This week’s topic: college loans.
AB: The increasing interest rates will have an impact on the economy because, for example, less people will be able to take low-paying teaching positions, and more people will have to wait before purchasing a home. The cost has far outpaced inflation.
JN: It’s not that big a deal. Sure, it delays home-buying, but some studies show home ownership is not necessarily good for the economy anyway. In regards to teachers, the market will fix it. Increasing your human capital has a cost, but it also has a great benefit.
CW: Federal subsidized loans are a disaster. It should be left exclusively to the market. If interest rated go up… whatever.
Bryan W: Salaries are regulated by teacher associations, so it’s not that the salary will adjust up but rather the quality of teacher will adjust down.
MM: Loans don’t mean less teachers. We could pay them more. Subsidizing loans is the easiest way to interfere with education. A large argument for is that student loans miss a market becayse students have no credit history.
DG: Student loans are generally a bad idea. Investments come with risk. There’s no guarantee you’ll get a high-paying job. There are alternatives (ie. merit scholarships). I have no sympathy.
AT: Lower-quality education means people stay in school longer. The first and second years of college are just like HS. It’s repetitive. Loans allow too many people to go to school. Licensing regulations are also a problem. The demand for education has been artificially driven up. The belief that college solves everything is also problematic.
VR: Education has numerous benefits/positive externalities. [Ruckus.] It decreases divorce rates, leads to better health, etc. This country is committed to K-12 education - isn’t the upper limit arbitrary? Why not higher?
BL doesn’t want to be accused of having a cow (which he would have been, with pleasure): I have no sympathy. A person with a BA makes $1m more over a lifetime. As much as $100k in costs is a reasonable investment. You will make your money back.
FB to Alan: College is repetitive because K-12 is broken. We could lower the number of required credits for a BA. If only the K-12 system worked without a full-time commitment from parents (which fewer and fewer students have). You can use loans to invest on the stock market, why not in your education? Not everyone comes from a family making $100k+ a year like most UF students do. Maybe the cost of education is going up because the quality is too. Average students don’t get scholarships. Also, debt can build your credit score. There are benefits to student loans.
CW: I don’t believe in invisible “externalities.” Vouchers deal with school choice. Why should I be districted? People say, “shouldn’t everyone get education?” Yes, if they can pay for it. No one denies loans can be a good investment. We just don’t think the government should provide them. People will start needing higher degrees. People used to have to work in college. It was hard but it was possible. K-12 is broken because it’s public! We need to get back to vocational studies.
FB: People should be able to get private loans.
FC temporarily sides with Vake: We can’t always account for externalities from education. The government doesn’t play by the same rules. You can’t go bankrupt. The IRS will hunt you down.
LG: People who complain that interest rates are too high need to read their contracts. They shouldn’t be taking out a loan in the first place. The premium on education is increasing, and not all of us have parents who can help us pay. Loans are necessary.
Nuri: I’ve been looking for private loans. They have higher interest rates and the requirements are demanding. For the public interest, the fovernment should keep providing. Scholarships are exclusionary. Not everybody can get them. It’s not good to leave it up to scholarships.
MM: We’re not arguing that loans are bad/good, just whether the government should subsidize them. Alan said more people going to college deminishes the value of the government’s investment. That remains to be seen. Everyone going to college might increase productivity and output. It could have a positive return.
BW: I’ve never had to deal with loans, but my friends have. Low interest rates are a good thing. It means they don’t have to be paid back so soon.
BL: First of all, I do believe in externalities. I’m ambivalent about the federal government providing loans. It’s hard to repossess the equity bought with the funds. It’s not that bad in terms of cash flow (not like social security or earmarks). They will normally eventually need to be paid back, so it’s not a total loss. I would, though, prefer it to go away.
BW: The problem is with the debt, not the amount of debt.
SS: Every questions comes back to externalities. Even if people will need more education to be equally as productive, we’re still better off. There is instrinsic value in people being educated, as well as non-economic benefits (whether or not we call them externalities).
AT: That the government gets to track down defaulters is fine with me. That offsets the lower interest rates. I’m not a fan of bankruptcy. Also, something that helps one person doesn’t necessarily help everyone (eg. in a stadium: when one person stands, he can see better; when everyone stands, nobody sees better). What will make people more productive is vocational training. The well-rounded education should come in HS. What is taught by colleges matters.
MM: It’s debatable whether people going to college increases productivity, but if it does, there’s more competition and we are all better off.
VR: It’s funny that CW doesn’t believe in “invisible forces” but he does believe in the invisible hand. ["Zing," says CW.] I believe in the right of the government to regulate loan companies.
MM: Can’t the government just provide loans on its own?
VR: Bribery by loan companies has led to the resignation of school administrators.
DG: Scholarships are exclusive. I think that’s a good thing. I might not be opposed to universal merit-based scholarships, where anyone who is good enough gets to go to college. That could work. It rewards achievement.
CW: If we must have a system, it should look like that. Private loans have higher interest rates because government loans crowd out the market. Also, the invisible hand corresponds to people’s preferences. Externalities don’t adapt. SS’s point that education is an end in itself resonates, but I wouldn’t impose it. It should be optional. That’s why I favor vouchers.
BL: I agree that it’s a good thing, but not that government should pay for it.
[MM and SS clarify SS's position: that education can have benefits independent of economic productivity, eg. Friedman's famous example of neighborhood effects.]
FB: This is not a dictatorship. We shouldn’t take money from the farmer to pay for the doctor’s son’s music class.
BW: We should do studies with 50-100 kids and student loans.
CW: Proprietary schools provide vocational education to poor people; they’re not getting student loans.
Nuri to BL: So the government shouldn’t fund education? Who should?
BL: The government shouldn’t fund it at all. We shouldn’t underestimate private charity. In working class London, people were educated.
Nuri: Who will take care of the growing minorities?
BL: That’s a good point. But historically, the government kept minorities from getting educations.
Nuri: The government should ensure they get it.
BL: I would be happy with a voucher system.
Nuri agrees it doesn’t need to be public.
VR: It’s an externality when the consumer doesn’t receive all the benefits or costs.
CW: Asians have more access to education. The government still keeps people from education through affirmative action. We regularly deny opportunities to people based on race. We shouldn’t say people need an education to vote.
SS: I’m not saying people should have to be educated in order to vote. (I doubt Friedman is either.) I thoroughly oppose restricting suffrage based on educational requirements. But people don’t vote. And we’ve seen that the more educated you are, the more likely you are to be politically engaged. So maybe providing education is the cheapest way to reach that ideal. (Or maybe it’s not.)
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I’m not going to make a stink about education being an end in itself. If you want to believe it has “intrinsic value” (I sympathize with it, but don’t agree that it is served by public or compulsory education as determined by elites), then that is your business. But I definitely have to draw the line at the “ideal” of more people participating.
Mainstream media (from CBS to MTV to New York Times) and academia are complicit in the brainwashing of our youth in regards to this. More participation is not an end in itself. It’s a value neutral sort of thing. We don’t want to impose that on people either. In Australia, they decided to mandate it and it doesn’t change anything. It’s up to people themselves to decide whether they want to vote or not, and if they don’t, then they don’t care. Why do I want people who don’t care to vote? While the number of people who vote may increase with education, it is not necessarily BECAUSE of education, and there’s a HUGE amount of “educated” people who don’t vote. Let’s leave it alone.
Also, I actually never said that you said one would have to be educated to vote — and that’s a good thing as far as I’m concerned. I said AT said it (which you said he didn’t, but he confirmed my interpretation after your departure; I have no idea what Friedman said on the subject).
thanks for correcting me. as always, conversation moves fast and i am sure to miss things here and there.
just for the record, i’m not necessarily advocating compulsary education at higher levels. i understand you favor vouchers, and david mentioned a sort of universal system with a merit-based caveat. i don’t believe that’s incompatible with where i stand. i would draw a distinction between “being in school” and “being educated” in order to flesh out your argument that more participation is not an end in itself. more educated people is a good thing. more people in or who have been to college might not be. if someone truly doesn’t want to be there, he probably isn’t gaining anything (in which case clearly neither are we).
Really good and really interesting post. I expect (and other readers maybe :)) new useful posts from you!
Good luck and successes in blogging!
I think there is strong evidence out there suggesting a positive association between education and voter turnout. A simple google search will bring up tons of research suggesting a positive correlation between voter turnout and education (controlling for other variables). There is no question about the correlation between these two factors, however, as with any attempt to describe human behavior through a mathematical model, proving causation is difficult if not impossible in many cases.
Nevertheless, considering that a majority of research points towards a strong correlation between these two variables (and what my gut tells me), I will err on the side of caution and take the side of where most research seems to point.
My view on the correlation however does not mean my endorsement of government enforced “education.” For such a thing wouldn’t be education, it would be indoctrination. It is only consistent with my view that freedom of choice trumps any “social good.”