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More Than 40% of Student Borrowers Aren’t Making Payments

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Re: More Than 40% of Student Borrowers Aren’t Making Payments

#251

Post by smadge »

sh1ps wrote: post #22

A big takeaway from this article (for me) is that people are surprised that 17 year old kids don't understand what they're doing when they take out that college loan. Shock and astonishment despite there being little to no preparation for this kind of financial understanding previously in their education. That surprise and shock shocks and surprises me. Honestly it kind of reminds me of the whole Yelp minimum wage th…

Financial literacy is not enough. Lenders are always going to have more knowledge about their own financial products and the ability of the borrower to make payments. For example, in the subprime mortgage crisis, borrowers were blamed for recklessly borrowing money. This makes no sense. Who is more reckless, 1) a working class borrower with little financial literacy taking a loan, or 2) a multibillion dollar, multinational bank with extensive financial knowledge giving that loan to the borrower? It's the same situation with student loans. Don't blame the students, blame the banks.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#252

Post by dv_dt »

prostoalex wrote: post #210
dv_dt wrote: post #194

I this comes out of the flawed meme of private enterprise efficient/gov't inefficient. Thought it's true in some areas, in the area of funding education in society, it's terrible. The loans push money to unsophisticated buyers (kids and their parents), who use it to make a huge amorphous transaction which is only performed once in their lives and plays out over years. There's insufficient buyer information to provide…

That strategy seems to work for Year 1, but what happens when (a) universities expand to cover this newly created demand, thus requiring larger budgets, (b) people enroll only to find out that the classes they are interested in are full? To quote http://www.theatlantic.com/magazine/archive/2015/05/the-upwa... "When it comes to college, the central challenge for most Americans in the 21st century is not going; it’s fi…

I think with that proposal that you're rerouting the money for two years, but keep the same fundamental economic problem of buyers trying to be efficient at selecting what asset to purchase when they only do it a very few times in their life.

Let's put it this way: I give to $5 to go buy a coffee for (and or some other drink if you're not a coffee drinker) - chances are you'll decent value on that cup of coffee. Now, I give you $5M and say go buy a yacht. And oh, no longer than a three hour tour and you have to live on the yacht for the next thirty years... What are the chances that you'll get good value on that yacht? And if the yacht industry is flooded with buyers in your position - what is the chance that the industry will be particularly efficient at providing value to their customers?

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#253

Post by joe5150 »

josephjrobison wrote: post #189

Wondering if it would help at all if the parents saved up enough for each kid to fully fund their private college, and then when the kid hits high school tell them - when you graduate, you'll get $50k/yr towards your college. If you go to a private school it will cover it, but not leave much. If you go to a good public school, the extra $20k/yr is yours. If you get a full ride scholarship, the $50k/yr is all yours. W…

People with the means of fully funding their kids' private educations (even if they've "saved up") don't tend to have student loan defaults by definition, so I don't see how that's even relevant. If even a plurality of parents in America could afford to do that, we'd live in a different world.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#255

Post by meric »

josephjrobison wrote: post #189

Wondering if it would help at all if the parents saved up enough for each kid to fully fund their private college, and then when the kid hits high school tell them - when you graduate, you'll get $50k/yr towards your college. If you go to a private school it will cover it, but not leave much. If you go to a good public school, the extra $20k/yr is yours. If you get a full ride scholarship, the $50k/yr is all yours. W…

>> If you get a full ride scholarship, the $50k/yr is all yours. Would that work? I'm assuming for some it would.

Bitter personal experience taught me using extrinsic motivation destroys intrinsic motivation.

The kid will get that scholarship to pocket the $50k/yr. But then the kid won't be motivated to do much more than that afterwards. Now all he or she's thinking is how fast they can spend the $50k.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#256

Post by Futurebot »

alanh wrote: post #183
Rangi42 wrote: post #97

Earlier quoted context omitted.

Not everyone wants or needs to get a well-rounded liberal arts education. The problem is that undergraduate degrees are more and more a prerequisite for getting any job, so there's pressure to make it easy for poorer people to earn a degree. Towards that end we have loans, grants, scholarships, subsidized city colleges and state universities...

I am afraid you are wrong there. It’s a myth that the reason we have public funding of higher education is to help people get nice jobs. We have public funding of higher education because a better educated populace is a better democracy and a better public. It's an intrinsic value. See also: http://www.salon.com/2014/06/08/colleges_are_full_of_it_behi...

That has long been the romantic ideal, but it no longer matches the reality in a hypercompetitive, filter-laden job market and economy:

https://hbr.org/2015/10/firms-are-wasting-millions-recruitin...

http://www.economist.com/news/briefing/21640316-children-ric...

http://www.economist.com/news/special-report/21646985-americ...

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#257

Post by branchless »

kdamken wrote: post #13

Not surprising. Lots of kids are holding out hoping that someone will get elected and wave a wand to magically erase the money they borrowed.

Well it was magic'd into existence so magic it back out. Most degrees are not worth the cost because the cost is set by loose credit, and credit is ex nihilo.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#258

Post by serge2k »

tyre wrote: post #59

We have set students up to fail. On the one hand, we tell them that everyone has to go to college and that more education is better. Regardless of whether more education has any financial return. Is that the only metric? Absolutely not, but there is a point at which education is a luxury.[1] My entire high school education was focused on how to get into the "best" college. On the other hand, in order to get that educ…

> My entire high school education was focused on how to get into the "best" college.

and? The alternative is closing doors.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#259

Post by alecbaldwinlol »

pink_dinner wrote: post #94

We really need to educate students potentially starting college that they shouldn't major in something that pretty much has no chance of ever paying it back. This applies to most liberal arts programs. A college education is a major investment. It's sad that culturally, our financial education is this poor. I majored in a science and had all of my debts paid off within 5 years. I have friends that majored in things l…

I majored in history at UNC and paid off my $26,000 in student loans with my first commission check from my first sales job.

One's major and even one's skills are not an accurate predictor of ability to pay back loans. It is entirely a question of persuading other people to pay you lots of money quickly, and the requisite amount of luck it takes to find such a person quickly.

Re: More Than 40% of Student Borrowers Aren’t Making Payments

#260

Post by praxulus »

djsumdog wrote: post #166
letitgo12345 wrote: post #66

Earlier quoted context omitted.

The TARP bailout was not money just handed out to banks. It was loans to banking and other industries which was repaid in full overall. And in fact it was the auto industry which failed to repay the loan, not the banking industry. I'm not a fan of the financial sector but let's keep the facts straight here

No. They were hand outs. Only some banks got them. PNC got $5 billion from TARP. They then bought National City Bank, a regional bank in Ohio. National City was not allowed to even apply for TARP. PNC bought NC with that $5 billion, then got a tax break for $5 billion for "saving" them. PNC bought National City for free, using tax payers money. TARP was not a loan. It backed every bank debt 100% (when it should have…

It sounds like the tax break was the handout, not the TARP loan.
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