Is This a Good Idea? (Re: Tuition/Student Loan Reform)

I think I posted a variation of this on another thread.

The major problem with traditional efforts at making college "affordable" (i.e. making loans easily available) is that it drives up the cost of tuition.

Obama is currently proposing to reform student loan repayment so that repayment is capped at 10% of the graduate's income, and the remainder owed after 20 years is forgiven. In other circumstances, this might drive down the cost of tuition, because it effectively caps the amount lenders are going to receive in return for making the loans available. And lenders generally want to make money. However, since the federal government is the lender in this scenario, and their intention is that as many people go to college as want to, it seems more likely that it will just create a big bubble.

My proposal: instead of capping the amount students will have to repay (at 10% of income, for 20 years) regardless of what the school's tuition is, why not prohibit schools from charging more in tuition than 10% of the annual income of that school's average graduate, times twenty years? That way, the government can further its objective of making college affordable without putting themselves at the mercy of what schools decide to charge, and what schools can decide to charge is tied to their students' prospects for success upon graduation.

What do you think?

In my opinion, out of all the things that we Americans are provided, ranging from Fire Departments to Social Security, I think a person's complete education should be provided to the student.

I personally am still working on my college degree (I'm staying in state to save money) and I work at a datacenter in my city. I hear stories of many people. A most common complaint, is the pay back of their students loans. Essentially, all of their student loans are a second mortgage.

To me, if I am a person in power, this makes complete sense. You do not want people obtaining a lot of material wealth so they can become influential, or they make enough money that they do not need to work. (Think about the added income if people did not have to pay for their tuition.) Also, the added debt pushes these people to work a substantial part of their lives, providing the luxurious life of the people in control. (Why have billions of dollars, when if I order something off of the internet, there is no one to package the product, and no one to send that product to my doorstep?)

Now, as of right now, education is a booming business. Period. Some of the best schools in the area keep raising their tuition year after year, and that is because the administration of the schools are getting greedy. They also try and keep the student at the school as long as possible, putting in classes that really are not necessary, only so they receive more funds.

I feel like this system is similar to the economic crash recently. Since big investment banks would buy these mortgages, the banks that are actually seeing the people and having them sign the mortgage, are free from the risk of people not being able to pay back their mortgage. That I think is going on right now in education. Schools essentially get their money through the government. Schools do not have to worry about whether or not the student can or can not pay back the government. Therefore, the more students the better, because of the sheer amount of cash they will get. I would not be surprised if the admission process for the majority of schools (with an exception to schools who have a huge reputation to live up to) has lacked considerably.

If we want good quality education in our society, and if we want our tuition to be under control, then I think there are two solutions.

First, would be to socialize all education. Once people graduated, they would be able to participate in the free markets without any student debt. (This would require administrators to accept less profits, and the United States Citizens to pay higher taxes.)
Second, would be to put the loan responsibility on the school itself.

I suppose the banks would not like the second option, because that is essentially turning the school into a bank. However, that would force the school to be smart with their loans. This will undoubtedly force schools to lower their tuition to a more sane level. Tuition has risen faster than GDP for several years, and I read that stat in like 2007.

It isn't about education anymore, and I see it where I go to school. Education is the product/service, and the purpose is to make money. Just like with any capitalistic practice, there is intrinsic and designed obsolescence.

And if education is supposed to free the mind, then why are people enslaved to a second mortgage?

Krhazy said:

My proposal: instead of capping the amount students will have to repay (at 10% of income, for 20 years) regardless of what the school's tuition is, why not prohibit schools from charging more in tuition than 10% of the annual income of that school's average graduate, times twenty years? That way, the government can further its objective of making college affordable without putting themselves at the mercy of what schools decide to charge, and what schools can decide to charge is tied to their students' prospects for success upon graduation.

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I like the idea of schools charging based on future income rather than a flat fee for tuition. What I would like to see is schools taking a percentage of their students' future income for the first ten years after they graduate. For example, instead of saying "We charge $40,000 per year in tuition," schools would say "We charge 2.5% of your future income for ten years, per year in tuition" (so 10% if you finished in four years)...and the government could cap the total amount borrowed at, say, 15% of future income. If the school was strapped for the cash, the government could loan the school some of the money up front, using their accounts receivable as collateral...rather than loaning the student the money to give to the school.

As I see it, this would have several positive effects: 1) It wouldn't put all the risk of a bad economy on the student; it would also be shared by the school and the government; 2) It would make the cost of a degree more in line with the benefit it provides, both on a subject level (engineering degrees would cost more than philosophy degrees) and on a school level (Harvard degrees would cost more than Youngstown State degrees); 3) It would help keep overall costs down, because there would be a limit to how much students are allowed to borrow overall and because schools would be more invested in the success of their graduates.

Krhazy said:

I think I posted a variation of this on another thread.

The major problem with traditional efforts at making college "affordable" (i.e. making loans easily available) is that it drives up the cost of tuition.

Obama is currently proposing to reform student loan repayment so that repayment is capped at 10% of the graduate's income, and the remainder owed after 20 years is forgiven. In other circumstances, this might drive down the cost of tuition, because it effectively caps the amount lenders are going to receive in return for making the loans available. And lenders generally want to make money. However, since the federal government is the lender in this scenario, and their intention is that as many people go to college as want to, it seems more likely that it will just create a big bubble.

My proposal: instead of capping the amount students will have to repay (at 10% of income, for 20 years) regardless of what the school's tuition is, why not prohibit schools from charging more in tuition than 10% of the annual income of that school's average graduate, times twenty years? That way, the government can further its objective of making college affordable without putting themselves at the mercy of what schools decide to charge, and what schools can decide to charge is tied to their students' prospects for success upon graduation.

What do you think?

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The post secondary education system is probably the largest quasi public-private cartel in the U.S.
There are many, many problems that need to be addressed before adjusting loan terms, to curb costs.

Given wage stagnation and poor opportunity, the rate at which college costs are rising is unsustainable. I think Obama's plan is good, but it only partially addresses the symptom, and doesn't begin to address the cause.

I don't know that it's a great idea. It might help a little, but I don't really know if it addresses the root of the problem.

The biggest issue with post-secondary education in this country is that there are too many people going to college. There are millions of kids in college getting useless degrees that will cost them tens of thousands of dollars and won't increase their earning power once they get out. I'm honestly not sure how you combat that either. It seems like the message that everyone has to go to college has become part of our society. We need to stop telling high school kids that.

Because it's those people who are causing the problems.

molten_dragon said:

I don't know that it's a great idea. It might help a little, but I don't really know if it addresses the root of the problem.

The biggest issue with post-secondary education in this country is that there are too many people going to college. There are millions of kids in college getting useless degrees that will cost them tens of thousands of dollars and won't increase their earning power once they get out. I'm honestly not sure how you combat that either. It seems like the message that everyone has to go to college has become part of our society. We need to stop telling high school kids that.

Because it's those people who are causing the problems.

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I think that could be solved if schools charged a percentage of future income, instead of a flat-fee tuition. That way, no one will have to disappoint their parents by not going to college. If someone wants to spend four years partying every night and getting a degree in English Literature, that's fine. They pay for what that's actually worth (i.e. not much), and can pat themselves on the back for having attended college. Those who are pursuing more serious degrees that will actually lead to jobs can continue to pay more, since their degrees are worth more.

I think that would essentially eliminate the problem of too many people attending college too. Some people would attend an institution called "college" that is where kids go to drink and party, while occasionally going to class. Others would attend an institution called "college" where students learn valuable skills and professors conduct research, which would cost a bit more. I don't think we have too many kids pursuing the latter type of college.

Kandahar said:

I think that could be solved if schools charged a percentage of future income, instead of a flat-fee tuition. That way, no one will have to disappoint their parents by not going to college. If someone wants to spend four years partying every night and getting a degree in English Literature, that's fine. They pay for what that's actually worth (i.e. not much), and can pat themselves on the back for having attended college. Those who are pursuing more serious degrees that will actually lead to jobs can continue to pay more, since their degrees are worth more.

I think that would essentially eliminate the problem of too many people attending college too. Some people would attend an institution called "college" that is where kids go to drink and party, while occasionally going to class. Others would attend an institution called "college" where students learn valuable skills and professors conduct research, which would cost a bit more. I don't think we have too many kids pursuing the latter type of college.

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Except that it doesn't stop the kids who shouldn't be going from going. It encourages them to go in greater numbers, since tuition will be cheaper.