Lion of the Blogosphere

College, part 8, cost disease

So what’s driving college cost disease?

I think these points are pretty conventional, but not so conventional that journalists in the mainstream media and politicians widely believe in them.

1. The widespread and increasing availability of student loans means that people can afford to pay more, and colleges act like greedy corporations in that they charge as much as the market will bear. Even though student loans eventually have to be paid back, they feel like free money to 18-year-olds. And let’s not be too critical of 18-year-olds; do you remember what it was like to be 18? It’s up to more responsible and wiser adults to steer 18-year-olds in the right direction.

2. There has been a massive marketing effort to inflate the desirability of college. The message that is being given to high school graduates is that they will be economic losers without a college degree (which is not entirely false), and that college is this super-awesome-amazing experience that no one should miss (partially true to the extent that some college graduates, mostly those from upper-class families, do indeed look back to their college days like that).

I’m not sure who, exactly, is behind the marketing.

This point, however, doesn’t fully explain why people aren’t more price sensitive. People need food to live, so it’s even more important than college, but there’s price competition with food; there exists food that is very cheap.

3. Competition causes higher prices. Libertarian types hate it when I say that competition causes higher prices. But in many cases, it does.

The people who attend college are not paying with their own hard-earned money. They are almost entirely paying with other people’s money. Their parents. Financial aid. Student loans which feel like free money to 18-year-olds.

A low price could indicate an inferior school with less prestige than higher-priced schools. Furthermore, if students are paying with someone else’s money, will they pick the cheap bare-bones experience, or the experience with expensive gyms and student entertainment, better dorms, and expensively landscaped grounds?

Written by Lion of the Blogosphere

February 4, 2019 at 2:30 PM

Posted in Economics, Education

19 Responses

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  1. libertarians might be treated as children, but their ideology is promoted by the kochs and the freedom caucus because it serves their particular interests and the interests of their donors respectively.

    so it’s better to think of libertarians as the children in Miri (Star Trek: The Original Series).

    is the pope a libertarian?

    February 4, 2019 at 2:43 PM

  2. “Furthermore, if students are paying with someone else’s money, will they pick the cheap bare-bones experience, or the experience with expensive gyms and student entertainment, better dorms, and expensively landscaped grounds?”

    I knew a woman of modest means who cashed in her 401K so that her lesbian daughter could go to a fancy art school in Europe to do drugs and eat p*. So what did this girl want to study? Photography. And what did she do with it after she got out? Nothing. Smug people imagine they have “talent” because, unlike IQ, it’s a magical concept that can’t be measured. And their egos won’t let them admit that they’re nothing special. I figure a lot of teens do the same when going to college.

    destructure

    February 4, 2019 at 3:06 PM

  3. “Furthermore, if students are paying with someone else’s money, will they pick the cheap bare-bones experience, or the experience with expensive gyms and student entertainment, better dorms, and expensively landscaped grounds?”

    MoreSigmasThanYou

    February 4, 2019 at 3:44 PM

  4. The cost of college is tracking the gold price.

    map

    February 4, 2019 at 4:03 PM

    • Absolutely wrong

      Two in the Bush

      February 4, 2019 at 4:51 PM

      • In 1968, you could attend the University of Illinois at Chicago for roughly $370 per year in tuition…including health insurance. At the time, this was roughly 10 oz of gold, at $35 an ounce.

        Today, the U of I at Chicago costs around $13,000 a year in tuition. Again, roughly 10 oz of gold.

        map

        February 4, 2019 at 7:57 PM

  5. Pricey schools are for proles.

    Community colleges, for-profit schools and trade schools are for lumpenproles and NAMs.

    Ok, what, who's this again?

    February 4, 2019 at 4:39 PM

  6. Lion’s (1) is a minor issue, in my opinion. If profligate lending were a major cause of cost disease in higher education, it would have affected community colleges as well, but it hasn’t. Community colleges are still dirt cheap. You can do the first two years of any degree for $2k or less at a community college, and many students do, and many of those students are taking out loans. It hasn’t affected the cost of community college. What are community colleges doing right? Figure that out, and you’ll figure out the cost disease issue.

    Seth Largo (@SethLargo)

    February 4, 2019 at 5:14 PM

    • I don’t know, but I had always assumed community colleges have price controls.

      Blue Tribe Dissident

      February 4, 2019 at 7:31 PM

      • Yes. They are owned by the government and paid for with tax money.

        The kids who shovel your driveway want you to pay in cash. The guy who drives the plow that does the whole street never comes to you with his hand out. That’s not because big trucks are cheaper than shovels. It’s because the cost was rolled into your taxes… or as Democrats say “it’s free”.

        MoreSigmasThanYou

        February 5, 2019 at 11:17 AM

  7. Don’t forget the change in bankruptcy law in the late 90s making it impossible to discharge not just federal student loans, but also so called non-profit loans used by aggressive banks and private schools. Bottom line, you make something cheaper – loans to students cannot be discharged – and you will get much more of it.

    However, it looks like some judges may be opening a back door. https://www.forbes.com/sites/zackfriedman/2018/06/18/bankruptcy-student-loans/#4a10e19944f8

    What are the Lion’s thoughts here? Is the real story that there is yet another massive debt bubble hiding here spread between a Federal agency and private actors?

    jonnystiles

    February 4, 2019 at 6:09 PM

  8. My 18-year-old self was pretty cynical about college as my first impression was that colleges were glorified salespeople and this whole concept of ‘finding your dream school’ was bullshit. I was wrong about a lot of things at this age but this particular gut feeling was pretty much correct.

    Jokah Macpherson

    February 4, 2019 at 6:49 PM

  9. Better schools end up cheaper in practice because of their generous financial aid. The better product is also the cheaper one.

    Monsieur le Baron

    February 4, 2019 at 11:52 PM

  10. College is indeed marketed as the ultimate experience. I was quite depressed at the time because my expectations were so far removed from reality that I could not comprehend the situation. Even more so due to the fact that I was expected to maintain the façade that I actually enjoyed the process to avoid compromising my career prospects. College today really is scary because you have to deal with, on multiple fronts, the array of lies that hold up society including the plasticity of human nature, equality, and the idea of meritocracy. The authority figures, including your parents, that you’re conditioned to believe continue to tell you that the experience isn’t what it appears to be… which creates an almost indescribable level of angst within a doe-eyed 18 year-old. Middle school was at least expected to suck.

    Funny enough, the people I know that had the best outcomes coming out of college had pretty low expectations going into it. These were people that predominantly went to prep schools and therefore knew how the game was played at a much earlier age.

    Mr. Banana

    February 5, 2019 at 4:06 AM

  11. Education is also one area of the economy we have not yet been able to outsource to third-world shitholes.

    It is also true that most talented people actually don’t pay very much for college. Ivy League colleges are need-blind. If you are from a middle class family and manage to get into Harvard, you will end up paying a few thousand dollars a year, while your dumber classmates are piling on debt to study sports psychology at the University of Southern Nevada. There are also plenty of scholarships and even free rides for top students willing to go to a mid-ranked liberal arts college like Macalaster or a top state school instead of Dartmouth or Stanford. And then there are all the athletic scholarships.

    The whole system, like a lot of American life, is rigged. The connected people who know how to work the system get their kids a great education at an affordable price, the proles get fucked.

    Peter Akuleyev

    February 5, 2019 at 5:22 AM

    • I think a great secret of American life is that the good life is often cheaper than a normal one. Everything is full of loyalty programs, corporate discounts, and plain lower prices.

      Monsieur le Baron

      February 5, 2019 at 1:25 PM

  12. There are reasonable low (or no) cost options for college: (1) community college then transfer to State U; (2) active duty military/Reserves/National Guard; (3) employer-funded.

    E. Rekshun

    February 5, 2019 at 10:37 AM

    • Army Reserves????

      Not sure if serious.

      MoreSigmasThanYou

      February 5, 2019 at 11:37 AM

  13. 1. the government shouldn’t provide loans
    2. all loans should be dischargeable in bankruptcy court
    3. public schools should charge extremely low fees

    #3 means shutting down many low-tier, and redundant, schools. i live in maryland, a small state, where we have 5 public universities within 30 minutes of each other in the baltimore metro area alone.


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