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Keith Murphy
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It took me one minute of searching to find that student loan debt also approximately quadrupled over the period of 1990-2000, so your first premise is entirely wrong and apparently debt has been growing exponentially for a while. I care deeply about what you can demonstrate versus what you suspect, so if you know of data of people magically affording tens of thousands a year tuitions in a household making average wages, with no financial aid or loans, I'd love to see them. For now, I'll continue to believe that the 40% increased college enrollment has been driven by that quadrupling in total debt, and that prices are rising in part for the reasons I stated.
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I think you have missed some important elements of the causes of rising tuition. First and foremost is the ability to finance. There is a good analogy in residential real estate. Home prices are of course generally much higher than they would be if no banks offered mortgages and a homeowner was forced to pay alone. During the beginning of the crisis last decade, greater availability of financing rapidly drove up home prices. Similarly, the public policy commitment the federal government makes to student loans has unintended consequences. Over recent decades, financial aid programs and loans have created opportunities for a large percentage of students to attend college that would otherwise not be able to do so for financial reasons. We have gone from a nation where 15% of adults over 25 had a college degree in the late 1970's to one where nearly 30% of adults do today. Supply and demand alone dictates that when a large number of new customers find the financial capability to afford a product, the price of the product rises. There are a lot of things wrong with blindly accepting as dogma that college degrees equal better job opportunities and that the only public policy option is ample government-backed student loans. Consider the growing problem of for-profit schools spewing out graduates with degrees that do not significantly impact their true employability, despite the high debt levels they take on. It has been estimated that 30% or more of the Occupy Wall Street crowd were those driven solely by issues of unsheddable loan debt and no employability. Further consider that, while in the late 1970's 15% of the over-25 population had college degrees and nearly 30% do today, we clearly haven't cloned those 15% - we've just given the 70-85th percentile achievers some training and a degree. Those degrees help them in some maesure to do better jobs, certainly. But excellent work has shown that, in fact, the resulting salary premium from an Ivy league education versus state university was 2-3% for the education itself, which could be measured by comparing students who were accepted to both an Ivy and a state school and selected one or the other. Assigning that gap to education is actually debatable given the potential for greater impact from the personal network that one builds at a small high end private school. While we like to think that our college training is imperative to business success, given currently available information there's no way to discern that 80% premium's true cause. It could as easily be greater competition for the 70th percentile and above achievers due to a growing economy as it could be for their actual training. In fact, given that real wages have been stagnant for blue collar workers for some time, it could be rather due to degradation or stagnation in the denominator due to globalization - manufacturing jobs going overseas means lower wages for the middle percentile non-college graduates doing skilled labor. At any rate, we need to start thinking through the impacts of current public policies on education loans. It is likely that current policies play a strong role in the rocketing costs, and they certainly are responsible for a student loan debt situation that is growing increasingly concerning.
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May 18, 2013