student loans now?

By the way, there are more women than men in college, so I don't think which gender you're referring to.

[wiggin]

Also, 5%?! On student loans of about $25000, you're talking about paying thereabouts of $3300/year, depending on specific interest rates (this is assuming 6% interest for a 10 year repayment). This is ignoring the current tax writeoff which would drop that quite a bit. This would be 5% of income for someone making about $66k/year. Most people with useful college educations average higher than 66k in their 10 years of employment, so they'd pay less than 5%.... AND they'd only pay for 10 years, not 20 in the UC plan. Why would anyone getting a STEM degree (or going into medicine, law, or business) have any interest whatsoever in this system?

[Loki]

It's actually not as bad as it sounds. Higher future earnings are offset by future money being worth less than today's money. Assuming an average income of $60k once you settle into your job (which is well above the national average for college grads by the way), you're paying about $60k in present money over the 20 years. I believe that's pretty similar to the tuition UC charges.

Then you factor in the fact that student loans have substantial interest, even if part of it is written off, and it does seem like a good deal for those who don't expect to make too much money over their lifetime). If anything, this program will probably lose money (due to self-selection).

[Aimless]

I have to admit I find it a little curious that your first concern was that this would only be of any interest to people with crappy non-STEM degrees while the first commentary I found on the interwebs expressed concern about the exact opposite scenario.




Afaict the proposal is to scrap up-front payments altogether, so that all students at that uni are required to use this scheme. One of the touted benefits is [allegedly] simpler planning (for the uni as well as for the students who won't have to worry about sudden hikes in tuition and interest). I have no idea whether or not the uni may benefit from being able to scrap much of its tuition and financial aid administration. May or may not make it easier for students to pursue more advanced degrees. As always the highrollers would end up subsidising the basket-weavers

[wiggin]

I have to admit I find it a little curious that your first concern was that this would only be of any interest to people with crappy non-STEM degrees while the first commentary I found on the interwebs expressed concern about the exact opposite scenario.

I read the Free Exchange piece and I disagree. Yes, universities might have some incentives to increase the earnings of their graduates, but graduates (who by far have the most control over this) would have exactly the opposite incentive. Compared to the current situation, the cost of a humanities degree would go down, driving demand up.

I think that FE is fundamentally wrong about one thing - more valuable degrees (in terms of future earnings) shouldn't cost more just because they are more useful. They should have a higher price if the production costs are higher (not very much; most engineering/science departments actually subsidize the humanities because of grant overhead and alumni contributions), or if the demand is higher (not really; a depressing low growth rate in STEM graduates it tied to low student interest). This proposal is just increasing the price because people will find it more useful in the real world; maybe they shouldn't be subsidizing useless degrees in the first place.

Lastly, FE does bring up a good point - there's serious competition in the US for university students. Why would a high-earnings potential student stick with the UC's ridiculous system when they could pay upfront for a good education elsewhere - which would have lower lifecycle costs?

(Loki, I understand about future earnings and inflation, but remember that the UC price is effectively tied to wage inflation, while a loan scheme allows the price to be eroded by inflation combined with tax writeoffs. Pretty much any interest rate below 4% actually earns a graduate money, while any career advancement would cost a UC graduate money. Also remember that this system is replacing financial aid - that means that for students who don't pay the full tuition but get a high-value degree, they're really losing a lot from this arrangement. It essentially penalizes high achieving poor kids.)



BTW, I want to say for the record that I think top tier private universities should provide nearly free tuition - they can definitely afford it given the size of their endowments, and it would pay off a lot in being able to recruit the best students (rather than just those who can pay). It might also give alumni incentives to donate more, if they knew that their alma mater wasn't being greedy. But these after-graduation contributions are voluntary, not compelled, and there's no way this system would work in a huge public institution like the UC chain.

[Lewkowski]

This sort of scheme has come up before, but I can't recall having discussed the pros, cons and possible improvements on this forum.

So:

http://www.fixuc.org/




Very briefly: pay fixed percentage of salary (or other income?) for a couple of decades rather than having to rely on loans and financial aid right from the start. I'm trying to figure out if this may be an approach Sweden should consider

Am I the only who thinks its a good idea to have people work during school? You know... learning a work ethic? College today (at least undergraduate) is absurdly easy to get into and to graduate. Kids are selecting schools based on a whole host of non-academic non-career goals. "Party schools" what a joke.

Look if you want to waste your parents money or your money in order to "learn and grow" be my guest. But don't expect anyone to subsidize it in any fashion.

Furthermore the 0 payment schemes like this until you start working... what happens if you don't ever work? Who pays for it if you die? Who pays for it if you become disabled? Or are just plain lazy? Why should society (or even a college) fund people farting around learning pretty much nothing and just extending their childhood for another 4, 5, 6 or 7 years?

[Loki]

Can't this be viewed as a form of insurance? After all, who pays for all those people who get health insurance or life insurance and then do something awful like getting injured or dying?

[Lewkowski]

Can't this be viewed as a form of insurance? After all, who pays for all those people who get health insurance or life insurance and then do something awful like getting injured or dying?

How so? Insurance is paid for by the individual, schemes like this (and student loans in general) are subsidized by the tax payer.

[CitizenCain]

Insurance is a risk pool... whether it's voluntary or mandatory doesn't change what it is, just whether or not it's morally reprehensible.

(Or should be morally reprehensible, anyway... when you got half the population supporting theft from the other half, well, whatever. Society of cowards and thieves.)

[Loki]

How so? Insurance is paid for by the individual, schemes like this (and student loans in general) are subsidized by the tax payer.

The scheme in question is being run by some group within the University of California system, not the government. So the only subsidy is by people who'll end up getting good jobs to people who won't. That's not terribly different from healthy people subsidizing the insurance policies of those who are ill.

[Lewkowski]

The scheme in question is being run by some group within the University of California system, not the government. So the only subsidy is by people who'll end up getting good jobs to people who won't. That's not terribly different from healthy people subsidizing the insurance policies of those who are ill.

Doesn't the university of CA get money from the state of CA?

[Aimless]

Furthermore the 0 payment schemes like this until you start working... what happens if you don't ever work? Who pays for it if you die? Who pays for it if you become disabled? Or are just plain lazy?

Isn't the unemployment rate among college graduates something like under 5% at any given time? Isn't the default rate on student loans something like 9% of all loans as it is? Don't permanently disabled/dead people get their loans written off? I'm confused as to why that reality would be much worse than this scheme.

Why should society (or even a college) fund people farting around learning pretty much nothing and just extending their childhood for another 4, 5, 6 or 7 years?

I dunno, you tell me. I hear college graduates make far more money so I'm assuming college education makes for generally greater productivity.

[Loki]

Doesn't the university of CA get money from the state of CA?

What if this fund breaks even?

[Being]

I dunno, you tell me. I hear college graduates make far more money so I'm assuming college education makes for generally greater productivity.

I can't be sure but I believe his point is that you don't need a college education to be more productive than many college graduates.

[Lewkowski]

Isn't the unemployment rate among college graduates something like under 5% at any given time? Isn't the default rate on student loans something like 9% of all loans as it is? Don't permanently disabled/dead people get their loans written off? I'm confused as to why that reality would be much worse than this scheme.

I'm not in favor of subsidized student loans either.

[Loki]

How do you expect people to afford private colleges that generally charge $30k (with room and board) a year even after scholarships? Not too many sane banks would lend an 18-year-old $120k at anything approaching reasonable interest rates.

And heck, the only reason public colleges don't charge as much is because of government funding, which you oppose.

[Being]

I'm not in favor of subsidized student loans either.

I mean to be intrusive, how did you pay for your education?

[GGT]

Doesn't the university of CA get money from the state of CA?

I'm not in favor of subsidized student loans either.

All state university systems use tax money in some way. Including your home state of Texas. That's why in-state tuition is cheaper than its "true price" --- because the state helps subsidize the costs --- whether or not a loan is used. It's based on an Insurance Model of pooling resources that benefit an entire state, by producing enough educated professionals to serve a modern-day citizenry. Y'know, those people who become teachers, nurses, physicians, pharmacists, veterinarians, farmers, lawyers, police or fire chiefs.....




@ Aimless, in the US, student loans can't be discharged, even when declaring personal bankruptcy. The college grad employment rate has changed since the Great Recession, when many had decided to get a secondary degree and/or spread a four year degree into six.

[Lewkowski]

How do you expect people to afford private colleges that generally charge $30k (with room and board) a year even after scholarships? Not too many sane banks would lend an 18-year-old $120k at anything approaching reasonable interest rates.

And heck, the only reason public colleges don't charge as much is because of government funding, which you oppose.

Room and board? Yeah that's pretty unnecessary. In many cases renting off campus is cheaper. Plus what is wrong with 2 years of community college and then a transfer? Oh... that's right people want the "college experience." Its not like the basic courses are going to be that much different from one school to another.

BTW Loki - what percentage of the population should go to college? Or to ask it another way what percentage of jobs right now in the US labor market require a college degree compared to ALL the jobs in our labor market?

[Lewkowski]

I mean to be intrusive, how did you pay for your education?

Not that it matters but I worked during college and received assistance from family. I suppose you could say I also received government funding since I went to in-state university but again what happens to an individual personally should have no impact on an objective view of the way the world functions.

[Lewkowski]

All state university systems use tax money in some way. Including your home state of Texas. That's why in-state tuition is cheaper than its "true price" --- because the state helps subsidize the costs --- whether or not a loan is used. It's based on an Insurance Model of pooling resources that benefit an entire state, by producing enough educated professionals to serve a modern-day citizenry. Y'know, those people who become teachers, nurses, physicians, pharmacists, veterinarians, farmers, lawyers, police or fire chiefs.....

By your logic I assume you would be in support of only allowing student loans and in-state deductions for majors that a state would need? Right? Because a glut of liberal arts majors currently exist, surely if your purpose is to "insure" the state has qualified professionals you wouldn't want to throw money away by subsidizing degrees that already have sufficient saturation.

I'm not seeing much productivity gains for society by having people take 5-6 years to complete a 4 year degree to earn a piece of a paper that a mildly retarded person could also get. Outside of prestigious universities college courses are beyond. I kid you not, I had one course where the instructor based 25% of your grade for *showing up.*

[Loki]

Room and board? Yeah that's pretty unnecessary. In many cases renting off campus is cheaper. Plus what is wrong with 2 years of community college and then a transfer? Oh... that's right people want the "college experience." Its not like the basic courses are going to be that much different from one school to another.

BTW Loki - what percentage of the population should go to college? Or to ask it another way what percentage of jobs right now in the US labor market require a college degree compared to ALL the jobs in our labor market?

A) Many states don't have community college systems that are structured toward direct transfers into 4-year colleges. As a result, people lose at least a year by going this route.
B) Community college classes are oversubscribed, which means it takes substantially more than 2 years to get 2 years worth of transferable credits. If you combine A and B, it can easily take 6 years to get a 4-year degree.
C) The average private college costs about $40k a year and gives about 50% in scholarships. That's $20k a year. Good luck living on substantially less than $10k a year after tuition expenses.

How is the amount of people going to college relevant to the kind of people who can afford it? Or do you think only people whose parents can save up $100k should be able to go to a 4-year college?

http://www9.georgetown.edu/grad/gppi...FullReport.pdf According to this, 60% of Americans will need some kind of a college degree to get a job within 6 years. That number is only going to increase over time.

[Lewkowski]

A college sponsored a study about the importance of going to college? Surely you don't need expect that to be unbiased.

[Lewkowski]

Just another point Loki - you do realize there is a relationship between the number of students (demand) going to college and the price of college? The fact that the government subsidizes costs actually increases the total cost of college for society?

[Loki]

Just another point Loki - you do realize there is a relationship between the number of students (demand) going to college and the price of college? The fact that the government subsidizes costs actually increases the total cost of college for society?

The effect of the number of people going to college on the cost of college should only have a short-term effect. Over the long term, the number of colleges/number of seats available goes up to match the increasing number of students. Sure, without financial aid of any kind, the cost of tuition would probably be lower, but you'd systematically price out the poor and lower middle class out of the market.

As for the cost to society, surely you agree that having people get higher-paying job provides a benefit to society?

[Lewkowski]

The effect of the number of people going to college on the cost of college should only have a short-term effect. Over the long term, the number of colleges/number of seats available goes up to match the increasing number of students. Sure, without financial aid of any kind, the cost of tuition would probably be lower, but you'd systematically price out the poor and lower middle class out of the market.

As for the cost to society, surely you agree that having people get higher-paying job provides a benefit to society?

Simply increasing the number of degrees does not equate to higher paying jobs. Furthermore if nearly anyone can get one it merely replaces what a high school diploma was 50 years ago. If people were truly getting education and we as a country were gaining productivity gains, then OK I can see the purpose. I don't see that happening though. I see people using it as an excuse to remain a child for another 5-6 years (folks take that long to get 4 year degrees) and rarely learn much and retain even less.