Piketty goes post-secondary: why a university education is so goddamned expensive


#1

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#2

Maybe the worst article I’ve ever read on Salon.

When we’re in grade school, most of us at some point ask “Why can’t the government just print more money, and give that to poor people?”

As adults, most of us understand why this wouldn’t work. The government is printing more money to cover the same amount of wealth; the money is therefore worth less; and the price of everything would just go up.

College tuition is exactly the same scenario. The only difference is that in this case, the government is printing a special kind of money – money that can only be used for one thing. It apparently never occurs to Frank that the price of that thing just goes up accordingly.

Subsidies (i.e., cheap loans) increase demand. Increased demand causes the price to rise.

Consider:

  • The US massively subsidizes education. The price of education rises far beyond the rate of inflation.

  • The US massively subsidizes housing. The price of housing rises far beyond the rate of inflation.

  • The US massively subsidizes health care. The price of health care rises far beyond the rate of inflation. (Except, of course, the kinds of health care – like cosmetic surgery or lasik surgery – that do not typically get subsidized. Costs in these areas have plummeted.)

Pointing this out inevitably draws attacks, like by acknowledging this, you are part of a conspiracy to deny education to poor people. And I don’t pretend to have an answer to this dilemma. The only really clear thing is that the laws of supply and demand aren’t statutory laws, that can just be altered with a pen and a lot of hand-waving. They are fundamental natural laws, and well-intentioned attempts to manipulate markets (from student loans to price-control regimes) almost always trigger equal and opposite consequences.

The real shame is that important issues like these are so easily demagogued. Even though the system is clearly broken, no politician in his right mind would ever propose changing it. “Look!” Thomas Frank would scream. “He hates poor people!”


#3

One good way to change it would be to make the university own a portion of the risk (currently borne by taxpayers) for any loan defaults by its graduates.


#4

Federal student loans are not cheap. The federal student loan program actually runs a profit, and these profits are largely what subsidizes Pell grants. It used to be the situation that the government was in the business of giving grants and not loans, but that has long since ceased to be the primary means by which the US government promotes access to higher education.

This isn’t to say that the system is efficient or that it creates the right set of incentives for institutions of higher education (who typically have no skin in the student-debt game) but simply that unforgivable, undischargeable student loans are not a subsidy.

The US also doesn’t subsidize health care like other nations do, and to the extent they do it’s certainly not the case that these subsidies are responsible for US health care being way more expensive than in other countries.


#5

We could make public universities tuition-free if we wanted to, just like we currently do with high schools. This was the situation in California as recently as the 1970s, which is one reason California was at the heart of the computing and internet revolutions of the late 20th century. Plenty of other countries still have similar situations today.


#6

They do when you run something as a market. This was in fact the author’s entire point, that the spiraling tuition costs only began when we started treating higher education that way, as private services selling career advancement opportunities.

But like Brainspore says, not everyone treats it like that, and there are other countries that don’t have the same problem. The same could be said about health care, too.


#7

Yeah - what we want is to make our higher education institutes just as good as our high schools. eye roll


#8

Again: tuition-free public universities were a major part of the reason California has silicon valley and became the epicenter of the eleventy-skillion-dollar tech industry.

But you go ahead and mock the idea all you want if it makes you feel better.


#9

One thing I thought he should have mentioned (other than in passing) was the removal of all the debt protections associated with student loan debt, e.g. that students (and their families) cannot discharge student loan debt, no matter what, which completely throws the element of risk to banks out of the equation, and has greatly contributed to their (and the federal government, and the universities) willingness to loan out absurd amounts of money, which lets the universities charge absurd amounts of money as well. Also too briefly mentioned was the absolute gutting of state subsidies for higher education.


#10

The UCs are still technically tuition free, last I heard. All those thousands of dollars are merely “fees”. It’s depressing as hell.


#11

That would basically make them inaccessible, so unless it’s tied to some type of vocational outreach program, it’d more likely solidify the inequality gap.


#12

Thanks to recent legislation it’s almost impossible to default on student loans in the U.S. now. Even if you declare bankruptcy your student loans will follow you to the grave. They can even take payments out of your social security checks.

The real cost to the taxpayers is economic. Instead of spending money on houses and new cars and vacations and all the other things people used to spend money on when they entered the work force, college graduates get to use all their extra income to pay off debts for years or decades to come.


#13

That may or may not be, but surely you aren’t going to argue that California high schools are the example we want to follow when trying to improve higher education.


#14

It’s still possible to default on your student loans, and exceedingly easy to default on non-federal loans (only federal loans have payment plays like Pay As Your Earn, which caps repayment at 10% of income), and even if your aren’t technically in default under the federal payment plans, you’re still not paying the debts off according to standard repayment schedules. Default is different than discharging those loans in bankruptcy, though, and student loans have long been non-dischargeable in bankruptcy except under very limited circumstances. @lolipop_jones’s suggestion of making the educational institutions have some skin in the student-loans game makes a lot of sense, though.


#15

California high schools were ranked first in the nation back before they got hit with huge funding limits back in the 70s and 80s.


#16

One major thing I haven’t heard mentioned here: Those administrative costs aren’t always for nothing, and in many cases a lot of the added administrative personnel are there to handle all the massive paperwork that comes with grant applications. Anything to give your institution a shot at getting some of the increasingly scarce money that most research professors are now practically required to drag in.


#17

I teach at the largest community college in the country, which is currently at risk of losing its accreditation largely because the accreditation board deemed that they didn’t hire enough administrators.

Seriously. The academic outcomes for the college were deemed “outstanding,” but San Francisco could still be deprived of its only community college because there aren’t enough paper-pushers on staff.

There were also some pretty sketchy conflicts of interest on behalf of the accreditation board, which is largely made up of people who have a huge financial stake in private education and thus a motive to get rid of affordable public institutions.


#18

That’s the typical naive monetarist/libertarian line, but it isn’t accurate. Unlimited printing doesn’t work, but neither is printing felt in an inevitable amount of inflation. Not printing at all and the inevitable deflation is even worse than even fairly high inflation, though hyperinflation historically tends to follow periods of not-printing or deflation and other major economic disasters. High inflation can be a manageable response to a real problem, but hyperinflation is a symptom of massive death of both human labor and capital.

The actual mathematics don’t work out in your “adult” way because the economy isn’t a zero-sum logic machine. So while the syllogisms in your assertions sound nice, in practice they don’t work at all. Slack labor and capital resources, education and other public goods, positive and negative externalities, all these real-world features of life completely invalidate your naive talking points. Most of this is presented in post-secondary coursework, though, so it’s beyond the veil of simple larning.


#19

“Slack labor and capital resources, education and other public goods, positive and negative externalities, all these real-world features of life completely invalidate your naive talking points.”

Wow Andy: Entirely unsupported hand-waving presented snidely and condescendingly. Do you persuade a lot of people with that style of rhetoric?

  • AJ

#20

Maybe college shouldn’t be about individuals getting rich. Maybe there is another purpose.
In the long sweep of journalistic commentary on the tuition spiral, relatively few have raised that question.

Oh, the colleges themselves say that all the time - when complaining about people concerned about tuition.

Yeah - what we want is to make our higher education institutes just as good as our high schools. eye roll

@Aetius: I don’t know about you, but I went to high school on Long Island and our public high schools were great (and considered subpar by LI standards). There is nothing inherently bad about public schools. Remember, the CUNY system has as many Nobel laureate graduates as Princeton.