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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

#91

Post by danielweber »

bradleyjg wrote: post #73
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…

Like so much else the baby boomers ruined this. When they went to college it was inexpensive enough to work your way through and most of the faculty was full time moderately paid professors. Now tuition at many places is more than the national median household income, and the most of the faculty is made up of very poorly paid adjutants with a thin gerontocracy layer of tenured professors taking up most of the faculty…

I don't think the boomers ruined this one, although they were in the right place at the right time to blame them.

When 1) employers are allowed to discriminate against the non-college educated, 2) going to college becomes the default instead of the exception, and 3) there is no downward price pressure on educational costs, I think the results are inevitable.

Here is something really shocking we could do: make education something that most employers are not allowed to consider, like marital status or a handful of other things. (They mostly cannot consider IQ, because of Griggs v Duke, but they can use your degree, which uses an IQ test (the SAT) to decide if you get in.)

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

#92

Post by danielweber »

twoodfin wrote: post #90
bradleyjg wrote: post #76

Earlier quoted context omitted.

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.

I can see why we worried about it, but most schools are so leftist they would never come close to only letting in rich kids.

I don't think the choice is "lend the kids a whole bunch of money to let them in" vs "don't let them in at all."

It's "lend the kids a whole bunch of money" vs "don't lend them a bunch of money, and still let them in."

It's possible I'm wrong about this, but we've definitely went too far in the other direction.

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

#93

Post by driverdan »

Zimahl wrote: post #45
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…

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.

False dichotomy. Just because you don't go to college doesn't mean you'll be stuck in a dead end job.

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

#94

Post by sp332 »

leknarf wrote: post #80
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…

There's another side to need-based financial aid that tends to be ignored. For you to attend an expensive college for less than the average rate, someone else had to pay more than the average. That is, your discounted tuition increased the sticker price for someone else. That's inherently unfair. It may sound reasonable to ask wealthy families to pay more in order to subsidise poor families, but there's no reasonable…

The article is about loans. A loan is not a discount. And if you're talking about need-based financial aid, that's usually financed by people (often alumni) who decide to pay into a fund specifically for tuition subsidies. That means he didn't get a "discount" that average students had to make up.

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

#95

Post by chime »

jacquesm wrote: post #69
TallGuyShort wrote: post #37

Earlier quoted context omitted.

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…

> I learnt how compound interest worked long before high school. Good for you. I don't mean to be unsympathetic either but not everybody has an intuition for numbers. I know people that have serious problems relating even simple numbers, doing multiplication of anything over two digits (even with the help of pen and paper), you can just forget about compound interest. That doesn't mean that such people should not be…

> That doesn't mean that such people should not be able to apply for loans, it means that the consequences would have to be explained to them in terms that they can understand, not the mathematical equivalent shorthand for those consequences.

See my reply to the same OP: https://news.ycombinator.com/item?id=6225690

I think even explaining the math in Explain-Like-I'm-Five words would not be sufficient for most people because they might not be in a situation to fully grok it. What does $833/mo for 10 years mean to a student training to be a Radiologist? They hear salaries like $120k/yr and think $833/mo isn't a big deal. Then you end up with too many unemployed, qualified Radiologists, salaries plummet to $52k/yr, and suddenly $833/mo is significant.

My point is that when people signed up for these loans, they were told it was a risk-free investment in their own life. Every investment comes with risk. That is the entire point of investments. Nobody ever treats student loans as a risk on the student-side of things. That's what needs to be conveyed more clearly.

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

#96

Post by sp332 »

burntsushi wrote: post #53
ethanbond wrote: post #44

Earlier quoted context omitted.

The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). > Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the s…

> The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). Did you read the article? It provided a fairly sound argument supporting the conclusion that the availability of student loans and the price of tuition are quite related.

Fixing the lending problem might influence the overspending, but fixing the overspending would solve the problem much more directly.

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

#97

Post by driverdan »

vaadu wrote: post #19

A degree that provides the recipient with little foundation for income should not be underwritten with tax dollars. You want a teaching or nursing degree, I'm there. If you want a degree in puppetry, not happening.

College is not and should not be job training. If you want job training go to a trade school, get an internship / coop or apprenticeship. College is about learning how to think.

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

#98

Post by AnIrishDuck »

ethanbond wrote: post #44
AnIrishDuck wrote: post #38

Earlier quoted context omitted.

> Loans aren't at the root of the problem Loans absolutely are at the root of the problem. Not the abstract concept of loaning money, but the current implementation. The student loans legally allowed today are borderline usary. They provide a convenient way for lenders to sidestep bankruptcy protection. This leaves students with exact same problems society had before bankruptcy: it's far too easy for the unwary to si…

The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). > Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the s…

> I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the same trap most solutions do, though. What's "a reasonable expectation," and who decides it?

One simple change that would have drastic effects is modifying the forgiveness timeframe on income based repayment (IBR) for student loans. Right now, the expiration time is 25 years [1]. In other words, 99% of all kids going to college are on the hook for paying loans for longer than they have been alive.

I think the government should shorten that period down to fifteen or even ten years for any loan that is not dischargeable in bankruptcy. Correspondingly, it might be a wise idea to up the current reduced payment amount from 15% of AGI [2] to maybe 25-50%. I'm throwing out numbers here, clearly some careful study would be warranted if this idea was seriously considered.

This would probably mean a corresponding increase in loan forgiveness for public servents (teachers, firefighters, public defenders, etc). I'm not opposed to such an idea prima facie.

My expectation is this will drastically reduce the availability of certain types of degrees. The upside is we won't have a ton of young kids floating around with degrees they can't use and loan burdens they can't meet.

1. http://studentaid.ed.gov/repay-loans/understand/plans/income... 2. http://en.wikipedia.org/wiki/Student_loans_in_the_United_Sta...

EDIT: one more thing I forgot to mention: I think that, like many social systems with complex feedback, you cannot reduce this problem to "too much loans" or "too much spending". It's difficult to delineate cause from effect, but it's indisputable that the easy availability of credit has at least enabled recent skyrocketing tuition.

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

#99

Post by bradleyjg »

twoodfin wrote: post #90
bradleyjg wrote: post #76

Earlier quoted context omitted.

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.

It's an important consideration and so a good question.

A couple of points:

First I don't think such a school would remain the best very long. There was a time when CCNY and the CUNY system in general had a fantastic reputation largely because it served an immigrant population that the Harvards of the world refused to take on as students or faculty. CCNY's fortunes turned around for many reasons, but one of them was that the traditional top schools dropped their racial/ethnic quota systems and introduced aggressive need based scholarships.

Second, I think we a society need to move away from the idea that 18-22+ year olds are still members of their parents' economic unit. In Sweden college tuition is free, yet the percentage of students taking out loans is higher than the US because there is no expectation that parents will pay living costs. Perhaps banning co-signers for such student loans is going too far, but perhaps not.

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

#100

Post by jlgreco »

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.

If lenders had any significant risk, then lenders would evaluate the value of a school/degree combination (value being determined by the likelihood that they could be paid back).

High-tier school with a degree that has great employment potential? Throw a loan at that kid, that is a good investment.

High-tier school with a degree that has great employment potential... but the program has a 99% dropout rate? Think twice about throwing a loan at that kid, if he is in that 99% then you will have a hard time getting your money.

Shit school with a vanity degree? Tell that kid to get lost. If he wants a vanity degree, he can pay for it himself.

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