I see your point. But it is like if you say that if someone is shot while buying healthy food is good in a way, because he was shopping healthy food. Not false, but worth a deeper discussion. ;)
I do not think you read the article. The article is specifically cites two reasons for debt woes: older people becoming co-signers of their kids' or grandkids' loans, and being unable to pay off student debt that they themselves took out decades ago.
It says nothing about training, or older people gaining new skills and taking on new debt for themselves.
Slightly off topic, but does anyone know how/have experience getting a california bill put on the ballot?
One area that I believe is highly inequitable is that home owners can write off all of their interest on their home loan, but there are income caps for student loans that restrict who and how much interest can be written off.
I'd like to draft a measure to make student loan interest 100% tax deductable at the state level. The hope is that passing it in CA would create a conversation around federal income tax policy and student loan interest.
You wouldn't necessarily need to. It would lower one kind of tax stream, but giving people more money to spend would increase others by a similar amount. If I had another $500 of free money, I would most likely spend that on something that is taxed. Possibly something that's taxed at a higher rate, or something that contributes to the GDP.
We give tax breaks to companies all the time with the explicit understanding that they will cover that loss just by the mere fact that they exist and are spending money.
Well, not all groups do the same thing with their newly reclaimed income. If memory serves, lower income folks will tend to spend all of it because, well, it's expensive to be poor and they're trying to catch up to some basic level standard of living. Middle class – it's a mix, but much of it gets saved or invested. The rich – they don't spend the extra money – they invest it (often avoiding taxation or comparable taxation).
So, IF that's true, it might make this more viable because the rich and upper middle class are less likely to be holding student loans, and thus, this money is more likely to be spent.
What doesn't work is giving tax breaks to companies in the hope that they'll hire more people. That's called trickle-down economics, and you're right. We tried it, and it didn't work. Companies and rich people tend to just save the money instead of spending it. What does work is giving tax breaks to normal people, who will then spend that money on something that benefits the economy. It's the trickle-up effect.
If you gave me $500, I'd buy a new dishwasher. But a rich person doesn't have to save money to buy a new dishwasher. Giving them more money isn't going to change their life in any appreciable way. Everything they want, they already have. But poor people want/need a lot of things they can't afford. Giving them a tax break means they can now afford to buy things they previously couldn't, which means Whirlpool sells more American-made dishwashers, hires more American employees, and pays more American taxes.
Oh and the reason Bush raised taxes in the 80s is to pay for a war. You can't fix the deficit, cut taxes, and go to war. War is expensive.
I think a more likely scenario is people take the $500 and use most of it to pay bills or pay off credit card debt. They then take whatever money is remaining and go out to dinner, buy toys for their kids, etc. The real effect of the tax break on growing the economy is muted quite a bit in this scenario.
Bills need to get paid. If I'm paying my bills with "free" money, that means I have other money to spend on other things. If I'm paying off credit card debt, it means I have those interest payments available to spend now.
The only way to waste money from the economy's standpoint is to save it. As long as it's being spent, it's being spent well. And as long as it's being spent on something that you pay taxes on, the government wins too.
I am just trying to say that if someone uses the tax break to pay off a portion of debt or to pay for bills and not have to get a payday loan, it doesn't have the same immediate effect as if they go and buy a dishwasher. Yes, they end up paying less interest on their debt over long run, which gives them more money to spend (or save). But these gains are realized in there being less interest in the monthly debt payments, and I think in this case the gains are more likely to be saved rather than pooled to make a large purchase.
On a more fundamental level tax breaks to increase tax revenue is largely doomed to fail just because each dollar you cut has to be replaced by multiple times that amount spent in other tax streams to make up for it.
> Didn't we try that in the 80s, nation-wide, to ill effect?
Not exactly; Reagan's "biggest tax cut in history" on income taxes was followed very quickly by his less-frequently-remembered biggest tax increase in history (on payroll taxes), and so was really just part of the biggest tax burden shift in history from higher income to lower-income earners.
In the short-term, this didn't have bad top-line aggregate effects on the economy, but it was a key factor in the bad distributional results since that time.
Some of the tax money would be recovered via higher spending or potentially even an increase in real estate values and real estate taxes.
The rest may require either cuts in other programs or increases in income tax rates for everyone. Either event would create a more fair tax structure which is why it should be proposed.
We have a major student debt crisis and we should be attacking it from multiple angles.
Wouldn't making the interest tax deductible increase the price? I've read that economists argue that housing prices would be lower if we removed the interest deduction.
The student loan market isn't really a market. The biggest lender by far is the federal government and the interest rates and lending amount caps are set by Congress.
The point was that the effectively cheaper loans with make the product more expensive. House or university. It has nothing to do with selling the loans.
I think the claim was that the education market is (sort of) a market, at least in the sense that demand is driven to some degree by price. The claim is that if the loan cost drops (and thus the effective price of attending drops), demand will rise and school can raise prices until the perceived cost of attending (and corresponding demand) are back where they were earlier.
The cheaper loans are a _cause_ in the market mechanism being described, not an effect, so for this assertion it doesn't matter how market-oriented they are.
> I think the claim was that the education market is (sort of) a market, at least in the sense that demand is driven to some degree by price.
In a market, price is driven by demand (and supply). If price is externally controlled (which isn't, then, a free market), then the quantity traded will be driven by price (it will be the minimum of quantity demanded and quantity supplied at the price.)
But, that's all irrelevant; the relevant relationship is that an external subsidy to buyers outside of the price exchanged between buyer and seller (which is not a price cut) increases demand and, thereby, both market clearing quantity and market clearing price (assuming the supply curve slopes in the usual direction.) The latter effect (increase in market clearing quantity) is usually the intended effect of a subsidy, the price effect comes along for the ride.
OTOH, there is plenty of evidence that loan repayment costs (and this has been generally been shown to be the case with deferred costs) are excessively discounted in decision-making, which increases the degree to which loans act like subsidies (in both quantity traded and price effects), but also decreases the degree to which subsidizing loan repayment acts like a subsidy (because it reduces a costs that is discounted in decision-making, reducing the effect of both the base cost and the reduction of that cost.)
I don't think the mechanism you describe is particularly strong if the amount that can be borrowed is capped -- at least not beyond the price point of the cap.
Why do you say it isn't a market? You have buyers (people who borrow) and lenders (people who lend). Just because the gov't is the biggest lender doesn't mean supply and demand aren't important.
If you make it easier to borrow money for education, then there is less pressure to keep education costs down.
Then, as someone who is a renter and does not have student loans, I would miss out on two tax breaks. I think a more elegant solution is to get rid of interest deductions for home owners. When you take out a loan, I think you should pay the real price for that loan.
I got BS from a public school. I paid for school via a mix of working ~10 hours a week throughout the school year, applying for local scholarships, doing a paid internship every summer, living in a cheap apartment, and then getting some loans. Since my tuition was only ~$10,000 a year and I graduated in 4 years, the overall amount of loans needed were not huge and could be paid off relatively quickly.
I did a similar thing for undergrad and graduated with no debt. After working a few years went back for a grad degree which is how I accumulated some grad debt. Luckily I am doing fine and will have it paid off relatively quickly. My issue is more with the structural disadvantages we are creating for others and I think creating a system that is fair for both types of borrowers, home loan borrowers and student loan borrowers makes sense.
I would even consider allowing the write-off of discretionary interest like car loan interest. It should likely be capped at some value that allows people to buy a new, but not ridiculous car. (I don't own a car so this is especially not something I care about).
Point is, if home buyers are writing off their interest, people who are investing in themselves definitely should. I also agree with your elegant solution, and would support no write-offs, but I believe it is harder to take away write-offs than to add them.
The student loan deduction phases out somewhere ~70k a year in income. A lot of first year engineering grads will never get to deduct a cent of student loan interest.
Also, getting rid of the mortgage deduction would be a major hardship on the middle class.
More usury in the one of the most immoral societies in the world. Where it is perfectly legal to create terms of a contract where an elderly person can be pushed into crippling poverty if they are unable to pay.
Where to begin? Land stolen through genocide and worked by slaves? Mass incarceration? Instigation of coups in foreign governments to ensure lower consumer costs and higher profits at home? Unaccountable drone strikes of innocent people in several countries, including countries we aren't at war with like Yemen?
Our society is very sick. It has been for a long time.
If we get to reach back into history for atrocities to describe current societal ills, then we effectively mar most of the world's nations: practically all of Europe, most of East and South Asia, the Middle East, North and Central Africa.
Has there been any attempt to orchestrate an income based repayment program? This could be
implemented in a variety of ways, the most popular of which is taking a percentage of your
income after graduating.
Some advantages I can think of:
1. Educational quality is more tied to student success.
2. The burden of "payment" is shifted from the student to the school, as the school now must make
sure their students are capable of getting good jobs if they want to be paid themselves.
3. Education and corporate "curricula" are more coupled. This could also be a disadvantage,
depending on how you think about it.
Some diadvantages:
1. This hurts liberal arts, where the value is more opaque.
2. Research based, or generally any profession that's intellectually difficult, but pays low will be
discouraged, implicitly through this.
3. Makes the point of education a bit more professional and practical, which may have longer term
effects (people who think outside of the box generally aren't the ones who are paid well,
initially).
This system, in a way, exists in the UK. We have a single (govt sponsored) source of student loans and repayment is taken out of paychecks automatically. In the pre-2012 scheme it's 9% of everything over £20k (roughly), where the median salary outside of London is ~£25k.
For me, my student loans were about £20k overall (including living costs) and I'm paying back about £2.5k/year from it. Most of my friends are never going to pay it back.
However, it's not really put much burden on universities as they get the money immediately and then the losses from non-repayment are absorbed by the government.
> Most of my friends are never going to pay it back.
It scares me that people are taking on these loans with that assumption, spurred on by people like Martin Lewis.
The government has changed the rules before... they may change them again.
To be fair to Mr Lewis, he apparently put his money where his mouth is and engaged lawyers to challenge the recent changes, but I haven't heard of any results... http://www.telegraph.co.uk/finance/personalfinance/borrowing... Does anyone know if it was just posturing for the press at the time, hoping we'd forget about it? Was there ever a ruling or result?
What happens if you take a loan to study but can't pay it back? I'm thinking it makes it impossible to eventually get any other credit like a mortgage?
Nothing - under the current rules the Government writes off the debt after a number of years (either when you turn 65, after 25, 30 or 35 years, depending on when you got the loan and where in the UK you went to Uni). Also, having a student loan has little to no effect on obtaining bank loans or mortgages.
It doesn't work like a normal loan. So if you make below 20k a year, then you don't pay anything. But you are not "missing" payments or anything like that, it's just that you make less than 20k, so literally nothing is due. If the balance after 40 years(or whatever it is) is still not zero, then the remainder is forgiven by the government. Paying off the student loan has no effect on your credit score as it doesn't even show on credit checks.
My student loan for getting a BSc and MSc in Computer Science at one of the top universities in the UK is about ~12k total. But it's reassuring to know that if I lost my job tomorrow, I wouldn't have any payments to make until I found another job.
I suppose the economic theory here is that they enriched the population and hopefully kept someone in a line of employment that's beneficial to society instead of nose-diving in to drugs, crime, or some other 'drain on society'?
There's a second out of forgiveness after 240 payments, though last I check it is unclear exactly what the tax consequences are for that type of forgiveness (public service forgiveness does not incur a tax liability).
My school, Purdue University, has been making a big push towards IBR. The biggest issue with it I can see, is that, as far as I can tell, there's no cap on the money collected. That is to say, if they take 15% of your income, and you end up making lots of money, they will continue collecting their share past the actual cost of college. It honestly makes me feel like they see me as an indentured servant, not a student.
Mitch Daniels, the president of Purdue, has been pushing for this as a sort of solution to student loans, but it just ends up with the higher-income students subsidizing the education of the lower-income students, where 'income' refers to post-graduation job income.
> Mitch Daniels, the president of Purdue, has been pushing for this as a sort of solution to student loans, but it just ends up with the higher-income students subsidizing the education of the lower-income students, where 'income' refers to post-graduation job income.
You know what else does that? Having government guaranteed loans in the first place.
On the other hand, if the cost of a college is "flexible" as in a % of your income, doesn't it just end up in a situation in which higher-paid graduates subsidize the cost of college for lower-paid graduates?
I believe that's the entire idea of it. That and then the college could selectively decide how many majors of a certain type they need, financially speaking. A college will then be punished financially for pushing out tons of gender studies grads rather than engineers.
But since education is a market this would lower the reputation of the college thus attracting less candidates and if they lower the requirements too much they may even loose their accreditations.
Currently, I use part of my student loan payments to shield against higher taxes. AKA I can write off the interest payments on my tax return. I can then use the money I write off to invest in the stock market, buy groceries, etc. This is better for the economy long term, but also for myself. That's why there have been discussions around the topic, but not much action in the U.S.
Here are some issues it would have caused:
(a) Reduced my chances of getting an education at a top rate university (because I would be considered "at risk" for not succeeding, at least on paper). So I would have ended up at a less prestigious school, made less money, etc.
(b) If I had say 10% of my income siphoned off to a private company (which is a scary thought), I wouldn't have the opportunity to choose how to spend my money. For example, I have chosen to skip paying a loan payment to pay rent. I called and asked if this was alright, they told me it was fine. It kept me from being homeless for a month while I handled a cashflow issue.
(c) Because of the tax benefits, I have zero incentive to pay off my loan quicker. If 10% of my income went to some loan agency I'd pay it off quicker than I am now, and thus have less interest to write off. Further, I make money quicker than I lose it due to loan interest on the stock market, so I can actually pay back my loan faster by investing, then paying down the loan. This also helps spur the economy along, and at scale this is a massive reason it's not in anyone's best interest to implement a plan like this.
But why spend a dollar to save ten cents? If you paid off your loans quicker the savings in interest will far exceed the savings in tax deductions and depending on your rate of return in the market could even trump those gains.
> loans are only at 3.5%, but you can earn 7% on the stock market
This isn't prudent asset-liability matching. If your loan is 3.5% and you can find investment-grade bonds that (a) yield more and (b) compensate you, in the spread, for your risk and hassle, then that might work.
Agreed, and a completely federal reserve fueled one at that.
I remember how, with great fanfare, DOW 10,000 was ushered in. I was in 8th grade and it was 1998 or 1999, I remember how ten years later the DOW hit about 6,000.
We do not know how capitalism will respond to competent robotics and AI, and a population bust.
My highest loan is 10% interest (private loan), average between all of them is 5.2%. My annual return on the stock market is always well above 10% YoY... sooo it's basically never worth it.
Which is my point, the whole "we'll make you an indentured servant until you pay us back", seems stupid.
Can't you refinance the 10% one? My unsecured personal line of credit that's fully dischargeable in bankruptcy only charges 6%. 10% is a massive ripoff.
I'm only a couple of years out of school so don't think I'm rich or own property or anything.
What happens when another 1999 happens with three straight years of 20-30% declines? Or a 2008 where there's a nearly 40% decline? It takes several years of double digit gains to recover from these declines, and both of those happened within a decade (and we are not even a decade out from 2008).
Point is, investing v. paying off debt is not a simple matter of average expected growth compared to interest paid on loans. Investments often lose large portions of their value in the short-term while paying off debt is always a guaranteed return. So, for short loans (<15 years), it's probably not wise to use average expected return, instead use a wide range of +15%pa and -30%pa.
I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. This goes doubly because so many people have forgotten the lessons taught by past recessions and believe that 10%+ annual returns are the norm.
> I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing.
I wont even disagree, but my point is that it should be an option to do, versus money just being taken out of my pay check to pay a loan.
>"My annual return on the stock market is always well above 10% YoY"
That would make you one of world's most elite money managers. I'm sorry but that sounds to good to be true. Bernie Madoff was getting his clients 10% year over year and that turned out to be too good to be true as well.
Could you share some details on this investment strategy you have?
First, I hold all my investments for a year then dump them (occasionally, I'll rebalance before a year). I've been doing this for 5 years, averaging 35% returns. I said 10% a year, because I'm assuming one down year I will "lose" significantly.
I always do this in March, after my tax return, because that's my "play money". All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate, etc. or invest in my business.
I pick the high movers using a method I'm not going to describe at the moment. However, I am making a website which will help others invest as I do. It'll be a paid service, but I'm not going to charge outrageously. You can follow on my blog, I plan to release it sometime in late spring:
>"I use part of my student loan payments to shield against higher taxes. AKA I can write off the interest payments on my tax return."
and then:
>"All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate"
I am sorry but that kind of sounds like you are gaming the system. I don't think the intention of the student loan tax deduction was to allow people to buy gold and real estate but rather to help people to make ends meet. You don't actually need that deduction it sounds like.
> I am sorry but that kind of sounds like you are gaming the system.
Story time.
A side hustle I'm working on is creating a site that matches investors with solar projects. Due to how solar tax incentives are structured, if I can properly estimate your tax liability, I can create a partnership vehicle where instead of your tax liability going to the US federal government, its all invested in solar generation projects.
You still have to pay taxes, but because of a legislative and tax code hack, you can fund renewable energy deployment instead of federal tax receipts.
This is gaming the system, but I'd rather my money go to clean energy and not bombing innocent brown people and another carrier group. Economics 101 is incentives matter. If you set a system up, be prepared for people to poke at it to find its weaknesses.
EDIT: @bogomipz
Regarding your comment:
"So that Federal Government was OK when it came to you getting a student loan for an education but it's somehow not OK when it comes to paying your fair share to fund it?
I don't like paying taxes as much as the next guy but I do it and I understand why I need to."
I'm a high school dropout, and the services I care about (Social Security and Medicare) are funded out of my payroll taxes, which I'm fine with (I've paid $73k into Social Security, and $21k into Medicare, not including the exact matches my employers have paid in). I pay for the things that should be paid for (social services), and avoid paying for things that are unjust (the us military).
>"if I can properly estimate your tax liability, I can create a partnership vehicle where instead of your tax liability going to the US federal government,"
So that Federal Government was OK when it came to you getting a student loan for an education but it's somehow not OK when it comes to paying your fair share to fund it?
I don't like paying taxes as much as the next guy but I do it and I understand why I need to.
Student loan interest is an adjustment ("deduction") to gross income not a credit. 2016 - $2,500 for the year max deduction, so based on your tax rate you can compute how much your real "savings" are. I wouldn't necessarily think of this as a shield against higher taxes.. the amount is marginal based on the tax bracket your in.
Totally agree $2500 isn't much, but when you couple it with the fact I make more money on my investments than I do from paying down my loan (plus interest), it would actually cost me a lot more potential earnings paying down my loan.
I thought the same thing. My strategy was just to pay down loans as quickly as possible before putting money in stocks outside of retirement accounts. A flat year in the market doesn't make the OP's strategy worth it, not to mention a decline. Even in a really good year, $2500 isn't a huge amount to offset gains.
> Has there been any attempt to orchestrate an income based repayment program?
This wouldnt prevent students from going after useless degrees like they do today.
> 2. The burden of "payment" is shifted from the student to the school, as the school now must make sure their students are capable of getting good jobs if they want to be paid themselves.
It's usually not the schools loaning the money, they don't care what you do as long as you pay tuition, its banks and the federal government that loan the money, and they don't care because interest keeps accruing on your loan and you cant get rid of it.
they don't care because interest keeps accruing on your loan and you cant get rid of it.
I often wonder if the easy answer is to make student-loan debt dischargeable on bankruptcy. Yes, some banks would stop making the loans. But, would they all? I have to assume there would still be a market for student loans.
This is basically the french system, the bank does not even look at your credit history/revenue stream if your parents makes a decent amount of money and cosign, however getting a loan without a cosigner is almost impossible.
> Has there been any attempt to orchestrate an income based repayment program?
Such an option has been available for many years, though the main loan servicer has been accused of directing people into temporary deferments instead.
At one level all loans are "income based repayment programs" as they depend on income of the recipient to repay. But I don't think it is the "program" that is the problem.
If you step back and take in the wider view, you can see there is a business model for enslaving people without enough money. It works like this, you offer to give them money for something they want, even though they can't really afford it, and then you can add penalties and interest to garnish their future income until they die.
This is the business model of payday loans, you offer a loan until pay day, but they never have enough money so you "roll over" the loan and you're always owed interest. You create a situation where not only will the person never be able to pay you back you can milk them for anywhere from 5 - 50% of any money they manage to acquire. You have effectively enslaved them.
That was the same model used in the sub-prime mortgage crisis except there are two problems with sub-prime mortgages, one was they are usually no-recourse so you can just hand over the keys to the house and "pay them off" and they are dischargable in bankruptcy while the primary residence is protected.
So these leeches have turned to student "loans." Not dischargable in bankruptcy, you pay until you die. Check. At risk population that feels they have to have a college degree? Check. A set of 'for profit' schools willing to set aside any sort of moral principle so that they can transfer money to themselves? Check.
The predatory lenders stepped right into that ideal environment and have been convincing people left and right that things will be so much better and all they need is "education" and its easily within reach because they can "finance it."
Great comment Chuck! Just wanted to add, as someone who is an avid armchair debt/creditor law junkie, that private student loans can not garnish/attach to social security, but federal loans can.
That's a very important distinction, because in a lot of states, social security and other government support benefits are verboten from garnishment. The only two federal garnishments against social security that can occur are for federal taxes, and federal student loans.
Just a note that it's not actually progressive brackets - e.g. if you earn $90,000, you pay 7% of the $90,000, not just the portion over $85,719. It's not like the rest of the tax brackets which actually are progressive.
But yes, I really like the Australian system. The fact that's its integrated with the tax system means there's no other monthly payments to worry about, it sorts itself out at the end of the financial year.
> Has there been any attempt to orchestrate an income based repayment program? This could be implemented in a variety of ways, the most popular of which is taking a percentage of your income after graduating.
Yes. In the US, this was reasonably common before student loans.
> I wonder if people beyond their 20's are going back to college in hopes of meeting a mate?
If you read the linked article, it's about taking on debt for kids/grandkids or repaying debt incurred when they were young. There's nothing in there about a change in the trend of older people going back to school.
I've always taken "fastest-growing" to mean a small group that's turning into a bigger group. Like, I don't think people would expect China to have the "fastest-growing" population in the world, but American Samoa could.
There are multiple issues at play here, but it all comes down to mis-management of available funds.
1. Parent's (or grandparents) and student's not appropriately preparing for debt that a student will incur. If you know there is going to be a large debt in the future, stop buying and save. No one need's x-mas presents, no one need's that $30k car, no one need's to go on vacation. We as a culture are in the habit of spending and then complaining about our college debt.
2. Paying for college tuitions that we really don't need. If you don't have the available fund's to pay $20k a year for your undergrad, then don't. Go to a community college and pay 1/3 of the cost. Or better yet, take half the classes, live at home, create a budget, and pay for your school (or at least books) as you go. I have never heard of anyone being turned down for a job because of their undergrad being from a no-name college. Usually it's because the students want the "college experience" and then have to reap the cost of it later.
3. Mis-management of available fund's after college. College debt is debt. It may be a little more flexible than a credit card, but debt is debt. Live in the smallest house you can find, buy older cars, no vacations, no eating out. Pay off the debt that you agreed to, and then move on. I've seen too many people buying large homes, new vehicles, buying junk, and then complaining that they still have student debt.
4. Only go to college for a purpose, not because you feel the "need" to. Stop going to college just to go. Go to college with a purpose that will impact your life later in your years. So many people begin college no knowing at all what they want to do, change majors, and end up doing nothing related to their education.
5. Spend on your degree based upon your expected return. If you are getting your degree in liberal arts, do not spend $80k on your degree - you will not receive a balanced return on your investment.
Now, this article really has to do with parents and grandparent's co-signing for students and how the parents/grandparents are now on the hook for this debt. If there were required curriculums in high schools on how to manage money and how to manage debt, a lot of these types of articles would disappear. Or better yet, if people were not allowed credit until their student loans were paid.
Some just can't afford to pay off loan's quickly, and I feel for them. But if you are making $70k a year and cannot pay off your loans, you are mismanaging your money.
In regard's to the elderly in this article that are on the hook for this student debt, I have no remorse. They have lived long enough to understand money management and debt. If they allowed their grandchildren free access to debt using their credit, then they should either have a plan in place for repayment or been willing to bankroll the debt themselves.
I think putting universities on the hook for defaulted student loans would probably help. They'll start steering people out of $50k english degrees and into degrees that they might have some hope of paying off. Or will figure out a way to make english degrees less expensive.
I sympathize with and agree with a lot of the points you're making, but think they apply in an environment that doesn't really apply anymore. Our society as a whole is trending toward a situation where I think other factors are at play too.
I have never had student loan debt, so I'm not trying to defend any decisions I made.
However, part of why I was able to do that was because college was actually affordable at the time I went. Not easy to afford, but not something that would break the bank either. If tuition were at those levels now, we wouldn't be having this discussion.
Another fundamental problem is the increasing "credentialization" of labor supply in the US. What I mean by this is that employers, broadly speaking, do not approach employees as investments, but rather as objects. So a potential employee is not seen as someone who could be trained or learn, but as someone who performs a given task. The way they do this, moreover, is to rely on a credential that documents their ability to perform a specific task.
I don't think people always go into, say, English, because they think there's lucrative business opportunities or because they are incompetent. I think they go into it because they reasonably see themselves as having a diverse set of skills, and as being capable of doing more than what their degree focused on. This is the philosophy of a liberal arts degree, after all. They major in English because they think "I like English, and I'm going to hone my communication skills, and can always get work in something else or go to graduate school because I'm competent enough, and my degree will document my ability to function in a broad set of tasks. But when they are done, rather than seeing this, "oh this person is capable of understanding and completing a broad range of things, because they have a liberal arts degree," employers approach them as if their degree is a mark of identity: "oh, you do literature."
There are many exceptions of course, and I'm not saying that advanced skillsets aren't often necessary. But as a society, we tend to have a very narrow-minded idea of a person. If you do math, you can't write; if you do english, you can't do math, etc. And there's always graduate school. I don't mean that as a joke, I mean that if you see yourself as pursuing more advanced skills in some area anyway, why should it matter what your undergraduate degree is?
These calls for more "usable" degrees, and blaming individuals for seeking expensive college education always seem disingenuous to me, because it's often the businesses demanding the degrees in the first place, one way or another. And what does everyone think would happen if there were suddenly a flood of STEM graduates?
This also has all sorts of other manifestations too. E.g., the only way you can learn to do procedure X (not only do, but learn to do) is if you are a nurse, PA, or physician. Or the only way you can manage is if you have an MBA or masters of management or something like that.
Anyway, to me the root problem is businesses not seeing individuals as investments, but as widgets. They're trying to offload costs as much as possible. If you can't provide me with X now, you're not worth it. It's part of a broader trend, in not investing in R&D, etc. and so forth. I think even engineer types run into this with job ads that have ridiculously specific requirements. Do those really make sense to anyone in the field? If I completed a BS in comp sci from a decent university with decent grades, do you have any doubt that I could manage MS SQL Server?
> I have never heard of anyone being turned down for a job because of their undergrad being from a no-name college.
Have you really never come across this? My anecdota are the exact opposite. In every hiring process that I've been familiar with (granted, that's only like...3), you'd have a non-trivial advantage at getting your foot in the door if you have a good name on your resume. By the time you get to interviews, nobody really cares, but the recruiters in pretty much every organization I've been exposed to use extremely blunt filters like that.
Yeah, I literally laughed when I saw this. I worked at Goldman Ball Sachs for a little while. Tell you what, you will get discriminated by management if you don't have ivy on your resume. I have had a md talking straight to my face that he thinks I am lucky to get this job because the people around me all graduated with a phd from Havard, Princeton and Yale. I don't even give a shit.
> r better yet, take half the classes, live at home, create a budget, and pay for your school (or at least books) as you go. I have never heard of anyone being turned down for a job because of their undergrad being from a no-name college.
This was possible in 2004, but it hasn't been possible since ~2014. Back in 2004, community colleges were like ~$100/wk (~$1500/semester) in tuition, which is somewhat affordable out of pocket by a working student living at home. Those costs have gone up to like $250/wk ($3750 semester) which is a lot more than I suspect most part time jobs would pay.
But the underlying message is apt. This is probably your best college strategy if you didn't end up with some sort of scholarship to another school (and come from a stable home).
I can attest to this I did community college in 08 -> 11. I was averaging about 1500 a semester. With books being low hundreds.
A friend started community college Jan of last year. It was 5000 for the semester. In addition the books for the first semester were ~850, if I recall. Then for the culinary program a cook kit was required. You could only use the school licensed one, which I think was another 400. The worse thing was they had custom published core text books for the school. I.E. community college of Philadelphia Algebra 101. I checked with my old community college and they did the same. You could no longer save money by grabbing a used book.
Why are you placing all the moral blame on the heads of borrowers, and not lenders? The simple fact of the aging baby-boomer generation demands national and generational scale saving. The only way saving works on that scale is by making promises to provide something of real value later - infrastructure breaks down, capital becomes obsolete, consumer goods get consumed, but debt will remain. The end result of people getting better at saving for college is that there's more pressure to make riskier loans in other sectors of the economy. Advertising budgets for 0 down 0% interest auto loans go up. Banks are more willing to loan out money for remodeling your house. Credit cards get issued for greater limits and to more people.
At a macro level, the existence of pension funds and retirement savings means that as a whole, we are going to exchange current goods and services in exchange for promising to take care of the elderly in the future. If we tighten our belts, all it means is that interest rates go down until it balances out again. The only question is what sort of things we get today, and at what terms. Is a higher education experience the best thing to mortgage our society's future for? Cars? Houses? Health care? Ipads, televisions, and expensive lunches?
tl;dr - savings and debt are counter-parties to each other. If we want to have retirees live comfortably by drawing down their savings, we necessarily have to have current workers paying off their debts. If current workers as a whole set their lives up to shovel less money into student loan debt, it'd kick off systematic processes that increase how much of their other debt they end up paying off.
"Some older borrowers are carrying their own student loans, but most have education debt taken out on behalf of their children or grandchildren, either by borrowing the money themselves or co-signing loans with the student as the main borrower, the report found."
This is even worse than traditional student loans, because it parents feel like crap for not "helping" their children. When in reality, the fact that a student needs a PLUS loan should be an indicator that their chosen college is too expensive.
Eliminate Parent Plus loans. Then require colleges to guarantee to a student, before they start, that they can graduate from the program on time for the maximum amount of student loans they will be granted. This prevents students from going to an expensive university and ending up in a financial bind two years in.
The idea that necessary education is 12 years goes back a century, AFAIK. Perhaps it's time that we extend that to 16 years (I'm not the first to say it) and stop making it an issue of ability to pay. Certainly the job market values college degrees much more than high school diplomas; an economy full of more productive workers will make the tide rise for all the boats - people selling to those workers, hiring them, those workers' kids, etc etc.
That doesn't solve the abysmal K-12 education so many people receive, of course.
To clarify, I'm saying that college should be available to all either for free or at an affordable price.
More generally, I don't agree with the premises that some people deserve a better education than others, that we can determine people's worthiness at a young age, and that the only value (or even the primary value) of education is making money.
Regarding our ability to determine the worthiness of young students, note that parents' wealth and/or income are the leading factors (AFAIK) in determining how much education a student receives.
> previously it was 6 years, and you want to make it 16?
I think many ideas for limiting education imply an abandonment of progress, that we should plan for the economy and society we had over the last 50 years instead of looking to the future and building a more educated and productive one. The society and economy of the last 50 years was built by forward thinking people before that, including those who thought education should be expanded.
Perhaps if people were better educated, they would be less vulnerable to absurd political, economic, and scientific ideas. (To be clear: I'm not calling the parent's idea absurd; I'm referring to many others out there and sometimes here on HN.)
Pretty much all of Europe has technical schools, not just Germany.
Germany has a heavily industrialised economy with a lot of such skill work that doesn't necessitate a university degree.
What Germany also got right is worker rights for those in such jobs. It's one thing to be a welder in a factory, knowing that you will probably keep working there for all your life and another thing entirely to be a welder in a factory knowing that you will get fired the moment the economy slows down.
I like Germany's system of education, granted I went to a Gymnasium for a year, which seems like it's a better deal insofar as it sets you up for higher wage jobs.
But to push back a bit, the sorting process in 4th grade is incredibly unfair, especially to students with uneven learning (ie. are "behind" in 4th grade and thus are destined to be a low wage worker for their whole lives) or are immigrants.
And what's worse, well-off families can work around the system by pushing back if their child is "sorted" into Realschule or Hauptschule. Or, they can just opt to send them to private school instead.
So, it's not all roses. But outside tracking (which will never be a perfectly efficient), I think it is fundamentally a better than the U.S.'s education system.
Some people don't need to and shouldn't go to college. And, it's great if they can get an education that's tailored to them.
> Some people don't need to and shouldn't go to college.
Who are these people? Who decides? Have you asked them? What if they want to go to college? Is college only valuable for work skills? What about understanding the world?
I wonder if people said the same about high school, and basic literacy.
EDIT: I'll add to people reading this: Did you go to college? Do you expect your kids to? What about Senators, CEOs, etc - will their kids go to college? Much of this is the elite telling everyone else that their families don't need to go to college.
If I recall correctly, this was how universal secondary education came about (at least in Australia). Initially secondary education was available only through private schools (including religious). As demand for skilled workers rose, free public education was extended from primary to secondary education to meet the demand from employers.
The same justification could easily be applied today with regard to tertiary education. Maybe this could be implemented by giving all people a three year 'credit' for tertiary education that can be used as and when they please.
Note that I am not suggesting that tertiary education should be compulsory.
People at 12 years education today are less capable than people at 12 years a few decades ago. Long-time university lecturers dismay at having to teach first-years in basic skills they used to arrive with.
I can't find it now (at work), but on youtube Brady Haran interviews some lecturers on this topic - one pulls out an A-levels engineering exam from the early 80s, and the questions are dense paragraphs expecting you to apply learned knowledge. Then he pulls out the A-level paper for that year (2013, I think) and the first question is "pick the correct picture that is hydropower", with four pictures of different power generation mechanisms. Easily answerable by anyone who didn't do the course. "The questions get harder, though?" > "Yes, but not substantially".
It's quite a concept that easier student loan debt would create more of it.
Perhaps a better system would have kids starting internships 4 years earlier (i.e. high school) and having the flexibility and context to specialize in a path earlier. And if their career didn't have much use for a degree? Save the time and money. I had learned far more from working/independent reading/independent projects/the Internet in general than in my formal engineering classes by the time I had graduated. Two or three classes stuck out as having a comparable impact as my internships and other ventures, but in reality it's kind of a net waste. I'm more academically inclined than a lot of people, so that really speaks to how important this point is regarding those who grow up not liking academics in the first place.
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[ 3.6 ms ] story [ 174 ms ] threadIt says nothing about training, or older people gaining new skills and taking on new debt for themselves.
One area that I believe is highly inequitable is that home owners can write off all of their interest on their home loan, but there are income caps for student loans that restrict who and how much interest can be written off.
I'd like to draft a measure to make student loan interest 100% tax deductable at the state level. The hope is that passing it in CA would create a conversation around federal income tax policy and student loan interest.
We give tax breaks to companies all the time with the explicit understanding that they will cover that loss just by the mere fact that they exist and are spending money.
My history is a bit fuzzy having just woke up.
So, IF that's true, it might make this more viable because the rich and upper middle class are less likely to be holding student loans, and thus, this money is more likely to be spent.
If you gave me $500, I'd buy a new dishwasher. But a rich person doesn't have to save money to buy a new dishwasher. Giving them more money isn't going to change their life in any appreciable way. Everything they want, they already have. But poor people want/need a lot of things they can't afford. Giving them a tax break means they can now afford to buy things they previously couldn't, which means Whirlpool sells more American-made dishwashers, hires more American employees, and pays more American taxes.
Oh and the reason Bush raised taxes in the 80s is to pay for a war. You can't fix the deficit, cut taxes, and go to war. War is expensive.
The only way to waste money from the economy's standpoint is to save it. As long as it's being spent, it's being spent well. And as long as it's being spent on something that you pay taxes on, the government wins too.
US GDP growth from 1980 to 1988[1]:
1980: 9.62%
1981: 9.69%
1982: 3.79%
1983: 11.4%
1984: 9.62%
1985: 7.37%
1986: 4.86%
1987: 7.57%
1988: 7.76%
[1] http://www.multpl.com/us-gdp-growth-rate/table/by-year
Not exactly; Reagan's "biggest tax cut in history" on income taxes was followed very quickly by his less-frequently-remembered biggest tax increase in history (on payroll taxes), and so was really just part of the biggest tax burden shift in history from higher income to lower-income earners.
In the short-term, this didn't have bad top-line aggregate effects on the economy, but it was a key factor in the bad distributional results since that time.
The rest may require either cuts in other programs or increases in income tax rates for everyone. Either event would create a more fair tax structure which is why it should be proposed.
We have a major student debt crisis and we should be attacking it from multiple angles.
Basically, markets adapt to the cheaper money.
The cheaper loans are a _cause_ in the market mechanism being described, not an effect, so for this assertion it doesn't matter how market-oriented they are.
In a market, price is driven by demand (and supply). If price is externally controlled (which isn't, then, a free market), then the quantity traded will be driven by price (it will be the minimum of quantity demanded and quantity supplied at the price.)
But, that's all irrelevant; the relevant relationship is that an external subsidy to buyers outside of the price exchanged between buyer and seller (which is not a price cut) increases demand and, thereby, both market clearing quantity and market clearing price (assuming the supply curve slopes in the usual direction.) The latter effect (increase in market clearing quantity) is usually the intended effect of a subsidy, the price effect comes along for the ride.
OTOH, there is plenty of evidence that loan repayment costs (and this has been generally been shown to be the case with deferred costs) are excessively discounted in decision-making, which increases the degree to which loans act like subsidies (in both quantity traded and price effects), but also decreases the degree to which subsidizing loan repayment acts like a subsidy (because it reduces a costs that is discounted in decision-making, reducing the effect of both the base cost and the reduction of that cost.)
If you make it easier to borrow money for education, then there is less pressure to keep education costs down.
I would even consider allowing the write-off of discretionary interest like car loan interest. It should likely be capped at some value that allows people to buy a new, but not ridiculous car. (I don't own a car so this is especially not something I care about).
Point is, if home buyers are writing off their interest, people who are investing in themselves definitely should. I also agree with your elegant solution, and would support no write-offs, but I believe it is harder to take away write-offs than to add them.
Also, getting rid of the mortgage deduction would be a major hardship on the middle class.
Our society is very sick. It has been for a long time.
Then the metric ceases to be meaningful.
I am no moral relativist when it comes to civilizations: some are more humane than others.
On the other hand, how is it fair to judge a person or persons based off of their ancestors' actions?
Some advantages I can think of:
1. Educational quality is more tied to student success.
2. The burden of "payment" is shifted from the student to the school, as the school now must make sure their students are capable of getting good jobs if they want to be paid themselves.
3. Education and corporate "curricula" are more coupled. This could also be a disadvantage, depending on how you think about it.
Some diadvantages:
1. This hurts liberal arts, where the value is more opaque.
2. Research based, or generally any profession that's intellectually difficult, but pays low will be discouraged, implicitly through this.
3. Makes the point of education a bit more professional and practical, which may have longer term effects (people who think outside of the box generally aren't the ones who are paid well, initially).
For me, my student loans were about £20k overall (including living costs) and I'm paying back about £2.5k/year from it. Most of my friends are never going to pay it back.
However, it's not really put much burden on universities as they get the money immediately and then the losses from non-repayment are absorbed by the government.
It scares me that people are taking on these loans with that assumption, spurred on by people like Martin Lewis.
The government has changed the rules before... they may change them again.
To be fair to Mr Lewis, he apparently put his money where his mouth is and engaged lawyers to challenge the recent changes, but I haven't heard of any results... http://www.telegraph.co.uk/finance/personalfinance/borrowing... Does anyone know if it was just posturing for the press at the time, hoping we'd forget about it? Was there ever a ruling or result?
https://www.theguardian.com/money/2012/sep/24/student-loan-a...
(I don't believe it's changed since)
My student loan for getting a BSc and MSc in Computer Science at one of the top universities in the UK is about ~12k total. But it's reassuring to know that if I lost my job tomorrow, I wouldn't have any payments to make until I found another job.
Unfortunately interest keeps doing its thing so many people will see their loan amounts increase once on IBR.
This leaves their only likely out as forgiveness by making 120 payments and working for a gov/education institution for 10 years.
It's treated as taxable income unless you are insolvent, which you might be if you owe a lot of money.
It isn't because the minimum repayments are so low they never come close to the large interested accrued?
Mitch Daniels, the president of Purdue, has been pushing for this as a sort of solution to student loans, but it just ends up with the higher-income students subsidizing the education of the lower-income students, where 'income' refers to post-graduation job income.
You know what else does that? Having government guaranteed loans in the first place.
Here are some issues it would have caused:
(a) Reduced my chances of getting an education at a top rate university (because I would be considered "at risk" for not succeeding, at least on paper). So I would have ended up at a less prestigious school, made less money, etc.
(b) If I had say 10% of my income siphoned off to a private company (which is a scary thought), I wouldn't have the opportunity to choose how to spend my money. For example, I have chosen to skip paying a loan payment to pay rent. I called and asked if this was alright, they told me it was fine. It kept me from being homeless for a month while I handled a cashflow issue.
(c) Because of the tax benefits, I have zero incentive to pay off my loan quicker. If 10% of my income went to some loan agency I'd pay it off quicker than I am now, and thus have less interest to write off. Further, I make money quicker than I lose it due to loan interest on the stock market, so I can actually pay back my loan faster by investing, then paying down the loan. This also helps spur the economy along, and at scale this is a massive reason it's not in anyone's best interest to implement a plan like this.
This isn't prudent asset-liability matching. If your loan is 3.5% and you can find investment-grade bonds that (a) yield more and (b) compensate you, in the spread, for your risk and hassle, then that might work.
I remember how, with great fanfare, DOW 10,000 was ushered in. I was in 8th grade and it was 1998 or 1999, I remember how ten years later the DOW hit about 6,000.
We do not know how capitalism will respond to competent robotics and AI, and a population bust.
My highest loan is 10% interest (private loan), average between all of them is 5.2%. My annual return on the stock market is always well above 10% YoY... sooo it's basically never worth it.
Which is my point, the whole "we'll make you an indentured servant until you pay us back", seems stupid.
I'm only a couple of years out of school so don't think I'm rich or own property or anything.
Point is, investing v. paying off debt is not a simple matter of average expected growth compared to interest paid on loans. Investments often lose large portions of their value in the short-term while paying off debt is always a guaranteed return. So, for short loans (<15 years), it's probably not wise to use average expected return, instead use a wide range of +15%pa and -30%pa.
I'd argue the fact that you've beaten the average expected yearly return for so long suggests that a correction is imminent and paying off debt has a better expected return than investing. This goes doubly because so many people have forgotten the lessons taught by past recessions and believe that 10%+ annual returns are the norm.
I wont even disagree, but my point is that it should be an option to do, versus money just being taken out of my pay check to pay a loan.
That would make you one of world's most elite money managers. I'm sorry but that sounds to good to be true. Bernie Madoff was getting his clients 10% year over year and that turned out to be too good to be true as well.
Could you share some details on this investment strategy you have?
I always do this in March, after my tax return, because that's my "play money". All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate, etc. or invest in my business.
Here's this years, which has been unusually good:
http://imgur.com/a/j8YWR
I pick the high movers using a method I'm not going to describe at the moment. However, I am making a website which will help others invest as I do. It'll be a paid service, but I'm not going to charge outrageously. You can follow on my blog, I plan to release it sometime in late spring:
http://austingwalters.com/
Feel free to follow me, and I'll send out an update when I'm ready to release the stuff.
>"I use part of my student loan payments to shield against higher taxes. AKA I can write off the interest payments on my tax return."
and then:
>"All the money I made from the prior years investments + tax return I usually dump into other investments that hold up over time i.e. gold, real estate"
I am sorry but that kind of sounds like you are gaming the system. I don't think the intention of the student loan tax deduction was to allow people to buy gold and real estate but rather to help people to make ends meet. You don't actually need that deduction it sounds like.
Story time.
A side hustle I'm working on is creating a site that matches investors with solar projects. Due to how solar tax incentives are structured, if I can properly estimate your tax liability, I can create a partnership vehicle where instead of your tax liability going to the US federal government, its all invested in solar generation projects.
You still have to pay taxes, but because of a legislative and tax code hack, you can fund renewable energy deployment instead of federal tax receipts.
This is gaming the system, but I'd rather my money go to clean energy and not bombing innocent brown people and another carrier group. Economics 101 is incentives matter. If you set a system up, be prepared for people to poke at it to find its weaknesses.
EDIT: @bogomipz
Regarding your comment:
"So that Federal Government was OK when it came to you getting a student loan for an education but it's somehow not OK when it comes to paying your fair share to fund it? I don't like paying taxes as much as the next guy but I do it and I understand why I need to."
I'm a high school dropout, and the services I care about (Social Security and Medicare) are funded out of my payroll taxes, which I'm fine with (I've paid $73k into Social Security, and $21k into Medicare, not including the exact matches my employers have paid in). I pay for the things that should be paid for (social services), and avoid paying for things that are unjust (the us military).
So that Federal Government was OK when it came to you getting a student loan for an education but it's somehow not OK when it comes to paying your fair share to fund it?
I don't like paying taxes as much as the next guy but I do it and I understand why I need to.
But you did have a choice. You spent it before you had it, by borrowing from someone else. That was your choice.
This wouldnt prevent students from going after useless degrees like they do today.
> 2. The burden of "payment" is shifted from the student to the school, as the school now must make sure their students are capable of getting good jobs if they want to be paid themselves.
It's usually not the schools loaning the money, they don't care what you do as long as you pay tuition, its banks and the federal government that loan the money, and they don't care because interest keeps accruing on your loan and you cant get rid of it.
I often wonder if the easy answer is to make student-loan debt dischargeable on bankruptcy. Yes, some banks would stop making the loans. But, would they all? I have to assume there would still be a market for student loans.
Such an option has been available for many years, though the main loan servicer has been accused of directing people into temporary deferments instead.
http://www.huffingtonpost.com/entry/state-prosecutors-navien...
If you step back and take in the wider view, you can see there is a business model for enslaving people without enough money. It works like this, you offer to give them money for something they want, even though they can't really afford it, and then you can add penalties and interest to garnish their future income until they die.
This is the business model of payday loans, you offer a loan until pay day, but they never have enough money so you "roll over" the loan and you're always owed interest. You create a situation where not only will the person never be able to pay you back you can milk them for anywhere from 5 - 50% of any money they manage to acquire. You have effectively enslaved them.
That was the same model used in the sub-prime mortgage crisis except there are two problems with sub-prime mortgages, one was they are usually no-recourse so you can just hand over the keys to the house and "pay them off" and they are dischargable in bankruptcy while the primary residence is protected.
So these leeches have turned to student "loans." Not dischargable in bankruptcy, you pay until you die. Check. At risk population that feels they have to have a college degree? Check. A set of 'for profit' schools willing to set aside any sort of moral principle so that they can transfer money to themselves? Check.
The predatory lenders stepped right into that ideal environment and have been convincing people left and right that things will be so much better and all they need is "education" and its easily within reach because they can "finance it."
That's a very important distinction, because in a lot of states, social security and other government support benefits are verboten from garnishment. The only two federal garnishments against social security that can occur are for federal taxes, and federal student loans.
But yes, I really like the Australian system. The fact that's its integrated with the tax system means there's no other monthly payments to worry about, it sorts itself out at the end of the financial year.
Yes, it's called filing bankruptcy, and they removed the ability for people to do that for student loans.
Yes, this is available for most federal student loan programs today.
[0] https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
Yes. In the US, this was reasonably common before student loans.
There it is. The "fastest-growing". https://xkcd.com/1102/
I wonder if people beyond their 20's are going back to college in hopes of meeting a mate?
If you read the linked article, it's about taking on debt for kids/grandkids or repaying debt incurred when they were young. There's nothing in there about a change in the trend of older people going back to school.
1. Parent's (or grandparents) and student's not appropriately preparing for debt that a student will incur. If you know there is going to be a large debt in the future, stop buying and save. No one need's x-mas presents, no one need's that $30k car, no one need's to go on vacation. We as a culture are in the habit of spending and then complaining about our college debt.
2. Paying for college tuitions that we really don't need. If you don't have the available fund's to pay $20k a year for your undergrad, then don't. Go to a community college and pay 1/3 of the cost. Or better yet, take half the classes, live at home, create a budget, and pay for your school (or at least books) as you go. I have never heard of anyone being turned down for a job because of their undergrad being from a no-name college. Usually it's because the students want the "college experience" and then have to reap the cost of it later.
3. Mis-management of available fund's after college. College debt is debt. It may be a little more flexible than a credit card, but debt is debt. Live in the smallest house you can find, buy older cars, no vacations, no eating out. Pay off the debt that you agreed to, and then move on. I've seen too many people buying large homes, new vehicles, buying junk, and then complaining that they still have student debt.
4. Only go to college for a purpose, not because you feel the "need" to. Stop going to college just to go. Go to college with a purpose that will impact your life later in your years. So many people begin college no knowing at all what they want to do, change majors, and end up doing nothing related to their education.
5. Spend on your degree based upon your expected return. If you are getting your degree in liberal arts, do not spend $80k on your degree - you will not receive a balanced return on your investment.
Now, this article really has to do with parents and grandparent's co-signing for students and how the parents/grandparents are now on the hook for this debt. If there were required curriculums in high schools on how to manage money and how to manage debt, a lot of these types of articles would disappear. Or better yet, if people were not allowed credit until their student loans were paid.
Some just can't afford to pay off loan's quickly, and I feel for them. But if you are making $70k a year and cannot pay off your loans, you are mismanaging your money.
In regard's to the elderly in this article that are on the hook for this student debt, I have no remorse. They have lived long enough to understand money management and debt. If they allowed their grandchildren free access to debt using their credit, then they should either have a plan in place for repayment or been willing to bankroll the debt themselves.
I have never had student loan debt, so I'm not trying to defend any decisions I made.
However, part of why I was able to do that was because college was actually affordable at the time I went. Not easy to afford, but not something that would break the bank either. If tuition were at those levels now, we wouldn't be having this discussion.
Another fundamental problem is the increasing "credentialization" of labor supply in the US. What I mean by this is that employers, broadly speaking, do not approach employees as investments, but rather as objects. So a potential employee is not seen as someone who could be trained or learn, but as someone who performs a given task. The way they do this, moreover, is to rely on a credential that documents their ability to perform a specific task.
I don't think people always go into, say, English, because they think there's lucrative business opportunities or because they are incompetent. I think they go into it because they reasonably see themselves as having a diverse set of skills, and as being capable of doing more than what their degree focused on. This is the philosophy of a liberal arts degree, after all. They major in English because they think "I like English, and I'm going to hone my communication skills, and can always get work in something else or go to graduate school because I'm competent enough, and my degree will document my ability to function in a broad set of tasks. But when they are done, rather than seeing this, "oh this person is capable of understanding and completing a broad range of things, because they have a liberal arts degree," employers approach them as if their degree is a mark of identity: "oh, you do literature."
There are many exceptions of course, and I'm not saying that advanced skillsets aren't often necessary. But as a society, we tend to have a very narrow-minded idea of a person. If you do math, you can't write; if you do english, you can't do math, etc. And there's always graduate school. I don't mean that as a joke, I mean that if you see yourself as pursuing more advanced skills in some area anyway, why should it matter what your undergraduate degree is?
These calls for more "usable" degrees, and blaming individuals for seeking expensive college education always seem disingenuous to me, because it's often the businesses demanding the degrees in the first place, one way or another. And what does everyone think would happen if there were suddenly a flood of STEM graduates?
This also has all sorts of other manifestations too. E.g., the only way you can learn to do procedure X (not only do, but learn to do) is if you are a nurse, PA, or physician. Or the only way you can manage is if you have an MBA or masters of management or something like that.
Anyway, to me the root problem is businesses not seeing individuals as investments, but as widgets. They're trying to offload costs as much as possible. If you can't provide me with X now, you're not worth it. It's part of a broader trend, in not investing in R&D, etc. and so forth. I think even engineer types run into this with job ads that have ridiculously specific requirements. Do those really make sense to anyone in the field? If I completed a BS in comp sci from a decent university with decent grades, do you have any doubt that I could manage MS SQL Server?
Have you really never come across this? My anecdota are the exact opposite. In every hiring process that I've been familiar with (granted, that's only like...3), you'd have a non-trivial advantage at getting your foot in the door if you have a good name on your resume. By the time you get to interviews, nobody really cares, but the recruiters in pretty much every organization I've been exposed to use extremely blunt filters like that.
This was possible in 2004, but it hasn't been possible since ~2014. Back in 2004, community colleges were like ~$100/wk (~$1500/semester) in tuition, which is somewhat affordable out of pocket by a working student living at home. Those costs have gone up to like $250/wk ($3750 semester) which is a lot more than I suspect most part time jobs would pay.
But the underlying message is apt. This is probably your best college strategy if you didn't end up with some sort of scholarship to another school (and come from a stable home).
A friend started community college Jan of last year. It was 5000 for the semester. In addition the books for the first semester were ~850, if I recall. Then for the culinary program a cook kit was required. You could only use the school licensed one, which I think was another 400. The worse thing was they had custom published core text books for the school. I.E. community college of Philadelphia Algebra 101. I checked with my old community college and they did the same. You could no longer save money by grabbing a used book.
At a macro level, the existence of pension funds and retirement savings means that as a whole, we are going to exchange current goods and services in exchange for promising to take care of the elderly in the future. If we tighten our belts, all it means is that interest rates go down until it balances out again. The only question is what sort of things we get today, and at what terms. Is a higher education experience the best thing to mortgage our society's future for? Cars? Houses? Health care? Ipads, televisions, and expensive lunches?
tl;dr - savings and debt are counter-parties to each other. If we want to have retirees live comfortably by drawing down their savings, we necessarily have to have current workers paying off their debts. If current workers as a whole set their lives up to shovel less money into student loan debt, it'd kick off systematic processes that increase how much of their other debt they end up paying off.
Yeah. That's why.
Eliminate Parent Plus loans. Then require colleges to guarantee to a student, before they start, that they can graduate from the program on time for the maximum amount of student loans they will be granted. This prevents students from going to an expensive university and ending up in a financial bind two years in.
That doesn't solve the abysmal K-12 education so many people receive, of course.
So previously it was 6 years, and you want to make it 16?
IMO, the opposite should happen. Germany got this pretty right. https://upload.wikimedia.org/wikipedia/commons/thumb/0/0e/Ge...
There are far more varied education routes, it means not everyone takes $100ks of loans when they really just need a couple years of trade school.
To clarify, I'm saying that college should be available to all either for free or at an affordable price.
More generally, I don't agree with the premises that some people deserve a better education than others, that we can determine people's worthiness at a young age, and that the only value (or even the primary value) of education is making money.
Regarding our ability to determine the worthiness of young students, note that parents' wealth and/or income are the leading factors (AFAIK) in determining how much education a student receives.
> previously it was 6 years, and you want to make it 16?
I think many ideas for limiting education imply an abandonment of progress, that we should plan for the economy and society we had over the last 50 years instead of looking to the future and building a more educated and productive one. The society and economy of the last 50 years was built by forward thinking people before that, including those who thought education should be expanded.
Perhaps if people were better educated, they would be less vulnerable to absurd political, economic, and scientific ideas. (To be clear: I'm not calling the parent's idea absurd; I'm referring to many others out there and sometimes here on HN.)
Pretty much all of Europe has technical schools, not just Germany.
Germany has a heavily industrialised economy with a lot of such skill work that doesn't necessitate a university degree.
What Germany also got right is worker rights for those in such jobs. It's one thing to be a welder in a factory, knowing that you will probably keep working there for all your life and another thing entirely to be a welder in a factory knowing that you will get fired the moment the economy slows down.
But to push back a bit, the sorting process in 4th grade is incredibly unfair, especially to students with uneven learning (ie. are "behind" in 4th grade and thus are destined to be a low wage worker for their whole lives) or are immigrants.
And what's worse, well-off families can work around the system by pushing back if their child is "sorted" into Realschule or Hauptschule. Or, they can just opt to send them to private school instead.
So, it's not all roses. But outside tracking (which will never be a perfectly efficient), I think it is fundamentally a better than the U.S.'s education system.
Some people don't need to and shouldn't go to college. And, it's great if they can get an education that's tailored to them.
Who are these people? Who decides? Have you asked them? What if they want to go to college? Is college only valuable for work skills? What about understanding the world?
I wonder if people said the same about high school, and basic literacy.
EDIT: I'll add to people reading this: Did you go to college? Do you expect your kids to? What about Senators, CEOs, etc - will their kids go to college? Much of this is the elite telling everyone else that their families don't need to go to college.
The same justification could easily be applied today with regard to tertiary education. Maybe this could be implemented by giving all people a three year 'credit' for tertiary education that can be used as and when they please.
Note that I am not suggesting that tertiary education should be compulsory.
I can't find it now (at work), but on youtube Brady Haran interviews some lecturers on this topic - one pulls out an A-levels engineering exam from the early 80s, and the questions are dense paragraphs expecting you to apply learned knowledge. Then he pulls out the A-level paper for that year (2013, I think) and the first question is "pick the correct picture that is hydropower", with four pictures of different power generation mechanisms. Easily answerable by anyone who didn't do the course. "The questions get harder, though?" > "Yes, but not substantially".
Perhaps a better system would have kids starting internships 4 years earlier (i.e. high school) and having the flexibility and context to specialize in a path earlier. And if their career didn't have much use for a degree? Save the time and money. I had learned far more from working/independent reading/independent projects/the Internet in general than in my formal engineering classes by the time I had graduated. Two or three classes stuck out as having a comparable impact as my internships and other ventures, but in reality it's kind of a net waste. I'm more academically inclined than a lot of people, so that really speaks to how important this point is regarding those who grow up not liking academics in the first place.