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Ripping Off Young America: The College-Loan Scandal

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Re: Ripping Off Young America: The College-Loan Scandal

#81

Post by macspoofing »

ethanbond wrote: post #36
twoodfin wrote: post #24

Earlier quoted context omitted.

This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. Loans for the sake of loans seem to be the key problem here: If students who intended to get a "degree in bullshit" at a gussied up diploma mill faced difficulty finding a loan for that purpose, they might reevaluate their decision. And besides: Who's seriously advocating for the total elimination of s…

And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation. We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.

>And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use?

If you're a responsible lender, you sure as hell should look at the risk profile of the borrower. If the borrower is asking $200,000 to go to a private college for a liberal arts degree, you may want to assign a higher risk to him, then if he was going to Med school. In other words, you may want to go through the same exercise you go through to approve small business or real-estate loans. The problem is that you don't need to be a responsible student loan lender since the federal government will just guarantee you the loan anyway.

Re: Ripping Off Young America: The College-Loan Scandal

#82

Post by joyeuse6701 »

IMO, The issue is that it is a near societal necessity that everyone go to college, but the cost of it has not been lowered to reflect that. There is a supply of students, and the universities know it. Competition amongst schools for top talent is easily reflected in sports where colleges go head over heels to pay a student athlete's way through school if they would just play for them. The tables would need to be reversed to affectively lower the price of education as universities competed for students. Essentially, remove the abundance of students or introduce more universities to compete against the currently entrenched. That would be a free market method, because this regulated version isn't working out.

Somethine

Re: Ripping Off Young America: The College-Loan Scandal

#83

Post by lawnchair_larry »

Symmetry wrote: post #58
ethanbond wrote: post #12

Earlier quoted context omitted.

I agree. Loans aren't at the root of the problem, but they're also a bad solution. An even worse solution is getting rid of loans. The only solution worse than that? Blaming students. This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. I'm not going to be the one that screws an entire generation out of a worthwhile education in the name of "loans are ba…

Getting rid of loans isn't really on the table, people are generally free to loan each other money and there doesn't need to be a special government program for student loans to exist. But we do have a lot of laws and programs around student loans and I'm not sure that they do more good than harm, on net.

I think removing bankruptcy immunity would go a long way. It forces lenders to actually consider risk, and fixes a lot of perverse incentives. As it stands, there is no reason not to loan far more than someone could ever repay. You pay until you die, bankruptcy or not, and then your estate pays. And, it's guaranteed by the federal government. Why wouldn't you push as many of them everywhere you possibly could? There is no better asset on your balance sheet as a lender. It's guaranteed free money. But there is no asset, so it's even worse than the subprime mortgage scandal.

I know a few baristas in their 30s with six figure loans. Similar story for all of them. Barely 18, pressure to go to a good college, parents proud of their kid who encourage it more, who themselves are not the most financially savvy either. Throughout their college years, school administration makes it very easy to help them request another 10k or so at a time. Between parents, loan officers, and school administration, everyone is just whisking them through to sign and the money is theirs. Since it seems so normal and unquestioned, by people who are supposed to be providing guidance, many kids don't seriously consider the feasibility of the whole thing.

I'm a believer in personal responsibility, but I think when it becomes adversarial and systemically designed to provide all the rope necessary to hang themselves, it's hard to put the blame on some of the kids.

Re: Ripping Off Young America: The College-Loan Scandal

#84

Post by twoodfin »

coffeemug wrote: post #66
ethanbond wrote: post #36

Earlier quoted context omitted.

And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation. We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.

The market. Right now, the government loan programs treat all degrees interchangeably. If you introduce market forces into the equation, the lenders will run some basic stat calculations and you'll quickly end up with the following scenario: 1. Useful degrees from good universities will be easy and cheap for good students to fund. 2. Everything else will get harder/more expensive to fund, in proportion to its statist…

As I understand it, the problem with this approach is that even the pre-2010 system put the risk of default more or less completely on the Feds, as it is now. If you leave that risk there, then market players have no incentive to set rates themselves: It's up to the Feds to decide which loans at which rates they're willing to backstop or acquire. Not really a "market".

But if you move the risk of default onto the "market" via private lenders, then, the theory goes, the rates a student can expect will be swamped by other factors than the value of their prospective education, notably whether they have a sufficiently credit-worthy parent to cosign.

Maybe the best bet is to have market rates that are "cushioned" by the Feds in a need-based scheme.

Re: Ripping Off Young America: The College-Loan Scandal

#85

Post by Zimahl »

ebiester wrote: post #65
Zimahl wrote: post #45

Earlier quoted context omitted.

The problem is that the flip-side consequence is dead-end job prospects. It's a greater of two evils - have a disproportionate lack or opportunity or debt. Debt is the easy choice. The only thing kids need to consider is return on investment. A heap-load of debt will rarely get paid off with a humanities or communications degree.

Every time this comes up... Every time, people have to be reminded that few people start out in communications degrees. Someone makes it to college, trying pre-med. Then they realize that, while not failing, they do not have the grades to make it into medical school, and they don't have an aptitude for the sciences. So, if they quit at this point, they will have no degree and 20k of debt. The marginal cost:benefit an…

It's great that you've used your communications studies in your career but you didn't have to get a communications degree to learn that.

I feel that the anthropology, communications, biology, history, etc. classes I took in college were great and really opened my eyes to other things. However, I didn't pursue degrees in them because I knew it probably wasn't a good ROI (investment being time and money).

Re: Ripping Off Young America: The College-Loan Scandal

#86

Post by chime »

TallGuyShort wrote: post #37
jacquesm wrote: post #11

One big problem I have with college loans is that people that sign up for it are not adequately informed on the long term consequences of their action. Since this is a loan for education one would expect that before being allowed to sign for the loan there would be a test that you'd have to pass to be able to apply. That would get rid of a lot of people that find out the hard way that they've borrowed themselves into…

I learnt how compound interest worked long before high school. I don't mean to sound unsympathetic, but the notion that people who have applied to and been accepted to a university wouldn't be capable of making simple cost/benefit decisions or understand the consequences of a loan should be laughable. The fact that so many people are apparently approaching graduating without yet having thought about the consequences…

It's not the math that people have a difficulty with. It is the impact. I was a double major in CS + Econ with Math minor. I took out student loans and I knew the interest rates. I knew exactly how much my monthly payments would be. The problem is that the number meant nothing to me as a student.

I had no idea if $100/mo for 10 years is a lot or very little to pay for student loans because I had no job, no car payments, no mortgage, no healthcare costs, no hobbies, and no personal obligations. But I did have some side income and I could easily make $1000/mo making websites if I needed to. So I signed up. Would I have signed up if it was $2000/mo? No. But had my payments been $600/mo instead of $100/mo, I would have gone bankrupt because my starting salary after college was pretty low.

Just like a small percentage of people who abuse welfare, Medicare, and other social programs, a small number of students abuse the student loans by spending them on luxury goods. But most of the students take out loans because they have no alternative and regardless of the interest rate, social/family/economic pressure discourages them from choosing any other path.

And in this particular instance, the economy was pretty good 2000-2008. So the students who took out $80k loans for an Art degree from the Ringling School of Arts in 2006 did not think they would be stocking shelves in 2010. Ringling Graduates from the past two decades had done pretty well for themselves, finding work in Disney, ILM, and many other creative agencies around the country. Now nobody thinks twice before telling them "Well you should've thought twice before signing up for a useless art degree instead of something useful like STEM"

Re: Ripping Off Young America: The College-Loan Scandal

#87

Post by joyeuse6701 »

qdpb wrote: post #22
gxs wrote: post #7

Amazing, perspective is everything. I don't deny that college kids are being taken advantage of. Graduating from a small liberal arts college in South Dakota that no one's ever heard of with a degree is Culture Studies and 80k in debt really is a rip off. The flipside of this coin however is someone like me. My parents are immigrants and I was the first to go to school. To my parents, the fact that someone would be e…

Perhaps it helps to clarify that the evil here is not that college loans exist, but how easy it is to get them to pay for any kind of education, how much you can borrow, and how impossible it is to get rid of this debt burden. The choice between no loans or bad loans is fallacious.

Isn't that akin to the argument that a knife is evil because it is so easy to slit someone and someone else's throat? That isn't the evil, it's not how this college loan is used, what is evil is that our society necessitates college and the price you pay into the function is rarely less than what you get out of it these days.

Re: Ripping Off Young America: The College-Loan Scandal

#88

Post by Balgair »

My brother now works at a University of California school. He says that the professors are in on the con-game; they know that the kids know that this is all a bubble.

Trouble is, everyone involved is tied to the mast. The admins can't find other work for this kind of money, the profs have tenure, the grad students can only otherwise work slinging dope or burgers, and the undergrads have even worse prospects than the grads. Its a mess. And it can't continue, and everyone knows it.

One real wave generator is the MOOCs. The profs know it. At UCLA they just started allowing kids to take classes completely virtually. If the class is too full for the fire marshal, you can opt to take it online completely. The profs fought it, but lost. They all knew that was the camel's nose in the tent. Look to see MOOCs take the place of degrees real soon. Man though talk about a 'flat world'

Re: Ripping Off Young America: The College-Loan Scandal

#89

Post by lawnchair_larry »

ethanbond wrote: post #12
gxs wrote: post #7

Amazing, perspective is everything. I don't deny that college kids are being taken advantage of. Graduating from a small liberal arts college in South Dakota that no one's ever heard of with a degree is Culture Studies and 80k in debt really is a rip off. The flipside of this coin however is someone like me. My parents are immigrants and I was the first to go to school. To my parents, the fact that someone would be e…

I agree. Loans aren't at the root of the problem, but they're also a bad solution. An even worse solution is getting rid of loans. The only solution worse than that? Blaming students. This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. I'm not going to be the one that screws an entire generation out of a worthwhile education in the name of "loans are ba…

On the contrary - the way to screw an entire generation is to give them these loans. The loans are the problem. They don't have to be - loans are not inherently bad - but the current system is the problem.

Re: Ripping Off Young America: The College-Loan Scandal

#90

Post by twoodfin »

bradleyjg wrote: post #76
ethanbond wrote: post #36

Earlier quoted context omitted.

And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation. We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.

The schools are in the best position to underwrite loans. They should be the ones loaning out educations. That also has the advantage of giving the schools a stake in the marketability of their graduates.

How do you avoid the problem of schools only/mostly handing out loans to students with rich parents to cosign? That's the underlying cause of all this conflict: We want the best colleges and universities to be accessible to everyone, and not have existing class distinctions weigh too heavily on the scale.
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