Tuesday, January 12, 2016

Fed Reserve Concludes Student Loans Linked to Rising Tuition Costs

AS should be obvious, loan access allows rapid expansion of tuition fees.  All unrelated to the lousy salaries paid to anyone else.  It does not need a study by anyone to know what will happen and that expanding margins will be filled by rent seekers of all kinds calling themselves administrators.

Fixing it all is a problem though. True competition has been avoided. What is true is that the process has become seriously too pricey and if anything, the providers have been even more abused financially unless their star adds to the marketing story.

In the meantime, a third of the population gets a college experience which is rather too many except that much of the crowd are doing a commerce degree which i refuse see as other than light reading.  It just does not demand either convincing teachers or convincing students.

When i went back in the sixties the slack road consisted of a general Bachelor of Arts course which possibly prepared you for teaching high school and that not as the history teacher either....
Fed Reserve concludes student loans linked to rising tuition costs

 Dec 28, 2015 | By Martin Barillas


A satirical music video produced by Reason, a libertarian leaning website, provides insight into the causes of the soaring cost of higher education. The topic has been a favorite in Democratic presidential debates. Hillary Clinton is touting a plan to offer reduced rates for student loans, while Sen. Bernie Sanders is promising free education at public universities and colleges.

The song was written and performed by Remy. Some of the lyrics point out the penchant colleges and universities have for costly living quarters and entertainment for students, while also satirizing student political movements.

So we check the yoga studio–they're not there
The coffee shop, ice cream machine, everywhere
The sauna, the climbing wall, pool, the high dive
We want to know why our tuition's so high!
We're the students united, we won't be divided
We'll get what we want oh and don't try to fight it
Our SAT / ACT scores are sublime
But there still are some answers we struggle to find
We're protesting privilege, we're marching the streets
With the golf and the dance and equestrian teams
We need a safe space from the intolerant
Can't you see your words hurt me you dumb piece of shit?

Student loan debt is now in excess of $1 trillion.  In 2014, college graduates were facing an average $33,000 in student debt: twice the amount similar graduates faced twenty years ago.

Empirical evidences tends to show that government subsidies of higher education have driven up the cost of higher education. Over the last two decades, for instance, Federal financial aid to students has almost tripled while student debt has doubled. The costs of tuition rise to keep pace with the growing numbers of administrators at public universities and colleges. The average graduate in 2014 left college with $33,000 in loans. That's twice the burden students faced 20 years ago. During that time, federal financial aid per student almost tripled. Banks and the Federal government profit from the loans, some of which are offered at non-subsidized interest rates.

A recent report by the Federal Reserve backed the conclusion, which was first touted by former Reagan-era Secretary of Education William Bennett, has provided data to assert the claim. The study’s authors, David O. Lucca, Taylor Nadauld, and Karen Shen, found that when students fund education through loans, the amount of loan money directly affects the cost of tuition.

They wrote in the abstract of the study, “Higher tuition costs raise loan demand, but loan supply also affects equilibrium tuition costs—for example, by relaxing students’ funding constraints.” The authors found that “institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent.” Government student grant programs, as well as non-subsidized federal loans, also have a lessened effect on tuition rates. In short, the study that “on average, for a $1 increase in the subsidized-loan cap, tuitions rose by as much as 65 cents.” The study authors wrote, "[W]hile one would expect a student aid expansion to benefit recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect."

Democrats, including presidential candidates Hillary Clinton and Sen. Bernie Sanders, as well as Sen. Elizabeth Warren (D-MA) have addressed student tuition costs and debt. Sanders has called for free tuition at public institutions, while Clinton has called for $350 billion in new spending to provide free community college education, while reducing student loan rates and tuition costs. Warren wants to pay for the lower interest rates with the so-called Buffet Rule, which would set minimum tax rates for persons earning more than $1 million. Sanders proposed taxes on Wall Street trades to pay for students’ tuition.

A 2014 report entitled “College as a Country Club,” published by the National Bureau of Economic Research, found that some institutions -- excluding elite private institutions such as Yale and Princeton - attract more applicants when they invest in state-of-the-art facilities such as swimming pools, luxury dormitories, water parks, and rock-climing walls. The average tuition costs for such four-year colleges and universities continues to rise, more of them seek to justify the costs as a means of attracting and retaining students. Currently, the average per year cost for four-year institutions runs at approximately $18,000 for in-state students at public universities to almost $32,000 for out-of-state students, according to College Board.  Critics within and without academia have pointed out that another reason for rising tuition costs is the increase in non-academic administrative personnel at many institutions. See Spero News coverage here.
Here are some of the amenities found at public institutions:
Texas Tech at Lubbock TX has invested $8.4 million on a water park with an artificial river on more than 2 acres of land.
University of Missour at Columba MO has an indoor aquatic facility that features an indoor swim-through grotto reminiscent of Hugh Hefner's Playboy Mansion. It was on this campus that students occupied lawns on campus to protest mistreatment of African-Americans by police in Ferguson MO. The protests succeeded when the university president agreed to resign.

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