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U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

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Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#91

Post by nroets »

maxkwallace wrote: post #43
exabrial wrote: post #22

No creditor would give a loan to someone who doesn't have a chance of paying it back. There are kids going to school for music therapy that are taking $100K in debt. It's time to end government subsidized loans, at least in the current form. The private market does a great job of evaluating risk, the only thing that needs to be done is ensure there is ample competition so it self-regulates.

In principle I agree, but in practice, it seems like private lenders are empirically doing a bad job evaluating risk. Rates for private loans are so high they can only be explained by a high default rate, even among "low-risk" demographics. These rates are very high even for students that we'd view as a low credit risk (e.g. studying CS and not music therapy). I think this shows the private market is doing a poor job…

It's called adverse selection: A lot talented students happen to have one or more wealthy family member (s) who will either lend or donate the money to them.

So commercial lenders receive a disproportionate number of applications from students who will have a difficult time finding a well paid job.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#92

Post by ashelmire »

TrinaryWorksToo wrote: post #84
ashelmire wrote: post #74

Earlier quoted context omitted.

Actually, the simplest way to put downward pressure on tuition in the US is to allow the loans to be dischargeable in bankruptcy.

Won't people then plan to go bankrupt? Although perhaps that will allow a better equilibrium.

Yes, which is exactly the point; so banks/gov will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#93

Post by ashelmire »

p1esk wrote: post #83
ashelmire wrote: post #74

Earlier quoted context omitted.

Actually, the simplest way to put downward pressure on tuition in the US is to allow the loans to be dischargeable in bankruptcy.

Why?

See the other comment:

Banks will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#94

Post by drdeadringer »

anilshanbhag wrote: post #10

There is so much waste in universities: bloated admin/it staff , libraries filled with journals/magazines that no one reads, tenure system that doesn't allow you to downsize departments that have no students. Tuition can be reduced, however there is no incentive to do it since students can easily get loans.

> libraries filled with journals/magazines that no one reads

I appreciate both sides of this and I'm not sure where I currently am on the issue.

Libraries do purge from their shelves, and probably should as time progresses. It is interesting to me the figuring on what to purge, for obvious reasons. Likewise for what new material "should" be taken in to [re]fill the shelves.

Similarly, I once purchased a ~50-year-old book about "future" rocket science from a used book store. The clerk actually asked for clarification, "You understand this book is 50 years old, right?" ... yes I do, please take my money. This makes me wonder where libraries dispose of their discarded stock if not some gigantic shredder or similar.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#95

Post by ganoushoreilly »

dgzl wrote: post #77
erentz wrote: post #35

Earlier quoted context omitted.

Right. It’s become a government backed bubble. Somehow we need to pop it softly. I’m sympathetic to all the current student debt holders and providing relief to them but if we do that without putting and end to these guaranteed loans we’re just perpetuating (and making worse) the problem. Doing something like making community college and trade school level degrees free and leaving everything else to private loans sor…

Here's an idea for 'slowly popping it': Innovate in trade schools and start convincing high school students to take that path instead of University.

Somewhere in the early / mid 90's VO-TECH was changed to being a dirty word. I would even argue that some computer science related programs should take a vo-tech structure.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#96

Post by adriveatrain »

erentz wrote: post #35
anilshanbhag wrote: post #10

There is so much waste in universities: bloated admin/it staff , libraries filled with journals/magazines that no one reads, tenure system that doesn't allow you to downsize departments that have no students. Tuition can be reduced, however there is no incentive to do it since students can easily get loans.

Right. It’s become a government backed bubble. Somehow we need to pop it softly. I’m sympathetic to all the current student debt holders and providing relief to them but if we do that without putting and end to these guaranteed loans we’re just perpetuating (and making worse) the problem. Doing something like making community college and trade school level degrees free and leaving everything else to private loans sor…

> making community college and trade school level degrees free

that's a tax on the non-attendees, why should they pay for your education when it significantly raises your earning potential?

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#97

Post by twblalock »

tramGG wrote: post #7
alkibiades wrote: post #2

i predict we’re going to have to bail these people out. once a critical mass of americans do something idiotic, it becomes politically expedient to bail them out and blame the companies for greed. this is a direct response of the government providing unlimited loans to anyone

cancel the debt, and move towards free colleges.

I paid off my student loans. If people who didn't pay off their loans get forgiveness, I should be entitled to a refund.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#98

Post by BallinBige »

briandear wrote: post #37

This will be highly unpopular but it seems to me like a solution is to start doing some amount of payroll withholding for those with student loan debt similar to the way social security/Medicare is handled. It doesn’t have to be a huge amount, but enough to ensure repayment. Government forces us to “save for retirement” via social security, yet being debt-free is a far greater advantage in retirement than the retirem…

I think an income garnishment does this?

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#99

Post by jogjayr »

briandear wrote: post #37

This will be highly unpopular but it seems to me like a solution is to start doing some amount of payroll withholding for those with student loan debt similar to the way social security/Medicare is handled. It doesn’t have to be a huge amount, but enough to ensure repayment. Government forces us to “save for retirement” via social security, yet being debt-free is a far greater advantage in retirement than the retirem…

I rather like the idea of making student debt dischargeable in bankruptcy (not retroactively obviously). Why should borrowers alone face the consequences of their bad decisions? Aren't lenders equally complicit?

I understand that educational loans are essentially unsecured loans. So fine, let them be treated like personal loans and let lenders evaluate their risk accordingly. It'll quickly put an end to letting an 18-year old go into $100k in debt for a liberal arts degree.

Re: U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

#100

Post by nazgulnarsil »

adriveatrain wrote: post #96
erentz wrote: post #35

Earlier quoted context omitted.

Right. It’s become a government backed bubble. Somehow we need to pop it softly. I’m sympathetic to all the current student debt holders and providing relief to them but if we do that without putting and end to these guaranteed loans we’re just perpetuating (and making worse) the problem. Doing something like making community college and trade school level degrees free and leaving everything else to private loans sor…

> making community college and trade school level degrees free that's a tax on the non-attendees, why should they pay for your education when it significantly raises your earning potential?

potentially because the taxes tend to fall on those who benefit hugely from an educated workforce. Not sure I agree with this argument, but it's worth noting the justification so that it can be discussed seriously rather than more confusing arguments.
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