As Student Debt Grows, Possible Link Seen Between Federal Aid and Rising Tuition

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    Jun 12, 2012 5:47 AM GMT
    This seems like a no-brainer to me. Rising tuition is associated with a greater capacity to pay - and demand is being fueled by government subsidies - particularly for unsustainable degrees. Not that I think it will matter soon with the technological revolution that's happening... and that will crush a large number of institutions to the benefit of consumers of education.

    http://online.wsj.com/article/SB10001424052702303296604577454862437127618.html?mod=WSJ_hps_MIDDLENexttoWhatsNewsThird

    Rising student debt levels and fresh academic research have brought greater scrutiny to the question of whether the federal government's expanding student-aid programs are driving up college tuition.

    Studies of the relationship between increasing aid and climbing prices at nonprofit four-year colleges found mixed results, ranging from no link to a strong causal connection. But fresh academic research supports the idea that student aid in the form of grants leads to higher prices at for-profit schools, a small segment of postsecondary education.

    The new study found that tuition at for-profit schools where students receive federal aid was 75% higher than at comparable for-profit schools whose students don't receive any aid. Aid-eligible institutions need to be accredited by the Education Department, licensed by the state and meet other standards such as a maximum rate of default by students on federal loans.

    The tuition difference was roughly equal to the average $3,390 a year in federal grants that students in the first group received, according to the National Bureau of Economic Research working paper by Claudia Goldin of Harvard University and Stephanie Riegg Cellini of George Washington University.

    The authors only examined programs that award associate's degrees and nondegree certificates in fields including business, computer sciences and cosmetology. They didn't look at tuition charged for bachelor's degrees or at public and private nonprofit universities, which together educate roughly 90% of postsecondary students.

    The authors said their findings lent "credence to the…hypothesis that aid-eligible institutions raise tuition to maximize aid."

    Steve Gunderson, president of the Association of Private Sector Colleges and Universities, a trade group for for-profit schools, disputes a link between federal aid and prices, saying colleges merely respond to market demand.

    The study's authors warned their findings don't apply to public colleges and private nonprofit schools, which they say are different because they aren't motivated by profits and because their prices are largely determined by state funding and donations.

    A spokesman for Education Secretary Arne Duncan said the administration believes there is a link between federal aid and tuition increases at for-profit schools, but that it sees no such tie with public and nonprofit schools.
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    Nov 28, 2012 5:25 PM GMT
    "Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic"

    http://www.zerohedge.com/news/2012-11-27/scariest-chart-quarter-student-debt-bubble-officially-pops-90-day-delinquency-rate-g

    Student%20Loan%20Delinquencies.jpg

    Student%20Loan%20Delinquencies%20Total%2
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    Nov 28, 2012 8:09 PM GMT
    I might actually agree with you here:

    Health care (and therefore health insurance premiums) and higher education are two of the main things in the US economy that have been increasing in cost faster than the rate of inflation. Health care I can understand: New technologies, new pharmaceuticals, new treatments, more malpractice lawsuits, aging population, etc. But why in the world does the cost of higher education keep going up so fast? Are they paying professors significantly more? Are existing universities building new campuses? No. And this increasing cost is being fueled by the fact that too many employers are requiring degrees for positions that really don't require degrees. People need the degrees just to pass the resume scanner, can't afford them out-of-pocket, so they borrow the money, so universities and trade schools increase their tuition, so students borrow more money. So the vicious cycle continues and student debt skyrockets. And where does all this money from the increased tuition go?

    I think any government aid should be based on future ability to pay back loans. People seeking art history degrees should not be receiving the same amount of aid as people seeking computer science or law degrees.
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    Nov 28, 2012 11:15 PM GMT
    sfbayguy saidI might actually agree with you here:

    Health care (and therefore health insurance premiums) and higher education are two of the main things in the US economy that have been increasing in cost faster than the rate of inflation. Health care I can understand: New technologies, new pharmaceuticals, new treatments, more malpractice lawsuits, aging population, etc. But why in the world does the cost of higher education keep going up so fast? Are they paying professors significantly more? Are existing universities building new campuses? No. And this increasing cost is being fueled by the fact that too many employers are requiring degrees for positions that really don't require degrees. People need the degrees just to pass the resume scanner, can't afford them out-of-pocket, so they borrow the money, so universities and trade schools increase their tuition, so students borrow more money. So the vicious cycle continues and student debt skyrockets. And where does all this money from the increased tuition go?

    I think any government aid should be based on future ability to pay back loans. People seeking art history degrees should not be receiving the same amount of aid as people seeking computer science or law degrees.


    I like what you have said here. I also wonder if teachers are making a lot more than they are worth, especially the ones who teach useless courses, and perform useless research. I know someone who got a full scholarship to get a doctorate in the viola. As much as I want to be open-minded and supportive, I can't think of a more useless degree. I don't know where the scholarship came from, but I think it would be better used by training a medical, engineering or technical student.
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    Nov 29, 2012 2:00 AM GMT
    Blakes7 said
    sfbayguy saidI might actually agree with you here:

    Health care (and therefore health insurance premiums) and higher education are two of the main things in the US economy that have been increasing in cost faster than the rate of inflation. Health care I can understand: New technologies, new pharmaceuticals, new treatments, more malpractice lawsuits, aging population, etc. But why in the world does the cost of higher education keep going up so fast? Are they paying professors significantly more? Are existing universities building new campuses? No. And this increasing cost is being fueled by the fact that too many employers are requiring degrees for positions that really don't require degrees. People need the degrees just to pass the resume scanner, can't afford them out-of-pocket, so they borrow the money, so universities and trade schools increase their tuition, so students borrow more money. So the vicious cycle continues and student debt skyrockets. And where does all this money from the increased tuition go?

    I think any government aid should be based on future ability to pay back loans. People seeking art history degrees should not be receiving the same amount of aid as people seeking computer science or law degrees.


    I like what you have said here. I also wonder if teachers are making a lot more than they are worth, especially the ones who teach useless courses, and perform useless research. I know someone who got a full scholarship to get a doctorate in the viola. As much as I want to be open-minded and supportive, I can't think of a more useless degree. I don't know where the scholarship came from, but I think it would be better used by training a medical, engineering or technical student.

    Agreed. If the viola scholarship came from a private source (like a wealthy patron of the arts), then great. God help us if the money came from the government.
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    Nov 29, 2012 2:26 AM GMT
    So the problem really is for-profit schools. One solution is that student aid should only be available for students going to non-profit public and private schools.

    Tell me (no not you Riddler) are some for-profit schools ONLY taking students that receive public aid? It seems to me that if they're not, rising tuition at such places would also be charging non-aid receiving students more.

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    Nov 29, 2012 3:04 AM GMT
    Professors salaries have not risen in real terms (ie adjusting for inflation) for several decades.

    So why the increase?

    I) states are offloading large amounts of subsidies they used to give, the shortfall has then to be made up by increases in tuition. (this is by far and away the most important explanation)

    2) students demand a whole variety of services and facilities that were not previously provided. These are expensive and have to be paid for.... By tuition.

    3) research has generally increased; for many universities research is subsidized by teaching. guess who's paying for it?

    Having said all that, valuing education in monetary or utilitarian terms fails to recognize its full value.
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    Nov 29, 2012 3:27 PM GMT
    TigerTim saidProfessors salaries have not risen in real terms (ie adjusting for inflation) for several decades.

    So why the increase?

    I) states are offloading large amounts of subsidies they used to give, the shortfall has then to be made up by increases in tuition. (this is by far and away the most important explanation)

    2) students demand a whole variety of services and facilities that were not previously provided. These are expensive and have to be paid for.... By tuition.

    3) research has generally increased; for many universities research is subsidized by teaching. guess who's paying for it?

    Having said all that, valuing education in monetary or utilitarian terms fails to recognize its full value.


    Too bad you don't bother to reference any facts. Here are a few references for California:
    http://www.californiapublicpolicycenter.org/cppc-studies/the-real-reason-for-college-tuition-increases/ - professors' salaries are part of the problem - but benefits are the bigger issue - ie unfunded defined benefit pension plans and the *number* of professors. Even Joe Biden has said that college salaries have increased significantly.

    That being said, an even bigger driver is the rise in administration costs and student costs:
    http://chronicle.com/blognetwork/edgeofthewest/2012/03/11/why-is-tuition-rising/

    But does it even matter on cost increases? The bubble is bursting. Students can't afford the increases... This is the future that they may face:

    http://www.technologyreview.com/news/506356/qa-with-salman-khan/

    Here’s what I think it could look like in five years: the learning side will be free, but if and when you want to prove what you know, and get a credential, you would go to a proctoring center [for an exam]. And that would cost something. Let’s say it costs $100 to administer that exam. I could see charging $150 for it. And then you have a $50 margin that you can reinvest on the free-learning side.

    I think that is consistent with the mission. You are taking the cost of the credential down from thousands of dollars to hundreds of dollars. And the [software] system would tell them they are ready for it. So no paying tuition for community college and then dropping out, or even finishing the whole thing and saying “Oh, I’m $20,000 in debt and what did I get out of it?”

    Now you are like, “Look, there is this micro-credential in basic accounting I can get for $150, and I basically know I am going to pass before I invest that money.” That would be a huge positive for the consumers of education, and it could pay the bills on the learning side.