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Bloomberg, WSJ: Student Aid Increases Tuition

Soulskill posted more than 2 years ago | from the education-is-big-business dept.

Education 433

retroworks writes "Bloomberg News makes the case that when the federal government offers tuition assistance, students apply to more expensive colleges, giving the institutions an incentive to raise tuition and a disincentive to lower it. (The Wall Street Journal has a similar article, but it's paywalled.) This reminds me of the debate over President Reagan's cuts to the Pell Grant program in the 1980s. MIT's Campus Paper 'The Tech' quoted the MIT administration as saying it had 'no idea what really will occur' when Reagan's proposal to cut Pell came to Washington. So the question is, 25 years later, do we know now? Did cuts to federal tuition assistance hurt the education of the lower income students? Did increases to Pell grants create more opportunity? Or is federal money the milkshake, and students are just the straw?"

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well, duh (5, Insightful)

therealkevinkretz (1585825) | more than 2 years ago | (#40375529)

If more money is made available to to students for education, then:

1) more people will become students (intended)

2) educational institutions will raise their prices so as to absorb all the available funds (unintended)

Re:well, duh (5, Insightful)

Anonymous Coward | more than 2 years ago | (#40375665)

If I am a school and I have learned that students can borrow $60,000 a year from the government, then I am sure as hell I will raise my prices to get htat "free money".

Re:well, duh (4, Interesting)

vlm (69642) | more than 2 years ago | (#40375905)

If I am a school and I have learned that students can borrow $60,000 a year from the government, then I am sure as hell I will raise my prices to get htat "free money".

No, not at all. If you had a full campus while charging $5K/yr, you'll raise your tuition to $65K a year, because you'll collect the "free" $60K plus your campus full of students obviously can afford $5K/yr.

Not one extra person will attend (duh, the out of pocket cost remains $5K) and not one extra person will not attend (free money for all !!!)

Re:well, duh (1)

PraiseBob (1923958) | more than 2 years ago | (#40376015)

There are plenty of students who won't borrow 60k just because they can. They might in fact shop around for a cheaper institution, so they don't have to borrow money. Not everyone is eager to go into massive debt.

Re:well, duh (4, Insightful)

ThatsLoseNotLoose (719462) | more than 2 years ago | (#40376225)

Mabye not, but a Pell grant isn't a loan. I wouldn't borrow $60k for education, but there's no way I'd turn down a grant.

Re:well, duh (1, Informative)

hackula (2596247) | more than 2 years ago | (#40376227)

Unfortunately, most students get enough to cover tuition at the most expensive school they can get into, the cost of eating out every meal, rent an apartment in a trendy & safe place, and enough weed to last the full 6 years it will take them to graduate. Fine by me, I worked my way through to come out with 2k in debt and a good paying job, so that after interest I will have something like a 20 year head start on most of them. It sucked majorly feeling weak and hungry all the time for a few years, but I would do it again a hundred times to be in the position I am now.

Re:well, duh (1)

vlm (69642) | more than 2 years ago | (#40376255)

There are plenty of students who won't borrow 60k just because they can.

They don't make that decision. That decision is made for them by the school when they set their tuition rate.

Its like mistakenly thinking individual home buyers set the price of homes. Not so... They've got a out of pocket budget of (for example) $1000K/month and the govt sets the interest rate which sets the amount they can borrow which sets the price of the house.

In a similar way, a school knows the median student (and family) can toss in $5K/yr outta pocket, and the govt will toss in an additional guaranteed $20K. Therefore the price will be set by the school at $25K because $5K + $20K = $25K.

Re:well, duh (4, Insightful)

moeinvt (851793) | more than 2 years ago | (#40376159)

This is a great discussion.

Try visiting Yahoo! news or Politico or Huffington Post and explaining how guaranteed loans make college more expensive and you get flamed and accused of being a rich 1%er that only wants wealthy kids to go to college.

Visit /. and there's no need to explain the obvious.

"well, duh"

Succinct AND accurate


Re:well, duh (1)

Applekid (993327) | more than 2 years ago | (#40376277)

No, not at all. If you had a full campus while charging $5K/yr, you'll raise your tuition to $65K a year, because you'll collect the "free" $60K plus your campus full of students obviously can afford $5K/yr.

Not one extra person will attend (duh, the out of pocket cost remains $5K) and not one extra person will not attend (free money for all !!!)

Well, no, you don't do it all at once. You raise by $2.4K to $7.4K/yr, and the cashier's office can heavily advertise free government money to help cover the increase. People in the middle of getting their degrees aren't going to leave their living and work situations and their friends for an increase they just have to fill out a form to basically ignore. Maybe some new students will go someplace else, but since education grants are universal, every other institution has incentive to raise rates, too. Institutional education is a racket, just like when all the insurance companies decide to hike rates on compulsory coverage.

Then, 25 years later, you've raised tuition to $65K/yr and we take a step back and ask ourselves, "how did we get here?"

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40376183)

If I am a school and I have learned that students can borrow $60,000 a year from the government, then I am sure as hell I will raise my prices to get htat "free money".

Because you are competing with other schools. Most students care about the price they pay, which includes loans. There may be students who don't understand that a loan must be payed back, but if they are qualified for your school you have bigger problems.

Re:well, duh (2)

jedidiah (1196) | more than 2 years ago | (#40376235)

Public universities were increasing tuition rates as much as they could legally get away with long before any of these changes were made.

This is just a weak excuse for robber barons and associated wannabes to rob from the poor and give to the rich.

It's the WSJ after all. Although Republicans believed in investing in public infastructure once upon a time.

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40376267)

So borrowing == free money.

Can anyone remind me how this last crisis got started?

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375681)

This is basic economics. Look at the USA with a minimum wage hovering under $US10. Food is cheap, power is cheap, rent and housing is cheap. Then move to a European nation where minimum wages are sometimes set to the equivalent of double that. You simply cannot survive on a minimum wage in those countries like you can in the US, as everyone jacks up prices because it's possible. Food, power, housing, cars, gas - they're all sky high and absolutely unaffordable to the average person.

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375743)

Says the person clearly not trying to live on minimum wage in the United States.

Re:well, duh (5, Informative)

Anonymous Coward | more than 2 years ago | (#40375789)

A) Minimum wage in the US is NOT hovering around $10, it's $7.25. The difference between $10 and $7.25 with regards to pay is huge, not a rounding error.

B) You cannot live on minimum wage in the US anymore.

Re:well, duh (0, Troll)

HornWumpus (783565) | more than 2 years ago | (#40375979)

You are not intended to live on minimum wage. Anybody who shows up on time and sober will be making above minimum in three months.

Conversely anybody who can't produce at least minimum wage worth of value per hour will never ever be able to get (or keep) a job.

Re:well, duh (4, Informative)

danaris (525051) | more than 2 years ago | (#40376263)

You are not intended to live on minimum wage. Anybody who shows up on time and sober will be making above minimum in three months.

Conversely anybody who can't produce at least minimum wage worth of value per hour will never ever be able to get (or keep) a job.

Good God that's poorly informed.

I mean, I don't currently have direct evidence that you're wrong in the literal sense. However, I do know that there are plenty of places where youmay not make minimum wage, but you still don't make anywhere close to enough to live on, and no matter how long you work there (doing a good job, showing up on time, etc), you have no guarantee of making more.

I have personal knowledge of a job making $8/hr at a chocolate store, where the owner is on the lookout for more adults to hire, part time, for that much money, on a long-term basis. And has no intention of raising the pay, making a full-time position, or anything of the sort.

Minimum wage in this country is a joke, and while raising it to be a living wage would, indeed, cause some short-term loss of jobs, over the longer term, as the poorest working people were measurably better off and able to spend more money, it would contribute greatly to the country's economy.

Dan Aris

Re:well, duh (1)

Shadow99_1 (86250) | more than 2 years ago | (#40376271)

lol, so everyone magically makes more (providing they are sober?) than minimum wage in three months huh? So all those people forced to live on minimum wage where I live because companies no longer pay raises (going on four years now) are supposed to have magically gotten raises right? I mean they are generally sober (certainly at work, not so much outside it for some) and so they get this automagically correct?

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375989)

Yes you can, I did it for nearly 2 years. I did not have a cell phone or cable or a car that wasn't a POS, I went without a lot of things and living till the next pay day was very hard, but it can be done.

You cannot live on minimum wage with a sense of entitlement in the US anymore - FTFY

Re:well, duh (5, Informative)

stewbee (1019450) | more than 2 years ago | (#40375997)

I would not calling living on minimum wage in the US as surviving, at least in major cities. Take for example Chicago, since I am most familiar with it. For simplicity, lets assume you work 4*40 hrs/ month. this equates to 160 / month. Minimum wage in Illinois is $8.25/hr (which is more than the national minimum btw). this is a net of $1320/month. Looks good, but Illinois now take 5% leaving $1254. The feds will take 15%, leaving $1056. I don't know the exact rates for Medicare and SS, but lets assume that it will put you under $1k.

So you pretty much need a place to live. The rent for a studio apartment, assuming you don't get a roommate, is going to run about $600 - $700 /month leaves you with about $300-$400/ month. Transportation is going to be about another $100/month for a monthly CTA pass. Taking you down to $200-$300 month. Oh, you want to eat too? ~$200/month (granted, you probably qualify for food stamps, but you still need to pay some money out of pocket). An viola, you are out of money. I didn't even mention utilities or other living expenses.

tl;dr version:
Living on minimum wage is hardly a living wage. It is hardly enough to cover the bare necessities in the US. Most likely you will need to get a second job to make ends meet.

Re:well, duh (0)

Sparticus789 (2625955) | more than 2 years ago | (#40376211)

It is hardly enough to cover the bare necessities in the US.

That's the entire point of minimum wage, cover the necessities. Not have a cell phone, X-Box, HBO, chrome rims, etc.

Demand, meet supply (1)

bigtrike (904535) | more than 2 years ago | (#40375689)

So you're suggesting that the supply of education is entirely inelastic?

Re:Demand, meet supply (1)

Xugumad (39311) | more than 2 years ago | (#40375797)

Certainly, there's a huge lag in training new staff. Keep in mind a lecturer has typically two degrees (undergrad and PhD) then possibly several years of training as well.

Re:Demand, meet supply (1)

dgatwood (11270) | more than 2 years ago | (#40375909)

And there's a lag in building facilities. However, this is happening continuously, so for every university that is in a pinch to try to get enough faculty or facilities, there is always some university that just finished adding extra faculty or facilities and thus has extra capacity. It averages out (over all the schools in a region) to be elastic even if it may not appear to be when you look at a single school in isolation.

Re:Demand, meet supply (3, Insightful)

Chris Mattern (191822) | more than 2 years ago | (#40375799)

Entirely inelastic? No, nothing is entirely inelastic. Mostly inelastic? I suspect so; the resources to put together a high-class university are scarce, and the barriers to entry are high.

Re:Demand, meet supply (0)

Anonymous Coward | more than 2 years ago | (#40375839)

It pretty much is, at least in the short-to-medium term. Founding a university, achieving accreditation, and gaining a reputation for graduating knowledgeable, proficient students are pretty significant barriers to entry. It also takes time for an existing university to expand capacity. You need more instructors and more classrooms and that takes about a ten year timeframe to ramp up. (Not to mention, *not* expanding capacity creates demand-via-enforced-scarcity, like getting in the door at a trendy nightclub or getting a table at a well-reviewed restaurant.)

Re:Demand, meet supply (1)

vlm (69642) | more than 2 years ago | (#40375961)

You need more instructors and more classrooms and that takes about a ten year timeframe to ramp up.

If you want to be a educational success. If you just want to set up a degree mill to collect money, that takes about six months. Evidence is two blocks from where I'm working, but there are at least 3 other recently opened degree mills in the area here.

Re:Demand, meet supply (0)

Anonymous Coward | more than 2 years ago | (#40375939)

The large colleges really do have a bit of a strangle hold. Our 2 year college in our town which is excellent, and very affordable refuses to go to a 4 year college because it would be damaging to the 4 year institution 15 minutes away.

Re:Demand, meet supply (0)

Anonymous Coward | more than 2 years ago | (#40376071)

So you're suggesting that the supply of education is entirely inelastic?

Not just that, but also suggesting educators are essentially perfect economic robots who never make individualistic decisions or mistakes. Anyone who's ever looked at the administration processes of educational institutions is laughing hysterically now.

Re:Demand, meet supply (1)

idontgno (624372) | more than 2 years ago | (#40376283)

Well, consider the resale value of the product: how much does a degree from Alfred's College of Computers (Est'd 2011) is worth on the job market?

Yeah. I'd say that the unalterable value of prestige, certification, and reputation is a HUGE barrier to entry and guarantees that education supply can't expand by the best standard capitalist method: expansion of competition. So the only viable way is to expand facilities and staffing in current institutions (a process of years and decades) or simply overserve using current facilities (and drive down utility value of that education... although the sheepskin will still be as prestigious, even for having multiple years of "industrial agriculture" style processing behind it.)

Re:well, duh (3, Informative)

stevegee58 (1179505) | more than 2 years ago | (#40375725)

Took the words right out of my mouth. "Duh"

College tuition is a page right out of Econ 101: Supply and Demand. Too many (cheap) dollars chasing relatively few goods (schools) = inflation.

Re:well, duh (1)

dgatwood (11270) | more than 2 years ago | (#40375861)

The problems I have with that logic are that A. schools are not for-profit entities, with few exceptions, so there's no incentive to raising the price because the market will bear it, and B. the cost of running a school is for the most part roughly linear in the number of students (except that the cost per student increases when the size of the school drops below a certain threshold) because there are no scarce resources involved. Even facility upgrades (to handle more students) average out to be roughly linear based on the number of students over the long term.

Re:well, duh (5, Insightful)

demonlapin (527802) | more than 2 years ago | (#40375911)

Just because schools operate as not-for-profit enterprises does not mean that people don't make money off them. Administrators like bigger budgets and paychecks.

Re:well, duh (1)

dgatwood (11270) | more than 2 years ago | (#40376179)

Sure, but most college administrators aren't exactly raking in the dough. Here are some hard numbers [] .

Re:well, duh (1)

tranquilidad (1994300) | more than 2 years ago | (#40376021)

There are many incentives other than profit: increased research budgets, increased salaries, increased opportunities for sabbaticals. Increased tuition at state institutions allows for decreased budget allocations to the universities.

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40376245)

Research isn't paid for out of tuition.

Re:well, duh (2)

alexander_686 (957440) | more than 2 years ago | (#40376157)

I think there is a subtle point you are missing. The Federal Government subsidizes a good – any good - for simplicity; let us say $100 per student. This subsidy will be split by the consumer (student) and the producer (school.) How will it be split? The article argues that the lion shares goes to the school.

First, while schools are non-profit, very few are staffed by Franciscan monks who have taken a vow of poverty. Schools are interested in upgrading their campus, doing basic research and increasing staff salaries.

Second, there is a mismatch between the students and the schools. Young kids have a hard time determining the value of the education they are buying. On the other hand, parents have to disclosure all of their information to the school. If a kid wants to attend a school and the parents can pay for it the school can use price discrimination and charge them full price.

Re:well, duh (2)

Grishnakh (216268) | more than 2 years ago | (#40375981)

I wonder how it'd be different if two things changed. As I see it, one of the problems with college education is that there's very little competition, so schools just take advantage of the situation and raise tuition as much as they can. It's basically a monopoly or oligopoly situation.

1) in-state vs. out-of-state tuition. The problem now is that if you're in State A, you only have probably 2 or 3 schools that you can go to to get a good education. Of course, you could go to community college or a trade school, but that's going to have a major impact on your career, whereas going to a good state school, like the University of State A, or State A University, will generally keep most avenues open to you. Now, of course, you can go to the state next door, or any other state, and go to State B U. instead, but because you're "out of state", the price is now three times higher, so that severely limits competition. If we got rid of this idiotic in-state vs. out-of-state distinction, then it wouldn't matter which school you went to as much, and you could compare the schools based on their merits, their tuitions (which would probably be pretty similar within the same class of school), the cost of living of the areas they're located in, etc., instead of having a giant surcharge for anything outside your state.

2) foreign students. From what I'm reading, lots of large universites these days aren't even bothering to recruit students in their own state, and are recruiting overseas, because foreign students pay out-of-state tuition. What exactly is the point of having a "public university" (which is supposed to educate the citizens of that state or country) if they're ignoring all the citizens and trying to fill up all the slots with foreigners? If they were private schools, that'd be fine, but these are not private schools at all.

If we massively reduced the number of foreign students (in public schools), and got rid of the in-state/out-of-state distinction (since most of the money for state Us comes from the Federal government anyway), I think the economics of the situation would be very different; universities would be forced to compete with each other, and would have to cut costs (and administrator salaries) to stay competitive, even if student loans were still available. After all, if I can get $X in loans, and going to the school in my state would still require me to get a side job to pay all the bills, whereas going to another school across the country would cost half as much allowing me to focus on studying, why would I stick with the school in my state?

Re:well, duh (3, Insightful)

ohnocitizen (1951674) | more than 2 years ago | (#40375757)

If tuition assistance evaporated, enrollment would drop. With less students coming in, would universities:

1) Cut payroll/pay/offerings significantly
2) Raise tuition to make up the difference
3) Lower tuition significantly enough to reach students who can't afford college without assistance
4) Find non tuition based forms of funding
5) Fold

I think 3 is incredibly unlikely, and the original article is a bit foolish not considering the other side of the coin. 2 Doesn't seem likely (or wise) either. That leaves 1 (which I've seen happen over and over again in the face of budget issues), 4 (which works for a few universities, but isn't sustainable for all of them) and 5.

Of all the likely results of ending college tuition assistance, the most likely involves a few private institutions thriving, and most public/private institutions massively cutting their programs and pay. More electives suffer the cost of a society that increasingly doesn't value education beyond the immediate "will this turn our kids into productive workers", and the already tight job market for professors tightens (with less pay at the end of the road).

If we want to continue having the types of colleges and universities that truly enrich our society, we need to find smarter ways to make them more accessible than cutting tuition assistance.

Re:well, duh (1)

mjr167 (2477430) | more than 2 years ago | (#40375903)

I think the question we have to ask ourselves is which model of university do we want. Do we want everyone to learn "general enrichment" things from a university, or do we want everyone to learn a trade and a minority to get the "general enrichment" path? We should actually the question and think about the implications of both models instead of spouting retoric about "art is good!" or "productivity is good!"

Re:well, duh (1)

CubicleZombie (2590497) | more than 2 years ago | (#40375915)

They could roll back tuition quite easily.

My college has doubled tuition in the decade since I graduated. All the 50 year old buildings that held my classes have been razed and replaced with state of the art brand new architecture. There are numerous new sports stadiums for teams nobody's ever heard of. They're paving the streets with marble - literally, marble. It's like they are struggling to find ways to spend all the money.

Same professors and same classes.

Re:well, duh (1)

jmorris42 (1458) | more than 2 years ago | (#40375951)

> cost of a society that increasingly doesn't value education beyond the immediate "will this turn our kids into productive workers"

Count me in that group. I'm against all such aid on principle but if there is going to be ANY student aid it isn't unreasonable for me as one of the taxpayers being forced at gunpoint to donate to your education to insist in return that you at least use it toward something that has a reasonable chance of allowing you to a) pay off the loan and b) make you more a productive taxpayer so as to help with the burden of educating the generation which will follow. Discover yourself and take those * Studies on your own fracking dime.

Raise private funds and give scholarships if you believe it is that important. It is a certainty that you will do more good than the government would with the same resources.

Re:well, duh (1)

demonlapin (527802) | more than 2 years ago | (#40376081)

If you're taking my tax dollars to study something that won't make you more productive, you're a leech. People who want to party for four to six years and major in something bullshit can either pay for it themselves or convince their parents (or someone else) to.

Re:well, duh (4, Interesting)

ohnocitizen (1951674) | more than 2 years ago | (#40376223)

Let's look at what you said practically. "Your" tax dollars huh? Given the percentage that goes over to military spending, police, fire, libraries, infrastructure and public works, public schools, health initiatives, financial/economic initiatives, etc, only a tiny tiny amount is left for college. Of that, most aid comes in the form of student loans. So suggesting your personal tax dollars go to pay for leeches is quite misleading, since it is more like your personal tax cents.

Further, what major won't make you more productive? I studied philosophy, and now have a job as a web developer. Looking at people I've worked with, I see art history, psych, even sociology majors. A given major isn't bullshit (though some can be more than a bit funny sounding) - it comes down to how effective a given student is at taking advantage of what they chose to learn.

Re:well, duh (4, Insightful)

Rostin (691447) | more than 2 years ago | (#40376195)

Most universities could stand to trim some fat. Administrative costs in higher education have mushroomed in the past few decades. For example, at the very large public university where I'm a grad student, we have an office of "diversity and community engagement." The person in charge is one of the vice presidents of the whole university. Several assistant VPs, associate VPs, executive directors, etc are also employed by the university to lead different portions of this office. Each of these people has a staff, of course. According to the organizational chart, which I'm looking at right now, they come to a total of 44 people. All to address diversity concerns, or something. I'm actually not sure what they do. It seems somewhat doubtful that the expense of employing 44 people (which must run into the millions or maybe even the tens of millions of dollars per year) is actually accomplishing much of real value.

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375785)

Well, sort of... It's actually quite a bit nastier.

Most students never even "see" the money and don't realize if (for example) they withdraw from a class after the drop date they're still on the hook for that money, etc. So they borrow more than they really need, think nothing (financially) of switching majors, etc. The educational institutions encourage people to apply "even if they don't think they will qualify." What they want is people getting as much money for school as possible. Which is really pretty shitty as demand for higher education as already increased as a result of the available money.

But now you have all these students with debt leaving school. And there are more of them than ever. And there are only so many jobs to go around that actually require those degrees (and we're talking about degrees intended for real jobs, not just Masters in Ancient Martian Studies). Worse, it is harder than ever to discharge (or ignore) student debt. And paying back isn't predicated on getting a job in the field (or any job at all).

So we are basically creating an educated indebted class with no prospects for the future. Unless our economy can recover or we start adopting FDR's makework plans from the Depression, we're basically creating the perfect conditions for revolt.

Re:well, duh (1)

Dunbal (464142) | more than 2 years ago | (#40375887)

3) The perceived value of achieving any given degree will decrease (unintended). After all if everyone has an MBA then you're just another MBA. Especially when they are so easy to get...

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375889)

3) Even worse, the institutions will be flush with money and feel less incentive to compete by providing a good education to their students.

The act is however good for non-college construction jobs for it appears to cause a building boom on campus.

Re:well, duh (0)

Anonymous Coward | more than 2 years ago | (#40375893)

same for house mortgages.. just that it is more sensitive an issue to address

Everybody wants high-paying jobs. (0)

Anonymous Coward | more than 2 years ago | (#40375907)

People don't like feeling like they never had a fair shot at a high-paying job. To a large degree, educated labor is more expensive, so the education-for-everyone means everyone gets a fair shot. So, naturally enough, people demand government-provided student loans. And lots of them.

But it also means that the supply of educated labor outstrips demand, which winds up pulling those salaries down and also introducing different barriers-to-entry for those positions. Furthermore, since the means of attaining this education involves going into debt, we have a very large and very depressed labor force of well-educated people working menial jobs that do not pay them enough that they will ever climb out of debt.

All of this is on top of the fact that the widespread availability of student loans has driven the cost of education up so high that people who otherwise would have worked themselves through college now MUST get a loan to cover it.

It is a bad situation all-around, and it is largely the result of the human disinclination to simply accept reality.

Reality is....there are not enough, and never will be enough, high-paying jobs for everybody. *SOMEBODY* has to scrub the toilets. If we stopped giving out any student loans at all, several things would happen:

1) Many people would have no means of affording school, so they wouldn't go to school, and they would instead accept the toilet-scurbbing jobs (which we need) without a mountain of debt.
2) The sudden drop in demand for education would bring tuition fees back down to reasonable levels.
3) The people who actually can and do purchase an education will get access to higher-paying jobs because of it.
4) The poor would scream bloody murder. Compassion would motivate us to start with the student loans again, the end result being largely the same except that the workforce is smarter, poorer, and more depressed (exactly like what we have now).

Re:well, duh (1)

icebike (68054) | more than 2 years ago | (#40375955)

We covered this topic a few days ago [] in a side rant about the cost of education expanding to absorb all available funding. Upon further digging into the scarce data on the subject I found [] that it does appear that many universities are shifting the total cost to the student (and thereby to Federal Student Loans).

State funding levels (for state run institutions) have remained largely the same in many cases, while university budgets have mushroomed, (mushroomed all out of proportion to enrollment, out of proportion to salaries).

The budgets are being inflated for new dorms, buildings, and equipment, all funded by student tuition. Professors aren't getting much beyond cost of living raises.
But I need only look back at my school to see expansion of physical plant way beyond the size of enrollment, and a huge increase in the annual budget.

There will be those (arriving here in about ten seconds) that insist we can't know if the cost of an education has increased without a detailed analyses, seeking to hand waive the problem away. But the bottom line numbers suggest that the cost of 4 year post secondary programs have indeed expanded to absorb all available funds, while the cost of the prior 4 years (high school) have not expanded significantly beyond inflation in over 20 years.

I'm not even sure there is a conspiracy, simply each institution seeing an apparently inexhaustible pool of funding, and figuring out how best to tap it.

Re:well, duh (4, Interesting)

Great Gravy (2541128) | more than 2 years ago | (#40376013)

3) States will disproportionally cut university budgets to solve statewide budget shortfalls, effectively shifting the burden of state indigence to university students (intended?). If a state can't afford pensions for state park employees, the temptation is to plunder university budgets because students will make up the difference with their own debt. So indirectly, students are now paying for pensions of state employees, and the state stays in the black (or less in the red).

Re:well, duh (1)

umghhh (965931) | more than 2 years ago | (#40376099)

so till now that is common sense - people get incentive so they do desired thing and the rest is market behaviour. The interesting question would be: does this have any merit when one calculates all benefits and costs - are more students finishing university?

Re:well, duh (2)

khipu (2511498) | more than 2 years ago | (#40376117)

1) more people will become students (intended)

Is this really a good thing? How many art history and psychology majors do we need?

Re:well, duh (3, Interesting)

Sir_Sri (199544) | more than 2 years ago | (#40376129)

Depends on the funding and legal model around universities.

In canada for example the government (provincial) sets tuition fees for a university to be able to accept public funds. You can charge more than that, and be accredited, but you won't get public money. The Richard Ivey School of Business at Western is an example of a programme that went that route (but only for 2/4 years of undergrad and grad school or something weird, they're somehow part of western sometimes and separate from it others, but whatever).

Now the problem is that costs to run universities are increasing. Most of them are full of old buildings, so when the cost to heat or cool things goes up, they're screwed. There's just general inflationary pressure, the fact that staff need to be paid more as time goes on. As it is the technical faculty are becoming separated from industry rates and it's a real problem. A starting faculty at 70k is what a comp sci grad can get straight out of a bachelors.

If costs go up, you need to get more money. In canada at publicly funded universities you typically pay 5-7k per year, and the government chips in another 13k or so (foreign students pay the full amount). If tuition fees go up, well then student loans need to increase to compensate. It's not like students can magically live on 6 or 700 dollars a year less this year than last.

Now rightly, universities are trying to get as much money as they can. They may not run a profit, but they can't run at a loss indefinitely.

So that's one scenario, where cost increases and government approved tuition hikes to meet cost increases drive increased student loans.

In a more european system, where tuition is even less if not zero then it's entirely the government negotiating with universities on the price per student. And then you don't really have effect 2, and least not on core educational things, you might see more expensive restaurants on campus though.

The US system is a bit messier. There are enough schools that set their own tuition rates that you could see a bit of both going on. Where loans are increased in part to keep pace with public price changes, and private schools are taking advantage of that increased capital. But then loans have to be made available for students going to the expensive US schools which means the public ones can demand more money. In canada and europe if you want to go to a school with 20k tuition that isn't med school, well that's your own damn problem. In the US if you want to even go to a school like UCLA you're looking at 12k and tuition rates seem to vary much more wildly even within a state than they do elsewhere.

Without loans a lot of people wouldn't be able to go to school, but somewhat sadly, we're at the point where we're significantly over training in some areas (english, fine arts, history, drama, psychology, etc.) and giving out loans for a lot of those grads is just going to saddle them with debt for decades.

Bill O'Reilly (0)

Anonymous Coward | more than 2 years ago | (#40375555)

Student aid is flat, tuition rates rise, can't explain that!

Re:Bill O'Reilly (2)

ZeroSumHappiness (1710320) | more than 2 years ago | (#40375635)

Maybe they rise over time anyway due to inflation and not inflating student aid reduces the amount of rise? Maybe they rise more like healthcare? Maybe there are a combination of factors that describe tuition and one of those inputs is student aid?

Or are you saying that Bill O'Reilly is so stupid as to say that when the data doesn't fit the simplest possible model then whatever that model predicts must be wrong even of other, more complex models, can come to the same conclusion?

Re:Bill O'Reilly (1)

Anonymous Coward | more than 2 years ago | (#40375983)

Bill O'Relly claimed that there is no scientific explination for ocean tides as possible evidence for a god. You can find the clip on youtube

Re:Bill O'Reilly (0)

Anonymous Coward | more than 2 years ago | (#40376017)

Way to over analyze a meme.

Re:Bill O'Reilly (1)

ZeroSumHappiness (1710320) | more than 2 years ago | (#40376097)

Ah, didn't realize it was a meme. Disregard my statement!

Re:Bill O'Reilly (1)

tranquilidad (1994300) | more than 2 years ago | (#40376187)

Rising like healthcare is an interesting comparison. In both markets we are missing a significant consumer component that I believe encourages pricing levels unrelated to the cost of production. When massive third-party funding sources are not only available but widely encouraged and expected we tend to reduce our willingness to perform basic consumer due-diligence related to pricing.

I've bargained heavily for every car I've purchased but never really have a chance to bargain over medical or tuition costs. On the other hand, non-subsidized health care services such as lasik and cosmetic surgery often have price-points as one of the determining factors for provider selection.

Re:Bill O'Reilly (1)

vlm (69642) | more than 2 years ago | (#40376011)

Student aid is flat, tuition rates rise, can't explain that!

Low interest rates means you can borrow more means they charge more.

See the housing bubble, where multi-generational low interest rates lead to multi-generational high house prices despite real median family income declining and median family non-housing expenses increasing.

Now it may not matter (2)

paiute (550198) | more than 2 years ago | (#40375687)

Since the feds made student loans not eligible for inclusion in bankruptcy and the rates went up several points past the mortgage rate, I would guess that money is going to chase student loans in the future. Guaranteed payback at more than Tbills, more than the stock market average. The easy tuition loans in the future may not come from signing that Plus Loan with the government, they may come from signing that Usury Loan from the big financial houses.

Re:Now it may not matter (1)

Anonymous Coward | more than 2 years ago | (#40375793)

It's just like the housing bubble in a lot of ways:

- cheap debt - low interest rates on student loans (home loans)
- debt is securitized and sold off to institutional investors (just like with mortgages)
- promises of big payoffs - higher paying, more-secure job (and house prices will keep going up up up!)
- rising prices are fueled by increases in demand - more people getting an education (more buyers entering the housing market)
- as the bubble pops, people end up getting screwed - can't get a job, owe more than degree is worth (can't sell the house, owe more than it's worth)
- securitized debt gets downgraded, and businesses that relied heavily on this market as a business model go under (I'm looking at you, APOL, DV, ESI, and STRA)

And TFA is just poorly written. (4, Insightful)

khasim (1285) | more than 2 years ago | (#40375923)

From TFA:

First, universities, unlike the taxpayers, suffer no financial consequences when the underqualified students they have lured into their academic programs ultimately default on their loans.

"lured"? Kind of showing their bias, aren't they?

Second, students who study six years but ultimately drop out receive more financial aid than the diligent "A" student graduating in three years: We reward mediocrity and punish excellence.

How is getting something done in half the time a punishment?

Again, there's quite a bit of bias showing in that article.

Third, there is no adjustment of student-loan interest-rate terms to meet market conditions or differing risk factors relating to individual repayment prospects.

So they're pushing for different interest rates depending upon your major?

Fuck that! How about some GRANTS for people in the hard sciences?

Fourth, the Free Application for Federal Student Aid form, associated with these programs, aside from being unbearably complex, gives colleges private information about family finances that allows them to gouge students more.

Stick to a single point in each point, okay? Either they're "unbearably complex" or they give too much information about family finances.

Fifth, colleges' tuition and fee policies drive the amount of loan volume, rather than the other way around, thus contributing to the college-cost explosion and the subsequent academic arms race.

What "academic arms race"?

TFA needs an editor who is not looking to grind the same ax as the author.

Re:Now it may not matter (0)

Anonymous Coward | more than 2 years ago | (#40376035)

What I wish would happen is rather than student loans not being dischargeable (except in the most severe cases) thus causing problems given below, the schools would feel the pain themselves; I mean they already act as lackeys for the student loan industry as is (one school in my state received kickbacks from a particular lender and we saw the /. story about other things they do). This would make both the lenders and the schools more sensitive to the students' debt and to the price of their school. Thus the invisible hand would have a bigger effect. As it is, students are either buried under private debt, or screwed with public debt. The private debt never goes away and you have to pay it back and if you can't pay it, it will get bigger and bigger and bigger and bigger. With public debt, you can get income based repayment and other repayment options, but they increase the payback period to 25 years, which even still people may not be able to pay it off; once 25 years is hit, *POOF*, the debt disappears along with the interest; but then it is added to your income for the year and you have to pay taxes on it. Well, then the IRS gets to use both barrels to collect that.

milkshake (1)

Anonymous Coward | more than 2 years ago | (#40375711)

The milkshake brings all the colleges to the yard.

Nondischargeable debt (2)

gatfirls (1315141) | more than 2 years ago | (#40375715)

That's all there is to say. The banks will loan pretty much anything because they know that the debt is nonchargeable (with very rare exception), the schools know this too so they just keep raising tuition and the banks keep loaning more money. If school loans were allowed to be discharged like any other debt you would see the whole show come crumbling down like (probably more so than) the housing bubble. Tuition assistance is pretty much just the "gateway drug" of school loan debt.

And? (1)

HarrySquatter (1698416) | more than 2 years ago | (#40375727)

Isn't the whole point of the aid to allow them to go to better schools than they could otherwise afford? It's not as if low income people would be able to afford MIT today without aid had the Pell Grants been cut in the 80s anyway.

Re:And? (0)

Anonymous Coward | more than 2 years ago | (#40375917)

Yes, that's the point, but it's not what happens. If you just give everybody $10k to go to college, colleges will simply raise their tuition by $10k. It's just one of the basic tenets of economics that increasing the supply of currency causes inflation. If you print more money, prices go up; if you give people more money to go to college, tuition goes up.

Alternatively (or in addition), colleges simply reduce the amount of financial aid they provide. Rather than more people being able to attend college, the same number of people can attend, just the taxpayers pay for it instead of the colleges. The big difference being that when a college makes a loan, they want the money back, so they try to give it to only the most qualified individuals; the government isn't so choosy, so they give money to people who shouldn't be going to college in the first place.


Ron Paul said this.. (1)

Anonymous Coward | more than 2 years ago | (#40375769)

If you subsidize something, you get more of it.
- Ron Paul

Re:Ron Paul said this.. (1)

HarrySquatter (1698416) | more than 2 years ago | (#40375925)

Duh? Because people thought the aid was for less people to get educated?

He's right (1)

bigtrike (904535) | more than 2 years ago | (#40376197)

The military is in effect subsidizing doctors. They give people an education and expect them to pay it back with future service.
Would Ron Paul have been a doctor without this subsidy?

What about state budget cuts? (5, Insightful)

jpstanle (1604059) | more than 2 years ago | (#40375777)

Increased availability of aid and loans may very well create some tuition inflation, but I seriously doubt it is the major driving factor at public universities. It took me a while to graduate since I got called up to active duty for a while, but the tuition at the in-state public land grant university I attended nearly doubled between when I entered as a freshman and when I graduated. In 2003, tuition and fees was about 2200 USD/semester, but had ballooned to just over 4000 USD/Semester in Spring 2011. As far as I am aware, there hasn't been massive increases in the availability of aid or loans in that span (in fact, I'd argue generous private loans have become LESS available since 2008). What HAS happened is massive state budget short-falls due to economic downturns and short-sighted tax cuts. When the state is short on cash, higher education funding seems to always take the brunt of the damage in budget cuts, so public universities make up the difference by hiking tuition and/or recruiting out-of-state students.

Re:What about state budget cuts? (4, Interesting)

oh_my_080980980 (773867) | more than 2 years ago | (#40375881)

Given the fact that federal funding for college has steadily declined the last 30 years, state funding even more, and college tuition has continued to rise by leaps and bounds, would clearly demonstrate that no federal funding does not increase tuition.

Re:What about state budget cuts? (0)

HarrySquatter (1698416) | more than 2 years ago | (#40375965)

You expect a Rupert Murdoch-owned news source to care about facts? Perish the thought!

Re:What about state budget cuts? (1)

jmorris42 (1458) | more than 2 years ago | (#40376149)

> Increased availability of aid and loans may very well create some tuition inflation ....
> When the state is short on cash, higher education funding seems to always
> take the brunt of the damage in budget cuts, so public universities make up
> the difference by hiking tuition and/or recruiting out-of-state students.

Interesting you don't see the connect there. In-state rates ARE student aid. Just because it isn't a line item on your invoice doesn't make it less so. And as long as the taxes are rolling in, you are right that the rates you saw were kept low. But the per pupil costs were skyrocketing for you just like for the out of state students, it was just being masked by the subsidies from the State. With the Great Recession that subsidy is being reduced and you are seeing more of the actual costs.

If the schools know exactly, to the penny, how much aid you are eligible for, and they process the paperwork for you so they do know, is it unreasonable to assume the bill is going to very closely match the max plus just a little bit more so you will still be a 'starving student' and thus available for slave labor?

News Flash (0)

Anonymous Coward | more than 2 years ago | (#40375831)

Rain is wet. So is water.

Schools Raise Tution Regardless (1)

oh_my_080980980 (773867) | more than 2 years ago | (#40375837)

Hate to break it to the WSJ but schools raise their tuition all the time regardless of how students pay. They are not incentivized to raise tution simple because a student has a Pell grant!

Re:Schools Raise Tution Regardless (4, Insightful)

tmosley (996283) | more than 2 years ago | (#40376037)

Not because A student has A Pell Grant, but because ALL of their students have access to ANY AMOUNT of money via government guaranteed loans.

You might as well tell us that housing prices didn't go up due to lax lending standards. Same damn thing, only now the debtors can't get out by any reasonable means.

Definitely straw (0)

Anonymous Coward | more than 2 years ago | (#40375841)

Idk, I feel like a straw though. They sure sucked enough money outta my a$$!

This is news? (2)

russotto (537200) | more than 2 years ago | (#40375853)

Us stingy non-compassionate curmudgeonly types not swayed by cries that everyone must be educated or accusations of elitism have been saying this for a very long time.

Re:This is news? (2)

vlm (69642) | more than 2 years ago | (#40376155)

Us stingy non-compassionate curmudgeonly types not swayed by cries that everyone must be educated or accusations of elitism have been saying this for a very long time.

The combined un and under employment rate for recent grads is now 54%... I have personal knowledge of waitresses, sales clerks, and walmart shelf stockers with degrees, and I fail to see why I should want to pay for their degree out of my taxes. I get a benefit from the masters degree my kids teacher has, or my doc and dentists degree. Or the civil engineer who designed the freeway overpass I drove over on the way to work to pay for all these degrees. My bachelors degree waitress? Eh not seeing the point of educating her. If only 10% of jobs need university level skills, I see no reason beyond profit to send more than 10% of the population there.

Don't fall into the mistake of thinking education is only obtained magically solely by spending money on campus. And there's nothing wrong with spending your own money on a useless hobby, I've certainly blown thru enough cash on my hobbies... but I don't send men with guns to take your income from you to pay for my science fiction books... and we shouldn't do the same for my over-educated waitress.

Pulling up the ladder... (1)

raydobbs (99133) | more than 2 years ago | (#40375885)

The Department of Education doesn't seem interested in the solution to this - which would be to standardize the information taught in core curriculum in college-level courses. Accreditation was supposed to convey a certain level of performance and standards - but given the rampant creation of 'accredited bodies' to which every college can make their own and become a member of; it didn't go far enough. To a certain extent, a standard cost break-down of what core courses should cost based on what materials are taught would help people decide if a particular institution represents the value they claim they possess.

While it is true (limitedly) that when you increase financial aid resources, the tuition at institutions see an increase - placing this measure on services would keep unnecessary cost increases under pressure to remain competitive. Another step that would help is a more in-depth information packet being provided to the student - like a prospectus - showing how education dollars are spent, projections for costs during the time they are attending, and how this might impact their financial obligations.

What the WSJ and Bloomberg's talking heads suggest - eliminating or severely curtailing financial aid in all federal subsidized roles - merely cuts people off from access to these educational resources. While private student loans would continue to exist, the ability to attend college would be limited to those of financial means and upbringing, not merit or skill. The people who could obtain these new loans to attend college would be those who have, traditionally, been denied federal financial aid to go to college - the children of the elite and wealthy; people who do not need loans to attend any college of their parent's choosing. Sadly, a bit of this is 'I've got mine, so screw you and yours' that permeates conservative news media sites nowadays. Others are simply content to use this measure to eliminate 'competitors' to their wealth preemptively.

The answer to every problem with a program here or there is *not* simply 'dismantle and destroy it'

Duh. (0)

Anonymous Coward | more than 2 years ago | (#40375895)

It's really simple, lets say you sell at the tap chocolate milk. Your customers can get government vouchers to spend 100 dollars on faucet based chocolate milk service a month that they have to pay back in some distant future IF the government doesn't wipe the debt away someday, and the loans are also subsidized so even if they do have to pay it back it will probably be at rates far beneath what a bank would charge. You know that your customers can afford 30 dollars a month for chocolate milk service, so you price your service at 130 dollars which is what the market will bear. Your company builds a bunch of paintball places for the employees to play on because you have a TON of employees that really aren't all working as much as they could, but the service gets provided, and cutting jobs, salaries, or cutting back on jungle paintball places is unpopular internally. Besides, if your company hires too many people, builds too many paintball fields, and generally makes a mess of their finances it's OK, you can just raise the price of your internet service to 150 dollars a month. That's because your customers have parents that will pay even more just to make sure that their kids have the BEST chocolate milk out of their faucets that money can buy. In fact it's so ingrained in society that to not have chocolate milk at your faucet makes elitists think you are a second class citizen.

Chocolate milk is education, paintball fields are sports stadiums, government is government, banks are banks, and parents are parents.

Applies to many situations (3, Informative)

m0s3m8n (1335861) | more than 2 years ago | (#40375899)

This applies to many programs of this type. Back when I lived in Minnesota there was a big todo over welfare moms having more children simply to get an increase in welfare aid. Same same same. The programs intentions were good, but the outcome was not. And if you make this argument you are called a cold-hearted bastard. Well I guess I am a cold-hearted bastard, and all such programs should be eliminated. Flame suit on.

A really big straw (1)

Anonymous Coward | more than 2 years ago | (#40375913)

In the same way that giving $9000 to first time home buyers just caused house prices to go up by that amount. This is the same.

On another note, recently a California University system evaluation showed that administration staff was increased by %35 in the last two years. So things cost more, but no one knows why they needed to increase by a third the administrators.

Ugh, not this again (2, Insightful)

guises (2423402) | more than 2 years ago | (#40375987)

This is ridiculous, I feel like I have to post some obvious correction every time some republican politician opens their mouth about money these days: []

(Spoiler: tuition increases are not related to student loans)

Usually when I say stuff like this I try to keep it apolitical, but it's really gotten out of hand - republicans vilify every single thing that the government does nowadays (except the military, and state secrets, and domestic spying). Yes, Bloomberg is a republican politician (even if he's officially independent like Lieberman), and the WSJ is a republican mouthpiece just like every other Murdoch rag. I'll stop there, I don't want this to turn into some long rant, but come on: you can't use some twisted logic to turn lowering taxes into the solution for everything.

Planet Money Podcast on the subject (1)

twoallbeefpatties (615632) | more than 2 years ago | (#40376189)

And for anyone with a few minutes to spare, you can listen to the whole Planet Money podcast on this topic: (Link) []

Re:Ugh, not this again (-1, Troll)

Anonymous Coward | more than 2 years ago | (#40376285)

LOL, "NPR" are you fucking serious? Left wing statist libtard misleading bias at its best.

Speaking of the Straw (1)

Bill Dimm (463823) | more than 2 years ago | (#40375993)

This article [] talks about for-profit Corinthian Colleges soaking up federal dollars while many of their students drop out and default. Pretty interesting when considering whether the federal dollars are really helping students.

How about.... (1)

Anonymous Coward | more than 2 years ago | (#40376019)

Reducing the amount of credits required for a 4 year degree. Less credits = less money needed = less teacher time.

120 credits really isn't a realistic amount anymore. You can get a solid education with less than that due to the fact that a lot of courses have no real meaning in the real world, such as electives. Get rid of them. Concentrate on the REAL classes that people need to excel. If someone wants a CS degree, get rid of some liberal arts classes that are currently required. etc etc etc.

Calculus is pointless, unless you want to be an engineer, so don't require it for degrees that are not engineering or require heavy math. Same with physics. If you are going for a liberal arts or psycology degree, you have absolutely no use for calculus or physics. Its just wasted time, money and resources.

Of course it's the market! (4, Informative)

twoallbeefpatties (615632) | more than 2 years ago | (#40376047)

Why is it the market? Because we say it's the market! Don't bother investigating or ask colleges why they raised tuitions! Just assume it's the market! MARKET! The link in the OP is, predictably, an opinion piece and not any sort of survey or discussion with actual educators.

This link [] leads to a study by a nonprofit group that had some different answers:

The main reason tuition has been rising faster than college costs is that colleges had to make up for reductions in the per-student subsidy state taxpayers sent colleges. In 2006, the last year for which Wellman had data, state taxpayers sent $7,078 per student to the big public research universities. That's $1,270 less (after accounting for inflation) than they sent in 2002.

Public universities have been reining in overall spending per student in recent years. Flagship public universities' spending per student has risen from about $12,400 in 1995 to $13,800 in 2006 after accounting for inflation. But since 2002, spending at public colleges has generally not exceeded inflation.

Increases in spending were driven mostly by higher administration, maintenance, and student services costs. Public universities spent almost $4,000 per student per year on administration, support, and maintenance in 2006, up more than 13 percent, in real terms over 1995. And they spent another $1,200 a year on services such as counseling, which was up 23 percent. Meanwhile, they spent about $8,700 a year on classroom instruction for each student, up about 9 percent.

Big private universities, powered by tuition and endowment increases, have increased spending dramatically while public schools have languished. Total educational spending per student at private research universities has jumped by almost 10 percent since 2002 to more than $33,000. During that same period, public university total spending was comparatively flat and totaled less than $14,000 a year.

There will always be people who can afford it (1)

gelfling (6534) | more than 2 years ago | (#40376065)

So if you remove loans you simply are left with all the people who don't need them. Costs don't go down the number of colleges needed to support that shrinking population does.

Similarly if you eliminate health insurance you don't decrease the cost you simply wind up having to close most of the hospitals.

What incentive (1)

Vinegar Joe (998110) | more than 2 years ago | (#40376127)

Do schools have to ever lower tuition if the government is guaranteeing the loans?

coming from an inside source.... (1)

swan5566 (1771176) | more than 2 years ago | (#40376131)

A friend of mine is now a prof, and he says that tuition increases are mostly due to bigger and better cafe's, sport stadiums, better gyms and dorms... things peripheral to the actual education part of higher-education. He also said they if they don't keep up with these things, the college up the road will, and students will want to got there instead. The implication is that most students get enamored with the biggest and best, borrow however much from whomever (after all this is COLLEGE), and not worry about the debt because once they graduate, someone will OBVIOUSLY give them a well-paying job to pay it off, because a degree makes you a superstar (or so the college says). It's a vicious cycle of enable-ment and nativity on the part of the consumer - the student. It's pretty obvious that there has to be a breaking point somewhere - the question is whether or not we'll be the new Greece.

*YAWN* (-1)

Anonymous Coward | more than 2 years ago | (#40376137)

What do the secondary education, housing, and health insurance markets have in common?

All have been subsidized by the federal government, and the costs of all have risen above the rate of inflation for the past 30 years.

"For every complex problem there is an answer that is clear, simple, and wrong." In this case, the clear, simple, and wrong answer is government subsidies.

Go to college. End up broke. (3, Interesting)

sl4shd0rk (755837) | more than 2 years ago | (#40376141)

College (tuition) is the next Housing Market Crash waiting to happen.

Tuition is tried to loans AND applicants (2)

DirkDaring (91233) | more than 2 years ago | (#40376153)

If you ran an institution where:

1. You have more qualified applicants than availability
2. Nearly all have access to paying tuition with loans

Now you, being the bean counter - what would you do? Duh, you continually increase rates until #1 drops to a level you are uncomfortable with.

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