Feds spend more subsidizing undergrads than undergrads pay in tuition


Before Reagan was elected Governor the University of California didn’t charge tuition at all (though students still paid fees for non-academic services). We used to be pretty good at the “higher education without crippling debt” thing, we’ve just forgotten how.


We’ve not forgotten how, we’ve just decided that free education is not profitable, and is therefore evil. It’s socialism! How are kids supposed to know the value of an education if they didn’t pay anything for it?

On the other side, the schools can probably afford a much nicer stadium now.

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The sooner the student debt bubble pops, the sooner something gets done about it. Who knows? maybe we’ll (students, that is) even get bailed out! Oh wait, that’s for the predatory lenders, not the prey-borrowers.


This is exactly why college costs have soared at 400% of inflation over the last 2 decades. And why universities spend so much on administration and fancy buildings to attract more and more students. Meanwhile it is a giveaway to banks and we saddle students with a lifetime of debt slavery.

The way to fix this is to make the loans dischargeable in bankruptcy. That will put an end to the gravy train for banks and force the schools to cut costs.


So, we spend more money putting students in debt than many countries do graduating them debt free? How did Australia get so smart while we got so dumb. I blame Truman and Eisenhower.


I blame Reagan, for reasons stated above.


So the largest share of spending is… lending? Doesn’t that come back, mostly?

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Came here to say that. All of the above would be true, if loans were grants. But anybody with loans will tell you they’re not.

Leaving debt service out of the equation totally invalidates the pie chart, and probably some of the study as well. In theory, the nation “spends” nothing at all on loans - we spend some on administration, and some on collections, and we spend some when we write off the ones that will never be repaid. But that’s not the blue part of the pie, is it?


The loans do represent a massive transfer of wealth from students to the banking industry made possible by the federal government. While you are right that these loans are not directly financed by the taxpayer, they are still a huge socialized cost. It’s also unnecessary. That giant blue chunk of the pie shows that federal government’s role is not so much to make higher education accessible, but instead to make it profitable for lenders. It is probable that direct government grants to students/universities would have a better cost-benefit ratio for students, universities and society as a whole, rather than the current system of rent extraction.

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The point of the process is to keep the middle class and skilled workers perpetually in thrall to finance capital.

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That’s not a bug, it’s a feature. Creating a permanent underclass of serfs… Priceless.


There is virtue to the American system where you can buy your way into colleges. Places with free university level education tend to give no second chances. If you test poorly in high school, you are done. In the US, there is always some place that will take you. You can go to a community college, improve your grades, and move up. I wouldn’t want to give that up because I know more than one person who was an academic poor in high school, but was able to change their ways and work their way up into progressively better colleges.

Pouring money into education also isn’t a bad thing. US undergrad and graduate programs some of the best in the world because of the amount of money flowing through it. There are a lot worse things to piss money away on, like massive defense spending.

All of that said, there is a serious problem. The over subsidizing of education is murdering the middle class. Letting someone who is going to major in social studies get 200K worth of loans is bat shit insane. That person is going siphoning off a huge portion of their meager income until the day they die. No college should be charging that much, and no one should be able to scrape together that much money for anything that isn’t a technical degree that offers large post grad incomes. If you give people the capacity to borrow that much money, the universities will demand that much money because everyone “needs” a degree. Pump a system full of money for a thing people “need” in order to be competitive, and the people fulfilling that need will drink up every last drop of that cash.

If I had a magical wand, loans would be handed out based upon real expected ability to pay. You can probably gouge a future doctor for 200K, but a history major is going to be vastly less. Universities might have to charge different prices for different degrees. You can charge more for engineering than for humanities, and that is okay, the engineers are going to eat more money in terms of support equipment anyways AND they have the ability pay it off.

In general, all the prices need to fall. Universities are making money hand over fist and promptly dumping that money back into expensive building. A little growth is fine, but when they are in constant full construction mode something is horribly wrong. When the bubble bursts, and it has to burst at some point, it is going to be a catastrophe of epic proportions. Over built universities with too much infrastructure are going to implode in on their own weight. When this happens the ripples that first hit college towns and R&D are going to expand through the economy and wreak havoc on the US’s most productive sectors. From there, it is going to expand to destroy everything.

The government is repeating the exact same mistakes it made with the housing bubble. Instead of letting the price correct down, they keep shoving money at it so that it reaches higher and higher prices. It is going to implode horribly. The banks will get another bailout, and the students with massive debt are going to get fucked.


an expensive boondoggle that is optimized for paying bondholders who own student debt

I never would have guessed.

If the wealth distribution in the US were the same as it was in 1970 median family income would be around $90k rather than $50k.

Higher education would be very affordable to the middle class.

$200k in loans? Seems real scary with median family income of $50k (and we correctly assume that a lot of college educated people will have income in the 50-90% income percentiles)… doesn’t seem all that scary if the median were $90k.

I have recently realized that we don’t really have that much of a “college costs too much” problem, and not even all that much of a “college isn’t subsidized enough” problem. We have a massive “the people we expect to go to college don’t have enough income” problem.

Mostly this is just another symptom.

While Reagan is the modern villain, those two are the historic losers that failed to complete the new deal. No healthcare, no higher education and incomplete financial reform.

Do you have any specific systems in mind? I ask because this doesn’t ring true to this European who went to university for free.


I think it’s worth pointing out that community colleges in the US, particularly in California, are quite inexpensive, and it’s quite easy for anyone to enroll and take classes. They typically have a mix of recent high school students planning to transfer to universities, older students taking classes on specific practical skills, and a few people taking some classes just out of interest.

They’re in the short list of social institutions I really feel good about.

did you by any chance, learn that in college?

i believe the write off rate is in the neighborhood of 10 percent. couldn’t find a solid number. i did learn that the average default (>270 days out of compliance) is 9.1% lately.

so, unless the blue slice of that pie is the 10% write-off, and i don’t believe that is the case, i would have to agree that this study would be ignoring a very relevant part of the big picture, and i would have to wonder who benefits from that bias?