Paying for college

I really enjoyed this Upshot piece by Kevin Carey that argues that now that you can have your student loans forgiven so long as you make consistent payments for a set period, it’s really just shifting the subsidies for public higher education from states to the federal government.  Interesting:

Has the student loan crisis already been solved? …

In the 1990s, President Clinton helped create a new loan option that allowed students to borrow directly from the United States Department of Education. If they did, they were eligible for an income-based repayment regime in which loan payments were limited to 20 percent of the borrower’s income, after a deduction for basic living expenses. Any balance remaining after 25 years of payments was forgiven.  [emphasis mine] …

The logic behind income-based repayment is that because students can’t control whether they graduate in a recession, the student loan system is particularly vulnerable to the business cycle.

“College degrees pay off in the long run, but many graduates struggle to manage their debt upon graduation,” said Rory O’Sullivan, deputy director of Young Invincibles, a millennial research and advocacy group. “Income-based repayment plans protect students from early career struggles, layoffs and tough economic times.”

Under an income-based repayment, if you make little money, you repay little money. If you make nothing, you owe nothing, and your loan doesn’t go into default. The loan forgiveness provision protects borrowers from too much interest accumulating over time.

In 2010, Barack Obama was president, and he, too, pushed a financial aid overhaul through Congress. This time, the government-subsidized private sector loan program was entirely shut down.

Important changes to the income-based repayments were made, but because they were passed under the same legislation that created the Affordable Care Act, few people paid much attention to them. IBR had been made even more generous. Now borrowers had to pay only 10 percent of their income per month, even as the forgiveness threshold was lowered to 20 years. People who work in government or nonprofits are still eligible for forgiveness after a decade. Although [emphasis mine] it was originally slated to become effective in 2014, Obama administration lawyers found a way to effectively speed up the IBR start date by several years. Most important, all students would now borrow directly from the federal government and be eligible for the more favorable repayment terms.

The historical social contract used to be straightforward. All citizens were eligible for generous government college subsidies in the form of low tuition at public colleges and universities. Graduates “paid back” that subsidy in the form of larger tax payments — and in most states, higher marginal tax rates — on the additional income that their diplomas helped them earn…

By moving more students into IBR, the federal government is essentially replicating this arrangement. Once again, those who earn more pay more, returning the full amount of their loan, plus interest, before the 20-year forgiveness threshold is met. Those who earn less, for whatever reason, pay less. Nobody will ever default simply because they can’t afford to pay…

If it seems as if the whole concept of a government-backed student “loan” is disappearing, that’s true, and probably a good thing. Using a debt system to make college affordable has always been an awkward fit.

While home borrowers need a down payment, income and a credit rating, federal student loans are available to anyone who enrolls in an accredited college. While home and car loans are backed by assets that can be repossessed, banks can’t seize a college degree. This is one reason lenders successfully lobbied Congress to make student loans very difficult to discharge in bankruptcy, and thus even more onerous for people who can’t afford to repay them…

In the long run, the signs point toward the federal government replacing states as the primary financier of American higher education. Given how much unnecessary financial hardship has been imposed on students, this is a welcome trend. The sense of pervasive student loan anxiety that characterizes much of the contemporary higher education conversation could become a relic of an older time.

I knew we had made some good policy changes regarding student loans, but I really hadn’t paid close attention (with my intention of sending three kids to college, I sure should).  Anyway, I found this to be a really useful and interesting perspective on understanding the changing nature of student loans.

A perfectly defensible call

I know you are not here for my NFL analysis, but I am so annoyed at all the piling-on on Pete Carroll and the Seahawks today.  They were one great individual defensive play (the interception) from winning the Super Bowl and nobody would be complaining about choosing to call a pass for that play.  A variety of analyses suggest that a run was a better call, but not actually by a dramatic amount, and that for a number of strategic reasons, a pass was a more-than-defensible call.

First, Bill Barnwell in Grantland:

You might argue that the logic there doesn’t include the danger of throwing the football and the downside of an interception, and that’s true, but there are negative possibilities in every play call. In fact, this season it was more dangerous to run the football from the 1-yard line than it was to throw it. Before Sunday, NFL teams had thrown the ball 108 times on the opposing team’s 1-yard line this season. Those passes had produced 66 touchdowns (a success rate of 61.1 percent, down to 59.5 percent when you throw in three sacks) and zero interceptions. The 223 running plays had generated 129 touchdowns (a 57.8 percent success rate) and two turnovers on fumbles.

That said, Barnwell not a fan of the call:

The key phrase there, of course, is “in a vacuum.” This wasn’t a vacuum. This was the Seahawks and the Patriots, and while the size of the stage shouldn’t matter, the matchups should. As I mentioned in my Super Bowl preview, this was a matchup specifically built for running the football with Lynch in short yardage. According to Football Outsiders, the Patriots were the worst team in the league in power-running situations and fifth-worst in terms of stuffing the opposition for no gain or a loss. Seattle was the second-best power running team and the sixth-best team at avoiding stuffs. If there was ever a matchup that called for a team to live and die on the back of its running game from the 1-yard line, this was it.

Still, part of not a vacuum is what’s happened in the game and the Patriots had stopped Lynch in short yardage.

In Slate, Brian Burke also brings the data (and the statistical simulation):

Had Seattle run on second down and failed, it would have had to use its final timeout. This would mean that New England would know a pass was very likely on third down. If that had happened, the Internet would now be bashing Carroll for an entirely different reason…

The simulation—which is different than Win Probability—gave Seattle an 85 percent chance of winning by running and a 77 percent chance by passing. It turns out the added risk of a sack, penalty, or turnover was not worth the other considerations of time and down…

Seattle’s decision was not the best one possible, but it was defensible and supported by some reasonable considerations. Ultimately, it was a great defensive play that truly decided the game.

And Justin Wolfers brings the game theory:

The key insight of game theory for an N.F.L. coach is that when you think about what choice you should make, you need to also consider the response from the opposing coach, understanding that he is also thinking strategically. This line of thinking suggests that you should not necessarily call a run play, even if you’re blessed with a great running back. Likewise, it’s not clear that you should definitely pass. Rather, your choice should be somewhat random — a choice that game theorists call a “mixed strategy.”…

The logic is that if you always choose to run in this situation, then you make the opposing coach’s job too easy, as he will set a defensive formation aimed at stopping your running back. Forget guarding the receivers, Belichick would respond by piling players between Marshawn Lynch and the end zone. As great as Lynch is, even he would find it difficult to run over a stacked defense that was waiting for him. Likewise, if the Seahawks would always decide to pass in this situation, there would be little need for the Patriots to guard against the run, and so their defense could double-team the eligible receivers.

Instead, you need to keep your opponents guessing, and the only way to do this is to be unpredictable. The only way to be unpredictable is to be a little bit random…

Game theory points to the possibility that Carroll’s decisive call was actually the result of following the best possible strategy, and that this is a strategy that involves an element of randomness in play-calling. This leads to the intriguing possibility that if that fateful final play were to be run in a dozen parallel universes, with each coach continuing to play the same mixed strategy, the actual plays called would differ, as would their outcomes.

And so the same teams pursuing the same strategies under the same circumstances might have yielded a different Super Bowl champion.

Pete Carroll did not get where he is by being an idiot.  Was this call suboptimal?  Maybe.  Especially given the larger strategic considerations, it strikes me as more than defensible.  It’s a little ridiculous how everybody in America all of a sudden thinks they know better than one of the NFL’s best coaches.

UPDATE: Just after posting this I also found an excellent analysis at 538 which makes a strong argument that the really poor coaching choice was Belechick’s to not take a time out at the end.

This isn’t about passions, and it isn’t about statistical mumbo-jumbo. It’s about arithmetic.

Under the most pro-Beast set of assumptions, rushing may have been the better play but by the slimmest of margins (0.3 percentage points). Under a more pro-Gostkowski set of assumptions, passing may have been the best play by up to 3 percentage points.

But we’re still discussing marginal improvements in odds. Pick which assumptions you like; it doesn’t really matter. Carroll’s decision wasn’t the epically bad call many have made it out to be…

Note again that if we take the assumptions that are most unfavorable to Carroll, his mistake would have cost Seattle only 0.3 percentage points, while under the assumptions most favorable to Belichick, his error cost the Patriots 2.1 percent.4

But winning erases all sins.

 

American aristocracy?

Nice Economist piece on America as a “hereditary meritocracy.

Assortative mating of this sort seems likely, on average, to reinforce the traits that bring the couple together. Though genes play a role in the variation of intelligence from person to person, this is not a crude genetic determinism. People tend to encourage in their children what they value in themselves and their partners. Thus people bought together by their education and status will typically deem such things important and do more to bring them out in their children, both deliberately and by lived example—processes in which nature and nurture are more than likely to work hand in hand.

Not only do graduate couples tend to value education; they also tend to have money to spend on it. And though the best predictor of an American child’s success in school has long been the parents’ educational level—a factor which graduates are already ahead on, by defintition—money is an increasingly important factor. According to Sean Reardon of Stanford the past decades have seen a growing correlation between parental income and children’s test scores. Sort the students who took the SAT, a test for college applicants, in 2014 by parental income and the results get steadily better the further up the ladder you climb (see chart 1).

And a related article on how my marriage/family is contributing to the problem:

Intellectual capital drives the knowledge economy, so those who have lots of it get a fat slice of the pie. And it is increasingly heritable. Far more than in previous generations, clever, successful men marry clever, successful women. Such “assortative mating” increases inequality by 25%, by one estimate, since two-degree households typically enjoy two large incomes. Power couples conceive bright children and bring them up in stable homes—only 9% of college-educated mothers who give birth each year are unmarried, compared with 61% of high-school dropouts. They stimulate them relentlessly: children of professionals hear 32m more words by the age of four than those of parents on welfare. They move to pricey neighbourhoods with good schools, spend a packet on flute lessons and pull strings to get junior into a top-notch college.

I’m really not obsessed with my neighborhood (very clear if you’ve ever been here), nor lessons, and I just want my kids to go to top-notch public universities like those we have here in NC.  I do admit, though, to marrying a clever, successful woman.  And to conceiving bright children, but that generally goes along with the previous sentence.

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