The Becker-Posner Blog: Student Loans--Posner's Comment

December 03, 2006

Student Loans--Posner's Comment

Generally, it is more efficient both socially and privately for the consumer, in this case the student, to pay the full cost of the goods and services that he buys than for the government to pick up any part of the tab. A student admitted to an elite college like Harvard and Yale has high expected lifetime earnings, and it seems absurd that the federal taxpayer should be required to defray a part of the cost of his education. This is not a point about distributive justice, for nowadays most federal income tax is paid by high-income individuals. It is a point about the inefficiency of using the federal tax and spending power to subsidize purchases by affluent (as measured by expected earnings over the recipient's lifetime) consumers. The inefficiency lies not only in the transaction costs associated with the subsidy (including lobbying expenses), but also and more importantly in distorting the allocation of resources. Suppose that for some marginal student the expected return from a college education, net of tuition and opportunity cost (the forgone income from working if the student attends college instead), is negative, but turns positive if his tuition expense is subsidized; then the subsidy is inducing a waste of resources.

This would be obvious if the subsidy were for a course in automobile repair, but maybe there is something special about college or university education that distinguishes it from other services, including other educational services. There are two arguments. One is that higher education (lower also, presumably) confers social benefits (that is, benefits not captured by the student), whether by making people more informed voters, or by making them more productive workers (assuming they cannot capture their entire contribution to social output in their wage), or by reducing subsidized health costs by increasing health (Becker notes that educated people are healthier than uneducated people).

This is not a good argument for a subsidy because it does not appear that many persons who would benefit from a college education fail to obtain one. As Becker points out, the private returns (higher earnings) from a college degree are very great and a student can borrow to finance the tuition and other costs of the degree. It seems unlikely, though it is not impossible, that kids who would not personally benefit from college nevertheless would, if paid to go to college, confer the social benefits of a college education that the students who do benefit personally might be thought to confer.

But the points I have made so far really argue just against increasing the existing subsidies for college education, rather than against any subsidies. College education is already heavily subsidized, notably in the case of state and city colleges, where the taxpayer picks up a big share of the cost; but private colleges receive various tax breaks, so they are subsidized too. (I would not call alumni donations "subsidies," however, since they are voluntary and give value to the donor.) Since a worker usually cannot recapture in his earnings the full effect of his labor on output (because he produces some consumer as well as producer surplus), and college increases the productivity of those students who are intelligent enough to benefit from a college education, there is an argument for making college affordable by any qualified applicant. However, it is unclear to me whether this requires any subsidies; all that is required is that the boost in expected earnings from attending college exceed the cost of the loans, or other costs, that the student must incur for college to be a rumerative choice. For then the student will be motivated to attend college even though his doing so will produce social as well as private benefits. All that is important from the motivational standpoint is that the private benefits exceed the private costs.

The second argument for subsidizing higher education is that its high cost nowadays, which for students who must borrow to pay tuition and living expenses forces them to go into debt, deflects students from nonremunerative jobs, such as (in the case of debt-written law students) public interest legal practice, or public school teaching, that (especially teaching) may confer substantial social benefits. (I doubt that public interest law practice does.) The students have too much debt to be able to pay it off without taking a high-paying job. However, a student loan subsidy is a clumsy device for channeling students into employment that is underpaid from a social standpoint, since every student gets the subsidy but only a handful are induced by it to enter the desired channel. It would be more efficient to raise the pay for the jobs that are thought to confer social benefits. A loan-forgiveness program, where forgiveness is conditioned on taking one of the favored jobs, is better tailored to the end of encouraging students to take such jobs than a loan subsidy; it operates to raise the full income of the job.

To repeat an earlier point, which tends to be neglected in discussions of the student-loan issue, if I am right that very few persons who could benefit from a college education are deterred by its cost, the main effect of increasing the subsidy will be to attract applicants who would not benefit if they weren't being "paid" to attend college. That would be a misallocation of resources.

I conclude that the case--for which I gather there will be support in the new Congress--for increasing the student-loan subsidy by having the federal government subsidize a larger part of the interest on the loan is a weak one.

Posted by Richard Posner at 09:42 PM | Comments (35) | TrackBack (0)

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Comments

Bravo.

I kno you won't go as far as I would in believing that the higher education Emperor is butt nekkid (at least when we aren't speaking of technical and scientific study), but your points on subsidies are well-taken.
Why tax my gardener so that my daughter can spend more money on a college that will probably raise tuition anyway in response to subsidies? Why subsidize institutions whose denizens are increasingly inclined to subvert the values that keep our society together?

Of course, I might just -school.html">send her to trucking school, anyway.

Posted by Grumpy Old Man at December 3, 2006 10:44 PM | direct link

The link in the last comment got munched.

Here it is again:

Trucking school.

Posted by Grumpy Old Man at December 3, 2006 10:46 PM | direct link

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Posted by igoldc at December 4, 2006 04:00 AM | direct link

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Posted by Jack at December 4, 2006 06:11 AM | direct link

Another consequence of subsidizing student loans is that it can shift the market for higher education by providing institutions the ability to fill their seats with the same talent-level of students at a higher price then they would otherwise be able to charge. A lot of students in non-technical fields complain that tuition is rising faster than inflation and professors' salaries without any perceivable change in their programs. With student loan subsidies widely available, Colleges, especially public ones, have less of a incentive to control costs than otherwise.

It's also worth asking why the real cost of higher education has inflated so rapidly over the last 25 years. New technology and infrastructure costs can be substantial (and so can those sports programs), but some courses of study make more use of expensive inputs than others. Student are often charged similar tuitions, but compare the costs of a program in English literature to a program in high-energy Physics. Why should it cost twice as much in real terms to read Chaucer or learn non-computation-intensive Mathematics, or study the German language as the near identical activity cost a short while ago?

Posted by Lawrence Indyk, University of Kansas School of Law at December 4, 2006 07:52 AM | direct link

I'm pretty shocked at all the anti-education subsidy people on here. If ever there was a good that conferred vast amounts of positive externalities, it is education.

Posner says, "This is not a good argument for a subsidy because it does not appear that many persons who would benefit from a college education fail to obtain one. As Becker points out, the private returns (higher earnings) from a college degree are very great and a student can borrow to finance the tuition and other costs of the degree. It seems unlikely, though it is not impossible, that kids who would not personally benefit from college nevertheless would, if paid to go to college, confer the social benefits of a college education that the students who do benefit personally might be thought to confer."

What is the source on the first point? How would you even begin to know this. Besides, this seems like a circular argument because it completely ignores the risk-reducing benefit of government intervention. Posner's argument seems to be: all the kids that can personally benefit from education are the ones already going to college. Those not going to college have decided they won't personally benefit and if they were given money to go, they wouldn't confer social benefit anyway.

... Doesn't that completely ignore the whole point of the subsidy? The subsidy is to make the marginal group of people - those who are CLOSE to benefitting, benefit from subsidized money to defray part of their cost and 30 years worth of interest on that cost. This defrays quite a bit of the risk involved with that investment too. So, at the margin, those kids that may not have thought it beneficial to go to college, may. with a subsidy, think it quite beneficial.

Posner's second point says that well, even if kids who get no benefit go, they won't convey the same social benefits as those already going (the unsubsidized benefiters). But that is an odd argument too because it, again, says that these marginal kids won't personally benefit - but of course they will (or they think they will) otherwise why would they go in the first place. But let's just assume they wouldn't benefit personally. There are social benefits that a college education provides that goes beyond that person that ANYONE that goes to college likely would pass on. Chief amongst these is the idea of generational benefits. I go to college. maybe it ends up not being very fruitful for me financially on average, but I now have 4 years of advanced culture, intelligence, and world appreciation, political involvement, etc that I can depart onto my children - something I can impart that I didn't have in my formative years. This environment might then foster an even greater upbringing for my child than I had - making the potential returns even greater for them, and so on and so on through the generations.

It is well documented the benefits of higher education is more than just a good future income: better health, more cultured and intelligent environment for children - which then imparts a higher probability that that child will go to college, and so on. The chances of an individual recognizing and accounting for those public benefits is small indeed, so why not subsidize it.

Posted by Garth at December 4, 2006 08:22 AM | direct link

A student loan gives a student the benefit of funds in return for not having to expend the time to presently earn them, i.e., it is a grant of time more than money precisely when the student is in need of both. This is so attractive an opportunity that most--if not all--who wish to attend college do so irrespective of their finanacial circumstances. But having taxpayers fund greater amounts of money for student loans creates more of a false incentive whereby young people artifically extend adolescence into their early twenties (and later, should they enter a graduate or profesisonal school) pursuing a credential rather than entering the workforce and gaining experience. Isn't this a factor that should be considered viz. increasing taxpayer subsidized student loans?

Posted by robert at December 4, 2006 08:43 AM | direct link

I think that college tuition should be at least partially tax deductible. By creating a progressive percentage system where families with lower incomes can have more of their college tuiton deducted, I think Congress can create a very effective system. Although I agree than loans are not a tremendous burden, I think their effects cannot be overlooked. We live a country today that has seen immigration skyrocket, with an increasing supply of low skilled labor. As globalization takes root, and America sees a shift up in the deman for high skilled labor, I feel that it is necessary that Congress adjust its college education policy. America has been stubborn in not allowing high skilled foreign labor to enter the domestic market; the least Congress can do is provide an incentive to develop high skilled engineers and software designers here. There are many immigrant families that fall into a position where they have to choose between taking on a home mortgage or sending their children to college. It is simply financially unwise to take on both. If Congress can provide these middle class immigrants with an incentive to both educate their children and integrate themselves into American society by purchasing a home, I feel that the social benefits will tremendously outweigh the social costs.

Posted by Dmitri at December 4, 2006 12:17 PM | direct link

The problem with widely available student loans is, as mentioned above, that they allow institutions to raise tuition beyond what they could charge in absence of such loans. Essentially, government-guaranteed or interest-capped loans increase a student's ability to pay and thus willingness to pay, and the schools simply respond by raising their prices to capture more of the consumer surplus.
Higher education certainly does confer externalities and it should be made possible for qualified students to get such education. But financing reform must include provisions that create incentives for colleges to keep costs and prices down, rather than to simply absorb any new aid that is made available.

Posted by Haris at December 4, 2006 01:20 PM | direct link

Both Dr. Becker and Dr. Posner are both academic professors, so their conclusions may be colored with self interested. Just briefly...

That college degrees are financially valuable is perpetuated by the notion that college graduates will be valued by employers. The fact is that they are not.(exceptions include specialized and licensed degrees like law and medicine). Most employers look for experience, not grades, precisely because academic environments and their requirements for success rarely mirror corporate or entrepreneurial environments. Also, with the ease of access to the internet, and the flourishing of libraries and book stores (there is a Barnes and Noble book store on every street corner) and the relative democratization of information, formal education has become irrelevant.

Since the economic value of formal education has substantially decreased, while the costs have enormously increased,(due to deceptive marketing, the proliferation of for-profit universities, and an academic culture which values abstraction over practicality) it would be more reasonable to make colleges more selective, or make loans harder to come by, thereby removing the tax burden from society. This would also force schools to be more competitive and realistic, and pressure schools to get rid of gut courses, lunatic professors, and a tenure program which encourages complacency and pedantry.

Posted by Jason Stalos at December 4, 2006 01:45 PM | direct link

Garth:

You make the claim that education generates "vast amounts of positive externalities". Then, you don't support it.

Even your ending examples of generational benefits are internal - a person only passes these benefits on to his children.

Your entire argument hinges on the assumption that a college education generates significant positive externalities. This seems to be suspect, especially since (in the conversations I have had with professors) there is significant concern about the death of the liberal arts education (in the traditional sense). This is especially evident in the rapid growth of pure technical colleges such as the University of Phoenix.

Posted by nordsieck at December 4, 2006 01:56 PM | direct link

I wonder at the assumption that college costs are so insignificant (after accounting for loans) that everyone who might benefit from college goes. As I remember, only a 4th of the relevant population (i.e. those older than 25) hold bachelor's degrees. I am not at all comfortable with saying that that 4th, and only that 4th, are exactly the ones who were "intelligent" enough to benefit from college degrees especially considering that education is so strongly correlated with parent's education.
I also wonder about the distribution of types of education among those who receive nominally equal education. Are engineering degrees from MIT and Southwest Missouri State really equivalent in terms of increased life-time income? If not, as I suspect, are the pre-existing difference between those who attend MIT and Southwest Missouri State ones of raw ability, which would justify different income, or of socioeconomic class, which would have the effect of rewarding students for having the good sense to be born to wealthy families. My intuition is that there is a bit of both effects. I wonder further think that selection by ability, not family wealth or influence, has improved in the last 50 or so years but is by no means perfect. I wonder if anyone has done work on this, whether it is possible to determine why students attend community college instead of the University of Chicago.
I also wonder if Professor Posner can expound on his comment that public interest lawyers have no beneficial effects for society. If the market has determined that a competent criminal defense lawyer costs $500 an hour and a lawyer working for legal aid can provide competent defense while making the equivalent of $25 per hour, someone is accruing a whole lot of surplus. If that someone is a defendant who is morally/factually innocent, I would not hesitate to label that consumer surplus a benefit to society.

Posted by Ben at December 4, 2006 04:29 PM | direct link

I have never understood why free education through 12th grade is good but any thing past 12th grade should be paid for by students. What is special about 12 years of schooling? Foregoing income from work and working at school enough to get acceptable grades shows that a student values education. Maybe a better policy would be to spend less on students over 16 who will not study and more on those over 18 who will.

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Posted by ajashi at December 4, 2006 08:20 PM | direct link

Suppose that for some marginal student the expected return from a college education, net of tuition and opportunity cost (the forgone income from working if the student attends college instead), is negative, but turns positive if his tuition expense is subsidized; then the subsidy is inducing a waste of resources.

OK then. If you want to look at education purely as an investment yielding certain returns, perhapswe should be talking about taxing those returns the same way we tax other investment returns, like capital gains and dividends. That will make it much easier to repay loans.

Posted by Bernard Yomtov at December 4, 2006 08:47 PM | direct link

Whew! Some great posts on higher education!

As another poster, I've long thought that in the ideal world that carpenters, meat packers and egineers would have their lives and that of our society enriched by a beginning with a good liberal arts education. Long ago that seemed the message of educators as well but one that has switched to all education being some form of "voc tech" with the engineers and other specialties joining the "non-college" in being weak in liberal arts, most likely to the detriment of our entire society.

Posner and Becker seem to get hung up with too great a concern that each bit of cost get correctly assigned to the individual beneficiary. As one poster pointed out a "philosophy" that changes instantly as a student leaves the universal, free, public education that our nation committed to long ago and with great benefits to us all. There is also evidence of that "right wing??" fear that some tidbit of resource "might" be wasted on an undeserving student.

I'd ask if there is another philosophical compromise to be made here as all seem to agree that the hurdles facing the HS graduate prevent some number of them from continuning in school. Now that we've "signed on" to at least, selected elements of "global competition" (Big pharma, oil and a few others exemted of course) and gotten ourselves a $750 billion trade deficit it's about time we get together and decide what the US role is going to be in the world. For example are we educating so few engineers today an indication that we've ceded that and many other professional occupations to India, China and the rest of the world?

Without even getting down to the surviving career level, it's clear that our average educational level is not higher than that of many other competing nations. Also, it appears the "new economy" requires 75% college or high-tech employees while we're still graduating 25% college, and nearly as many who are HS drop-outs. I'd say this is an issue of national security worthy of being considered by the entire tribe and admit I'm not sure what how we should respond either but have a few suggestions:

One, is that our average HS level of achievement appears to be drawn down by the failures of our "inner city" schools, which for "some" reason remain so underfunded compared to the schools of the "nice" areas that nearly every state is engaged in lawsuits to provide both EQUITY and EQUALITY in those areas, or as TX, NY, MO, and a host of others, have already lost in court and their education systems are operated under court mandates to end their long history of prejudicially inequitable funding. A seeming result is that of locking up "criminals" at a rate nearly 10 times that of our more civilized neighbors and the literacy rate of those two million is said to be 25%. Not much "social good" taking place here.

And as one poster asked: What is the "magic" of K-12? Is that still the right number today? Having just guided an "advanced placement" student through school it seems they are stuffing about all they can into even the best of them in the time they have, with too much homework pressure, and still they're short of what they need to function in today's society.

A while back in a "poorer" era, government had enough money for elementary education plus paying for the draft and military service of quite a number of our youth, and even today, most credit the GI bill with returning to governmment and all concerned much more than the program cost.

So, at great risk of being called a socialist or "central planner" here (a term most likely not accorded to Horace Mann when compulsory universal education was implemented) should we zoom out and take a look at how we might come closer to supplying the number of college grads and high tech people our economy requires and set our sails to suit? Or just wring our hands over "the costs" and "who will pay them" and muddle through hoping for the best? What are the costs of having far too many competing for the few roofer jobs or huddled down there at the min wage level?

Here in Alaska (and in at least one other state) we've a program for the top ten percent of each HS grad class to have books and tuition fully paid at UAA and, personally I'd take a look at continuing free or at very low cost, public education for the first two years of college. Perhaps many students would do better going off to the "bigs" as something like a junior at age 20 than as freshmen at 18. I say, "something like a junior" as even colleges are having a tough time getting the job done in just 4 years and most rigorous disciplines take 5 years or more.

A last word on (economic) "benefit to those who don't go to college" I'd ask if a non-college employee hired by a college grad in the "new economy" is likely to do better than one working in the traditionally non-college areas of our dying industry and those being exported to lower cost venues?

Jack

Posted by Jack at December 4, 2006 10:33 PM | direct link

Whew! Some great posts on higher education!

Jack

Posted by Jack at December 4, 2006 10:34 PM | direct link

Judge P,

College doesn’t have the payoff it once did. Graduate school today is what college was thirty years ago. We fully subsidize high school education and college has basically replaced high school in terms of value. Today, job market selection takes place by the Masters/JD/PhD criteria.

Our standards have changed. Why shouldn’t we treat college today like four/five more years of high school?

Posted by Chairman Mao at December 4, 2006 11:58 PM | direct link

Some quick comments:

Posner said:
"may confer substantial social benefits. (I doubt that public interest law practice does.)"

Look really hard at the computer screen, perhaps in the fuzzy static you can make out the faint image of me, and everyone else who ever voted for Ralph Nader, flipping you the bird. If an Article III judge gets to make snide comments like that then I say I get to respond in kind.

One comment mentioned that the price of tuition is closely tied to loan rates. This is of course true. Another fact, unlikely to be noticed here on a blog full of free-marketers, is that all three branches of the government have significantly changed the regulatory climate for student lending over the last few decades and especially the last few years:

Witness, changes to the bankruptcy laws to make student loans exempt from discharge.

Witness, the 2005 Bankruptcy Reform Act, further restricting discharge in ways that will cover all other borrowing, including for school.

Witness, the Supreme Court's 2005 ruling in Lockhart v. United States: Held: The United States may offset Social Security benefits to collect a student loan debt that has been outstanding for over 10 years.

Sallie Mae gets backstopped by the federal government every way possible. Including now special permission to garnish the previously ungarnishable Social Security. These are lobbied for and gleefully granted corporate subsidies.

If no one can default, Sallie Mae can loan you more. If Sallie Mae can loan you more, tuition goes up. When I graduated from engineering school in 1997, I had $15K in loans on a ten year term. When I graduate from law school this year, I will have $100K on a 30 year term. Instead of buying a home, I pay Sallie Mae.

And meanwhile, Posner and y'all go on about efficient consumption of educational units. Which by the way is a public good. And on this comment:

"You make the claim that education generates "vast amounts of positive externalities". Then, you don't support it."

That's funny. That claim was supported just as much as Posner's claim that educational externalities are small. Do you see how he tricked you? He mentioned a few externalities, then you assumed a smart guy like that had thought of them all. But that's OK, because even this blog is an externality of higher education, an exhaustive list would take all day.

In the end I concur in the judgment here that loan interest subsidies are bad. But on an entirely different rationale. Without price controls on tuition and with Sallie Mae's ability to extend repayment even into retirement, lower interest rates will just mean more borrowing, leading to higher tuition, leading to the Bankruptcy Reform Amendment of 2009 that makes Sallie Mae the executor of all wills of anyone who ever went to college.

Well I have exams this week. I'll do my best for Aunt Sallie

Posted by Corey at December 5, 2006 12:34 AM | direct link

Quick note before I, too, return to exams. Education, while it does bring many positive externalities, is not a public good. A public good is clearly defined as a non-rivalrous, non-exclusionary product or service. Education, especially college admission spots, are rivalrous: if I get one, that means there's one less for you. It is also exclusionary: it doesn't cost much in time or effort to exclude those who weren't admitted or didn't pay their tuition: just don't give them grades or a diploma or a dorm room.

Btw, price controls on tuition would just lower quality of education. And dorm rooms. But mostly education.

Posted by Haris at December 5, 2006 03:09 AM | direct link

Haris; it looks as though you're studying econ and you spurred me to look up "public good" and find it an econ term perhaps first used by our old friend P. Samuelson who also said something to the effect of "not caring what the nation's laws were as long as he could design the economic laws."

Corey, our legal advisor appears to be using the public good as I would, as the sum of those two words pointing up the benefit to all from the actions of one, or the benefits to all from the actions of all or many.

Since we are discussing student loan burdens and the cost of college and in light of Samuelson's "design of the economic laws" we may as well get to the "cost relative to what" part of the statement. That is, as Posner claims, in some fields the cost benefit ratio is high; easy for a surgeon to pay off his loans, harder for a gen practitioner, and much harder yet for a saintly young teacher committed to returning to the barrio.

So it's not just the, absolute, cost of college and interest rates at issue but that of our rapidly growing income and wealth gap which makes these costs stick out like huge rocks at low tide for some and hardly be a problem at all for others. Thus....! here we are again, bumping into the question of transfer payments and "subsidies" to make it possible for, shall we say enough of our youth to go to college to give us a snowball's chance to compete in the global village and take care of our own affairs?

FWIW my guess is that college costs and even teaching K-12 and, for that matter, lawyering, will outpace inflation as they do not benefit from mass production or being done in low cost venues as are most of the things that "hold down inflation", and if energy costs double the same rooms still must be heated and cooled etc.

I'd like to complain about high salaries but most often end up thinking that most teachers and profs could do as well or much better in the business sector and that I should save my salary whining for pointing out that the compensation of one insurance co. CEO would pay the salaries of a whole dept in most colleges and that paying insurance premiums these days is a lot more onerous than a student loan.

Posted by Jack at December 5, 2006 05:57 AM | direct link

someone said that "You make the claim that education generates "vast amounts of positive externalities". Then, you don't support it."

Of course I supported it. Besides health benefits that might not be internalized, the intergenerational benefits are also not necessarily internalized when the decision to school or not is made. Just because they are your kin does not make something an "internal" benefit. Education is correlated with a whole host of postive aspects such as political involvement, societal health, culture, in addition to exponential future productivity due to the increased human capital and 'knowlege' over the generations.

And while I agree that colleges may likely raise tuitions rates, it should be noted that those increased rates would effect EVERYONE. The subsidy would help those at the margin who likely would not go at all otherwise. So while it might cause the average collegegoer to pay a little more, this can be more than offset but increasing the pool that go in general, especially when taking into account the future benefits not only to themselves but to their kin and society and general which they might not even have an inkling about at the time of the decision.

Posted by garth at December 5, 2006 12:06 PM | direct link

For your consideration:

http://www.csae.ox.ac.uk/workingpapers/pdfs/20-15text.pdf

Posted by Garth at December 5, 2006 12:10 PM | direct link

Being in academic science, I imagine a future where, in the next few hundred years, humanity will transfer its consciousness to a giant computer in space. The collective consciousness of humanity will then devote itself to trying to understand the universe in sufficient detail to know whether humanity's existence has any purpose.

With this future, it seems rather natural that society would, through government funding, support academic pursuits (particularly scientific research) at a high level. This high level of support could easily include government funding of education beyond high school.

It is, of course, entirely possible that there is no purpose to humanity's existence. In this case, a purpose could be chosen arbitrarily. One could, for example, decide that the ethnic distribution across the planet was of supreme importance. One could engage in killing and destruction in order to achieve an outcome where some ethnic group or other predominated in some part of the world or other.

One could also just engage in killing and destruction for for its own sake - because choosing an arbitrary goal and then killing and destroying to achieve that goal gives purpose to an otherwise meaningless existence.

That seems to be the case currently. The USA spends much more on killing and destroying than it does on scientific research. The conflict in the Middle East is much more interesting to the American public than scientific progress. It is much more distressing to most Americans that they might be promoting college education than that they are promoting killing and destruction in Middle East.

Posted by Wes at December 5, 2006 12:10 PM | direct link

Judge,

(It appears a spam-bot named ajashi has circumvented your defense mechanisms. Time to ratchet up the protections).

Solid posts all. While many of you (who are quite well-educated) focus on the taxpayer-burden issue in arguing against further assistance to students in their borrowing and repayment of educational loans over time, and do so quite logically, Corey cogently exposes the reality: schools are ratcheting up tuition as Congress and the Courts increasingly protect Sallie Mae from student loan default. Combine that with the other painful reality for students, which Chairman Mao points out:

"Graduate school today is what college was thirty years ago. We fully subsidize high school education and college has basically replaced high school in terms of value. Today, job market selection takes place by the Masters/JD/PhD criteria."

Finally, we have the unavoidable correlation- statistically documented by Becker- between education and income over time.

Taken all together, we have a situation where people have to pursue higher education if they want to make decent money, but whose bachelor's degrees are all but useless in the current hiring environment, but who MUST pay the increasing cost of borrowing and higher tuition that the universities and lenders- who are fully aware of the hiring environment and the legal protections- gleefully impose.

So that's the crunch we're facing. Now, have earnings from higher education kept pace with the increases in tuition? That's the question that I need to see answered. It seems safe to say that college graduates make more money than non-college grads. But that's not the problem- the issue is whether or not earnings from education are outpacing the cost of obtaining education, especially in light of how hard it is to find the top, high-paying jobs that are often cited (law, finance and medicine).

Finally (addressing the circularity of relying on an assessment of the taxpayer burden as a reason against further student loan subsidization), it needs to be re-noted b/c I'm not the first person in this discussion to say it that the taxpayers who pay the lion's share of tax are the high-wage earners, the college-educated professionals. If they have more than 100k in grad school debt, they're probably in the 28-33% bracket. This tax break is for them, the ones who, now working like dogs paying back public and private loans at 10.5%, are wondering why they ever got their fancy education in the first place.

Posted by hypocriticist at December 5, 2006 03:40 PM | direct link

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