Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ripping Off Young America: The College-Loan Scandal

rollingstone.com

Post reply on HN
Print view View original

131–140 of 277 posts

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

#131

Post by ethanbond »

macspoofing wrote: post #71
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…

>and the price of education has little correlation to the availability of student loans (contrary to popular belief)... That's just blatantly wrong. The easy availability of student loans is what's driving education costs. The fact that lenders are willing to lend enormous amounts of money to people who may not be able to pay them back, tells you right there that there is quite a bit of market-distortion going on. Co…

http://www.washingtonpost.com/blogs/answer-sheet/post/the-ur...

Lots of sources down at the bottom.

EDIT: Also, I've yet to actually see any study that concludes direct causation between availability of loans and tuition prices. Yet somehow the burden of proof is on the naysayers?

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

#132

Post by danielweber »

newbie12 wrote: post #109
lmg643 wrote: post #103

Earlier quoted context omitted.

the core problem with college loans is that they are non-dischargeable. this means that no matter what the student's ultimate financial situation (long term unemployed, finances wiped out, etc) they still have to pay down the debt, and it can't be wiped out in bankruptcy. This stands in contrast to virtually every kind of loan out there, which can be discharged (written off). As a result, there is less risk for the l…

Student loans are unsecured, so if they could be discharged, the market rate would be akin to a credit card with a huge balance-- 15% to 20% a year in the current interest rate environment. Plus if they could be discharged, such action would become commonplace, a rite of passage at graduation.

such action would become commonplace, a rite of passage at graduation

Good.

Then people will stop lending students tens or hundreds of thousands of dollars. Then schools will lower their prices.

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

#133

Post by ChuckMcM »

danielweber wrote: post #46
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…

Part of the reason prices have gone up so much is that credit has become so easy. 50 years ago, if you wanted to go to college, you went, and the prices were reasonable because people could not afford a lot of money for it, and no one would lend it to them. There is almost no downward price pressure on college costs, and there is upward price pressure: since the students don't care about the price, they always want t…

I think it is even worse than simply "easy credit", I think the rewards built in encourage exploitation. Allow me to explain.

1) You have capital seeking a return.

2) There exists a basic need that can be facilitated by the application of capital (a degree for a "good job").

3) You remove all the risk out of providing capital for filling the need through government guarantees.

4) You provide a rate of return that is higher than the government guaranteed rate on their own capital instruments (treasury bills).

#4 there, which gives you higher returns on low risk investments, creates a demand for those instruments. And that demand causes a supply of instruments to be created. And the regulation on that supply is minimal.

The result is you get financial institutions giving loans to students for useless degrees at inflated cost institutions knowing that the government has made defaulting nearly impossible (hence the low risk) and they can offer better rates than t-bills.

Students are being exploited exactly like unqualified home buyers were being exploited in the mortgage fiasco of 2008.

What annoys me about the journalistic coverage is that the 'rage views' are "Students are graduating with few prospects from college and a mountain of debt" whereas the bigger story is that "Rich people demanding higher returns, enslave unsuspecting youth through their loan seller proxies."

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

#135

Post by jlgreco »

JonFish85 wrote: post #126

Whatever happened to personal responsibility? You're 18, you can smoke, drive, join the army and take out gigantic loans you can't repay. It's a fine line between making it easy for everyone to go to college and making it easy for a mathematically disinclined person to take out a huge loan for a dumb reason. It would be great for everyone to have the chance to go to some college. For some reason, people seem to immed…

In this case, going for the Porsche experience is fine even if you can't afford it, so long as you are smart about it. Make sure you have a plan to pay it off after graduating, and make sure you have a contingency plan if you fail to graduate (you should find state schools with programs that you can fall back on before even starting at your "Porsche school").

The problem is people want the Porsche experience, and have a bizarre notion that they shouldn't have to do the planning and are entitled to just study whatever pleases them. Either of those two attitudes by themselves are more or less fine, but when you combine them then you get problems.

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

#136

Post by JackFr »

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…

"the price of education has little correlation to the availability of student loans"

Sure. And the bubble in home prices was a purely secular affair, with no correlation to the introduction of option ARMs, low doc/no doc loans and subprime credit availability.

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

#137

Post by citricsquid »

JonFish85 wrote: post #126

Whatever happened to personal responsibility? You're 18, you can smoke, drive, join the army and take out gigantic loans you can't repay. It's a fine line between making it easy for everyone to go to college and making it easy for a mathematically disinclined person to take out a huge loan for a dumb reason. It would be great for everyone to have the chance to go to some college. For some reason, people seem to immed…

From the first day of school children are taught two things, to obey authority and if you want to make something of yourself, go to college. A large number of people go to college because they believe that is what they have to do, they've had it drilled into their heads that if you want to be successful, you go to college. If you can go to college, whatever the cost, you go to college. No one is forced at gun point to go to college but they are pressured into it throughout their entire lives, most people truly believe that they need to go to college to be successful, to end up with a spouse, a house and children, they think college is the only path. You can quit smoking, you don't have to drive, you can leave the army after a few years, but what you can't do is reverse the decision to take on student loans, they're just not comparable.

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

#138

Post by pc86 »

GFischer wrote: post #129
gebe wrote: post #124

Earlier quoted context omitted.

University education in China is not free, they have tuition costs as well.

Sorry, I must have wrong information :( . I'm 100% sure we don't have tuition here in Uruguay, and poorer students get state help. However, five years after you graduate, you have to pay a mandatory special "university graduate tax" called "Fondo de Solidaridad" which helps pay for the poorer students, etc., so I guess it is a form of debt :) . It's about U$ 200 every six months currently.

Is that $200 ever six months in perpetuity or does it stop at some point?

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

#139

Post by ethanbond »

positr0n wrote: post #59
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…

Since that is indeed popular belief, do you have any proof otherwise? I'd love to hear different theories.

First, the burden of proof actually isn't on the people saying there's no correlation. It's on those saying that there's direct causation. Baseless claims should be treated as such until there's something more behind them than "well it just makes sense."

Secondly, there's a lot of sources at the bottom of this. http://www.washingtonpost.com/blogs/answer-sheet/post/the-ur...

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

#140

Post by wayne_h »

danielweber wrote: post #46
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…

Part of the reason prices have gone up so much is that credit has become so easy. 50 years ago, if you wanted to go to college, you went, and the prices were reasonable because people could not afford a lot of money for it, and no one would lend it to them. There is almost no downward price pressure on college costs, and there is upward price pressure: since the students don't care about the price, they always want t…

This was caused by government unintended consequences....

Some doctors graduated from med school with $100ks in loans. So they immediately filed for bankruptcy and cleared the debt. After a few years of work they were back in the bucks and debt-free.

The loan industry had congress write some new laws (was it 2008 ish?). The package clamped down on debt-collectors calling at all hours. It also eliminated clearing college loans with BK.

The loan industry celebrated - nothing like sure bet! Indentured servitude - Yahoo! They started giving away loans like candy.

Then the schools noticed all the free-flowing money and joined the party.

Post reply on HN