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PostPosted: Tue Apr 10, 2012 6:48 pm 
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http://chronicle.com/blogs/innovations/there-are-as-many-student-loan-debtors-as-college-graduates/31944


http://andrewsullivan.thedailybeast.com/2012/04/the-looming-student-loan-disaster.html


We have talked about this a lot in the past. The article (first link) and graph (second link) are interesting. What really stands out for me is the insanely small drop in the percentage of 30-39 year olds holding student loans when compared to those Under 30. It's obvious that most people aren't trying to or able to pay these loans down quickly.


Plus, almost 5% of student loan debt is to 60 year olds? Crazy.




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PostPosted: Tue Apr 10, 2012 7:48 pm 

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Why has'nt competition between universities driven down prices ? Is Higher Education an example of a Giffin good, where demand rises with price increases because of a consumer perception of greater value ? And further exacbated by the availability of almost unlimited credit ?




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PostPosted: Tue Apr 10, 2012 8:18 pm 

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> Plus, almost 5% of student loan debt is to 60 year

> olds? Crazy.


Yup, my sister is one of those. She owes at least $50k that I'm aware of and is still working on her Masters in Social Work. Couldn't be bothered to get a job while going to school. Couldn't just save her money to go to school. Because she wants to work in a meaningful job (hint: if you haven't found one by age 55, you ain't gonna find one!).


So far, since 2007, she's managed to get a Bachelor's in Judaic Studies, complained that she couldn't get a career job (duh!), and is halfway through the Masters.




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PostPosted: Tue Apr 10, 2012 10:15 pm 
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The unlimited credit that can't be eliminated with bankruptcy is the prime cause. It's a no lose situation for the banks.


Competition in education is kind of like it is in healthcare. The industry naturally makes it difficult for the consumer to make choices. Plus, it's not that hard to add classes or increase class size, so it's not like there are a finite number of spots to fill.


From my vantage point, if you can't get into an Ivy league or equivalent (Duke, Stanford, University of Chicago, etc.) and you can't get into one of the big name schools (Michigan, Ohio State, UCLA, etc.) then you should go for your cheapest option, which is generally a no name state school.


@George

Wow, that doesn't sound like a great plan for your sister.


At one point in my life I was thinking about getting a doctorate in history to teach college. The first school I looked at was the closest major college (Pitt). The website for their history department stated, "Do not take this degree with the intention of teaching college. Currently there is 1 job for every 100 qualified applicants." That is what more schools need to do. Especially, the law schools.




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PostPosted: Tue Apr 10, 2012 10:56 pm 

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chenda asks a good question. The laws of economics are distorted when applied to universities for a variety of reasons. One reason for this is that the universities collude on tuition price. More importantly, though, is that a university education is considered a luxury commodity, so the research-oriented universities combat one another in terms of prestige rather than in terms of price.


You find this doesn't apply to smaller, teaching-oriented schools. Community colleges are still cheap--with tuition around $3,000.


The fact is that universities are becoming more expensive to run, for three main reasons:


1. Byzantine administration. Whatever your politics, having endless administrators dedicated to gender equality, minority welfare, rape counseling, and other hot button university issues is expensive. This has inflated costs for universities since the culture wars of the 90s.


2. Service-oriented costs have gone up more than real wages in America. We all know that wages have been stagnant for the middle classes for the past 40 years, but prices have gone up. Universities, like government offices, have raised salaries and benefits for faculty and staff much more than private institutions. This has made the universities' services more expensive for people living in the private sector economy.


3. The prestige competition is really expensive. Hiring star researchers is expensive and a relatively inefficient way to run a university. If you want to lure an Oxford professor with a $250,000 salary to teach one grad class per semester, he is a big loss to your bottom line, but this is seen as a sort of "loss-leader" for the university as a whole. Universities then cut costs by having T.A.s, Ph.d. students, and adjuncts teach a lot for relatively little pay.


It's much more complicated than what I've written, but I think these are the main factors involved in the cost inflation at universities. I'd love to hear others' input on this, since I know there are a couple of Ph.d.'s on the board.




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PostPosted: Wed Apr 11, 2012 1:30 am 
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Not forgetting the cost of regularly gilding the helmets of the football team and the dome of one of the campus buildings with real gold.


Generally speaking though, things are priced to what people can afford to pay---not to the effort that actually goes into creating them. Since people are willing to pay as much as it takes for various idiosyncratic reasons, making it easier for people to afford more (through loans) is going to drive the prices up thus nullifying this early advantage. It's essentially a credit fueled bubble. Although for education, there seems to be a large number who still thinks that a college education makes the whole difference in terms of how rich a person is eventually going to be.


If student loans, home loans, or OPM for health insurance became more difficult to obtain, tuition (and home and health) prices would easily drop again. There's nothing inherently expensive about education. All it requires is a room, some chairs, and a cheap teacher.


[Having spent about 15 years in academia, it always looked to me as if the money got spent as close to the source as possible. For example, the newest and most updated buildings were always the administration buildings (disregarding the sportscenter). The biggest computers and screens were often used by professors to read emails, not to crank code. Emeritus professors, who come in once a week to sleep through a seminar, had the biggest offices. The crappiest buildings/rooms and tech were where the real work got done. So basically the money is to a large extent considered "funny money", that is, money that must be spent on whatever under this year's budget lest there be an decrease in next years budget.]




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PostPosted: Wed Apr 11, 2012 1:40 am 

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I'd basically agree with Jacob--I focused on the extra administration costs, but it's also true that shiny new buildings and sports are a huge cost for a lot of universities, and these have really little to do with the actual business of the university.


I remember one school spent millions refurbishing its old library building, which basically meant installing a bunch of new open study spaces and lounges. The result was that there wasn't enough room for the current amount of books, so they had to install those crank-powered bookshelves at the last minute and store a bunch of books offsite.


The problem, I think, with universities is that they cater to a wide income base--the children of multi-millionaires as well as the children of the lower middle class--so even if credit tightens you may not see tuition prices for top-tier universities contract. A similar real-world analogy would be the fall in house prices after the subprime mortgage crisis--while middle-class houses fell in value by up to 80% in some markets, the cost of luxury houses fell much less, or actually rose in some markets (Long Island, NYC, and Seattle, for instance).




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PostPosted: Wed Apr 11, 2012 3:46 am 
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Cuts in state funding here are one of the factors of rising costs. Someone has to pick up the bill...




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PostPosted: Wed Apr 11, 2012 4:31 am 

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Cuts in state funding have been a particular problem at schools in the University of California, but I have little sympathy with them. While also facing funding cuts from the state, the university has also dug itself into a deep hole with huge pay raises for administrators, particularly the regents, and higher and higher salaries for professors at UC schools, while giving them less and less teaching requirements. Those salaries were only recently cut with furloughs and pay freezes, but before that people were getting paid above their actual pay scale. UC schools have a weird system where they publish a pay scale for professors, but actually pay individual professors "scale plus x%". So if the starting pay for an assistant professor was officially 50k, many were hired at 75k (scale plus 50%), with the pay justified as the cost for attracting star researchers. These star researchers would then teach one or two classes per semester.




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PostPosted: Wed Apr 11, 2012 12:46 pm 

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All sounds like an educational bubble to me.


http://www.fool.com/investing/general/2012/03/13/the-next-bursting-bubble.aspx?source=isesitlnk0000001&mrr=0.33


http://www.fool.com/investing/general/2012/02/22/will-the-education-bubble-end-badly.aspx?source=isesitlnk0000001&mrr=1.00




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PostPosted: Wed Apr 11, 2012 10:25 pm 

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Similar to many of the previous comments, I suspect that education costs in the US are probably directly related to the availability of education loans. It certainly seems that a number of institutions adjust their tuition to maximize the school's ability to benefit from the available lending programs.


Does anyone have a good link that supports this contention: "Universities, like government offices, have raised salaries and benefits for faculty and staff much more than private institutions." My experience as a faculty at both a public and a private university has been different to this-- the faculty were paid more in the private sector, better benefits too. Average salary data is likely skewed by the extremes, but on average private university faculty make about 20 percent more than public. Perhaps the contention is that previously the gap was even wider.




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PostPosted: Wed Apr 11, 2012 10:58 pm 

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@secretwealth, star researchers in the biological sciences and medicine generate a lot of revenue for the institution by getting their grants funded. As I wrote this comment, it occurred to me that if you mean people who research stars, I really don't know much about that funding, but if you mean people who are very good at presenting research, then I know a good amount about that in chemistry, biology, and medicine. I don't really know how the funding works for other fields.


Asking your star researcher to spend a lot of time teaching is somewhat analogous to asking your best salesmen to spend time doing things other than attempt to make sales. They are star researchers, not necessarily star teachers, and my experience has been that there actually isn't much money in teaching.


For some types of research, when the research gets funded (particularly if funded by a govt source) the researcher's salary also gets supported based on the percentage of time dedicated to the project (NIH salary max for funding purposes is about $200k/yr). Additionally grants come with additional monies referred to as "indirect costs"-- so if I bring in a grant for $1million to research a topic, and I will devote 50% of my time to that topic, the grant may well include $100k for my salary in the $1mil, but the indirects, which vary, but could easily be over 20% will also come along. The $200k is not included in the $1mil grant number, and the institution has some flexibility in how that money is spent.


So in my fields, a researcher who can bring in grant money reliably becomes a huge revenue stream for the institution. I've often thought that's why they are sought after and competitively compensated in both the public and private universities.


University funding is a strange beast, and it varies a lot from place to place, but my experience has been consistent in this way: A funded researcher is a money machine, and the money can be reasonably well tracked. Tuition payments, on the other hand, seem to be money fed into a fire-- I've never worked at a uni where I had even the slightest idea how much revenue this was and where it went on even a basic level.




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PostPosted: Thu Apr 12, 2012 11:12 am 

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Tuition is not the sole cause of student debt. A large part of student loans is used to cover living expenses. This use of student loans sort of artificially increases student debt. Living expenses need to be paid whether one is in school or not.




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PostPosted: Thu Apr 12, 2012 11:20 am 

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@Mo: I'm in (or was in) the humanities, so I can't speak for how it works in the STEM fields. I know that star researchers in the humanities bring in very little research funding (mostly because so little is available to humanities research), and when they do, that money usually goes straight to researching costs with little to no surplus money going to the department or university. Thus a star researcher hired in a history department may cost the university $200k in yearly salary, and in exchange the professor will teach one course per semester while producing maybe a monograph every two years. I don't see how star researchers directly bring in money in the humanities.


My experience has been quite opposite: there seems to be a pretty arrow going from student's pocket book to administrators to university faculty. But I've never been an administrator, so I don't know much about the messy details.




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PostPosted: Thu Apr 12, 2012 12:05 pm 
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The potential for "research" professors to waste money is a possible problem. However, I don't see how it can be a major issue. As Mo points out, many of the science researchers are actually big dollar earners for the university. Plus, there are a ton of schools that don't do any research and their tution has went up in lock step with the research universities.


In my limited experience (two schools) I didn't see a ton of bureaucracy, at least not more than the Fortune 500 companies I worked for had. I'm not suggesting they don't have too much, just that it isn't anymore of an issue with colleges than it is with any other large human organization.




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PostPosted: Thu Apr 12, 2012 12:16 pm 

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@Chad: "Plus, there are a ton of schools that don't do any research and their tution has went up in lock step with the research universities."


Is this the case? I thought the skyrocketing tuition costs were for research-oriented state universities, private schools, and SLACs. Are non-research oriented schools also experiencing rapidly rising fees?




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PostPosted: Thu Apr 12, 2012 2:10 pm 

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This data:

http://www.aaup.org/AAUP/comm/rep/Z/ecstatreport10-11/


Indicates that when considering all faculty, average salary has just about kept pace with inflation over the past 40 years-- down 1% relative to the BLS CPI-U.


@secretwealth, what is STEM? I find your differing perspective very interesting. It does seem foolish to pay a faculty more than he/she can contribute. For you, there is an obvious money trail from student to faculty-- does your institution make its budget public and transparent so that you can see how much is brought in by tuition, and figure out where that money goes? If so, is it online, so that I could look at it?


For my college of medicine, the tuition revenue should be around $13-14mil per year (based on number of students and published tuition), but I couldn't begin to tell you where that money goes.




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PostPosted: Thu Apr 12, 2012 4:31 pm 

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@Mo:


STEM = Science, Technology, Engineering and Mathematics.




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PostPosted: Thu Apr 12, 2012 9:03 pm 

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When I was finishing up university (~10 years ago), there were a lot of offers to "consolidate" student loans, and a major point of these was that your expected repayment time went from 10 years to 30 years. I didn't have enough debt for it to be worthwhile (<$10k), but a LOT of people I knew were going in for consolidation. If my anecdotal experience is representative of the general college going population, I'm not surprised that there isn't a big drop off in debt between 20-somethings and 30-somethings, because most 20-somethings are going to be in debt until their 50s.


I believe the easy availability of loans is a PRIME reason for rising tuition costs. If loans were not so readily available, I'm pretty sure that universities would be running on a tighter budget. When I was in grad school, our department seemed to be constantly adding administrative positions and each person seemed to have a very narrow range of duties--I was sometimes baffled as to how they could be hired full-time. In contrast, I went to an undergraduate school where tuition was much lower and where it was (historically) quite difficult to get permission to raise it, and a similarly sized department would have a much smaller administrative team. Things seemed to get done at about the same pace at each university, and the actual services available to students were comparable also.


In the STEM fields, professors pay is often closely tied to their ability to bring in funding, so I'd say the large salaries for stars are generally justified. I know the (public) university I was recently at had a hard time recruiting faculty because the pay was apparently comparatively low compared to private universities or industry, so if public university salaries are ballooning, something else is ballooning even more.




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PostPosted: Thu Apr 12, 2012 9:50 pm 

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Tac, I saw the same thing as I finished med school. People consolidated to 30 year terms, and really didn't make much effort to pay things off. There was a time period where people were consolidating loans at under 4%.


A lot of financial advisers will tell people not to pay off the loan early because the interest rate is so low. I guess I can understand the intention of this advice for folks with very low rates and very large balances who also qualify to deduct the interest on their taxes.


The unfortunate reality though, is that many people don't really understand the advice fully and do stupid things like spend every available cent on consumer garbage. For the overwhelming majority, simple advice like: pay off the loan ASAP, might be better.


As was said, people will be paying these loans off in their fifties. I've simply said to people who ask: "Do you want to still be paying on the loan when you are 55?" If the answer is no, then pay it off now.




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PostPosted: Thu Apr 12, 2012 11:10 pm 

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I have worked for seven different colleges over the past twenty years, teaching in the humanities and social sciences and working in various administrative positions. I have worked for huge public schools, small, elite private ones, a large Ivy, and for a for-profit college.


All are expanding meaningless administrative positions, and the biggest bloat is at the director/associate dean/assistant provost level.


I work now for a well-known university that is no better or worse than any of the other schools I have worked for. The leanest administrative machine was the for-profit school; they had shareholders to answer to.


The worst in terms of waste and bloat? The Ivy.


The single biggest cause of waste, in my experience, has been the detachment of faculty from administrative work. Adding these new layers of administrative professionals who do not interact daily with students in any meaningful way, and who create new task forces for this, or a strategic planning initiative for that, yet push the development office to bring in more and more dollars to fund these enormous wastes of time (and that never create meaningful change) is the biggest waste. Period.


I have also seen an incredible increase since the mid 1990s in legal and regulatory staff on campuses, from Academic Development offices to handle students with academic disabilities (ADHD, dyslexia, etc -- not traditional physical disabilities) to university lawyers to HR staff. Judiciary bodies used to discipline students; now they act more as safeguards against lawsuits.


But that expansion is minor compared to the higher-level bloat.


Also anecdotal, but there has been a massive increase in the offering of food at university events over the past 15 years or so. Food is everywhere. Everywhere! And the amount of food has increased. So a smal lecture that, in the past, wouldn't have any food might have had coffee, lemonade and cookies ten years ago, but now it has a spread of pastries, cookies, fruit, coffee and soda.


A faculty meeting that would have had nothing five years ago might include take-out now. Or a student movie night for the department might have had nothing ten years ago; now they have to have pizza and movie snacks.


It is crazy! Minor compared to other costs, but it is so pervasive, and the administrative support for the food, from staff who has to order it to accounting staff who have to process the paperwork for all these small events -- it adds up.




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PostPosted: Fri Apr 13, 2012 12:02 am 

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I was actually listening to a radio story one day about rising costs of higher education and they interviewed a guy who's basic argument was that the increase in staff is what's fueling the rise. He had actually gone then and reviewed the notes of staff meetings from several universities (I want to say they were UCs but I could be wrong). He said that one of the biggest meeting topics was: setting the agenda for the next meeting. Unbelievably inefficient.




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PostPosted: Fri Apr 13, 2012 12:16 am 

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I thought it was a given that every college student knows exactly where the free food is at any given time.




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PostPosted: Fri Apr 13, 2012 1:34 am 

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prosaic basically said everything I have to say on the issue. All I would add is that I've worked in institutions outside of the U.S. that have not seen skyrocketing tuition costs (the UK has seen a huge rise in tuition fees, but that is directly traced to governments cutting funding--and even then research-based UK institutions cost a fraction of their American counterparts). Outside the US, you don't see pastries at meetings (the only food at meetings I ever saw was paid for by a separate grant or from faculty members themselves), developmental offices popping up to handle all sorts of issues, or the like. I'm not saying that UK institutions are particularly efficient, but they certainly hire less administration than American universities.


In the UK, the only rapid and aggressive growth of administration I saw was marketing efforts to lure more Chinese students to the school. Similar efforts to get tuition fees from Indonesian, Malaysian, and Singaporean students were also present, but less visible. Since these were highly profitable operations (overseas students pay about 3x more tuition fees than UK or EU students), this was clearly a money-making operation, whereas American universities setting up a new office to assist students with learning disabilities isn't particularly profitable.


A pretty good example of what I'm talking about: CUNY's "Welcome Center" is at 42nd st., steps from Grand Central in one of the most expensive office spaces in NYC. They offer the following services (taken from their website):


Admission Support

Application Assistance

Citizenship and Immigration Advisement

Financial Aid Information

One-On-One Counseling

Scholarship Information

Veterans Counseling


Now, I'm not criticizing them for offering these services, and my wife recently went to the Welcome Center and said they were overworked. But it does seem like a lot of bloat for essentially pairing up educators with students.




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PostPosted: Fri Apr 13, 2012 1:36 am 

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Man I wish I could find one of those meaningless, useless director jobs! I see other people with them and I want one too! That's basically my goal for ERE is to get paid at a job where I do almost nothing of any real difficulty or consequence. Prosaic, do you have a link to any job openings like this?




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