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Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

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Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#261

Post by Raidion »

jdmichal wrote: post #90
godelski wrote: post #65

Earlier quoted context omitted.

The problem I really see is that we've dug ourselves a big hole. The safety net created for the banks were done to ensure that everyone could get a loan. Banks were "worried" that people would default on their student loans and run away with the money, even though this hasn't happened or is really rare. There was an unfortunate side effect that this incentivized banks to give out riskier loans. Couple that with telli…

> I'd say "bite the bullet, and that's what banks get for giving out risky loans" but we know that's not going to play out that way, especially since the gov owns a fair portion. > Making tuition free is nice... I think it's funny that you have these two ideas so close together... The government owning most of the loans provides a very easy path to enabling free college retroactively: extinguish all the loans. The go…

That punishes everyone who took out private loans or worked to put themselves through college. Not to mention it hurts those who worked to pay down their loans earlier.

There are a lot of ways of socializing the cost of education, doing it retroactively opens up a whole can of worms.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#262

Post by OliverJones »

nsporillo wrote: post #58

As a current student and one who will graduate with roughly $60k in student debt, after scholarships and grants - I often question the legitimacy of the driving factors in increased tuition. Most would say the volume of administrators has ballooned due to the increasing number of services universities now provide for the students. Better and more services offered to students should benefit quality of life. Does the e…

The article mentions "loose student loan underwriting standards." Here's what's going on:

The people originating the loans have no skin in the game. So, they don't call NYU or even Northern Essex Community College and say, "look, here's a student who wants to be a social worker, asking for 100K in loans to get the degree. We don't think they'll be able to repay that debt on a social worker's wages. So, no loan."

If the lenders WERE calling the colleges saying that, the colleges would not be escalating tuition as radically as they are.

It's not realistic to expect the kid who just got in to NYU or a community college to play that kind of hardball in negotiating tuition rates. But when the lenders don't play that hardball, it leaves higher-education executives trucking to the bank on the proceeds of those loans.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#263

Post by Raidion »

ktta wrote: post #147
jartelt wrote: post #43

Earlier quoted context omitted.

The article does compare them (albeit without much detail). “Delinquency rates on student loans are much higher than those on auto loans or mortgages, due to loose student loan underwriting standards, the unsecured nature of student debt, and the inability to charge off non-performing student loans in bankruptcy,” Goldman Sachs Group Inc. analysts Marty Young and Lotfi Karoui wrote in a note Tuesday. “The substantial…

If the default risk is borne by the US Treasury, then what risk do we have in general?

The risk that the increased supply of money lowers the value of that money. Not that this is the straw that's gonna break the camels back, but it's not like there aren't consequences to the taxpayer for allowing the government to allocate funds in a sub optimal manner.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#264

Post by OliverJones »

CalChris wrote: post #112

The fundamental problem here is that student loans have been declared a special debt not dischargeable through bankruptcy. At the same time, these loans can be Federally guaranteed through FFEL. This leads to $100K cooking schools promising to turn a recent dischargee from the Army into a pro-chef, sign here, here and here. If student loans were subject to bankruptcy banks would be more careful. Instead we have a pol…

Exactly. The lenders don't have enough skin in the game to make it worth negotiating with the colleges / universities to keep tuition down. The article mentions "loose student loan underwriting standards". That means the underwriters don't call the colleges on the carpet about grossly overpriced degree programs. So tuition spirals.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#265

Post by jpao79 »

jedberg wrote: post #22

There is definitely an education bubble. It's way too easy to get money for college. You hear a lot of stories about the increasing costs of college and crushing debt on graduation, but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan". Almost everyone gets approved, regardless of their future ability to pay it back. We need a fundamental shift in the way college is paid for. Some…

>> Another solution is to let you go to school for free and then pay a percent of all your future earnings back to your college, or at least into a pool that pays for the next generation's college.

PBSNewsHour did a piece on this concept:

Purdue invests in students’ futures with new model of financing https://www.pbs.org/newshour/show/purdue-invests-students-fu...

"Unlike student debt, it shifts the burden — or the risk, I should say — entirely from the student to the investor."

"That’s because the terms of the agreement, called an ISA, are made well before students launch their careers. So, even if a student ends up in a low-paying job, the pay-back percentage stays the same."

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#266

Post by muraiki »

jedberg wrote: post #22

There is definitely an education bubble. It's way too easy to get money for college. You hear a lot of stories about the increasing costs of college and crushing debt on graduation, but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan". Almost everyone gets approved, regardless of their future ability to pay it back. We need a fundamental shift in the way college is paid for. Some…

You said: "...profitable majors, so you'd probably see a lot more STEM degrees and a lot fewer of everything else...". In terms of lifetime earnings, STEM is not necessarily a sure fire route:

"'Students and parents have a pretty good idea of what majors pay the most, but they have a poor sense of the magnitude of the differences within the major,' said Douglas A. Webber, an associate professor of economics at Temple University who studies earnings by academic field. He points to one example: The top quarter of earners who majored in English make more over their lifetimes than the bottom quarter of chemical engineers.

But what if you never make it to the top of the pay scale? Even English or history graduates who make just above the median lifetime earnings for their major do pretty well when compared to typical graduates in business or a STEM field."

See https://www.nytimes.com/2017/11/03/education/edlife/choosing...

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#267

Post by Veratyr »

was_boring wrote: post #203
Veratyr wrote: post #177

Earlier quoted context omitted.

> Another solution is to let you go to school for free and then pay a percent of all your future earnings In Australia we have a system somewhere between this and a loan. You go to (heavily subsidized) university, tuition is paid for by the government with an automatic interest free loan. Once you earn above a particular (somewhat generous) threshold, your employer automatically starts taking a percentage of your inc…

question: why would you pay it off early? money (generally) gets cheaper over time and if interest is lower then inflation there is no reason to pay it off early as the debt becomes cheaper every year.

I no longer live in Australia and as long as you have this debt, you're required to file an Australian tax return. I paid it off to get rid of that hassle.

Also it used to be that voluntary payments got you a discount.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#268

Post by linkregister »

mattmanser wrote: post #97
JonFish85 wrote: post #79

To me, this is another implementation of the housing bubble: - People see college graduates making a lot of money - Politicians make it a priority to make it easier for people to get loans to go to college - More people take out loans to go to college - Colleges realize there is no downward pressure on price and raise tuition. - Politicians continue to make it easy for people to go to college - People take bigger loa…

The thing I don't understand is, how does it unravel? It feels like politically acceptable short-termism of shunting education costs onto future generations. No-one's going to 'lose' money over it. Who will suffer? It doesn't look like it will be corporations that will suffer, save some institutions will close when the endless supply of money suddenly dries up. It looks to me like it will be governments, a political…

I think it unravels over time. The feedback loop is very long.

At some point, large amounts of young adults will accept loans that exceed the value-add of college by a significant amount. Then, those who chose not to attend college and pursued a trade will be more visibly affluent. The trend will swing the other way, universities will experience downward pressure on tuition, and trade schools will be inundated as universities are now.

Until there is a political solution, I don't see how the cycle rights itself.

Maybe better information dissemination will give young adults more ability to make the rational choice whether or not to get large loans (or what amount of loans to get). Until then, the feedback loop is too long. Furthermore, for those who chose wrongly, there's no remedy. It's a bad situation.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#269

Post by wang_li »

jedberg wrote: post #22

There is definitely an education bubble. It's way too easy to get money for college. You hear a lot of stories about the increasing costs of college and crushing debt on graduation, but you don't hear a lot of stories of "I wanted to go to college but couldn't get a loan". Almost everyone gets approved, regardless of their future ability to pay it back. We need a fundamental shift in the way college is paid for. Some…

> It's way too easy to get money for college.

It'd be more correct to say that it's way too easy to get money while at college. An awful lot of college students believe that being in college means that they have a middle class lifestyle. It is cliche, but in my day (1989-1993) students were poor. You lived in a dormitory and ate in a cafeteria. Maybe you'd go to a bar once a month. And 99% of the time you walked everywhere.

I think easy of approvals for student loans combined with the 2008 recession and slow recovery led to a lot of people finding that student loans were a source of income rather than a way to pay for college.

Re: Student Loan Debt Is Now as Big as the U.S. Junk Bond Market

#270

Post by martin_bech »

sol_remmy wrote: post #213
martin_bech wrote: post #131

Earlier quoted context omitted.

We have a system like that. Its called taxes and free education. Everyone is offered free college education, including basic living expenses. In return everyone pays a litle more in taxes. And those who choose college, often earn more, and then pay more in taxes. (Im from Denmark)

Maybe you should focus on not falling too far behind Finland, the Netherlands and Sweden first. I don't think I've ever heard of a Danish tech company. Even tiny Iceland has EVE Online.

What a wierd comment? But Ill play along. Heard of Skype? Endomondo? Just Eat, Google V8 (the javascript engine in chrome and node.js)? And if you want games, heard of Hitman? Subway Surfers? Limbo?
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