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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

#211

Post by freyr »

eqdw wrote: post #106
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…

> 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. I grew up in another country and do not really know what the process is for american would-be colleg…

> "We will give you this much money. We will charge an annual interest rate of x%. Interest will not accrue until you graduate"

It's pretty much exactly like that, in most cases.

But I think an underlying issue is that many teenagers now enter college with no concept of money. Many haven't worked before and haven't paid their own bills (they can't deal with that as teenagers because they need to focus on getting into a good college). They don't understand how fast money spends and how slow it accrues. When they think of the salary they may earn after graduating, they don't account for the government shaving 20%-30% off the top. All of this knowledge comes later, with experience.

When you're 18, and the government starts mailing you $3,000 checks every semester, it feels like free money and it's hard to quit. It's not until four or five years later (well, better make that six or seven, because you'll need a master's degree to set yourself apart and land the job you really want) and you're $40,000+ in debt with interest accruing, that reality starts to set in. When the free money stops, and you need to pay your rent, car insurance, groceries, health insurance, loans, etc., etc., with your hard earned money, that's the first real dose of reality for many kids today.

Was it irresponsible of them? Yes. But it's not surprising, all things considered.

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

#212

Post by ScottWhigham »

zeteo wrote: post #179
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…

>Whose fault is that? They didn't read what they're signing for? Isn't that their own damn fault? [...] No one forced them to go to college Yes, but it was an offer they couldn't refuse. One of my favorite results from game theory is that sometimes more options lead to everyone being worse off. Let me explain. Suppose in scenario A only the very wealthy or the very smart and dedicated (scholarships) have the option t…

Yes, but it was an offer they couldn't refuse.

Not quite that simple - students have tons of choices. They could choose a school with a lower tuition. They could stay in-state so as to avoid the much more "out of state tuition". They could opt for a degree with a higher chance of getting a job. They could opt for a degree with a higher average salary. They could work full-time to pay off the loans while they go to school (as my wife did). They could live with their parents instead of paying rent/dorm.

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

#213

Post by bayesianhorse »

ianhawes wrote: post #105

I like the name "The Silent Bubble" for this impending crisis because when it bursts, the voices of the millions of Millenials this affects will be drowned out by the constant bitching of the Baby Boomers.

All real bubbles are silent. Just because everyone screams "bubble" at any growth curve, does not mean that anybody knows for sure when it is going to burst.

Eventually most growth curves falter or crash every so often. Then the same people will say "Ha! I knew it was a bubble for the last ten years!"

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

#214

Post by minikites »

WalterBright wrote: post #144
minikites wrote: post #78

Earlier quoted context omitted.

http://press.princeton.edu/titles/9112.html > Historically, the humanities have been central to education because they have rightly been seen as essential for creating competent democratic citizens. But recently, Nussbaum argues, thinking about the aims of education has gone disturbingly awry both in the United States and abroad. Anxiously focused on national economic growth, we increasingly treat education as though…

I categorically reject the notion that STEM does not teach critical thinking. After all, STEM fields have a built in reality check for one's thoughts. If you design an airplane and it doesn't fly, you're forced to develop critical thinking skills so that doesn't happen again. Physical reality isn't going to bend to your thoughts.

Does it teach empathy, teach a way to see others as we see ourselves and imagine other people complexly?

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

#215

Post by ethanbond »

macspoofing wrote: post #197
ethanbond wrote: post #131

Earlier quoted context omitted.

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?

The writer is the president of the National Association of Independent Colleges and Universities, which has a vested and financial interest in keeping the status-quo. The fact that this organization is pushing so hard for federally backed student loans should ring some warning bells that its members may benefit. I don't have the will nor energy nor need nor the time to research this topic extensively, but because of…

I'm very well aware of who wrote it. That's why I didn't tell you to read the blog. I told you to look at the sources.

I have no idea who's to blame. I think part of it is institutions adding several layers of bureaucracy is one part. Institutions expanding resources is another (justifiable) increase in cost. Most importantly, a simple increase in demand: Students need to do something to give them an edge in the job market. The safest way to do that is still, by far, to go to college. Just because it's less safe than it used to be doesn't mean it's more irresponsible than, say, dropping out and hoping you're Zuckerberg/Gates/Jobs 2.0

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

#216

Post by gyardley »

I don't really think the government should be in the student loan business at all -- but if the government absolutely has to be in the student loan business, then they have to be in the cost-control business as well.

That's pretty much how Canadian higher education worked when I was an undergraduate in the mid-90s. There were no private universities, and the government set the university budget. It more or less worked. Canadian universities looked and still look a lot shabbier than their American counterparts, since not nearly as much is spent on facilities, but the education is fine.

In America, perhaps the government could only give loans to students of universities who kept cost increases below the rate of inflation or met certain tuition targets. The best of the private universities would opt-out, and the rest would fall into line. Unfortunately, the American government doesn't have the will to do any meaningful cost-control, so this isn't going to happen.

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

#217

Post by 7Figures2Commas »

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…

You cannot simply look backward to assess what would happen to interest rates on student loans going forward if a) the federal government significantly reduces its role in the market and b) allows for discharge of student loan debt in bankruptcy.

There are way too many factors that cannot be ignored, but that you choose to ignore. You need to look at the interest rate environment (which determines the cost of capital), banking regulations (which have changed dramatically in the past several years), the unemployment rate (you might have noticed we're in the slowest "recovery" since the Great Depression) and inflation-adjusted wage growth (hint: there basically is none), amongst other things.

Finally, you fail to note that the federal government was a participant in the student loan market well before 1996, so you cannot look at the history of private student loans without understanding that the government has influenced the market to varying degrees for some time.

If you want to assume that private lenders would rush to provide student loans at low rates at the same pace the federal government has in this economic environment and without the discharge restrictions currently in place, I'd love to introduce you to someone looking to sell you his 100 year J.C. Penney bonds. They yield over 11% and you can buy them at ~70 cents on the dollar - a great deal!

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

#218

Post by scottmagdalein »

minikites wrote: post #214
WalterBright wrote: post #144

Earlier quoted context omitted.

I categorically reject the notion that STEM does not teach critical thinking. After all, STEM fields have a built in reality check for one's thoughts. If you design an airplane and it doesn't fly, you're forced to develop critical thinking skills so that doesn't happen again. Physical reality isn't going to bend to your thoughts.

Does it teach empathy, teach a way to see others as we see ourselves and imagine other people complexly?

Usability design?

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

#219

Post by [deleted] »

driverdan wrote: post #93
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.

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

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