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The Student Debt Problem Is Worse Than We Imagined

nytimes.com

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Re: The Student Debt Problem Is Worse Than We Imagined

#331

Post by usaar333 »

brazzledazzle wrote: post #305
usaar333 wrote: post #258

Earlier quoted context omitted.

> The problem would be solved in a week. Solved in what way though? The end solution state might be one where loans are less available, further entrenching generational income inequality.

We’re so obsessed with stopping cheaters or lazy good-for-nothing’s that we’ll privatize at all costs. That’s including, oddly enough, publicly distributing the risk those private institutions take on. Why not just cut out the middle man and have the government pay for the higher education of the low and middle class directly?

The purpose of loans is that the private sector should be able to better evaluate college ROI than a government agency and offers/prices appropriately. Admittedly, government loan backing breaks this model.

(Also it doesn't help that the least risky students are out of the pool by either parents funding or scholarships)

Re: The Student Debt Problem Is Worse Than We Imagined

#332

Post by paulmd »

paulmd wrote: post #261
bogomipz wrote: post #84

Earlier quoted context omitted.

>"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 t…

Example that comes to mind: my alma mater tore down a building that contained english/math classrooms and lecture halls, and replaced it the year I graduated. The basic requirements of an english/math classroom or a large lecture hall have not fundamentally changed in the last 100 years, they may have added projector screens but it's still fundamentally a room that people sit in and receive instruction, and there was no real need to replace it besides "we could".

The university did put forward that it would save them $300k per year in energy costs, which means that at the cost of $69 million it'll only take them 210 years to make their money back.

https://www.mlive.com/news/kalamazoo/index.ssf/2010/05/weste...

They are currently planning to tear down 12 student dorms and rebuild them at a cost of $55-75k per bed.

https://www.mlive.com/news/kalamazoo/index.ssf/2017/09/weste...

That's the kind of thing that drives up costs.

Re: The Student Debt Problem Is Worse Than We Imagined

#333

Post by mrep »

phkahler wrote: post #276
vilmosi wrote: post #269

Earlier quoted context omitted.

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.

And then lenders won't make the loans. That's exactly the point. Student loans were a bad idea in the first place. The ready availability of tuition money has lead to schools raising tuition FAR faster than inflation for the last 20-30 years. Most of that money isn't even going to education.

Except without those loans, poor people will have to grind out low paying jobs trying to save up enough money to go to college and get a higher paying job that requires a degree because they have no money to pay for it. Then, when they finally get through college, they will be years behind the kids of wealthy people and to make matters worse, every year you delay putting off a degree decreases the future value of said degree since you generally have a limited amount of working years and thus less years to earn money from said degree.

Re: The Student Debt Problem Is Worse Than We Imagined

#334

Post by mrep »

ransom1538 wrote: post #252
vilmosi wrote: post #251

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…

How do you propose funding poor people's education then? Keep in mind education is not like a house where you generally pay 20% down and the bank gets to keep your house if you default which they can then resell to recoup some/most of their loan. Poor people have very little money to pay for education and all of the value goes towards their brain which a bank cannot just reposses which is why the government takes ownership of said loans and effectively repossesses your future earnings.

Re: The Student Debt Problem Is Worse Than We Imagined

#335

Post by mrep »

leoedin wrote: post #281
vilmosi wrote: post #277

Earlier quoted context omitted.

It's not bad. But it doesn't matter how much tuition costs or what degrees offer pay or not. Everyone will study whatever they want, borrow at 1000% interest if necessary or 1% interest for "profitable" degrees, and then dump the dept as soon as they graduate. Or am I missing something? Original question, what's stopping everyone from defaulting right after graduation?

What's to stop people defaulting on other unsecured loans, like credit cards? Some people do, but most people don't. Why? Because defaulting on a loan means a bad credit score and suddenly modern society becomes hard - no mortgage, no car loan, no more credit cards etc.

The main difference is a bank can repossess your house/car/possessions for normal loans thus making back some of the money they leant you (and you losing all of the stuff you bought with that debt). They cannot repossess any bit of the money spent on your education. This is why the federal government steps in because they legally can repossess some of your education by extracting it out of your future earnings.

Re: The Student Debt Problem Is Worse Than We Imagined

#336

Post by mrep »

lghh wrote: post #289
vilmosi wrote: post #277

Earlier quoted context omitted.

It's not bad. But it doesn't matter how much tuition costs or what degrees offer pay or not. Everyone will study whatever they want, borrow at 1000% interest if necessary or 1% interest for "profitable" degrees, and then dump the dept as soon as they graduate. Or am I missing something? Original question, what's stopping everyone from defaulting right after graduation?

Nothing would stop everyone from defaulting. There would just be less student loans to default on in the first place. If defaulting was an option, student loans would either not exists or nearly not exist. If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. If colleges drop their cost, students don't need loans. The cycle ends.

> If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats.

For lots of colleges, I agree. However, lots of people who come from well to do families have their entire colleges paid for by their parents even today with high tuition costs and thus top colleges could still increase feas as rich parents can afford it whereas poor people would have to grind out for years in low paying jobs just to afford the chance to go to the rich schools. Without guaranteed loans, poor students would practically never have the opportunity to go to rich schools.

Re: The Student Debt Problem Is Worse Than We Imagined

#337

Post by mjevans »

mrep wrote: post #334
ransom1538 wrote: post #252

Earlier quoted context omitted.

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…

How do you propose funding poor people's education then? Keep in mind education is not like a house where you generally pay 20% down and the bank gets to keep your house if you default which they can then resell to recoup some/most of their loan. Poor people have very little money to pay for education and all of the value goes towards their brain which a bank cannot just reposses which is why the government takes own…

OK, I'll bite.

I propose that the government should have an anti NEET law (for 'working age' people), that is, someone should always be in Employment, Education or Training. It was either to complete the acronym, or the latter two are differentiated between theory education and trade-school education.

The education/training parts are pretty simple; a minimum 'living wage' (for ACTUAL living, not fake numbers) and housing near the education/training site will be provided in exchange for participating in the education/training. This payment also applies to child student dependents of legal guardians (usually parents) and is their "tax credit" replacement.

The employment part is a combination of publicly paid internships and/or work directly for the public good. In both cases the employee is a civil servant and any "works" they create become the public domain; unless the median pay rate for that job is paid to the government as a "temp" placement fee.

While I'm at it, part time workers receive pro-rated benefits funding and the option to buy from (any of) their employer's benefits pool(s). Partial work shouldn't be an excuse to deny benefits.

If benefits are fully socialized (E.G. single payer primary health cost coverage) then the above can still apply to over the top benefits.

Re: The Student Debt Problem Is Worse Than We Imagined

#338

Post by taysic »

AvocadoPanic wrote: post #299
paulmd wrote: post #257

Earlier quoted context omitted.

So people who do everything right and delayed purchasing a house/etc to pay student loans just get screwed? If I can make my loan payments, they can too. Student loan forgiveness is a solution that only helps a narrow slice of those affected by the student loan problem. It's not something that just affects those making payments, it affects literally everyone who ever had a loan. Jubilees are only going to decrease re…

Maybe lending should be risk based like other types of lending. 250k for med school, sure. 100k for undergrad in women's studies - no government guarantees for you I'm sure there's enough data already on the RoI of various programs. Seems like there should be a floor / bar based on the RoI for programs to qualify for government backed loans to students.

When the gov is in charge of things, there are too many vested personal interests that would argue certain unprofitable programs need more funding anyway etc... The only way these things can be assessed with certainty is when a private company is giving out the loans and they have real skin in the game.

Re: The Student Debt Problem Is Worse Than We Imagined

#339

Post by SamReidHughes »

mmanfrin wrote: post #189
SamReidHughes wrote: post #173

Earlier quoted context omitted.

$22K in debt isn't serfdom, that's the price of a Honda Civic. It takes few grand a year to keep up with interest.

22k is an average. There are many people whose debts are significantly more.

Even with 100k in debt you're talking 7k interest. Get a job in sewer maintenance instead of museum curation and you'll have no problem paying that off.
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