Tuesday, May 08, 2012

Markets in Everything: College Degree for < $10k

ODESSA, TX — "Five bachelor’s degrees at the University of Texas of the Permian Basin got a new price tag of $10,000 last Wednesday when the UT System board of regents approved the Texas Science Scholar Program.  The program was developed in response to Gov. Rick Perry’s challenge for a “$10,000 degree” during his 2011 State of the State address. 

One year of study currently costs students in these majors $6,452, totaling $25,808 for four years. Beginning in August, UTPB students interested in studying chemistry, computer science, geology, information systems or mathematics can work toward a bachelor’s degree for only $2,500 a year."

MP: Is this part of the hissing sound from the college tuition bubble starting to deflate? 

53 Comments:

At 5/08/2012 1:48 PM, Blogger Paul said...

"Is this part of the hissing sound from the college tuition bubble starting to deflate?"

I think that hissing sound is coming from the layabout academics who hate Rick Perry's guts..

 
At 5/08/2012 2:00 PM, Blogger hal said...

from link:
"The state operates more than 100 colleges, universities, technical schools, and two-year community colleges, organized into six separate systems"

Socialism

Time to shut it all down.

 
At 5/08/2012 2:09 PM, Blogger morganovich said...

mark-

i think it's part of the coming bifurcation of educational prices.

at the high end (ivies, stanford, mit, etc) the prices are unlikely to come down.

at the low end, they seem likely to. it's sort of a substitutes issue for demand.

u of t is not a perfect substitute for yale. some would argue it is not a substitute at all just as a kia is no substitute for a porsche or a pickup truck no substitute for a class 8 rig.

i think prices at the lower end of university education have likely gotten out of line and may come down, but i also doubt that the prices at U of T will affect the price of dartmouth any more than the price of hondas affects ferrari.

 
At 5/08/2012 2:38 PM, Blogger FactsAreFriendly said...

As a taxpayer in Texas, I am curious as to how this was accomplished.

Was tax revenue simply shifted around so that a larger subsidy goes to this school?

In other words, has there been a real reduction in total costs?

Dwight Oglesby

 
At 5/08/2012 2:58 PM, Blogger morganovich said...

dwight-

you may have hit the nail on the head. it could be the sound of pork being slopped as opposed to a deflating bubble. (though i have no idea if that is the case)

 
At 5/08/2012 3:11 PM, Blogger juandos said...

"at the high end (ivies, stanford, mit, etc) the prices are unlikely to come down"...

Thanks for bringing this bit up morganovich since it has bugged me for the longest time...

Do these so called, 'high end' schools provide anything more than a name brand?

 
At 5/08/2012 3:16 PM, Blogger bart said...

"Is this part of the hissing sound from the college tuition bubble starting to deflate?"


SWEET!

 
At 5/08/2012 3:30 PM, Blogger Jon said...

It's not so much a bubble as it is that right wingers have gotten precisely what they've wanted over the last few decades. Sharp reductions in state subsidy. As subsidy reduces tuition goes up. Surprise, surprise. The result of this right wing experiment has been catastrophic for young people now saddled with non dischargable debt.

The University of Michigan has some helpful slides explaining the situation here:

http://www.vpcomm.umich.edu/budget/fundingsnapshot/index.html

So after decades of getting exactly what they want right wingers look around at the destruction in their wake and ask "How did this happen?"

 
At 5/08/2012 3:31 PM, Blogger Jet Beagle said...

Dwight Oglesby,

The program will only be open to a small subset of UTPB's students. At the same time the university announced the $10,000 degree programs in math and sciences, they proposed small tuition increases for the rest of the student body.

Apparently UTPB needs to fill up its new $54 million Science and Technology building. That must be some building. My employer in Texas just awarded contracts for a new 500,000 sq ft Technology building at a price of approximately $60 million.

UT-Permian Basin said that the entire campus has a 6,000 student capacity but "but there are currently about 4,000 students and a lot of empty seats in classrooms".

 
At 5/08/2012 3:32 PM, Blogger Larry G said...

MIT has lowered the price even more!

M.I.T. Game-Changer: Free Online Education For All

 
At 5/08/2012 3:39 PM, Blogger Jet Beagle said...

juandos: "Do these so called, 'high end' schools provide anything more than a name brand?"

I can offer my perspective. I have a B.S. degree from a low-end state school and an MBA from an Ivy League school. I've also taken graduate classes at two different Texas state universities.

Professors at all the graduate schools were sharp. Classmates at Wharton were much superior. So we learned more because the professors could fly through the material.

Of course the Ivy League MBA opened doors for me. But I've worked alongside and for some pretty sharp people who came from the Texas state universities. Their lack of a national "brand" did not hold them back. Talent and desire win in the end.

 
At 5/08/2012 3:42 PM, Blogger AIG said...

u of t is not a perfect substitute for yale. some would argue it is not a substitute at all just as a kia is no substitute for a porsche or a pickup truck no substitute for a class 8 rig.
WHAT? You're telling me there is no such thing as "college"? ;)

Do these so called, 'high end' schools provide anything more than a name brand?
Ask the employers. If something had no value other than a name brand, you'd think over the decades, someone would have caught on, and stopped hiring from them.

MIT has lowered the price even more!
Sure it has.
2010 average MIT tuition: $38,940
2012 average MIT tuition: $40,732

 
At 5/08/2012 3:42 PM, Blogger Jon Murphy said...

Begging your pardon, Jon, but subsidies towards higher education are at an all-time high. They have hardly been slashed. Low interest loans, grants, scholarships, financial-aid, etc all count as subsidies. it's not just the direct support granted by states.

 
At 5/08/2012 3:47 PM, Blogger AIG said...

Talent and desire win in the end.
Of course, but 98% of Wharton graduates end up being in the top 5% of their companies while only 10% of UT graduates end up in the to 5% of their companies (just making numbers up for demonstration purposes)

ie...what a degree from Wharton tells an employer is the likelyhood of greater success. And since hiring the right people, the first time around, is probably one of the most important things a company does, that signal is in fact worth the extra money.

It may say nothing about the individual's capabilities or talents, but it does signal the "fit" of the individual. Of course, over time, this relationship weakens as the individual gains more experience.

 
At 5/08/2012 3:52 PM, Blogger Jon said...

JM, the source I've seen indicate that the per pupil state support has declined. Overall state support may have increased because more and more are going to school, but that's due to both population growth and increases in the participation rate.

So the tuition cost increase is not a bubble. It's to be expected when subsidy per student declines.

 
At 5/08/2012 3:57 PM, Blogger AIG said...

So the tuition cost increase is not a bubble. It's to be expected when subsidy per student declines.

Hmm...lets think about this for a minute :)

 
At 5/08/2012 4:04 PM, Blogger Jon Murphy said...

So the tuition cost increase is not a bubble. It's to be expected when subsidy per student declines.

Well, no.

See, a subsidy is enacted when either a) the cost of something is deemed to high or b) the good/service is deemed "honorable." The goal of the subsidy is to increase the demand of that good/service. As demand increases, so does the price (unless the firms are prohibited from increasing prices, which colleges are not). So, rising prices are what you expect in a subsidized market and the opposite would be true in an unsubsidized market, since demand is at a more "natural" level.

Think about it this way: corn prices are subsidized so they can be used for ethanol. That encourages more supply of corn, thus decreasing the price and increasing consumption of corn. As corn becomes more attractive due to the lower prices, the demand for corn will increase, forcing up prices. This will require more subsidies to keep the price at the same level simply because of demand-push inflation. The prices rise further. That is why our food prices are so expensive compered to what they should be. Realistically, we could produce milk for about $1/gal. But because milk is highly subsidized (and combined with a price floor) milk is about 300% more expensive than it needs to be.

Or, for that matter, look at medical costs.

 
At 5/08/2012 4:07 PM, Blogger Jon Murphy said...

Subsidies, by both nature and design, encourage over-consumption which leads to higher prices.

 
At 5/08/2012 4:09 PM, Blogger AIG said...

which leads to higher prices

Well, then you just subsidize it more :p

 
At 5/08/2012 4:13 PM, Blogger AIG said...

See JM he is confusing the amount of money the student pays, with the "price" of that particular service.

 
At 5/08/2012 4:21 PM, Blogger Paul said...

Jon,

"As subsidy reduces tuition goes up. Surprise, surprise."

Let's say that was true. So? It doesn't automatically follow that total cost has gone up. In fact, it's highly likely that scenario would bring total costs down.


"The result of this right wing experiment has been catastrophic for young people now saddled with non dischargable debt."

Yes, by all means let's stick that bill to the taxpayers rather than the people who are, you know, actually benefiting from the education.

"The University of Michigan has some helpful slides explaining the situation here:"

And then Jon links to a university PowerPoint detailing why they just don't have enough taxpayer money. Did not see that one coming! Let me know when the U of M cuts back and starts firing anti-American turds like Juan Cole and maybe I'll start giving a sh*t. Nah, probably not even then.

 
At 5/08/2012 4:48 PM, Blogger Jon said...

The cost of what is going up rapidly? Cost of an education? Or tuition? These are different things.

I'm not aware that the actual cost of an education has gone up a lot. Maybe it has, maybe it hasn't. If you have data, please share. What I do know is that tuition has gone up a lot. So when people talk about a bubble deflating what I assume they mean is that the cost of tuition, which has been going up rapidly, is a bubble that must pop.

The education is funded through 2 components. Tuition and state subsidy. The tuition is going up rapidly. The state subsidy is going down rapidly. Presumably the cost of the education is somewhere in between. It's not necessarily a bubble. A bubble implies that the price is going off the scale because of euphoria or other irrational means. But I see no evidence that this is happening. For all I know the price of a college education has been dropping. Since state subsidy is declining (one component of the funding) the tuition must go up. People think it's unreasonable, like a bubble, but it isn't. It's exactly what you would expect if the cost of an education remained the same, but one source of funding was reduced.

 
At 5/08/2012 5:09 PM, Blogger Jon Murphy said...

The cost of what is going up rapidly? Cost of an education? Or tuition? These are different things.

Are you asking if the cost to the school to provide education is going up?

 
At 5/08/2012 5:45 PM, Blogger Jet Beagle said...

AIG: "And since hiring the right people, the first time around, is probably one of the most important things a company does"

Do you think so? I've never seen the stats, but my guess is that Wharton MBAs are more mobile than UT MBAs. I think retaining new talent and attracting talent from other companies is more important.

 
At 5/08/2012 8:47 PM, Blogger AIG said...

Well, that's still hiring people, and the right kind of people. But ultimately companies that hire people from Wharton operate under a different business model, and a different retention/HR model than companies that hire UT people. One knows that its talent will leave every 2-3 years, the other knows it will have to invest more in developing their people.

Neither is better or worst, but a degree from Wharton and a degree from UT serves a different job, to different customers. (and I'd hate to pick on UT or anyone else, but just for argument's sake)

And that was my point; there is no such a thing as a "college degree" anymore than there is such a thing as a "4-wheel vehicle". A tractor and a ferrari are essentially the same thing, if one looks at it as an economist ;)

Sure there is likely a "bubble" in some degrees, but there's probably several reasons for this bubble in those degrees. But there's probably a "bubble" in some degrees all the time, since people make decisions on past performance of a field.

I'd say that besides the gov subsidies, the real issue we are observing is the channeling of such subsidies to particular degree-school combinations: state school liberal art degrees.

We also have a demographic issue. The parent's of today's college students were the first generation to go to college on mass. They expect their kids to also go to college, whether they are smart enough to or not. This creates an artificial demand for "college degrees", which funnels people into liberal arts fields at a higher rate, because not everyone is cut out to be an engineer or scientist, but anyone can be a school teacher. Plus this was also the hippie generation, so they probably taught their kids to go study whatever makes them happy. Well math never makes anyone happy.

These demographic and preference changes have got to play a role in the increasing costs. In fact, I'd say the costs probably aren't high enough; or the students aren't bearing enough of the costs themselves.

 
At 5/09/2012 1:26 AM, OpenID Sprewell said...

Haha, the "high end" will be fine, what a joke. In fact, it is the high and the low end that will go down first, as all new entrants go after niches first and online learning will take on the two extremes first, ie students who aren't doing well in regular schools are the ones in virtual academies now and those kids smart enough to recognize the college scam get out first. It is the vast middle paying the median jacked-up tuition to their massive state university who will exit last, as their parents have been brainwashed by the college myth for so long that they won't stop going till it's blatantly obvious. Also, it is easier to create a customized curriculum that is much better than the clueless Ivies on the high-end of online learning than it is to create solutions for the masses at scale.

Of course, none of this will happen as long as those attempting to set up online learning are fairly clueless or simply ape the existing worthless university curricula, so the biggest bottleneck, as with many aspects of the information age, is the ignorance and apathy of those trying to fashion something new with these powerful new tools of the PC and the internet, that have dropped into their lap. But someone will figure it out- just as the musicians eventually figured out that there's no money in selling recorded music anymore and they just jacked up their concert prices and signed big touring deals- it may take a decade or two, but the old college model is dead, only a matter of when.

 
At 5/09/2012 8:12 AM, Blogger Jon said...

Are you asking if the cost to the school to provide education is going up?

Yes. Tuition is up for sure, but whether the overall cost is up I don't know. Could be up a bit, but I doubt it's up very dramatically.

 
At 5/09/2012 8:30 AM, Blogger Jon Murphy said...

Yes. Tuition is up for sure, but whether the overall cost is up I don't know. Could be up a bit, but I doubt it's up very dramatically.

Room and board costs are up some as well as salaries, but other than that, not much.

Where the real costs are are on the student side of things: text books, lab fees, etc. That's where the subsidies come in. Subsidies do not raise the cost of producing the product. The raise the price of the product because of increased demand. They also increase the waste of resources towards, for lack of a better word, luxuries that are not necessary. For example, do college dorms need cable TV? Do they need a restruant in the basement? Do they need a game room? All these things drive up costs.

Subsidies create bubbles. This is a widely acknowledged fact by members across the political and economic spectrum. Their sole purpose is to create a bubble. That is exactly what they are designed to do. Any subsidy is meant to encourage increased demand for the good/service whether it be housing (mortgage tax deduction), education (student loans, grants, scholarships, direct funding), alternative energy (solar subsidies), medical care (medicade, medicare), etc. Since demand increases, price increases higher than where it would be naturally. That is why the conversation always revolves around cost control. All a subsidy does is shift the burden of who pays. It does nothing to lower the actual price of the good/service.

 
At 5/09/2012 10:26 AM, Blogger Don said...

Jon,

Ok, let's get back to your original argument:

"As subsidy reduces tuition goes up. Surprise, surprise."

If this were true, then non-state schools (e.g. private schools) would have a different tuition increase curve.

Google is your friend!

http://nces.ed.gov/fastfacts/display.asp?id=76

Looking at this, not sure if it supports you or not. Public tuition does appear to have increase a bit more than private, but the difference appears to be minimal, and of course, private tuition responded more quickly to the financial down turn.

 
At 5/09/2012 1:01 PM, Blogger AIG said...

and online learning will take on the two extremes first

Online learning has proved not to be a competitor to either, at least the model it has followed so far. They offer significantly less value than any other alternative. And the reason we know this, is because we can see their labor-market performance.

Of course, it is hard for a school like University of Phoenix to really create as much value when it has 300,000 students. It is hard for Capella University to really create value when it has 11,000 PhD students (What the!!!)

We have 10 years of experience in these schools. They don't create value. They have a niche...true...but that niche is NOT affecting "traditional higher ed". The niche that they have is mostly focused on continuing education for experienced professionals. That's a different market.

e students who aren't doing well in regular schools are the ones in virtual academies now
No they are not. Vast majority of people in "virtual academies" are continuing education adults; people who don't have the time to go to school, or whose companies will pay for an additional degree/certification program in order to advance to a higher career level. It's an entirely different market.

and those kids smart enough to recognize the college scam get out first
Sure. All the smart kids are college dropouts.

Also, it is easier to create a customized curriculum that is much better than the clueless Ivies on the high-end of online learning than it is to create solutions for the masses at scale.
That didn't make much sense to me.

fairly clueless or simply ape
Jeeze, take it easy. It never crossed your mind that perhaps other people also know what they're doing, besides you?

trying to fashion something new with these powerful new tools of the PC and the internet, that have dropped into their lap.
But there's nothing "new" about them. Schools have been offering online classes, and online materials for well over a decade now. Online makes some information easier to access, but it's not really a "game changer"...since "information" is not what education is about.

 
At 5/09/2012 1:05 PM, Blogger AIG said...

Where the real costs are are on the student side of things: text books, lab fees, etc
the cost increases are in research. The labor market demands more advanced degrees, which are more research focused. More people getting more Master or professional degrees, because BA/BS no longer is enough for a lot of fields.

The labor market is being ignored here. But the labor market )ie the employers) are the real customers of education, not the students.

For example, do college dorms need cable TV? Do they need a restruant in the basement? Do they need a game room? All these things drive up costs.
These are insignificant costs

All a subsidy does is shift the burden of who pays. It does nothing to lower the actual price of the good/service.
Right.

 
At 5/09/2012 1:10 PM, Blogger Jon Murphy said...

These are insignificant costs

I would disagree with you that they are insignificant. The game room at my Alma mater had a $100,000/academic year budget.

But then again, it is one data point.

 
At 5/09/2012 1:12 PM, Blogger Jon Murphy said...

the employers) are the real customers of education, not the students.

I'm sorry, I don't follow. The employers do benefit from college educated workers, but they are not consuming the education themselves. They are not paying for it. I don't see how they are consumers. If anything, they benefit from a positive externality. I mean, if businesses actually consume education, then why is anyone but companies paying for it?

 
At 5/09/2012 2:07 PM, Blogger AIG said...

The game room at my Alma mater had a $100,000/academic year budget.
We didn't have a "game room" at my school. But, $100,000 in a school of, lets say, 30,000, comes out to $3 per person per year.

I'm sorry, I don't follow. The employers do benefit from college educated workers, but they are not consuming the education themselves. They are not paying for it. I don't see how they are consumers. If anything, they benefit from a positive externality. I mean, if businesses actually consume education, then why is anyone but companies paying for it?

Companies hire people based on their qualifications. What they want, is those qualifications. They don't care how or who brings it to them.

Schools, provide these qualifications. The student is the medium...they buy it from the school, and sell it to the employer. But the employer is the ultimate consumer, since there's nothing a student can do with these qualifications if the market for them didn't exist.

Which is why, for example, you can get a nuclear science degree in Zimbabwe that may be 100% as good as that you may get at MIT...but it has no value because it has no customer.

And companies ARE paying for it. They pay you a wage that is higher depending on the qualifications you bring. Therefore, they are paying for those qualifications. The student doesn't pay. The student takes out loans which are paid back through the wages the employer pays.

Companies don't hire people, they hire capabilities to fulfill a requirement.

 
At 5/09/2012 2:25 PM, Blogger Jon Murphy said...

I'm sorry, but I still don't understand. The companies are a second derivative of the educational process. Just because there is no market for, say, a puppetry degree does not mean there is no market for puppetry. If folks want to learn about puppetry, then that is the demand.

What I am understanding your argument to be is something like this:

Households are the ultimate consumers of coal. Since they buy electricity from a power plant and the power plant buys coal, then the consumers are a customer of coal. But that's not correct. The consume the benefits of the good/service, but not the good/service itself.

 
At 5/09/2012 2:27 PM, Blogger Jon said...

In any case, JM, I'd like to see the data.

Don, that's a reasonable inference, but I think it would certainly be best to look at the data directly. The price set by a private institution is probably greatly affected by the out of pocket cost at the public school. As the cost of public schooling goes up private institutions are able to charge more due to competition.

 
At 5/09/2012 2:31 PM, Blogger Jon Murphy said...

We didn't have a "game room" at my school. But, $100,000 in a school of, lets say, 30,000, comes out to $3 per person per year.

Unrelated, but my school had a full-time population of 3,000, only 1,000 of which lived on campus.

 
At 5/09/2012 2:32 PM, Blogger Jon Murphy said...

In any case, JM, I'd like to see the data.

What data? You mean that subsidies cause prices to rise? Hell, man, do a Google search. That's Econ 101 stuff there.

 
At 5/09/2012 2:45 PM, Blogger Jon Murphy said...

http://chartingtheeconomy.com/wp-content/uploads/2009/04/healthcare309_28214_image012.gif

Here's a chart of US Health Care Expenditures compared with CPI.

I mean, the fact that subsidies cause prices to rise is not only empirically proven, it's logical.

Think about it:

A subsidy is designed to encourage the consumption of a good or service, since those who consume do one bear the full cost of their actions. The providers of that good or service have a scarce number of resources to work with. In order to ensure that they cater to only those most willing (and to pad profit margins, as all economic actors are profit-seeking), they raise prices, thus meaning increased costs on the buyers.

Let's try to explain it this way:

Their is a field. It is lush and fertile. All the local farmers bring their cows to graze on that field. Since none of them bear the full cost of the field, but do enjoy its benefits, it is in the interest of no farmer to re-sod the field. The field becomes barren due to over-grazing.

Moral of the story: if the full costs of an action are not borne by those who enjoy its benefits, their actions will lead to higher costs on all involved.

 
At 5/09/2012 3:04 PM, Blogger Jon said...

JM, the data I'm looking for is the total cost to educate a student. Has that been going up?

Given that public subsidy has been dropping, on your theory that subsidies cause bubbles the total cost should be declining, right?

BTW, health care costs in the rest of the industrialized world are about half of what they are in the US, and their systems produce better outcomes by international measures (World Health Organization, Commonwealth Fund studies). Yet they have even greater public subsidy on cost. The fact that health care costs have gone up greater than inflation tells us nothing about what the cause is.

 
At 5/09/2012 3:19 PM, Blogger Jon Murphy said...

JM, the data I'm looking for is the total cost to educate a student. Has that been going up?

Given that public subsidy has been dropping, on your theory that subsidies cause bubbles the total cost should be declining, right?


Yes. Have you paid a tuition bill recently?

Subsidies aren't dropping. They are at record levels.

 
At 5/09/2012 3:22 PM, Blogger Jon Murphy said...

Yet they have even greater public subsidy on cost.

No, they also have cost controls. In most of the industrialized world, they have a single-payer tax system, and the government sets the prices. In the US, we only have the subsidies. As I said before, without cost controls, the price will rise. However, cost controls open up a whole other can of worms, but that is a discussion for another time.

 
At 5/09/2012 3:25 PM, Blogger Jon Murphy said...

Education costs are going up

Subsidies are rising

 
At 5/09/2012 3:29 PM, Blogger Jon Murphy said...

Oh, that 2nd chart is per-student, not total

 
At 5/09/2012 4:25 PM, Blogger AIG said...

Just because there is no market for, say, a puppetry degree does not mean there is no market for puppetry.
That's only because the qualifications and skills needed for puppetry, aren't provided through a puppetry degree.

What I am understanding your argument to be is something like this:
Households are the ultimate consumers of coal. Since they buy electricity from a power plant and the power plant buys coal, then the consumers are a customer of coal. But that's not correct. The consume the benefits of the good/service, but not the good/service itself.


Exactly, but in this example, the "coal" is the student :) ie the medium. The power-plant is the school, and the household is the employer. The household doesn't hire coal, you're right. It hires the the "quality" that coal transmits.

-----------

This is why creative destruction works...or at least the destruction part of it. For example, companies used to hire a lot of people to keep track of their inventory, their orders, they supply chain etc. Loads of people. They had a "job" to fulfill, and the "people" provided the ability to fulfill this job.

The ERP systems came around. Now computer could do it. The company was still getting the same "job" done, and it could get rid of the people.

But companies don't hire "people". They hire the means of fulfilling a "job", just as households don't hire "coal".

Unrelated, but my school had a full-time population of 3,000, only 1,000 of which lived on campus.
Silly New Hampshire :p

 
At 5/09/2012 4:47 PM, Blogger Jon said...

JM, your first link shows that tuition is going up, and on that we agree. The question is about the overall cost.

My slides from U of M say that they are now getting less state subsidy in real terms. I find the same claim from other schools (for instance University of Washington at this link).

http://slog.thestranger.com/slog/archives/2012/02/07/its-not-the-cost-of-a-college-education-thats-skyrocketing-its-the-price

I suspect your link is adding in money available in the form of loans. The subsidy there isn't the amount of the loans, but whatever interest on the loans the government is paying. People are naturally taking out more loans as state subsidy declines and they have to foot an ever larger share of the bill. But the total cost of an education may not be rising (see University of Washington article).

 
At 5/09/2012 5:44 PM, Blogger Jon Murphy said...

Jon-

State funds going to schools are just one of many forms of subsidies.

Loans are also part of the subsidy process, not just the interest. After 10 years, with good credit, your loans are forgiven.

The price of education is rising. That is undeniable.

 
At 5/09/2012 5:48 PM, Blogger Jon Murphy said...

The cost of a college to provide education isn't rising much but the cost of someone to obtain a college education is rising, and that is exactly what a subsidy will do.

 
At 5/09/2012 8:16 PM, Blogger AIG said...

The cost of a college to provide education isn't rising much but the cost of someone to obtain a college education is rising, and that is exactly what a subsidy will do.

Both are rising. But it's not entirely unreasonable that they are rising for other reasons besides subsidies...such as demographics, such as the labor market demands etc.

Saying "subsidies" encompass a lot of targeted programs, which may or may not be contributing in more narrow fields than just "college degrees". Ie, subsidies that are channeled more towards liberal art degrees, may not be responsible for increased tuition in science degrees.

 
At 5/09/2012 10:40 PM, Blogger Jon said...

I think we need to see some good data before making a judgment. It seems difficult to find. You can find it for individual schools, but I'm not seeing data overall.

BTW, student loan debt is never forgiven. You can't even get out of it with bankruptcy. If you haven't paid your student loans back they'll dock your Social Security check when you are older. These are the stickiest loans that exist. They never even settle with people because they know you will pay no matter what.

 
At 5/10/2012 6:33 AM, Blogger Jon Murphy said...

I think we need to see some good data before making a judgment. It seems difficult to find. You can find it for individual schools, but I'm not seeing data overall.

What more data do you need? I've given you official stats, theories behind them, unofficial states, a logical walkthrough. What more could you possibly need? There is no more data! Subsidies, simply by their nature, cause prices to go up.

BTW, student loan debt is never forgiven.

Yes it is. Under the law Congress passed about 6 months ago, after 10 years, any Federal student loan debt is forgiven if you have been making regular payments.

 
At 5/10/2012 6:59 AM, Blogger Jon Murphy said...

Let me try this one more time:

A subsidy, by design, increases demand of a good/service.

When demand for a good or service increases, the price of that good or service increases.

Subsidies increase prices. It may not be the price the consumer sees, but it is the price someone has to pay; There is no such thing as a free lunch.

But let's say you still remain unconvinced by this.

Even if your claims about subsidies were true (which we've already established they are not as total subsidies are at an all-time high, enrollment is at an all-time high, and the Education CPI is at an all-time high), can we please drop this "right-wing conspiracy" crap? The "right-wing" hasn't been in power for nearly 4 years. Any declines in subsidies would have to be from the current administration. After all, G.W. Bush did increase federal spending on education to a record level.

 
At 5/11/2012 10:49 AM, Blogger Jon said...

What more could you possibly need?

I'm looking for plots of the overall cost of an education. The chart you gave was probably counting dollars twice. When public subsidy drops people naturally seek more in loans. So your chart showed tuition going up, and that same tuition is paid for with additional loans that students seek. So loan amounts go up. That same dollar provided to the school is being counted twice. For every dollar reduction in public subsidy tuition goes up a dollar and the student gets a loan worth an additional dollar. You can't count that as two dollars provided to the school, one in tuition and another in a loan. I'm looking for the amount of money being sent to the school per student. I don't think professor salaries are going up that much. I don't think class sizes are dropping. The amount of money going to the university may be up, but I suspect it's not dramatic. And if you look at the source I provided on the University of Washington you find that per pupil money going to the school has dropped.

Yes it is. Under the law Congress passed about 6 months ago, after 10 years, any Federal student loan debt is forgiven if you have been making regular payments.

I don't believe it and I can't find a source. Do you have one. This would be great news for a relative of mine if true, but I doubt it.

When demand for a good or service increases, the price of that good or service increases.

That assumes the supply curve has held, and I don't think it has. Technological advances have made it easier to provide an education. But I'm not denying that generally when public subsidy goes up the total cost goes up. What I'm saying is that since subsidy has dropped there's good reason to think the total cost has also dropped. Though it's tough to find the data overall. What I've found so far is individual schools and it confirms my point.

I don't think I've said anything about a right wing conspiracy. What I'm saying is that with Reagan there has been a political shift rightward, and what that has meant is policies preferred by the right have been implemented in college education. Public subsidy is declining. You say it isn't, but I've explained why your charts are not showing what you are claiming.

 

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