It doesn't matter if it was a nice idea but if it was adopted outside the normal and proper means of adopting regulations then it is not okay. Forms of action matter regardless of the desirability of the substance. However, nothing prevents this being adopted again in the proper fashion under the Administrative Procedures Act.
From the article it sounds like the regulation comes from a court precedent. The court sought advice from the Obama administration. It was not an executive order.
Not quite. The use of "Dear Colleague" letters by the US Department of Education have dubious status in terms of being regulations let alone being binding. It didn't play a role in a court case directly. A court sought clarification after a settlement was reached between litigants but it wasn't necessarily required to be issued in that fashion by the case.
This is probably a good idea. It's ridiculous that we coddle people who wastefully took out loans with the goal of improving human capital, and then failed to take advantage of them.
Previously student loans were a socialized losses, privatized gains situation. This gives borrowers some skin in the game and will hopefully give them more reason to carefully evaluate whether college is really a good idea for them.
I agree with the downvote and the fact that borrowers have skin in the game, but not that lenders have none. Debt should not be dischargeable, else it's not debt at all.
Of course debt can be written off. Out there in the real world contracts are renegotiated all the time. More of that would be advantageous in the face of information asymmetry, the party with better insight would be less tempted to exploit their position.
You're talking about corporate debt not personal debt. Show me an example of personal date that is frequently discharged (outside of bankruptcy) and I'll adjust my position.
If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. It should be.
Yes that's true. However, they won't discharge it completely. They'll set you up with a payment plan and/or negotiate the total. I think they still report it to your credit profile though.
a lot more people are thinking about the actual utility of college
Yeah. It's time that lenders began doing diligence again on their borrowers. Even if the prospective borrower didn't know that that Kaplan degree wasn't such a great idea the loan officer at the bank would know and deny the loan.
>Borrowers already have skin in the game. Lenders have none
That's absolutely false. Lenders have skin in the game - they run the risk that the borrower fails to pay back the principal. That's why they charge risky borrowers more interest.
If lenders truly had no skin in the game then loans would be nearly interest free.
It's a good point. I failed to caveat that my prediction might not be true:
- in a situation where other "risk-free" investments are more profitable
- in a situation where the supply of money lent is regulated or controlled enough to fail to bring down rates.
A professional VC will be wrong about some 80% of the startups they fund. Yet you want to punish a teenager for not correctly evaluating the chances of receiving a well-paying job 4+ years into the future?
And the startup founder isn't punished for failing to earn enough money; the wealthy fund with the risk capital accepts the loss and moves on rather than pursuing the broke founders for the rest of their life with 16% penalty interest rates and invented collection costs and special legislation to exempt them from bankruptcy
Why are people lending to students expecting to not be punished for their voluntary investment losses?
Except we've created a system in which you're told that you have to go to college your entire life. You can't be a damn hotel manager without a college degree these days. The price of college has been on the rise for decades and the only one assuming risk here is the borrower.
Giving kids 120K loans for Puppeteering majors at public universities will be looked back upon as a bait for criminal indentured servitude of our nation's young academic minds.
Your pathetic insistence on their fault in this manner while big loan fat-cats get fatter off the false promises made to the younger generation that can "major in anything and get a living wage" is perfectly archetypical of the sociopathic capitalistic mindset peddled on here regularly that seeks to milk naive yet gifted minds of their worth for the benefit of the higher classes that exploit them mercilessly.
I have a comment if you go into my history that detail's Harvey Mudd's model for universities. Only STEM. No other majors. If you want to major in Gender Theory, you can do it at a private university without loans. I don't want tax dollars funneled in that direction if they're not getting the general public jobs. If you can pay out of pocket for Queer Marxist Theory you can do that at a private "university". Otherwise, stop milking the bright kids/teens out of high school with false promises, big loans and useless majors.
If you think for one second having useless majors doesn't line the pockets of the rich, you're an evil, evil person. Don't trample on others because you made it out cleanly.
"That [protection] forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default."
The lendee can't default, but that doesn't mean the loan gets paid. Some people just don't have money/income/assets to seize, and courts will not garnish poverty wages.
After a few years of unemployment and being treated for bipolar depression my loans were in default. Due to the grace of the system at the time, I was able to bring my loans out of default and I now pay them like everyone else. This type of thing punishes the downtrodden even more. There must be a set of checks and balances that at least attempts to differentiate between deadbeats and broke people that don't need a higher hill to climb. The loans never go away. You can't escape them with bankruptcy. Let's not make this a living hell for people that got educated and fell on hard times.
I don't pay student loans. Do you know why? I don't have them. I went to an inexpensive local school, worked while going to school, and took the public bus to and from it. (I was fortunate enough to be able to live with my parents.)
While I don't know your situation, it's hard for me to feel sorry for someone who went to an expensive private school, lived on campus in a "country club" atmosphere, and then expects the Taxpayers to cover it.
I think it's more that students are allowed to take loans that they can't possibly service. Since you can't get out of loans via bankruptcy and the loans are backed by the federal government, loan agencies have no reason to make sure borrowers are qualified. When they issue big loans to women's studies and philosophy majors, they don't assume any of the risk that's rightfully theirs. That's where the abuse happens. Students, in their ignorance, take on more than their fair share of risk.
Talking about "taxpayers" is disingenuous at best - the private loan holders are the ones that made the unwise loans and should be directly losing out. To the extent that these private parties have agreements with USG guaranteeing they'll be bailed out, then the proper time to object to that corrupt arrangement was when it was being made!
Debt, in general, must be dischargeable in bankruptcy. Otherwise the practice is equivalent to the gradual reinvention of slavery. Student loans already run afoul of this principle - let's not double down on the corruption merely to delay writing down losses that have already occurred.
Student loans are not dischargable because there is nothing that can be repossessed and you don't want to allow graduates declaring bankruptcy at 21 to wipe out the debt. (Most people with large debt would be better served to immediately declare bankruptcy than to even attempt paying them off.)
Under such a system, once lenders stopped lending, college would again become available primarily to the wealthy.
Yes, that is the justification that the private lenders bought the law with. But it doesn't refute my point.
From a policy standpoint, if the realities make it impractical for lenders to lend then papering over those incentives is effectively doubling down on a bad idea. Compromising in order to encourage more of something generally results in system feedback consuming the desired change, with the downsides of the compromise remaining.
Fewer college loans would mean that society would have to adapt elsewhere - the K-12 schools couldn't punt any substantive learning until "college", employers couldn't insist on pedigree degrees for every job, the value in funding state universities would be respected, etc.
As we're fast finding out, our societal addiction to credit does not help people actually afford things, but creates a de-facto-mandatory system of wealth extraction from the powerless.
What if the realities make it practical and profitable to lend if that debt is not dischargeable, but make it impractical to lend if that debt is dischargeable?
In such a case, it seems worth exploring whether society overall and different segments are better or worse off with each policy.
I think that's the case we're in, and even though it would likely help me personally and help my kids, I don't want to return to a world where a pedigree degree is even more restricted to those with, well, pedigrees.
The specific realities that I was referring to are that a college education is expensive and expected to be self-funded. While non-discharagability makes it more practical to lend, it does not affect either of those underlying conditions! Instead, it just delays their realization, basically reinventing indentured servitude with college replacing the boat.
You say you don't know anything about his situation but then you go on to heavily speculate about his situation.
I'm in your situation btw. I worked through undergrad and grad school and had my work pay for almost all of my school so I never had any debt. But I realize I was lucky and had a good situation lined up and not everyone has the same opportunities. Some people need more assistance than others, and I don't mind if the govt helps those folks out.
>>I was fortunate enough to be able to live with my parents.
Um, you added this as an afterthought, but it's by far the biggest expense. We're talking probably around $500 per month on average (if you live with others) plus utilities, not to mention food. So you were able to save around $1000 per month living with parents - and that's a conservative estimate.
How far HN has fallen when an intelligent comment like this is downvoted. Yes, I expect mine will be too. I no longer care about the opinions of this community.
I'm surprised by the comments here. I am a fiscal conservative, but having taken and struggled to pay for student loans, and having hired people in the same situation, find that the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result.
Do I think people should pay their debt? Yes, but these lenders are the same lenders that get bailed out time and time again. They are in no peril. It is our students that assume this risk.
The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. It was not until I left the Army and started my own business that I finally started to claw my way out.
Our education system is broken. We know this. So lets stop punishing kids for doing what they've been told do to throughout K-12, and instead help them find a way out of the rat race. Kids swimming in debt are of no service to this country. We have to do better.
> The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not.
Okay, so then I must ask: What did you major in, what was your total debt, and did you research the career prospects of your major BEFORE going to college?
Sometimes I think a basic mandatory form that came with your college acceptance letter would do wonders for student debt.
You have chosen to apply to be a history major at private
school X. Our graduation rate for the program is 95%. Your
total student debt upon graduation will be approximately
$145,000. That is a monthly payment of $2000. Our 25th,
50th, and 75th percentile wages for graduates with this
degree are $20,000, $25,000, and $30,000. This means you
can expect to pay about 107% of your income towards
servicing your loan for the first 10 years after
graduation.
Of course, but I had to sign stuff like this to get a mortgage. A bunch of mandated forms about worst case payments. Seems an easy law to help reform loans.
It's easy and it should be done, but I don't think it will be that effective. Mortgages come with other rules. If you can't come up with 20% down, you pay mortgage insurance. If you have limited ability to pay it off, you don't qualify for as much cash. If you have a bad credit history, you pay higher interest. All these things are meant to keep mortgage debt from getting out of control. No such rules exist for student loans.
That's not true. There are a lot of private universities and so called "non profit" universities where a lot of people are making money. Even public universities will do what it takes to stay open - including denying state residents admissions in favor of foreigners who pay full price.
Yes, state funding cuts have severely messed-up universities' ability to act according to their chartered purpose. That doesn't mean the charter isn't there.
The trap is far less obvious. 150K $ 4% = 500$ per month which seems doable. But, many things can also snowball.
First intrest rates can rise, second unemployment can rapidly increase loan amounts when either the student after graduation or the parents during collage. Loans are often 50+% higher than initially expected for a huge range of reasons.
Interest rates can be fixed. Some are some are not. If not fixed, they often have a ceiling, and you can propose a guide.
In no case will it be bulletproof against things like unemployment. That is OK. We haven't had a recession in years. People in the last 4 years with student loan debt problems? Not due to a sudden economy shift.
Yes, it's a good idea to take eighteen year olds (that have been told their whole lives that they should go to college) and push them make decisions whose negative consequences we never allow them to escape.
They do that every day on their own. They decide to smoke or not. Many choose to drink and drive. By 18 you easily have the power to ruin your life, or those of others. At 16 even, not the uncommon to see a 16 year old in the news for running over someone.
I propose we give them more information. Perhaps not the end all be all, but at least give them a hope to make a smart decision.
uliano’s study is worth reading. He reviewed every bankruptcy case involving
student loans in 2007. He found that of the 169,774 student loan debtors
filing bankruptcy, only 213 filed adversary proceedings, a necessary step to
discharge student loans. And of that 213, 51 received full discharges, 30
received partial discharges and 25 received an administrative remedy. In
other words, 0.1% of bankruptcy filers even tried to discharge their student
loans. And of those who tried, 50% of them received some kind of relief from
the court and 25% received a full discharge of their student loans.
So either the who-knows-how-many attorneys involved in 169,774 - 213 = 169,561 bankruptcy cases (99.87% of such cases) involving student loans are incompetent, or ... student loans are functionally impossible to discharge in bankruptcy.
I got a B.S. in Psychology and a minor in religion. Total debt around 25-30k. I went to school at age 20 and graduated at age 25. I did not go straight from High School.
I did not want to be a shrink. I wanted to focus on research. Unfortunately, I could not afford to continue on to graduate school. My grades weren't good enough to get a scholarship. I was working as a cook at the Olive Garden, and had kids at home, so I tried a few careers that didn't work out. I wound up in the Army because it seemed like the right thing to do. I'm glad I did it.
And what happens when you switch majors? All of your scholarship money gets revoked?
Most schools do not require you to declare a major when applying or during the freshman year. Most people that have a major in mind when entering college end up changing it as well.
I think this is telling that MOST people do not go to college because they are super passionate about whatever subject. Most people go to college because they would like to find a job that will ensure them middle class wages.
If we fixed the job market (ie prevent jobs from requiring a bachelors or masters when many high school graduates could be trained to do it AND increase wages not just at the top of the spectrum), I have a strong suspicion there wouldn't be so many people going to college for "bullshit" degrees and even if there were they would actually be able to pay their loans back in a timely manner.
And what happens when you switch majors? All of your scholarship money gets revoked?
Honestly, switching majors if a bit of a failure of the system. Ideally we would expose students to more parts of a major in High School, so they can make better decisions. Most high schools do not do a great job of this in the US.
Most schools do not require you to declare a major when applying or during the freshman year.
Most people that have a major in mind when entering college end up changing it as well.
(Citation required for both of these). I have found it a mix on what schools require. Back when I applied to colleges (2000?), most colleges DID have me pick a major. A few pushed off till Sophomore year, but not most by any means. And MOST people did not switch majors when I was in school. Some did, and some dropped out, but hardly most.
I think this is telling that MOST people do not go to college because they are super
passionate about whatever subject. Most people go to college because they would like to find
a job that will ensure them middle class wages.
Great. So why do people major in History and "Business" and "Women's Studies"? None of these majors lead to a middle class job. If you want a middle class job, there are many majors almost guaranteed to get you there (i.e. education, nursing, programming.. all a big demand for people, all pay some form of middle class white collar wage).
If we fixed the job market (ie prevent jobs from requiring a bachelors or masters when many
high school graduates could be trained to do it AND increase wages not just at the top of the
spectrum), I have a strong suspicion there wouldn't be so many people going to college for
"bullshit" degrees and even if there were they would actually be able to pay their loans back
in a timely manner.
What? As an owner of a business, you would tell me I cannot require college degrees from my new hires? Fine, I will remove it from my job posting. During interviews I will ask what college the person went to. If I don't like the answer, I will send them home. You are NEVER going to legislate anything like this away. Businesses hiring want the best candidates. If they feel college students are better, then they will pick them. This would be perhaps the worst regulation you could possibly put on small businesses.
Removing loan guarantees, and forcing students to scrutinize the value of the degree they are pursuing will improve the problem of students blindly doing what they've been told to do.
If they don't suffer the consequences of buying a useless degree, why wouldn't they keep doing it?
Any possible improvement of the status quo is going to involve pain. Certainly universities themselves could start feeling some of it, as they are complicit in accepting the guaranteed money without any incentive to more selectively filter either: the students getting the loans, or the quality of degrees they are receiving, or both.
I come from a country where my education was paid for by other people's tax money. I studied the subjects where my curiosity was greatest, and though I don't work in that field now, I do rely on things I learned through my college experience almost every day, and they make me better at my current job. Overall they make me a better contributor to the world around me, and I also have this feeling of gratitude that my world class education was not entangled with crushing debt, plus, you know, the playing field is at least somewhat more level at home than here in the US. You get the grades, you go to college. You don't have to evaluate the pros and cons of large amounts of unsecured loans. It's astonishing to me how things have turned out in the US. Ireland is far from perfect but we do pretty ok at affordable, accessible higher education.
I am from the US and the government also paid for my education entirely, no strings attached. I could have studied Byzantine erotica if I had wanted. This is not a US vs world issue.
The Average student loan debt post graduation in the US is $40k now, so I'd say it's a hell of a lot bigger problem in the US than the rest of the modern world.
I was not clear that I was responding in part to parent's idea about "useless" degrees not being worth money. I'm glad your education was such. ... But I also seem to have the impression that this is not the norm in the US- that you have to pay out of pocket or with loans for the most prestigious schools? In Ireland you compete with other students academically but not financially. At least in theory. Like I said, not perfect. If free higher education is available, why do 18 year olds take on large debts to pay for it?
Why should lenders not be punished for financing the useless degree? After all the availability of easy financing drives up the price of the useless education.
Remember, the "moral hazard" spoken of in financial bailouts is that the lenders aren't being punished for taking bad risks.
I agree. A little bit more demand constraint for taking out debt for degrees that provide little opportunity return would be great. Would save a lot of people from great stress.
I wish I would have been turned down for the loans that paid for my MFA. I'll be paying $450/month until I'm in my 10th year of retirement on that loan. But then again, the school that I went to would probably not exist if it weren't for these loans (Graduate Art School). Considering the caliber and notoriety of the graduates of this university, national culture would suffer as a result of these regulations.
I have to agree that somehow the risk and the student's motivation and achievement are inversely related though there was never any inquiry into my records in the process outside of verifying that my university was on the up-and-up.
But beneath this is a more fundamental question. Why can't we as a country afford the things that are important (our health, our education and our homes) when we make so much more than the developing world where they have the same basic needs? What have we actually gained (aside from creature comforts) from our high incomes as it relates to living our lives. We're borrowing money to pay for almost everything and then paying the interest the rest of our lives.
Much like the housing collapse, banks have been mandated to finance to people that can't afford it for student loans. The blame doesn't solely lay with the banks. The government is at least equally to blame.
That banks were "mandated" to finance people who couldn't afford housing is nothing more than a conservative talking point. The risky loans that banks took on -- no doc loans, interest only loans, negative amortization loans, sub prime high interest loans -- were "non conforming". "Non conforming loans" by definition were not government backed loans.
People who were taking advantage of those loans generally fell into a few categories. Investors who were buying real estate to flip. People who were getting houses appraised at more than they were worth and were illegally getting cash out and people with money that were buying over priced houses to live in but to sell later.
> If they don't suffer the consequences of buying a useless degree, why wouldn't they keep doing it?
So when you are young and still have no degree nor experience in life you should be punished if you choose wrong. Unless you are rich, then if you choose wrong you have a second opportunity.
Shouldn't some of the burden be on the institutions offering the degrees? They have the money, they have the knowledge, they have resources, they should suffer a good part of the consequences of offering bad degrees.
Aren't the students with a degree that doesn't offer financial stability already punished? Aren't their dreams of having a career already broken? Isn't adding the burden of debt over that just cruelty for the benefit of for-profit education institutions?
> Vocational and apprenticeship programs are excellent ways for people to learn useful skills while remaining gainfully employed.
And the other way around is also true. There is value in people educated on arts or science even if they don't get a job directly related to it.
You are right that the link education-employment is in fact is wrong, I will say it is quite elitist. It presumes that people in jobs that don't require especial skills should not get a high education and at the same time that only people with a degree should have skilled jobs. And that's not true.
> There might be a "value" in it but why shouldn't they pay for it?
It is called an investment. Society invests in an individual education because in the long run that individual is going to be able to contribute more positively to society, returning a greater value than the initial investment. A better educated society takes better decisions, is more creative, adapts faster to change... Why shouldn't countries invest in its own future?
If citizens have to pay for that education maybe they are not going to be able to afford it, or just are not going to do that investment because they lack the education to understand the benefits. The situation becomes a loss for the individuals, but also for the country.
To treat education as an expense is a mistake. That same happens with, for example, infrastructure. If you treat it just as an expense, why do the government build roads? The reality is that a country without infrastructure is as badly prepared as one without educated citizens.
It is called an investment. Society invests in an individual education because in the long run that individual is going to be able to contribute more positively to society
My CS education at an unknown state college costed 10-25% of what a liberal arts degree costs from a "prestigious" private college. So why should I pay for people who want a liberal arts degree that is not as valued by society? If we made large student loans harder to get, colleges would have to adjust. Maybe even to the point of making a liberal arts degree cost less than a computer science degree.
That's a different discussion. The problems is that the White House is removing protections for the people that already have that big loans. Easy to get loans and harsh penalties for defaulting is the worst of the combinations.
Making student loans harder to get is a good solution to reduce the burden of debt and even to reduce prices. But at the same time it makes education to become a privilege of the wealthy. So it has an important downside.
> So why should I pay for people who want a liberal arts degree that is not as valued by society?
Is not as valued by society or is not as valued in the job market? This are two different things. I can earn more than a doctor thanks to my long experience as software engineer, but I will not jump to the conclusion that I'm more valuable to society than a doctor (or a janitor for example). I have meet too much people with high salaries that do more damage than good to companies to believe that "salary" is a measure of "been valuable".
At the time I went to the state college I went to. People were paying for school almost completely out of pocket working minimum wage jobs and staying at home with their parents.
A pell grant plus a minimum loan can pay for someone to go to a two year college. In my state, if they work hard enough during the first two years, get a 3.0 GPA they can get their tuition paid at any state college to finish their four year degree.
Of course they can get all four years paid if they did well in high school. But students are still racking up debt to go to private schools and go out of state.
If they don't suffer the consequences of buying a useless degree, why wouldn't they keep doing it?
Why shouldn't the lender also assume part of this risk?
Why is their recoupment guaranteed (student loans can't be dissolved in bankruptcy)?
Why are they always likely to be bailed out (prove me wrong by showing a student loan lender that went into bankruptcy)?
Lenders need to do more due diligence and stop lending to students that are more likely to have problems with payback. The entire liability should not be assumed by the borrowers and co-signers.
I don't think that is true. You can temporarily avoid repaying the loan, but you can never be absolved of it via a bankruptcy declaration (whereas most other loans will effectively disappear). Student loans are repayable as long as you are alive, you can only get a temporary pause in repayment, at most. Hence, the lender is guaranteed repayment as long as the borrower or consigners are alive.
I'm sorry, this is bullshit.
What's the role of government? To provide services for the benefit of it's citizens. How does it do that? by collecting taxes. That's how infrastructure gets built, that's how we have schools, hospitals and other public services. At least that's how it should be.
Student loans should be subsidised by government, no matter what subjects the students pick, and citizens should pay taxes to support that.
This makes for a better, more integrated society over all. Here in Sweden education is free, child care and medical expenses are minimal, and student loans have an interest rate of around 1%. Also, you pay back your loan as a percentage of earnings, so the more you earn the more you pay.
This is the contract of society, or at least it should be. Everyone benefits.
> ...the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result.
> Do I think people should pay their debt? Yes...
You were duped, but pay up anyway.
Doesn't that smack you as immoral in anyway?
If anything is screwed up in education, it's that it isn't free for anyone that wants it. How hard is it to see the value in having a citizenry that is well educated? How many other cons can the public see, but also feel they can make informed decisions in the face of it instead of "Duped, but pay up" herd mentality?
My reading of the explanations on studentloans.gov was that the standard payment was a minimum of $50/month, and that it could be even lower on an income based plan, is that wrong? Was your minimum higher?
If it's anything like the office i encountered in my life, the minimum is always how high they think you can afford, regardless of how low they could technically go, regardless of whether that means they get nothing.
I have a hard time feeling any sympathy for students racking up tens of thousands of dollars worth of debt to go to a "good school" to get a degree in a field that doesn't pay enough to make it a worthwhile investment.
I went to an unknown state college and paid less for my four year CS degree than many of my coworkers paid for 1 year and within 3 years of graduating, I had no debt, and was making just as much as people sitting beside me who went to more "prestigious" schools.
I had former classmates that thought they were too good to go to the local state college,racked up thousands in debt to be a teacher or a social worker. Why?
Removing the debt protections for the industry (ie. allowing students to default) would be the surest way to limit the proclivity of institutions to offer bad investments to students.
It's super easy to look back and think, "it really doesn't matter where you went to school." and it's true, I've met people who went to no-name schools and get employed at great companies.
But put yourself into the shoes of an impressionable 16-17 year old. Private and flagship public universities have mastered selling their product with tours, special programs, the "college experience" etc. In addition, they sell getting a job with countless networking opportunities (especially prestigious schools).
It'd be really efficient for anyone who would need loans to get a degree to knock out all gen eds at a comm college and then transfer to an in-state university (it makes zero sense to pay 30-55K a year to take an entire schedule of calc 1 and chem 101). But it's hard to blame a 17 year old for taking the more fun and cooler option than the practical one.
I suppose if government and states invested heavily into community colleges and made them "cool" with great facilities and opportunities, more kids can be incentivized to go that route and avoid the heavy loans.
How many 16-17 year olds don't have parents or guardians to talk some sense into them?
Government loans have a limit, especially for non independent students. Parents usually end up cosigning.
I told my children they "choose" what college they go to based on how hard they work in high school. If they don't get scholarships, they have to get loans in their own name - meaning one ended up in a 2 year school, lived at home, and could transfer later if he did well.
I keep seeing people say that the student loan crisis will be the next "bubble pop". It seems like colleges and lenders both got greedy and created a mass of debt to them that will never be paid off. That, and I imagine the current generation will send their own kids to college at a much lower rate than their parents did. The "college bubble" is going to pop.
I have two teenagers and a 7 year old. The oldest is 15 and doesn't even think about college. I don't nudge him either way, but find it interesting he has not even considered it.
My daughter is 13 and wants to go to college, but only because TV says that's where you go to meet boys and get married.
The very top will survive the cuts in federal funding, but research at lower tiers won't survive. The larger sectarian colleges will survive, the smaller ones will die. Notre Dame will remain, Seton Hall and the Franciscan University of Steubenville will go away, that's a good thing.
Its going to be a really rough bubble. There's no one source to point the finger at, but we've got ourselves in a spiral where:
-More people are going to school
-University costs have skyrocketed (mostly due to expanded administration services), which has increased the need for students to secure loans
-Wage growth has been low/flat for a long time
-A college degree has replaced a high school diploma/GED as a minimum requirement for most middle class jobs
-New grads are coming out of school to lower paying jobs relative to the cost of their education than ever before, driving defaults.
-As college matriculation becomes more and more necessary, even great high schools pivot towards a goal of getting students into college, instead of providing them great educations which have a secondary effect of getting them into college. Further decreasing the value of high school as someone's highest degree of education.
The last one is very worrisome for me, and something I hear a lot about. I have family and friends who are college professors - even those at ivy league universities are saying their students are just as smart as before, but on average now they're not as generally educated and way less prepared for serious academic work. They can't handle the same work loads, don't write or research as well, require more oversight/direction - things like that.
How do you fix that without blowing everything up and probably destroying the lives for a huge group of people who's only crime was being born in a certain set of years? Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?
>How do you fix that without blowing everything up and probably destroying the lives for a huge group of people who's only crime was being born in a certain set of years?
A huge number of millennial college students who weren't fortunate enough to graduate into a tech career between 2007-2011 already went through this. It wouldn't be anything new.
>Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?
I mean...this is already happening. I'm not sure what you're getting at here. "Blowing everything up" is the only way to stop this cycle.
Probably should've separated/clarified my last two sentences; I agree that its already happening, and that the system will blow up on its own eventually.
My questions are: Can we do something about to reverse it? If not can we do a "controlled demolition"? Is there even anyone in a position to do anything / is the train accelerating with no breaks and no one at the helm?
Is this debt that will blow up the economy somehow? Is it being bought and sold on the public markets and being packaged as derivatives?
The bubble of it may pop, but I'm not clear how it hurts anyone but the banks and colleges. Students who can't pay will continue not having any money to pay anything with, and that needs to be addressed, but it doesn't seem like the same scale as the mortgage crisis.
I'm trying to think about how one can profit from this bubble popping through the stock market but I just don't see it really popping. You can't really default on student loans and the government can garnish your wages.
Ironically, the head of the Dept. of Ed. invested over a hundred million dollars in a debt collection agency that tacks on these usurious fees and rates.
There's a trillion dollars of liability we're talking about. I'm OK with some forgiveness, but if and only if the Government gets out of the student loan business. (Watch tuition drop like a rock if this happens!)
And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Essentially move the 100% of the risk that borrowers currently have and move a nice portion of it to the lenders so they both bear the burden of the loans can't be repaid.
Imagine if banks had zero risk when providing home loans. I don't think it would be too difficult to buy a house you couldn't afford and quickly the price on homes would be driven up. The student loan industry is so completely fucked and needs to be reformed before it ruins our economy.
And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy.
Then why would the loan companies do student loans at all except at exorbitant rates (thereby making the responsible students pay more for those who aren't excluded altogether)?
They wouldn't. That's the point. You shouldn't be able to borrow $150k+ without some collateral or a 20% down payment.
I believe that if this happened, you'd see tuition rates plummet. But it won't until some catastrophic economic event occurs because the student loan industry is predatory and corrupt. Essentially ruining people's lives by selling them a lie in the name of "investing in your future."
Sometimes I do wonder why American Universities charge exorbitant tuition fee?
Education being the bedrock of an advanced society, isn't but natural the developed economies like US should be able to subsidize education to such an extant that youth of country don't have to worry about paying their tuition fee and focus more on learning and innovation that will take everyone forward.
It is but a reflection on the sad state of affairs that our higher education system has fallen into!!
> Sometimes I do wonder why American Universities charge exorbitant tuition fee?
Students demand a lot. Good profs. Dorms with AC. Sports teams. Medical care.
All that cost a lot.
States and federal gov't pays less each year. The difference has to come from somewhere?
In any case, its not perfect but I will take US colleges 100x over Japanese Colleges or Chinese Colleges or Mexican Colleges or 98% of the colleges in the world.
Sports teams are generally a net positive. You and I see the $3.5M salary for a football coach at a public university and think it's absurd, but the football program itself pulls in tons of cash directly and indirectly and is probably more than 'worth it' to the school overall.
edit: Looks like this is generally wrong. I'll leave it up but see below comment.
I hear that sound byte (bite?) here a lot. It does not seem to be true based on the news I read. Perhaps you have better sources than I. From what I see, 20 out of 1,083 NCAA schools made money on sports. The other 1,063 lost money.
Only 24 FBS schools generated more revenue than they
spent in 2014, according to the NCAA Revenues and
Expenses of Division I Intercollegiate Athletics Programs
Report. That figure jumped from 20 schools in 2013, but
it has remained relatively consistent through the past
decade.
Don't forget to account for scholarships. You are giving free tuition to the football team, ladies soccer team, lacrosse team, ladies cross country, swimming, etc. etc. etc.
Only two sports were profitable at FBS schools, according
to the report. Football programs netted a median profit
of slightly more than $3 million and men’s basketball
netted a median $340,000. But the profits at most schools
quickly vanished after paying for a long list of other
intercollegiate teams, all of which lose money. The
median loss among of athletic departments was $11.6 million.
Hey, that's news to me. I heard this in terms of specifically the UC schools' major sports endeavors, so maybe it's still true there, but thanks for the sources.
This seems to be based on some misinformation. Tuition only covers a small portion of a university's costs. The rest is made up by endowments, grants, donations, and other sources.
People have been going to college in this country for a long time and only relatively recently has the outstanding amount of loans and those in delinquency have shot up. I have a hard time believing the reason is having good professors and air conditioning.
>Students demand a lot. Good profs. Dorms with AC. Sports teams. Medical care.
Why would you expect your university to provide dorms for you? This whole living on campus thing on Anglo universities was always weird to me. You'd only expect perks like that if you pay thousands of dollars a semester.
Also Re:"Medical care": That's what universal health care is for.
> Why would you expect your university to provide dorms for you
Traditionally, you go to school hundreds or thousands of miles away from your family. You need someplace to stay, no? Growing up in a city and you will have much more options to "live at home"
> That's what universal health care is for
The US does not have universal health care. So not sure what you are saying, how could a university not charge for something that is required and not provided elsewhere?
The university gives students access to cheaper housing than they could find on their own. Not sure how that is any different from say, providing electricity for the classrooms. You need both electricity and a place to sleep to attend school no?
> Well, there's your problem
Sure, but that isn't going to change anytime soon. Just giving up on any problem because "whelp, no universal healthcare" is not a productive way to live life.
I went to university in 2008. We did not have dorms with AC. The dorm I lived in was built in the 40s or 50s. Tuition (no relation to dorm costs) was still rising rapidly. Now my alma mater has new dorms with AC, but they cost far more than the older dorms (which are still available). Tuition has continued to rise since then, albeit more gradually.
My university did not provide free medical care. Professor quality has not quantifiably improved over that time.
Have sports team costs increased so rapidly in the last 10-15 years?
Even if US colleges are better than 98% of the world (which I doubt, it seems like you conveniently forgot Canada, Europe, Australia, etc.) employers are mostly using that degree as a box tick. Convincing students they need the exhorbitantly priced best when they really don't still seems predatory to me.
Personally I paid the equivalent of 16kUSD for a 4 year software degree in New Zealand, and my fortune 500 employer seems fine with it. A foreigner would have to pay double, but that's still far from US prices.
There is a big range. You can get a 4 year "software degree" from a community college in the US for no more than 20k USD. Most of the big numbers you see toted are for private university, or giant flagship campuses. Many schools do offer cheaper deals at the smaller campuses. Don't buy the hype that any college degree in the US cost $200k.
If you read my posts further down, Football is one of the only net positives for most universities. So getting rid of Football may raise your tuition by $500.
Now if you got rid of swimming, lacrosse, cross country, track, cricket, etc. etc., that would lower tuition by a bit.
They charge an exorbitant fee because tuition is being heavily subsidized. The consequences of this exact policy change being discussed is a form of removing part of that subsidy.
There are three gigantic sources of waste in the US: healthcare, military spending and education. All of them are 1) run by large organizations with growing bureaucracies, 2) considered so important that any expense is justified, 3) heavily subsidized or financed with loans or insurance, so growing costs are always met 4) in a position where the bureaucracy decides how much should be spent, not the end consumer. In other words, the school decides its students need $300 text books, or to raise rates $1k to fund new buildings and programs. Same with hospitals: the last hospital I was at had a grand piano and robots roaming the hallway. Politicians don't want to be seen cutting defense spending, so the military bureaucracy decides how much to spend, and when there's money left at the end of the year they always find a way to spend it. I'm not sure how we should fix it, but I'd imagine we either have to increase pressure on these institutions to save money by drying up their endless source of revenue, or take the purchasing decisions out of their hands and back into the hands of consumers.
Although I can appreciate the comparison in terms of amount of money in each, I don't know there is tremendous waste in all three, or that the source of expense is the same in all three.
What they do have in common is being seen as indispensible or essential services. I agree they also all have tremendous bureaucracies.
For example, I think one primary source of costs in healthcare (strangely almost completely unaddressed in the current healthcare law debates) is lack of competition. Licensing laws and government regulation over procedures and whatnot stifles effective choices in healthcare.
There are many other problems too, like lack of transparency over pricing, and an inversion of the normal economic decision-making process (for example, instead of the buyer having fixed costs and benefits to choose between, they are often at best only given the option of accepting or refusing the service).
Education is a bit different, IMHO. There, you have businesses using degrees as checklist criteria and pushing off real training onto schools; schools have become administratively topheavy. Rather than being faculty-driven, they're increasingly administratively-driven (it's not uncommon to have several deans of a given college, for example). States, which have historically funded universities in the public interest, are cutting that funding and pushing costs onto students.
I guess my point is that I don't really see the solutions being the same, nor do I see simply cutting funding and "starving the beast" as the right solution. Education is already underfunded, and what tends to happen is that administrators cut other positions over their own, or over relinquishing decision-making authority to democratic processes.
Too much discussion has focused on who pays for healthcare, and in what way, or how much. It's important but not really helpful in the long-term, because the real problems are in transparency and overregulation. It's ridiculous, for example, to assume that citizens can take responsibility for their own healthcare if the government explicitly prevents people doing just that: by preventing them from making their own healthcare decisions, preventing competition, and raising regulatory hurdles to new services (e.g., in the form of drug regulation, overly strict laws about who can provide what service, and what hospitals and manufacturers must do). So we end up with a system where you can't refill a harmless medication you've used for years without getting approval of an overpaid provider, but can get a harmful opiate from that same provider when another service (from a different type of provider) would be more helpful.
The amount of money being spent in these areas is not really the problem; it's a symptom. Just cutting spending on them will not really address the problems, and may make them worse.
Because they can and they want to make money (even the non-profits). There's no other way to justify a 3x increase in tuition over 10-15 yrs. Teacher's salaries have stagnated or dropped (due to use of adjuncts) and course material costs have effectively gone to zero (most materials are available on the Internet so the only excuse for $300 books now is greed or very esoteric subjects). That's why I refuse to donate to my alma mater. They have more than enough money. They have an unlimited, endless supply of money coming in from these federal loan programs, and they increase tuition to tap into more and more of it. It's a never ending cycle of making money off of students while offering the least amount of education possible.
This is what a society that doesn't value education in the least looks like. Instead of figuring out how to educate our population, we're too busy figuring out how to prevent people from pursuing education because most people are just too stupid for college by the time they reach college age. And why wouldn't they be, considering that in our best public schools, they just spent 12 years being babysat and learning almost nothing?
> Sometimes I do wonder why American Universities charge exorbitant tuition fee?
Because American universities are viewed as institutions under the control of a "hippie class", and academics are viewed as "prissy" and "elite". It's a class hatred of the educated, combined with a desire for power over the working class in the form of loan repayments.
I've always wondered if the fact we make it so essentially students are forced to repay their student debt (even if they are otherwise insolvent) contributes to higher cost of education.
After all, you have a captive market that has to buy your service or deal with a higher risk of unemployment and a lending institution that doesn't take on any risk.
What if we let students default on their loans?
My bet:
- Less people will go to college (not necessarily a bad thing)
- The cost of college will go down because the demand is stifled
If the government works to guarantee you will get paid, you can charge whatever you want and that might be what we are seeing.
Absolutely. There are three parties here: Schools, students, and lenders.
Schools set the price based on what they can get students to pay, which is a function of the willingness of lenders to give the students money.
Lenders approve borrowing students based on their likeliness to repay, which is currently very large due to the legal framework.
Students select college programs and loans based on a convoluted mix of 17-year-old wisdom, well-meaning advice suggesting they pursue their dreams, their ability to get the loan, and a hazy idea of future employment, income, and repayment.
It's obvious that increasing the penalties to the students after graduation is about the least effective measure you can take.
If students were allowed to discharge student loans through bankruptcy, that would still be a hefty penalty. Lenders would be less willing to give them money. With less money available, schools would have to charge less.
> Estimated costs to make college tuition free for every citizen: $62 billion
How? There are ~20 million Americans enrolled in college so $62 billion is only $3,000 per person. In comparison, the US spends about $12,000 per year per high school student.
I'm not disagreeing, but presumably at least some portion of those expenses would be paid back in some way. The Australian model has the government provide the student loan. The interest rate is fixed to CPI and repayments are garnished directly from salary provided you earn over a certain amount (something like 50k). Students also get discounts via copaying which was about $500 per year from memory.
The government obviously never breaks even directly from this scheme. I think they've begun to exclude certain degrees that don't have good prospects which is a big debate at the moment.
Having free university doesn't mean every person gets in. Nor does it mean there are more spots than currently. It does mean the competition will be much more difficult for the current spots.
This USA student loan scheme is one of the most brilliant machines of social control ever devised.
People get of college already owing a lot money, now they have to work for shit, and put up with their asshole bosses do. They can't have the option to spend couple of months searching for jobs or they will have to default their debt and mess all their future life.
Nothing like a well behaved society where the workers can't complain.
"...a cynic might argue that we haven't really abolished slavery; we've just relabeled it. The cynic would have a point: an ancient Greek would certainly have seen the distinction between a slave and an indebted wage laborer as, at best, a legal nicety."
Also, Soros's The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, though Graeber's book is what really brought Soros's claims into focus for me. https://www.amazon.com/dp/B004HKIFR4
Good. I paid the $120K for my education and co-signed a loan for a friend (big mistake) for $10k for her education that I ended up paying off because she was a dead beat.
There has been a huge disturbing trend in the US in the last 30 years or so: you're not responsible for your actions; it's always some one else's fault.
You choose to go to a high priced school and study something that offers no marketable skills or is hyper competitive and only a few positions exist, why should I, as a taxpayer, fund that? - that is your choice.
I wanted to study physics, because I love the subject, but when I entered college, I evaluated that my job prospects were low, especially with merely an undergrad degree. Instead, I studying electrical & computer engineering, and I paid off my student loan debt 4 or 5 years after leaving college.
So you are against the ability for people to declare bankruptcy then?
Many boomers that spent beyond their means and lost their homes in 2008 were able to walk away from their loans. While they had a house to "give back", that asset probably lost 50-300K depending.
Many people every year get expensive medical care and are unable to pay it off. They cannot "give back" a medical procedure, so the cost is written off and/or they declare bankruptcy. This negatively affects everyone else that pays for healthcare.
But when it comes to education, it's a different story? I have a feeling the different story is: educational debt primarily effects the young, housing/medical debt primarily effects the older generations.
Educational debt used to be like other debt, but then the boomers went to college and got into positions of power...
1) the Obama policy (not even official administrative rule with any weight of enforcement, just a memo with a veiled threat of negative attention if flouted with any frequency) was only in place for his last 1.5 years. This letter just pulls that back to the first 6.5 years of his reign.
2) Note this quote: "The withdrawal of the Obama administration memo arrives the same week as a report from the Consumer Federation of America (CFA) showing that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. "
In other words, after this rule was put in place, millions of loan recipients stopped making any payment altogether and 14% more entered default despite added mechanisms for avoiding default.
This article doesn't even go into the huge taxpayer bailout of students of closed and failing for-profit diploma mills[0]. It was an unprecedented windfall for those affected, the entire debt was forgiven, they took no hit on their credit, and the debt forgiveness wasn't counted as income by the IRS (like debt forgiveness normally works). Taxpayers paid for it all. It was a great buy-off of new voters.
An obvious small mitigation would have been to instead have their debt applied against a replacement degree program (e.g. you owe $20,000, you go to a new school at $10,000 tuition per year, then your first two years' tuition payments wipe out that debt, with interest charges stopped while in school).
163 comments
[ 3.5 ms ] story [ 217 ms ] threadPreviously student loans were a socialized losses, privatized gains situation. This gives borrowers some skin in the game and will hopefully give them more reason to carefully evaluate whether college is really a good idea for them.
Make student loans dischargeable and suddenly a lot more people are thinking about the actual utility of college and it's costs.
If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. It should be.
How else would they be dischargeable? I assume you were talking about bankruptcy.
Yeah. It's time that lenders began doing diligence again on their borrowers. Even if the prospective borrower didn't know that that Kaplan degree wasn't such a great idea the loan officer at the bank would know and deny the loan.
That's absolutely false. Lenders have skin in the game - they run the risk that the borrower fails to pay back the principal. That's why they charge risky borrowers more interest.
If lenders truly had no skin in the game then loans would be nearly interest free.
There's a testable hypothesis there: did rates for student loans go up much when they were made non-dischargeable? I'm too lazy to check.
Why are people lending to students expecting to not be punished for their voluntary investment losses?
I don't think they should be.
Giving kids 120K loans for Puppeteering majors at public universities will be looked back upon as a bait for criminal indentured servitude of our nation's young academic minds.
Your pathetic insistence on their fault in this manner while big loan fat-cats get fatter off the false promises made to the younger generation that can "major in anything and get a living wage" is perfectly archetypical of the sociopathic capitalistic mindset peddled on here regularly that seeks to milk naive yet gifted minds of their worth for the benefit of the higher classes that exploit them mercilessly.
I have a comment if you go into my history that detail's Harvey Mudd's model for universities. Only STEM. No other majors. If you want to major in Gender Theory, you can do it at a private university without loans. I don't want tax dollars funneled in that direction if they're not getting the general public jobs. If you can pay out of pocket for Queer Marxist Theory you can do that at a private "university". Otherwise, stop milking the bright kids/teens out of high school with false promises, big loans and useless majors.
If you think for one second having useless majors doesn't line the pockets of the rich, you're an evil, evil person. Don't trample on others because you made it out cleanly.
"That [protection] forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default."
While I don't know your situation, it's hard for me to feel sorry for someone who went to an expensive private school, lived on campus in a "country club" atmosphere, and then expects the Taxpayers to cover it.
The govt makes a substantial amount of money from student loans as it currently is.
Debt, in general, must be dischargeable in bankruptcy. Otherwise the practice is equivalent to the gradual reinvention of slavery. Student loans already run afoul of this principle - let's not double down on the corruption merely to delay writing down losses that have already occurred.
Under such a system, once lenders stopped lending, college would again become available primarily to the wealthy.
From a policy standpoint, if the realities make it impractical for lenders to lend then papering over those incentives is effectively doubling down on a bad idea. Compromising in order to encourage more of something generally results in system feedback consuming the desired change, with the downsides of the compromise remaining.
Fewer college loans would mean that society would have to adapt elsewhere - the K-12 schools couldn't punt any substantive learning until "college", employers couldn't insist on pedigree degrees for every job, the value in funding state universities would be respected, etc.
As we're fast finding out, our societal addiction to credit does not help people actually afford things, but creates a de-facto-mandatory system of wealth extraction from the powerless.
In such a case, it seems worth exploring whether society overall and different segments are better or worse off with each policy.
I think that's the case we're in, and even though it would likely help me personally and help my kids, I don't want to return to a world where a pedigree degree is even more restricted to those with, well, pedigrees.
I'm in your situation btw. I worked through undergrad and grad school and had my work pay for almost all of my school so I never had any debt. But I realize I was lucky and had a good situation lined up and not everyone has the same opportunities. Some people need more assistance than others, and I don't mind if the govt helps those folks out.
Um, you added this as an afterthought, but it's by far the biggest expense. We're talking probably around $500 per month on average (if you live with others) plus utilities, not to mention food. So you were able to save around $1000 per month living with parents - and that's a conservative estimate.
Many people aren't so fortunate.
Good for you, really, but it's hard for me to take that as genuine advice.
We detached this comment from https://news.ycombinator.com/item?id=13903065 and marked it off-topic.
Do I think people should pay their debt? Yes, but these lenders are the same lenders that get bailed out time and time again. They are in no peril. It is our students that assume this risk.
The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. It was not until I left the Army and started my own business that I finally started to claw my way out.
Our education system is broken. We know this. So lets stop punishing kids for doing what they've been told do to throughout K-12, and instead help them find a way out of the rat race. Kids swimming in debt are of no service to this country. We have to do better.
Okay, so then I must ask: What did you major in, what was your total debt, and did you research the career prospects of your major BEFORE going to college?
Sometimes I think a basic mandatory form that came with your college acceptance letter would do wonders for student debt.
First intrest rates can rise, second unemployment can rapidly increase loan amounts when either the student after graduation or the parents during collage. Loans are often 50+% higher than initially expected for a huge range of reasons.
In no case will it be bulletproof against things like unemployment. That is OK. We haven't had a recession in years. People in the last 4 years with student loan debt problems? Not due to a sudden economy shift.
I propose we give them more information. Perhaps not the end all be all, but at least give them a hope to make a smart decision.
ps -- none of your supposed similar items are widely endorsed by teachers/society/parents.
I did not want to be a shrink. I wanted to focus on research. Unfortunately, I could not afford to continue on to graduate school. My grades weren't good enough to get a scholarship. I was working as a cook at the Olive Garden, and had kids at home, so I tried a few careers that didn't work out. I wound up in the Army because it seemed like the right thing to do. I'm glad I did it.
Most schools do not require you to declare a major when applying or during the freshman year. Most people that have a major in mind when entering college end up changing it as well.
I think this is telling that MOST people do not go to college because they are super passionate about whatever subject. Most people go to college because they would like to find a job that will ensure them middle class wages.
If we fixed the job market (ie prevent jobs from requiring a bachelors or masters when many high school graduates could be trained to do it AND increase wages not just at the top of the spectrum), I have a strong suspicion there wouldn't be so many people going to college for "bullshit" degrees and even if there were they would actually be able to pay their loans back in a timely manner.
If they don't suffer the consequences of buying a useless degree, why wouldn't they keep doing it?
Any possible improvement of the status quo is going to involve pain. Certainly universities themselves could start feeling some of it, as they are complicit in accepting the guaranteed money without any incentive to more selectively filter either: the students getting the loans, or the quality of degrees they are receiving, or both.
http://www.businessinsider.com/top-100-entrepreneurs-who-mad...
Maybe 'unnecessary' is a better word, or maybe define usefulness as needed utility per time and money.
Remember, the "moral hazard" spoken of in financial bailouts is that the lenders aren't being punished for taking bad risks.
I have to agree that somehow the risk and the student's motivation and achievement are inversely related though there was never any inquiry into my records in the process outside of verifying that my university was on the up-and-up.
But beneath this is a more fundamental question. Why can't we as a country afford the things that are important (our health, our education and our homes) when we make so much more than the developing world where they have the same basic needs? What have we actually gained (aside from creature comforts) from our high incomes as it relates to living our lives. We're borrowing money to pay for almost everything and then paying the interest the rest of our lives.
People who were taking advantage of those loans generally fell into a few categories. Investors who were buying real estate to flip. People who were getting houses appraised at more than they were worth and were illegally getting cash out and people with money that were buying over priced houses to live in but to sell later.
So when you are young and still have no degree nor experience in life you should be punished if you choose wrong. Unless you are rich, then if you choose wrong you have a second opportunity.
Shouldn't some of the burden be on the institutions offering the degrees? They have the money, they have the knowledge, they have resources, they should suffer a good part of the consequences of offering bad degrees.
Aren't the students with a degree that doesn't offer financial stability already punished? Aren't their dreams of having a career already broken? Isn't adding the burden of debt over that just cruelty for the benefit of for-profit education institutions?
Vocational and apprenticeship programs are excellent ways for people to learn useful skills while remaining gainfully employed.
And the other way around is also true. There is value in people educated on arts or science even if they don't get a job directly related to it.
You are right that the link education-employment is in fact is wrong, I will say it is quite elitist. It presumes that people in jobs that don't require especial skills should not get a high education and at the same time that only people with a degree should have skilled jobs. And that's not true.
It is called an investment. Society invests in an individual education because in the long run that individual is going to be able to contribute more positively to society, returning a greater value than the initial investment. A better educated society takes better decisions, is more creative, adapts faster to change... Why shouldn't countries invest in its own future?
If citizens have to pay for that education maybe they are not going to be able to afford it, or just are not going to do that investment because they lack the education to understand the benefits. The situation becomes a loss for the individuals, but also for the country.
To treat education as an expense is a mistake. That same happens with, for example, infrastructure. If you treat it just as an expense, why do the government build roads? The reality is that a country without infrastructure is as badly prepared as one without educated citizens.
My CS education at an unknown state college costed 10-25% of what a liberal arts degree costs from a "prestigious" private college. So why should I pay for people who want a liberal arts degree that is not as valued by society? If we made large student loans harder to get, colleges would have to adjust. Maybe even to the point of making a liberal arts degree cost less than a computer science degree.
That's a different discussion. The problems is that the White House is removing protections for the people that already have that big loans. Easy to get loans and harsh penalties for defaulting is the worst of the combinations.
Making student loans harder to get is a good solution to reduce the burden of debt and even to reduce prices. But at the same time it makes education to become a privilege of the wealthy. So it has an important downside.
> So why should I pay for people who want a liberal arts degree that is not as valued by society?
Is not as valued by society or is not as valued in the job market? This are two different things. I can earn more than a doctor thanks to my long experience as software engineer, but I will not jump to the conclusion that I'm more valuable to society than a doctor (or a janitor for example). I have meet too much people with high salaries that do more damage than good to companies to believe that "salary" is a measure of "been valuable".
A pell grant plus a minimum loan can pay for someone to go to a two year college. In my state, if they work hard enough during the first two years, get a 3.0 GPA they can get their tuition paid at any state college to finish their four year degree.
Of course they can get all four years paid if they did well in high school. But students are still racking up debt to go to private schools and go out of state.
Why shouldn't the lender also assume part of this risk?
Why is their recoupment guaranteed (student loans can't be dissolved in bankruptcy)?
Why are they always likely to be bailed out (prove me wrong by showing a student loan lender that went into bankruptcy)?
Lenders need to do more due diligence and stop lending to students that are more likely to have problems with payback. The entire liability should not be assumed by the borrowers and co-signers.
Degrees aren't like, say, sodas or toilet paper rolls, a frequently repeated purchase, in any case.
> Do I think people should pay their debt? Yes...
You were duped, but pay up anyway.
Doesn't that smack you as immoral in anyway?
If anything is screwed up in education, it's that it isn't free for anyone that wants it. How hard is it to see the value in having a citizenry that is well educated? How many other cons can the public see, but also feel they can make informed decisions in the face of it instead of "Duped, but pay up" herd mentality?
I went to an unknown state college and paid less for my four year CS degree than many of my coworkers paid for 1 year and within 3 years of graduating, I had no debt, and was making just as much as people sitting beside me who went to more "prestigious" schools.
I had former classmates that thought they were too good to go to the local state college,racked up thousands in debt to be a teacher or a social worker. Why?
But put yourself into the shoes of an impressionable 16-17 year old. Private and flagship public universities have mastered selling their product with tours, special programs, the "college experience" etc. In addition, they sell getting a job with countless networking opportunities (especially prestigious schools).
It'd be really efficient for anyone who would need loans to get a degree to knock out all gen eds at a comm college and then transfer to an in-state university (it makes zero sense to pay 30-55K a year to take an entire schedule of calc 1 and chem 101). But it's hard to blame a 17 year old for taking the more fun and cooler option than the practical one.
I suppose if government and states invested heavily into community colleges and made them "cool" with great facilities and opportunities, more kids can be incentivized to go that route and avoid the heavy loans.
Government loans have a limit, especially for non independent students. Parents usually end up cosigning.
I told my children they "choose" what college they go to based on how hard they work in high school. If they don't get scholarships, they have to get loans in their own name - meaning one ended up in a 2 year school, lived at home, and could transfer later if he did well.
My daughter is 13 and wants to go to college, but only because TV says that's where you go to meet boys and get married.
Sweetbriar: https://www.nytimes.com/2015/04/23/fashion/the-independent-w...
The very top will survive the cuts in federal funding, but research at lower tiers won't survive. The larger sectarian colleges will survive, the smaller ones will die. Notre Dame will remain, Seton Hall and the Franciscan University of Steubenville will go away, that's a good thing.
-More people are going to school
-University costs have skyrocketed (mostly due to expanded administration services), which has increased the need for students to secure loans
-Wage growth has been low/flat for a long time
-A college degree has replaced a high school diploma/GED as a minimum requirement for most middle class jobs
-New grads are coming out of school to lower paying jobs relative to the cost of their education than ever before, driving defaults.
-As college matriculation becomes more and more necessary, even great high schools pivot towards a goal of getting students into college, instead of providing them great educations which have a secondary effect of getting them into college. Further decreasing the value of high school as someone's highest degree of education.
The last one is very worrisome for me, and something I hear a lot about. I have family and friends who are college professors - even those at ivy league universities are saying their students are just as smart as before, but on average now they're not as generally educated and way less prepared for serious academic work. They can't handle the same work loads, don't write or research as well, require more oversight/direction - things like that.
How do you fix that without blowing everything up and probably destroying the lives for a huge group of people who's only crime was being born in a certain set of years? Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?
A huge number of millennial college students who weren't fortunate enough to graduate into a tech career between 2007-2011 already went through this. It wouldn't be anything new.
>Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?
I mean...this is already happening. I'm not sure what you're getting at here. "Blowing everything up" is the only way to stop this cycle.
My questions are: Can we do something about to reverse it? If not can we do a "controlled demolition"? Is there even anyone in a position to do anything / is the train accelerating with no breaks and no one at the helm?
The bubble of it may pop, but I'm not clear how it hurts anyone but the banks and colleges. Students who can't pay will continue not having any money to pay anything with, and that needs to be addressed, but it doesn't seem like the same scale as the mortgage crisis.
Imagine if banks had zero risk when providing home loans. I don't think it would be too difficult to buy a house you couldn't afford and quickly the price on homes would be driven up. The student loan industry is so completely fucked and needs to be reformed before it ruins our economy.
I believe that if this happened, you'd see tuition rates plummet. But it won't until some catastrophic economic event occurs because the student loan industry is predatory and corrupt. Essentially ruining people's lives by selling them a lie in the name of "investing in your future."
Education being the bedrock of an advanced society, isn't but natural the developed economies like US should be able to subsidize education to such an extant that youth of country don't have to worry about paying their tuition fee and focus more on learning and innovation that will take everyone forward.
It is but a reflection on the sad state of affairs that our higher education system has fallen into!!
What do you people think?
Students demand a lot. Good profs. Dorms with AC. Sports teams. Medical care.
All that cost a lot.
States and federal gov't pays less each year. The difference has to come from somewhere?
In any case, its not perfect but I will take US colleges 100x over Japanese Colleges or Chinese Colleges or Mexican Colleges or 98% of the colleges in the world.
edit: Looks like this is generally wrong. I'll leave it up but see below comment.
http://www.ncaa.org/about/resources/media-center/news/athlet...
Don't forget to account for scholarships. You are giving free tuition to the football team, ladies soccer team, lacrosse team, ladies cross country, swimming, etc. etc. etc.http://www.politifact.com/virginia/statements/2014/dec/22/ji...
People have been going to college in this country for a long time and only relatively recently has the outstanding amount of loans and those in delinquency have shot up. I have a hard time believing the reason is having good professors and air conditioning.
Why would you expect your university to provide dorms for you? This whole living on campus thing on Anglo universities was always weird to me. You'd only expect perks like that if you pay thousands of dollars a semester. Also Re:"Medical care": That's what universal health care is for.
Traditionally, you go to school hundreds or thousands of miles away from your family. You need someplace to stay, no? Growing up in a city and you will have much more options to "live at home"
> That's what universal health care is for
The US does not have universal health care. So not sure what you are saying, how could a university not charge for something that is required and not provided elsewhere?
I still don't see why it's the university that has to provide this.
>The US does not have universal health care.
Well, there's your problem
> Well, there's your problem
Sure, but that isn't going to change anytime soon. Just giving up on any problem because "whelp, no universal healthcare" is not a productive way to live life.
My university did not provide free medical care. Professor quality has not quantifiably improved over that time.
Have sports team costs increased so rapidly in the last 10-15 years?
Personally I paid the equivalent of 16kUSD for a 4 year software degree in New Zealand, and my fortune 500 employer seems fine with it. A foreigner would have to pay double, but that's still far from US prices.
Now if you got rid of swimming, lacrosse, cross country, track, cricket, etc. etc., that would lower tuition by a bit.
What they do have in common is being seen as indispensible or essential services. I agree they also all have tremendous bureaucracies.
For example, I think one primary source of costs in healthcare (strangely almost completely unaddressed in the current healthcare law debates) is lack of competition. Licensing laws and government regulation over procedures and whatnot stifles effective choices in healthcare.
There are many other problems too, like lack of transparency over pricing, and an inversion of the normal economic decision-making process (for example, instead of the buyer having fixed costs and benefits to choose between, they are often at best only given the option of accepting or refusing the service).
Education is a bit different, IMHO. There, you have businesses using degrees as checklist criteria and pushing off real training onto schools; schools have become administratively topheavy. Rather than being faculty-driven, they're increasingly administratively-driven (it's not uncommon to have several deans of a given college, for example). States, which have historically funded universities in the public interest, are cutting that funding and pushing costs onto students.
I guess my point is that I don't really see the solutions being the same, nor do I see simply cutting funding and "starving the beast" as the right solution. Education is already underfunded, and what tends to happen is that administrators cut other positions over their own, or over relinquishing decision-making authority to democratic processes.
Too much discussion has focused on who pays for healthcare, and in what way, or how much. It's important but not really helpful in the long-term, because the real problems are in transparency and overregulation. It's ridiculous, for example, to assume that citizens can take responsibility for their own healthcare if the government explicitly prevents people doing just that: by preventing them from making their own healthcare decisions, preventing competition, and raising regulatory hurdles to new services (e.g., in the form of drug regulation, overly strict laws about who can provide what service, and what hospitals and manufacturers must do). So we end up with a system where you can't refill a harmless medication you've used for years without getting approval of an overpaid provider, but can get a harmful opiate from that same provider when another service (from a different type of provider) would be more helpful.
The amount of money being spent in these areas is not really the problem; it's a symptom. Just cutting spending on them will not really address the problems, and may make them worse.
This is what a society that doesn't value education in the least looks like. Instead of figuring out how to educate our population, we're too busy figuring out how to prevent people from pursuing education because most people are just too stupid for college by the time they reach college age. And why wouldn't they be, considering that in our best public schools, they just spent 12 years being babysat and learning almost nothing?
Because American universities are viewed as institutions under the control of a "hippie class", and academics are viewed as "prissy" and "elite". It's a class hatred of the educated, combined with a desire for power over the working class in the form of loan repayments.
After all, you have a captive market that has to buy your service or deal with a higher risk of unemployment and a lending institution that doesn't take on any risk.
What if we let students default on their loans?
My bet:
- Less people will go to college (not necessarily a bad thing)
- The cost of college will go down because the demand is stifled
If the government works to guarantee you will get paid, you can charge whatever you want and that might be what we are seeing.
Schools set the price based on what they can get students to pay, which is a function of the willingness of lenders to give the students money.
Lenders approve borrowing students based on their likeliness to repay, which is currently very large due to the legal framework.
Students select college programs and loans based on a convoluted mix of 17-year-old wisdom, well-meaning advice suggesting they pursue their dreams, their ability to get the loan, and a hazy idea of future employment, income, and repayment.
It's obvious that increasing the penalties to the students after graduation is about the least effective measure you can take.
If students were allowed to discharge student loans through bankruptcy, that would still be a hefty penalty. Lenders would be less willing to give them money. With less money available, schools would have to charge less.
Estimated costs to make college tuition free for every citizen: $62 billion
https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War
How? There are ~20 million Americans enrolled in college so $62 billion is only $3,000 per person. In comparison, the US spends about $12,000 per year per high school student.
The government obviously never breaks even directly from this scheme. I think they've begun to exclude certain degrees that don't have good prospects which is a big debate at the moment.
People get of college already owing a lot money, now they have to work for shit, and put up with their asshole bosses do. They can't have the option to spend couple of months searching for jobs or they will have to default their debt and mess all their future life.
Nothing like a well behaved society where the workers can't complain.
Brilliant!!
https://books.google.com/books?id=lliTBQAAQBAJ&pg=PT275
For critical responses to Graeber's book, the Crooked Timber seminar on it is well worth reading. http://crookedtimber.org/category/david-graeber-debt-seminar...
There has been a huge disturbing trend in the US in the last 30 years or so: you're not responsible for your actions; it's always some one else's fault.
You choose to go to a high priced school and study something that offers no marketable skills or is hyper competitive and only a few positions exist, why should I, as a taxpayer, fund that? - that is your choice.
I wanted to study physics, because I love the subject, but when I entered college, I evaluated that my job prospects were low, especially with merely an undergrad degree. Instead, I studying electrical & computer engineering, and I paid off my student loan debt 4 or 5 years after leaving college.
Many boomers that spent beyond their means and lost their homes in 2008 were able to walk away from their loans. While they had a house to "give back", that asset probably lost 50-300K depending.
Many people every year get expensive medical care and are unable to pay it off. They cannot "give back" a medical procedure, so the cost is written off and/or they declare bankruptcy. This negatively affects everyone else that pays for healthcare.
But when it comes to education, it's a different story? I have a feeling the different story is: educational debt primarily effects the young, housing/medical debt primarily effects the older generations.
Educational debt used to be like other debt, but then the boomers went to college and got into positions of power...
1) the Obama policy (not even official administrative rule with any weight of enforcement, just a memo with a veiled threat of negative attention if flouted with any frequency) was only in place for his last 1.5 years. This letter just pulls that back to the first 6.5 years of his reign.
2) Note this quote: "The withdrawal of the Obama administration memo arrives the same week as a report from the Consumer Federation of America (CFA) showing that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. "
In other words, after this rule was put in place, millions of loan recipients stopped making any payment altogether and 14% more entered default despite added mechanisms for avoiding default.
This article doesn't even go into the huge taxpayer bailout of students of closed and failing for-profit diploma mills[0]. It was an unprecedented windfall for those affected, the entire debt was forgiven, they took no hit on their credit, and the debt forgiveness wasn't counted as income by the IRS (like debt forgiveness normally works). Taxpayers paid for it all. It was a great buy-off of new voters.
An obvious small mitigation would have been to instead have their debt applied against a replacement degree program (e.g. you owe $20,000, you go to a new school at $10,000 tuition per year, then your first two years' tuition payments wipe out that debt, with interest charges stopped while in school).
[0] https://www.usnews.com/education/blogs/student-loan-ranger/2...
[EDIT]: Here is the original Obama FFEL memo:
https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf