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The Student Debt Problem Is Worse Than We Imagined

nytimes.com

261–270 of 374 posts

Re: The Student Debt Problem Is Worse Than We Imagined

#261

It's a damn shame we've let this crisis reach this scale. Along with healthcare, climate change, the debt, our inauguration, and so on, we've been essentially frozen for most of my life as politicians concern themselves more so with existential power struggle. The right wants to bring us back to the gilded age, the left makes headlines but is barely relevant, and the center is trying to squeeze bandaid solutions whil…

>"Along with healthcare, climate change, the debt," There's an interesting parallel with the cost of healthcare. Increases in costs for both seem to outstrip inflation year over year. And there's lots of of people making lots of money in both sectors. And yet nobody in either sector seems to be able to say exactly why the costs are increasing at the untenable rates they are. The only thing Washington ever seems to do…

The parallels in both cases are that service providers have no incentive to hold costs down, because the costs are not directly borne by the consumer or are delayed.

Providers charge whatever they want, because they know you really don't have a choice and that insurance is picking up the bill, and if insurance won't pay you can go after the patient. Patients don't have any way to price shop (it's usually impossible to know the cost of a procedure or service before you get it, nor what will really be covered by insurance) and are insulated from most of the costs by their insurance.

In education, a huge chunk of the tab is covered by loans, which makes students price-insensitive, and the institution has no real incentive to hold costs down, in fact they actually use the fancy rec center and stadium to attract students. They can also run up the gen-ed courseload to artificially increase the amount of time it takes to graduate. Students have no real flexibility here either, because it's not like you can take a class at another university because it's too much, or choose to pass on a gen-ed.

The sad truth about healthcare is there's just too many middlemen all taking their cut and it all adds up. Hospitals, drug companies, insurance companies, doctors all need to make their cut, and by the time the service is delivered it's extremely expensive. Most other countries impose a lot more price controls, reduce the number of middlemen, and provide doctors with free education to increase the supply and remove the need to repay their own steep student loans (iirc you are looking at about $400k these days). Fixing the problem involves taking on a number of very powerful lobbying groups at the same time and is going to piss off a lot of people whose gravy-train would come to an end.

In schools, the problem largely comes down to reducing the amount of administrators and reducing the spend on non-essential facilities (rec center, stadium, etc). The actual teachers themselves are usually overworked and underpaid, the money is disappearing at an institution/administration level.

Re: The Student Debt Problem Is Worse Than We Imagined

#262

Earlier quoted context omitted.

It's the opposite. If people can default, then the bank has to avoid defaulters, staying away from financing expensive studies in dead end careers. Otherwise the bank needs to get more defaulter, because they are more profitable than people who pay back.

Imagine a student having to provide grades and a course plan to their bank, and a loan officer has to sign off on this. Not unlike buying a house.

I can't imagine a student not having to provide his university name and major. Lend 20k per year to study the history of arts, what could go wrong?

Re: The Student Debt Problem Is Worse Than We Imagined

#263

Earlier quoted context omitted.

> Maybe a way to do this would be to separate teaching from testing. Have testing be established by some external body, and make it so both the university and the student receive a payout when the student succeeds on the test. This is basically what standardized testing is all about, and it's a significant contributor to the inadequacy of education in the United States. We haven't figured out a scalable way to measur…

How does standardized testing contribute to the inadequacy of education? If anything, it shows which students need help, as opposed to grade inflation and throwing out A grades to everyone that hands in a homework assignment on time. Local parents can influence grades, but they can’t get past standardized testing (which is why colleges use SAT/ACT/AP grades to filter rather than GPA). Perhaps funding as a result of s…

Standardized testing leads to teaching to the test, and the tests need to be easily gradable, so we teach kids how to take tests that represents content in a mannor that is a mile wide but an inch deep. Multiple choice is a crap way to measure most understanding.

This doesn't take away your other point: unsupportive environments. Socio-economically disadvantaged kids are truly disadvantaged.

Re: The Student Debt Problem Is Worse Than We Imagined

#264

Where is this a problem apart from the US? Any folks from countries where education is for sale want to chime in on what it looks like at their end of the woods?

In the Netherlands they recently (3 years ago) scrapped the "studiefinanciering" (study financing) which was a grant gifted to college student to support them in their living. It was replaced by a loan type system where students are able to lend money from the goverment against a 0% (for now) interest rate.

You have 35 years to pay back the loan, with an interest rate set every 5 years. You only start paying back the loan if you make more then the the minimum wage (or if you make more then 143% of the minimum wage if you have children)[1].

Defaulting on the loan is possible, although i have no clue how easy that is. (It probably involves being placed under "Schuldsanering"[2])

The system has been highly critized as getting a loan is extremely easy and many first year students just loan the maximum amount allows. (which is a staggering 1300 euro a month, for comparison, the old system was a grant of rougly 400 euro a month).

College costs itself is funded mainly by the goverment, as both Universities of applied science and universities of science have major oversight from the goverment.

The subsidized collegecosts are the same for everyone regardless of major(2000 euro a year roughly). This subsidizing only applies on your first bachelor of first masters though. If you want to do more then one bachelor/masters, you pay the full price, which is depend on major.

1: https://duo.nl/particulier/studieschuld-terugbetalen/terugbe...

2: http://www.financieelbewind.nl/wnsp-wat-is-schuldsanering.ht...

Re: The Student Debt Problem Is Worse Than We Imagined

#265

Earlier quoted context omitted.

Student loans are secure. They cannot be discharged through bankruptcy.

That’s not what “secured” refers to. It means that if a loan is in default, the lender can seize an asset, like a house or some receivables. The fact that student loans can’t be discharged in bankruptcy makes them less risky, but not nearly as safe as a secured loan where there is an asset backing it up.

Incorrect. Bankruptcy is more secure.

When the student can't pay, the abusive interest rate accrues fast enough that it becomes a perpetual loan. It's a guaranteed lifetime earning for the bank.

It's also a misnomer to call that defaulting. The principal can be covered many times over by the interest. It's very profitable.

Re: The Student Debt Problem Is Worse Than We Imagined

#266

Earlier quoted context omitted.

That's basic economics of lending. If X% of people default then you have to increase interest rates to cover the people that default. The increased interest rate will dissuade students from taking on degrees with lesser economic prospects. It's like adding back pressure or load shedding to a distributed system. It is better to drop or delay requests than let the entire system collapse under it's own weight.

Higher tuition (skyrocketing tuition, actually) should have already done that

Naw, you just get a bigger loan :)

Re: The Student Debt Problem Is Worse Than We Imagined

#267

Earlier quoted context omitted.

That’s not what “secured” refers to. It means that if a loan is in default, the lender can seize an asset, like a house or some receivables. The fact that student loans can’t be discharged in bankruptcy makes them less risky, but not nearly as safe as a secured loan where there is an asset backing it up.

Incorrect. Bankruptcy is more secure. When the student can't pay, the abusive interest rate accrues fast enough that it becomes a perpetual loan. It's a guaranteed lifetime earning for the bank. It's also a misnomer to call that defaulting. The principal can be covered many times over by the interest. It's very profitable.

[deleted]

Re: The Student Debt Problem Is Worse Than We Imagined

#268

Earlier quoted context omitted.

I can't express how wrong this response is. Term limits are necessary, there should be no such thing as a "career politician". A politician should be required to have actual skills, and not just a nice smile. Experience with politics is meaningless, there should be NO establishment. It is always the new guy who reveals the truth to the people, which is a good thing. Experience only results in being able to lie to the…

Being a good politician I think has two meanings which kind of drives this divide in opinion: 1) being good at getting elected 2) being good at getting things done It really does take experience, connections, networks, and skill to accomplish things in legislatures. Same with getting elected. The problem is in order to become #2, you have to become #1. Unless we as voters become far more informed and drastically chan…

Why not just cut out 1) all together. Let people get chosen randomly.

Re: The Student Debt Problem Is Worse Than We Imagined

#269

Earlier quoted context omitted.

> Just let students default. It's not that easy. What's to stop everyone from defaulting?

Good question. EG Why doesn’t everyone default on a loan? This is asking “how do loans work”. Typically, a loan with interest is a gamble. You want to get your money back with a return. If you loan money you want to ensure you will get your money back by qualifying the applicant. There is a risk though because they might not pay it back, thus you increase the interest rate according to how qualified the loan is. Good…

I think you're slightly missing the point.

If student loans can be defaulted, it doesn't matter what the investor thinks or what interest you get or if you're backed up by the government or not.

Even if you study [insert profitable degree], the rational action to do after graduating is to default, since students typically don't have much to lose.

Re: The Student Debt Problem Is Worse Than We Imagined

#270
post #64

"...averaging $22,000 in debt by graduation" That is not very much money. That's a modest new car or a down payment on a small home in a cheap zip code. At low enough interest rates, that monthly bill will be less than most people's cell phone or cable bill. I think that's a reasonable price for something as unique and transformative as a college experience. There is obviously a serious problem here, but not necessar…

> I think that's a reasonable price for something as unique and transformative as a college experience.

That's begging the question, though. What if it's not as unique and transformative as we hope? What about people who don't finish their degrees? What if you can get unique and transformative for a fraction of the price?

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