Ah student loans, the magic money factory (for the lenders, that is) preying on youth ignorance.
And young people seem to feel a kind of pride in knowing jack nothing about loans and interest calculations and "only the payment matters" because hey, math is hard and is not "cool". And "nobody told us how to calculate that" well, it's not like there are no ways of finding out.
But it seems the smart way is to default on this (as long as it doesn't affect the co-signer, or the co-signer should default on it - if possible - as well)
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I'm not sure about the specifics of student loans, so below might be different (Edit: see hextinium comment):
Lenders usually sell non-performing to a collection agency where you can negotiate a discount or they can try to execute it in court (where they need to prove they actually own the loan - for a lot of home loans this was not the case )
Can't speak for every kind of student loan, but AFAIK at least federal student loans are not like other loans. They are notoriously difficult to wipe away. I recall reading that a judge will only forgive it if there is no chance you can ever pay it back, or something like that. Search online for the specifics. You cannot treat them like other kinds of loans.
For a normal loan, the game theory pits the lender against a future bankruptcy court, and they have to decide if they'll get more money by reducing the debt, or if going to court is the best solution.
Not so for student loans; in the U.S. they typically cannot be reduced in bankruptcy court. So the choice becomes a simple one of cooperate=1, defect=2. Well, okay, it's not that simple. We don't yet have hereditary debt, so the debtor can still choose defect by killing themselves, reducing the amount the lender can collect. Debtors usually consider the cooperation strategy the better one.
The author of the article wouldn’t have escaped the debt even by dying - her parents would still be on the hook. It’s not “hereditary debt” but it’s close.
Even if you go into default because it is a student loan the IRS will garnish any return and send it to the creditor and of course your credit score will drop. Doing so may force a more reasonable interest rate than what you previously. I am interested if anyone on here has taken this route.
Nope, they just resell it repeatedly tacking on ~$1,200 each time. I once saved up enough to pay off my last loan and they resold it before I could get a check in the mail which meant I didn't have enough money so I was like "screw those people" and bought a car instead. Probably not a good plan but, you know, screw 'em.
Don't even think they bother to send a bill anymore since they'd have to fight with the IRS to (not) get money out of me.
You can't really default on student loans. Even if you go bankrupt they don't go away. It's created a huge amount of moral hazard for lenders, and this is the result.
This is the most under-discussed issue in the loan debate. There are so many schools with dubious programs that fail to place graduates in careers that justify the outlay that have a nearly unlimited access to capital via these loans.
I went to a much better school than my older sister. It also cost roughly 4x as much. When I graduated college, my income was just shy of 3x compared to that of my sister. I paid off my student loans before I turned 30, she is still paying hers at 35. Was it the quality of our schooling that impacted our return on investment? No. It was our choice in profession. She went into teaching, I went into finance.
The college I attended churned out graduates headed to both careers, both costing the same. Had my sister gone to the quality of school that I attended, she would never have been able to pay her loans. She probably would be more qualified to teach the next generation, but an education major at Ivy League College would still be a "dubious program".
I realize that isn't what you're intending to say. However, college pricing is generally (thought to be) correlated with quality of education, not with return on investment of that education. The result of targeting the "dubious program" ends up simply devaluing low-pay jobs.
If the idle rich want to keep fascinating but impractical fields of study on life support, that's a fine tradition to continue. We just shouldn't let working class students mistake these for sound career investments.
One of the main reasons I will be strongly encouaging (read: insisting) my fortunately-dual-national kids to avoid university in the USA. It was staggeringly expensive when I went to US college in the 90s. Now it beggars belief.
We moved back to NZ when my eldest hit high school, here college is much cheaper with interest free loans so long as you stay in the country and pay them off as required (or are in school), we used a small portion of what we made from selling our Bay Area home to pay off our kid's loans free and clear when they were done - best decision we ever made
Not only that, some of us worked our asses off to give our kids a non-US nationality so this would be an option for them.
The EU has plenty of problems (and funny enough, I really, really miss junior colleges; they're great!) but the day my daughter's EU passport arrived I felt a huge sense of relief.
An interesting article about a person who got every warning, knew all the details of her own undoing but is trying to claim ignorance after the fact to put the blame on the “big bad industry” who really did nothing wrong here.
She’s a fool who complain that her principle hasn’t gone down when she never actually paid anything towards it. And yes she knows that and yes they and her parents, old teachers, friends and any advicers she has ever talked to explained that the basics of a loan are that you pay it down and pay interests on it.
She’s mortified that a variable rate interest loan has a rate that varies.... and sure as hell she remembers them telling her that, she’s just playing dumb to sound the victim.
Oh and ofcause they make the details of the loan “almost impossible to find!....” in a tab called details on their website....... or if in doubt you know, you could call them. What sort of black hole level of entitlement is she living in?
Education is costly in the USA, this is horrible and wrong. But hell Tesla’s are costly too, you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years.
In the ideal world she could have been denied the loans on the basis of her lack of ability to manage her own financiancials. But then it would not be the land of the free, and she would just have been complaining about that instead.
> But hell Tesla’s are costly too, you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years.
Legally you _do_ get more sympathy given that you are at least able to discharge those loans in bankruptcy.
We've been over this a thousand times: you would not be able to get loans for education if you could discharge them in bankruptcy. They would become a super-toxic bet. They would have to be conditioned on the ability of the student to make significant earnings, because otherwise the optimal play for many people would be to get the education, and then declare bankruptcy.
That situation is US specific. Many other countries allow you to go bankrupt from student loans in various ways. (Or have an alternative way of supporting the debt, for example family co-signing) The fact the current system wouldn't work it doesn't mean the idea is impossible.
In most other countries, student loans aren't even a thing, because university is subsidized to the extent that it is free or relatively inexpensive. The size of the bet is absolutely integral to whether giving the loan makes sense, because it affects the benefit of discharging the loan. If you're saying, "We should make uni cheap or free, and also make loans dischargable," well, sure, but now you're talking about changing a lot of variables rather than just one, and correspondingly increasing the difficulty of reform.
Jup. I mean for 100k you could live in an European country for a few years with some good groundwork and get a degree with 10k some left.
I'd say you'd even get a better job/deal, because surely if these degrees made u 200k a year this thread wouldn't exist.
An investment should yield a profit in return... going all in and return with less, are we talking schools or casinos here? It doesn't make moral sense, and in the long run surely is not beneficial for general education.
I know socialism isn't particular popular in the US but in outher countries student loans are issued by a non-profit / government supported body. Repaying the loan is conditional on earning a reasonable wage.
I wouldn't say I am firmly against this approach, but I do feel that if you have that sort of system, you probably need some control over the types of studies that people can engage in. This is a somewhat unpopular opinion most places, but I do think it's possible for a major to be more or less useful to society. I think that (broad strokes) that is reflected by compensation and/or demand for the services offered by graduates of a given major (teachers and social workers notwithstanding). I think in general it's in the best interests of society to limit the number of people studying unproductive subjects.
> We've been over this a thousand times: you would not be able to get loans for education if you could discharge them in bankruptcy.
This is literally an extremist statement (i.e. either you cannot get loans or you can) and as such an impossible oversimplification. Clearly it's more nuanced than that. The difficulty of discharging loans in bankruptcy certainly does affect the market of available loans though it's not black and white.
The statement is also obviously false. Students received loans before they couldn't be discharged in bankruptcy.
On a final note, who is "we" exactly? I don't remember conversing with you in the past.
> This is literally an extremist statement (i.e. either you cannot get loans or you can) and as such an impossible oversimplification.
I find that most times when people say, "You cannot," or, "You can," what they're actually saying is, "The probability of you being able to is very low/very high." Surely this is the case for my claim. If it helps, please read it as such.
> Students received loans before they couldn't be discharged in bankruptcy.
Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.) You may be right that under current circumstances banks would be equally willing to lend. That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?
> I find that most times when people say, "You cannot," or, "You can," what they're actually saying is, "The probability of you being able to is very low/very high." Surely this is the case for my claim. If it helps, please read it as such.
That's still a worthless statement honestly. A useful statement would be saying that by making it very difficult to discharge loans in bankruptcy (under certain specific terms), the number of loans increased by 15% and the terms changed by blah blah. Personally I've never heard such numbers. In fact, I've never been able to find any sources that showed that students declaring bankruptcy was ever originally a large problem.* (Why would it be? It's not like bankruptcy is some harmless thing even if you don't have assets.) It doesn't surprise me that this reason would be trotted out by the lending industry however. What part of the loan industry wouldn't want the government to enforce this against borrowers?
> Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.)
So in other words the loans are _worse_ deal. Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk? Why?
> You may be right that under current circumstances banks would be equally willing to lend.
When did I say they would be equally willing to lend? Why would we even want that? There are many examples of people that are extremely in debt for dubious payout. Would it not be a _good_ thing if they were not in that debt due to the inability to be granted a loan under such terms?
> That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?
Wow such humility.
* Edit: For example, here is a quote from a write up that indicates it was not a problem:
> D. Protections Against Abuse
> One of the most common reasons legislators give for excluding student loans from discharge is the need to prevent abuse of the bankruptcy system. 135 The 1976 Bankruptcy Code included a five-year waiting period before student debts could be discharged because lawmakers were skeptical of new graduates discharging their debts while they still had few assets and then going on to more lucrative careers. 136 As stated earlier though, this fear of post-graduate abuse was baseless when the provisions were put into effect because, even then, student debt abuses accounted for less than 1% of all filings, and this fear remains baseless today. 137 Even if abuse of the bankruptcy system posed as large a threat as legislatures believe, existing anti-abuse measures can sufficiently curb abuse without having to resort to the harsh measure of exempting private student loans from discharge. 138
> Currently, the Code has independent abuse provisions, most notably the means test in § 707(b), which sets an objective and straightforward standard for a judge to detect and prevent abuse of the system. 139 Also, even if an individual’s filing passes the means test, a court can still dismiss the case if it finds that the filing was made in “bad faith,” or if “the totality of the circumstances . . . of the debtor’s financial situation demonstrates abuse.” 140 In addition, many student loans by private lenders today require a co-signing party to help ensure that the bank is secured in the event of abuse. 141 Together these protections effectively safeguard against abuse in the bankruptcy system, which this Comment will argue makes the exemption of student loans unnecessary.
> A useful statement would be saying that by making it very difficult to discharge loans in bankruptcy (under certain specific terms), the number of loans increased by 15% and the terms changed by blah blah.
I'm afraid I don't have enough information to make such a specific statement. :(
> Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk?
I don't object to the government stopping their subsidy. I'm just saying what I expect the result to be: either loans would stop being issued overall, or they would only be issued to certain majors, which the public would find unacceptable.
> I don't object to the government stopping their subsidy. I'm just saying what I expect the result to be: either loans would stop being issued overall, or they would only be issued to certain majors, which the public would find unacceptable.
The government could certainly choose to subsidize those students explicitly by providing loans on better terms itself. It's not like there are no other solutions.
Regardless, we as a society should get beyond some bizarre idea that there is no other way to provide university education without allowing the loans to be dischargeable. That's exactly how it used to be in the US. Furthermore, many other models are used elsewhere in the world. We should call it what it is: a government supported subsidization of the loan industry taking advantage of naive students. Of course it works out well for some people, but there should be recourse for those it does not. That's exactly the point of bankruptcy.
> The government could certainly choose to subsidize those students explicitly by providing loans on better terms itself. It's not like there are no other solutions.
Sorry if I gave the impression that I was trying to exhaustively enumerate the solution space. I was not! Thanks for the discussion.
> you would not be able to get loans for education if you could discharge them in bankruptcy.
Well, maybe it would have been better this way.
This way universities would be forced to be affordable, and use the money for teaching instead of today's tuition costs that goes 50% for a new stadium, 45% "administrative costs" 5% teachers and TAs
I don't deny it. There are considerations in both directions. You could also imagine a system of universal rate setting, where you can only offer loans to potential engineers if you do so to art students as well. You could imagine genuinely allowing a free market in student loans. There are a lot of possibilities, each of which would fall at different places on the multi-dimensional optimization problem that we've got in front of us.
But I argue that if you want folks to offer student loans, and don't want lenders to discriminate against certain majors, and don't want interest rates >10%, and want principles on the order of >$100k, you probably need to prevent discharging the loan in bankruptcy. You can't get all those other things and dischargeable loans at the same time.
Our Government (Australia) just gives us an interest free loan to any domestic student (it is indexed to CPI though, so does increase nominally but not in real terms). You pay it off as part of your tax return, about 4% per year once you're working, but only when you're making over a certain threshold (I think it's around $55K). Works pretty well - it can't really put anybody in financial hardship. Doesn't hurt that our university fees are way less what you'd pay in the US either (except for international students, they gouge them a bit).
That isn’t so much a question of sympathy as much as a question of the type of asset. If you go into bankruptcy they can claim the physical car and use it to reduce their loss.
If you could dischharge student loans you would have to sign over the rights to any future financial gain you would have from your education to let them reduce their loss. This is essentially what happens when they garnish your wage to reduce the loan, but ofcause not in a clean cut bankruptcy like process.
How can you even compare a luxury item to getting an education? Besides students are in a disadvantaged position when they really want to get educated. They have no bargaining power.
Just because it's legally ok, doesn't mean it's morally right.
And as far as I remember, the big bad industry was saved after the crash...
> How can you even compare a luxury item to getting an education?
A car can be a necessity, in that case a Tesla is a luxury.
An education is not a necessity in any case, but for the sake of argument lest pretend that it was, a that you would die a quick death if you did not at minimum have a degree in something. Then choosing the cheapest available option would the the necessity and choosing to take variable rate high interest loan in order to stay "with your friends and the teacher you know" is a luxury.
Then with a huge pile of debt, and a finished degree, to decide to pursue graduate school abroad instead of getting a job and dealing with your debt is an insane luxury.
Don't get me wrong, I'm not saying that anyone who takes an education is buying themselves a luxury, but in a market with varying costs and opportunities, if you decide on your own to go out and put yourself in huge debt to study above your means, then you are choosing a luxury. And saying things like "but community college sucks/My kids can't be successful without expensive private schools/etc." Does not suddenly make it societies responsibility to magically make it possible for you to live above your means.
> And as far as I remember, the big bad industry was saved after the crash...
Yes, the government went in and invested in the industry when it was at the lowest and no one else had available capital to invest. Those investments are paying off today(https://projects.propublica.org/bailout/), and the industry is at a better place, where among other tings it can provide loans to students who would otherwise not be able to pay for their education. What is your point? Should they start printing free money to students like this who can't manage their finances, gets whiny when it comes time to pay back the money they loaned?
While I generally agree with your comments, I still think it's absurd to have such high interest rates. What's really ironic is that the bailouts were payed with taxpayer money - they shouldn't be printing money but taxpayers should reap the benefits of the investment - directly, not "supposedly" just because the state earned it. I'm not an Is citizen, but I feel the US is much more person-centric than Europe thus the responsibility is on the individual. In Europe we expect certain things from the state, namely not to turn education and health into a private business.
> Besides students are in a disadvantaged position when they really want to get educated. They have no bargaining power.
I would agree if the only way to get educated was a private university. As it turns out, that's not the case. For starters, state universities are about 90% cheaper per credit hour as compared to their private competitors.
She had already done 2 years of schooling -- to drop out at that point would leave her with no degree, and a massive mountain for existing debt. She was effectively forced into taking a horrible loan, which she understood was horrible (just not how horrible).
> She was paying ~$70k for a degree whose first job paid less than $20k/yr.
I'd say that is the problem in the US education system as well. US colleges and universities are ridiculously expensive and getting more and more expensive every year. And there's no reasonable explanation, why.
Yep. The same thing happened in the UK - the cost is capped by the government, but the limit was increased from about 3k to 11k/year, with the government arguing that there will be competition between universities and only the best ones will charge maximum.
But it never worked like this - there are literally zero downsides to charging maximum amount, so every university does it - and the students don't care because they are guaranteed a loan by the Student Loan Company anyway, and none of the students I've interacted with ever asked themselves "is this degree worth about £50k once I'm done" - they just want to go to uni, the cost is just a magical number no one looks at. The only good thing about the UK system is that the loan repayment is means based and if you don't make more than ~£22k/year you don't pay anything, and if you do you only pay 10% of your salary above 22k towards your student loan(so the more money you make the faster it will be paid off). If the loan is not paid off in 40 years it's automatically forgiven.
But from my point of view - it's completely nuts either way. Higher education should be completely free to the student, no matter where or what they study.
Maybe not completely free (to deter people from sticking around for 10+ years), but at least semi free. Probably below 1k a year. If you add living costs to that, anyone who takes up a part time student job should be able to sustain themselves and graduate without debt.
Any system that forces someone to graduate with significant amounts of student debt, is in my view, bad. It's not really going to benefit society, unless your view of society is modern slavery and chaining people as a slave to their debts.
Mind: that doesn't mean that certain schools aren't worth the tuition (Stanford, Columbia, Oxford, Cambridge, etc). But part of the "value offering" comes from the network you build up there.
That all said, while university can be a good part of your development as an adult, maybe more people will eventually realise it's not necessarily the best option anymore.
The writer of this article might have gotten a similar "education" (perhaps not in the formal sense -- but on an intellectual level) had she gone and lived abroad in a new environment doing something useful for a few years when she was in her late teens / early 20s. But it's a very personal situation that very much depends on the individual.
Yes, ultimately everyone is responsible for managing their own finances, and it seems like the author acknowledges that and her own part in their mismanagement.
But expecting young people to make rational, fully-considered choices about taking loans in order to receive education is a tough sell. Higher education is often - sometimes unfairly - seen as an essential requirement for making progress in many careers. And in a situation where so many people are struggling with unmanageable debt, it seems that “every individual is responsible for their own choices” is a less useful position than “what is wrong with this system nationally and how can we fix it”. It’s kind of like US healthcare: participants are almost obliged to participate in the system, and for various reasons can’t be considered fully rational consumers.
There are lots of things that can be done, though. A change in culture making college education less essential; better loan programs; excision of bureaucracy; single-payer education systems; the list goes on.
The answer is a lot more complex than “college students need to make better decisions”.
Completely. Nobody sat me down to explain debt, they just explained that it was an option to go to the school I wanted to go to. I'm pretty much an idiot now, I can barely comprehend how stupid I was at 18. So to think that I somehow could fully realize the repercussions of student loans is less than unrealistic.
It's a many many billion dollar industry versus some (mostly) naive kids. I'm on the side of the idiot kids on saying that the moment in time we are living through is brutal. I hope we find a fix for future kids.
It's not just an unfair reading it's a laughably short-sighted reading.
These loans are ultimately guaranteed by State and Federal governments (meaning the banks take zero risk beyond servicing costs) and yet they magically generate billions in profit. Where do you think those billions come from? What do you think actually happens when this woman effectively defaults on her loans? Who really loses when this woman can't afford to start a family or start a startup because she's paying thousands of dollars to banks and collection agencies who, again, took zero risk?
Really, the American tax payer might be the dumbest type the planet has ever seen. The genius of the student loan racket[1] is that Americans are paying billions to the government to steal billions from other Americans and then give those billions to banks -- who are working full-time to further undermine American democracy. It's a scheme whose boldness goes beyond the outright slavery and peasant-bondage paradigms of the past. The elites have actually tricked their victims into paying for their own chains.
Its legalized extortion. In other countries healthcare and education are viewed as core to national security, in the US these become legal platforms for hardcore extortion of vulnerable people whether its the student desperate to move ahead or the person who needs to take out a second mortgage on their home to afford a copay.
I live in a country with free healthcare and free education, people like the woman in the article aren’t better off here. They just take the same huge loans to buy, cars houses and generally live above their means for years until the debt comes crushing down.
The american education and health system needs reform
desperately, but not because of financially irresponsible people can shoot themselves in the foot, that will always be the case unless you start completely dismantling the financial freedoms of the individual.
I live in a country with free healthcare and education (well, nationalized) and we have much stronger protections against predatory lending. The problem with US student loans is that they can't be defaulted on.
You are, like the article making the very unfair and very wrong equation of her financials and every college student in America. I’m not saying that “college students need to make better choices” I am saying that this is an article about one individual who knowingly made bad choices and is now trying to claim ignorance and blame an industry that did nothing wrong in this specific case.
We could ban loans altogether on the grounds that some people cannot handle the financial responsibility that they bring about. Or only allow loans to people who are 50 years old+ but what sort of world would that put us in?
The solution she wants is for someone to say “you don’t need to pay any more money, you already payed enough so we’ll let you off the hook” the actual solution would have been someone telling her before “you don’t have the money to take the education you want, go find a 9-5.
What I read in that article was something like: “I made some bad decisions about financing, but the wider system is a problem for the following reasons.”
You’re right that from a technical point of view nothing was done wrong. A college student signed up to a loan, agreed to the terms, and was subsequently shocked by the extent to which it was difficult to pay it off. I disagree that she’s asking to be “let off the hook” but is instead using her case to highlight the wider problems in this system.
There are wider-ranging options than banning loans or restricting them to older people. Making college more affordable, or regulating interest rates, or providing a government-backed system for college funding are all alternatives.
At some point, if a huge number of people are struggling with a system, it’s reasonable to ask how it can be reformed - because this isn’t an isolated case. The focus on individual decisions risks missing out on a discussion about how that wider problem can be solved - that students feel the need to get into this debt in the first place.
It's particularly interesting to me that she spent most of her undergrad at a private institution.
> Education is costly in the USA, this is horrible and wrong.
I mean, there are straight forward ways to pay very little money for a degree in a high earning field. That people people decide not to take this path tells me a lot.
A decision is only bad in so far as the consequences are (expected to be) unpleasant.
> In the ideal world she could have been denied the loans on the basis of her lack of ability to manage her own financiancials.
This is where her parents failed her (and I suppose, themselves, since they are on the hook as well).
Community College -> State School costs very little, especially when compared to private universities like the article. State schools tend to offer everything, so picking a high earning field is typically a matter of an hour's worth of research and maintaining high enough grades to get accepted into the program.
There are a few instances where going to an elite private school can pay off (e.g. MBA from a top 5 ivy league school), but for the most part, there is no measurable benefit of going to a private university when compared to a public one.
Programs like Running Start[0] can drop this cost even further.
Attending Community College can be seen as déclassé, but looking at a university degree purely as an investment, it seems like a pretty reasonable decision.
I understand that not everyone wants to treat college purely as an investment, which is fine. Life is not purely about making money. However, the further away from treating college as an investment a person gets, the more painful the post college experience will be.
It's generally fine to get a degree in a low earning field (e.g. philosophy) as long as you don't spend too much on it. It's also fine to spend a lot of money to get into a high earning field (e.g. dentistry). It is a toxic brew to spend a lot of money on a low earning potential credential (e.g. MFA in dance from a private university).
The take-away here is probably teaching kids from like grade 5 on and up on how to amortize loans and debt repayment. The math is useful and it'd be good to drill in to every kid out there.
Maybe it's different in New York, but interest calculations were a part of the Grade 11 math curriculum when I was in school. Grade 12 math is a hard requirement for most undergraduate degrees.
> you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years.
Banks get to create the principal that they loan out of thin air[1], lend it at ridiculous interest rates to students and have it guaranteed by tax money...they do not have my sympathy!
Risk usually dictates interest rates. Meaning that there must be a chance for you to lose the money, but that is not the case with most student loans. Yet they still charge high interest rates.
It is criminal that zero-interest (or near zero) loans are not available for students from the government. I am fine with hounding them for life the principal and even not letting them discharge it with bankruptcy, but the interest is practically evil considering the banks take no risk at all.
There is literally nothing we can invest our tax money in that will return bigger gains than education and healthcare.
The idea is that you can’t “give back” the education so if you could discharge student loan debt the whole system would probably collapse as students would just finish their education and declare bankruptcy.
The idea is that students have nothing to lose and a mountain of debt when they graduate, so they should systematically declare bankruptcy to erase the debt.
The bankruptcy would remain on their credit report for seven years (affecting their ability to buy a house, rent an apartment, or perhaps even get a job), so it's not at all correct that they have "nothing to lose".
As the article clearly shows, the risk in student loans is that the student will accrue more debt that they can handle and not get a high enough income to pay down the principle, in which case the lender will end up getting their money back far far slower than planned. Just because there isn’t a risk of default doesn’t mean there isn’t any risk. If American Student loans were risk free profit at 8% the entire financial market would rush to invest, bringing about competition and driving down the rates.
> Banks get to create the principal that they loan out of thin air[1]
I’m not sure how you get this from your reference - people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students. The “creation” comes from both the depositor and the borrower thinking they have the money.
Your framing of the core issue is all wrong. "the industry" is monetizing on an opportunity it helped to engineer, there is no point in pointing fingers as this by itself will happen naturally.
The real takeaway you should be left with here is the result of this social-economic engineering - people left with crippling debt and other economic or otherwise repercussions.
People have "bugs" - you can engineer a way to make them act irrationally (against their own eventual good), this is actually a science, you can call it mass-psychology, propaganda, marketing and so on.
Consider yourself lucky, for one reason or another you did not end up in this "trap" but probably not in the account of your "intuition" or "all comprehending knowledge"..
Bang on brother! You speak directly from the bottom of my heart. She messed things up big time and now is whining around because of the bad, bad world. Ridiculous!
And why the heck did she not talk with her parents who might have been more capable of doing some basic math!?
I think it comes down to this - should we as a society let contracts that involve agreeing to harm, should we let them be legal?
If you and I agree that you will sell me your left kidney, or that I can punch you repeatedly next Saturday for fifty quid, noncourt will enforce those contracts because you are agreeing to harm. And that history has shown that people in adverse conditions will sell their organs/children/dignity whenever offered (and frequently at below market rates)
Usury Contracts like this are another form of harm and we just need to decide where the line gets drawn.
Please don't come to Hacker News to gloat about what a fool someone is and how they deserve their misfortune. Comments here need to have more substance than that, and at least a little more decency. We're all fools anyhow.
Financing is just all-around bad news that should be strenuously avoided.
At the same time, I'm sure her deal with the devil was very clearly spelled out in 8pt type.
It is very hard to wade through that much whining when it comes from a literate and numerate middle class kid, in a western country, in the age of Google.
It's probably worth keeping in mind that the internet of endless information is still relatively new. I went to college in 2003. Google was a freshly minted verb[0]. "The age of Google" probably didn't even really start until after I had graduated. I know that it wasn't part of my college life. I think it was my sophomore year when "wikipedia" started showing up in school ethics codes. The countless blog articles available to you right now simply didn't exist. You assume this info was at everyone's finger tips, but the people who wrote most of those articles probably graduated after I did. ROI of education really only became a conversation topic after the financial crisis started to display a permanent effect on the workforce. My younger brother is about the author's age, and we were still ingrained with the mindset of "that's just what you do after high school". The pro/con list had very few cons until relatively recently.
> Kids are taking loans out at 17 or 18 that they won’t be able to pay back until they’re 40 or 50.
This is the big problem. Calling 18 year olds, kids, is basically saying that 18 year olds aren't old enough to be considered adults. Either you get the freedom of being an adult along with the responsibility or your leader decides what is best for you and you no longer have freedom. Even more so in her case. Her parents are ok the hook for repaying the debt. That means that they (ages 40 I guess) looked at the contact and thought it was a good deal. Is the author suggesting that 40 year olds shouldn't be allowed to get loans?
If that isn't enough she describes defaulting on a loan as something okay. She decides to fly abroad and just assumes that the loan holders won't require her to start repayment.
But even before that, she realizes in the middle of her undergrad that the tuition is to much. But she decides to get a loan on bad terms because she doesn't want to loose her friends. Come on. She decides to get a terrible loan because she is to shy to make new friends.
For poor people, who know how to handle the freedom of being an adult, student loans could be exactly what they need to succeed in life. But for irresponsible people like the author, I don't think any laws can protect her from herself.
You're given a choice of not getting education and having limited job options, or taking a loan with unknown (variable) rate, for unknown amount (uni can raise fees), getting an unknown benefit (who knows what the job market will be like in a few years, maybe there's another global market failure). The lender is happy if you repay, and happy if you don't (the loan is gov guaranteed anyway, this is pre-2010 Sallie Mae)
You say "But for irresponsible people like the author, I don't think any laws can protect her from herself." which is crazy considering one side of this problem wouldn't exist if the laws didn't explicitly enable this. Banks giving student loans risk next to nothing. If you think this person was so irresponsible because obviously she can't repay, what is your comment on the bank. Surely they know the market even better and reviewed her family finances - why would they give her a loan in the first place? Are they irresponsible adults as well?
To quote the article. The bank sold student loans with expected default rates at 92 percent.
The bank knows exactly what they are doing. The partial repayments are enough to cover the initial principal and a good margin. The bank basically makes money on defaulting.
The abusive interest accrues too fast to ever be repaid. The loan will last for as long as the person live. This is only possible because loans cannot be discharged.
The flip side is that without government guarantees people would be complaining that college is only for upper-middle class kids who's parents can afford to pay.
TFA's author goes on about how her father tried (unsuccessfully) to talk her out of taking a loan with "abusive interest" but that didn't stop her.
My mom was pretty unhappy I tricked her into letting me sign up for the army at 17 but that doesn't mean there's anyone to blame but myself.
Well, they can't legally buy a drink, so I guess they're not "considered adults" by government either, at least not fully. If you don't think that a person is responsible enough to be allowed to have a bottle of beer, can you really trust them on making a sound financial choices, especially the ones with huge and long term effects? Or blame them if they don't?
Most 18 year olds have never had anything more than a minimum wage jobs and now they are supposed to be responsible for making decisions worth more than they've made in their entire life and lasting longer than they've been alive? Where is someone this age supposed to get the experience to make these responsible decisions?
I graduated about $40,000 in debt and it was only then that I realised how difficult it is to pay that back. Up until that point, it's just a number on a piece of paper. I managed to pay it back in about 2 years but I was lucky in that I graduated with Comp Sci which is in demand and got a pretty well paying job in my city for someone with no experience.
And I say lucky because choosing my degree was just based on an interest of mine in high school that I thought would be interesting. It's no different than other people choosing to study what's interesting but in my case, comp sci and programming pays well in the economy while history doesn't.
Student loans are a vicious supply and demand cycle. Students can take out loans to cover school so universities realise they can charge more which in turns leads to students taking out more to cover education.
> Most 18 year olds have never had anything more than a minimum wage jobs and now they are supposed to be responsible for making decisions worth more than they've made in their entire life and lasting longer than they've been alive?
They're old enough to know that $10,000 is real money and that they should be asking for advice and help if they feel over their heads.
18 year olds have no experience of financial decision making and are asked to make one of the most major financial decisions of their life immediately upon being eligible to do so, with limited opportunity to delay this decision.
> Either you get the freedom of being an adult along with the responsibility or your leader decides what is best for you and you no longer have freedom.
Maturity, experience, and knowledge are all complicated. Nothing magical happens to you when society deems you an adult; you still need to learn things. That's why there should be laws and regulations to protect people from situations like this, because you shouldn't be able to get into this kind of debt, and especially not at the beginning of your adult life.
> She decides to fly abroad and just assumes that the loan holders won't require her to start repayment.
I think you shouldn't be so dismissive. She went to grad school overseas. A lot of people come overseas to US grad schools and that's great for us, and a lot of our students go overseas to foreign grad schools and that's good for us too. Diversity of background, experience, and culture are important, and we all benefit from it. It should be a fundamental part of education.
Furthermore this isn't her point. She couldn't get a deferment because Navient's software systems didn't have a key for overseas grad schools. That's so mind boggling to me I don't even know where to begin: Navient couldn't add a row to their DB, and it cost her over $7k (more, after it keeps getting compounded).
> But even before that, she realizes in the middle of her undergrad that the tuition is to much.
It's more likely she hit the cap on her government loans. Pretty much everyone does, which is why we have loan corporations like Navient and Great Lakes. If you look at her balance sheet, there are a lot of gov't loans for small amounts, then a couple big Sallie Mae loans.
> But she decides to get a loan on bad terms because she doesn't want to loose her friends.
Unless you're in a pretty lucrative program (like CS or engineering) or you're pre-professional (pre-med, pre-law), often one of the most valuable things you get from your college experience is a social network of professors, administrators, and fellow students. I pretty much owe my entire career to a few of my professors in college and if I'd had to leave that behind it would have cost me dearly financially.
> But for irresponsible people like the author, I don't think any laws can protect her from herself.
I do think she was irresponsible. I think private universities are generally a terrible deal unless you get a scholarship or you're in a top-10 school, I think going overseas for grad school and defaulting on her loans because she couldn't get a deferment was a bad move, and I think she probably should have taken a gap year and worked. I also think she should live somewhere cheaper with a better commute -- although it's really hard to get a job when you need to relocate, and again with that network thing.
But I also think everyone is irresponsible, and that the penalty for being irresponsible in this way shouldn't be essentially a lifetime of debt. If Sallie Mae weren't legally allowed to lend her that $24k, she'd be remarkably better off. We have all kinds of laws that prevent people from entering into extremely bad deals (can't sell organs, can't agree to work in super hazardous conditions) because we recognize the power of institutions and society to coerce people into making these choices. We need to realize that the loan industry is one of these things that needs similar regulation.
Adulthood isn’t binary, it’s a process. This is pretty much captured by how the law sets age limits: In the US you can drive at 16, vote at 18, buy booze at 21, and become president at 35.
Loans that will take decades to repay are arguably things that we shouldn’t expect younger adults to fully grasp.
I'm not US based, so I don't know. But I don't see why it wouldn't be possible if someone has been employed on a decent income for years. Even paying 5 or 7% would be better than 11%.
I was offered a 25k interest only loan with no securities. It had a 5% interest rate. I'll mention that I have 0 debt, a high 750-850 credit score, and relatively strong income.
Its this kind of stuff that enables the rich to just get richer. I'd assume ppl with 10mil+ of net worth can get way better rates & loan amounts than I.
However you could easily refinance that loan and get a better rate these days.
It's almost exceptionally easy to get an unsecured personal loan for that amount of money through Prosper or LendingClub or Lending Tree if you have good credit.
I just did it a few months ago to do some renovations and put a new heating system in my house.
I don't think I've ever seen a bank offer anything other than compound interest on a loan. It's definitely legal and most likely the default for every account.
I think as the article pointed out we might've different standards in referring to what is compound interest.
But my original point is that I thought consumer loans would not incur interest-on-interest (as in if you're late in payments for your car loan, the interst "compounds" due to higher unpaid principal, but the missed interest would not add to the principal), which seems not be the case for student loans as per the author.
Do you have sympathy for other irresponsible victims? If an party-hard sorority girl is flirty and into drinking and then gets raped, no sympathies? Honestly, it's harder to have sympathies in such cases, but we should still work to find it and to focus on criticizing the actual abusers who took advantage of the irresponsible victim.
One of America's diseases right now is the entitlement of those who think they that they're obligated comfortable success if they check the right boxes without ever stopping to think or do the math. And when they dig a hole, I do not feel sorry for them. (And I don't think it's remotely like rape.) If her article was about how she was stupid, and how somebody could avoid making the same mistakes, and how she'd learned, I might be sympathetic. But it's not.
I fail to see how making bad, but clearly demarcated, decisions, is remotely like rape. (So on some level, yes, I don't see her as a victim.) (And yes, I do have a chip on my shoulder because I could see this kind of thing coming and so turned down the University of Chicago to go to a state school for less than half the money - my best guess is I'd have graduated with something over $120k in debt had I accepted, from the state school I graduated with almost zero.)
It's perfectly fair to criticize her article, criticize her decisions, emphasize the responsibility that people take in watching out for their own long-term best interest…
But when financial institutions are making massive profits off of other people's irresponsible decisions, you can't ethically just say that's fine. The ethical way to deal with irresponsible people is to teach them to be responsible, not to exploit them.
As long as powerful interests are profiting off of irresponsible people, those interests will actively seek to encourage continued irresponsibility…
It's a bit sickening to see many the replies here crapping all over this woman. I suspect that most (all?) of us are quite a bit older than 17, and have taught ourselves a decent amount about finance in the meantime. And yes, I'll admit that my knee-jerk reaction is often similar to the negative ones here.
But then I really think back to when I was just graduating from high school and figuring out how to pay for college. I didn't understand much about finance, or about loans. I had no idea how repayment worked, or how the majority of each payment would go toward interest for a long time. I didn't know how much in total I'd pay, or even how to figure that out. My parents (who co-signed some of my loans) tried to help me, but their understanding certainly wasn't all-encompassing either. There's pretty much no such thing as "financial education" in K-12 schools in the US. They don't even teach you how to balance a checkbook, let alone tackling the concept of debt.
I was lucky. I was lucky that my interest rates were low, and stayed low. I was lucky that I got a stable, well-paying job (with regular raises) after college and was able to exceed my monthly payments. It was all luck. I could have just as easily ended up in a bad situation. If I had ended up in a bad situation, I hope I would have been mature enough to accept at least some of the blame for it.
But that doesn't mean predatory lenders are off the hook. That doesn't mean it's ok to avoid telling a potential customer exactly how repayment works, ahead of time. That doesn't mean it's ok to charge exorbitant fees and penalties that make it harder to repay. That doesn't mean it's ok to make someone jump through hoops to access and understand detailed information about their loan accounts. And the lack of up-front, plain-language transparency is disgusting.
If you're not swayed by that, let's talk about outcomes. We're raising a generation of new adults who will be crushed by debt well into their 30s and often later. These people can't meaningfully participate in the consumer side of the economy while they're forking over half or more of their paycheck to lenders. If there are massive defaults, that will be a huge drain on resources: economic, financial, and educational. And the next generation of students just won't bother being students. They'll see what happened, and forego higher education. In some cases, that will be ok, and they'll be financially better off for it. In most others, though, it will just weaken the level of education in the US, which hurts science, engineering, research, technology, everything. Even if you have no compassion for the students with crushing debt, at least consider the scope of the problem all this causes, and be pragmatic about it.
I may not have been a financial wizard as a kid, but I managed to figure out going to a private school for a liberal arts degree probably is a bad damn idea. She took out almost $100,000 in student loans to go to a private school. It's hard to have a lot of sympathy for that, when she could have gone to an inexpensive state school for considerably less money.
The fact that her first job paid $20,000/year is telling. At one point she says "what should I do, transfer to a public school" and the answer is holy hell, yes you should. She didn't. I don't think my position is justifying predatory lenders, because it doesn't. But she has to share in the responsibility to a great degree, because she made a decision to go into insane amounts of debt to stay in private school.
Luckily I never had to face these predators. Living in a place where universities charge around $1000 per semester and having parents that didn't charge rent allowed me to get by with jobs on the side.
One of our economy teachers explained: "As students you can get a loan from the state with no interest. You're stupid if you don't take it and keep it for some extra interest." I calculated the interest this would generate and decided that it was too much hassle for few extra bucks. And I didn't want the temptation either.
As others have mentioned, this seems like a test case issue of bad financial planning. There are lots of ways to get into such a situation, not all of them student loan related.
Frankly if you look at only the numbers, then 170,000$ total on a 95,000$ is what you'll get for a 20 year loan with 6.5% interest (give or take). From what I can tell from the article she will be paying it for roughly 20 years.
If you take a fixed-rate payment (I.E. paying the same amount monthly for the entire loan, rather then paying the same percentage of the remaining loan every month), this is exactly the situation you'll get - I.E. the first few years your payments go almost entirely to interest and only later years you pay for the principal.
These are very common financial instruments that you can get from a bank or credit company. Especially if your parents are cosigned.
I think the main takeaways are rather these:
1. How in the world is a variable interest loan based on LIBOR (which the article alludes to) gets to 11% interest? that's prime + 8%, at least. That's practically loan-shark territory. How is a government led (and financed) aid program have such an insane interest rate?
2. When you take a loan for investing (such as education, or starting a new company), I.E. leveraging, you should always consider whether the future value of the investments is higher then what you borrowed. I'm assuming she studied for jobs that don't pay well.
3. American education is insanely expensive. It's probably cheaper to just study abroad for a few years and come back (like she did for her master's degree).
Sallie mae provided "guaranteed" student loans, where if the borrower is bankrupt, the government takes over the loan. The government also sets the interest rates for these, as I understand it.
I thought she took one of these, though maybe she took just a regular private loan? but those aren't usually referred to as student loans (and will banks actually give those when there are guaranteed ones available?)?
> I thought she took one of these, though maybe she took just a regular private loan? but those aren't usually referred to as student loans (and will banks actually give those when there are guaranteed ones available?)?
Federally guaranteed loans have limited interest rates and criteria for what schools they can be used at (etc.); private student loans aren't bound by either of those and have been offered largely for that reason.
>Sallie mae provided "guaranteed" student loans, where if the borrower is bankrupt, the government takes over the loan.
Where did you get that? From what I read in Wikipedia, the only difference with a regular private loan is that they are not easily discharged through bankruptcy thus the interest rates are quite low compared to a regular unsecured loan for a person with no credit history and no income.
Not defending student loans or the entire predatory infrastructure that supports them, but rates on all unsecured loans are nasty.
Home loans can be cheap because they are secured by the value of the house: if you default, the bank thinks it can sell your house and still make a profit.
Unsecured loans yield nothing when they go bad, so they have absurd interest rates whether the loan is for education, business, or whatever. That’s why many people choose to eg take out a second mortgage when starting a business: better interest rates, because it is secured, but you lose your house if your business fails.
Educational loans are guaranteed by the US government. When she defaults, Sallie Mae will sell her loan to the government and will be compensated 100% for all principal and interest.
The US government now owns a non-performing loan which they then sell for 10%-15% of what they bought it for to - you guessed it - Sallie Mae loan recovery. Since this loan can't be discharged by bankruptcy, part of every paycheck she ever earns will be garnished, every tax refund will be seized until Sallie Mae gets their money.
My understanding is that only federal student loans are insured & guaranteed by the government, and that private student loans, while they benefit from the whole “can’t be defaulted on” thing, can still go bad.
How hard can it be to understand that businesses doesn't just hand out money without expecting anything in return? This is just stupidity and carelessness...
And clearly refinancing would be a good option to get a way better interest.
> If, like me, you didn't receive a ton of financial education in high school, and you're wondering how that's even possible, welcome to my boat.
While it is true that high school definitively needs a "basic finance" class (where taxes, these loans, how to save, how banks work... are explained) she got a TON of warnings, and she took a loan.
Hacker News has a pretty well educated community, so it's not surprising that the general response seems to be that this was an obvious outcome. But this story is not unique to this woman. There are a huge number of people that seem to be in the same situation, and it's dismissive to just say that people should be more educated.
People aren't rational agents. They suck at making decisions about their long term well being. They're told that the best way to support their future is to go to university, so they take out a loan under the assumption that once they're finished, they'll earn so much that paying it off won't be an issue. And if you're not particularly financially literate, you might assume that this is fine since everyone else seems to be doing it. And you might also assume that they wouldn't lend you money that you couldn't repay.
The reality is there's an information asymmetry in favour of lenders. They know better than you how likely you are to repay your debt. And their incentives are structured to maximise their return, not clear your debt. So if the best way for them to make money is for you to not be able to pay off your debt, that's what they'll try to do. The harder it is for you to understand what you're getting into, the better for them. The less financial literacy you possess, the better for them.
I'm not arguing that the author shouldn't bear responsibility for her decisions. Of course people should understand the things that they agree to and meet their obligations. But there is a calibration problem when the pursuit of an education can lead to three decades of financial hardship.
To me, this seems like a possible case where people are rational agents, but they don't have comprehensive information. Selling a financial instrument that someone can't possibly understand is unethical, and should be illegal. My own rule of thumb is that the higher responsibility goes to the bigger guy.
Why? google search of student loans problems turns up literally a ton of results on very reputable sites discussing these issues. If a person can not be bothered to make a simple google search before making a 100K decision I don't think the problem is the bank.
I would argue the majority if not all of those websites didn’t exist for people who are struggling today. For new students, sure. But someone struggling in this situation didn’t have these resources in early 00’s.
Oh. It sure isn't the bank's problem. You can't even default on a government backed student loan. The bank is incentivized for you to fail and rack up fees.
don't doubt that but starting salary of 20K with masters degree tells me the choice of degree was not optimized very well. There are many ways to get degree for close to free just takes a bit of effort but paying down 200K is def. significantly more effort.
Because most 18 year olds don’t think the entire financial system is designed to make them into financial slaves? Someone with authority says they are offering something good and smart for their situation so they believe them?
The banking institution which created, offered & services the financial instrument you’re describing has about 1 trillion times more data on the risks and the possible outcomes. They should absolutely have the responsibility when offering 5-6 figures to 18-year-olds.
Well than I have a bridge to sell you. You can not make a system where there is no personal consequences to making dumb decisions there is no "they" who will take a fall for you.
Then we should consider rewriting the laws which made a system where there is no consequence for lenders who make dumb decisions about who they lend to, and possibly consider consequences for the colleges they are basically colluding with?
The consequence for lender is not getting their loan back. You can remove special provisions related to student loans this will make loans less accessible and they will carry higher interest rates but it's a reasonable approach if people want to make this change.
This happened 10 years ago, and while I don’t doubt there were articles warning you about the dangers of student loans, it probably wasn’t as visible as it is today.
You can buy a car without knowing anything about cars. You can buy a house without knowing anything about them. Do you think the seller is being unethical in these cases too? Particularly when you're buying the car from a manufacturer or the house from a large broker. What about selling a computer to somebody that is computer illiterate?
I agree that what the banks are doing is very likely unethical, but I think your generalization about the bigger guy having more responsibility doesn't always hold.
The other problem is that people will generally say that they understand even if they don't. Maybe a mandatory class on basic finance and economics would be a good idea.
Cars and houses are both heavily regulated for the exact reason of information asymmetry. Markets appear to have regulated computers, but I don't know if that can be generalized to other kinds of products.
I agree that schools should teach about personal finance. My son was assigned a paper to write on the payday loan business, and it was pretty eye-opening for him.
This can be generalized to fairly large number of decisions one has to make in life ultimately a person making the decision will have to bear the consequences of their decisions. I think a general theme of people expecting someone else to bear the consequences for their poor decisions is a significant contributing factor to people getting into these situations.
It’s almost like 18 year olds don’t have a firm grasp on how to manage their future. Especially when they’ve been brainwashed to believe College is the only way they’ll have a future.
Further, interest calculation is actually a differential equation. I wouldn’t expect half the graduating class to understand its wreckless power. What students need is a nice excel sheet they can “play” with. If I paid this I would be done paying with loans here etc.
We need to make video games where you have to take loans at the start and then later pay them off. If this mechanic became popular enough I would wager that a lot of people would have some form of intuitive understanding of these loans.
Roller Coaster Tycoon (1999) had a basic loan system where you'd start most scenarios off with a 10k loan, and every week of the month you'd be paying back some interest. RCT 2 had a more sophisticated system where the interest rate was displayed to the player, and it some parks it was fairly high, to where one had to carefully reason about their financial options.
You don't need to know any of that to understand a loan. That's somebody's math homework, not an actual financial transaction.
When you get a loan, they tell you the interest as annual percentage rate (APR). That annualized rate plugs right into the simple interest formula they teach you in high school math class. You just calculate each year one at a time, plugging in the amount you owe at the start of the year and you'll get how much is owed at the end of the year.
If you make payments or if the rate changes during the year, you can use the same formula to calculate what you owe at the time of change/payment, and continue on from there. Using the effective annualized rate for less than a year will give you an answer that's slightly off, but it will be very close.
You'd have a very difficult time using differential equations for a real loan. That question has the buyer making an infinite number of infinitesimally small car payments, because a monthly installment would make it a bad differential equations homework problem. The sensible way to solve most real-world problems is just to calculate the result iteratively using basic multiplication and addition.
I suppose? The above mentioned method is really inaccurate. Student interest is calculated daily.
Here is a top search result for calculating student loan interest. They suggest not to do a yearly approach like you suggest. It even mentions doing a daily compounded function. I added a [LEAP] where the author left the reader hanging.
---
To understand how compound interest works, let’s look at an example. Consider a Direct loan with a $10,000 balance and a 4.45% interest rate.
First, you figure your daily interest rate by dividing 4.45% by 365 to get 0.012%. On $10,000, that works out $1.20. That $1.20 is added to your loan balance, bringing it to $10,001.20. That’s your new balance, and when interest is compounded the following day, you’ll pay interest on that total amount.
[LEAP]
By the end of the year, you’re looking at paying $455.02 in interest, rather than the $445 you’d pay if your interest was compounded just once a year instead of daily.
That's not using the APR percentage, which would be 4.55% for that loan. Had they used that, they would have gotten the correct value.
> By the end of the year, you’re looking at paying $455.02 in interest, rather than the $445 you’d pay if your interest was compounded just once a year instead of daily.
They used the wrong percentage and got $445/year. That's off by $10/year. Still, it's close enough to use for yearly financial planning and for judging if the loan is worthwhile. It should be sufficient to prevent any surprises like the article author's.
I very distinctly remember listening to a conversation between two fellow undergrads while I was waiting in line at the student loan office at my college circa 1993. It went something like "Ya man, I'm taking out extra funds this fall so I can buy a car and party with the cash." And the response was laughter and "I'm getting some Pioneer speakers for my stereo."
You forget that there are also ignorant people who just take the loan whatever the deal is regardless if what they do makes sense - it just "feels" right for them. Then when the time comes to pay it back, they'll just try to moan it away. If there is enough people with such attitude so that it could be a good number of voters, there will be a politician willing to climb on it and force companies one way or another to waive the loans.
Ultimately people should be taught to take responsibility and not that ignorance pays off.
Seriously though it's obviously by design. Ever wondered why they don't teach financial responsibility in school? Give people incentive to work as much as they can to keep economy rolling. Capitalism at it's finest.
You act like all of these kids (and that’s what they are when taking loans, kids) have a support structure and education that’s taught them how to make good long term financial choices. Not everyone has good parents who taught them finances, never mind long term life planning.
No, but they all went to college, so they should have learned calculus, and derivatives. Even a debt that high should be payable with sweat and some deferral of immediate enjoyment, a situation that would have become obvious with just a little bit of math.
> No, but they all went to college, so they should have learned calculus, and derivatives.
I've been out of school for ten years, and haven't used calculus in about twelve. How exactly do you think knowing calculus would have helped here? Be careful assuming everyone learned the subject as you did and knows how/when to apply it to various situations.
Personally, I learned about interest rates in middle school. I used that knowledge, combined with additional research on subsidized loans, to decide to take out loans. I also had the advantage of learning the downsides of debt collection from my brother's mistakes.
Not everyone is a rational economic actor. Children/young adults ages 17-22 definitely aren't the most rational amongst us.
You forget that repaying a loan for something like the postmodern conveniences of a University Science Education may be the wrong thing to do, especially given that the Universities generally don't require vocational training as part of general education.
When people take the loan it's because they feel like they have to, and when they don't want to repay it, sometimes it's like, "No, look: if the people around me needed this so that I could live, something's wrong, and I don't want to continue collaborating with them."
The U.S.A. may also be experiencing an ongoing violent revolt against compulsory literacy in the high schools, so the problems don't really start with the loans and the college application process.
The problem with the argument about information asymmetry in this case is that one of the loans was signed right after the financial crisis. Loans and topics about interests and all that were talked about in many places.
But I agree with the other commenter about excel sheets and playing around with numbers.
By all accounts she was well educated; she was accepted to and attended a private university and then graduate school over seas. She also made poor financial decisions spanning a decade. I'm sure she would have rather not made those bad decisions, but it's probably safe to say she could not have made better decisions because.. She would have, but didn't.
So what's the solution here? Do people take a test to determine if they are allowed to make their own financial decisions? If they don't pass their parents or the government decides for them? Sure we can tweak the terms, put up special regulations for student loans, or increase education.. However if we accept that some people are incapable of making good financial decisions, potentially for their entire life, this problem will remain? Does this extend out past financial decisions? We could have the human equivalent of processor binning.
I messed up my credit when I was in my early 20s. I was lucky enough to find myself in a better situation in my early 30s.. I'm not convinced I have gotten much better at financial decisions or have just managed to out earn my natural spending habits. Maybe both.
Some countries have free (and good) education alternatives. Some countries also have student loans as a public service. Education is probably one of the most important things to preserve a democratic state, so you would think it is in the public interest.
I vehemently disagree that this is an information asymmetry issue. That woman has been to a private university for some time when she signed that 9.5% loan contract. She must have had basic calculus in elementary school and calculating with fractions a few years later. Even her working-class father realized this was a bad idea.
A relative of mine is currently attending university who decided to blow a $50k college fund on TWO years of a four-year degree. I didn't even pay that much for four years (this was 10 years ago). A lot of the younger generation don't care because they don't have to pay anything now, so they'd rather go to a school they can brag to their friends about.
That isn't that expensive: $10k/year for tuition and books, $15k/year for housing/food/life expenses. Now if its actually $25k/year just for tuition, that's pretty expensive.
if you're going to a school worth bragging about (read: Ivy League) then those are actually the ones that provide pretty good financial aid to those less well off. If you don't meet the qualifications for financial aid but still find yourself unable to pay, perhaps you're parents are holding out, and/or living above their means.
The high interest loan was for her last year of school. She has indicated that there was no alternative. Of course it would have been better to arrange for all financing before she started school but that would have taken some foresight. I wouldn't blame her for taking the loan in the senior year. It is not a matter of simple calculus as you said -- it is strictly worse to not take the loan and quit school at that moment.
Add: Please consider the possibility that not knowing when you start school that you may need a high interest loan as a senior in order to finish school is an example of information asymmetry.
> She has indicated that there was no alternative.
Actually, she indicated that the alternatives were not attractive to her (especially the friendship thing is ravingly stupid).
> Of course it would have been better to arrange for all financing before she started school but that would have taken some foresight.
Yep. The ability to divide cost through four years, add a little bit for emergencies. This ain't rocket science.
Liferafts tend to cost a lot more when the flood is coming.
> Add: Please consider the possibility that not knowing when you start school that you may need a high interest loan as a senior in order to finish school is an example of information asymmetry.
I do not think anyone is served by abusing vocabulary to hide the true meaning you implied: it's stupidity and lack of planning, not information asymmetry.
A very basic thing to do here is to pay off your high interest loan first. Her payments seemed to have gone mostly to reducing the balance of the lower interest ones. She did manage to reduce her total balance by $26000 and that could have been used to eliminate the $24000 high interest loan (which would actually result in higher balance reduction overall as well since less money would have gone to paying interests). Is there some structural thing preventing her from paying off the high interest balance first or was she simply not aware of a better way?
Based on the screenshot, it seems like autopay was set up on the lower-interest loans but not on the highest-interest loan. It's hard to say for sure but it does seem possible that she missed the impact of this.
People aren't rational agents. They suck at making decisions about their long term well being
But, are legally adults, and that’s what that means.
These arguments about students not knowing what they’re doing has only one solution: raise the age of legal adulthood to 25. Which is not as unreasonable as it sounds; it was 30 in Ancient Greece.
I've got a template that I think will solve this kind of cross-talk. Here it goes:
What follows is an institutional critique.
Some content goes here, preferably with citations.
This concludes the institutional critique.
Once the header and footer is in place, the reader is not allowed to make counterarguments based on anecdata or moral speculation about the personal responsibility of the institution's participants.
HN users are perfectly capable of making these distinctions. I'm sure if I post a paper about timing attacks that leverage subnormals, nobody would complain that HTML5 users need to better educate themselves on IEEE 754.
Now that I write that, I'm not so sure-- so please always use the template above when making an institutional critique.
The Australian Prudential Regulation Authority has made it a condition of approving loans that the minimum scheduled payments end up paying off the loan in the indicated timeframe, and this applies to loans for real estate which is supposed to be a source of income.
Perhaps it is time to apply the same kinds of rules to loans for education, along with increasing the minimum income at which repayments are required to be made, and the maximum proportion of total income that the repayments are allowed to be.
In addition, require that student loans must be not-for-profit.
Perhaps even consider nationalising the student loan system and having repayments taken out of incomes at fixed low rates, so the incentive is for the state to improve wages?
Now let me ask this - if there would be a proposal in Congress to disband Sallie Mae and do away with these bad loans, just not let people take loans that they can't pay - which side of it she would be on? I have little doubt she would claim this is terrible and makes only rich people to afford education and ruin the country and so on. And would never vote for any representative that proposes that. But when she gets exactly what she, and her parents, and everybody around them, enthusiastically supported and voted for - subsidized loans that there's no way they could afford otherwise and that are way beyond her means normally - it's suddenly terrible and somebody else's fault.
What about a proposal to return to subsidizing higher education the way that most developed countries do, so that prohibitive loans are no longer necessary in order to acquire it? In the Information Age, isn't having an educated workforce a public good?
So the solution to a problem of unaffordability is to have Uncle Sam pay for it and take it out of the tax payer's pocket? That lady couldn't pay for her expensive education, so I should?
Since I graduated 15 years ago, the public University I went to has increased costs significantly and massively improved student amenities. Baristas and rock climbing walls and whatnot. Why? It improves rankings and people will still pay for it, subsidized by student debt. If, say, people actually had to be able to afford the bill, I bet all the expensive nonsense and massive staff beuracracy would shrink in no time and the schools would go back to costs being classrooms and books.
UK: over the last decade or so we have moved from a grant based/free tuition system of finance for university students to a (capped) fee paying/state loan one.
Not sure which is best. The move the fee paying/state loan has seen the salaries of University managers rise significantly. The part time degree sector has been significantly reduced in volume.
> the salaries of University managers rise significantly.
> classrooms + books + dorm/shared house
I think we can notice what's going on here. I do not know about the UK, but if you look at education costs in the US, it becomes painfully obvious. It's not books, classrooms or dorms the students are paying for. I mean, think about it. Which books can cost 100K over a bachelors degree, where most knowledge has been known for centuries already? Classrooms have been built years ago in the most places, and their marginal costs of maintenance is negligible. Dorms are not that expensive to run either, not to the tune of tens of thousands per year per student, unless you're talking about luxury which most people neither need nor can afford. So subsidizing those necessities should not cost much. Something else is driving the costs up.
Do you propose to eliminate private education or to sponsor 100% of private education cost, whatever it is, for anybody who asks? We already have public schools, but the article specifically talks about attending a private school.
If the feds didn't have the program, private firms would come in and still offer loans. However these loans wouldn't be offered to students who on average couldn't realistically pay them off due to defaults (Something loans are protected from today).
For example giving 150k of loans to an engineer is a sound investment. Engineers at the low end make 50-60k/year. And most likely pull 100k/year after a few years.
> However these loans wouldn't be offered to students who on average couldn't realistically pay them
That's the point.
> giving 150k of loans to an engineer is a sound investment
No it is not. I've pretty good education (one can claim I maybe over-educated a bit even since I've studied tons of things I never use), I earn six figures, and my education did not cost even close to 105k. And I would be terrified to take a loan of 100k+ even with my current income level, stable job and some assets I've accumulated over the years of work. The only thing I would take such a loan on is a house, but definitely not because I want to attend nicely-named social gathering group that by the way also gives degrees. How a person can take such a loan with no income, no specific job prospects, no savings, no clear perspective of how it would be paid off - just boggles the mind. And it's not like community colleges do not exist...
Moreover, it is absolutely clear to me that the most of 100k is paying for services the students do not need and for the fact they got the coveted paper. Education per se does not cost that much, you can clearly see it in price dynamics and administrative vs. teaching staff dynamics. It's not like professors are known for being billionaires either. The costs inflation is happening elsewhere. And these loans enable it and drive it - what's the incentive to cut costs if the students will just get another government loan, never refused, each time you raise tuition?
> 150k of loans to an engineer is a sound investment for the investor.
Not really even that. Try to get an un-secured loan for 150k and see how happy the bankers would be without government backing to hand it to you and what the rates would be. You need a heck of an income to support such a loan, or mortgage-like duration. Even for 10 years, at 6% - which is very good for an unsecured loan, that's what secondary secured loans charge now, if you're lucky - it's $1660/month. On top of your other expenses, like mortgage or rent. And 10 years is a long time, what if the debtor changes her mind or something happens to her? Now add to that the fact that it's not even know if the debtor is going to actually finish the degree...
Sallie Mae is a state enterprise, subsidized by state. The loans it makes do not exist on private market. Therefore, it's a subsidized loan, even if the subsidy is not as overt as in some other loans.
Sallie Mae is a publicly traded company. Loans have not been federally backed since the Health Care and Education Reconciliation Act of 2010. The loans it makes do exist on the private market because it makes them all on the private market.
Once upon a time, kids (in the US) could afford to go to state schools without racking up horrendous debts.
Now, the in state tuition in my state (NH) is over $28K a year. Education was once a societal priority. Maybe we should, as a society, value educating our populace as much as say, we value imprisoning them? [1] It wouldn’t surprise me that we societally do value it but something is thwarting us from getting what we value.
I think the problem is the opposite, college as presently exists is something we value far too much. Lots of people go to college and learn essentially nothing.
I'd fully support free tuition if and only if college was actually hard and rigorous. Instead for most people it's daycare and I don't think we should subsidize daycare for 18 year olds.
Tax, "a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions.".
Nothing about the lotto is compulsory or based on income. I don't think its fair to say that its a "tax on the poor".
This scholarship has been great for the state overall and was a smart move. Georgia Tech is now a top 5 engineering school in the us, and top 10 worldwide. UGA became a highly ranked University. The tier 3 schools became tier 2, and tier 2 schools tier 1.
If it wasn't for this scholarship you'd have overall worse schools, and a brain drain on your hands.
Lotteries are marketed pretty directly to lower income folks, and you can tell it's working because they're the ones buying most of the tickets. They also spend a higher percentage of their income on it. This is just sort of empirically clear, like do you see lottery signs in upper middle class areas? Nope. You see them in the "poor" grocery stores (not Whole Foods), gas stations, and liquor stores. For maximum convenience, some check cashing/pay day loans have lottery booths too.
> If it wasn't for this scholarship you'd have overall worse schools, and a brain drain on your hands.
I mean, if you're OK with this kind of redistribution (FWIW I am too, it makes a lot of sense) then I think we should ask the richest of us to foot it, not the poorest of us.
They're marketed at that target segment to avoid the problems that came with not providing a state-sponsored version of those services. If you look back at the history of the lottery, it started out as black market, unregulated gambling that led to violence and other crime as the people running the often-fixed games fought over the right to fleece people. The modern, state-run lotteries just provide an outlet for gambling that would happen anyways.
> If you look back at the history of the lottery, it started out as black market, unregulated gambling that led to violence and other crime as the people running the often-fixed games fought over the right to fleece people.
I think a game (quoting Powerball here) where your odds are 1:292,201,338 is by definition a fleece. All that happened here is the state is reserving that right for itself, justifying it as taxing a vice. This is a common theme -- look at cigarettes and alcohol -- but in basically every case it's lower income people who are shelling out.
> The modern, state-run lotteries just provide an outlet for gambling that would happen anyways.
This is a common policy argument (see cigarettes/alcohol above or legalizing drugs), but does this even make sense? White collar crime is pretty rampant, so what if we legalize it and make an embezzling tax? Or human trafficking is a persistent scourge, what if we legalize it and tax it?
Furthermore, these vice taxes are regressive flat taxes. If we start legalizing things and replacing the criminality with a tax, really that only opens it up to people with means. It's still ruinous for lower income people to engage with it. Which is -- you probably won't be surprised to hear -- another reason the lottery preys on lower income people.
I think we should just admit that this stuff is discriminatory -- a lot on class but at least a little on race.
> I think a game (quoting Powerball here) where your odds are 1:292,201,338 is by definition a fleece
No, it isn't. The odds from an individual ticket are irrelevant. Only the ratio of expected value to price matters when if you want to call it a fleece. The state lotteries offer many different variance options with Powerball being among the largest. And while the lottery is, in nearly all cases (there have been some exceptions), negative EV, it's not so much so that you'd call it fleecing.
Remember, the original lotteries were unregulated and those selling tickets would pick the winning numbers based on the numbers that gamblers had chosen to minimize the number of payouts. That was a fleece. It wasn't until they developed a system where the winning numbers were determined by the results of horse races that there was some semblance of fairness to the system, but operators still found ways to minimize winners winninga.
There's a clear difference between gambling/drinking/smoking/drug abuse and the crimes you mentioned like embezzling and human trafficking. The former are self victimizing while the latter directly victimize others. That's the rationale behind legalization and why nobody would suggest it for regular crimes. Essentially it's giving people the freedom to make their own mistakes as long as they aren't hurting anyone but themselves. Instead we tailor the laws to protect others from being hurt by collateral effects (no smoking in public buildings, no stealing for drug money, no advertising cigarettes to kids, etc) and we raise money, often to support programs to educate people about the risks of those behaviors and help those who want to recover.
From what I've seen from places that have legalized various vices, it seems to always end up doing more good than criminalization.
There's really no such thing as a victimless crime, because there's no such thing as an act that affects only the actor. Drinking alcohol has an impact on others, smoking cigarettes has an impact on others, same with gambling and so on. You can separate based on "collateral effects", but the whole thing is a continuum and we draw the lines arbitrarily.
I dislike this line of reasoning because it leads us naturally to the conclusion that vice taxes (etc.) are the best we can do because some people are very incorrigible and many people are a little incorrigible. While I think we'll never eradicate "vices", I do think most of them have root causes and the most effective thing would be to treat those. If we think Behavior X is unhealthy to the self or societally damaging, sure taxing it is a way to balance out the damage to society, but that does nothing for the person. If we spent time fixing smoking, for example, we'd save so many lives and so much money that it's kind of bewildering that we haven't done it.
I do think legalization in general is better than criminalization -- but only because the US criminal justice system is deeply harmful. It would be better if we treated the more serious users of vices instead of imprisoning or aggressively taxing them.
Ok, but who gets to decide where to draw the line between harmful behaviors and nonharmful ones. One could argue that just about everything we do has some degree of risk, some more than others. As you say it's a continuum. Should we ban unhealthy foods? Should we ban contact sports? How about extramarital sex? The values of the person you ask will dictate whether any given thing is a vice or a pastime.
What right do you have to say whether the enjoyment someone finds in a vice is offset by the damage it does to their health or finances or social life? And for any given vice, usually the ill effects are a function of how heavily one uses the vice. So does a full ban to save the few who overindulge balance against depriving the rest of the option to make small trades against their own lives for some pleasure? Should we ban alcohol to save the alcoholics at the cost of everyone else being able to unwind with a beer? We tried that and it didn't go very well.
Evidence seems to point to education and access to treatment being far more effective than bans. And it's very difficult to get any kind of long term results by involuntarily treating someone, so I'm not sure there's much to be gained by criminalization with enforced treatment instead of just punishment.
At the end, you pretty much have to let people make their own informed decisions. Anything else sounds like a step toward an authoritarian state dictating everything you do.
> Ok, but who gets to decide where to draw the line between harmful behaviors and nonharmful ones.
You're right, this is tricky. But consider China's opium epidemic in the late 19th century. A lot of legalization advocates argue that drug use is a victimless crime, but in that epidemic 13.5 million people were addicted to opium. That has a huge social cost. Or US prohibition in the early 20th century: alcohol was leading to awful domestic abuse and it caused women to be the strongest supporters of the 18th amendment.
In fact the prohibition case is interesting because I think we went about it entirely the wrong way, which was the point of my parent post. If we simply criminalize the act then we're essentially saying whomever commits the "vice" is incorrigible and has to be separated from polite society. One step better is to tax the act so society can in some ways be reimbursed for the cost of the behavior. But the best step would be to discover why so many people are abusing alcohol in the first place and solve that problem. We'll only have the justification to do that though, if we recognize that the people who fall victim to those vices deserve our support, rather than just being abandoned as morally weak or fundamentally lower than us.
The cool thing about that is then we don't need to have some weird arbitrary line between, "oh 2 drinks is OK, 4 drinks you're going to jail". And we help people who fall victim to alcoholism or whichever vice we're talking about. It's a win-win, if only we can get over our preening moralism.
But in general you're right, there's not a lot of daylight between an act and a crime because not everything we regulate has a moral underpinning. But that doesn't mean those regulations can't do good, and it certainly doesn't mean that just because we enact some regulations we're inevitably headed towards totalitarianism. That's just a slippery slope fallacy.
I think his point was the money is not being taken from them forcibly by the state, as is the case with a tax. One could rightly argue that the state should also not be in the lottery business. In this case though there is no coercion.
There are forms of coercion beyond force -- beyond the IRS garnishing your paycheck in this case.
I really think coercion discussions are interesting. You might remember when SCOTUS was debating the constitutionality of the ACA, and essentially said everything was fine except the funded Medicaid expansion. The opinion of the court was that the subsidies were too "coercive" and that no state could reasonably decline them even if they had other good reasons for doing so (whatever they might have been... let's stipulate those good reasons exist).
The reason I think coercion discussions are interesting is that they tend to reveal bias. It's fundamentally a discussion about whom you have sympathy for. If you have sympathy for lower income people who are burning their money in hopes of the slimmest chance at a better life (honestly though, more like the dopamine high of imagining a better life and escaping their stressful life for 15 seconds at a time) then you'll see the system as coercive. If you think they should wise up and not be so obviously scammed, then you'll think they get what they get.
Or in the ACA case. If you have sympathy for the states who are philosophically against the welfare state and you see the Medicare subsidies as an irresistible corrupting (politically speaking, declining Medicaid subsidies when people in your state are dying from lack of medical care is a tough sell) device, then you'll see the system as coercive.
I was a HOPE recipient at Georgia Tech. I took a random signals class from Mark Clements which had its basis in probability and statistics. He brought up the regressive nature of the lottery and the ethics of it: the expected value of these games is negative and in the case of scratch games, so negative that you can't even easily assign a dollar value to how bad it is. The state markets these games even though they aren't in citizens best interests. The state has given itself a monopoly on these games, so there is no competition to the poor payouts. If you look at who plays lottery games in Georgia, it's mostly lower class people transferring their wealth to middle and upper class families.
It can be great for the state and a "smart move" and still be exploitative.
There's a middle ground here.
I used to feel the same about the lotto being a game for "consenting adults", but it's a game that the state has a monopoly on and markets primarily to the least educated and most in need of hope. That should make recipients uncomfortable.
One of the surprising things to me is that most people do not actually pay the sticker price, many colleges have needs based financial aid that brings it down, before even talking about things like Pell grants.
From reading the headlines it's easy to think that graduating with 100k in debt is normal, but the average is "only" 37k. And the median is lower still (media loan payments at ages 20-30 are $203 vs average $351[1]).
Which basically says to me that the issue with student loans isn't so much how expensive college is in general, it's that we have a segment of the population, like the author falling into a trap where they graduate with far more debt than they should.
You're pretty spot on about your comments on state support though, FiveThirtyEight had a good piece on how tuition costs at public universities have largely been due to a decrease in government funding: https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
Coming from Australia it's also a bit odd that so many students move to go to university. Most of the people I knew at university were still living with their parents. Partly this is just the concentration of the population in a few major cities, but I think it's also the general trend of building universities close to population centers, and maybe less strong differentiation between university profile sin different regions.
> Maybe we should, as a society, value educating our populace as much as say, we value imprisoning them?
Even with college as expensive as it is, there are literally an order of magnitude more college students than prisoners in the US (22m vs 2.2m). Making it cheaper would of course further alter that.
Naturally, education is important. But there's no way to hand out college educations without (1) significant changing what the average education is or (2) significant lowering the average standard of living.
---
These articles are always about people who wanted to go to very expensive private schools (see item 1). There are tons of reasonably priced universities.
I went to
1. University of Florida (public school) which even without one of the easy Florida scholarships is $3200 per semester tuition.
2. Brigham Young University (religiously affiliated private school) which even without one of its academic scholarships is $2800 per semester.
Without savings, scholarships, tax credits I could literally cover one year full tuition with a 40 hr/wk $10/hr summer job.
The real problem is that in America we should have access to free public education, but we don't. Instead we have a for profit system that ruins the middle and lower class.
What I mean by free is that the funding can be diverted into our education system from other sources, like the military budget, but alas it seems that somebody or something doesn't want an education populace, but a debt-slave one.
> My father, an electrician who worked nights driving Amtrak trains to put himself through trade school, only earned his associate’s degree in his mid-30s.
She, too, could have started with a 2 year associates degree.
Seems like if I were an employer, the way to find the smartest people is look for resumes where the first two years were done at a community college, and then continued on for two years at a state / public college.
The Allies "fixed" Germany. Hitler took all of your guns and all we wanted was a population that was peaceful enough that we wouldn't have to worry about another ground war in Europe -- at least for a long while. It seemed to have worked out.
The mess in education and healthcare in the U.S. is mostly due to different partial solutions being applied by different actors at different times, and at different political levels. Each solution kinda sounded good -- but had flaws. And the feedback loop was glacial. This is quite different than having one party mostly in charge of everything for decades at a time. One wag said the U.S. doesn't have a healthcare system; it has four healthcare systems. (Each with different rules, goals, managers, and so forth, and each acting somewhat at odds with the other)
The education mess, which is just as horrible in my mind if not worse, is a bit simpler. If I had to reduce it all to a blurb, I'd say "One side wanted higher education for all no matter what", "One side didn't care about that, but wanted people who lend money to students to be assured of getting paid back no matter what". Each side had a really good point. I will not debate those here. But combined, we ended up in the worst of both worlds.
Are we discussing what makes Germany work? If so, I missed it.
It was a history question. I like history, so I tried to answer as neutrally as I could. If you don't like the answer you are welcome to provide another answer.
When you look around and say "Why are these things different?" then start hitting the books to learn why. If the OP's only point was that Germany is better than the U.S., then I guess no further learning is necessary. You are making a value statement. Discussing such statements online usually are a waste of time.
> I'm from Germany and never fired let alone held a gun. I don't know anyone who did. Only police.
The German association of shooters has more than a million members and is one of the largest sports associations in Germany[0]. I am also German and shot everything I legally may; not because I am a gun enthusiast but because of occasions - there are plenty.
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[ 3.3 ms ] story [ 286 ms ] threadAnd young people seem to feel a kind of pride in knowing jack nothing about loans and interest calculations and "only the payment matters" because hey, math is hard and is not "cool". And "nobody told us how to calculate that" well, it's not like there are no ways of finding out.
But it seems the smart way is to default on this (as long as it doesn't affect the co-signer, or the co-signer should default on it - if possible - as well) .
And then what?
Lenders usually sell non-performing to a collection agency where you can negotiate a discount or they can try to execute it in court (where they need to prove they actually own the loan - for a lot of home loans this was not the case )
Not so for student loans; in the U.S. they typically cannot be reduced in bankruptcy court. So the choice becomes a simple one of cooperate=1, defect=2. Well, okay, it's not that simple. We don't yet have hereditary debt, so the debtor can still choose defect by killing themselves, reducing the amount the lender can collect. Debtors usually consider the cooperation strategy the better one.
Well that escalated quickly...!
Don't even think they bother to send a bill anymore since they'd have to fight with the IRS to (not) get money out of me.
And for the universities.
It shouldn't be this hard to find a good, affordable education.
The experience of living in a dorm, and socializing with people... That was the best time of my life. I wouldn't trade that away, if I could help it.
Why isn't there enough competition to provide "live at a good, affordable college"?
It's not exactly a shocking recent revelation either: https://www.nytimes.com/1987/02/18/opinion/our-greedy-colleg...
'ACCOUNTING FOR THE RISE IN COLLEGE TUITION' [PDF] http://www.nber.org/papers/w21967.pdf
The college I attended churned out graduates headed to both careers, both costing the same. Had my sister gone to the quality of school that I attended, she would never have been able to pay her loans. She probably would be more qualified to teach the next generation, but an education major at Ivy League College would still be a "dubious program".
I realize that isn't what you're intending to say. However, college pricing is generally (thought to be) correlated with quality of education, not with return on investment of that education. The result of targeting the "dubious program" ends up simply devaluing low-pay jobs.
Source: https://www.insidehighered.com/news/2015/06/04/colleges-arts...
The EU has plenty of problems (and funny enough, I really, really miss junior colleges; they're great!) but the day my daughter's EU passport arrived I felt a huge sense of relief.
She’s a fool who complain that her principle hasn’t gone down when she never actually paid anything towards it. And yes she knows that and yes they and her parents, old teachers, friends and any advicers she has ever talked to explained that the basics of a loan are that you pay it down and pay interests on it.
She’s mortified that a variable rate interest loan has a rate that varies.... and sure as hell she remembers them telling her that, she’s just playing dumb to sound the victim.
Oh and ofcause they make the details of the loan “almost impossible to find!....” in a tab called details on their website....... or if in doubt you know, you could call them. What sort of black hole level of entitlement is she living in?
Education is costly in the USA, this is horrible and wrong. But hell Tesla’s are costly too, you’d get no sympathy if you buried yourself in debt to buy a Tesla and then didn’t pay off the principle for years.
In the ideal world she could have been denied the loans on the basis of her lack of ability to manage her own financiancials. But then it would not be the land of the free, and she would just have been complaining about that instead.
Legally you _do_ get more sympathy given that you are at least able to discharge those loans in bankruptcy.
I'd say you'd even get a better job/deal, because surely if these degrees made u 200k a year this thread wouldn't exist.
An investment should yield a profit in return... going all in and return with less, are we talking schools or casinos here? It doesn't make moral sense, and in the long run surely is not beneficial for general education.
This is literally an extremist statement (i.e. either you cannot get loans or you can) and as such an impossible oversimplification. Clearly it's more nuanced than that. The difficulty of discharging loans in bankruptcy certainly does affect the market of available loans though it's not black and white.
The statement is also obviously false. Students received loans before they couldn't be discharged in bankruptcy.
On a final note, who is "we" exactly? I don't remember conversing with you in the past.
I find that most times when people say, "You cannot," or, "You can," what they're actually saying is, "The probability of you being able to is very low/very high." Surely this is the case for my claim. If it helps, please read it as such.
> Students received loans before they couldn't be discharged in bankruptcy.
Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.) You may be right that under current circumstances banks would be equally willing to lend. That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?
That's still a worthless statement honestly. A useful statement would be saying that by making it very difficult to discharge loans in bankruptcy (under certain specific terms), the number of loans increased by 15% and the terms changed by blah blah. Personally I've never heard such numbers. In fact, I've never been able to find any sources that showed that students declaring bankruptcy was ever originally a large problem.* (Why would it be? It's not like bankruptcy is some harmless thing even if you don't have assets.) It doesn't surprise me that this reason would be trotted out by the lending industry however. What part of the loan industry wouldn't want the government to enforce this against borrowers?
> Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.)
So in other words the loans are _worse_ deal. Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk? Why?
> You may be right that under current circumstances banks would be equally willing to lend.
When did I say they would be equally willing to lend? Why would we even want that? There are many examples of people that are extremely in debt for dubious payout. Would it not be a _good_ thing if they were not in that debt due to the inability to be granted a loan under such terms?
> That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?
Wow such humility.
* Edit: For example, here is a quote from a write up that indicates it was not a problem:
> D. Protections Against Abuse
> One of the most common reasons legislators give for excluding student loans from discharge is the need to prevent abuse of the bankruptcy system. 135 The 1976 Bankruptcy Code included a five-year waiting period before student debts could be discharged because lawmakers were skeptical of new graduates discharging their debts while they still had few assets and then going on to more lucrative careers. 136 As stated earlier though, this fear of post-graduate abuse was baseless when the provisions were put into effect because, even then, student debt abuses accounted for less than 1% of all filings, and this fear remains baseless today. 137 Even if abuse of the bankruptcy system posed as large a threat as legislatures believe, existing anti-abuse measures can sufficiently curb abuse without having to resort to the harsh measure of exempting private student loans from discharge. 138
> Currently, the Code has independent abuse provisions, most notably the means test in § 707(b), which sets an objective and straightforward standard for a judge to detect and prevent abuse of the system. 139 Also, even if an individual’s filing passes the means test, a court can still dismiss the case if it finds that the filing was made in “bad faith,” or if “the totality of the circumstances . . . of the debtor’s financial situation demonstrates abuse.” 140 In addition, many student loans by private lenders today require a co-signing party to help ensure that the bank is secured in the event of abuse. 141 Together these protections effectively safeguard against abuse in the bankruptcy system, which this Comment will argue makes the exemption of student loans unnecessary.
http://law.emory.edu/ebdj/content/volume-32/issue-1/comments...
I'm afraid I don't have enough information to make such a specific statement. :(
> Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk?
I don't object to the government stopping their subsidy. I'm just saying what I expect the result to be: either loans would stop being issued overall, or they would only be issued to certain majors, which the public would find unacceptable.
The government could certainly choose to subsidize those students explicitly by providing loans on better terms itself. It's not like there are no other solutions.
Regardless, we as a society should get beyond some bizarre idea that there is no other way to provide university education without allowing the loans to be dischargeable. That's exactly how it used to be in the US. Furthermore, many other models are used elsewhere in the world. We should call it what it is: a government supported subsidization of the loan industry taking advantage of naive students. Of course it works out well for some people, but there should be recourse for those it does not. That's exactly the point of bankruptcy.
Sorry if I gave the impression that I was trying to exhaustively enumerate the solution space. I was not! Thanks for the discussion.
Well, maybe it would have been better this way.
This way universities would be forced to be affordable, and use the money for teaching instead of today's tuition costs that goes 50% for a new stadium, 45% "administrative costs" 5% teachers and TAs
I don't deny it. There are considerations in both directions. You could also imagine a system of universal rate setting, where you can only offer loans to potential engineers if you do so to art students as well. You could imagine genuinely allowing a free market in student loans. There are a lot of possibilities, each of which would fall at different places on the multi-dimensional optimization problem that we've got in front of us.
But I argue that if you want folks to offer student loans, and don't want lenders to discriminate against certain majors, and don't want interest rates >10%, and want principles on the order of >$100k, you probably need to prevent discharging the loan in bankruptcy. You can't get all those other things and dischargeable loans at the same time.
If you could dischharge student loans you would have to sign over the rights to any future financial gain you would have from your education to let them reduce their loss. This is essentially what happens when they garnish your wage to reduce the loan, but ofcause not in a clean cut bankruptcy like process.
Just because it's legally ok, doesn't mean it's morally right.
And as far as I remember, the big bad industry was saved after the crash...
A car can be a necessity, in that case a Tesla is a luxury. An education is not a necessity in any case, but for the sake of argument lest pretend that it was, a that you would die a quick death if you did not at minimum have a degree in something. Then choosing the cheapest available option would the the necessity and choosing to take variable rate high interest loan in order to stay "with your friends and the teacher you know" is a luxury.
Then with a huge pile of debt, and a finished degree, to decide to pursue graduate school abroad instead of getting a job and dealing with your debt is an insane luxury.
Don't get me wrong, I'm not saying that anyone who takes an education is buying themselves a luxury, but in a market with varying costs and opportunities, if you decide on your own to go out and put yourself in huge debt to study above your means, then you are choosing a luxury. And saying things like "but community college sucks/My kids can't be successful without expensive private schools/etc." Does not suddenly make it societies responsibility to magically make it possible for you to live above your means.
> And as far as I remember, the big bad industry was saved after the crash...
Yes, the government went in and invested in the industry when it was at the lowest and no one else had available capital to invest. Those investments are paying off today(https://projects.propublica.org/bailout/), and the industry is at a better place, where among other tings it can provide loans to students who would otherwise not be able to pay for their education. What is your point? Should they start printing free money to students like this who can't manage their finances, gets whiny when it comes time to pay back the money they loaned?
I would agree if the only way to get educated was a private university. As it turns out, that's not the case. For starters, state universities are about 90% cheaper per credit hour as compared to their private competitors.
She had already done 2 years of schooling -- to drop out at that point would leave her with no degree, and a massive mountain for existing debt. She was effectively forced into taking a horrible loan, which she understood was horrible (just not how horrible).
Purely from a financial standpoint, dropping out would be been the better choice or to at least change majors.
I'd say that is the problem in the US education system as well. US colleges and universities are ridiculously expensive and getting more and more expensive every year. And there's no reasonable explanation, why.
But it never worked like this - there are literally zero downsides to charging maximum amount, so every university does it - and the students don't care because they are guaranteed a loan by the Student Loan Company anyway, and none of the students I've interacted with ever asked themselves "is this degree worth about £50k once I'm done" - they just want to go to uni, the cost is just a magical number no one looks at. The only good thing about the UK system is that the loan repayment is means based and if you don't make more than ~£22k/year you don't pay anything, and if you do you only pay 10% of your salary above 22k towards your student loan(so the more money you make the faster it will be paid off). If the loan is not paid off in 40 years it's automatically forgiven.
But from my point of view - it's completely nuts either way. Higher education should be completely free to the student, no matter where or what they study.
Any system that forces someone to graduate with significant amounts of student debt, is in my view, bad. It's not really going to benefit society, unless your view of society is modern slavery and chaining people as a slave to their debts.
Mind: that doesn't mean that certain schools aren't worth the tuition (Stanford, Columbia, Oxford, Cambridge, etc). But part of the "value offering" comes from the network you build up there.
That all said, while university can be a good part of your development as an adult, maybe more people will eventually realise it's not necessarily the best option anymore.
The writer of this article might have gotten a similar "education" (perhaps not in the formal sense -- but on an intellectual level) had she gone and lived abroad in a new environment doing something useful for a few years when she was in her late teens / early 20s. But it's a very personal situation that very much depends on the individual.
no?
>When I finally got my first full-time office job at the start of 2013, it paid less than $20,000 a year
Yes, ultimately everyone is responsible for managing their own finances, and it seems like the author acknowledges that and her own part in their mismanagement.
But expecting young people to make rational, fully-considered choices about taking loans in order to receive education is a tough sell. Higher education is often - sometimes unfairly - seen as an essential requirement for making progress in many careers. And in a situation where so many people are struggling with unmanageable debt, it seems that “every individual is responsible for their own choices” is a less useful position than “what is wrong with this system nationally and how can we fix it”. It’s kind of like US healthcare: participants are almost obliged to participate in the system, and for various reasons can’t be considered fully rational consumers.
There are lots of things that can be done, though. A change in culture making college education less essential; better loan programs; excision of bureaucracy; single-payer education systems; the list goes on.
The answer is a lot more complex than “college students need to make better decisions”.
It's a many many billion dollar industry versus some (mostly) naive kids. I'm on the side of the idiot kids on saying that the moment in time we are living through is brutal. I hope we find a fix for future kids.
HN expects one to add to the discussion rather than simply quoting and liking, but it's hard to add anything to that quote :-)
These loans are ultimately guaranteed by State and Federal governments (meaning the banks take zero risk beyond servicing costs) and yet they magically generate billions in profit. Where do you think those billions come from? What do you think actually happens when this woman effectively defaults on her loans? Who really loses when this woman can't afford to start a family or start a startup because she's paying thousands of dollars to banks and collection agencies who, again, took zero risk?
Really, the American tax payer might be the dumbest type the planet has ever seen. The genius of the student loan racket[1] is that Americans are paying billions to the government to steal billions from other Americans and then give those billions to banks -- who are working full-time to further undermine American democracy. It's a scheme whose boldness goes beyond the outright slavery and peasant-bondage paradigms of the past. The elites have actually tricked their victims into paying for their own chains.
[1] https://abovethelaw.com/2010/09/the-student-loan-racket-now-...
The american education and health system needs reform desperately, but not because of financially irresponsible people can shoot themselves in the foot, that will always be the case unless you start completely dismantling the financial freedoms of the individual.
We could ban loans altogether on the grounds that some people cannot handle the financial responsibility that they bring about. Or only allow loans to people who are 50 years old+ but what sort of world would that put us in? The solution she wants is for someone to say “you don’t need to pay any more money, you already payed enough so we’ll let you off the hook” the actual solution would have been someone telling her before “you don’t have the money to take the education you want, go find a 9-5.
What I read in that article was something like: “I made some bad decisions about financing, but the wider system is a problem for the following reasons.”
You’re right that from a technical point of view nothing was done wrong. A college student signed up to a loan, agreed to the terms, and was subsequently shocked by the extent to which it was difficult to pay it off. I disagree that she’s asking to be “let off the hook” but is instead using her case to highlight the wider problems in this system.
There are wider-ranging options than banning loans or restricting them to older people. Making college more affordable, or regulating interest rates, or providing a government-backed system for college funding are all alternatives.
At some point, if a huge number of people are struggling with a system, it’s reasonable to ask how it can be reformed - because this isn’t an isolated case. The focus on individual decisions risks missing out on a discussion about how that wider problem can be solved - that students feel the need to get into this debt in the first place.
> Education is costly in the USA, this is horrible and wrong.
I mean, there are straight forward ways to pay very little money for a degree in a high earning field. That people people decide not to take this path tells me a lot.
A decision is only bad in so far as the consequences are (expected to be) unpleasant.
> In the ideal world she could have been denied the loans on the basis of her lack of ability to manage her own financiancials.
This is where her parents failed her (and I suppose, themselves, since they are on the hook as well).
Can you give some examples?
There are a few instances where going to an elite private school can pay off (e.g. MBA from a top 5 ivy league school), but for the most part, there is no measurable benefit of going to a private university when compared to a public one.
Programs like Running Start[0] can drop this cost even further.
Attending Community College can be seen as déclassé, but looking at a university degree purely as an investment, it seems like a pretty reasonable decision.
I understand that not everyone wants to treat college purely as an investment, which is fine. Life is not purely about making money. However, the further away from treating college as an investment a person gets, the more painful the post college experience will be.
It's generally fine to get a degree in a low earning field (e.g. philosophy) as long as you don't spend too much on it. It's also fine to spend a lot of money to get into a high earning field (e.g. dentistry). It is a toxic brew to spend a lot of money on a low earning potential credential (e.g. MFA in dance from a private university).
[0] http://www.k12.wa.us/OSSI/K12Supports/CareerCollegeReadiness...
Banks get to create the principal that they loan out of thin air[1], lend it at ridiculous interest rates to students and have it guaranteed by tax money...they do not have my sympathy!
Risk usually dictates interest rates. Meaning that there must be a chance for you to lose the money, but that is not the case with most student loans. Yet they still charge high interest rates.
It is criminal that zero-interest (or near zero) loans are not available for students from the government. I am fine with hounding them for life the principal and even not letting them discharge it with bankruptcy, but the interest is practically evil considering the banks take no risk at all.
There is literally nothing we can invest our tax money in that will return bigger gains than education and healthcare.
[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Why?
"Their money" is where we have a disagreement.
They get to create that money (nearly) out of thin air.[1]
[1] https://www.investopedia.com/articles/investing/022416/why-b...
I’m not sure how you get this from your reference - people deposit money at a bank, and the bank lends (gives!) some of that money out to (e.g.) students. The “creation” comes from both the depositor and the borrower thinking they have the money.
People deposit money at a bank and the bank lends out 10 times as much!
Granted the "new money" is destroyed as the principle is paid back, but its new money out of thin air -- and the interest is real money!
Here is a more easy-to-read version[1]
[1] https://www.investopedia.com/articles/investing/022416/why-b...
And why the heck did she not talk with her parents who might have been more capable of doing some basic math!?
They should be protected against this stuff, not put into debt because the baby boomers want to spend tax dollar on pensions instead of education.
If you and I agree that you will sell me your left kidney, or that I can punch you repeatedly next Saturday for fifty quid, noncourt will enforce those contracts because you are agreeing to harm. And that history has shown that people in adverse conditions will sell their organs/children/dignity whenever offered (and frequently at below market rates)
Usury Contracts like this are another form of harm and we just need to decide where the line gets drawn.
https://news.ycombinator.com/newsguidelines.html
At the same time, I'm sure her deal with the devil was very clearly spelled out in 8pt type.
It is very hard to wade through that much whining when it comes from a literate and numerate middle class kid, in a western country, in the age of Google.
Rose colored glasses.
It's probably worth keeping in mind that the internet of endless information is still relatively new. I went to college in 2003. Google was a freshly minted verb[0]. "The age of Google" probably didn't even really start until after I had graduated. I know that it wasn't part of my college life. I think it was my sophomore year when "wikipedia" started showing up in school ethics codes. The countless blog articles available to you right now simply didn't exist. You assume this info was at everyone's finger tips, but the people who wrote most of those articles probably graduated after I did. ROI of education really only became a conversation topic after the financial crisis started to display a permanent effect on the workforce. My younger brother is about the author's age, and we were still ingrained with the mindset of "that's just what you do after high school". The pro/con list had very few cons until relatively recently.
[0] https://www.theatlantic.com/technology/archive/2014/06/the-f...
Books on it had been written. Talks on it had been given. This lady was just too focused on the gold at the end of the rainbow to care.
This is the big problem. Calling 18 year olds, kids, is basically saying that 18 year olds aren't old enough to be considered adults. Either you get the freedom of being an adult along with the responsibility or your leader decides what is best for you and you no longer have freedom. Even more so in her case. Her parents are ok the hook for repaying the debt. That means that they (ages 40 I guess) looked at the contact and thought it was a good deal. Is the author suggesting that 40 year olds shouldn't be allowed to get loans?
If that isn't enough she describes defaulting on a loan as something okay. She decides to fly abroad and just assumes that the loan holders won't require her to start repayment.
But even before that, she realizes in the middle of her undergrad that the tuition is to much. But she decides to get a loan on bad terms because she doesn't want to loose her friends. Come on. She decides to get a terrible loan because she is to shy to make new friends.
For poor people, who know how to handle the freedom of being an adult, student loans could be exactly what they need to succeed in life. But for irresponsible people like the author, I don't think any laws can protect her from herself.
You're given a choice of not getting education and having limited job options, or taking a loan with unknown (variable) rate, for unknown amount (uni can raise fees), getting an unknown benefit (who knows what the job market will be like in a few years, maybe there's another global market failure). The lender is happy if you repay, and happy if you don't (the loan is gov guaranteed anyway, this is pre-2010 Sallie Mae)
You say "But for irresponsible people like the author, I don't think any laws can protect her from herself." which is crazy considering one side of this problem wouldn't exist if the laws didn't explicitly enable this. Banks giving student loans risk next to nothing. If you think this person was so irresponsible because obviously she can't repay, what is your comment on the bank. Surely they know the market even better and reviewed her family finances - why would they give her a loan in the first place? Are they irresponsible adults as well?
The bank knows exactly what they are doing. The partial repayments are enough to cover the initial principal and a good margin. The bank basically makes money on defaulting.
The abusive interest accrues too fast to ever be repaid. The loan will last for as long as the person live. This is only possible because loans cannot be discharged.
TFA's author goes on about how her father tried (unsuccessfully) to talk her out of taking a loan with "abusive interest" but that didn't stop her.
My mom was pretty unhappy I tricked her into letting me sign up for the army at 17 but that doesn't mean there's anyone to blame but myself.
I graduated about $40,000 in debt and it was only then that I realised how difficult it is to pay that back. Up until that point, it's just a number on a piece of paper. I managed to pay it back in about 2 years but I was lucky in that I graduated with Comp Sci which is in demand and got a pretty well paying job in my city for someone with no experience.
And I say lucky because choosing my degree was just based on an interest of mine in high school that I thought would be interesting. It's no different than other people choosing to study what's interesting but in my case, comp sci and programming pays well in the economy while history doesn't.
Student loans are a vicious supply and demand cycle. Students can take out loans to cover school so universities realise they can charge more which in turns leads to students taking out more to cover education.
They're old enough to know that $10,000 is real money and that they should be asking for advice and help if they feel over their heads.
Maturity, experience, and knowledge are all complicated. Nothing magical happens to you when society deems you an adult; you still need to learn things. That's why there should be laws and regulations to protect people from situations like this, because you shouldn't be able to get into this kind of debt, and especially not at the beginning of your adult life.
> She decides to fly abroad and just assumes that the loan holders won't require her to start repayment.
I think you shouldn't be so dismissive. She went to grad school overseas. A lot of people come overseas to US grad schools and that's great for us, and a lot of our students go overseas to foreign grad schools and that's good for us too. Diversity of background, experience, and culture are important, and we all benefit from it. It should be a fundamental part of education.
Furthermore this isn't her point. She couldn't get a deferment because Navient's software systems didn't have a key for overseas grad schools. That's so mind boggling to me I don't even know where to begin: Navient couldn't add a row to their DB, and it cost her over $7k (more, after it keeps getting compounded).
> But even before that, she realizes in the middle of her undergrad that the tuition is to much.
It's more likely she hit the cap on her government loans. Pretty much everyone does, which is why we have loan corporations like Navient and Great Lakes. If you look at her balance sheet, there are a lot of gov't loans for small amounts, then a couple big Sallie Mae loans.
> But she decides to get a loan on bad terms because she doesn't want to loose her friends.
Unless you're in a pretty lucrative program (like CS or engineering) or you're pre-professional (pre-med, pre-law), often one of the most valuable things you get from your college experience is a social network of professors, administrators, and fellow students. I pretty much owe my entire career to a few of my professors in college and if I'd had to leave that behind it would have cost me dearly financially.
> But for irresponsible people like the author, I don't think any laws can protect her from herself.
I do think she was irresponsible. I think private universities are generally a terrible deal unless you get a scholarship or you're in a top-10 school, I think going overseas for grad school and defaulting on her loans because she couldn't get a deferment was a bad move, and I think she probably should have taken a gap year and worked. I also think she should live somewhere cheaper with a better commute -- although it's really hard to get a job when you need to relocate, and again with that network thing.
But I also think everyone is irresponsible, and that the penalty for being irresponsible in this way shouldn't be essentially a lifetime of debt. If Sallie Mae weren't legally allowed to lend her that $24k, she'd be remarkably better off. We have all kinds of laws that prevent people from entering into extremely bad deals (can't sell organs, can't agree to work in super hazardous conditions) because we recognize the power of institutions and society to coerce people into making these choices. We need to realize that the loan industry is one of these things that needs similar regulation.
Loans that will take decades to repay are arguably things that we shouldn’t expect younger adults to fully grasp.
But we'll let a 17 year old join the military.
It's all about priorities.
But I would assume she has looked into that.
Its this kind of stuff that enables the rich to just get richer. I'd assume ppl with 10mil+ of net worth can get way better rates & loan amounts than I.
However you could easily refinance that loan and get a better rate these days.
I just did it a few months ago to do some renovations and put a new heating system in my house.
I think as the article pointed out we might've different standards in referring to what is compound interest.
But my original point is that I thought consumer loans would not incur interest-on-interest (as in if you're late in payments for your car loan, the interst "compounds" due to higher unpaid principal, but the missed interest would not add to the principal), which seems not be the case for student loans as per the author.
Though I do think variable rate loans are kind of outrageous in a general sense. And I find it curious that one was the only option.
One of America's diseases right now is the entitlement of those who think they that they're obligated comfortable success if they check the right boxes without ever stopping to think or do the math. And when they dig a hole, I do not feel sorry for them. (And I don't think it's remotely like rape.) If her article was about how she was stupid, and how somebody could avoid making the same mistakes, and how she'd learned, I might be sympathetic. But it's not.
I fail to see how making bad, but clearly demarcated, decisions, is remotely like rape. (So on some level, yes, I don't see her as a victim.) (And yes, I do have a chip on my shoulder because I could see this kind of thing coming and so turned down the University of Chicago to go to a state school for less than half the money - my best guess is I'd have graduated with something over $120k in debt had I accepted, from the state school I graduated with almost zero.)
But when financial institutions are making massive profits off of other people's irresponsible decisions, you can't ethically just say that's fine. The ethical way to deal with irresponsible people is to teach them to be responsible, not to exploit them.
As long as powerful interests are profiting off of irresponsible people, those interests will actively seek to encourage continued irresponsibility…
But then I really think back to when I was just graduating from high school and figuring out how to pay for college. I didn't understand much about finance, or about loans. I had no idea how repayment worked, or how the majority of each payment would go toward interest for a long time. I didn't know how much in total I'd pay, or even how to figure that out. My parents (who co-signed some of my loans) tried to help me, but their understanding certainly wasn't all-encompassing either. There's pretty much no such thing as "financial education" in K-12 schools in the US. They don't even teach you how to balance a checkbook, let alone tackling the concept of debt.
I was lucky. I was lucky that my interest rates were low, and stayed low. I was lucky that I got a stable, well-paying job (with regular raises) after college and was able to exceed my monthly payments. It was all luck. I could have just as easily ended up in a bad situation. If I had ended up in a bad situation, I hope I would have been mature enough to accept at least some of the blame for it.
But that doesn't mean predatory lenders are off the hook. That doesn't mean it's ok to avoid telling a potential customer exactly how repayment works, ahead of time. That doesn't mean it's ok to charge exorbitant fees and penalties that make it harder to repay. That doesn't mean it's ok to make someone jump through hoops to access and understand detailed information about their loan accounts. And the lack of up-front, plain-language transparency is disgusting.
If you're not swayed by that, let's talk about outcomes. We're raising a generation of new adults who will be crushed by debt well into their 30s and often later. These people can't meaningfully participate in the consumer side of the economy while they're forking over half or more of their paycheck to lenders. If there are massive defaults, that will be a huge drain on resources: economic, financial, and educational. And the next generation of students just won't bother being students. They'll see what happened, and forego higher education. In some cases, that will be ok, and they'll be financially better off for it. In most others, though, it will just weaken the level of education in the US, which hurts science, engineering, research, technology, everything. Even if you have no compassion for the students with crushing debt, at least consider the scope of the problem all this causes, and be pragmatic about it.
The fact that her first job paid $20,000/year is telling. At one point she says "what should I do, transfer to a public school" and the answer is holy hell, yes you should. She didn't. I don't think my position is justifying predatory lenders, because it doesn't. But she has to share in the responsibility to a great degree, because she made a decision to go into insane amounts of debt to stay in private school.
One of our economy teachers explained: "As students you can get a loan from the state with no interest. You're stupid if you don't take it and keep it for some extra interest." I calculated the interest this would generate and decided that it was too much hassle for few extra bucks. And I didn't want the temptation either.
Frankly if you look at only the numbers, then 170,000$ total on a 95,000$ is what you'll get for a 20 year loan with 6.5% interest (give or take). From what I can tell from the article she will be paying it for roughly 20 years. If you take a fixed-rate payment (I.E. paying the same amount monthly for the entire loan, rather then paying the same percentage of the remaining loan every month), this is exactly the situation you'll get - I.E. the first few years your payments go almost entirely to interest and only later years you pay for the principal.
These are very common financial instruments that you can get from a bank or credit company. Especially if your parents are cosigned.
I think the main takeaways are rather these:
1. How in the world is a variable interest loan based on LIBOR (which the article alludes to) gets to 11% interest? that's prime + 8%, at least. That's practically loan-shark territory. How is a government led (and financed) aid program have such an insane interest rate?
2. When you take a loan for investing (such as education, or starting a new company), I.E. leveraging, you should always consider whether the future value of the investments is higher then what you borrowed. I'm assuming she studied for jobs that don't pay well.
3. American education is insanely expensive. It's probably cheaper to just study abroad for a few years and come back (like she did for her master's degree).
I don't think Sallie Mae is providing financial aid. According to Wikipedia[1] it's providing private student loans.
1. https://en.wikipedia.org/wiki/Sallie_Mae
I thought she took one of these, though maybe she took just a regular private loan? but those aren't usually referred to as student loans (and will banks actually give those when there are guaranteed ones available?)?
Federally guaranteed loans have limited interest rates and criteria for what schools they can be used at (etc.); private student loans aren't bound by either of those and have been offered largely for that reason.
Where did you get that? From what I read in Wikipedia, the only difference with a regular private loan is that they are not easily discharged through bankruptcy thus the interest rates are quite low compared to a regular unsecured loan for a person with no credit history and no income.
https://en.wikipedia.org/wiki/Private_student_loan_(United_S...
Home loans can be cheap because they are secured by the value of the house: if you default, the bank thinks it can sell your house and still make a profit.
Unsecured loans yield nothing when they go bad, so they have absurd interest rates whether the loan is for education, business, or whatever. That’s why many people choose to eg take out a second mortgage when starting a business: better interest rates, because it is secured, but you lose your house if your business fails.
The US government now owns a non-performing loan which they then sell for 10%-15% of what they bought it for to - you guessed it - Sallie Mae loan recovery. Since this loan can't be discharged by bankruptcy, part of every paycheck she ever earns will be garnished, every tax refund will be seized until Sallie Mae gets their money.
And clearly refinancing would be a good option to get a way better interest.
While it is true that high school definitively needs a "basic finance" class (where taxes, these loans, how to save, how banks work... are explained) she got a TON of warnings, and she took a loan.
People aren't rational agents. They suck at making decisions about their long term well being. They're told that the best way to support their future is to go to university, so they take out a loan under the assumption that once they're finished, they'll earn so much that paying it off won't be an issue. And if you're not particularly financially literate, you might assume that this is fine since everyone else seems to be doing it. And you might also assume that they wouldn't lend you money that you couldn't repay.
The reality is there's an information asymmetry in favour of lenders. They know better than you how likely you are to repay your debt. And their incentives are structured to maximise their return, not clear your debt. So if the best way for them to make money is for you to not be able to pay off your debt, that's what they'll try to do. The harder it is for you to understand what you're getting into, the better for them. The less financial literacy you possess, the better for them.
I'm not arguing that the author shouldn't bear responsibility for her decisions. Of course people should understand the things that they agree to and meet their obligations. But there is a calibration problem when the pursuit of an education can lead to three decades of financial hardship.
Oh. It sure isn't the bank's problem. You can't even default on a government backed student loan. The bank is incentivized for you to fail and rack up fees.
The banking institution which created, offered & services the financial instrument you’re describing has about 1 trillion times more data on the risks and the possible outcomes. They should absolutely have the responsibility when offering 5-6 figures to 18-year-olds.
See the problem now?
I agree that what the banks are doing is very likely unethical, but I think your generalization about the bigger guy having more responsibility doesn't always hold.
The other problem is that people will generally say that they understand even if they don't. Maybe a mandatory class on basic finance and economics would be a good idea.
I agree that schools should teach about personal finance. My son was assigned a paper to write on the payday loan business, and it was pretty eye-opening for him.
Not really. I've bought and sold houses and cars while knowing relatively little.
The real difference between cars, houses, and educations is that the first two are collateral and lenders do due diligence to avoid foreclosure.
Educations can't be forclosed on -- there is no collateral, and relatedly the loans are non-dischargable.
https://math.stackexchange.com/questions/1499656/compounded-...
[1]: https://en.wikipedia.org/wiki/Drugwars
When you get a loan, they tell you the interest as annual percentage rate (APR). That annualized rate plugs right into the simple interest formula they teach you in high school math class. You just calculate each year one at a time, plugging in the amount you owe at the start of the year and you'll get how much is owed at the end of the year.
If you make payments or if the rate changes during the year, you can use the same formula to calculate what you owe at the time of change/payment, and continue on from there. Using the effective annualized rate for less than a year will give you an answer that's slightly off, but it will be very close.
You'd have a very difficult time using differential equations for a real loan. That question has the buyer making an infinite number of infinitesimally small car payments, because a monthly installment would make it a bad differential equations homework problem. The sensible way to solve most real-world problems is just to calculate the result iteratively using basic multiplication and addition.
Here is a top search result for calculating student loan interest. They suggest not to do a yearly approach like you suggest. It even mentions doing a daily compounded function. I added a [LEAP] where the author left the reader hanging.
--- To understand how compound interest works, let’s look at an example. Consider a Direct loan with a $10,000 balance and a 4.45% interest rate.
First, you figure your daily interest rate by dividing 4.45% by 365 to get 0.012%. On $10,000, that works out $1.20. That $1.20 is added to your loan balance, bringing it to $10,001.20. That’s your new balance, and when interest is compounded the following day, you’ll pay interest on that total amount.
[LEAP]
By the end of the year, you’re looking at paying $455.02 in interest, rather than the $445 you’d pay if your interest was compounded just once a year instead of daily.
https://studentloanhero.com/featured/how-student-loan-intere...
> By the end of the year, you’re looking at paying $455.02 in interest, rather than the $445 you’d pay if your interest was compounded just once a year instead of daily.
They used the wrong percentage and got $445/year. That's off by $10/year. Still, it's close enough to use for yearly financial planning and for judging if the loan is worthwhile. It should be sufficient to prevent any surprises like the article author's.
I very distinctly remember listening to a conversation between two fellow undergrads while I was waiting in line at the student loan office at my college circa 1993. It went something like "Ya man, I'm taking out extra funds this fall so I can buy a car and party with the cash." And the response was laughter and "I'm getting some Pioneer speakers for my stereo."
Brainiacs, all.
You mean like the people who keep lending money to students who aren't going to be able able to pay it back?
Seriously though it's obviously by design. Ever wondered why they don't teach financial responsibility in school? Give people incentive to work as much as they can to keep economy rolling. Capitalism at it's finest.
(Somehow -- through mechanisms that are still beyond me -- this is exactly what happened in 2008. Absurd.)
I've been out of school for ten years, and haven't used calculus in about twelve. How exactly do you think knowing calculus would have helped here? Be careful assuming everyone learned the subject as you did and knows how/when to apply it to various situations.
Personally, I learned about interest rates in middle school. I used that knowledge, combined with additional research on subsidized loans, to decide to take out loans. I also had the advantage of learning the downsides of debt collection from my brother's mistakes.
Not everyone is a rational economic actor. Children/young adults ages 17-22 definitely aren't the most rational amongst us.
When people take the loan it's because they feel like they have to, and when they don't want to repay it, sometimes it's like, "No, look: if the people around me needed this so that I could live, something's wrong, and I don't want to continue collaborating with them."
The U.S.A. may also be experiencing an ongoing violent revolt against compulsory literacy in the high schools, so the problems don't really start with the loans and the college application process.
But I agree with the other commenter about excel sheets and playing around with numbers.
So what's the solution here? Do people take a test to determine if they are allowed to make their own financial decisions? If they don't pass their parents or the government decides for them? Sure we can tweak the terms, put up special regulations for student loans, or increase education.. However if we accept that some people are incapable of making good financial decisions, potentially for their entire life, this problem will remain? Does this extend out past financial decisions? We could have the human equivalent of processor binning.
I messed up my credit when I was in my early 20s. I was lucky enough to find myself in a better situation in my early 30s.. I'm not convinced I have gotten much better at financial decisions or have just managed to out earn my natural spending habits. Maybe both.
Add: Please consider the possibility that not knowing when you start school that you may need a high interest loan as a senior in order to finish school is an example of information asymmetry.
Actually, she indicated that the alternatives were not attractive to her (especially the friendship thing is ravingly stupid).
> Of course it would have been better to arrange for all financing before she started school but that would have taken some foresight.
Yep. The ability to divide cost through four years, add a little bit for emergencies. This ain't rocket science.
Liferafts tend to cost a lot more when the flood is coming.
> Add: Please consider the possibility that not knowing when you start school that you may need a high interest loan as a senior in order to finish school is an example of information asymmetry.
I do not think anyone is served by abusing vocabulary to hide the true meaning you implied: it's stupidity and lack of planning, not information asymmetry.
But, are legally adults, and that’s what that means.
These arguments about students not knowing what they’re doing has only one solution: raise the age of legal adulthood to 25. Which is not as unreasonable as it sounds; it was 30 in Ancient Greece.
What follows is an institutional critique.
Some content goes here, preferably with citations.
This concludes the institutional critique.
Once the header and footer is in place, the reader is not allowed to make counterarguments based on anecdata or moral speculation about the personal responsibility of the institution's participants.
HN users are perfectly capable of making these distinctions. I'm sure if I post a paper about timing attacks that leverage subnormals, nobody would complain that HTML5 users need to better educate themselves on IEEE 754.
Now that I write that, I'm not so sure-- so please always use the template above when making an institutional critique.
Sure. But I'm missing your suggestion here.
Others aren't saying "people should know better" to pontificate, but just to say "there isn't a solution outside of personal responsibility."
Do you believe there is a (worthwhile) institutional solution? If so, what?
Perhaps it is time to apply the same kinds of rules to loans for education, along with increasing the minimum income at which repayments are required to be made, and the maximum proportion of total income that the repayments are allowed to be.
In addition, require that student loans must be not-for-profit.
Perhaps even consider nationalising the student loan system and having repayments taken out of incomes at fixed low rates, so the incentive is for the state to improve wages?
Since I graduated 15 years ago, the public University I went to has increased costs significantly and massively improved student amenities. Baristas and rock climbing walls and whatnot. Why? It improves rankings and people will still pay for it, subsidized by student debt. If, say, people actually had to be able to afford the bill, I bet all the expensive nonsense and massive staff beuracracy would shrink in no time and the schools would go back to costs being classrooms and books.
Not sure which is best. The move the fee paying/state loan has seen the salaries of University managers rise significantly. The part time degree sector has been significantly reduced in volume.
http://www.bbc.co.uk/news/education-40511184
I do personally think that the classrooms + books + dorm/shared house route with subsidy for less affluent ones has benefits.
> classrooms + books + dorm/shared house
I think we can notice what's going on here. I do not know about the UK, but if you look at education costs in the US, it becomes painfully obvious. It's not books, classrooms or dorms the students are paying for. I mean, think about it. Which books can cost 100K over a bachelors degree, where most knowledge has been known for centuries already? Classrooms have been built years ago in the most places, and their marginal costs of maintenance is negligible. Dorms are not that expensive to run either, not to the tune of tens of thousands per year per student, unless you're talking about luxury which most people neither need nor can afford. So subsidizing those necessities should not cost much. Something else is driving the costs up.
For example giving 150k of loans to an engineer is a sound investment. Engineers at the low end make 50-60k/year. And most likely pull 100k/year after a few years.
That's the point.
> giving 150k of loans to an engineer is a sound investment
No it is not. I've pretty good education (one can claim I maybe over-educated a bit even since I've studied tons of things I never use), I earn six figures, and my education did not cost even close to 105k. And I would be terrified to take a loan of 100k+ even with my current income level, stable job and some assets I've accumulated over the years of work. The only thing I would take such a loan on is a house, but definitely not because I want to attend nicely-named social gathering group that by the way also gives degrees. How a person can take such a loan with no income, no specific job prospects, no savings, no clear perspective of how it would be paid off - just boggles the mind. And it's not like community colleges do not exist...
Moreover, it is absolutely clear to me that the most of 100k is paying for services the students do not need and for the fact they got the coveted paper. Education per se does not cost that much, you can clearly see it in price dynamics and administrative vs. teaching staff dynamics. It's not like professors are known for being billionaires either. The costs inflation is happening elsewhere. And these loans enable it and drive it - what's the incentive to cut costs if the students will just get another government loan, never refused, each time you raise tuition?
Not really even that. Try to get an un-secured loan for 150k and see how happy the bankers would be without government backing to hand it to you and what the rates would be. You need a heck of an income to support such a loan, or mortgage-like duration. Even for 10 years, at 6% - which is very good for an unsecured loan, that's what secondary secured loans charge now, if you're lucky - it's $1660/month. On top of your other expenses, like mortgage or rent. And 10 years is a long time, what if the debtor changes her mind or something happens to her? Now add to that the fact that it's not even know if the debtor is going to actually finish the degree...
[1] $30-$60K year https://www.cbsnews.com/news/the-cost-of-a-nation-of-incarce...
I think the problem is the opposite, college as presently exists is something we value far too much. Lots of people go to college and learn essentially nothing.
I'd fully support free tuition if and only if college was actually hard and rigorous. Instead for most people it's daycare and I don't think we should subsidize daycare for 18 year olds.
https://medium.com/@simon.sarris/higher-education-erodes-a7c...
I literally made money while attending Georgia Tech for my engineering degree. 100% of my tuition was paid for by the state
Disclaimer: Hope recipient
Nothing about the lotto is compulsory or based on income. I don't think its fair to say that its a "tax on the poor".
This scholarship has been great for the state overall and was a smart move. Georgia Tech is now a top 5 engineering school in the us, and top 10 worldwide. UGA became a highly ranked University. The tier 3 schools became tier 2, and tier 2 schools tier 1.
If it wasn't for this scholarship you'd have overall worse schools, and a brain drain on your hands.
Source: http://www.businessinsider.com/lottery-is-a-tax-on-the-poor-...
> If it wasn't for this scholarship you'd have overall worse schools, and a brain drain on your hands.
I mean, if you're OK with this kind of redistribution (FWIW I am too, it makes a lot of sense) then I think we should ask the richest of us to foot it, not the poorest of us.
I think a game (quoting Powerball here) where your odds are 1:292,201,338 is by definition a fleece. All that happened here is the state is reserving that right for itself, justifying it as taxing a vice. This is a common theme -- look at cigarettes and alcohol -- but in basically every case it's lower income people who are shelling out.
> The modern, state-run lotteries just provide an outlet for gambling that would happen anyways.
This is a common policy argument (see cigarettes/alcohol above or legalizing drugs), but does this even make sense? White collar crime is pretty rampant, so what if we legalize it and make an embezzling tax? Or human trafficking is a persistent scourge, what if we legalize it and tax it?
Furthermore, these vice taxes are regressive flat taxes. If we start legalizing things and replacing the criminality with a tax, really that only opens it up to people with means. It's still ruinous for lower income people to engage with it. Which is -- you probably won't be surprised to hear -- another reason the lottery preys on lower income people.
I think we should just admit that this stuff is discriminatory -- a lot on class but at least a little on race.
No, it isn't. The odds from an individual ticket are irrelevant. Only the ratio of expected value to price matters when if you want to call it a fleece. The state lotteries offer many different variance options with Powerball being among the largest. And while the lottery is, in nearly all cases (there have been some exceptions), negative EV, it's not so much so that you'd call it fleecing.
Remember, the original lotteries were unregulated and those selling tickets would pick the winning numbers based on the numbers that gamblers had chosen to minimize the number of payouts. That was a fleece. It wasn't until they developed a system where the winning numbers were determined by the results of horse races that there was some semblance of fairness to the system, but operators still found ways to minimize winners winninga.
Nah. If it paid off at a billion to 1, I would buy some tickets ;-)
From what I've seen from places that have legalized various vices, it seems to always end up doing more good than criminalization.
I dislike this line of reasoning because it leads us naturally to the conclusion that vice taxes (etc.) are the best we can do because some people are very incorrigible and many people are a little incorrigible. While I think we'll never eradicate "vices", I do think most of them have root causes and the most effective thing would be to treat those. If we think Behavior X is unhealthy to the self or societally damaging, sure taxing it is a way to balance out the damage to society, but that does nothing for the person. If we spent time fixing smoking, for example, we'd save so many lives and so much money that it's kind of bewildering that we haven't done it.
I do think legalization in general is better than criminalization -- but only because the US criminal justice system is deeply harmful. It would be better if we treated the more serious users of vices instead of imprisoning or aggressively taxing them.
What right do you have to say whether the enjoyment someone finds in a vice is offset by the damage it does to their health or finances or social life? And for any given vice, usually the ill effects are a function of how heavily one uses the vice. So does a full ban to save the few who overindulge balance against depriving the rest of the option to make small trades against their own lives for some pleasure? Should we ban alcohol to save the alcoholics at the cost of everyone else being able to unwind with a beer? We tried that and it didn't go very well.
Evidence seems to point to education and access to treatment being far more effective than bans. And it's very difficult to get any kind of long term results by involuntarily treating someone, so I'm not sure there's much to be gained by criminalization with enforced treatment instead of just punishment.
At the end, you pretty much have to let people make their own informed decisions. Anything else sounds like a step toward an authoritarian state dictating everything you do.
You're right, this is tricky. But consider China's opium epidemic in the late 19th century. A lot of legalization advocates argue that drug use is a victimless crime, but in that epidemic 13.5 million people were addicted to opium. That has a huge social cost. Or US prohibition in the early 20th century: alcohol was leading to awful domestic abuse and it caused women to be the strongest supporters of the 18th amendment.
In fact the prohibition case is interesting because I think we went about it entirely the wrong way, which was the point of my parent post. If we simply criminalize the act then we're essentially saying whomever commits the "vice" is incorrigible and has to be separated from polite society. One step better is to tax the act so society can in some ways be reimbursed for the cost of the behavior. But the best step would be to discover why so many people are abusing alcohol in the first place and solve that problem. We'll only have the justification to do that though, if we recognize that the people who fall victim to those vices deserve our support, rather than just being abandoned as morally weak or fundamentally lower than us.
The cool thing about that is then we don't need to have some weird arbitrary line between, "oh 2 drinks is OK, 4 drinks you're going to jail". And we help people who fall victim to alcoholism or whichever vice we're talking about. It's a win-win, if only we can get over our preening moralism.
But in general you're right, there's not a lot of daylight between an act and a crime because not everything we regulate has a moral underpinning. But that doesn't mean those regulations can't do good, and it certainly doesn't mean that just because we enact some regulations we're inevitably headed towards totalitarianism. That's just a slippery slope fallacy.
I really think coercion discussions are interesting. You might remember when SCOTUS was debating the constitutionality of the ACA, and essentially said everything was fine except the funded Medicaid expansion. The opinion of the court was that the subsidies were too "coercive" and that no state could reasonably decline them even if they had other good reasons for doing so (whatever they might have been... let's stipulate those good reasons exist).
The reason I think coercion discussions are interesting is that they tend to reveal bias. It's fundamentally a discussion about whom you have sympathy for. If you have sympathy for lower income people who are burning their money in hopes of the slimmest chance at a better life (honestly though, more like the dopamine high of imagining a better life and escaping their stressful life for 15 seconds at a time) then you'll see the system as coercive. If you think they should wise up and not be so obviously scammed, then you'll think they get what they get.
Or in the ACA case. If you have sympathy for the states who are philosophically against the welfare state and you see the Medicare subsidies as an irresistible corrupting (politically speaking, declining Medicaid subsidies when people in your state are dying from lack of medical care is a tough sell) device, then you'll see the system as coercive.
Someone smarter than me once said "the lottery is a tax on those who are bad at math."
Which has some pretty good wisdom behind it.
There's a middle ground here.
I used to feel the same about the lotto being a game for "consenting adults", but it's a game that the state has a monopoly on and markets primarily to the least educated and most in need of hope. That should make recipients uncomfortable.
I got into GT out of state for CS but I'd end up paying like 40k/year so I decided against it.
Through cheaper (than other states) tuition and programs like the hope it rose in rankings
From reading the headlines it's easy to think that graduating with 100k in debt is normal, but the average is "only" 37k. And the median is lower still (media loan payments at ages 20-30 are $203 vs average $351[1]).
Which basically says to me that the issue with student loans isn't so much how expensive college is in general, it's that we have a segment of the population, like the author falling into a trap where they graduate with far more debt than they should.
You're pretty spot on about your comments on state support though, FiveThirtyEight had a good piece on how tuition costs at public universities have largely been due to a decrease in government funding: https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
Coming from Australia it's also a bit odd that so many students move to go to university. Most of the people I knew at university were still living with their parents. Partly this is just the concentration of the population in a few major cities, but I think it's also the general trend of building universities close to population centers, and maybe less strong differentiation between university profile sin different regions.
[1]https://studentloanhero.com/student-loan-debt-statistics/
Even with college as expensive as it is, there are literally an order of magnitude more college students than prisoners in the US (22m vs 2.2m). Making it cheaper would of course further alter that.
Naturally, education is important. But there's no way to hand out college educations without (1) significant changing what the average education is or (2) significant lowering the average standard of living.
---
These articles are always about people who wanted to go to very expensive private schools (see item 1). There are tons of reasonably priced universities.
I went to
1. University of Florida (public school) which even without one of the easy Florida scholarships is $3200 per semester tuition.
2. Brigham Young University (religiously affiliated private school) which even without one of its academic scholarships is $2800 per semester.
Without savings, scholarships, tax credits I could literally cover one year full tuition with a 40 hr/wk $10/hr summer job.
https://admissions.unh.edu/tuitionfees
Looks like 18.5k$, which is still about 8.5k$ higher than most other states.
> My father, an electrician who worked nights driving Amtrak trains to put himself through trade school, only earned his associate’s degree in his mid-30s.
She, too, could have started with a 2 year associates degree.
They are rich and modern but got guns and expensive health care and education.
Such a crazy mix.
I'm from Germany and never fired let alone held a gun. I don't know anyone who did. Only police.
I paid about 4000€ for my degrees and got all my health costs covered by the public.
The mess in education and healthcare in the U.S. is mostly due to different partial solutions being applied by different actors at different times, and at different political levels. Each solution kinda sounded good -- but had flaws. And the feedback loop was glacial. This is quite different than having one party mostly in charge of everything for decades at a time. One wag said the U.S. doesn't have a healthcare system; it has four healthcare systems. (Each with different rules, goals, managers, and so forth, and each acting somewhat at odds with the other)
The education mess, which is just as horrible in my mind if not worse, is a bit simpler. If I had to reduce it all to a blurb, I'd say "One side wanted higher education for all no matter what", "One side didn't care about that, but wanted people who lend money to students to be assured of getting paid back no matter what". Each side had a really good point. I will not debate those here. But combined, we ended up in the worst of both worlds.
Yep. That's totally what makes modern Germany work...
It was a history question. I like history, so I tried to answer as neutrally as I could. If you don't like the answer you are welcome to provide another answer.
When you look around and say "Why are these things different?" then start hitting the books to learn why. If the OP's only point was that Germany is better than the U.S., then I guess no further learning is necessary. You are making a value statement. Discussing such statements online usually are a waste of time.
The German association of shooters has more than a million members and is one of the largest sports associations in Germany[0]. I am also German and shot everything I legally may; not because I am a gun enthusiast but because of occasions - there are plenty.
[0] https://de.m.wikipedia.org/wiki/Deutscher_Schützenbund
But not in big cities, where I lived most of my life.