Join 3,556 readers in helping fund MetaFilter (Hide)


preventing people from accumulating useful skills
June 14, 2012 2:45 PM   Subscribe

An op-ed in today's New York Times promotes replacing public loans for university students with private equity contracts, wherein funding firms would receive a percentage of graduates' earnings.

The author, Luigi Zingales (c.v.), is the Robert McCormack Professor of Entrepreneurship and Finance at the University of Chicago (academia being, according to his op-ed, "the least competitive and most subsidized industry of all").

He previously (pdf) proposed a similar scheme for solving the crisis in the housing market, offering renegotiated mortgages to homeowners in exchange for signing a stake in future appreciation to the lender.

The Chronicle has a brief rebuttal, calling Zingales' idea "indentured servitude" -- a charge he preemptively dismisses in the op-ed: "This is not a modern form of indentured servitude, but a voluntary form of taxation".

The introduction to a recent book argues that winning hearts and minds is the biggest challenge facing modern capitalism:
Capitalism, or more precisely, the free market system, is the most effective way to
organize production and distribution that human beings have found. While free markets,
particularly free financial markets, fatten peoples’ wallets, they have made surprisingly
little inroads into their hearts and minds. Financial markets are among the most highly
criticized and least understood parts of the capitalist system. The behavior of those
involved in recent scandals like the collapse of Enron only solidifies the public
conviction that these markets are simply tools for the rich to get richer at the expense of
the general public. Yet, as we argue, healthy and competitive financial markets are an
extraordinarily effective tool in spreading opportunity and fighting poverty. Because of
their role in financing new ideas, financial markets keep alive the process of “creative
destruction” – whereby old ideas and organizations are constantly challenged and
replaced by new, better, ones. Without vibrant, innovative financial markets, economies
would invariably ossify and decline.
posted by junco (262 comments total) 18 users marked this as a favorite

 
Well, I'm sure this can't possibly go wrong.
posted by emjaybee at 2:47 PM on June 14, 2012 [20 favorites]


Garnished wages? Sounds awesome! Where do I sign up?
posted by mcstayinskool at 2:50 PM on June 14, 2012 [10 favorites]


Ha, I was just coming in to comment THIS DOESN'T SOUND LIKE INDENTURED SERVITUDE AT ALL and then I read below the fold.

In reality, I'm not sure how much of a difference it would make, since every my age that I know is already a slave in a low-income job unable to move, innovate or pursue other options due to the dead weight of student loans.
posted by WidgetAlley at 2:50 PM on June 14, 2012 [12 favorites]


...I owe my soul to the company store.
posted by Thorzdad at 2:52 PM on June 14, 2012 [23 favorites]


The Internal Revenue Service could perform collection services on behalf of private lenders, and at no cost to taxpayers.

Because the Federal Government exists to extract wealth from the disadvantaged adn give it to the rich?

Sorry, Prof. Zingales, we aren't quite living in your fantasy land yet....
posted by GenjiandProust at 2:53 PM on June 14, 2012 [14 favorites]


I'm going to say this, since apparently it's not being realized.

If the middle class can't accumulate wealth -- not a lot, but some -- you don't keep your middle class. And the cost of running a society without a middle class is high enough that, in retrospect, you should have paid for one.
posted by effugas at 2:54 PM on June 14, 2012 [65 favorites]


I'm absolutely certain that garnishing all future wages from those whose families can't afford college is a splendid idea.

Also, I am a 17th Century English Aristocrat.
posted by graphnerd at 2:54 PM on June 14, 2012 [66 favorites]


When the hell are these fucking clowns going to shut up?
posted by enn at 2:55 PM on June 14, 2012 [37 favorites]


Wait, so this isn't a "free range Irish babies are delicious thing?!"
posted by entropicamericana at 2:55 PM on June 14, 2012 [23 favorites]


How about instead we just eat the rich? I mean really now
posted by crayz at 2:56 PM on June 14, 2012


So wait, why don't we actually just have taxes, that pay for college education? States wanting a strong labor force could increase taxes to cover the cost of educating their populace. The education benefits both students (whose future earnings ostensibly increase) and corporations (who have an educated workforce that is correspondingly more productive).

Then it's not even administered by the IRS (really? he says this should be IRS administered?).

Oh right, because taxes which are arranged progressively are bad, and regressive ones (like this "can't afford college otherwise" option) are bad. (Wait, what?)
posted by nat at 2:58 PM on June 14, 2012 [8 favorites]


While free markets, particularly free financial markets, fatten peoples’ wallets,

I think he forgot the SOME

As far as the op ed, I think it's interesting, in both the health care and education market, that even with the inelasticity of both of these markets, and how poorly the free market seems to be working in these areas, the solution is to try more and more interesting, and fraknly exploitative, financial tricks. Maybe, just in a couple of areas, the free market isn't the best way to organize something.

Granted, if this was applied equally to all majors, (which in libertarian fantasy land, it wouldn't) it would mean free English degrees for everyone, as comparing the increase in salary would probably show little growth in today's economy. Of course, in libertarian fantasy land, these financiers who stand to gain from this would no way in hell subsidize anything but computer science and engineering degrees. Maybe the harder business majors. Pure sciences would also be seen as less lucrative.
posted by zabuni at 2:59 PM on June 14, 2012 [2 favorites]


I can't even. Scrooge 2.0 has ceased to provide me with even mirthless laughter.
posted by Sidhedevil at 3:00 PM on June 14, 2012 [1 favorite]


I'll be fucked if I'm going to listen to an argument about the efficiency of the free market from somebody with tenure.
posted by mhoye at 3:00 PM on June 14, 2012 [72 favorites]


OK, to be slightly less snide, although no less outraged. This article is a bald statement of a very sick tendency in our society -- in the 70s, the dominant idea of higher education was that an educated populace was a common good that should be paid for communally. During the last 30-40 years, way too many people have gotten the idea that the only reason for a college education is for the student to "get a good job," which is an individual good which should be paid for individually. This has led to massive disinvestment from higher education, which has driven spiraling student debt.

The point is, education is very much a collective good, and the state has an extremely compelling interest in supporting it. We need people to enter a wide variety of careers, some of which pay better than others. It's not live everyone can simply get a job in, say, engineering -- not only are there insufficient jobs, but society would not function for long if that happened.
posted by GenjiandProust at 3:01 PM on June 14, 2012 [92 favorites]


Wow, GenjiandProust, that bit about the IRS didn't even register when I read through it. Notice how from the following parenthetical he starts conflating his idea with -- loan programs!
posted by junco at 3:01 PM on June 14, 2012 [1 favorite]


Somehow, "I'm still working off my indentured servitude" sounds less appealing.
posted by ethansr at 3:02 PM on June 14, 2012 [2 favorites]


I'm glad he demolished that "Wait, isn't this worrisome how much this is like indentured servitude?" concern by saying, "No, this isn't indentured servitude."

Oh! I see, it's not. Thanks.
posted by MoonOrb at 3:03 PM on June 14, 2012 [18 favorites]


That's already how it works in Australia, except you take loans from the government, and you pay it back over time as a percentage of your wages in Australia if you earn above $x. And it's not garnished forever, just until you pay back your loan.

... okay, maybe it's just a better type of student loan and not what the op-ed is talking about.
posted by Xany at 3:03 PM on June 14, 2012 [9 favorites]


How long until this (or completely unrelated deregulation legislation which just happens to accidentally legalise this) ends up on the legislative agenda? It took a few decades for got-mine-fuck-you neoliberalism to transition from being a few Objectivists' fantasy to it being considered a self-evident fact that there is no other way to run a society.
posted by acb at 3:03 PM on June 14, 2012 [3 favorites]


Dude, stop trying to turn the world into your 15th century role playing game.
posted by The Whelk at 3:03 PM on June 14, 2012 [14 favorites]


In reality, I'm not sure how much of a difference it would make

Depressingly true.

I'm mildly pleased to see that at least the proposal doesn't include tying the "sponsored" student to a particular employer until the loans are paid off, but comparing it to taxation is rather missing the point of taxation, and comparing to the Australian system seems ridiculous insofar as the taxation agency is doing the work of ensuring repayment of money loaned by the government to students, rather than doing corporations work for them. It's just a silly proposal all around.
posted by EvaDestruction at 3:03 PM on June 14, 2012


I know how to solve this: kickstarter.
posted by Fizz at 3:05 PM on June 14, 2012 [1 favorite]


So how has this worked in Australia, where the Op-Ed says such a system has been in place for 25 or so years? Unlike the snarkers, I wouldn't dismiss this idea out of hand. I believe Clinton tried to institute such an option. With the right checks and balances, this could be a positive alternative to student loans.

Of course, I would prefer if education was free and funded through general taxation, but assuming that is not a possibility, why is this such a horrendous idea? Is Australia a nightmare of indentured servitude?
posted by Falconetti at 3:05 PM on June 14, 2012 [1 favorite]


It's silly to make a big deal out of this program as being nationwide or nothing. Anyone could set up a voluntary program for this. It's basically he student betting they are not very successful and the investor betting on an outsized income. That's not the best incentive structure but it could work.
posted by michaelh at 3:05 PM on June 14, 2012 [1 favorite]


Hey, that thing other people have suggested as satire, let's do that, for realz, yo.
posted by 0xdeadc0de at 3:05 PM on June 14, 2012


Mary Doria Russell wrote about this in The Sparrow.
posted by annathea at 3:06 PM on June 14, 2012 [4 favorites]


"Because of their role in financing new ideas, financial markets keep alive the process of “creative destruction” – whereby old ideas and organizations are constantly challenged and
replaced by new, better, ones."


And by what mechanism will the idea of markets be challenged? Itself?
posted by JHarris at 3:08 PM on June 14, 2012 [8 favorites]


This is not a modern form of indentured servitude, but a voluntary form of taxation, one that would make only the beneficiaries of a college education — not all taxpayers — pay for the costs of it.

Because, as we all know, those with higher education selfishly hoard the benefits, and certainly do not share their knowledge and expertise with society. Only doctors benefit from doctors, and only teachers benefit teachers. There is no conceivable reason society would want to fund education for these professions to ensure their services are provided to all. Not if you're a neoliberal hack, at least.
posted by mek at 3:08 PM on June 14, 2012 [34 favorites]


This could be implemented by acknowledging the other half of the corporations-are-people equation: that natural people are essentially corporations with one shareholder, and allowing them to sell stock in themselves to raise funds as synthetic corporations (formerly known just as corporations) can. Then, all significant lifestyle decisions of individuals who are not their own majority owner would be up for a vote by stockholders: if you had to sell 55% of your stock to earn your engineering degree and the hedge funds who own it agree that they'd get more for their investment if you went to put up cell towers in Tajikistan or work on the Canadian tar sands than writing mobile apps in a café in Seattle, pack your bags.
posted by acb at 3:11 PM on June 14, 2012 [8 favorites]


I love the part where the author signals to wealthy conservatives in the executive class about how much academia sucks, even though it's self-defeating:

I'm in a subsidized, non-competitive industry, I've had no incentive to improve myself or my theories, so you should ignore my work product including this op-ed.

But no matter. As long as he's signaled agreement he's in the clan, and together they can formulate yet another proposal that screws over non-members and just happens to concentrate wealth at the top.
posted by airing nerdy laundry at 3:12 PM on June 14, 2012 [3 favorites]


When the hell are these fucking clowns going to shut up?

I know this one! It's when you cut off their heads.
posted by CautionToTheWind at 3:13 PM on June 14, 2012 [15 favorites]


Is Australia a nightmare of indentured servitude?

No, because if you stop working, you just stop repaying your loan. When you start working again, you continue paying it back where you left off.

It works really well. Almost every Australian I know who went to university was on this scheme, except the ones who were on scholarships.
posted by Xany at 3:13 PM on June 14, 2012 [9 favorites]


The problem with your model, acb, is that it would give people the same mobility afforded to capital.

You cannot possibly be suggesting that everyday people be given access to the control systems created by and for the wealthy. My god.
posted by aramaic at 3:14 PM on June 14, 2012 [4 favorites]


Because, as we all know, those with higher education selfishly hoard the benefits, and certainly do not share their knowledge and expertise with society. Only doctors benefit from doctors, and only teachers benefit teachers.

And, as the teachers and doctors and so on needed to make up the extra income to pay their owners investors, they could just substantially raise their own rates. It would be perfect! Instead of a society held together by bonds of communal interest, we could build a perfect society based on thousands of individual contracts designed by the same sorts of minds that brought us the tech and housing bubbles! Hurrah! Paradise!
posted by GenjiandProust at 3:14 PM on June 14, 2012 [1 favorite]


I am starting to become a communist out of spite.
posted by hellojed at 3:15 PM on June 14, 2012 [20 favorites]


So how has this worked in Australia, where the Op-Ed says such a system has been in place for 25 or so years?

In Australia, the tax agency collects money from graduates to pay off an income-adjusted portion of income to pay off a predefined amount loaned them by the government, whereas in the system he proposes, the IRS collects money from graduates to give to private corporations x% of their income, forever. He deliberately conflates these two models, presumably to make it sound more acceptable.
posted by junco at 3:15 PM on June 14, 2012 [27 favorites]


Then, all significant lifestyle decisions of individuals who are not their own majority owner would be up for a vote by stockholders....

Go on, how do I deploy my golden parachute while simultaneously destroying the retirement savings of millions?
posted by Kid Charlemagne at 3:16 PM on June 14, 2012



The Internal Revenue Service could perform collection services on behalf of private lenders, and at no cost to taxpayers.


This seems to me like a significant increase in the amount of individual data the IRS has to calculate, collect, and keep track of, probably resulting in some kind of structural changes. I'm sure that costs money -- unless the government is going to charge these private investors for this service.
posted by The Great Big Mulp at 3:16 PM on June 14, 2012 [2 favorites]


Only a Chicago economist could be so stupid and so... what's the word I'm looking for... malicious? Ideologically blind? (Deliberately) Ignorant? Evil?

University education is a public good which is why in the vast majority of developed states the public pays for it.

And that Saving Capitalism book looks pretty funny. I was somewhat relieved to see it was published in 2003 but it's always good to remind us exactly which individuals were those that so vigorously called for heavily deregulated financial markets. If Americans had a clue they wouldn't have listened to these people a decade ago and if they have any brains they certainly won't listen to them now.
posted by nixerman at 3:17 PM on June 14, 2012 [3 favorites]


Counterpoint: Academic Freedom and Indentured Students, from the Jan/Feb 2012 issue of the American Association of University Professors journal, Academe. The author, Jeffrey J. Williams, previously wrote about this topic in the Fall 2008 issue of Dissent.
posted by catlet at 3:18 PM on June 14, 2012


This could be implemented by acknowledging the other half of the corporations-are-people equation: that natural people are essentially corporations with one shareholder, and allowing them to sell stock in themselves to raise funds as synthetic corporations (formerly known just as corporations) can.

Ahem.
posted by Kadin2048 at 3:18 PM on June 14, 2012 [2 favorites]


The problem with your model, acb, is that it would give people the same mobility afforded to capital.

The solution is simple: make the very cheapest degree cost more than 50% of the stock in the typical undergraduate.
posted by acb at 3:18 PM on June 14, 2012


Perhaps in the future you can hope for the life of a slave, with food and healthcare.
posted by CautionToTheWind at 3:20 PM on June 14, 2012 [4 favorites]


This is captialism. (descriptivist definition)
This isn't captialism, it's rent seeking. (prescriptivist definition)
posted by justsomebodythatyouusedtoknow at 3:21 PM on June 14, 2012 [2 favorites]


Some of these U of Chicago Econ professors should get together for a country supper with the conservative members of the Supreme Court and they can describe How Things Are from their perch on Mars or wherever the hell they live. Because it sure ain't Earth.
posted by mcstayinskool at 3:21 PM on June 14, 2012


Mr. Zingales:

No.

Fuck you.

--H. Jerkwater, esq.
posted by Harvey Jerkwater at 3:21 PM on June 14, 2012 [8 favorites]


The Australian system is like this only in a single aspect of his proposed collection mechanism ('it involves the IRS! and percentages of income!'), and no other way. His phrasing is highly disingenuous and suggests that he is either deliberately attempting to communicate incorrect ideas, or that he is ignorant to a surprising degree for someone writing a proposal like this.
posted by jacalata at 3:22 PM on June 14, 2012 [10 favorites]


I have a friend that went to grad school at U of Chicago in Econ and he has unlimited stories of limitless jackassery from that faculty.
posted by mcstayinskool at 3:22 PM on June 14, 2012 [2 favorites]


While free markets,
particularly free financial markets, fatten peoples’ wallets, they have made surprisingly
little inroads into their hearts and minds.


Oh I get it, he's joking. It's a joke.
posted by Stagger Lee at 3:22 PM on June 14, 2012 [1 favorite]


way too many people have gotten the idea that the only reason for a college education is for the student to "get a good job," which is an individual good which should be paid for individually.

Frankly, even if we buy that getting a good job is the only reason to go to college, having lots of employed and well-paid people is good for the economy. So, even from a strictly economic standpoint, it is still good for the wider community.
posted by asnider at 3:23 PM on June 14, 2012 [1 favorite]


There's a fine line between Freakonomics and Absolutely Terrifyingonomics
posted by theodolite at 3:23 PM on June 14, 2012 [4 favorites]


So how has this worked in Australia...

The Australian system works quite well, but the devil is in the details here. Firstly, almost all universities are public universities, and the "higher taxation" rate is actual taxation by the government, used to support the public university that provided you with the education in the first place, rather than being funnelled off to a private company. Secondly, the debt that you're paying off doesn't accrue commercial interest rates. They are linked to inflation, but that's about it. Thirdly and most importantly, as others have pointed out, the higher taxation rate is progressive: if you don't earn enough money, you don't get slugged with additional taxes. So the way it works in practice is that if you don't have a job then you don't pay. Once you get a decent job, you have slightly higher taxes for a few years, until your student loan is repaid.

Frankly, despite protestations to the contrary, it sounds to me like someone is trying to use the Australian system which aims to provide a fairly equitable way of supporting public universities as a cover for introducing indentured servitude in the US. If they want to propose an Australian style repayment system, then there's a whole lot of somewhat-socialist features that they'll need to add to this proposal. We really aren't living out a capitalist fairy tale down here, and I rather resent that we're being used to justify predatory market-based solutions elsewhere. And it beggars belief that the author of the piece doesn't know the difference.

Why, it's almost as if someone is being deliberately disingenuous...
posted by mixing at 3:25 PM on June 14, 2012 [46 favorites]


This is just a silly idea. It's so much easier to keep discouraging higher education so we can continue to turn the masses into ignorant tax ATMs.
posted by It's Raining Florence Henderson at 3:25 PM on June 14, 2012


Yes, this is just like the Australian model except that instead of the tax authority managing government loans, the tax authority would become a debt collector for private enterprises.

In other words, they're nothing alike and fuck this guy.
posted by Sidhedevil at 3:28 PM on June 14, 2012 [5 favorites]


And if they are unable to work for an extended period, the lending corporation can eat the negligent party.
posted by doctor_negative at 3:30 PM on June 14, 2012 [2 favorites]


They can eat me right now!
posted by It's Raining Florence Henderson at 3:31 PM on June 14, 2012 [7 favorites]


This vitriol is hilarious. The idea here is to align the interest of funders of education with those of the funded.

As it stands, the funders of education (the Federal Government, by and large) have no particular interest in the post-college earning power of the funded. The funded, by and large, do have an interest in their own post-college earning power (yes, I've heard the standard Metafilter tirade about the intrinsic value of education, but the fact is that most students use college as vocational training). This mismatch helps subsidize the choice of majors unlikely to lead to much remuneration or real economic value.

Bringing the interest of funders and the funded will help shape universities into places that better prepare their students for the real world.
posted by downing street memo at 3:35 PM on June 14, 2012 [1 favorite]


Look, on the surface it seems like a terrible idea, but when you look at it a bit deeper and consider all of the angles, it's honestly the stupidist fucking thing you've heard all day, possibly all week. That's saying something in an election year!

So, bravo!
posted by eyeballkid at 3:35 PM on June 14, 2012 [18 favorites]


There's a fine line between Freakonomics and Absolutely Terrifyingonomics

Dadaonomics. All businesses are required to stock and sell big mouthed bass, all tax forms must be submitted in cuneiform, reciting the treaty of Versailles in total allows you to circumvent sales tax, student loans are given out based on a random number generator!
posted by The Whelk at 3:36 PM on June 14, 2012 [15 favorites]


And, at a forest-for-the-trees level, what's more objectionable about a scheme like this, than one that simply saddles people with a giant load of debt that can never disappear and says "good luck"?
posted by downing street memo at 3:37 PM on June 14, 2012 [1 favorite]


This is more like autoerrotic asphyxonomics.
posted by It's Raining Florence Henderson at 3:38 PM on June 14, 2012 [3 favorites]


Since this is based on percentage of earnings, there is no debt.
posted by The Ted at 3:38 PM on June 14, 2012


dsm:As it stands, the funders of education (the Federal Government, by and large)

You are very fundamentally confused about who funds higher education in the US.
posted by Runes at 3:40 PM on June 14, 2012 [8 favorites]


The University of Chicago, you don't say--from their Department of Finance, you don't say.

Talk about appropriation by capital.
posted by Ironmouth at 3:42 PM on June 14, 2012 [1 favorite]


He's doing the Jonathan Swift thing, right?

Right?

Guys.....
posted by schmod at 3:43 PM on June 14, 2012 [1 favorite]


And, at a forest-for-the-trees level, what's more objectionable about a scheme like this, than one that simply saddles people with a giant load of debt that can never disappear and says "good luck"?

Higher cost for the student.
posted by Ironmouth at 3:43 PM on June 14, 2012 [1 favorite]


The best part is where he finds an acceptable role for the IRS in his capitalist dream scheme: "They will make excellent debt-collectors, my friends, and they'll be working for us, er, I mean YOU!"
posted by Anitanola at 3:43 PM on June 14, 2012


P. S. It's called sharecropping.
posted by Anitanola at 3:44 PM on June 14, 2012 [4 favorites]


No but seriously - ignore the word "equity" or "ownership" - what's wrong with replacing our current lending with something more equitable.

Think about how you structure this - everyone has some implied interest rate on their debt. Repayment rates and amount are a function of what you earn with some floor. I.e. - earn less than the 20th percentile of people with your terminal degree (not by major, just degree type) and you are in permanent deferment ramping up to earning the median for your degree you pay enough to amortize your debt over a twenty year time period, and as you move above the median you pay more but the obligation ends after 20 years, so a high income earner ends up subsidizing college grads who chose less lucrative fields or just weren't as lucky as them.

(of course to make it work you'd probably need the system to be compulsory - otherwise the children of the rich would avoid having to pay their fair share)

I mean its not an easy solution to implement and Zingales is the sort of jackass who frames it in freshwater terms and everything, but its not eating babies. Really done correctly its just a second income tax for college grads
posted by JPD at 3:45 PM on June 14, 2012 [2 favorites]


Since the "lender" is only entitled to a percentage of earnings, 20-somethings will no longer be fixed with a huge load of debt early on in their careers, requiring them to enter cash-now mode too early. Also, if you are laid off, guess what: your student loan payments automatically are set to zero.
posted by The Ted at 3:45 PM on June 14, 2012 [1 favorite]


ETA : it goes without saying the government needs to run this, not private capital.
posted by JPD at 3:45 PM on June 14, 2012


I don't know. Will this contracted debt--or whatever thing--will it be dischargeable in bankruptcy? Will you be able to collect social security without garnishment to see the lenders get a cut? Will you be able to "refi" as it were, multiple times, without having to go back to school? Because then it might be better than these shitty student loans.

This probably just all buyer's remorse for me.
posted by adoarns at 3:47 PM on June 14, 2012


Higher cost for the student.

Why is that necessarily true?
posted by downing street memo at 3:49 PM on June 14, 2012



I don't understand economists.

His proposed solution to the taxes -> government -> student loop is to add another layer of middlemen in the form of taxes -> government -> equity firm -> student and this somehow is more efficient ?

How is adding another layer of people who need to be paid less costly overall ?

I'm tired of having to be smart to do my work. Will his school hire me ? I can be twice as stupid at half the price.
posted by Pogo_Fuzzybutt at 3:50 PM on June 14, 2012 [4 favorites]


Selling your soul to Bain Capital et al.
posted by ericb at 3:50 PM on June 14, 2012


As it stands, the funders of education (the Federal Government, by and large) have no particular interest in the post-college earning power of the funded.

As Runes points out, above, you are mistaken. However, let's assume you aren't, and the Federal Government paid for all higher education. It may not have, in your scenario, an interest in the earning power of the graduates, but it has a very real interest in the ability of those graduates to do specific jobs. Society needs people to do stuff -- we need a certain number of engineers (with certain specializations), and a certain number of teachers (with focuses in specific disciplines), and a certain number of lawyers, and a certain number of librarians, and, yes, certain numbers of artists and historians and so on. We even need a certain number of economists, although, looking back over the last decade or two, I wonder if we maybe have too many or the wrong type.

Anyway, since the Federal Government has an interest in getting people well suited to these jobs (which pay a wide range of salaries) into the right programs, even an efficiency argument has to see that basing funding for education on expected earnings rather than the expected needs of society, is just another Capitalist boondoggle.
posted by GenjiandProust at 3:50 PM on June 14, 2012 [1 favorite]


A system like this, incidentally, would be a massive incentive to keep people employed.
posted by downing street memo at 3:52 PM on June 14, 2012 [1 favorite]


Also, if you are laid off, guess what: your student loan payments automatically are set to zero.

The government might go for such a mollycoddling scheme, but private investors? They would just have you do something else, like clean up hazardous waste or grow spare kidneys for people.
posted by GenjiandProust at 3:54 PM on June 14, 2012 [6 favorites]


Damnit, people beat me to the punch to rant about technocratic aspects of the Australian benefits system. The system here is called HECS-HELP, more detail at this previous comment.

Comparing with Australia is also complicated. Most* students have about half the cost of their tuition directly subsidised, with only the outstanding half having to be paid-off via HECs-HELP - I understand that the US-level of subsidisation is not nearly as great, but happy to be corrected by someone who has actual figures and the like.

HECS-HELP exists alongside additional massive government subsidies, not in isolation to, which shoots a hole through Zingales' example of Australia to argue one (income-contingent-loans) should replace the other (direct subsidies).

* Those students who are permanent residents, mostly.
posted by kithrater at 3:55 PM on June 14, 2012 [3 favorites]


Its not the Australian model and its not indentured servitude. Its worse than indentured servitude, at least that ended after however many years. He just wants your wages garnished forever. CWaA.

When the hell are these fucking clowns going to shut up?

After something long, messy, and likely fruitless such as an election.
posted by Slackermagee at 3:55 PM on June 14, 2012 [1 favorite]


ahah i can't wait until the U of I basketball team has JP Morgan Chase, GE, Fox News Corp, and Virgin Intergalactic as individual-team-member shareholders. this is gonna be faaaaantastic.
posted by gorestainedrunes at 3:55 PM on June 14, 2012 [1 favorite]


His underwater mortgage proposal is way less crazy than this one.
posted by MoonOrb at 3:56 PM on June 14, 2012 [1 favorite]


I am starting to become a communist out of spite.

They all do, read the manifesto
posted by Hoopo at 3:59 PM on June 14, 2012 [3 favorites]


I'm glad he demolished that "Wait, isn't this worrisome how much this is like indentured servitude?" concern by saying, "No, this isn't indentured servitude."

Well, he's right. Indentured servitude is where you owe a particular amount and interest keeps mounting, rather like what happens with student loans right now. Owing a percentage of your income premium (compared to the median non-college income) is much more manageable because the marginal cost to you, the graduate, is fixed.

I'd sign up for this in a heartbeat, whereas I dare not take on the risk of student loans as currently structured.
posted by anigbrowl at 4:00 PM on June 14, 2012 [2 favorites]


By "education", Runes and others, I meant "consumption of education" which is indeed mostly government funded (10 to 1, if finaid.org is right)

Yes, the federal government wants people to have jobs. But it's a dispersed desire, whereas in this scheme investors would have an interest in individual earning power.

I dunno. Guess I just don't see why it's the stupidest most neoliberal idea evar.
posted by downing street memo at 4:01 PM on June 14, 2012


Also, if you are laid off, guess what: your student loan payments automatically are set to zero.

The government might go for such a mollycoddling scheme, but private investors? They would just have you do something else, like clean up hazardous waste or grow spare kidneys for people.


You don't have to work. And blanket federal subsidies for higher education is why for-profit schools are gouging their students and not giving them any work prospects.
posted by The Ted at 4:02 PM on June 14, 2012 [2 favorites]


expected earnings rather than the expected needs of society

That's the rub, though. I suspect most Chicago school economists take on premise that there's no more accurate way to judge the "expected needs of society" than via salary expectations. Although there may be some noteworthy exceptions, in general I suspect they are basically correct; an objective forward-looking analysis of expected salaries would probably give you a pretty good idea of society's needs in the same span of time. At least as far as anyone can tell, which may not be particularly well in the best case.

Also, allowing government to set quotas for x doctors, y lawyers, z theater actors, etc. has historically not worked very well, and that's setting aside the fact that it's pretty clearly a non-starter (along with anything else that smacks so obviously of Politburo-style central planning) in the US.
posted by Kadin2048 at 4:02 PM on June 14, 2012


Is this where I mention that I had a both a grant and then a remissible loan that was forgiven in increments for every three months of living here after I completed my post secondary education?
posted by ODiV at 4:02 PM on June 14, 2012


I dunno. Guess I just don't see why it's the stupidest most neoliberal idea evar.

You can't see how selling kids to banks (for life!) might not be desirable to people?
posted by gerryblog at 4:08 PM on June 14, 2012 [2 favorites]


Ugh! I started a project about super horrible things from the future, like buying and selling orphans as commodities based on projected income, and privatized government service providers providing 'budget friendly' options to local governments, etc. But every time anything gets written, it becomes real in no time! How are we suppose to write modern dystopias if you people keep stealing our ideas!
posted by Garm at 4:15 PM on June 14, 2012 [2 favorites]


You can't see how selling kids to banks (for life!) might not be desirable to people?


For people who claim to love education, there's an alarming lack of critical thinking in this discussion. Do you understand the difference between a fixed-sum obligation and a percentage of income? I personally feel that being able to attend the school of my choice would be well worth a 5% increase in my basic tax rate.
posted by anigbrowl at 4:15 PM on June 14, 2012 [3 favorites]


I mean its not an easy solution to implement and Zingales is the sort of jackass who frames it in freshwater terms and everything, but its not eating babies. Really done correctly its just a second income tax for college grads... whose parents/trust fund can't afford to send them to college.

How are those people contributing? Do they pay a second income tax? I guess we all know the evils of the progressive income tax. It would be better to have a tax where your maximum obligation is determined by how little your parents make i.e. your total tax obligation is not just the tax/loan rate but the loan amount, which would be larger for students of parents who can't/won't contribute.

Comparing it to the current loan system is a straw man. The current loan system is completely fucked. But it doesn't matter. People like Zingales are ideological radicals driven by a totalizing ideology. Arguing about the specifics just allows them to frame the argument.
posted by ennui.bz at 4:16 PM on June 14, 2012


Yay! Now our corporate owners can get cheaper skilled labor too!
posted by Legomancer at 4:20 PM on June 14, 2012 [3 favorites]


Do you understand the difference between a fixed-sum obligation and a percentage of income? I personally feel that being able to attend the school of my choice would be well worth a 5% increase in my basic tax rate.

Yeah, I understand it. For starters, who said it would be 5%?
posted by gerryblog at 4:23 PM on June 14, 2012


Wait, isn't this basically the same idea proposed by a student group for the University of California system (whose politics I assume are as far as they can be from the University of Chicago professors).
posted by gyc at 4:25 PM on June 14, 2012 [1 favorite]


For people who claim to love education, there's an alarming lack of critical thinking in this discussion.

We love education and have seen what these Capitalists have done to it over the past twenty years. They can claim its the best thing to do under the circumstances, but their circumstances that have come about largely thanks to their meddling.

Also, I will never trust these people. Not once, not ever.
posted by Slackermagee at 4:25 PM on June 14, 2012 [2 favorites]


Finally someone listens to me
posted by miyabo at 4:26 PM on June 14, 2012


Ugh... elementary grammar mistake in an "I love education post". Goddamn it.
posted by Slackermagee at 4:26 PM on June 14, 2012


Perhaps this is redundant, but my gut reaction was: "Buh-scuse me?"
posted by the littlest brussels sprout at 4:27 PM on June 14, 2012


I wonder if this would result in a fee discrepancy situation similar to the US health care industry. The educational institution will essentially have a rate that individuals pay and then another, lower rate that has been negotiated for by the company because of their "bulk discount".
posted by ODiV at 4:28 PM on June 14, 2012


Bringing the interest of funders and the funded will help shape universities into places that better prepare their students for the real world.

I despise this phrase "the real world", as if academia isn't real. As if student life isn't real. As if learning isn't real. When people say "the real world", they generally mean the business world, because they think that nothing else has value.
posted by jokeefe at 4:28 PM on June 14, 2012 [29 favorites]


Brilliant! And then we can bundle all the private equity contracts into securities, and sell tranches of them on the open market as AAA-rated bonds! Everyone profits, and the risk to the system is practically zero!
posted by dephlogisticated at 4:28 PM on June 14, 2012 [13 favorites]


A true free-market system equalizes opportunities, if not for fairness, at least for efficiency: talent should not be wasted.

And that, right there, my friends, is the siren call of the lizard people. You can think of education as a human right. As it has been for thousands of years, a means for men and women to realize their place in the universe and learn the bettering of it. A path for realizing one's limitations and for gaining the means for stretching them, however slightly.

Or you can, as the economist does, think of education as a service performed by and for the market. The student's benefit a somewhat higher wage, the market's benefit an increase in talent. The rule that governs this relationship the Iron Law of Wages.

The day is coming, sooner every day, it feels like, when people are going to have to decide, once again, which it will be. Do we work for the markets, or do the markets work for us? Does capital exist to serve life, or does life subsist to serve capital?
posted by R. Schlock at 4:29 PM on June 14, 2012 [4 favorites]


I'm pretty sure that on Alternate Universe Metafilter, where they're debating replacing percentage-of-income repayment with fixed-dollar-amount repayment rather than the other way around, everyone is just as outright pissed at Big Finance: for attempting to foist risk off of bankers and onto naive prospective students, for suggesting a scheme more regressive than any flat tax that would take relatively more money from the poor and less from the rich, and for threatening to cut the heart out of liberal arts education by making it potentially financially disastrous for students to choose their majors based on their hearts rather than based on expected market value. One weirdo suggested that fixed repayment amounts might help students hedge against hyperinflation, but he was quickly shouted down.

Note that I'm not assuming Alternate Universe Metafilter is any smarter than Our Metafilter; it may just be dumb luck that status quo bias causes most of their arguments to make sense while ours sound so grossly irrational.
posted by roystgnr at 4:29 PM on June 14, 2012 [5 favorites]


Another important detail about the "Australian" system... voluntary, early repayments result in a significant discount on the total amount owed. If I recall, private lenders aren't usually so happy about you paying off loans early...
posted by Jimbob at 4:29 PM on June 14, 2012


Next up: Forehead tattoos.
posted by Artw at 4:30 PM on June 14, 2012


hey ennui.bz I assume you just missed the part where I said the system would have to be compulsory in order to work.
posted by JPD at 4:31 PM on June 14, 2012


I thought Alternate Universe MetFilter was the one where they set the tax rate at a level sufficient to pay for social goods, and didn't blow all the money on wars and prisons.
posted by gerryblog at 4:32 PM on June 14, 2012 [10 favorites]


I despise this phrase "the real world", as if academia isn't real. As if student life isn't real. As if learning isn't real. When people say "the real world", they generally mean the business world, because they think that nothing else has value.

Don't put words in my mouth. I said that most students use college to prepare themselves for the business world, a task that college is not good at. Adapting something resembling this scheme would bring schools' interest in line with students'.
posted by downing street memo at 4:32 PM on June 14, 2012 [1 favorite]


The introduction to a recent book argues that winning hearts and minds is the biggest challenge facing modern capitalism
This immediately brought to mind something from the venerable Harper's Index:

Percentage of Americans in 2009 who believed the free market “is the best system on which to base the future of the world” : 74

Percentage of Americans who believe so today : 59

Percentage of Chinese who do : 67

posted by mullingitover at 4:32 PM on June 14, 2012 [1 favorite]


You can think of education as a human right. As it has been for thousands of years

LOL
posted by downing street memo at 4:34 PM on June 14, 2012


Fucking philistine.
posted by R. Schlock at 4:35 PM on June 14, 2012


Don't put words in my mouth. I said that most students use college to prepare themselves for the business world, a task that college is not good at.

Um... so basically, in fact, I just reiterated what you said?
posted by jokeefe at 4:36 PM on June 14, 2012 [3 favorites]


A "second income tax" that's privatized to for-profit entities? How does this make sense?

Again, the Australian system works because it's government money in, government money out, facilitated by a government entity.

This plan is giving private businesses the IRS's services as a debt collector. What the actual fuck, y'all?
posted by Sidhedevil at 4:37 PM on June 14, 2012 [1 favorite]


On another note, I recently started a book about the Civil War which discusses how - prior to the war - people really valued and encouraged education as a means of improving industrial production speciifically and the economy/society as a whole. (Not Civil War expert-ist by any stretch.)

And that me sad: what happened to that idea, and how can we even revive it?
posted by the littlest brussels sprout at 4:41 PM on June 14, 2012


OK, so the Australian MeFi shift has now come on line. So, I'd like to begin with: What the fucking fuck?

In Australia, such a system has been in place since the 1980s. The national tax agency enforces repayment of loans contingent on income, though the payments of the wealthiest graduates are capped, and therefore less affluent graduates need to be charged more to make the program viable than in the system I am proposing.

This is, at best, an egregious misrepresentation. The Australian system can be summarised thusly, although Wikipedia has a good article on this:

Most university places are Government supported; the Government subsidises these places, and the students pay a component of the cost. The maximum student contribution is set by the Government, e.g., $4000 per subject. These places are allocated on the basis of academic merit. The student contributions are determined on the basis of estimated likely future earnings, depending on your course of study. So law students pay more than art history students.

All students who get a place, are eligible to defer their contributions - essentially a loan from the Government. So poor kids can go to uni, and just have to worry about cost of living, books...etc.

You pay your Government provided student loans back once your income reaches a certain level - it's currently $47K AUD a year - at that level you pay 4% of your income towards your loans annually, although the percentage increases as you earn more, up to 8%.

Important points:

You get a discount if you pay early, or if you pay upfront.

The debt is not subject to interest, but it is indexed to the CPI.

If you stop earning, you stop paying.

But the most important part - when your loan is paid off, you stop paying!
posted by His thoughts were red thoughts at 4:46 PM on June 14, 2012 [13 favorites]


I have a friend that went to grad school at U of Chicago in Econ and he has unlimited stories of limitless jackassery from that faculty.

Milton Friedman is dead and safely buried, but the stench of a rotting corpse continues to emanate from his ideas.
posted by jamjam at 4:47 PM on June 14, 2012 [1 favorite]


Yeah, I understand it. For starters, who said it would be 5%?


No, apparently you don't. 5% is a sum that I'm saying I would be prepared to pay without thinking twice. Yes, I pulled it out of the air, although it's a bit more than a typical mortgage and therefore not out of the bounds of reality.

the difference about a fixed obligation vs a percentage is that if your income goes down (eg you get laid off), you don't have to keep making the payments until you're working again. The horror!
posted by anigbrowl at 4:49 PM on June 14, 2012 [1 favorite]


This is the best news I have heard all day, as it makes my country look so so good in comparison. And we have proper toffs running the place over here.

Seriously though. Fuck You Chicago School and your Bullshit right-wing extreme capitalism.
posted by marienbad at 4:49 PM on June 14, 2012


This plan is giving private businesses the IRS's services as a debt collector.

This exact plan is dumb, but the idea of income dependent repayment of college education costs is at the end of the day what he's trying to advocate for. Personally I sort of have enough faith (probably misplaced) that properly regulated using private capital to fund the plan with a government backstop and a well thought out regulatory regime then it could work. But I would not argue with someone saying it has to be state capital because we've shown an inability to effectively regulate the private sector. In a perfect world private capital should be able to work, but we don't live in a perfect world.
posted by JPD at 4:50 PM on June 14, 2012


Someone should do a kickstarter for funding students. For each student a company is formed and shares issued proportional to investment. The company takes care of paying for tuition. After graduation, the company bids on contracting jobs ans sends it's only employee, the recent graduate, to fill the role. The company pays the the employee a wage and pays dividends to the shareholders till the funds are repaid, after which the company is disolved and everyone is released from further responsibility.

I think that having a board and investors as mentors would be awesome. These people are fully invested in your success, and could even hold votes to change the conditions, unlike some investment bank that could run to the IRS and would no dobut adopt a fuck you pay me attitude.
posted by Ad hominem at 4:51 PM on June 14, 2012


I said that most students use college to prepare themselves for the business world, a task that college is not good at.

An explanation for why the business world continues to bring us horrendous failure? We can blame Harvard and Yale for the business world's global financial crisis?
posted by Jimbob at 4:53 PM on June 14, 2012


My dad used to have a cartoon he'd clipped from somewhere that showed a rich owner talking to an employee saying something like "Man, all these hoops to jump through. Wouldn't it be easier if we could just beat it all out of you?"

Carry on.
posted by Joey Michaels at 4:54 PM on June 14, 2012 [1 favorite]


the difference about a fixed obligation vs a percentage is that if your income goes down (eg you get laid off), you don't have to keep making the payments until you're working again. The horror!

That's one difference. Another difference is that under the proposed plan you never stop owing. Another is that there's no limit to what you can owe; for some people this could ultimately be in the hundreds of thousands of dollars, or more. Still another difference is that your debt rises, rather than diminishes, with inflation.

I am opposed to the current system too, let's be clear -- but this is not an improvement and is, as I suggested originally, tantamount to selling kids to banks, for life.
posted by gerryblog at 4:55 PM on June 14, 2012 [1 favorite]


hey ennui.bz I assume you just missed the part where I said the system would have to be compulsory in order to work.

I guess I did but, are you really proposing that rich kids take out compulsory loans with early repayment penalties presumably equal to the 20 year cost of the loan? (and that's not even thinking about whether they spend their lives "working" as a low-income "artist" under the median and living off of their trust.) And even then, the "college tax" is flat with respect to parental income: why?

The problem is that without the "freshwater" assumptions of market efficiencies i.e. eliminating unprofitable majors, none of this makes any sense. Of course, it still doesn't make any sense since the current loan program for the most predictably profitable majors: Law and Medicine, is either broken or rapidly breaking. Making heart surgeons pay for pediatricians med school loans doesn't change anything about the inflation in med school costs.
posted by ennui.bz at 4:59 PM on June 14, 2012


These days, in the US, the very notion of a "common good" has pretty much become antiquated and quaint, if not outright poisoned by rhetoric from right. I don't see "education is a common good" as having any real currency in today's political climate.
posted by treepour at 4:59 PM on June 14, 2012 [3 favorites]


Well I think in the olden days they meant Readin' Ritin' and Rithmatic. We pretty much , except for some sepctaculer failures, achieve that now no? Isn't anything above that really "to get a good job"?
posted by Ad hominem at 5:03 PM on June 14, 2012


Making heart surgeons pay for pediatricians med school loans doesn't change anything about the inflation in med school costs.... (just to clarify) unless you think that the problem with the cost of med schools goes away once everyone is a heart surgeon.

Why in the world would private capital fund a degree in say, even, mathematics when it's clear that the risk on something as predictable as Law is becoming increasingly volatile?
posted by ennui.bz at 5:04 PM on June 14, 2012


Well, look at that, an ideologue is making the same old assertions that "everything is fine" and "you can't understand the details" so "shut up and accept that the smart people have this in hand".
posted by clvrmnky at 5:08 PM on June 14, 2012


the very notion of a "common good" has pretty much become antiquated and quaint, if not outright poisoned by rhetoric from right

Indeed, common good used in a proper conservative sentence would be "Its in the interest of the common good not to tax me for nothing never and then give me social security."
posted by Joey Michaels at 5:11 PM on June 14, 2012


Or you can, as the economist does, think of education as a service performed by and for the market. The student's benefit a somewhat higher wage, the market's benefit an increase in talent. The rule that governs this relationship the Iron Law of Wages.

Not even Marx believed in the Iron Law of Wages.

Another difference is that under the proposed plan you never stop owing.

So? You never stop benefiting either. You could easily put a ceiling in place, as with Australia.

Another is that there's no limit to what you can owe; for some people this could ultimately be in the hundreds of thousands of dollars, or more.

Since your obligation is a function of your income, if you end up forking out hundreds of thousands it's because you're earning a few million. Why not even make it progressive? If you start earning fuckloads of money, you pay a slightly greater proportion of it.

Still another difference is that your debt rises, rather than diminishes, with inflation.

No it doesn't. Your repayments go up...in nominal terms. In proportion with your income. your repayments as a proportion of your income don't rise. They can't, by definition. It's statements like this that make me question whether you understand the basic mathematics involved.

I am opposed to the current system too, let's be clear -- but this is not an improvement and is, as I suggested originally, tantamount to selling kids to banks, for life.


No it isn't, any more than taxation is tantamount to being a slave of the state, for life. I feel like I'm talking to a cartoon here. Do you consider income taxes slavery? Because that's the argument you're making. I don't consider income taxes slavery, even though if I earned a fuckton of money I'd end up paying much more income tax, I owe tax on the income I make through my lifetime, and so on.
posted by anigbrowl at 5:11 PM on June 14, 2012 [2 favorites]


Why in the world would private capital fund a degree in say, even, mathematics when it's clear that the risk on something as predictable as Law is becoming increasingly volatile?

I mean, why does private capital fund anything? An investor believes a given instrument will outperform the market.

It's worth noting that the federal student loan program doesn't even attempt a cost-benefit analysis on individual applicants, leading to the continued subsidy of majors unlikely to lead to what students really want out of an education: increased earning power.

It is probably fair to say that our math major will make more money than the average bear, so she'll get funded. And if she doesn't end up making more money? Them's the risks of investment.
posted by downing street memo at 5:12 PM on June 14, 2012


Why in the world would private capital fund a degree in say, even, mathematics when it's clear that the risk on something as predictable as Law is becoming increasingly volatile?

You couldn't allow them to choose. If you let them choose and offer lower rates to econ majors than art history majors you are doing the opposite of what you are hoping to accomplish - which is socialize education costs and the risk of future income across the whole pool.

I guess I did but, are you really proposing that rich kids take out compulsory loans with early repayment penalties presumably equal to the 20 year cost of the loan? (and that's not even thinking about whether they spend their lives "working" as a low-income "artist" under the median and living off of their trust.) trust income is income - you'd have to make it "taxable" for this purpose. You wouldn't even structure it like a loan. Its a tax obligation that you can't repay early. And yes you have to force rich kids to take it. What would really concern me is there would be a lot people gaming things around age 44 to avoid taxes. You'd have to formulate some kind of look back at 50 to stop that dodge.
And even then, the "college tax" is flat with respect to parental income: why?

I guess you've got to a call a line at some point. Plus we already know there is a very strong correlation between parent/child incomes so you'll see some of that through there.

I mean yeah, this is all totally a pipe dream at the end of the day.
posted by JPD at 5:16 PM on June 14, 2012


What I like about these threads is how they remind me how malleable the human mind is, how it can twist itself into thinking horrible things are reasonable and good. Wait, wrong word, it's not what I LIKE about these threads, it's more the opposite. LOATHE, that's it yes.

The Ted: Since this is based on percentage of earnings, there is no debt.

No. INSTEAD YOU GET ETERNAL WAGE GARNISHING. You can go to hell.

downing street memo: A system like this, incidentally, would be a massive incentive to keep people employed.

Oh yes, although the incentive would be on the "investor." So most likely, it would be a system by which someone pays one-time to get a percentage of a person's earnings in perpetuity, then employs that person. You know what happens if you take that system to 100%? YOU'VE RECREATED SLAVERY. Of course you don't have to take it to 100%, no, you could just become a partial slave, that's a great idea. To hell, go there.
posted by JHarris at 5:20 PM on June 14, 2012 [3 favorites]


Since your obligation is a function of your income, if you end up forking out hundreds of thousands it's because you're earning a few million.

A person who makes the median income for someone with a B.A. or higher in U.S., which was approximately $50,000 in 2011, paying your proposed 5%, would pay $100,000 between age 25 and 65, not factoring in inflation, lost investment income, etc. The average student debt load in 2011 was $25,000.

People are (obviously!) going to come out way worse under a situation where they never stop paying the banks for their education.

Still another difference is that your debt rises, rather than diminishes, with inflation.

No it doesn't. Your repayments go up...in nominal terms. In proportion with your income. your repayments as a proportion of your income don't rise. They can't, by definition. It's statements like this that make me question whether you understand the basic mathematics involved.


If I owe $25,000 in 1998 dollars, inflation is my ally. If I owe 5% in current dollars perpetually, I don't benefit from inflation at all, but have to pay 5% of my income regardless of whether my wages have risen commensurate with inflation or not. Given that inflation is constant, why would I trade my debt for a peonage system?

No it isn't, any more than taxation is tantamount to being a slave of the state, for life. I feel like I'm talking to a cartoon here. Do you consider income taxes slavery? Because that's the argument you're making. I don't consider income taxes slavery, even though if I earned a fuckton of money I'd end up paying much more income tax, I owe tax on the income I make through my lifetime, and so on.

You don't pay permanent income tax to a private bank.
posted by gerryblog at 5:20 PM on June 14, 2012


You don't pay permanent income tax to a private bank.

Arguably, we do, we just call it "bail outs."
posted by Joey Michaels at 5:25 PM on June 14, 2012 [1 favorite]


This system sounds like it would really disincentivize people against working to make a lot of money. It sounds like you pay at a sliding rate, at least up until a point - so you pay less at lower incomes (presumably both as a percentage and as a total amount). Taxes do the same thing. However, now you are getting double-dinged - you are fighting two sliding scales that go up the more you make, and both of them all but go away at low incomes. Plus, if the attitude people have toward their college loans is any indication, people will grow to hate the company that funded them.

In the end, there is almost no incentive to make the sacrifices necessary to make more money; there are strong forces keeping you at the poverty level and if you make more it just goes to fund some contemptible corporate asshole anyway, so why not stay at the lowest survivable point? Higher paying jobs usually extract a price in greater number of hours, less rewarding work, or crappier locations. If all of the gains are going to feed some leech who will literally never go away, why would you ever make those sacrifices?
posted by Mitrovarr at 5:25 PM on June 14, 2012


Some of these U of Chicago Econ professors should get together for a country supper with the conservative members of the Supreme Court and they can describe How Things Are from their perch on Mars or wherever the hell they live. Because it sure ain't Earth.

I have a friend that went to grad school at U of Chicago in Econ and he has unlimited stories of limitless jackassery from that faculty.

Seems like this guy is actually from the business school, which makes him even worse than the normal UChicago econ faculty. There's a reason why there was booing when the Booth School of Business students were recognized at convocation this past weekend...
posted by astapasta24 at 5:25 PM on June 14, 2012


Oh yes, although the incentive would be on the "investor." So most likely, it would be a system by which someone pays one-time to get a percentage of a person's earnings in perpetuity, then employs that person. You know what happens if you take that system to 100%? YOU'VE RECREATED SLAVERY. Of course you don't have to take it to 100%, no, you could just become a partial slave, that's a great idea. To hell, go there.

You know, I was more thinking that rich people and rich corporations would fund peoples' educations with the expectation of a return, and then would have every incentive to safeguard that return, up to and including providing more democratized access to good jobs.

Oh, and since I don't see Prof. Zingales calling for the repeal of the 13th Amendment, at no time would people have to do anything their funders asked of them. Indeed, if graduated students chose not to work, their funders wouldn't get a dime. Slavery safely averted. Whew!
posted by downing street memo at 5:27 PM on June 14, 2012 [1 favorite]


Why do you all assume you wouldn't just design the pools so that they end up relatively equivalent to a pool of student loans in terms of expected return? It will still have a government guarantee. If the pool overearned the target you just use that money as a reserve for the inevitable pool that would underearn the target.

Why do you assume the payback period wouldn't phase out at some point?

I think those are very very fair concerns but I don't understand why it would have to be like that.
posted by JPD at 5:31 PM on June 14, 2012 [1 favorite]


You've gotta admit, it's a good gag the way these "the free market solves everything" people are always either tenured faculty (Glenn Reynolds, I'm looking at you) or safely ensconced at a corporate-funded think-tank. Good gag.
posted by octobersurprise at 5:31 PM on June 14, 2012 [1 favorite]


A little more on this at Marginal revolution.

What I like about these threads is how they remind me how malleable the human mind is, how it can twist itself into thinking horrible things are reasonable and good. Wait, wrong word, it's not what I LIKE about these threads, it's more the opposite. LOATHE, that's it yes.


Of course, the human mind can equally twist itself into believing that reasonable things are horrible and loathsome. But I am sure you are immune from such cognitive bias.

No. INSTEAD YOU GET ETERNAL WAGE GARNISHING. You can go to hell.

Not necessarily, but in any case yo I'm not clear what would be so awful aboutthis, since it would just be like paying a slightly higher rate of tax. In return for the education taht was provided free at the point of delivery.

So most likely, it would be a system by which someone pays one-time to get a percentage of a person's earnings in perpetuity, then employs that person. You know what happens if you take that system to 100%? YOU'VE RECREATED SLAVERY. Of course you don't have to take it to 100%, no, you could just become a partial slave, that's a great idea. To hell, go there.

Well, neither of your assumptions (employment by investor, or 100% income garnishment) sound even remotely credible, so why should I take your conclusion seriously?
posted by anigbrowl at 5:32 PM on June 14, 2012 [5 favorites]


You know, I was more thinking that rich people and rich corporations would fund peoples' educations with the expectation of a return, and then would have every incentive to safeguard that return, up to and including providing more democratized access to good jobs.

Who gets to define what a good return is? Who gets to define what a good job is?
posted by rtha at 5:32 PM on June 14, 2012 [1 favorite]


I think those are very very fair concerns but I don't understand why it would have to be like that.

Because finance capital always designs everything to maximally benefit themselves and maximally screw everybody else. We're just assuming it'd work the same way as everything else.
posted by gerryblog at 5:33 PM on June 14, 2012 [3 favorites]


The current system of taxpayer subsidization of public and non-elite private education is already on the way out; it's just not popular enough in a time of massive deficits that will be rising for 30+ years with the baby boomer retirement wave. Something innovative will need to come in to make up for it, and a system that organically links the funds provided with the individual value expected is a reasonable place to start.

(Something I find interesting is that the taxpayer subsidization of elite private education is actually increasing and will likely continue to do so, insofar as it is achieved mainly through exemption and deduction from (likely to rise) tax rates on endowment contributions, endowment income, sales and use tax, and property tax.)
posted by MattD at 5:40 PM on June 14, 2012 [2 favorites]


Because finance capital always designs everything to maximally benefit themselves and maximally screw everybody else. We're just assuming it'd work the same way as everything else.

So don't let the capital holders have a say. Tell them "federally guaranteed loans are gone. This is the new thing. Buy it, don't buy it. We don't care."
posted by JPD at 5:41 PM on June 14, 2012 [1 favorite]


Who gets to define what a good return is?

No one! I don't understand why this is so difficult for folks to understand. You wouldn't need some godlike creature to determine a good rate of return. Generally, a "good" rate of return is one that beats the return of other instruments for a given level of risk. How investors calculate this is up to them.

Who gets to define what a good job is?

Okay. Seriously sit and think about this for a second; suppose you're a millionaire and you want to bankroll my college education in exchange for, let's say, 10% of my income for the rest of my life. Say, further, that my education cost $100,000.

You'd need to make ($100,000 * average rate of return) + $1 to make your investment worthwhile. Say the average return is 4% compounded yearly; you'd need to make around $480,000 on me across a 40-year career to make your investment worthwhile. So in this case a "good" job is one that leads to a ($480,000 * 10) / 40 average salary across a career, or, around $120,000.

Now, say I'm unemployed. Aren't you going to give your business school buddy at MegaCorp a call and tell her all about me and what I'd have to offer their firm?
posted by downing street memo at 5:44 PM on June 14, 2012 [1 favorite]


When the predicate of "Seriously sit and think about this for a second" is "of course, millionaires will personally intervene in the lives of all the millions and millions of people who hold bachelor's degrees," I feel like one of us has lost the plot.
posted by gerryblog at 5:49 PM on June 14, 2012 [6 favorites]


Isn't anything above that really "to get a good job"?

and

what students really want out of an education: increased earning power.

Here we have a significant part of the problem. While every student might reasonably want "a good job," not every "good job" involves "increased earning power." People are, thankfully, motivated by a lot of things, money being only one of them. Perhaps the major failure of capitalism (or at least the way it is practiced in the American business world) is its need to reduce everything monetary value, preferably immediate monetary value. So the work of, say, a teacher can only be valued according to her salary (which, weirdly, the people who like this sort of thinking generally want reduced as far as possible). There is no way to account for intangibles like job satisfaction, living in the sort of place you like, or a sense of providing a useful service to the community. For most of the students I talk to, salary is not the most important thing on their minds. This system, if implemented, would make it the only thing on their minds.

And, if you think that this system, were it to be implemented, would not include safeguards for the investors making it difficult or impossible for a "beneficiary" to make decisions that would reduce his/her earning power, you are, I expect, very much mistaken.
posted by GenjiandProust at 5:51 PM on June 14, 2012 [2 favorites]


When the predicate of "Seriously sit and think about this for a second" is "of course, millionaires will personally intervene in the lives of all the millions and millions of people who hold bachelor's degrees," I feel like one of us has lost the plot.

In that scenario, millionaire rtha has money riding on my ability to get a good job. If I don't get a job, or if I get a low-paying, shitty job, rtha loses money.

Why wouldn't (s)he "personally intervene" in my life?
posted by downing street memo at 5:53 PM on June 14, 2012


A person who makes the median income for someone with a B.A. or higher in U.S., which was approximately $50,000 in 2011, paying your proposed 5%, would pay $100,000 between age 25 and 65, not factoring in inflation, lost investment income, etc. The average student debt load in 2011 was $25,000.

So? They'd make $2 million over the same period (assuming the same 0% inflation) which is exactly what I said above. Say the non-college median income is $25,000, the college graduate is earning an extra $1 million over his/her working life. Assuming that you don't have any kind of cap, something which I indicated I was quite prepared to consider.

People are (obviously!) going to come out way worse under a situation where they never stop paying the banks for their education.

Right now their obligation goes up even if their income stagnates or goes into decline. Why do you think the administration is arguing to move up the IBR mechanism? As for paying the banks, that's a red herring. I don't really care who it does to; if the government puts up the money it'll do so by selling 30 year treasury bonds anyway.

If I owe $25,000 in 1998 dollars, inflation is my ally. If I owe 5% in current dollars perpetually, I don't benefit from inflation at all, but have to pay 5% of my income regardless of whether my wages have risen commensurate with inflation or not. Given that inflation is constant, why would I trade my debt for a peonage system?

You don't owe $25,000 in 1998 dollars unless you have an interest-free loan or your interest rate is below the rate of inflation. If your income has failed to keep pace with inflation, then youreducation cost is also going to be below the rate of inflation. It's 5% of your income, not 5% of your consumption. Your arguments don't make a lick of sense.

No it isn't, any more than taxation is tantamount to being a slave of the state, for life. I feel like I'm talking to a cartoon here. Do you consider income taxes slavery? Because that's the argument you're making. I don't consider income taxes slavery, even though if I earned a fuckton of money I'd end up paying much more income tax, I owe tax on the income I make through my lifetime, and so on.

You don't pay permanent income tax to a private bank.


That's not what I asked you. do you consider permanent financial obligation slavery or not? If you do, then taxes are a form of enslavement and the only difference is whether you're a privately or publicly owned slave, which I suggest to you is a distinctly secondary problem that of being a slave. Again, I do not consider taxes to be a form of slavery., any more than if I owned shares in a bank I would consider the bank employees to be my slaves.
posted by anigbrowl at 5:53 PM on June 14, 2012 [1 favorite]


Marvelous idea /sarcasm.
posted by arcticseal at 5:58 PM on June 14, 2012


Why have universities at all? Why not just apprentice all the promising kids to the most profitable corporations directly out of (private) school?
posted by octobersurprise at 5:58 PM on June 14, 2012 [1 favorite]


While every student might reasonably want "a good job," not every "good job" involves "increased earning power." People are, thankfully, motivated by a lot of things, money being only one of them...So the work of, say, a teacher...

Then this sounds like a really great way to get millionaires on board with paying teachers more, doesn't it?
posted by downing street memo at 6:03 PM on June 14, 2012


Education is a public good. This is an attempt to privatise the profits from that public good, but only if said profits come from a poor person. It's hard to argue that our current system of onerous loans is good, but this proposal that people who were born poor should forever have a higher tax rate is definitely worse.
posted by pmb at 6:05 PM on June 14, 2012


This is an attempt to privatise the profits from that public good

It also privatizes the losses.
posted by JPD at 6:11 PM on June 14, 2012 [2 favorites]


Why wouldn't (s)he "personally intervene" in my life?

Does the bank personally intervene in your life when you're about to be foreclosed upon, and get you a good job so you can keep paying? We're talking about millions of people; this is a faceless bureaucracy we're implementing, not something that can be micromanaged at the level of the individual.

So? They'd make $2 million over the same period (assuming the same 0% inflation) which is exactly what I said above. Say the non-college median income is $25,000, the college graduate is earning an extra $1 million over his/her working life. Assuming that you don't have any kind of cap, something which I indicated I was quite prepared to consider.

What you actually wrote is: Since your obligation is a function of your income, if you end up forking out hundreds of thousands it's because you're earning a few million. Why not even make it progressive? If you start earning fuckloads of money, you pay a slightly greater proportion of it. I can't see how earning the median income is properly described as "earning fuckloads."

That's not what I asked you. do you consider permanent financial obligation slavery or not?

The population has democratic control over its taxation rate and what it is spent on. Neither obtains with your proposed banking system. They're not parallel in any meaningful way.

You don't owe $25,000 in 1998 dollars unless you have an interest-free loan or your interest rate is below the rate of inflation.

I think you need to look at the math on that again. Your interest rate is constant -- so the higher the inflation rate is, the less the amount you owe is increasing each year. (Compare the difference: my debt is increasing 6% a year while inflation is 0%, vs my debt has a 6% interest rate while inflation is 5%. In the second case I have a 1% effective interest rate; inflation eats the rest.) This is why people who own debts hate inflation, and people who owe money love it.
posted by gerryblog at 6:11 PM on June 14, 2012 [2 favorites]


As it stands, the funders of education (the Federal Government, by and large) have no particular interest in the post-college earning power of the funded.

Sure. Except for, you know, taxes 'n' shit.
posted by erniepan at 6:12 PM on June 14, 2012 [1 favorite]


I wonder what would have happened if the Founding Fathers explicitly identified education as a right in the Constitution or its amendments. Well, one can dream. But in the meantime, one could be swallowed whole in the minutiae of money.....
posted by the littlest brussels sprout at 6:15 PM on June 14, 2012


For most of the students I talk to, salary is not the most important thing on their minds. This system, if implemented, would make it the only thing on their minds.

If you're paying a fixed percentage rather than a fixed nominal amount, wouldn't that make you more free to pursue your non-monetary goals, since the amount you pay decreases proportionally with your income? If you have a standard loan, the loan payments hurt you more the lower your income becomes, and can trap you into a vicious cycle of debt unless you can keep up.
posted by Pyry at 6:16 PM on June 14, 2012 [2 favorites]


If you're paying a fixed percentage rather than a fixed nominal amount, wouldn't that make you more free to pursue your non-monetary goals, since the amount you pay decreases proportionally with your income?

But, like, slavery and 100% garnishing.
posted by kithrater at 6:17 PM on June 14, 2012 [1 favorite]


Does the bank personally intervene in your life when you're about to be foreclosed upon, and get you a good job so you can keep paying?

No, because it's cheaper for them to repossess your house and sell it back to recoup part of their money, than it is to labor-intensively help people out one-by-one.

You can't repossess an education.

At the end of the day, this is an excellent way to get millionaires on board with Keynesian policies. The more people get paid, the more they get paid!
posted by downing street memo at 6:17 PM on June 14, 2012 [2 favorites]


For what it's worth, taxes are what I pay the government to have roads and police officers and firemen and shit.

If I am paying a private corporation money my whole life - a private corporation that isn't providing me with roads or police officers or the FDA - then I'm not really paying taxes.

Presumably, I still would be paying taxes so the EPA can help make sure there's no lead in my drinking water after I paid my loan lien (or whatever word you want to call it that isn't taxes - how about "fruit basket?") to the bank.

Now, if this were a system where-by the government paid for my education and then I paid a percentage of my income every year to them so they could afford to have a military and schools, that would be taxes. Presumably, that would also be considered socialism since we were paying money to the government to benefit everyone instead of to a bank to benefit shareholders.
posted by Joey Michaels at 6:20 PM on June 14, 2012 [5 favorites]


So, uh, what about the students who graduate high school with low SAT scores? Who is going to invest in them through loans?

Wait, what if I'm a female with a 4.0 and a 2400 on the SAT going to (choose your fave school,) the best school in the nation? Will I find someone to sponsor my loan? Because the problem is, statistically I am going to make about 75% of the overall wage of a comparable male going to my same school. Since statistics say that I'm not going to perform as well as comparable males from the perspective of returns on any investment in me, does that mean that my sponsor is going to give me a worse deal in initial investment than the guy in the line next to me at graduation even though we are co-salutarians? Of course they will! That's just good business sense!

Sure, the banks could agitate to equalize pay across gender and race so as to maximize their investments, but that's a lot of work. Probably they will just put all of their energy into those students that have a history of earning the highest salaries. So you're female, a person of color, from a low-income background, short or have any other combination of traits that affect wages in the USA? Well, maybe the banks will still give you that loan, but they'll want you to pay out a higher percentage of wages...you know, to insulate against the "risk."

Sounds like fun guys! This way I can get an exact picture of my estimated worth to society! Where can I sign up? I have a Master's I've been meaning to get...
posted by newg at 6:20 PM on June 14, 2012 [15 favorites]


No, because it's cheaper for them to repossess your house and sell it back to recoup part of their money, than it is to labor-intensively help people out one-by-one.

But the bank IS going to labor-intensively help people out one-by-one in this case, getting them all high-paying jobs at nearby Mega Corp, rather than just wait out periods of higher-than-usual unemployment, which (Great Recession aside) have tended to be relatively short?

I really don't see it happening.
posted by gerryblog at 6:20 PM on June 14, 2012


But the bank IS going to labor-intensively help people out one-by-one in this case, getting them all high-paying jobs at nearby Mega Corp, rather than just wait out periods of higher-than-usual unemployment, which (Great Recession aside) have tended to be relatively short?

If I ran a bank, or any kind of theoretical fund investing in students along this model, I'd do everything I could to maintain a good revenue stream from those investments, especially during recessions, when things of great value can be had for cheap.
posted by downing street memo at 6:26 PM on June 14, 2012


You're talking about lenders micromanaging the individual careers of millions of people all across the country! This is totally batty.
posted by gerryblog at 6:27 PM on June 14, 2012 [3 favorites]


Hi, millionaire rtha here.

No, I will not personally intervene on your behalf, because I don't know who the fuck you are. You are one of the thousands of people that my firm has bet on. We'll lose on some of you, ideally win on more. But this has to be at a huge scale to work. Right now, there are banks that bet on students when those students borrowed tuition money from them, and banks are not intervening when those students get shitty paying jobs or no jobs. Why would your system be different in this respect?
posted by rtha at 6:28 PM on June 14, 2012 [2 favorites]


Right now, there are banks that bet on students when those students borrowed tuition money from them, and banks are not intervening when those students get shitty paying jobs or no jobs. Why would your system be different in this respect?

Because the loans are not dischargeable in bankruptcy! Those banks are going to get repaid regardless of how the lender fares on the job market. It might take 60 years, but they're going to make their money back. They have zero incentive to step in and help out.
posted by downing street memo at 6:32 PM on June 14, 2012 [1 favorite]


And that's the only thing stopping them from helpfully intervening on behalf of millions of students?
posted by rtha at 6:34 PM on June 14, 2012 [1 favorite]


Then this sounds like a really great way to get millionaires on board with paying teachers more, doesn't it?

No, it sounds like a good way to make sure that education students cannot get loans for their education. More likely, we would end up with a two-tiered system where private investors would "support" students in programs that are likely to lead to a high pay off and the government supporting students (although with less tax revenue and schools with (I imagine) less alumni support) in low-paying but necessary fields. Kind of like the way we have privatized the lucrative urban package delivery services while leaving the Post Office the more costly letter and rural delivery duties. Profits are for private investor, costs are for the public sector.
posted by GenjiandProust at 6:36 PM on June 14, 2012 [3 favorites]


There is no way to account for intangibles like job satisfaction, living in the sort of place you like, or a sense of providing a useful service to the community. For most of the students I talk to, salary is not the most important thing on their minds. This system, if implemented, would make it the only thing on their minds.

This is wrong. First, we most certainly can account for intangibles. You can make inferences about the utility of things like white picket fences by measuring the opportunity cost associated with them, and group such things into what economists call a composite bundle. Second, this system wouldn't make salary the uppermost consideration because working for a lower salary would result in lower education payments. If you owe a fixed amount then you do have to worry about salary a lot more because you will owe that same amount (plus interest) whether you have a low or a high salary. So you reduce your indebtedness (you hope) by pursuing a high salary. If your obligation is fixed at 5 or 10% of your income, then you can get by with a lower salary and the result is a positive externality.

So? They'd make $2 million over the same period (assuming the same 0% inflation) which is exactly what I said above. Say the non-college median income is $25,000, the college graduate is earning an extra $1 million over his/her working life. Assuming that you don't have any kind of cap, something which I indicated I was quite prepared to consider.

What you actually wrote is:
Since your obligation is a function of your income, if you end up forking out hundreds of thousands it's because you're earning a few million. Why not even make it progressive? If you start earning fuckloads of money, you pay a slightly greater proportion of it. I can't see how earning the median income is properly described as "earning fuckloads."

I'm not claiming that it is. That's a separate proposition. That's why it is in a different sentence, following a hypothetical question to introduce a new concept.

That's not what I asked you. do you consider permanent financial obligation slavery or not?

The population has democratic control over its taxation rate and what it is spent on. Neither obtains with your proposed banking system. They're not parallel in any meaningful way.


I'm not proposing a banking system. I don't care whether the government or a private investors put up the money. It's irrelevant. Now answer the question, do you consider taxation a form of state slavery, or not?

I think you need to look at the math on that again. Your interest rate is constant -- so the higher the inflation rate is, the less the amount you owe is increasing each year. (Compare the difference: my debt is increasing 6% a year while inflation is 0%, vs my debt has a 6% interest rate while inflation is 5%. In the second case I have a 1% effective interest rate; inflation eats the rest.)

You are aware that not all debts are at a fixed interest rate, right? And that the interest rate (fixed or floating) consists of the lender's estimate of future inflation plus a risk premium, right? so that unless inflation goes up substantially, the interest rate will still exceed inflation, and the accrued (compound) interest on your outstanding principal can grow faster than income?

This is why people who own debts hate inflation, and people who owe money love it.

You know who else hates inflation? People who have savings accounts...those filthy capitalists.
posted by anigbrowl at 6:36 PM on June 14, 2012 [1 favorite]


I think the more important intervention is that lenders would naturally support, at the margin, expansionary economic policy. But yes, if I had invested in students' future earnings and found that I was losing more than I was winning, I'd do whatever possible to ensure my investment paid off.
posted by downing street memo at 6:39 PM on June 14, 2012


I would say it would probably work like it does with insurance: my renter's insurance agency isn't going to come and micro-manage my apartment complex to minimize the risk of fires, but they will give me a discount for owning a fire-extinguisher. If I'm running a student income tax loan provider, I'm not going to micro-manage individual students, but I might partner with someone like monster.com (is that still a thing?) and give the students in my pool discounts or other incentives for actively seeking jobs (or higher-paying jobs if they're already employed).
posted by Pyry at 6:41 PM on June 14, 2012 [3 favorites]


You can get a 2400 on the SAT now? Shit. Also, downing street memo, you are thinking on way too small a scale. Your interest doesn't scale up, as people are trying to point out.
posted by adamdschneider at 6:43 PM on June 14, 2012


Ya load sixteen tons, whaddaya get...
posted by jonmc at 6:45 PM on June 14, 2012


You are aware that not all debts are at a fixed interest rate, right? And that the interest rate (fixed or floating) consists of the lender's estimate of future inflation plus a risk premium, right? so that unless inflation goes up substantially, the interest rate will still exceed inflation, and the accrued (compound) interest on your outstanding principal can grow faster than income?

You're being awfully condescending for someone whose basic point is 100% incorrect. Inflation helps the person who owes money in 19xx dollars relative to the person who owes a fixed percentage of their income in current dollars, and there is always inflation.

It's true that not all debts are at a fixed interest rate, but most (I believe nearly all) education debt is. And the issue is not whether the interest rate exceeds inflation -- the issue is how much inflation cuts into the interest owed. The relative cost of $25,000, borrowed in 19xx and paid back over a decades of inflation, will diminish as a percentage of current nominal income as the currency devalues; a fixed x% rate in current dollars will always stay the same regardless of what happens with inflation. This is super basic.
posted by gerryblog at 6:47 PM on June 14, 2012 [2 favorites]


So, uh, what about the students who graduate high school with low SAT scores? Who is going to invest in them through loans?

Nobody, unless they resit the test or take AP-type exams or something to make up the academic deficit. But they won't have to pay the 'college tax' so they'll retain a greater share of their income.

Now, if this were a system where-by the government paid for my education and then I paid a percentage of my income every year to them so they could afford to have a military and schools, that would be taxes.

Yeah, but right now people who don't go to college subsidize the education of those who do, when it really ought to be the other way around. So you pay a higher rate of tax if you're educated because you have access to a wider range of opportunities.

You're talking about lenders micromanaging the individual careers of millions of people all across the country! This is totally batty.

You're assuming that. How it would actually work in practice is that you'd be asking commercial borrowers how many jobs this loan their seeking was likely to generate.
posted by anigbrowl at 6:47 PM on June 14, 2012


As for the rest of it: (1) the whole point of bringing up the median income person was to disprove your claim that the only way you'd wind up paying hundreds of thousands is if you were "earning fuckloads" (2) no, taxation is not slavery.
posted by gerryblog at 6:51 PM on June 14, 2012 [1 favorite]


This discussion demonstrates one thing: that 21st century capitalism is very like 20th century communism in one respect. To the true believers it can never fail; it can only be failed.
posted by octobersurprise at 6:51 PM on June 14, 2012 [11 favorites]


You're being awfully condescending for someone whose basic point is 100% incorrect. Inflation helps the person who owes money in 19xx dollars relative to the person who owes a fixed percentage of their income in current dollars, and there is always inflation.

No, my basic point is not incorrect, for 3 reasons. First, you assume a fixed interest rate. Some people have loans with floating interest rates. Second, you assume a steady income. If you lose your job or are disabled, your income plummets (notwithstanding inflation) but your obligation, crucially, does not. Also, you don't have the option of taking a lower-paying job unless you're willing to see your loan payments rise as a percentage of your income. Third, there is not always inflation. There is such a thing as deflation.

This is super basic.

So's having to service your loan payments when you're unemployed, because the interest keeps accruing. This has been a widespread problem lately because a lot of people lost their jobs, so their income went down while their obligations kept going up. You can't inflate your debt away if you don't have any money to service it with.
posted by anigbrowl at 7:01 PM on June 14, 2012


No, my basic point is not incorrect, for 3 reasons. First, you assume a fixed interest rate. Some people have loans with floating interest rates.

Again, most education debt is at a fixed rate, and even floating rates can only increase at established, regular rates, not willy-nilly.

Second, you assume a steady income. If you lose your job or are disabled, your income plummets (notwithstanding inflation) but your obligation, crucially, does not. Also, you don't have the option of taking a lower-paying job unless you're willing to see your loan payments rise as a percentage of your income.

This has nothing to do with whether inflation devalues the cost of a loan relative to the baseline. In any event, hardship deferments exist, as does discharge in the event of permanent disability.

As for the taking a lower-paying job issue, I agree with the people upthread who have argued that the system will be rigged to prevent this, as well as to prevent deferred compensation, reduced workload schemes, noncompensatory perks, etc. Bankers will get their money, because they always do.

In any event, the majority of people have steady or steadily rising incomes, both as a result of inflation and as a result of earning more money as they get older. As a result most people will be worse off under your scheme.

Third, there is not always inflation. There is such a thing as deflation.

Fine, but prolonged deflation is very rare. Inflation has been the rule for centuries, especially in cases (like ours) where the government owes a lot of money and would prefer not to pay it back.

--
Look, you're putting me in the position of defending the status quo, which is terrible. But enslaving ourselves to the banks would definitely be worse for any number of reasons. We should just raise taxes on rich people and go back to funding state universities, like we used to. There's no reason to bring back feudalism over this.
posted by gerryblog at 7:11 PM on June 14, 2012 [2 favorites]


Christ, what an asshole.
posted by ioerror at 7:15 PM on June 14, 2012


As for the rest of it: (1) the whole point of bringing up the median income person was to disprove your claim that the only way you'd wind up paying hundreds of thousands is if you were "earning fuckloads"

I pointed out that if you paid out in the hundreds of thousands it would be because your had earned a few million over that period, which was exactly commensurate with the example you offered. I then commented, as a separate matter, that if someone were earning fuckloads (like several hundred thousand a year and upwards), then it could be slightly progressive.

If you don't think taxes are slavery, then would you be OK with a graduate tax that was paid to the government? I would - in fact, this strikes me as the most sensible way to implement the scheme, because then the government can sell bonds in a pool instead of students' being evaluated by lenders on a case-by-case basis, and the surplus flows back to the public after the bondholders are paid.
posted by anigbrowl at 7:16 PM on June 14, 2012


If you don't think taxes are slavery, then would you be OK with a graduate tax that was paid to the government?

I would be more okay with that having people permanently owe x% of their income to a banker or millionaire. But this whole idea that government is transactional is nonsense to me; higher education is a public good and should be paid for out of public moneys, just like police, firefighters, roads, etc. We don't have to invent special systems to make sure that no one is accidentally "charged" for the public university system who didn't "benefit"; everyone benefits from common goods.

Just pay for it with taxes, like we used to, and everything will be fine.
posted by gerryblog at 7:21 PM on June 14, 2012 [1 favorite]


I just love people who genuinely cannot tell the difference between a private corporation and a government.

People: you are hilarious, and I thank you.
posted by aramaic at 7:30 PM on June 14, 2012 [2 favorites]


Again, most education debt is at a fixed rate, and even floating rates can only increase at established, regular rates, not willy-nilly.

Well, what about the education debt that's not at a fixed rate, those people don't matter? Having once had a variable rate mortgage during a unexpected and brutal recession/real estate crash, I can assure you that your repayments can indeed increase willy-nilly.

This has nothing to do with whether inflation devalues the cost of a loan relative to the baseline. In any event, hardship deferments exist, as does discharge in the event of permanent disability.

But it's got a great to do with whether percentage-based repayments impose a higher or lower financial burden. If you are on such a system and your income goes down, so do your payments, automatically, without any administrative overhead of seeking deferments and so on.

As for the taking a lower-paying job issue, I agree with the people upthread who have argued that the system will be rigged to prevent this, as well as to prevent deferred compensation, reduced workload schemes, noncompensatory perks, etc. Bankers will get their money, because they always do.

I don't see any such argument, just evidence-free claims to that effect.

Fine, but prolonged deflation is very rare. Inflation has been the rule for centuries, especially in cases (like ours) where the government owes a lot of money and would prefer not to pay it back.

Inflation is certainly pervasive, but deflation is more common than you would think. Again, inflation is a debtor's friend but a saver's enemy, and I don't think it's a particularly good thing - it certainly shouldn't be the basis of a personal finance strategy.

Look, you're putting me in the position of defending the status quo, which is terrible. But enslaving ourselves to the banks would definitely be worse for any number of reasons. We should just raise taxes on rich people and go back to funding state universities, like we used to. There's no reason to bring back feudalism over this.

Well, you haven't actually shown how this ends up enslaving anyone, and you've ignored my suggestion that there could be a cap on the total amount paid or that government itself could be the creditor. The basic characteristic of this plan is that if you take advantage of higher education you return a percentage of your subsequent earnings. You're obsessed with the thought that this might end up in the hands of the banks, whereas I really don't care about that but I do like the idea that a) it's prorated and b) people with more education give back some of their increased earnings, both of which sound vastly more sustainable than the current system, which is manifestly unfair.
posted by anigbrowl at 7:35 PM on June 14, 2012


LOL at the people who think that further financializing eduction is going to end well. Rentiers gonna rent.

Evidence? I present to you...the housing crisis. But hey. Why not feudalize America, we may get some epics out of it and that makes it all worth it.

If you're shilling for this program, seriously, fuck you, you're blind or willfully ignorant.
posted by wuwei at 7:39 PM on June 14, 2012 [2 favorites]


Well, what about the education debt that's not at a fixed rate, those people don't matter?

The vast majority of education debt is at a fixed rate, and such debt diminishes with inflation. To the extent that some debt is at a floating rate, that's not relevant; if that debt is pegged to inflation, it'll just have the same outcome as a person who pays a regular x% in current.

If you are on such a system and your income goes down, so do your payments, automatically, without any administrative overhead of seeking deferments and so on.

...at the cost of a massive increase in administrative overhead making sure every person's lender gets repaid the proper percentage of their salary in perpetuity.

Again, I'm sure there are some cases where you'd be better off paying x% of your salary forever, but that won't be the general case. Even now in the heights of the Great Recession we're not majorities of people permanently un- and underemployed, and this is the worst financial crisis in decades; your arguments are appealing emotionally to a desire for risk avoidance rather than how the numbers actually compare.

Again, inflation is a debtor's friend but a saver's enemy

I'm not arguing inflation is good or bad, just that it exists and will continue to exist. Student borrowers benefit from inflation's existence under the current paradigm, but they won't under the proposed scheme.
posted by gerryblog at 7:48 PM on June 14, 2012


The real question is why we should be subsidizing 4-year college vacations. There are some technical professions for which that might be necessary, but for the vast majority, the whole thing could be done in far shorter time.

The truth is that tuition loans and grants have been exactly what have pumped up college prices to absurd levels. And the money often gets spent on ice hockey rinks, killer dorms, and literally endless layers of university administration. Hey, it's great fun, but let's be serious: it's hardly a public necessity.

Phil Greenspun, MIT professor who started his own 1-year CS program (tuition-free) on improving undergraduate education:

The calendar was designed for rich families. You want your kid available in the winter so that you can take him down to your estate in Florida. You want him free to accompany you on a Grand Tour of Europe during the summer. In 2007, however, most college students are from middle-class families. Why would you want to pay for the kid to attend four years of college, plus spring break trips to Mexico and summer vacations, when a bachelor’s degree could be obtained in 2.5 years on a normal 48-week/year work schedule?
posted by shivohum at 7:48 PM on June 14, 2012 [3 favorites]


But this whole idea that government is transactional is nonsense to me; higher education is a public good and should be paid for out of public moneys, just like police, firefighters, roads, etc. We don't have to invent special systems to make sure that no one is accidentally "charged" for the public university system who didn't "benefit"; everyone benefits from common goods.

Not to the same degree, they don't. I am fine with the idea of government being transactional. You pay tax on gas in proportion to the amount you use, and most of that goes to roads. I keep my trash/recycling bill low by opting for the smallest trash collection option, and I manage my waste more carefully. I don't think massively subsidized college education benefits society nearly as much as people assert, but rather depresses the earnings of non-college-educated people through credentialism while (recently) putting educated people in an unconscionable debt trap. Simply saying 'let's put taxes back up' is reasonable to some degree, but ignores the spiralling cost of education delivery.
posted by anigbrowl at 7:49 PM on June 14, 2012


...it'll just have the same outcome as a person who pays a regular x% in current DOLLARS.
posted by gerryblog at 7:49 PM on June 14, 2012


The basic characteristic of this plan is that if you take advantage of higher education you return a percentage of your subsequent earnings.

Corporations would NEVER accept a deal that said "if you take advantage of the American business structure you return a percentage of your subsequent earnings".

I'll pass too, thanks.

(This really is a company-store-program pig wearing lipstick.)
posted by Benny Andajetz at 7:50 PM on June 14, 2012 [1 favorite]


...at the cost of a massive increase in administrative overhead making sure every person's lender gets repaid the proper percentage of their salary in perpetuity.

What massive increase? It can just be a line on your tax return (more so if you pay government rather than a private lender), or you produce a certificate of tax liability once a year to confirm your taxable income to the loan servicer. It would be trivial to administer, most people would just submit a copy of their w-2 like they would for any other loan.

As for 'in perpetuity,' please stop belaboring this point, which I've already indicated I'm flexible on.

your arguments are appealing emotionally to a desire for risk avoidance rather than how the numbers actually compare.

What emotional appeal? I'm not the one wailing about slavery and feudalism. Risk avoidance is a good thing, for the same reason that insuring your house is wise and saving some of your paycheck is a good thing, notwithstanding people like yourself touting the virtues of inflation. As you can tell, I'm not a fan of unmanageable debt.

There's something of an irony in you fulminating about how evil banks are and then complaining that I'm promoting risk avoidance.
posted by anigbrowl at 8:04 PM on June 14, 2012


In 2007, however, most college students are from middle-class families. Why would you want to pay for the kid to attend four years of college, plus spring break trips to Mexico and summer vacations, when a bachelor’s degree could be obtained in 2.5 years on a normal 48-week/year work schedule?

Ah yes, who can forget the mandatory spring break trips to Mexico? Almost everyone I know was glad for a break here and there to see their families and, if they could find a job or two, spent the summer months trying to put together enough cash to make it through the next year.
posted by ODiV at 8:21 PM on June 14, 2012 [3 favorites]


In general, I tend to view the University of Chicago School of Economics as the Spherical Cow Institute for Modern Feudalism, and in some ways this is certainly no different. He is laughably optimistic about his expectations and even more naive about the goodwill he imagines these firms would have were this to be implemented, methinks. But I can see a number of beneficiaries from this, as well as a number of classes I can picture getting screwed.

Beneficiaries include the current middle class, for a generation or two. A shift from debt to equity would allow current parents to have to worry less about paying for their kids educations, and allow them to build more wealth in the short term. Of course, that gets paid back down the line...

Another big, big beneficiary I could see would be international students, particularly from Asia. Demographically, a group already composed of the brightest and most talented from their nations, coming to the U.S. because of the strength of the universities here, and overwhelmingly going into high-yield fields such as medicine, law, computer science and engineering. From a firm's standpoint, these students present the greatest and most bankable ROI, and in a sense, that's fine, but it also creates issues when American students are being squeezed out financially in favor of international students.

As far as those getting screwed, first and foremost I picture women. Now, here the legal issues get tricky, but between the travesty of an earning power differential and the higher likelihood of a female student not entering the workforce, or entering for a more truncated period, after college and you've suddenly got "legitimate" reasons for the firms to prefer male students for their investments. In a government-run program, this wouldn't matter, as gender-based preference would be unconstitutional. Same with a private institution running this program in conjunction with a public university (and he doesn't make it entirely clear if this is the way he expects this sort of program to work or not, but it seems like he does.) But with private firms and private schools, there would possibly be no state actor in place, and thus the firms would have every reason to screw over individual young women based not on what they will themselves do in the future (as if one could know) but rather on the current earning potential of women, and that's a bad, bad situation.

On a similar note, I don't think the banks are foolish enough to not foresee a way to hammer single-income families on this. Now, in most ways this isn't actually any different from the current student-loan-debt situation, but it still could hamstring family planning choices if one partner is suddenly being "taxed" at a higher rate because the other partner chose to stay at home.

Additionally, lower-yield majors, obviously, get the shaft a bit here. Zingales says that the superstar students subsidize the rest of them. He also says that while top-tier schools already have endowment systems in place which somewhat replicate this on their own terms, this is really tailor made for the next tier down. This makes me believe that the financing in his model would be funded by private firms, but through the schools themselves. To get the best analogy for how this would play out, picture college sports, with tons of different teams, but all of the revenue coming from football and, to a much lesser extent, basketball. Now remove Title IX from the equation. Suddenly you've got one or two areas producing revenue, and little reason to keep the others at all, or at least fund them well. When the business school and medical school and law school are subsidizing the arts and humanities, it becomes harder for those arts and humanities programs to justify their existences.

And I might be wrong about all of this. As I said at the top, I'm biased against the Chicago School, which always seems to be me to be playing a game with policy of doing system design with the constant ultimate goal of driving all power and money towards private equity. But in any case, let's look at the two real scenarios here, based on what the banks would need to make this worthwhile for them:

1. It is a micromanaged system. Private firms now have control over who goes to college and what majors they may study.

2. It is not micromanaged. Banks are guaranteeing that they get even a greater percentage of the earnings from the next generation than they already have.

Neither looks at all good to me. The current system is awful, and needs to be fixed or replaced. The Australian Model looks like a decent place to start, but not like this.
posted by Navelgazer at 8:27 PM on June 14, 2012 [7 favorites]


In exchange for their capital, the investors would receive a fraction of a student’s future income — or, even better, a fraction of the increase in her income that derives from college attendance.

I think the latter proposal means they would like to pay me an annual stipend.
posted by pullayup at 8:52 PM on June 14, 2012


academia being, according to his op-ed, "the least competitive and most subsidized industry of all"

hahahahahahahaha*snort*
posted by en forme de poire at 8:53 PM on June 14, 2012 [1 favorite]


But yes, if I had invested in students' future earnings and found that I was losing more than I was winning, I'd do whatever possible to ensure my investment paid off.

Yes, people wouldn't get laid off. They'd have their contract sold to farm owners or Internet spammers for pennies on the dollar, just like we do with foreclosures and other unpaid debts.

(I'm guessing this Libertarian paradise wouldn't have minimum wage, or unemployment insurance, or welfare, or food stamps. I bet it would have ironclad contract laws, though)
posted by dirigibleman at 9:37 PM on June 14, 2012


The proposed idea sounds tedious and stifling. That's why it's a bad idea.
posted by polymodus at 10:00 PM on June 14, 2012


academia being, according to his op-ed, "the least competitive and most subsidized industry of all"

hahahahahahahaha*snort*
posted by en forme de poire at 20:53 on June 14 [+] [!]


Seriously. Not competitive? No incentive to innovate? I just...

The fact that we are actually debating in this thread whether this is or is not a good idea is further proof that we have collectively lost it. Further privatization of education is absolutely not the solution to solving the nation's crippling student loan debt, and I'll defer to the excellent points made by gerryblog and Navelgazer, above. Navelgazer in particular makes very good points on how such a system would disproportionately affect women (and couldn't we also say minorities?). I'd be interested to hear how the champions of Zabales talk their way out of that one.

To those offering up theoretical after theoretical as "evidence" that the theoreticals of others are somehow incorrect, I can only laugh and shake my head. Seriously--this entire conversation is predicated on hypotheticals, so the smarmy condescension is super unnecessary when none of us have any more details than those hazily drawn up in this ridiculous fucking op-ed.
posted by nonmerci at 10:03 PM on June 14, 2012 [2 favorites]


So what? If it were contract-based rather than government run (which I'm not advocating), whoever bought the underperforming asset wouldn't be able to put the squeeze on you anyway.

Honestly, I've never seen so much ideological handwaving.
posted by anigbrowl at 10:04 PM on June 14, 2012


So what? If it were contract-based rather than government run (which I'm not advocating),

Robert McCormack is advocating it, as are others in this thread. To be honest, I'm not sure what you're advocating at this point, or how this "government run" system would be any different than the Australian system, or the current system under income-based repayment.

whoever bought the underperforming asset wouldn't be able to put the squeeze on you anyway.

Why not?
posted by dirigibleman at 10:13 PM on June 14, 2012


So, how will this system deal with processing students to see if they're a good risk? Will there be health checks to ensure you don't die at 30? Will it have long range forecasts for which degrees are profitable? How will it avoid law school bubbles? How will it weight institutional choice? (There are only so many places at higher tier institutions, after all, although everyone is going to want to buy shares in Harvard students.) Why should government help the free market collect money if the free market is so capable of doing all? How are they going to weigh foreign degrees of students coming into the US system? And if academia is so shite why does this guy want them involved in selecting students at all? Shoudn't those decisions be in the hands of companies? Etc, etc.

Of course it's a horrible idea, not just because it would create a class of indentured servants, but because many financial institutions have proven that not only will they hire incompetents, but they'll reward many of them for failure (having defined failure as success, naturally) and these are the people we would ask to work out what areas of education should ultimately be funded. Are JP Morgan really going to be able to manage a system as massively complex as third level education? Are the people who were involved in creating the subprime mortgage fiasco capable of long range thinking?
posted by lesbiassparrow at 10:18 PM on June 14, 2012 [3 favorites]


It should be the universities that are (partially) repaid this way, not private companies. If universities have more skin in the game of how many graduates succeed long-term, it will kill quite a few of the perverse incentives with one stone.

It would also kill non-vocational education, so would have to be managed carefully...
posted by -harlequin- at 10:19 PM on June 14, 2012


Getting back to the op-ed, the problem statement is fine. It's very honest and accurate; government guaranteed student loans, serviced by the banks, created a flood of credit disconnected from risk, which basically was free money for the universities, allowing tuition to skyrocket.

It's his solution that sucks: it's the financial sector exploiting the problem rather than trying to solve it -- which in a nutshell is what the financial sector does: it's precisely the behavior you're asking for and should expect any time you run to the private sector for solutions to public problems. "Market-based solutions" are like every other aspect of capitalism: it exploits conditions, it doesn't try to change them. Changing the world is what the public sector is supposed to be for, and we need to stop starving it.
posted by George_Spiggott at 10:53 PM on June 14, 2012 [3 favorites]


And if academia is so shite why does this guy want them involved in selecting students at all?

Hint: he doesn't.
posted by junco at 10:55 PM on June 14, 2012


Again, inflation is a debtor's friend but a saver's enemy, and I don't think it's a particularly good thing

You might as well have an opinion as to whether gravity is good or bad. Inflation is clearly a common property of economies. Economic policies attempt to control it sufficiently to render it predictable, but none of any merit consider it "not good." Obviously runaway inflation is bad; but, similar sudden changes in gravity would render you into a pancake, and it is for similar reasons of scale that sudden large changes in inflation are bad for one's bank accounts.
posted by mek at 10:57 PM on June 14, 2012


Phil Greenspun, MIT professor who started his own 1-year CS program (tuition-free) on improving undergraduate education:

The calendar was designed for rich families. You want your kid available in the winter so that you can take him down to your estate in Florida. You want him free to accompany you on a Grand Tour of Europe during the summer. In 2007, however, most college students are from middle-class families. Why would you want to pay for the kid to attend four years of college, plus spring break trips to Mexico and summer vacations, when a bachelor’s degree could be obtained in 2.5 years on a normal 48-week/year work schedule?


Ah, so, then, someone openly advocating that life should suck for all the poors, just like it did back in good old feudal serfdom. How refreshing!
posted by junco at 10:59 PM on June 14, 2012


whoever bought the underperforming asset wouldn't be able to put the squeeze on you anyway.

Why not?


Because the hypothetical is that you are contracted to pay a set %age of your income. Even if the note were traded, there's no real way to foreclose because the obligation is prorated at a fixed fraction of income.

Inflation is clearly a common property of economies.

Sure, but as I said above it shouldn't be the cornerstone of your personal/educational finance strategy.

There are some particular law schools I'd like to attend and could easily handle academically, but you know how pricey law school is. I could probably get some scholarships, but hat part of financing is woefully untransparent and time consuming. And I really don't like the idea of taking out $100k+ in loans. Income-based repayment is one tool (that I've talked about for a while), and there are some assistance programs for doing public service type law, but the areas I'm interested in don't pay that well, I'm not really in it for the money anyway, and the job market remains tight. So it's going to take a very long time for inflation to wear down $100k+ in debt and I don't really want to impose that financial burden on my family.Give me a reasonable income-keyed plan with no overhang and I'd be on it like a shot. I suspect that it would work out a lot better for everyone financially speaking as well because subsequent career decisions can be guided by skill considerations rather than debt repayment schedules.

This isn't unusual; a lot of people who are doing legal jobs they hate in big corporate law firms are doing so because of the huge college debts they need to pay off even though they might rather be doing poverty law or what-have-you.
posted by anigbrowl at 11:18 PM on June 14, 2012 [1 favorite]


Phil Greenspun, MIT professor who started his own 1-year CS program (tuition-free) on improving undergraduate education:

[...]

Ah, so, then, someone openly advocating that life should suck for all the poors, just like it did back in good old feudal serfdom. How refreshing!


What is this bullshit? The guy set up a free degree program under the MIT umbrella, and you accuse him of treating people like serfs for acknowledging that a majority of students can't afford and don't especially seek trust-fund lifestyles!? Sounds like you want affirmation rather than education. Good grief.
posted by anigbrowl at 11:40 PM on June 14, 2012 [1 favorite]


Once again it looks like a small number of people seem to have latched on to some wrong thing and seem to think there's nothing terribly bad about it. Saying there is no moral problem with staking a claim to a percentage of everything a person ever earns ever. I don't think, anigbrowl, that you're particularly refuted my claims concerning slavery above -- the principle of hopelessness, that you can enter into an arrangement that entitles some person to some portion of your earnings forever, still applies. You could of course claim that no one forces people to enter into those arrangements, but that ignores that there are all kinds of duress that can be applied to a person, and the desire to better oneself is one of the strongest types there is.

Of course things like the evil of slavery, and indentured servitude, and child labor, and debtor's prisons, and serfdom, and the divine right of kings, and a host of other bad ideas that it's taken centuries to overcome seem to have lost some of their edge lately, or at least the idea that deals made under extreme unequal power are inherently bad seems to have lost some of its stink. What is it about those bad old concepts that people find attractive enough that they have to invent new versions of them? Once they become established it usually takes the situation becoming extremely bad, to the extent of actual uprising, before they get abolished. I wonder how many centuries of the situation becoming slowly worse it would take before this terrible idea dies?
posted by JHarris at 11:45 PM on June 14, 2012


So what? If it were contract-based rather than government run (which I'm not advocating), whoever bought the underperforming asset wouldn't be able to put the squeeze on you anyway.

Honestly, I've never seen so much ideological handwaving.


It's hardly ideological. If it were contract run, it would be a system that allows large corporate entities to make large profits off people too poor to afford tuition (because the payments never stop, even after you have paid the cost of the loan).

Rich people (who don't need the loans) would, effectively, get university education cheaper than poor people.

That's a stupid outcome, based on the idea that education is an individual good, and not a public one. The system needs improvement, but this would not be the optimal way to fix its shortcomings.
posted by His thoughts were red thoughts at 11:50 PM on June 14, 2012 [1 favorite]


It may not be the optimal system, but would it be better than the current system of student loans? Could it (with modifications) be better than the current system? Does it have some good aspects that could be incorporated into other systems? Simply discussing the proposal is not going to bring it into existence, we don't have to act like an evil genie will privatize education if we let down our defenses and consider anything other than the least charitable interpretation of the idea.
posted by Pyry at 12:41 AM on June 15, 2012


Pyry, absolutely there are things in this worthy of discussion, the first of which would be why private firms haven't already begun doing this. As far as I understand, there is nothing keeping them from doing so, except for wariness about the investments themselves.
posted by Navelgazer at 12:52 AM on June 15, 2012 [1 favorite]


If I'm understanding the arguments here correctly, couldn't we just make the simple fix of having student loans be disbursible in bankruptcy, and then we'd all have millionaire bankers calling us up to offer us jobs at their buddy's firm?
posted by lantius at 1:12 AM on June 15, 2012 [2 favorites]


Saying there is no moral problem with staking a claim to a percentage of everything a person ever earns ever. I don't think, anigbrowl, that you're particularly refuted my claims concerning slavery above -- the principle of hopelessness, that you can enter into an arrangement that entitles some person to some portion of your earnings forever, still applies.

Except for the fact that I've said I'm quite OK with a cap on the repayments (as in the Australian system) and that I am equally OK with the government operating the scheme as opposed to private finance firms, points which everyone seems determined to ignore so they can wring their hands about the injustice of it all without addressing the basic point that maybe people who go to college should pay on the back end, and pay more in percentage terms than people who have not gone to college.

What is this 'principle of hopelessness'? Are you saying that a 5 or 6 figure student loan debt that keeps accumulating whether or not you're working and can't be discharged in bankruptcy is some sort of epitome of freedom? What's hopeless about it if even a private lender can never claim more than a fraction of your current income, notwithstanding the ups and downs of your financial situation?

You keep comparing it to slavery without providing any actual argument for why it constitutes slavery. You get something good (education) up front, and you don't have to do insane things to your credit rating in the process. You pay out a potion of your income in return - or, as sensibly suggested, the positive difference between your income and the median non-college income, which, by definition, a fraction of the benefit you have received.

This is no more slavery than taxes are, and I feel the objections to it are just as asinine as the sort of arguments I hear from tea Party types against taxation.

It's hardly ideological. If it were contract run, it would be a system that allows large corporate entities to make large profits off people too poor to afford tuition (because the payments never stop, even after you have paid the cost of the loan)

Again with the insistence that the payments never stop. Nobody is saying that this has to be the case. Again with the insistence that it all goes to corporate entities, even though it would be quite OK for the government to operate such a system. But even if they did never stop and even if they did go to a corporate entity which was comprised entirely of moustache-twirling villains, so what if they make a big profit? It's a fraction of the increased financial benefit, if any, enjoyed by the educated person.

Rich people (who don't need the loans) would, effectively, get university education cheaper than poor people. That's a stupid outcome, based on the idea that education is an individual good, and not a public one. The system needs improvement, but this would not be the optimal way to fix its shortcomings.

So what? If you subsidize college for everyone you're giving rich people free education that they could easily afford to buy for themselves (or their offspring), plus there's zero incentives for colleges to make any attempt whatsoever to control costs. So they take the money they would have spent on college and use it to make more money, in which case you've given a fat subsidy to people who have no need of it. Ooops.

Literacy and basic education is a public good, I'm not at all convinced that higher education is. I am a hell of a lot more worried about people who don't graduate high school or reach adulthood without being able to read than I am about rich people being able to pay for college up front. Frankly, I don't care if rich people fill their swimming pools with small bills and swim around in them like Scrooge McDuck. I accept the fact that some people start out with significant advantages through an accident of birth, it doesn't bother me. What bothers is whether people who don't have that kind of money can get access to things like education that allow for social and economic mobility. If you have to go massively into debt to get that, that's bad. If it's totally free, then not only are you subsidizing rich people as above, people who don't have the interest/ability/opportunity to attend college for non-financial reasons end up subsidizing the people who do from a beginning position of lesser earning power. That's not good either.

This scheme would make education more of a public good, because people who worked for relatively low salaries in socially useful fields would not be crushed by the debt burden and could afford to consider other factors besides debt servicing. Their relatively low salaries would be subsidized by the people who went to school and earned very high salaries afterwards.
posted by anigbrowl at 1:20 AM on June 15, 2012 [2 favorites]


Sounds like somebody read The Unincoporated Man.. Which is a pretty interesting book in terms of ideas and their implications even for an anti-randian like myself.
posted by srboisvert at 1:22 AM on June 15, 2012


What is this bullshit? The guy set up a free degree program under the MIT umbrella, and you accuse him of treating people like serfs for acknowledging that a majority of students can't afford and don't especially seek trust-fund lifestyles!? Sounds like you want affirmation rather than education. Good grief.

First off, could you provide a link to any information about his "one year free degree program under the MIT umbrella"? Because I can't find any. But it's late, and I'm not particularly interested in looking at the moment.

Anyway, even if he has done so, and it's an unalloyed good (I think such a thing would be quite admirable), his overall assessment of the problems with universities is totally backward, and again start from the assumption that universities are primarily job-training centres. The solution to the problem of a four-year university course being unaffordable for the middle class isn't to shorten the length and quality of the course, it's to provide it for free (to the student at the time the degree is taken), or (as was the case several decades ago) at a price that students could pay for themselves through part-time (during the semester) and full-time (during the summer) work.

But keep on thinking that I "want affirmation rather than education", whatever you meant by that. Affirmation of what?
posted by junco at 1:31 AM on June 15, 2012


Pyry, absolutely there are things in this worthy of discussion, the first of which would be why private firms haven't already begun doing this. As far as I understand, there is nothing keeping them from doing so, except for wariness about the investments themselves.

Some have (see the marginal revolution link above) but it needs a critical mass to make it economical, just like an insurance pool.

couldn't we just make the simple fix of having student loans be disbursible in bankruptcy

Before that law was changed, I knew 3 people who went to film school, bought themselves a vanload of filmmaking equipment (professional tools are immune from seizure in bankruptcy proceedings) and then declared bankruptcy. Bad hit to the credit rating, but in film production you often get hired because people want to rent your equipment package. If you're skilled, then eventually word gets around and they want to hire you for your technical or artistic skills, but have gun, will travel. This is anecdata of course, my point is that bankruptcy laws can be abused in quite creative ways.

One good thing about bankruptcy discharge was that the risk meant schools had to be realistic about how much tuition they could charge before it became more practical for students to choose the nuclear option. It all turns into a big game of pass-the-parcel otherwise, and the bigger a school gets the biggers its economic leverage in the local market, providing a significant advantage over competitors through education exemptions from income tax etc. The Academy of Art in San Francisco is a notorious example, the president keeps her vintage car collection in a large and permanently closed showroom on a piece of prime retail real estate for which she doesn't have to pay any property tax worth talking about. Any time someone suggests that the Academy of Art is rolling in money and should perhaps kick a bit more into the city's coffers it's a hideous attack on education. Some people feel the same way about UCSF, which owns vast tracts of extremely expensive real estate.
posted by anigbrowl at 1:32 AM on June 15, 2012


Some people feel the same way about UCSF, which owns vast tracts of extremely expensive real estate.

That is the entire point and was specifically set up that way by politicians who, as they did once upon a time, gave a shit about the people they governed. You have a lot to say about things you seem not to know very much about.
posted by junco at 1:38 AM on June 15, 2012


First off, could you provide a link to any information about his "one year free degree program under the MIT umbrella"? Because I can't find any. But it's late, and I'm not particularly interested in looking at the moment.

You can't be trying terribly hard, it only took me a few seconds: here.

Anyway, even if he has done so, and it's an unalloyed good (I think such a thing would be quite admirable), his overall assessment of the problems with universities is totally backward, and again start from the assumption that universities are primarily job-training centres.

They are, although that is far from their only function, and that's a big part of what makes the a public good: they provide people with useful skills. You don't have to go to university to broaden your mind; there are libraries and bookstores for that, and there's no rule that says you have to get all your art or philosophy study done by age 30. You can study for pleasure or simple self-improvement very cheaply. But if you hope to have a career in the sciences, the professions, or become an accredited expert whose opinion or skills people find worth paying from, whether in art, accounting, or zoology, university training and credentials are likely to be extremely helpful.

The solution to the problem of a four-year university course being unaffordable for the middle class isn't to shorten the length and quality of the course, it's to provide it for free (to the student at the time the degree is taken), or (as was the case several decades ago) at a price that students could pay for themselves through part-time (during the semester) and full-time (during the summer) work.

Many European countries offer undergraduate degrees with 3 years of instruction and no general education requirement, plus you can go into law or medicine directly if you have the academic scores. I haven't heard anyone accusing Europe of turning out inferior degree-holders.You're saying a 4 year degree is better, without showing that to be the case.

But keep on thinking that I "want affirmation rather than education", whatever you meant by that. Affirmation of what?

Your bizarro-world class warfare rhetoric 'Ah, so, then, someone openly advocating that life should suck for all the poors, just like it did back in good old feudal serfdom. How refreshing!' in response to Greenspun's argument that higher education could usefully be both cheaper and shorter. But what does he know, he's only an educator at one of the world's top scientific universities, and trying to educate people for free is just another way of keeping the 'poors' in their downtrodden place.
posted by anigbrowl at 1:54 AM on June 15, 2012 [2 favorites]


That is the entire point and was specifically set up that way by politicians who, as they did once upon a time, gave a shit about the people they governed. You have a lot to say about things you seem not to know very much about.

Except that they probably didn't expect the land to be so expensive that it kept driving inhabitants out of the city, or for teaching hospitals to sell their services so expensively that they have sky-high copays on expensive health insurance plans, for institutions which cost a small fortune (or a mountain of debt) to attend as a student. Nor am I sure that that the intent was use existing landholdings to leverage further land purchases without lowering the cost of tuition. UCSF alone has net assets of $3.5 billion. Average cost of a medical degree at UCSF (expressed as student indebtedness at graduation): $98000.

Also, for someone who's complaining that I don't know what I'm talking about, you're upset about the idea that universities are job-training centers, which you call 'totally backward.' for the link you just posted, the purpose of land grant colleges was
without excluding other scientific and classical studies and including military tactic, to teach such branches of learning as are related to agriculture and the mechanic arts, in such manner as the legislatures of the States may respectively prescribe, in order to promote the liberal and practical education of the industrial classes in the several pursuits and professions in life.
I've highlighted some words in bold to help you spot them with minimal effort. It sure sounds like the people who set up the land grants thought that the universities should use part of their endowment to teach skills that would be useful in the workplace. In fact, that sounds an awful lot like the primary purpose they had in mind, as opposed to becoming vast conglomerates that charge people and arm and a leg to get an entry-level professional credential.
posted by anigbrowl at 2:21 AM on June 15, 2012 [2 favorites]


Zingales' proposal seems a bit unwieldy to me. Wouldn't it be simpler to just put recent high school grads up on an auction block a sell them to the highest bidder?
posted by nowhere man at 4:03 AM on June 15, 2012


It looks like a lot of what he's saying is on point.
Just as subsidies for homeownership have increased the price of houses, so have education subsidies contributed to the soaring price of college. Between 1977 and 2009 the real average cost of university tuition more than doubled.
This is legitimately true. If you want education to cost less, you have to get the government out of the business of giving a loan to everyone who wants one. Because this forces colleges to raise tuition significantly to keep their exclusivity. It's the same thing that happened with private school education.

Honestly, the whole "payment as a portion of income" works really well for some top schools, such as Yale, which offers a very similar loan repayment plan. You don't pay it back while you're not working over a base level of income, but you do pay it at different rates depending on your employment.

Because, as we all know, those with higher education selfishly hoard the benefits, and certainly do not share their knowledge and expertise with society. Only doctors benefit from doctors, and only teachers benefit teachers. There is no conceivable reason society would want to fund education for these professions to ensure their services are provided to all.

Wait, so all federal loans are going just to doctors and teachers? What are all those other people doing?

In the end, there is almost no incentive to make the sacrifices necessary to make more money; there are strong forces keeping you at the poverty level and if you make more it just goes to fund some contemptible corporate asshole anyway, so why not stay at the lowest survivable point? Higher paying jobs usually extract a price in greater number of hours, less rewarding work, or crappier locations. If all of the gains are going to feed some leech who will literally never go away, why would you ever make those sacrifices?

You're absolutely right. We should do away with progressive taxation. Or were you talking about something else?

So, uh, what about the students who graduate high school with low SAT scores? Who is going to invest in them through loans?

A better question is, why should anyone? What is the purpose of subsidizing higher education for people who aren't ready to undertake it or to perform on a college level?
posted by corb at 4:09 AM on June 15, 2012 [1 favorite]


I think a lot of you saw "Zingales" "University of Chicago" and "Private Sector" and went straight to GRAR. The program is high earners pay more, low earners pay less. There is nothing in the op-ed that says the program should be done by underwriting risk on a person by person basis which is a very very fair objection many of you have voiced. There is nothing in the op-ed that says the obligation would never end.

You could structure the program with pools sufficiently broad enough that the average pool pays something close to what other federally guaranteed bonds payout. Median earners end up paying about what they pay now. Overearners subsidize underearners. Overpayments get retained by the government to subsidize pools that are underperforming. You set a fixed period in which you are in this pool - 20 years. You'd have to make sure it was compulsory otherwise the fact that the children of the rich tend to stay rich would mean you'd have an adverse selection problem in the program. The M/F split wouldn't matter.

If you set it up like that then who cares if private investors are buying interests in the pools who cares. Hell Fannie and Freddie did something like this for for what 70 years before they got caught up in the housing bubble? And the left always thought they were a great thing. And remember they only got in trouble by veering out of their core competency and once congress decided to force open their markets to private originators.

I mean its totally impractical from a political standpoint and I actually wonder about the legality of making it compulsory (and you can't call it a tax for other legal reasons) but again its not eating Irish Babies.
posted by JPD at 4:26 AM on June 15, 2012 [2 favorites]


Corporations would NEVER accept a deal that said "if you take advantage of the American business structure you return a percentage of your subsequent earnings".


Once again it looks like a small number of people seem to have latched on to some wrong thing and seem to think there's nothing terribly bad about it. Saying there is no moral problem with staking a claim to a percentage of everything a person ever earns ever. I don't think, anigbrowl, that you're particularly refuted my claims concerning slavery above -- the principle of hopelessness, that you can enter into an arrangement that entitles some person to some portion of your earnings forever, still applies. You could of course claim that no one forces people to enter into those arrangements, but that ignores that there are all kinds of duress that can be applied to a person, and the desire to better oneself is one of the strongest types there is.


I am consistently amazed by the objections people have to things in this thread, as long as they're tagged with "private enterprise", while voicing no objection to the same things, when they're called "Taxes."

How are taxes not indentured slavery? They even get you beyond death, by getting a percentage of your estate.
posted by corb at 4:37 AM on June 15, 2012


I'm reminded of the debate that happened when one of the States (Kansas?) talked about removing all tax on "business owners". In this percentage-based scenario, what's to prevent a person from incorporating a company and "consulting" rather than getting a salary? It seems like anyone (or, more likely, those with the wealth and status to do this) could shelter their income from the loaner, no?
posted by Lemurrhea at 4:38 AM on June 15, 2012


It seems like anyone (or, more likely, those with the wealth and status to do this) could shelter their income from the loaner, no?

No. Just base it off adjusted gross income = includes dividends and business income. Not W-2 income.
posted by JPD at 4:58 AM on June 15, 2012


I am consistently amazed by the objections people have to things in this thread, as long as they're tagged with "private enterprise", while voicing no objection to the same things, when they're called "Taxes."

Taxes are not the same thing.

Taxes can be onerous. They can be misguided. They can be wrong. But they aren't the same thing - (theoretically, at least) taxes are charges we place on ourselves to provide ourselves with goods and services that we deem desirable for the public good. Shared sacrifice, and all that. And, again theoretically, we have some control over taxes at the ballot box.

Income taxes have gone down by that exact process. So, yippee! Now I work, not to pay my income taxes, but to pay my skyrocketing health care, worthless mortgage, and about six billion new bank fees. None of which I have any say in.
posted by Benny Andajetz at 5:06 AM on June 15, 2012 [5 favorites]


I can understand the objection on the grounds that we should all pay higher taxes to fund tertiary education because its a public good. But I don't understand how this is fundamentally different from a specific tax on college grads.
posted by JPD at 5:12 AM on June 15, 2012 [1 favorite]


so would JP Morgan get a percentage of my pension? bonuses? stocks? If not, why wouldn't I just structure my contract so that I get my compensation in those forms instead?

the only way in which you would come out "ahead" is if you got a low-paying job, and why would Jamie Dimon want to subsidize that?
posted by Challahtronix at 5:17 AM on June 15, 2012


At this point what is being discussed bears no basically relationship to what what proposed in the op-ed. First, some sort of "permanent obligation" is an obviously necessary feature of the imagined system, or you'd just have delayed-compensation schemes cheating the banks out of their prize.

More importantly, by:

(1) shifting the "lender" from private banks to the government,
(2) making the program compulsory, and
(3) (most recently) basing the obligation off "adjusted gross income," which (as it includes trust funds, etc) bears no particular relationship to post-college earnings

you've basically canceled Zingales's proposal and just recreated progressive taxation instead, with the slight change that the "pool" of those being taxed includes only degree-holders (and presumably degree-attempters, though I'm not clear that Zingales or any of you has thought through how degree-attempters would be taxed under these imagined plans).

This isn't what Zingales proposed in any form, which (just as a refresher) was private investment in would-be borrowers in return for a share of lifetime earnings.

Now, your scheme is significantly better than Zingales'! It's very close to what the rest of us want to do, which is just raise taxes generally.

As I explained upthread, I remain opposed to your version of the "just raise taxes" plan for the same reason I'm opposed to a special police tax that applies only to people who call 9-11, or a firefighting fee that kicks in after your house burns down. Tax dollars and pooled and spent on public goods; you don't have to show a specific "return on investment" for each and every cent you paid in.

Regardless of that objection, though, the crucial thing for this endless argument is for you guys to recognize that you're not longer talking about Zingales's bizarre neo-serfdom, but about a much more traditional, liberal question about taxes vs. fees.
posted by gerryblog at 5:21 AM on June 15, 2012


the only way in which you would come out "ahead" is if you got a low-paying job, and why would Jamie Dimon want to subsidize that?

He wouldn't - he's just betting that for everyone of us who gets a low-paying job one of us chooses to chase a high income career. But in order to make that investment he isn't allowed to choose who he's investing in - he just buys a part of a pool everyone around your age is put into.
posted by JPD at 5:21 AM on June 15, 2012 [1 favorite]


I disagree - the only thing fundamentally at odds with what Zingales wants is the cross-subsidy between the pools. He'd rather the overpayment accrue to private capital and the underpayment represent a loss to private capital. The tenor of the obligation isn't really going to matter that much. Its pretty trivially easy to do the math on that. the PV of a CF that doesnt begin for twenty years ends up being very small relative to its nominal value.

(I agree with you WRT to taxes)
posted by JPD at 5:24 AM on June 15, 2012 [1 favorite]


I just wanted to say that (i) I enjoyed the gerryblog/anigbrowl debate, which highlights good points on both sides of this issue, and (ii) I did not enjoy the surprisingly large number of unreasoned, insulting, and hyperbolic comments.
posted by brain_drain at 7:21 AM on June 15, 2012 [4 favorites]


The real question is why we should be subsidizing 4-year college vacations. There are some technical professions for which that might be necessary, but for the vast majority, the whole thing could be done in far shorter time.

The truth is that tuition loans and grants have been exactly what have pumped up college prices to absurd levels. And the money often gets spent on ice hockey rinks, killer dorms, and literally endless layers of university administration. Hey, it's great fun, but let's be serious: it's hardly a public necessity.


This is not particularly true, unless you want to trash the whole idea of a liberal education in favor of technical schools, which is not a particularly good idea. The over-colonization of credit hours by many Engineering programs produces graduates who are, in many cases unable to express themselves clearly in speech or writing, think critically, or operate in anything except their discipline. It does neither them nor society any favors, and it hinders industry more than it helps.

To graduate from a 120 credit program in 4 years, a student needs to take 15 credit hours per semester, which should take them approximately 45 hours of work per week, including class and study time. Many students have part-time jobs, which they need to stay in school. If it's a commuter campus, figure on significant transit time. Since I like my students to be well-rested and focused, I recommend plenty of sleep and at least some down time with friends. If a student is fully supported, they might be able to handle another 3-6 credits per semester, but, of course, that increases scheduling issues for student and school, increases pressure on the student, and would, I expect, result in lower performance in the long run. (All of this is based on a Fall/Spring semesters of 13-15 weeks rather than a quarter system, by the way.)

There are the summer months, of course, but most schools are already offering a summer session or two, so I am not sure that sandwiching a third semester in the mix would really speed things up that much, since the significant number of students already taking summer classes would just get folded back into the student body. Additionally, they students won't pay less, since they would be paying tuition for the new semester (probably at the higher regular semester rates). Additionally, this wouldn't save money for the institution, because it would have to extend faculty contracts to cover the extra time and teaching. Furthermore, this would increase costs at institutions that require any kind of serious scholarship, which tends to get pushed into the faculty's "off months" (despite their contract demanding it -- summer for research faculty is part vacation, but also a large part uncompensated work time. Hurrah!) If those faculty standards are going to be maintained, it would require a lighter teaching load, and higher personnel costs as a result.

The primary advantage of this scheme, I guess, is that it would get students into the workforce slightly faster (3 years instead of 4). I am not convinced the disruption is worth the benefit, especially at a time where jobs aren't growing quickly, if at all.

As for tuition money being spent on dorms, hockey rinks, and endless layers of administration:

a) students don't want to live in holes, and the state of the campus and dorms affects recruitment and retention, which have an enormous impact on university budgets. The expense appears to pay for itself in the long run.

b) university sports are, for the most part, an enormous boondoggle that moves public money to the owners of sports teams. All you capitalists should be in favor of this. I'd be happy to see the big dollar programs shut down in favor of a more student-oriented athletic program, but there you have it.

c) some schools have way too much administration, but there is a lot going on that needs to be handled by competent administrators, especially if its a public school that needs to interface with state government. There is a lot of reporting to do. Additionally, at least some of those administrative jobs support students via counseling, advising, some kinds of academic support, dealing with various campus climate issues, etc. They aren't all jet-setting VPs.

If you want education to cost less, you have to get the government out of the business of giving a loan to everyone who wants one. Because this forces colleges to raise tuition significantly to keep their exclusivity. It's the same thing that happened with private school education.

I can't speak for every institutions, but, really, most institutions seem to want tuition as low as possible, since it makes them more attractive, and they get a better selection of students from which to choose, which is valuable for maintaining a successful student body. Retention is really really important to universities, and high tuition and low student success (and resulting frustration) are major factors in students transferring or failing to complete.
posted by GenjiandProust at 8:57 AM on June 15, 2012 [1 favorite]


... academia being, according to his op-ed, "the least competitive and most subsidized industry of all"

Maybe that's because it's not a goddamn industry, goddamnit.
posted by steambadger at 9:06 AM on June 15, 2012 [9 favorites]


The University of Chicago Economics Department has spawned some of the vilest ideas of the last 50 years.
posted by nikoniko at 10:04 AM on June 15, 2012 [1 favorite]


This really isn't a serious proposal. If it is, it would last about a week before universities realize they can cut out the middlemen and simply offer this deal themselves, for less of a premium than the investors are demanding.
posted by mullingitover at 10:48 AM on June 15, 2012


At this point what is being discussed bears no basically relationship to what what proposed in the op-ed. First, some sort of "permanent obligation" is an obviously necessary feature of the imagined system, or you'd just have delayed-compensation schemes cheating the banks out of their prize.

No it isn't. You're just assuming that for the sake of your argument; a canonical straw man.

you've basically canceled Zingales's proposal and just recreated progressive taxation instead, with the slight change that the "pool" of those being taxed includes only degree-holders

No, nobody ever suggested this. You still have regular progressive taxation where you pay a slightly higher rate on higher earnings. Not one person has ever suggested that this scheme be a substitute for the existing system, but rather that it's a supplement to it. Please stop resorting to special pleading by continually introducing new and groundless claims about the arguments your opponents are making.

(and presumably degree-attempters, though I'm not clear that Zingales or any of you has thought through how degree-attempters would be taxed under these imagined plans).

I have, actually, and the answer is fractionally or not at all.

This isn't what Zingales proposed in any form, which (just as a refresher) was private investment in would-be borrowers in return for a share of lifetime earnings.

A share of future earnings, which you assume to be lifelong, and assume to be excessive.

Now, your scheme is significantly better than Zingales'! It's very close to what the rest of us want to do, which is just raise taxes generally.

No it isn't. It's fundamentally different. I would be for raising taxes generally, while also reducing the number of taxes and levying a tax on educational premiums (or administering collection in return for funding by the private sector).

As I explained upthread, I remain opposed to your version of the "just raise taxes" plan for the same reason I'm opposed to a special police tax that applies only to people who call 9-11, or a firefighting fee that kicks in after your house burns down. Tax dollars and pooled and spent on public goods; you don't have to show a specific "return on investment" for each and every cent you paid in.

Yes, but your approach means that you don't have to show a specific ROI on anything you paid in. You call 911 in response to unexpected danger, often imposed by a third party. (As a side note, this is why I favor publicly funded healthcare; we don't want everyone to be a doctor, but you can plan illness or accident, and most people are not qualified to evaluate risk because they're not able to diagnose and treat their own illnesses or prescribe medicine etc..)

Education, on the other hand, is an investment in oneself, and for most people it's an economic investment, designed to improve earning power and/or social standing. If you just want knowledge and don't care about the degree, there's already a wealth of free resources. This is easily observable from the fact that people present their degrees as a proxy for their learning on their resume. Few people would be willing to pay anything to an institution that didn't grant degrees or issue transcripts, no matter how good the quality of the instruction.

Regardless of that objection, though, the crucial thing for this endless argument is for you guys to recognize that you're not longer talking about Zingales's bizarre neo-serfdom, but about a much more traditional, liberal question about taxes vs. fees.

I find it neither bizarre nor serfdom. You've never addressed the fact that (under any version of this proposal) the financier (private or public, over any term) has no say over when you work (as opposed to volunteeringing or other useful activities), where you work (in or out of the same field you started, or at what salary level, or the income level of the community you work in), how you work (salaried or piecewise) or why you work (for your personal gain or for your community). All of these are implicitly leveraged by the existing student loan system with its massive debt overhang and consequent credit rating hit. Your only response to the practical changes at the level of the individual student has been an assertion that private equity always tries to screw people and they'll do so in this case too. That's not an argument, that's an expression of religious faith.

You just can't stand the idea that a private entity making a relatively high risk investment will see a profit on that investment if the scheme works. You want loans or subsidies handed out to all applicants for the asking, but are infuriated by the idea that a single penny more than necessary might ever flow to the private sector, regardless of how much risk it takes on or over what term it recovers it investment. I personally would be fine with this, even over a lifetime earning period; if I found that I had (say) paid out $1 million 25 years from now I would be happy that a) I had enjoyed an extraordinary level of earnings success and b) I had indirectly subsidized other people who went to college under such a scheme. What is missing from your criticism and from most of the other objectors' is an acknowledgement that profits are a reward for risk. At this point someone will say 'privatize the profits, socialize the losses' while ignoring the fact that most of the time private industry/equity absorbs the losses.

It's extremely easy to conceive of financing methods for education that place limitations on the investor, like requiring a pool (to avoid discrimination), limiting repayment to a fraction of income (to avoid debt), and even operating as a public good (constrained nonprofit status or mutuality, eg credit unions). Those of you who think nothing but wickedness emanates from the private sector should look into the history of My Rich Uncle, which was based on exactly this concept of education financing.

Maybe that's because [academia]'s not a goddamn industry, goddamnit.

If you get paid to teach or charge tuition money then of course it's an industry. You want to engage in intellectual pursuits for their own sake? Fine - buy some books or join a club. This is, to some extent, the purpose of sites like metafilter - a free exchange of ideas. People who work in academia are professional educators and researchers. They're engaged in a specific form of economic activity, which is what an industry is.

This really isn't a serious proposal. If it is, it would last about a week before universities realize they can cut out the middlemen and simply offer this deal themselves, for less of a premium than the investors are demanding.

I suggest you research it a little further, following the various links in this thread. It most certainly is a serious proposal, is already operated in limited fashion by private universities, and has had some success in the amrketplace.
posted by anigbrowl at 12:06 PM on June 15, 2012


The over-colonization of credit hours by many Engineering programs produces graduates who are, in many cases unable to express themselves clearly in speech or writing, think critically, or operate in anything except their discipline.

But that already happens. I'm very skeptical that the few gen ed courses and freshman composition courses tossed into an engineer's curriculum are significantly improving communication and critical thinking skills. Heck, plenty of liberal arts majors can't communicate or think particularly well. That really has to start from an earlier age and be supported by the family and by individual effort. Decent communication and critical thinking skills should be in place by high school graduation.

A general liberal education is now available to anyone who wants it online. Yeah, it's not as wonderfully perfect as an ideal small-college seminar, but that model doesn't scale, and anyway, a great seminar is rare even at good private universities. If there are people who really really want that or can afford that, fine, but most people don't need it.

To graduate from a 120 credit program in 4 years, a student needs to take 15 credit hours per semester, which should take them approximately 45 hours of work per week, including class and study time.

That's not how most students study. Most students wait till the last minute then cram. That means 15 hours of class time (supposing they attend every class), and usually a lot less than 30 hours of extra time for homework and so on. Surveys seem to show that hours spent on work outside of class are dwindling to very low levels.

since the significant number of students already taking summer classes would just get folded back into the student body.

How significant is it? Most students till take 4 or even more years to graduate, so I suspect summer classes are just a way for people to take fewer classes during the normal semester.

A great comparison is high school. High school is often far more of a learning experience than college is. Actual instruction is much more information-filled and demanding in high school.

Additionally, this wouldn't save money for the institution, because it would have to extend faculty contracts to cover the extra time and teaching.

The lecture model really has to stop. There need to be online videos of expert lecturers, video tools and quizzes to ensure learning, and humans available for some kind of recitation or for extra guidance.

Retention is really really important to universities, and high tuition and low student success (and resulting frustration) are major factors in students transferring or failing to complete.

Tuition has been raised commensurately every single time the federal loan limit goes up. What if it were limited to $10,000/year? Would people be completely unable to acquire an education at that price? Somehow, I think the market would adjust. People were able to get good educations in the 70s and 80s just fine paying a pittance, and they didn't have the sophisticated online tools we have today.
posted by shivohum at 2:10 PM on June 15, 2012 [1 favorite]


I've highlighted some words in bold to help you spot them with minimal effort. It sure sounds like the people who set up the land grants thought that the universities should use part of their endowment to teach skills that would be useful in the workplace.

"The several pursuits and professions in life" != "the workplace," as much as you and your ideology may wish were so.
posted by junco at 2:28 PM on June 15, 2012


Maybe that's because it's not a goddamn industry, goddamnit

That is how Kirk would make Libertarian-bot spin around shouting "does not compute! Does not compute!" and explode.
posted by Artw at 2:33 PM on June 15, 2012 [1 favorite]


"The several pursuits and professions in life" != "the workplace," as much as you and your ideology may wish were so.

The practice of a profession is a form of work, by definition. In speaking of 'liberal and practical education' as well as 'agriculture and the mechanical arts' the law clearly contemplates employability as well as edification.

You brought the Morrill Act into the discussion: it's not my fault that its text undermines your argument that Philip Greenspun's "overall assessment of the problems with universities is totally backward, and again start from the assumption that universities are primarily job-training centres." Greenspun teaches at MIT, a land-grant college whose leading object - by law - is the education of the industrial classes.

I'm not the one wishing away reality here.
posted by anigbrowl at 3:13 PM on June 15, 2012


yea, but that's why it says 'pursuits of life and professions' - clearly implying that it is not solely referring to the workplace.
posted by jacalata at 3:15 PM on June 15, 2012


Nobody ever suggested that job-training was the sole function of universities. If the assertion that it's a primary function of universities is 'totally backward,' then job-training should be among universities' lowest priorities. But this is not, in fact, the case. It is a (joint) top priority of those colleges that are endowed, maintained, and supported by federal land grants to the states.

Some people here seem to think that recognizing this makes me one the lizard people.
posted by anigbrowl at 3:38 PM on June 15, 2012


shivohum: I'm very skeptical that the few gen ed courses and freshman composition courses tossed into an engineer's curriculum are significantly improving communication and critical thinking skills. Heck, plenty of liberal arts majors can't communicate or think particularly well. That really has to start from an earlier age and be supported by the family and by individual effort. Decent communication and critical thinking skills should be in place by high school graduation.

If they are well taught, they can do a good job (and a general education curriculum should be a whole, not a bunch of random courses "tossed into a curriculum"). Focusing on improving writing and oral communication has produced favorable responses from employers, at least in my institution's case. Maybe high schools should be turning out skilled writers, but they aren't, and the solution is not to say "oh well, nothing to be done; we'll just have a technical school." A university is not supposed to be merely turning out people with training in a field.

shivohum: A general liberal education is now available to anyone who wants it online. Yeah, it's not as wonderfully perfect as an ideal small-college seminar, but that model doesn't scale, and anyway, a great seminar is rare even at good private universities. If there are people who really really want that or can afford that, fine, but most people don't need it.

Leaving out the question of access to the technology (which many many people lack), people are, for the most part, not that good at studying without some direction and the pressure of tests and grades and the structure of a class. Nice online lectures are, well, nice, but they won't replace classes any time soon for anything except a small subset of learners.

Me: To graduate from a 120 credit program in 4 years, a student needs to take 15 credit hours per semester, which should take them approximately 45 hours of work per week, including class and study time.

shivohum: That's not how most students study. Most students wait till the last minute then cram. That means 15 hours of class time (supposing they attend every class), and usually a lot less than 30 hours of extra time for homework and so on. Surveys seem to show that hours spent on work outside of class are dwindling to very low levels.

I dunno. Most of the students in my class seem to need most of that time to get through their assignments. Anyway, building a curriculum based on a student's worst habits is not a great way to ensure success.

shivohum: How significant is it? Most students till take 4 or even more years to graduate, so I suspect summer classes are just a way for people to take fewer classes during the normal semester.

It varies quite a lot at my institution. Some years, the campus is quite crowded for both summer session. This year it seems a bit more sparse, but it's hard to tell without a trip to Enrollment Services. One of the problems coming up with usable numbers, I imagine, is what to do with the students that use the summer sessions not to work toward graduation but to retake classes that they did poorly in during the regular semester.

The lecture model really has to stop. There need to be online videos of expert lecturers, video tools and quizzes to ensure learning, and humans available for some kind of recitation or for extra guidance.

Again, you are assuming that all students have easy access to computers and bandwidth, which, I can assure you is not true. Furthermore, the failure and drop rates for online courses are significantly higher than for face to face courses, suggesting that it's not really a great model (and asynchronous courses seem to do even worse; I expect the lack of pressure to avoid "disappointing" a teacher with whom you have some kind of personal bond is a factor, but I haven't done a ton of reading on that particular issue). With some work, the numbers can be improved, I think, but students in general have been very resistant to the model. Also, I have deep skepticism that shifting to online courses will save money -- on the whole they take more time, and the technical infrastructure is a black hole that can swallow any sized budget you wish to provide. Now it would serve to move money from faculty salaries to IT salaries and (potentially) from universities to private companies, so, if that is your aim, you may be on to something.

Tuition has been raised commensurately every single time the federal loan limit goes up. What if it were limited to $10,000/year? Would people be completely unable to acquire an education at that price? Somehow, I think the market would adjust. People were able to get good educations in the 70s and 80s just fine paying a pittance, and they didn't have the sophisticated online tools we have today.

You do realize that, for state schools at least, it was not uncommon for the state to cover at least a quarter to a third of the operating costs of the institution, a share that has now dropped to less than 10% in many states? If you are looking for a reason for tuition inflation, the abandonment of paying for education as a common good is a great place to start. On top of everything else (inflation, increased equipment costs, etc), tuition is increasingly carrying the load of paying for the institution. Not raising taxes has directly caused raising tuition.
posted by GenjiandProust at 7:57 PM on June 15, 2012 [2 favorites]


Not raising taxes has directly caused raising tuition.

I should say "Not assigning tax revenues to higher education has has led to raising tuition." Obviously, the way taxes are spent has little to do with how high or low they are.
posted by GenjiandProust at 4:22 AM on June 16, 2012


The $100 Masters Degree From Udacity: "In an interview with Udacity founder Sebastian Thrun, it was revealed that he hopes to offer a Masters degree for only $100, and is close to offering a full computer science degree. 'There are unfortunately some rough edges between our fundamental class CS101 and the next class up, when this is done I believe we can get an entire computer science education completely online and free and I think this is the first time this has happened in the history of humanity.' The latest course from Udacity is on statistics, and he is hoping to top the 160,000 sign up for his first online class on AI. It is also hoped to be the first class where students can visit a testing center to get their achievments formally certified."

Interview With Sebastian Thrun
In the end, there were 160,000 people signed up, from every country in the world, he says, except North Korea. Rather than tape boring lectures, the professors asked students to solve problems and then the next course video would discuss solutions. Mr. Thrun broke the rules again. Twenty-three thousand people finished the course. Of his 200 Stanford students, 30 attended lectures and the other 170 took it online. The top 410 performers on exams were online students. The first Stanford student was No. 411.

Mr. Thrun's cost was basically $1 per student per class. That's on the order of 1,000 times less per pupil than for a K-12 or a college education—way more than the rule of thumb in Silicon Valley that you need a 10 times cost advantage to drive change. So Mr. Thrun set up a company, Udacity, that joins many other companies attacking the problem of how to deliver the optimal online education. "What I see is democratizing education will change everything," he says... this is going to disrupt public schools and teachers unions and universities and tenured professors and so on, Mr. Thrun effectively interjects: "The dialogue always focuses on what's going to happen to the institutions. I'm totally siding with the students. [...] The AI class was the first light. Online education will way exceed the best education today. And cheaper. If this works, we can rapidly accelerate the progress of society and the world. If you think Facebook is neat, wait five to 10 years. So many open problems will be solved."
posted by kliuless at 9:26 AM on June 16, 2012


23000 people out of 160,000 people who enrolled finishing a single course (if I'm reading that article correctly) does not make me confident that online education alone is going to be the panacea it is being promised to be. I did not know the dropout rate would be quite that high.
posted by lesbiassparrow at 11:43 AM on June 16, 2012 [1 favorite]


I should say "Not assigning tax revenues to higher education has has led to raising tuition."

I don't disagree, and think (like Zingales) that there should be some subsidies for higher education, particularly for less well-off students who enter higher education at a disadvantage. But is the cost of delivering education too high to begin with?

23000 people out of 160,000 people who enrolled finishing a single course (if I'm reading that article correctly) does not make me confident that online education alone is going to be the panacea it is being promised to be. I did not know the dropout rate would be quite that high.

What's wrong with that? maybe only one in seven people is sufficiently capable to complete this course. But for those who dropped out, the loss is tiny instead of being many thou$and$ of interest-accumulating debt.
posted by anigbrowl at 1:15 PM on June 16, 2012


It's problematic to me because this person is setting up a company which he is explicitly positioning as a cheap replacement for traditional forms of education and this interview is advertising for that product and thus, I imagine, is presenting its best aspect. Fair enough: he is absolutely entitled to try and make money in the education field. But what he's touting as a solution is having a miserable success rate at the moment in a single course. That's one course, just one. What is the success rate going to be like when it's scaled to a degree level? And the program gets even larger? Are we going to say that if it gets down to a 2% success rate it's still working because it's cheap?

I'm not saying this to argue that taking on thousands of dollars of debt is a good thing for students. It's not. It's crushing people. But the belief that you can deliver a quality education for 1 dollar a student is pernicious and harmful in my opinion. This reasoning is part of why education gets less and funding in every budget and why reform of higher education is usually shorthand for cutting money without any actual reform that benefits students.
posted by lesbiassparrow at 1:26 PM on June 16, 2012 [1 favorite]


But what he's touting as a solution is having a miserable success rate at the moment in a single course.

The object of higher education is not to graduate everyone. So 6 out of 7 try and fail. They can try again, or try something else. Some were not really interested, some didn't work hard enough or devote enough time, and some just don't have the ability. I'd bet that most of the dropouts were in the first few weeks.

That's one course, just one. What is the success rate going to be like when it's scaled to a degree level? And the program gets even larger? Are we going to say that if it gets down to a 2% success rate it's still working because it's cheap?

Why would you assume it's cumulative? But even if we posit your 2% success rate, at $100 for a master's degree the ultimate cost of delivery ends up at $5000 per successful student. At that cost, we can afford to try many different approaches. You seem oblivious to the fact that the top ~400 students were online ones, beating out the Stanford cohort. that suggests that they have got something right.
posted by anigbrowl at 1:58 PM on June 16, 2012


23000 people out of 160,000 people who enrolled finishing a single course (if I'm reading that article correctly) does not make me confident that online education alone is going to be the panacea it is being promised to be. I did not know the dropout rate would be quite that high.

Well, the drop rate is significantly higher in online than face to face classes even when the student is paying full tuition, although, at a university, a faculty member who had an 85% drop rate would have some fast explaining to do....

There is a fairly common problem with STEM courses, especially fundamentals producing students who retake them until they get a passing grade. The usual explanation is either a) poor preparation of the students (either they are unfit for the discipline or poor high schools) or b) the rigor of the subject. For my part, while these are probably part of the answers, I also believe that at least some STEM disciplines (I am looking at you, Chemistry and Calculus) suffer from pedagogical problems that really need addressing. As a matter of fact, while I don't think that a university education can be sufficiently automated for an entire program, it's possible some of the much-maligned "gateway courses" could be replaced with sets of relatively rote video series/interactive programs. It may be worth looking at, although the digital divide issues and disconnection of the students are still substantial problems.
posted by GenjiandProust at 4:01 PM on June 16, 2012


The usual explanation is either a) poor preparation of the students (either they are unfit for the discipline or poor high schools) or b) the rigor of the subject.

Sounds more likely that it's a selection effect, no? Our best students don't study online because of the stigma.
posted by downing street memo at 3:04 AM on June 17, 2012


Sounds more likely that it's a selection effect, no? Our best students don't study online because of the stigma.

Sorry, I was unclear. The pass rate in these foundational STEM classes tends to be dismal in face to face classes (as well as online). Since the assessments tend to be simpler than in foundational humanities and social science courses, an online program that made the retaking less onerous might be a solution, since no one in the STEM disciplines seems terribly concerned with improving pedagogy and reducing class sizes to allow for more personal instruction would exacerbate the cost problems.

Additionally, there is the idea that the purpose of these gateway classes is not so much to assure foundational competence before entering a STEM major but to keep out the rabble who are unfit for STEM careers which also educes the number of graduates seeking jobs, I suppose). Needless to say, this is not a happy or healthy idea (and online programs wouldn't necessarily help with that attitude).
posted by GenjiandProust at 8:13 AM on June 17, 2012


Why would you assume it's cumulative

Mainly because it's a lot easier to take on one class than it is to take on 4-6 a semester or even to take one several classes one after the other for a period of years. I am not attacking cheap education or denying that this will work for a small pool of people and I don't find it hard to imagine that you could find over 400 people throughout the world who could outs ore Stanford students...but, that said, we are not told the background of the high scoring students, their previous areas of study or anything that allows you to make an informed judgement about how successful this model is going to be in the long term. It also strikes me the model most likely to fail students with any academic issues or, indeed, any issues.

As for the 100 dollar masters, it's not going to be possible without the student being subsidised in some way. What research materials is he going to supply for this cost? What advising? What help for any problems? At some point they're going to need access to verious materials outside class notes, and that will have to be paid for by someone. Education does not need to be as expensive as it is, but there is no way you can provide an education at that price, except perhaps for a very small group of highly motivated students (and I'm dubious even about that). Embracing new technologies and new ways which enable people to obtain knowledge and qualifications for less are great; accepting without question what an interested party claims is possible for a $1 a class less so. I know I too am an interested party, so my opinion may be seen as problematic (and perhaps should be), but I am trying to come at this with an open mind.
posted by lesbiassparrow at 11:12 AM on June 17, 2012 [1 favorite]


We should honestly stop even recognizing this drivel as capitalism because frankly it's corporatism, not capitalism. In pure capitalism, lenders should be responsible for their own due diligence when investing, the state should not be involved aside from foreclosure and eviction proceedings. There should be no artificial recovery options created by the state when assets like knowledge cannot be foreclosed on, simply a heavier burden of due diligence.
posted by jeffburdges at 9:05 AM on June 21, 2012 [1 favorite]


In a case like that lenders will simply exit the market in preference to one where they have more realistic recovery options (like foreclosure). If getting a return on the capital is too risky or unpredictable then people just won't extend credit for that purpose. Try getting credit to operate a business based on marijuana, say; nobody in the commercial sector will lend to you because while that might be a successful business if marijuana is ever legalized, the prospects for legalization are so uncertain that it's not worth the risk. There are plenty of other opportunities elsewhere. Result: people can't get financing to go to college.

This is why I keep banging on about the ever-rising costs of education. Maybe if people didn't have to borrow so much to attend school, the debt overhang wouldn't be the problem that it is. Taxes may be part of that, but there's no denying that the costs have spiralled. In some cases, this was because colleges and legislatures didn't do their due diligence:
The UC Retirement Plan’s huge deficit was created by investment losses during the global economic crisis — and the nearly two decades when campuses, employees and the state did not contribute any money toward pensions.
...
For years, the UC system has used its generous retirement benefits to attract and retain talented employees and professors willing to accept lower salaries in exchange for a secure retirement.
So, you promise rock-solid retirement benefits to potential faculty for two decades while failing to set aside anything with which to back these promises up? Sure, the UC system had investments that lost a lot of money during the financial crisis...but that was the whole retirement plan - to finance it out of investment returns without putting a single extra dime in for twenty years?

Every time I see a commercial for a mutual fund or investing product on TV, there's a little disclaimer saying something like 'the value of investments can go down as well as up, consult your financial adviser.' And even though I've never been a solo investor, I know that you're supposed to invest in a variety of assets ('don't keep all your eggs in one basket') and as you approach retirement favor a shift towards more low-yield but extremely safe assets like treasury bonds ('a bird in the hand is worth two in the bush'). Plus, I get the idea that you're supposed to save some of your money as it comes in. Now I am not any kind of financial wizard at all, whereas the University of California administrators can call on some of the nation's leading scholars in the fields of economics, law, mathematics and so on, any time they wanted advice about how to prudently manage their fiscal obligations.

Instead, the university system just coasted along with the assumption that it could pay all its future obligations out of its trust fund. When this turned out not to be the case, taxpayers were asked to rbidge the gap, except that the State of California a) had yawning budget deficits due to a sudden decline in Californian's taxable income and b) has a dysfunctional legal code that makes it very difficult to raise taxes (which is not a new development either). So tuition soars and the answer to soaring tuition is to tell people to borrow more money via student loans. The same thing has happened at a lot of other universities.

I'm sorry, but this is not entirely the fault of corporations or capitalism. There has been some staggering fiscal irresponsibility in the public sector as well as the private sector. Don't tell me that the University of California administrators and the various treasurers of California were all bamboozled by Wall Street. They're supposed to be smarter and more responsible than that. That's what they're paid for.
posted by anigbrowl at 12:33 PM on June 21, 2012


There are basically two main problems with university financing, corruption and bureaucracy. I believe the bureaucracy largely interacts with other state, federal, and corporate bureaucracies, complexity costs money, but hey.

I'd imagine the situations anigbrowl describes represent mostly corruption. not bamboozlement. I'd expect they simply wanted the pension fund payments for other activities that benefited the UC executives more.

Aren't most universities' quasi-profesional football program's mostly about laundering fairly restricted funds into more flexible funds? You know Rutgers spent $120M expending their stadium after 1 winning season. Do you imagine they seriously expected to repay that? Not likely. It's pure corruption.
posted by jeffburdges at 1:05 PM on June 21, 2012


« Older It is still June 13 for the Parliament of Canada...  |  Benji Schwimmer, the winner of... Newer »


This thread has been archived and is closed to new comments