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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

#201

Post by cosmie »

JonFish85 wrote: post #171
ruswick wrote: post #161

Earlier quoted context omitted.

Unlike the things you listed above, college isn't perceived as a choice. It's perceived as an obligation. Because of this, a myopia has set in among most students: "I need to go to the best possible college or kill myself trying." The decision is no longer theirs, it is the product of tremendous stigmatization, social pressure, and the nonstop inundation of students essentially from birth with platitudes about the ne…

I agree that college isn't perceived as a choice, but I do question why it's the fault of anyone but the student if they apply only to $50k/yr schools, ignoring whatever their state schools are. Is it the schools' fault for accepting students who can't afford it? Is it the loan companies' fault for trying to provide loans for students who likely can't pay them back? If so, should loan companies be able to discriminat…

> but I do question why it's the fault of anyone but the student if they apply only to $50k/yr schools, ignoring whatever their state schools are.

State schools aren't at $50k/yr (for in-state; some are for out of state), but they're not dirt cheap either. 4-year universities averaged a 15% tuition bump in 2011[1]. Median base tuition in 2011 was over $11,000, which does not include the thousands in miscellaneous fees, books (which are all "customized" for each school or only available as a non-downloadable ebook), online course software licenses, and mandated laptops that must be purchased.

> Is it the loan companies' fault for trying to provide loans for students who likely can't pay them back?

Yes and no. It's actually the government's fault for enacting legislation that forbids discharging he loan in bankruptcy. That completely removed the bank's need to do any risk assessment and price/approve loans accordingly. This in turn removes the incentive for schools to remain cost competitive, because their constituents have virtually guaranteed access to limitless capital. I don't have time to dig for it now, but I saw a graph not too long ago that showed tuition prices and average loan debt over time, which showed a considerable increase when that legislation was enacted.

[1] http://collegecost.ed.gov/catc/Default.aspx#

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

#202

Post by ScottWhigham »

megaframe wrote: post #154

My feeling is we should put the burden on the Colleges or the Loan providers. Make it so if the student fails to graduate, or graduate and cannot get a job in their field they're forced to pay the loan or at least the loan interest. Their incentive would then become to avoid loosing money and only give out loans of appropriate sizes to people who's college degree has a high probability of investment return. The way i…

Make it so if the student fails to graduate, or graduate and cannot get a job in their field

In other words, "If the kid doesn't graduate, all of the other students should pay for that kids chance at an education." Do I have that right? If that's your point, why not do away with tuition all together and just have the state/feds pay for "College for everyone"?

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

#203

Post by jacoblyles »

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…

You're a very special case, going to one of the best schools in the country at a good price. 3/4 of American college students are not traditional college students going full time to a four-year university. And only 30% of Americans eventually achieve a bachelor's degree. But plenty of the rest take out $20k in student loans and never have anything to show for it.

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

#204

Post by toomuchtodo »

rayiner wrote: post #64
toomuchtodo wrote: post #6

Earlier quoted context omitted.

"The U.S. government is forecast to generate $185 billion in profit over the next decade from students and their families under an overhaul of the federal student loan program endorsed by the White House and approved by the Senate on Wednesday. The profit figure, if annually averaged through 2023, would place the U.S. student loan program among the 20 most profitable public companies in the world, according to Fortun…

Honestly, I'm okay with the student loan system, I just think schools need to face tuition caps to be eligible for federal student loans. My wife and I have substantial student loans from law school. We got good jobs and can afford to pay. Meanwhile, lots of people don't and can't, and rely on the governments very generous and flexible repayment terms. As long as the program as a whole turns a profit, its a cross-sub…

Let me take this a step further then.

If we're going to cap tuition (price controls), why not increase taxes as well? College becomes much cheaper ($10K for your degree, not your semester), and society, the student, and every future employer benefits.

I understand people don't like taxes sometimes. Even me. But with them, I buy civilization.

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

#205

Post by toomuchtodo »

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.

My house was secured, had a 5% interest rate, and the bank lost over $150K when I walked away from it. People still default their mortgages when they're as little underwater as $10-15K, yet, the interest rate on mortgages has not shot up. Go figure.

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

#206

Post by jacoblyles »

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…

In the political world price is a feature, not a bug. You will not pass any proposal through congress that significantly lowers the price of a quality education, say through technology.

If the government is giving out $800 billion/yr, there are MANY people with the incentive to see that continue and grow.

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

#207

Post by WayneS »

GFischer wrote: post #120
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…

"In some countries, you don't even have the OPTION to take out a loan to go to school" In some countries, like mine (Uruguay) university-level education is free :) (though postgraduate studies are paid). I think China is the biggest example of free university education. EDIT: I was wrong, about U$ 2000/year and rising apparently. At least our bazillion psychologists and communication majors (equivalent to the dreaded…

The thing about China and possibly several other countries on your list is that while college is cheap (or free), the number of students accepted are very low. So for example only the top 10% (or 1%) of high school students even get the option to go to college. So competition in high school is very fierce to get one of the college slots and not end up with a factory job.

(And I imagine money can be used to "open" a spot, but that won't appear in tuition summaries.)

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

#208

Post by Fargren »

MBCook wrote: post #158
Fargren wrote: post #102

Earlier quoted context omitted.

Free college subsidized by taxes? We have had that in Argentina for a long time, and for some time we had the best education you could get in Latin America. I'll admit nowadays we are pretty much average, but still free. I can't really explain the reasons for the decline in the quality of our education, and it may be related to our lack of monetization.

Without any kind of price control or accountability on the cost of the education, that's just cutting out the middle man in the cash flow problem. Sure no one will have student loans, but taxes will have to be raised to make up the difference. As the article points out, all those new buildings they're always building aren't free and the posh dorms are unnecessary. But everyone is paying for them anyway, because why n…

Well, we don't have dorm rooms in college, since the buildings are in the cities or very close to them. That dorm room situation is very weird to me, I don't really see the benefits.

But more to the point, the problem is pretty much the opposite of what you describe. Since money for education comes from taxes, education doesn't get nearly as much money as it does in the US. Some buildings are in a pretty lousy state, and teachers don't get paid much. The private sector sometimes invests in universities that will prepare people for the jobs they need, but even that is sometimes protested by the faculty and students since it can be seen as influencing in the curricula. Not to say it's all bad. We certainly could use more money, but we are still giving some of the best education this country offers, for free. In a lot of fields, the only reason to go to a private college is because it's easier to graduate.

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

#209

Post by ScottWhigham »

pekk wrote: post #57

There's no way to win this issue. If you don't give loans, you are doing wrong. If you do give loans, you are doing wrong. If you expand no-strings grants, those are expanding entitlements.

I think that's an over-simplification - "this issue" is not just about funding; it's also about costs. Ultimately costs have to come down - if costs come down, then so much of this is not an issue (or at least goes back to being what it was in the 80s and 90s).

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

#210

Post by philwelch »

jellicle wrote: post #149
newbie12 wrote: post #109

Earlier quoted context omitted.

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.

That's a fine prediction. And yet, student loans were only made so hard to discharge due to changes in the law in 1996 and 2000. And prior to 1996 and 2000, student loans were offered at much less than the exorbitant rates you predict, and lenders made nice fat profits on them even so. And no, there was no significant abuse of the system - after all, there's always a judge involved in bankruptcy proceedings, who has…

Obviously there are zero confounding variables in the late 1990's and this is a perfectly controlled experiment.
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