Credit Supply and the Rise in College Tuition

The Review of Financial Studies ^ | June 21, 2018 | David O Lucca, Taylor Nadauld, and Karen Shen

[reaganaut1]

Abstract We study the link between the student credit expansion of the past 15 years and the contemporaneous rise in college tuition. To disentangle simultaneity issues, we analyze the effects of increases in federal student loan caps using detailed student-level financial data. We find a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar and of about 20 cents on the dollar for unsubsidized federal loans. The effect is most pronounced for more expensive degrees and degrees offered by for-profit and 2-year institutions.

[reaganaut1]

The more government subsidizes something, the more expensive it becomes.

[E. Pluribus Unum]

Giving 18-year olds an open line of credit to hand over to college perfessers is a recipe for financial ruin.

[EEGator]

If I could go back in time, I would go to a technical high school and be a lineman right after high school.

[Jim Robinson]

Corrupt to the hilt!

[SamAdams76]

If I could go back in time, I would go to a technical high school and be a lineman right after high school.

I went to a technical school (after serving a 4-year hitch in military) instead of college. Result was I had zero college debt at age 22 and took me less than 10 years to get to a six figure income. Never looked back.

I had my sons follow pretty much the same path. Neither of them had any college debt to contend with and they have good careers in the high tech field.

[EEGator]

After a regular HS, I worked crappy jobs for about 7 years. After that, I went to the USAF, then college. I’m in a good spot now, but it certainly wasn’t the wisest path.

[Maine Mariner]

One of my students joined the Maine National Guard. He had attended college for a year. He did well in high school and has a solid work ethic. He received a signing bonus and the Guard will pay for his tuition. After basic training he went to truck driving school. He should be able to leave school debt free and both an academic degree and a practical skill.

[GnuThere]

It used to build character to be a college student getting by on a shoestring budget and (hopefully) learning a bit about how to manage money. Now they don’t just get loans for the basics, they live in the luxury student apartments that have sprung up and try to assume their parents’ standard of living right off the bat.
I, too, wish I’d taken the technical/trade route.

[montag813]

I had my sons follow pretty much the same path. Neither of them had any college debt to contend with and they have good careers in the high tech field.

Programming? Or hardware? Looking for advice for my 17 year old (Senior) son

[max americana]

Never asked not one time for money from my parents for university. I had some really “odd” jobs like disc jockey for a strip club 3 nights a week (best job ever :) and driver for an escort service etc to pay for tuition. Pretty simple: you have no money, you create it.

And where did I get this advice?

The Art of the Deal by Donald Trump. I read that book in freshman year at Stanford alongside Warren Buffett’s how to get rich books..

Today’s generation are a bunch of p*ssies

[rlmorel]

I was lucky, I did a four year hitch in the Navy, and was one of the last people in under the “old” GI Bill...

I got enough to pay for my tuition to a state college, and I was able to live at home and commute to school and only had to work to pay for books, gas, and living expenses. Got a job after graduating, no debt.

[SamAdams76]

One is more hardware (medical equipment that allows doctors to remote in while the patient is at home) and the other son is involved with programming software for a large supermarket chain that improves efficiency with SKUs with regard to replenishing stocks and re-routing overstocks to minimize wastage.

Both the medical and supermarket industries are recession proof. Everybody needs to eat and everybody needs health care.

[Fungi]

True. But a mere question concerning authorship. I am seeing more and more articles with multiple authors. Why? It is especially prevalent at the Washington Compost, but also at other leftist publications. Why does it take more than one person to write an article? Are they covering their butts? Are they following rules? Why? My take is validity; the publication is trying to make it appear the article, with more than one author, is sound, well "researched," respectable, authoritative, and "true." Nonsense.

[goodnesswins]

Well...my first thought is cause journalists have half a brain....sorry couldn’t resist

[Karl Spooner]

They are involved with slavery. How else could a publication like the lowly Washington Post pay multiple workers for the same amount of work of one?

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[Getready]

Lived in a ex chauffeurs sitting room and did 1 hour of gardening per day for my rent. Included water and electricity. Was on 7 acre estate but I had no money and was going to one of top public universities. Worked at very odd jobs during school career

Agree...today’s students are stupid as h**l when it comes to spending money. Pretty much.pampered incompetents who cannot shape an argument or process new contradictory information.Future marijuana and alcohol and nicotine slaves.

[max americana]

That’s why the Deep State pushed for legalization of marijuana to keep the population stupid and easy to control, plus you must be noticing how they made us tolerate faggots and freaks to soften us up.

[imardmd1]

Giving 18-year olds an open line of credit to hand over to college perfessers is a recipe for financial ruin.

You don't understand. The money does not go to the professor teachers. The high tuition goes to multiplying the numbr and salaries of non-teaching administrators. In fact, your undergraduates rarely see experienced teachers. Their lessons are taught and reviewed by graduate students, not famous name staff.

The availability of credit has at the same time diminished the quality of learning through the dilution of the quality of both faculty and undergraduates. Most of the people going to college today could never, ever, have passed the entrance examinations of my day, the mid 1950s, when there was no such thing as government-backed loans.

The year I entered Syracuse University the tuition was $700 per year, and the entire student body was (IIRC) less than 2,500, both undergraduate and graduate.

In the years following the initiation of state- or federal-backed student loans, the greed of the university administrators led to such an explosion of now-debtor students that the demand for instructors far outran the ability of the college systems to supply qualified teachers, and the system has never caught up.

[cpdiii]

I obtained degrees in geology and pharmacy. I was able to get these degrees due to working at menial and professional work. I paid for my education. This can not be done today.

The costs of university education today is obscene. The reason for this is even more obscene federal largess in the form of student loans. The Universities have no reason to control the cost of education so long as federal loans cover their expenses for the student.

The student that graduates not in the hard sciences has a massive debt and a worthless degree that will not give him a job that can repay his loans. Those in the hard sciences will be able to pay over many years. The only reason those can repay is the have a valuable skill which they paid for many times over as compared to what education should cost.

Circa 1966 the administration building was 1/4 of the chemistry building. That was when I was in Geology. Circa 1985 when I graduated in Pharmacy after a few years in the oil fields the administration building was a three story complex much greater than in the past. About six times greater. The student population went from 7000 thousand to 11000 in those years. The administration building and staff increased for in excess of student population.

This is a total function of insane government loans to students that follow degrees of no financial worth.

[imardmd1]

Actually, you've hit the nail on the head. By limiting the number of really intelligent people to receive academic training, many are turned back into the hourly wage-roll class, where smart, trainable workers are really needed. It is those capable workers that our substructure trades need to be built on, many of whom would shine there, but be only average or sub-desirable performers in positions truly needing longer and deeper quality degreed academic training.

But now that the value and quality of a bachelor's degree is no longer distinctive, where are we? We have under-performers populating bot the wage-roll and salaried classes, who will scream bloody murder if they aren't promoted when they shouldn't be.