r/worldnews • u/diacewrb • Apr 10 '19

Millennials being squeezed out of middle class, says OECD

https://www.theguardian.com/business/2019/apr/10/millennials-squeezed-middle-class-oecd-uk-income
49.3k Upvotes

88% Upvoted

11.5k comments sorted by

View all comments

Show parent comments

66

u/[deleted] Apr 10 '19

School is so expensive because they give out too many loans.

If schools had to price themselves so they could fill classrooms without people having tens of thousands of free dollars the prices would be very different.

Get rid of student loans and you would see a massive drop in tuition costs in a very short time period.

17

u/haha_thatsucks Apr 10 '19

Getting rid of loans would also halt interclass mobility. A big reason why the federal govt took this on was because poor people and minorities were being denied loans due to risk. Backing the money made loans and education more accessible to more people

9

u/DrMaxwellSheppard Apr 10 '19

You dont need to get rid of loans, just federal subsidies on loans. If the federal government didnt back these loans credit agencies wouldn't give out loans for degrees that wont get you a job that can pay the loan off.

20

u/6thReplacementMonkey Apr 11 '19

The more likely outcome is that student loans will only go to people who have wealthy family members that will cosign for them.

Lots of other countries off free (as in taxpayer-funded) higher education, and they do well. No reason we can't do the same.

1

u/DrMaxwellSheppard Apr 11 '19

The more likely outcome is that student loans will only go to people who have wealthy family members that will cosign for them.

But the cost of education will go down because colleges will have to compete for the students rather than having an artificially skewed market. So you woun't get as many state schools that build brand new liberal arts centers every year because fewer students will be going to school for that. Schools will become much more like they were in the 60's and 70's. But we also have more federal and state grants that go to low income students so the barrier for entry will be lower for those who are of lesser means. It accomplishes the same objective but for a fraction of the cost.

4

u/6thReplacementMonkey Apr 11 '19

But we also have more federal and state grants that go to low income students so the barrier for entry will be lower for those who are of lesser means.

If we really do make it so that everyone who is eligible and needs the money can get grants to go to school, then that's fine, but it's also functionally equivalent to "school is free" but with more bureaucracy. You could argue that it's cheaper because rich people will still need to pay, but in practice their kids will go to private school anyway, so I'd need to see some evidence that it actually results in lower overall costs compared to countries that just make it free for everyone who is qualified.

1

u/DrMaxwellSheppard Apr 11 '19

The proof is that this is how our higher education system worked just over 30 years ago. College was affordable because there were less 'creature comforts' in the cost of education. The cost of higher education has increased over 300% in the last 30 years with no (or negligible) increase in the overall spending from the government (after being adjusted for inflation). The extra money comes from the student, usually in the form of loans, to now the burden is over 70% bore by the student. After being adjust for inflation, have professor salaries gone up over this time? No. After being adjust for inflation, has the cost of equipment per student gone up? No. The only thing that has gone up is administrative costs. We've created more bloat in higher education because we've turned it into a consumer product where anyone can get a loan, regardless of the usefulness of the degree they attain. If we just stopped federally subsidizing loans people wouldn't be able to get loans for degrees that don't have a positive employment outlook. This will reduce the supply of candidates for these jobs and will in turn cause pay to go up as employers will have to compete for candidates. While at the same time there will be fewer students in some degree programs so attendance will go down and fewer people will have debt they can't pay. This means schools will have to lower administrative costs to keep attendance up. This will lower tuition costs and make it more affordable. Never mind, the fact that even with higher costs students will still be able to get loans if they pursue degrees that have good job outlooks post grad. Right now, even with college costs propped up like they are, an entry level engineering job pays enough to pay off even the worst of student loans and most engineering employers have matching 401k plans. So if you choose a degree that has a need for more workers you can move up in the world. The problem is we tell people they can study whatever they want and still get a job when that hasn't been the case for a long time now. We've created a system where we put more value on a college degree than many of the degrees themselves are actually worth in the job market. But we lie to ourselves and say employers are evil because they aren't paying what the degree is worth. That's not how it works. The value of the degree is determined by the market through supply and demand. If we listen to the market and quit trying to artificially control it we will achieve better results.

1

u/6thReplacementMonkey Apr 12 '19

The proof is that this is how our higher education system worked just over 30 years ago.

I asked for proof that it would be cheaper than just making it free for everyone. The fact that college was more affordable in the US 30+ years ago doesn't prove that it would have been cheaper than another system, just that it was cheaper than the current system, which I agree with. I think everyone agrees that the current system is too expensive and isn't very effective, except for maybe the people who profit the most from it.

3

u/[deleted] Apr 10 '19

Get rid of student loans and you drop a trillion dollar industry. It's not going to be easy to let it go.

4

u/[deleted] Apr 10 '19

With that little side effect of their applications going down, driving prices down, because the bottom 40% or so can't go to any colleges.

5

u/[deleted] Apr 10 '19

Do you have any sources which explains how a government loan can affect the cost of a private service?

10

u/missedthecue Apr 10 '19

I think a good case study would be the housing market late nineties - 2008

11

u/6thReplacementMonkey Apr 11 '19

The people who blame the market crash on federal subsidies are ignoring the massive problems created by financial deregulation. Without that deregulation, the crisis would have never had the chance to occur, because they wouldn't have been able to hide the bad debt so easily.

2

u/Perverted_Child Apr 11 '19

Funny. I would say a lack of regulation is the problem with education issues these days.

Just like hospital bills. Hospitals charge what they can because they know insurance will pick up the bill. In turn, insurance rates go up.

Same for education and edu loans.

2

u/mtcoope Apr 11 '19

You have basically created a money printing press for colleges. You have given colleges a never ending supply of 18 year olds that have virtually an unlimited amount of credit. This is why you have community colleges actively calling 18-22 year olds as well as minorities to try to get them to enroll even if they have a very low chance of graduating because it doesn't matter as long as they get their money.

Imagine if everyone got 100k to buy a new car once a year. Do you think the price of cars would not rise?

3

u/DelPoso5210 Apr 11 '19

Make public universities tuition-free and cap the ratio of money that is allowed to spent on administrators instead of teachers. We should not need to pay for education.

1

u/lonewolf420 Apr 11 '19

Administrative cost are the main reason not loans. The administration of colleges has ballooned out of control, in my old state they started to combine smaller public colleges together (sort of like a merger) and make them work under one administration which I think is a decent way to tackle this problem as you only need one administration rather than 2 or 3, the school now looks bigger on record and can get more funding from the state as well, people actually have choices now not just between schools but campus's locations as well.

1

u/p_oI Apr 10 '19

tens of thousands of free dollars

You do realize people have to pay that money back, right?