Ask HN: What went wrong with the student debts in the US?

https://news.ycombinator.com/item?id=26112445

by inglor_cz • 5 years ago

1 1 5 years ago

news.ycombinator.com

So, I am a European watching the explosive, bubble-like growth of tuition in the US and current attempts to cancel some of the debt, which would be a de-facto partial bankruptcy of the system. What has gone wrong?

I heard several explanations, all of them plausible and none seemingly complete:

a) people aged 18-19 are bad at this kind of heavy financial decisions,

b) colleges compete on amenities and overall experience, which costs a lot of money and is only tangential to the real quality of education; for some reason, no one bucks the trend and prospective students choose the coolest school, to their future ruin,

c) cancerous growth of administrators, now much outnumbering the core staff, basically a bureaucracy that hasn't yet hit the economic ceiling of self-empowerment.

I would be interested in insights of HN readers. Also regarding the fact that paying tuition is generally considered a right-wing policy in Europe (as opposed to the school being financed from taxes), but at the same time tertiary education in the US skews heavily left; why would right-wing politicians help finance hostile institutions?

jfengel• 5 years ago

Yes to all of those, but more.

Administrative growth is part of it, but in general schools have made themselves more expensive in many dimensions: more buildings, bigger sports stadiums, more attractive campuses, better food, and so on.

They compete with each other, and the accessibility of student loans removes a brake on the competition. Many people can afford to go... today. Whether they can actually pay it back is less clear -- even if they are working in STEM fields. College education is mandatory but not sufficient for the best paying jobs. We had an economic crash in 2001, and another in 2007 that is persisting in some ways until this day.

As of 2005, student loans can't be discharged through bankruptcy. So student loans taken out at 18 will follow you forever, no matter what.

Colleges are hard to start. There's no really good way for economic competition to open up. Many recommend community colleges, but employers often discriminate against them. Online degrees, similarly, are often low quality, and are certainly treated that way regardless. The job market for young people is tight, and the ones with the most expensive degrees will in general get the most desirable jobs.

Employers could be more flexible than colleges, but many just won't. With so many candidates they filter heavily, including college transcripts.

This is still a vast oversimplification. It's a number of factors all pointing in the same direction: rising costs, availability of money, tough employment market. It's not so much that the 18 year olds are bad at making decisions as that college is a practically necessary decision, and yet it's no longer the obviously lucrative choice it used to me. Many get stuck for one reason or another, and they're stuck hard. College prices have risen to match the advantage they give.

Fixing that is at least two parts: making it better in the future, and dealing with two generations of students who genuinely couldn't have known what they were getting into. Neither is easy.