You misspelled "the taxpayers". Student loans are almost exclusively federal affairs these days.
As this WSJ piece from December on the matter of the GAO estimating $108 billion in writedowns (probably a low figure, as they admit their accounting on the matter is crap) puts it:
"To help pay for ObamaCare, Democrats simultaneously federalized the student loan market and projected fictitious savings, all while adding more than $1.2 trillion to the federal balance sheet... then cited the government “savings” to peddle the fallacy that the feds make money off student loans—a pretext they then used to sweeten debt forgiveness plans that have helped keep default rates artificially low."
Things may be changing, but the recovery rates on defaulted student loans used to be 120%, meaning that the government was collecting an additional 20¢ on each dollar in default. This is in comparison to programs like SBA that have recovery rates around 50%. When you factor in an already high interest rate, this state of affairs is profitable.
I'm not sure what year I read that, or what article it was in, but after some cursory searching, in 2014, the recovery rate was 103-111%. Recovery rates are much higher in student loans because they cannot be discharged. So 120% is certainly not out of the question some years.
Things may be changing, but the recovery rates on defaulted student loans used to be 120%, meaning that the government was collecting an additional 20¢ on each dollar in default. This is in comparison to programs like SBA that have recovery rates around 50%. When you factor in an already high interest rate, this state of affairs is profitable.
The new analysis shows that at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.
I think this might be a matter of framing -- "failed to pay down at least $1 on their debt" might include students with a deferment who are planning on having the debt forgiven. That is, for better or worse, public policy of the United States; it seems weird to conflate that with default.
For example, if you have a Perkins Loan, you can defer during a period of service at any employer where 10+ years would get you loan forgiveness. That list is... rather expansive?
Would I expect people graduating from e.g. a teaching college to largely make principle-decreasing loan payments given that this is our policy? No, I would not; it would require that they receive terrible financial advice.
In order to qualify for those deferals you still need to pay 10% of your income. This means factually that all of those people cannot cover their interest with 10% of their income. In my opinion, that should be considered a loan in default.
They can get out from under the loan in 10 years, we still have to pay for it.
It is failed policy to allow college to get to expensive due to inflation of prices through loose lending. IMO, that is the real bubble.
It's 10% of discretionary income, which is the amount that excess 150% of the federal poverty level. Nonetheless, the law also allows for hardship forbearances that allow people to stop paying without defaulting. Personally, I think the law is a backdoor subsidy done in the worst way. It increases stress on families who can't afford the tuition for 20 years to give a subsidy to the university. It incentivizes high tuition and keeping students on the treadmill, with no concern for quality. I don't particularly mind if tax money helps pay for an esoteric major, but I expect it to produce a capable scholar in that field.
This is going to be a problem. Student debt cannot be discharged in bankruptcy, debtors simply garnish wages.
Terrible things will happen with a young overburdened workforce slaving away for their debt. Politicians are already trying to figure out how to squeeze more social security taxes out of them.
This is bad for the economy, likely to cause extreme class warfare and social upheaval.
What you're getting in LA is tent cities of young people who can't live at home with their parents. You have an entire generaton of working young people who can't afford rent. Its producing a mean society, anarchy is more the outcome than class war, the war of off against all and the growth of a feral meaness in society.
Indeed. If it were discharged through bankruptcy, I think we'd see lenders making much more critical decisions (and a lot of firms who talk a good game but add no value going out of business).
Actually, as long as they don't revolt, it's great for the economy. (It's unethical to dupe a whole generation into indentured servitude ... but great for the economy).
These people will have to work. No sabbaticals to find themselves, or time off to spend with a newborn. They'll have to put up with every pointy haired boss and dysfunctional workplace they encounter (at least until they can find another job).
Every day of their lives will boost the GDP. (But it sure sucks for them that their culture didn't steer them down a smarter road when they were 18 and didn't know better).
Economies go great when people are spending money. If a large part of your discretionary income goes to paying off student loans instead of spending on other things, and you put off buying a house or having children due to financial insecurity caused by student loans, then the economy suffers.
Agreed. The US is primarily consumption driven economy. This could lead to behavioral conditioning that could affect future growth (e.g. depression era, silent generation).
Those of the silent generation are what can be most accurately described as frugal spendors.
Again, this tendency is rooted in their surroundings as they grew and developed within the society around them that was facing hard and desperate times.
Your comment is full of assertions, but not evidence or explanation.
My own assertions:
(1) GDP measures production. If debtors are incentived to produce more, GDP rises.
(2) The spending of debtors doesn't fall. It is just directed toward different sectors (education and financial products instead of housing, etc.).
(3) Every dollar lost by a debtor is a dollar earned by a creditor. These dollars don't disappear from the system. And even if creditors tend to churn money less than debtors, inflation targeting by the Fed should fully counter any changes in the aggregate velocity of money.
Now, it's possible you're right and I'm wrong. But I think it takes a much more sophisticated (and justified) argument than what you are asserting.
I agree that a sophisticated argument would take longer.
Regarding (3): The money does not disappear, but what is done with it? Already excess money in the hands of the 1% is just going into real estate, the stock market and stupid VC companies. All this is not particularly good for the real economy.
FYI, this is a fallacy. Money cannot "go into" an asset, in aggregate. Every buyer is always matched with a seller. For example, I have heard people say that in the crash of 2008 there was more selling of stock than buying of stock. But that would have been impossible. Each time a dollar was collected from selling a stock, there was a dollar spent buying that stock. They exactly equal. Money cannot go into assets, in aggregate.
This is of course different from personal experience, where exchanges are essentially one-sided, not two-sided. An individual can exchange money for property. But a closed economy cannot.
True. But that only describe the private actors in an economy. In the same way that money come from the state it can disappear there.
The state can decide that "running deficits" is bad and start to destroy money running a surplus, frequently, when what you need is the opposite, like currently in the Euro-zone.
Running a budget surplus doesn't mean that money is destroyed. Also, the claim that the Euro-zone needs deficits is a highly contentious point, and not at all obvious or a consensus. Asserting it rather than arguing it does a disservice to the subtleties.
Banks create money when they lend, and destroy it when the loan is paid. It's one-sided.
(Of course, a well functioning government will compensate for that in monetary policy. The US gov just stopped being capable of that by around 2008, it is progressing on recovering some control, but still has very little.)
Again, a blank assertion that is in truth contentious. I apologize for my tone, but it frustrates me when armchair economists comment on the internet and phrase opinions as facts. It is not at all an established, consensus fact that the US Government lost control of monetary policy after 2008. In fact, quantitative easing and interest on reserves are two policy levers that central banks continued to pull after hitting the zero bound. Short-term interest rates are not the only tool, nor the only framing, of monetary policy.
Quantitative easing was tried, and didn't work. There was nobody to lend money to, so velocity felt in proportion to the new money printed and the whole thing turned into just a hidden bank subside. It may work if coupled with the correct fiscal policy (AKA a temporary universal income), but nobody on the US government has the power to do that.
Interest on reserves is a fringe monetary instrument that is getting support from economists out of desperation. The leading theory is that it doesn't work at all, the fringe theory that everybody is hoping to be right is that it can work if the government restricts the use of paper money. AFAIK, nobody has any idea on what unexpected effects can come from doing it for any long period.
Interest rates are not the only tool, but the US government has already spent all of the orthodox tools. In fact, I do think the lest one to stop working was quantitative easing.
> (1) GDP measures production. If debtors are incentived to produce more, GDP rises.
Production is dependent on demand of consumables in the U.S.
2 & 3 are the similar (the same?) point. The poorer one is, or the earlier in life they are (students) the greater % of their income is spent on consumables. I don't think money sloshing around financial services has as direct an impact on the things that most impact production.
I think (3) is a very important and debatable point.
Important because, as you mentioned, there is a very large difference in marginal propensity to consume between 'hand-to-mouth' consumers and savers - this affects the velocity of money and GDP. Debatable because at the zero-lower bound, how much effect the Fed really have is very much in question (see: excess reserves at https://goo.gl/NQG2O5).
I personally would disagree - money funneled to creditors rather than in the hands of consumers is more harmful to the economy than the reverse, but is that money passed to capitalists (low consumption) or used for business investment (high investment)? That being said, consumption is about 70% of GDP.
But isn't a large amount of debt that isn't transitioning whether by getting paid back or written off by the creditor bad for the economy? I'm no economist but my intuition is that these unmoving debts represent money that should exist but doesn't. Since student debt is unusual in that it can't be discharged by bankruptcy it will stay in limbo longer than other kinds.
It's reasonable to think that in time much of it will get paid back but there are other kinds of investments that would perform better, and hence the economy would have been better off had these loans not been made and the money were spent on something else.
Also to your comment about sabbaticals and other less productive activities, is that really the common case? I believe that underemployment via career choices and local demand for skills would be more common.
Not sure why you are being downvoted. Perhaps because people tend to equate "good for the economy" with "good for well-being", which is not necessarily the case.
An entire generation that can't assume any slight risk for getting a better job or starting a company? No needed sabbatical for updating their knowledge (those aren't all just for fun, you know), no capacity to care for children.
Looks like a huge boost to an economy. Besides, let's not forget that economies are made of people.
> This is going to be a problem. Student debt cannot be discharged in bankruptcy, debtors simply garnish wages.
I studied in Austria so I'm not too familiar with how student loans in the US work, but as far as I know the Income Based Repayment program limits your monthly payments to a given percentage of your income. You can't discharge those debts, but an upper bound on the monthly payments doesn't sound too bad either.
But the interest keeps compounding, which means the person is going to be paying a still sizable portion of their income for a significantly longer timeframe. This is money that arguably would be spent on housing, family, and retirement, e.g. things that provide significant societal and personal stability.
This doesn't surprise me at all. I'm not in the US, but the picture I get from abroad is that Americans are pushed to go to college, without really making sure that this is actually what they want to do or is in their best interests. And once they get to school, many will party and play video games instead of studying, ending up either dropping out or with a low GPA and a general degree of no real use. Neither of these is going to help the college-goer get a job that helps them repay their debts.
I remember reading shortly after the start of the Great Recession how student debt was going to be the next big ball to drop. I wonder how far we are from that.
In the U.S. it is mostly assumed that students go straight to college, if that is an option. I think it's very shortsighted.
Four-year colleges are far to expensive to use it to figure out what you want to do. I think it would be much more valuable to try and find internships/shadowing opportunities with different businesses and people. That's what I would do, if I were going to do everything again.
For those who do want to go straight to college, taking random classes at a community college is the right way to go. Typography, Geology, Pre-law—use those classes to get an idea for what you want to study.
I'm from the US and I went to a high school in an affluent, upper-middle class town. We were basically taught from day one freshman year that the was no other option except to go to college. Our 'guidance counselors' were only there to help seniors with their college applications.
I think this is a huge disservice and if I ever have kids I'm going to stress that they do NOT have to go to college right after HS or ever. How many people waste a Bachelor's degree because they were forced to pick a major when they were 18?
I never went to college, I'm too dumb, poor, and undisciplined, but whenever I would visit friends at UCI, UCLA, UCR, etc, I would often be shocked at how nice many of the housing and general facilities were. Even the dorms, which I had always imagined as being run down were actually very pleasant. Some of the common facilities were down right luxurious, I imagine some high end resorts would be jealous.
I certainly don't think students should be living and studying in squalor or unsafe conditions but I wonder how much of the increased costs in education are a result of the kind of spending that goes into some of these facilities. Have universities, particularly public universities, always spent this lavishly on their campuses or is this a more recent thing?
And have any studies been done on how much of the increased costs are due to increased administration numbers and nicer buildings?
In the U.K. certainly we have the problem certainly that developers are building 'luxury' student accommodation to serve wealthy foreign students - with universities then outsourcing their accommodation to them.
Part of this is economics. It's easy to build and subsidize accommodation knowing that you can make the subsidy back on private hire conference guests if you're an Oxford or Cambridge. Less so if you're Bath or Coventry.
Students who used to have reasonable, subsidized accommodation now have a choice between the relatively unregulated and unsubsidized private rental market and these overpriced palaces with flat screen TVs etc.
All TVs are flatscreen. The TV license costs more than a TV.
I'm sure the new student accomodation is overpriced, but that's market effects not the presence of TVs. The real culprit is the government trying to run universities as profit centres. The policy isn't "joined-up": we're probably going to see further crackdowns on student visas at the same time as European funding is withdrawn. I'm waiting for the first redbrick university to go bankrupt..
At my University they spun off their accommodation, which is perfectly adequate, into a separate company. Then the private sector came in and built slightly better accommodation and charge slightly more. The town is filling up with student accommodation and we're entering the Pork Cycle [1] as rooms go unfilled. The spun-off housing suffering worst of all, and without money to invest.
"All of those trends add to the cost of college, but not by that much. At most, about a quarter of the increase in college tuition since 2000 can be attributed to rising faculty salaries, improved amenities and administrative bloat. By comparison, the decline in state support accounts for about three-quarters of the rising cost of college."
To be fair, that doesn't say anything about the relative efficiency of university spending. It says:
a) they've increased their spending on amenities and salaries by about 25%
b) they're taking in less money than before (apparently they're receiving 3x less money than they are increasing the budget? So budget increase is 25% of extra costs while funding decrease is 75%?)
I suppose it depends what metric we should be judging by. If university generates measurable value for the public (it probably does; having lots of smart people walking around isn't necessarily a bad thing), the next question is "how much money must be spent per unit of said public good?" Of course, no one can really agree on the goal of university or any metrics by which to judge (other than you have to go if you care about your future!), so it's kind of fubar.
I'd be willing to bet that they could get away with spending less money. I've been saying this for a while, but sooner or later student debt will lead to a major re-balancing of balance sheets. I'm a big believer in learning for free via the internet; if you have internet access, you've got everything you need to learn anything and contact anybody. Let the university system die a natural death and let's massively lower the cost and expand the reach of education.
I had a longer response until I read that you are happy to let universities die off. I agree that MOOCs are great for several fields, but everything is not computer science. Even many engineering fields need the physical lab space to get the most impactful learning done. We are seeing many alternatives to universities arise, which are great, but I REALLY don't see how that translates into letting the world's best higher education system decay into disrepair.
Even computer science would suffer from pure online learning: learning to effectively work in groups, and to design and implement software together is a skill that is trained at university. Remote collaboration is entirely different and less applicable. Add to that the loss of any opportunity for lab work for embedded computing.
> computer science would suffer... learning to effectively work in groups
At my university, 'working effectively in groups' usually meant one smart kid at the computer in the computer lab doing all the work while 7 other kids swarmed around them and copying what they did as close as possible without triggering the 'plagiarizing' senses of the teacher.
I worked alone (in the same computer lab) so I could actually learn and internalize what I was taught, but I'd look around and that was a common sight.
A university is not required (and in fact, I'd argue that classwork and grades isn't a good structure for it) in order to figure out how to be effective in a group. Working a single job in fast food taught me more about working in a group than any group project at school or the 'Small Group Communications' class I was required to take for my major.
Also computer science is conceptually pretty easy as most fields go. Many of my friends are aerospace engineers and their classes were just conceptually way more difficult than mine and learning all that through MOOCs without a lot of support and hands on guidance would be prohibitively difficult.
> everything is not computer science. Even many engineering fields need the physical lab space to get the most impactful learning done. We are seeing many alternatives to universities arise, which are great, but I REALLY don't see how that translates into letting the world's best higher education system decay into disrepair.
Have lab space then, have the government pay for it and schedule times for people who want to use it. Should not be limited to a university's chosen student body; it should be open to anyone that wants to learn.
You get much more than that and it gets superfluous. US universities are superfluous to the point of wastefulness.
I still say defund them and let them figure it out or shut down. But yes, I understand why this sounds extreme, particularly if you don't share my views of college being a super shit deal for most people (and universities--peddling such shit deals and responding to criticism with moral indignation--are no better than timeshare salesmen).
> I'm a big believer in learning for free via the internet; if you have internet access.
In many university courses the tuition you pay is to access the network of alumni, faculty. These are(still) vital for Phd to collaborate and MBAs to find work. I am not sure the internet is actually even a partially workable substitute for this important aspect.
I don't believe it's even doable. Could I pick up an instrument and learn to noodle around on it from watching YouTube videos for a few weeks? Possibly, although for some instruments I doubt even that's possible. But to attain basic proficiency, much less the level of mastery required to play at a professional level just isn't possible without someone to show you how and to correct you when you're wrong (and thousands and thousands of hours of practice, of course).
It's really not. Intonation, posture, attack, phrasing, proper breathing... technique in general for singing or any instrument cannot be taught without being right there with the student. If you are at all serious about learning to play an instrument, YouTube and MOOCs are not a solution.
How about a regularly meeting "learn to play violin" meetup?
How much does music school cost btw? Probably way more than most violinists make right? Going into debt for education is a crap deal, that's what I'm saying. You can get the same result cheaper.
They are resorts. Louisiana State University where I went is prototypical. The easy way to see this is the case is to compare undergrad housing facilities with immigrant family housing. Guess which one is dilapidated on American campuses?
UC tuition is still very low compared to most colleges, and I actually thought they charged too much for campus housing for what you could get renting in the area (like paying single room price for a double room). Their meal plans are also a profit center for them too.
This is quite surprising to me. I studied in the UK, and for three years my room was literally in a disused brothel. I kid you not, it was a rumour when I went there, and it turned up on Wikipedia one day. Not an unhealthy room, no mould or leaks, but nothing like a hotel room. The college actually owned a hotel, so I guess they could have decked it out that way, but they were sensible not to spend money where it wasn't needed.
My brother's just finished at Columbia, and he was living in a slum apartment in NYC. Not nice at all.
Has someone got pics of these amazing college facilities?
When was this?
The accommodation in The Young Ones [1] isn't too far a cry from the sorts of student accommodation you'd find in the 80s and 90s, and a disused brothel would fit right into that picture.
It seems to me (anecdata), that shortly after tuition fees were introduced (1998/1999), the trend for better (and correspondingly more expensive) student accommodation began, kicking off development of purpose-build accommodation.
There's some interesting numbers in a real-estate report from GVA [2], which shows a reduction in university-owned student halls, and an increase in privately-owned purpose-built student halls.
IIRC, studies show that the quality of the facilities has a massively outsized impact on school choice for students. Students should be choosing based on quality of education and cost, but both of these metrics are difficult to fully understand and internalize for the average 18 year old. But nice facilities are easy to see and judge.
And (in theory) this would make a good proxy for judging the other aspects: if the university has pride in providing good quality accommodation for their students, than you could assume that they provide similarly good quality education, library services, etc.
There is also an argument that the accommodation has a direct impact on students' education: if students are worrying about dodgy landlords, ongoing issues with heating or mould or leaking pipes, then they'd lose potential study-time in having to address the issues, have less mental capacity to channel to their education, and have an environment less suited to studying.
So good quality accommodation is a net asset for educational services, but in some places the cost is substantially higher than the private-sector rental market.
Because paying customers demand better services. In the UK, I went to university in the first year that students were charged direct tuition fees.
My dorm was modelled on a Swedish prison, had a single plug socket per room, and two toilets between 20 of us. The kitchen was barely big enough for 6 people, and couldn't support more than 4 people cooking at once.
That wretched hall was demolished and replaced by something a lot nicer - because when students are paying thousands of pounds per year, they expect something a little more salubrious for their cash.
The same was true of teaching. I remember a bunch of us complaining about the poor quality of lectures from one particular professor. The head of our department was genuinely shocked when I said "I don't think I'm receiving value for money". Students were now expecting a guarantee of quality for the debt they accumulated.
Better facilities cost money - but capitalism demands that students (as rational consumers) should seek value for money. If you have a choice between UCLA and NYU - it makes sense for your to spend your money on something that is attractive to you.
A truly rational student might forgo comfort in exchange for excellent teaching. But I suspect the majority will spend their money on something which looks nice, rather than is actually effective.
This is an excellent point. When you go deep into debt to go to college, you want the experience to be as nice as possible. Not to mention that as states push their public colleges and universities to be more businesslike and rely more on tuition, they are doing so, by making themselves more appealing to a broader range of customers.
The flip side of this is that student loans are guaranteed by the federal government, and when tuition goes up, so does loan availability. If financing is guaranteed no matter the cost, then no one should be shocked when customers lose their price sensitivity.
It's also important to keep in mind that the graduates coming out of college in the time period mentioned have entered the most challenging job market for new job seekers in 70 years. It's hardly fair to expect them to be able to live up to promises they made in the mid 2000s when everyone running the economy promised it was in great shape, while those same people were building the house of cards that collapsed on the millenial generation. There's lots of blame to go around, but very little of it should land on the students who took out these loans.
> When you go deep into debt to go to college, you want the experience to be as nice as possible.
What you want and what you can afford can be two very different things. Just because you can get a big loan does not mean you can afford it.
For myself, the purpose of going to college was to get a piece of paper to get my first software development job. I didn't care if the college looked nice, offered all sorts of amenities, etc. I went to a local state university and commuted.
Too many people have been brainwashed into going college for the non-education part of the 'college experience' without understanding the long-term implications of coming out of school with an enormous debt load. Continuing to allow 17-21 year old kids to sign up for these loans is just a scam.
> The flip side of this is that student loans are guaranteed by the federal government, and when tuition goes up, so does loan availability. If financing is guaranteed no matter the cost, then no one should be shocked when customers lose their price sensitivity.
This is not true. Federal student loans have an annual cap and overall cap, anything above that has to be financed with private student loans, which are not guaranteed by the government and have much higher interest rates. They are generally co-signed for by a parent, who is on the hook if the student cant pay.
That doesn't explain how the cost of tuition has risen a lot faster than the cost of most other goods and services that people also pay for and demand (and receive) good quality of. Also, it assumes a previous state of not paying for the services which did not exist in the US in the same way it did in the UK.
In the US most students at public universities have never paid for most of the services they receive, the state has paid for the bulk of their university education. For the past decade or two the states have been slashing university funding left and right. This is why tuition costs have been rising.
That is not surprising at all. I think it probably should be the case.
Football at any SEC school or basketball at Duke generate a significant amount of money for the school—sometimes in the hundreds of millions. This revenue may subsidizes other sports programs entirely.
And as people continue cutting the cord and ESPN will actually have to start charging what people will pay for sports coverage, that money will disappear.
It's always seemed weird to me how in some countries the student housing is actually owned and run by the university. I studied in Sweden where there was student housing run by a non-profit foundation (cheaply priced and well-maintained, they renovated it my second year there). Some people chose to live in the student housing, others chose to live in private or public housing. Many stayed with their parents to save on costs (I commuted by bus+train for 45 minutes a day until I scored a student housing room).
That's how you get to rent anything at all in Sweden. Every company has their own waiting list that you sign up for. You get one point per day you're on the list.
When you are interested in an apartment you apply for it, and if you are the one with most points you get it. It's all very structured.
Disclaimer: I work for a large and pretty prestigious University that has been undergoing major work in the last decade to update facilities and add buildings.
Almost all of the building budget has been paid for through our endowment and donations from wealthy families so all the building activity hasn't really touched our bottom line at all. However, year after year the state has cut our funding which has directly led to the rise in tuition. The University already runs as lean as possible with staff-our total compensation is a joke (even factoring in generous retirement bonuses) because of this many years long death by a thousand cuts that the federal and state government has pushed on us. EVERYONE has to justify their jobs every year-and this includes faculty. If a faculty member isn't publishing, teaching, and doing community outreach on behalf of the University they won't be getting tenured.
If the state is cutting your funding year after year it sounds like they aren't getting a good ROI from the university via well trained employees or prospering companies? What state are we talking about if you don't mind?
The state is cutting all education funding bit by bit. Its a problem nationwide-and the worst part is that here in Michigan its not even 'that bad' compared to other states. Public universities across the country are struggling. Its become so bad that there has been talk about our University giving up its public status and going private. It'd free us from a lot of state rules and the funding from the state has gotten so minimal that the loss of it isn't the deciding factor any longer about going private.
These buildings are replacing elderly buildings/adding capacity so we can serve more students. So the operation/maintenance costs should fall dramatically for the buildings that are being replaced, and new revenue from more students pay for the new buildings maintenance/operations.
At the University I attend, donors have to give enough for the building and an endowment for ongoing maintenance and operation expenses. A long time ago they were getting these amazing buildings donated, then getting stuck with much higher maintenance costs than the previous billing, or had a lot of extra square footage to heat, cool, and maintain.
Harvard publishes an annual balance sheet [1] and its a good read to get a sense of elite tier university revenue and cost structures. Its net worth is $42B in 2016, down from $44B last year due to very poor returns in the public equity and natural resources portion of its endowment investment portfolio, run by Harvard Management Company.
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Total operating revenues in 2016 were $4.8B (up 6%):
- $1.7B endowment disbursement (36% of revenues, up 7%)
- $1.0B tuition/room/board revenue (21% of revenues, up 7%)
- $0.6B federal funding (11% of revenues, up 3%)
- $0.3B non-federal funding (5% of revenues, up 9%)
- $0.4B donations for 2016 use (9% of revenues)
- $0.8B other revenue (17% of revenues)
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Total operating costs in 2016 were $4.7B (up 5%):
- $2.3B in salaries and wages (50% of costs, up 6%)
- $2.0B in services, space & occupancy, depreciation, equipment (42% of costs)
- $0.2B in interest payments (5% of costs)
- $0.1B in scholarships (3 % of costs)
Harvard used 4% of its endowment to fund operations, up 7% from 2015. In normal years, the endowment fund would see returns that would cover the 4% withdrawal, but in 2016 the fund lost $626m for a -2.0% investment return (3% below benchmark of +1.0%). Real estate returned +13.8%, but public equity returned -10.2% (4.1% below benchmark) and natural resources returned -10.2% (11.6% below benchmark).
Over 50% of the real estate investment portfolio is "direct investment" - the actual purchase and management of property, as opposed to indirect investment in real estate funds. This direct investment returned 20.2% in 2016, probably one of the most lucrative asset classes for HMC. You can be sure that the university will be making a lot more land purchases in the Cambridge area in the near future...
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This is all to say that purchasing real estate is a huge source of returns for colleges like Harvard, and that building facilities and updating old ones will continue as colleges look to increase the value of their purchased land. Salaries and wages at 50% of cost seem slightly high for a largely human asset-based company (compare with 48% for Facebook, 46% for HCA Holdings the largest hospital conglomerate) and will probably continue to be trimmed if returns on the rest of the endowment portfolio don't increase.
>I would often be shocked at how nice many of the housing and general facilities were.
UMD would like to disagree. The facilities look nice on the outside, but on the inside they just stick two students into a space smaller than the average apartment living room. Bathrooms are floor shared, no kitchen appliances, laundry is in another building. No AC. $700 per-student. The commercial housing right next to the college, which is the highest cost/quality in the area, is $1400 for two bedroom, bathroom, kitchen, balcony, a full gym, pool, laundry, its a nice living.
This should never been an option. But you can....leave.
In fact I have met several Americans in China with 6 fig student debt that seem to have chosen this option.
That won't work. The majority of student loans are taken out with a parent or a relative as co-signers. So if you die, your co-signer will be responsible to pay off the loan. It will not be forgiven.
The correct way to do this is to first consolidate your loan under your own name, so your parent, loved ones, or whomever the co-signer won't be ones trapped with the debt.
However, in order to place the loan under your own name, you'd have to first make consecutive payments to show you are able to pay off the loan w/o the co-signer. This means you'd need to have a job with steady income first; something difficult to do for the debt-laden grads in the first place.
I really do not understand what this fuss is all about.
I started working as a software engineer back in 2001. It was a no-brainer to steer to higher-paying areas (from Perl to Java, and then to software engineering in banking, then to quant finance). I didn't get my diploma until 2014 (when I thought it would be a good idea to eventually get a PhD).
For all these years and career steering, I've been asked about my degree _once_. When applying at a position in a huge telecom company, not even my first (or second) choice. The rest of employers were happily ignoring the lack of degree.
Ironically, I was never good in managing personal finances. However, if someone told me back when I was 18 that I had to spend tens of thousands dollars to get my degree, only to get zero work experience and start with a junior position, repaying my debt for many years — I would have laughed in their faces.
Software engineering is an outlier, and it sounds like your experience is too. In all my jobs and interviews (semiconductors, government, management consulting), employers cared about my degree. Even in my interviews with software companies, I doubt I would have gotten in without being a Stanford student, since I had little evidence of skill otherwise.
Edit: My point is not is to argue that degrees are worthwhile or today's system is best. I'm just trying to convey 'what the fuss is about.' Most people seek degrees to get past gatekeepers at employers. And most employers use these gatekeepers to save time and effort.
Well, that's what I've been busy with the first years — building skills and evidence, sometimes working for free (and sometimes paid). Much less expensive than a Stanford degree.
I am not saying that high education is without its merits. But for me, it is a luxury good, or a path to academia, not a prerequisite to a nice job and a house in suburbs.
The key word here is "for me". As a previous commenter pointed out, your experience seems to be an outlier that is the result on many factors (innate talent, country of origin, socio-economic status, upbringing, luck, etc...).
Others (a majority apparently) do not really have the choice, the risk (of ditching uni) is too much for them to take and there is considerable pressure in some societies on young people to go to college to prove their "worthiness". Hence the fuss.
I wish I could just stay at home, learn scala and start trading crypto, but I won't have any safety net to rely on in case of failure, specially where I come from (developing african country).
Russia in the 90s, right after the collapse of the Soviet Union, was arguably as dangerous and poor as some African countries. My family was never rich, and I left home early, changing careers, places of residence and learning relentlessly.
You are right about the safety net. For me, it was the fact that I always can get back to a relatively boring and stable job of Java (or whatever) software engineer, if things went wrong. And I often had to. But the key point is that you do not need 4 years of education to become a Java software engineer. In 2017, it is way easier than in 2001, thanks to GitHub (the fact of Java being still around is the incredible stroke of luck, of course — but I had to change the horse midway, as I had started with Perl, and Perl is much deader these days).
Well, this is a first test — you see the bachelor degree requirement and you apply anyway, being ready to explain how your specific experience and domain knowledge from previous free gigs will bring more value to their business than a generic freshly minted candidate with a bachelor's degree.
Proactivity counts. Relying on paths carved by other people isn't always a good idea.
Or, more likely, you never get called in for an interview because filtering on degree is one of the easiest things for a recruiter to do to cut down on the huge pile of applications for an open position.
Not to be a jerk, but I have trouble understanding how someone obviously intelligent can make such an oblivious statement. To be a successful self-taught software engineer and quant you likely have a IQ a couple standard deviations above average and work in one of the few fields where someone can succeed through intelligence and hard work with little need for credentials.
"Quit school and become software engineer" is good advice for probably about 1-3% of the population. Granted the alternative shouldn't be dropping $200k on a humanities degree, but what is your "no brainer" solution for everyone else? A degree has long been a pathway to the middle class / white collar work.
Trades? I'm a self-taught programmer who started getting paid at "market rate" for mid-level dev a year before my colleagues graduated. For me coding is pretty much a "trade" and boot camps are like "mass apprenticeships".
I'd imagine other trades have similar avenues of employment as well. Maybe if we stop trying to convince people that a 4 year college is the only prestigious career path (even 2 years of community college + 2 years of a 4 year gets a stink eye sometimes!) they'll stop trying to force themselves into inescapable debt.
I really dont understand a society forcing 18 year olds to sit in classrooms for 4 years at 6 figure cost for a 50/50 shot at a 5 figure job. Theres gotta be a better system.
Work in IT, got hired before I even finished school. Started paying in 2003. Been doubling up loan payments for about half that. When school is $35,000+ a year, you get the picture. Basically paid for a house, while paying for another house.
The school I was going to closed the new branch I was going to after one quarter. They paid for most of that, and offered a tuition-free ride at the main campus across the country. Suddenly my ~$100,000 college bill was about $25,000. Graduated 2009, fully repaid December 2014.
great, now that we've identified the problem, let's get some robust public spending on loan forgiveness in order to stimulate the economy be removing a substantial debt burden from people who are in their prime earning years.
this isn't rocket science. people keep more money after their essential bills = people spending more money
the alternative is that we let this debt continue until the students eventually riot or kill themselves-- to be clear, i believe this is the most likely outcome
I'd feel a bit cheated. I really wanted to go to Carnegie Mellon or U. of Illinois, but I didn't because it was too expensive, so I went to U. of Arizona.
If the government gives a big subsidy to people who made what I consider to be a serious financial mistake by buying an outrageously overpriced luxury good, why don't I get a subsidy too? I'm left with no debt, but also no outrageously overpriced luxury.
A couple reforms I think would genuinely fix this system:
1: Cap interest rates, especially for private loans. Education pays itself back several times over to society when people have good jobs and disposable income.
2: Federal student loans should not be serviced by private corporations. Way too many redundant services add unnecessary cost and nobody in society benefits from this system but the loan companies. If I have a federal loan I should pay the federal government. Simple as that.
3: Expand the earned income tax credit to subsidize apprenticeships. Whether you're a welder or a programmer, it would be a lot easier for your employer to get a wage subsidy and train you into the role, instead of gambling on each prospective employee to be "the best" without them leaving in a few years to a higher paying job so they can pay off their student loans.
My only concern is the people like me who have loans - not too much but a lot - who are capable of paying them back and see those who got useless degrees with 6 figure debt being bailed out. What will the reaction be? If the Obama Administration's history with Wall St is any indication, it won't be pretty.
Atleast for Software Engineers/ CS Majors...what was your out of school loan? (I'm curious - I'm a 2016 SE grad from Canada, and it cost me ~70k total - which includes tuition, dorms etc.).
I didn't go to UW or UofT, but I'm sure their total cost is ± 30k at most.
So I'm just curious how students manage to have loans of around 35k/yr.
I'm an advocate for simplifying and flattening the tax code, but with what we've got would it make sense for some sort tax insensitives? Like funds to repay student loans could be tax free like 401k contributions or maybe employers could get a tax break for helping to repay the loans. Gosh, assuming this stuff doesn't already exist.
"After identifying an error in the code that generates repayment rates, the Department fixed the error and recalculated all repayment rates and replaced the previously published repayment rate data values with revised values. The error was a technical one in the coding that caused undercounting of some borrowers who had not reduced their balances, and therefore inflated repayment rates for almost all schools. This revision includes all repayment rate data values in all of the merged data files and all versions of repayment rates including repayment rates for each repayment rate cohort, the 1-, 3-, 5-, 7-year repayment rates, and all repayment rates disaggregated by demographic category (e.g. first-generation status, gender, etc.). The relative difference—that is, whether schools fall above, about, or below average— is modest; over 90 percent of institutions on the College Scorecard tool do not change categories from the previously published to the new rates. However, in some cases, the nominal differences are significant."
Besides the initial cost of tuition,books,room and board, etc.,the money borrowed has to be paid back eventually. No matter how nice thw college campuses are,I feel for those, like myself, who were taught to get an education, then start a career and life won't be hard. However, I never saw a future of working not only without using my degrees costing into six figures, but working a job that only requires a high school diploma, pays more than the few job placements I had that required a degree and still having to pay back a debt that I am not using and that is putting a strain on my income/finances. GOING TO COLLEGE WAS THE WORSE DECISION I EVER MADE!
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[ 3.0 ms ] story [ 211 ms ] threadAs this WSJ piece from December on the matter of the GAO estimating $108 billion in writedowns (probably a low figure, as they admit their accounting on the matter is crap) puts it:
"To help pay for ObamaCare, Democrats simultaneously federalized the student loan market and projected fictitious savings, all while adding more than $1.2 trillion to the federal balance sheet... then cited the government “savings” to peddle the fallacy that the feds make money off student loans—a pretext they then used to sweeten debt forgiveness plans that have helped keep default rates artificially low."
http://www.wsj.com/articles/obamas-giant-student-loan-con-14...
https://www2.ed.gov/about/overview/budget/budget14/justifica...
In FY 2016: 100-112% https://www2.ed.gov/about/overview/budget/budget16/justifica...
I think this might be a matter of framing -- "failed to pay down at least $1 on their debt" might include students with a deferment who are planning on having the debt forgiven. That is, for better or worse, public policy of the United States; it seems weird to conflate that with default.
For example, if you have a Perkins Loan, you can defer during a period of service at any employer where 10+ years would get you loan forgiveness. That list is... rather expansive?
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
Would I expect people graduating from e.g. a teaching college to largely make principle-decreasing loan payments given that this is our policy? No, I would not; it would require that they receive terrible financial advice.
Unless the conflation is deliberate, intended to suggest that the folks pursuing those deferments and forgivenesses are as parasitic as the deadbeats.
They can get out from under the loan in 10 years, we still have to pay for it.
It is failed policy to allow college to get to expensive due to inflation of prices through loose lending. IMO, that is the real bubble.
Terrible things will happen with a young overburdened workforce slaving away for their debt. Politicians are already trying to figure out how to squeeze more social security taxes out of them.
This is bad for the economy, likely to cause extreme class warfare and social upheaval.
These people will have to work. No sabbaticals to find themselves, or time off to spend with a newborn. They'll have to put up with every pointy haired boss and dysfunctional workplace they encounter (at least until they can find another job).
Every day of their lives will boost the GDP. (But it sure sucks for them that their culture didn't steer them down a smarter road when they were 18 and didn't know better).
Economies go great when people are spending money. If a large part of your discretionary income goes to paying off student loans instead of spending on other things, and you put off buying a house or having children due to financial insecurity caused by student loans, then the economy suffers.
https://blog.dol.gov/2016/11/03/spending-habits-generation
https://medium.com/generations-of-spending/meager-spending-a...
Those of the silent generation are what can be most accurately described as frugal spendors.
Again, this tendency is rooted in their surroundings as they grew and developed within the society around them that was facing hard and desperate times.
My own assertions:
(1) GDP measures production. If debtors are incentived to produce more, GDP rises.
(2) The spending of debtors doesn't fall. It is just directed toward different sectors (education and financial products instead of housing, etc.).
(3) Every dollar lost by a debtor is a dollar earned by a creditor. These dollars don't disappear from the system. And even if creditors tend to churn money less than debtors, inflation targeting by the Fed should fully counter any changes in the aggregate velocity of money.
Now, it's possible you're right and I'm wrong. But I think it takes a much more sophisticated (and justified) argument than what you are asserting.
Regarding (3): The money does not disappear, but what is done with it? Already excess money in the hands of the 1% is just going into real estate, the stock market and stupid VC companies. All this is not particularly good for the real economy.
This is of course different from personal experience, where exchanges are essentially one-sided, not two-sided. An individual can exchange money for property. But a closed economy cannot.
What it means, then?
Depending on the policy of the Fed (or other issuer of fiat currency), the money supply may be increasing or decreasing at the same time.
The 'other issue of fiat currency' sounds mysterious.
(Of course, a well functioning government will compensate for that in monetary policy. The US gov just stopped being capable of that by around 2008, it is progressing on recovering some control, but still has very little.)
Quantitative easing was tried, and didn't work. There was nobody to lend money to, so velocity felt in proportion to the new money printed and the whole thing turned into just a hidden bank subside. It may work if coupled with the correct fiscal policy (AKA a temporary universal income), but nobody on the US government has the power to do that.
Interest on reserves is a fringe monetary instrument that is getting support from economists out of desperation. The leading theory is that it doesn't work at all, the fringe theory that everybody is hoping to be right is that it can work if the government restricts the use of paper money. AFAIK, nobody has any idea on what unexpected effects can come from doing it for any long period.
Interest rates are not the only tool, but the US government has already spent all of the orthodox tools. In fact, I do think the lest one to stop working was quantitative easing.
Production is dependent on demand of consumables in the U.S.
2 & 3 are the similar (the same?) point. The poorer one is, or the earlier in life they are (students) the greater % of their income is spent on consumables. I don't think money sloshing around financial services has as direct an impact on the things that most impact production.
Important because, as you mentioned, there is a very large difference in marginal propensity to consume between 'hand-to-mouth' consumers and savers - this affects the velocity of money and GDP. Debatable because at the zero-lower bound, how much effect the Fed really have is very much in question (see: excess reserves at https://goo.gl/NQG2O5).
I personally would disagree - money funneled to creditors rather than in the hands of consumers is more harmful to the economy than the reverse, but is that money passed to capitalists (low consumption) or used for business investment (high investment)? That being said, consumption is about 70% of GDP.
It's reasonable to think that in time much of it will get paid back but there are other kinds of investments that would perform better, and hence the economy would have been better off had these loans not been made and the money were spent on something else.
Also to your comment about sabbaticals and other less productive activities, is that really the common case? I believe that underemployment via career choices and local demand for skills would be more common.
Looks like a huge boost to an economy. Besides, let's not forget that economies are made of people.
I studied in Austria so I'm not too familiar with how student loans in the US work, but as far as I know the Income Based Repayment program limits your monthly payments to a given percentage of your income. You can't discharge those debts, but an upper bound on the monthly payments doesn't sound too bad either.
this is already the reality for many americans. eventually they'll riot
I remember reading shortly after the start of the Great Recession how student debt was going to be the next big ball to drop. I wonder how far we are from that.
Four-year colleges are far to expensive to use it to figure out what you want to do. I think it would be much more valuable to try and find internships/shadowing opportunities with different businesses and people. That's what I would do, if I were going to do everything again.
For those who do want to go straight to college, taking random classes at a community college is the right way to go. Typography, Geology, Pre-law—use those classes to get an idea for what you want to study.
I think this is a huge disservice and if I ever have kids I'm going to stress that they do NOT have to go to college right after HS or ever. How many people waste a Bachelor's degree because they were forced to pick a major when they were 18?
I would love to get the story behind this. The cynic in me wants to say it was an Excel screw-up.
I certainly don't think students should be living and studying in squalor or unsafe conditions but I wonder how much of the increased costs in education are a result of the kind of spending that goes into some of these facilities. Have universities, particularly public universities, always spent this lavishly on their campuses or is this a more recent thing?
And have any studies been done on how much of the increased costs are due to increased administration numbers and nicer buildings?
Part of this is economics. It's easy to build and subsidize accommodation knowing that you can make the subsidy back on private hire conference guests if you're an Oxford or Cambridge. Less so if you're Bath or Coventry.
Students who used to have reasonable, subsidized accommodation now have a choice between the relatively unregulated and unsubsidized private rental market and these overpriced palaces with flat screen TVs etc.
All TVs are flatscreen. The TV license costs more than a TV.
I'm sure the new student accomodation is overpriced, but that's market effects not the presence of TVs. The real culprit is the government trying to run universities as profit centres. The policy isn't "joined-up": we're probably going to see further crackdowns on student visas at the same time as European funding is withdrawn. I'm waiting for the first redbrick university to go bankrupt..
https://en.wikipedia.org/wiki/Pork_cycle
When was the last time you saw a CRT?
"All of those trends add to the cost of college, but not by that much. At most, about a quarter of the increase in college tuition since 2000 can be attributed to rising faculty salaries, improved amenities and administrative bloat. By comparison, the decline in state support accounts for about three-quarters of the rising cost of college."
a) they've increased their spending on amenities and salaries by about 25%
b) they're taking in less money than before (apparently they're receiving 3x less money than they are increasing the budget? So budget increase is 25% of extra costs while funding decrease is 75%?)
I suppose it depends what metric we should be judging by. If university generates measurable value for the public (it probably does; having lots of smart people walking around isn't necessarily a bad thing), the next question is "how much money must be spent per unit of said public good?" Of course, no one can really agree on the goal of university or any metrics by which to judge (other than you have to go if you care about your future!), so it's kind of fubar.
I'd be willing to bet that they could get away with spending less money. I've been saying this for a while, but sooner or later student debt will lead to a major re-balancing of balance sheets. I'm a big believer in learning for free via the internet; if you have internet access, you've got everything you need to learn anything and contact anybody. Let the university system die a natural death and let's massively lower the cost and expand the reach of education.
At my university, 'working effectively in groups' usually meant one smart kid at the computer in the computer lab doing all the work while 7 other kids swarmed around them and copying what they did as close as possible without triggering the 'plagiarizing' senses of the teacher.
I worked alone (in the same computer lab) so I could actually learn and internalize what I was taught, but I'd look around and that was a common sight.
A university is not required (and in fact, I'd argue that classwork and grades isn't a good structure for it) in order to figure out how to be effective in a group. Working a single job in fast food taught me more about working in a group than any group project at school or the 'Small Group Communications' class I was required to take for my major.
Have lab space then, have the government pay for it and schedule times for people who want to use it. Should not be limited to a university's chosen student body; it should be open to anyone that wants to learn.
You get much more than that and it gets superfluous. US universities are superfluous to the point of wastefulness.
I still say defund them and let them figure it out or shut down. But yes, I understand why this sounds extreme, particularly if you don't share my views of college being a super shit deal for most people (and universities--peddling such shit deals and responding to criticism with moral indignation--are no better than timeshare salesmen).
In many university courses the tuition you pay is to access the network of alumni, faculty. These are(still) vital for Phd to collaborate and MBAs to find work. I am not sure the internet is actually even a partially workable substitute for this important aspect.
anything, that is, which doesn't need a lab. So much for physics, chemistry, biology, everything that depends on them...
Doable? Maybe. Effective for the general population? Unlikely.
Am self taught at computing too.
How much does music school cost btw? Probably way more than most violinists make right? Going into debt for education is a crap deal, that's what I'm saying. You can get the same result cheaper.
My brother's just finished at Columbia, and he was living in a slum apartment in NYC. Not nice at all.
Has someone got pics of these amazing college facilities?
It seems to me (anecdata), that shortly after tuition fees were introduced (1998/1999), the trend for better (and correspondingly more expensive) student accommodation began, kicking off development of purpose-build accommodation.
There's some interesting numbers in a real-estate report from GVA [2], which shows a reduction in university-owned student halls, and an increase in privately-owned purpose-built student halls.
[1] https://en.wikipedia.org/wiki/The_Young_Ones_(TV_series)
[2] http://www.gva.co.uk/research/student-housing-market-overvie... [PDF]
Some of my friends in London were indeed living like in The Young Ones.
There is also an argument that the accommodation has a direct impact on students' education: if students are worrying about dodgy landlords, ongoing issues with heating or mould or leaking pipes, then they'd lose potential study-time in having to address the issues, have less mental capacity to channel to their education, and have an environment less suited to studying.
So good quality accommodation is a net asset for educational services, but in some places the cost is substantially higher than the private-sector rental market.
My dorm was modelled on a Swedish prison, had a single plug socket per room, and two toilets between 20 of us. The kitchen was barely big enough for 6 people, and couldn't support more than 4 people cooking at once.
That wretched hall was demolished and replaced by something a lot nicer - because when students are paying thousands of pounds per year, they expect something a little more salubrious for their cash.
The same was true of teaching. I remember a bunch of us complaining about the poor quality of lectures from one particular professor. The head of our department was genuinely shocked when I said "I don't think I'm receiving value for money". Students were now expecting a guarantee of quality for the debt they accumulated.
Better facilities cost money - but capitalism demands that students (as rational consumers) should seek value for money. If you have a choice between UCLA and NYU - it makes sense for your to spend your money on something that is attractive to you.
A truly rational student might forgo comfort in exchange for excellent teaching. But I suspect the majority will spend their money on something which looks nice, rather than is actually effective.
The flip side of this is that student loans are guaranteed by the federal government, and when tuition goes up, so does loan availability. If financing is guaranteed no matter the cost, then no one should be shocked when customers lose their price sensitivity.
It's also important to keep in mind that the graduates coming out of college in the time period mentioned have entered the most challenging job market for new job seekers in 70 years. It's hardly fair to expect them to be able to live up to promises they made in the mid 2000s when everyone running the economy promised it was in great shape, while those same people were building the house of cards that collapsed on the millenial generation. There's lots of blame to go around, but very little of it should land on the students who took out these loans.
What you want and what you can afford can be two very different things. Just because you can get a big loan does not mean you can afford it. For myself, the purpose of going to college was to get a piece of paper to get my first software development job. I didn't care if the college looked nice, offered all sorts of amenities, etc. I went to a local state university and commuted.
Too many people have been brainwashed into going college for the non-education part of the 'college experience' without understanding the long-term implications of coming out of school with an enormous debt load. Continuing to allow 17-21 year old kids to sign up for these loans is just a scam.
This is not true. Federal student loans have an annual cap and overall cap, anything above that has to be financed with private student loans, which are not guaranteed by the government and have much higher interest rates. They are generally co-signed for by a parent, who is on the hook if the student cant pay.
edit: this is further broken down into subsidized and unsubsidized loans (the former the government pays the interest on while you are in school, the latter they dont): https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid...
The highest-paid public employee in 39 US states is either a football or men's basketball coach
http://www.businessinsider.com/us-states-highest-paid-public...
But it doesn't say how much their salaries are compared to the overall budget or how much the team facilities cost.
Football at any SEC school or basketball at Duke generate a significant amount of money for the school—sometimes in the hundreds of millions. This revenue may subsidizes other sports programs entirely.
http://www.cheatsheet.com/sports/the-5-most-valuable-college...
If schools want to generate revenue from their sports programs, then winning is very important. What's the key to winning? Hiring the best coaches.
Edit: There is a Forbes article with more information and teams, I just hate linking to Forbes.
Is there a waiting list?
When you are interested in an apartment you apply for it, and if you are the one with most points you get it. It's all very structured.
Almost all of the building budget has been paid for through our endowment and donations from wealthy families so all the building activity hasn't really touched our bottom line at all. However, year after year the state has cut our funding which has directly led to the rise in tuition. The University already runs as lean as possible with staff-our total compensation is a joke (even factoring in generous retirement bonuses) because of this many years long death by a thousand cuts that the federal and state government has pushed on us. EVERYONE has to justify their jobs every year-and this includes faculty. If a faculty member isn't publishing, teaching, and doing community outreach on behalf of the University they won't be getting tenured.
Also, that money would, in theory, be available for scholarships or other programs if it wasn't being wasted on unnecessary things.
---
Total operating revenues in 2016 were $4.8B (up 6%):
- $1.7B endowment disbursement (36% of revenues, up 7%)
- $1.0B tuition/room/board revenue (21% of revenues, up 7%)
- $0.6B federal funding (11% of revenues, up 3%)
- $0.3B non-federal funding (5% of revenues, up 9%)
- $0.4B donations for 2016 use (9% of revenues)
- $0.8B other revenue (17% of revenues)
---
Total operating costs in 2016 were $4.7B (up 5%):
- $2.3B in salaries and wages (50% of costs, up 6%)
- $2.0B in services, space & occupancy, depreciation, equipment (42% of costs)
- $0.2B in interest payments (5% of costs)
- $0.1B in scholarships (3 % of costs)
Harvard used 4% of its endowment to fund operations, up 7% from 2015. In normal years, the endowment fund would see returns that would cover the 4% withdrawal, but in 2016 the fund lost $626m for a -2.0% investment return (3% below benchmark of +1.0%). Real estate returned +13.8%, but public equity returned -10.2% (4.1% below benchmark) and natural resources returned -10.2% (11.6% below benchmark).
Over 50% of the real estate investment portfolio is "direct investment" - the actual purchase and management of property, as opposed to indirect investment in real estate funds. This direct investment returned 20.2% in 2016, probably one of the most lucrative asset classes for HMC. You can be sure that the university will be making a lot more land purchases in the Cambridge area in the near future...
---
This is all to say that purchasing real estate is a huge source of returns for colleges like Harvard, and that building facilities and updating old ones will continue as colleges look to increase the value of their purchased land. Salaries and wages at 50% of cost seem slightly high for a largely human asset-based company (compare with 48% for Facebook, 46% for HCA Holdings the largest hospital conglomerate) and will probably continue to be trimmed if returns on the rest of the endowment portfolio don't increase.
[1] http://finance.harvard.edu/files/fad/files/harvard_ar_11_120...
UMD would like to disagree. The facilities look nice on the outside, but on the inside they just stick two students into a space smaller than the average apartment living room. Bathrooms are floor shared, no kitchen appliances, laundry is in another building. No AC. $700 per-student. The commercial housing right next to the college, which is the highest cost/quality in the area, is $1400 for two bedroom, bathroom, kitchen, balcony, a full gym, pool, laundry, its a nice living.
The correct way to do this is to first consolidate your loan under your own name, so your parent, loved ones, or whomever the co-signer won't be ones trapped with the debt.
However, in order to place the loan under your own name, you'd have to first make consecutive payments to show you are able to pay off the loan w/o the co-signer. This means you'd need to have a job with steady income first; something difficult to do for the debt-laden grads in the first place.
I started working as a software engineer back in 2001. It was a no-brainer to steer to higher-paying areas (from Perl to Java, and then to software engineering in banking, then to quant finance). I didn't get my diploma until 2014 (when I thought it would be a good idea to eventually get a PhD).
For all these years and career steering, I've been asked about my degree _once_. When applying at a position in a huge telecom company, not even my first (or second) choice. The rest of employers were happily ignoring the lack of degree.
Ironically, I was never good in managing personal finances. However, if someone told me back when I was 18 that I had to spend tens of thousands dollars to get my degree, only to get zero work experience and start with a junior position, repaying my debt for many years — I would have laughed in their faces.
Edit: My point is not is to argue that degrees are worthwhile or today's system is best. I'm just trying to convey 'what the fuss is about.' Most people seek degrees to get past gatekeepers at employers. And most employers use these gatekeepers to save time and effort.
I am not saying that high education is without its merits. But for me, it is a luxury good, or a path to academia, not a prerequisite to a nice job and a house in suburbs.
Others (a majority apparently) do not really have the choice, the risk (of ditching uni) is too much for them to take and there is considerable pressure in some societies on young people to go to college to prove their "worthiness". Hence the fuss.
I wish I could just stay at home, learn scala and start trading crypto, but I won't have any safety net to rely on in case of failure, specially where I come from (developing african country).
You are right about the safety net. For me, it was the fact that I always can get back to a relatively boring and stable job of Java (or whatever) software engineer, if things went wrong. And I often had to. But the key point is that you do not need 4 years of education to become a Java software engineer. In 2017, it is way easier than in 2001, thanks to GitHub (the fact of Java being still around is the incredible stroke of luck, of course — but I had to change the horse midway, as I had started with Perl, and Perl is much deader these days).
Instead you have to retake your finals on a whiteboard during the interview.
Proactivity counts. Relying on paths carved by other people isn't always a good idea.
"Quit school and become software engineer" is good advice for probably about 1-3% of the population. Granted the alternative shouldn't be dropping $200k on a humanities degree, but what is your "no brainer" solution for everyone else? A degree has long been a pathway to the middle class / white collar work.
I'd imagine other trades have similar avenues of employment as well. Maybe if we stop trying to convince people that a 4 year college is the only prestigious career path (even 2 years of community college + 2 years of a 4 year gets a stink eye sometimes!) they'll stop trying to force themselves into inescapable debt.
The school I was going to closed the new branch I was going to after one quarter. They paid for most of that, and offered a tuition-free ride at the main campus across the country. Suddenly my ~$100,000 college bill was about $25,000. Graduated 2009, fully repaid December 2014.
this isn't rocket science. people keep more money after their essential bills = people spending more money
the alternative is that we let this debt continue until the students eventually riot or kill themselves-- to be clear, i believe this is the most likely outcome
If the government gives a big subsidy to people who made what I consider to be a serious financial mistake by buying an outrageously overpriced luxury good, why don't I get a subsidy too? I'm left with no debt, but also no outrageously overpriced luxury.
1: Cap interest rates, especially for private loans. Education pays itself back several times over to society when people have good jobs and disposable income.
2: Federal student loans should not be serviced by private corporations. Way too many redundant services add unnecessary cost and nobody in society benefits from this system but the loan companies. If I have a federal loan I should pay the federal government. Simple as that.
3: Expand the earned income tax credit to subsidize apprenticeships. Whether you're a welder or a programmer, it would be a lot easier for your employer to get a wage subsidy and train you into the role, instead of gambling on each prospective employee to be "the best" without them leaving in a few years to a higher paying job so they can pay off their student loans.
My only concern is the people like me who have loans - not too much but a lot - who are capable of paying them back and see those who got useless degrees with 6 figure debt being bailed out. What will the reaction be? If the Obama Administration's history with Wall St is any indication, it won't be pretty.
I didn't go to UW or UofT, but I'm sure their total cost is ± 30k at most.
So I'm just curious how students manage to have loans of around 35k/yr.
https://www.irs.gov/taxtopics/tc456.html
"After identifying an error in the code that generates repayment rates, the Department fixed the error and recalculated all repayment rates and replaced the previously published repayment rate data values with revised values. The error was a technical one in the coding that caused undercounting of some borrowers who had not reduced their balances, and therefore inflated repayment rates for almost all schools. This revision includes all repayment rate data values in all of the merged data files and all versions of repayment rates including repayment rates for each repayment rate cohort, the 1-, 3-, 5-, 7-year repayment rates, and all repayment rates disaggregated by demographic category (e.g. first-generation status, gender, etc.). The relative difference—that is, whether schools fall above, about, or below average— is modest; over 90 percent of institutions on the College Scorecard tool do not change categories from the previously published to the new rates. However, in some cases, the nominal differences are significant."