The Student Loan Bubble is Starting To Burst • Hacker News Board

Re: The Student Loan Bubble is Starting To Burst

#61

Post by druiid » Mon, Sep 09, 2013, 10:26 PM UTC

I really have to wonder if a lot of the changes made previously to the student loan system are at all linked to the huge campaign contributions made by the University of California system. Basically, any changes that have been made I think benefit greatly the schools (including the rising tuition/costs) to the great chagrin of students. You have a situation where the real people making out here are school administrative types and the students and teachers get the short end. I don't say this lightly, but I do wonder if the nearly $2 million donation each cycle [1] (making them the top contributor in both of the last two cycles) has something to do with how things have worked out.

As a previous (sadly I had to withdraw due to time and work commitments) UCSD student I can tell you that student per-quarter costs went up about 25% over the time I started and the time I left. During that period as well there were certainly no administrators begging to have their pay brought down, only calls to cut teachers, teaching hours, maintenance staff, etc.

During that same time period as well, there was a building boom on campus with no stopping in construction of many new campus housing projects (even some which have consistently NOT been anywhere near capacity), new administrative building and a few new campus buildings here and there (where they can fit them between all of the new administrative buildings and housing projects). Of course this was all going on during the period that UC regents were (and really continue to) say that the state was cutting far too much money and thus the reasoning for raising tuition year-over-year.

So, really I guess my question is: How much did/has money 'talking' in an election cycle contribute to the situation the entire student loan system now finds itself? I'm by far no conservative, but I can't help but personally see this as the public being sold out.

[1] http://www.opensecrets.org/pres08/contrib.php?cid=N00009638

Re: The Student Loan Bubble is Starting To Burst

#62

Post by muzz » Mon, Sep 09, 2013, 10:26 PM UTC

asmithmd1 wrote: post #18

Huge difference between student loans and mortgages - the only pain felt will be by the students and taxpayers who will (again!) make the lenders whole on their bad bets: Student loans cannot be discharged even if you declare bankruptcy - while home owners could walk away and hand the keys to the bank. Student loans are guaranteed by the government - the issuers just file for compensation. The sickening part is that…

Taxpayers no longer subsidize private lenders. That ended in 2010.

Re: The Student Loan Bubble is Starting To Burst

#63

Post by masmullin » Mon, Sep 09, 2013, 10:29 PM UTC

jobu wrote: post #40

kilroy123 wrote: post #34

Earlier quoted context omitted.

A large part of the problem is all the shitty for profit schools. They get students to take out large government backed loans, then are defaulting, since they can't actually get a job. I knew several people I grew up with who went to these schools. They took out huge loans, 10k plus, and they never landed any kind of job with their "certificates" / degrees. [1] Half of all defaults are from these kind of schools. [1]…

Always ask if the school is Regionally Accredited in the degree you intend to take: http://en.wikipedia.org/wiki/Regional_accreditation#Regional... If not, the credits are generally non-transferrable and many businesses will simply toss your resume.

How do you know that 'Regionally Accredited' is meaningful until you are educated? My high school guidance councillor certainly never talked about this.

My college actually shouted "we're accredited" at the top of their lungs, but I didn't give a fart until I was half way through the degree, and one of my profs talked to me about why they worked so hard ensuring accreditation (for the same reasons you state) - at which point I said, "pheww it's a good thing this place is accredited"

I had no difficulty getting a job after grad. But I certainly didn't know that accredited was important before I entered the course.

Re: The Student Loan Bubble is Starting To Burst

#64

Post by muzz » Mon, Sep 09, 2013, 10:29 PM UTC

dnautics wrote: post #56

muzz wrote: post #48

Earlier quoted context omitted.

Not sure you apply that definition at all. Education is not an asset-- it can't be transferred ie sold like a house can. Along the same lines, there is no incentive or ability to buy an extra degree in Vegas, Phoenix, or Miami, just because prices are going up there.

who says assets have to be transferrable. Is life insurance not an asset, even though, obviously, it's not transferrable?

Life insurance can be collected upon. How does one cash in a degree?

Re: The Student Loan Bubble is Starting To Burst

#65

Post by zachrose » Mon, Sep 09, 2013, 10:29 PM UTC

MattGrommes wrote: post #45

everettForth wrote: post #17

No, it's not. Not even close, and this is really terrible reporting. It's unfortunate that so many young people are carrying large amounts of student loan debt, but there is no sign of a "bubble" bursting any time soon. I don't even understand how the notion of a "student loan bubble" makes sense, since people don't "speculate" on college like they speculate on real estate. There are so many things wrong with the ide…

I'm not arguing since you know way more about this than I do but I'm curious: I've thought of a lot of the problem with the college loan situation as exactly "speculation" since people are gambling that the job they get on the other side is going to let them pay off the giant loans easily. No, people don't buy and sell degrees but isn't there a lot of speculation type behavior going on?

I think speculation roughly encompasses anything you buy for short or medium term gain. You don't put in four years of work to speculate on German bearer bonds.

Re: The Student Loan Bubble is Starting To Burst

#66

Post by nicholas73 » Mon, Sep 09, 2013, 10:30 PM UTC

everettForth wrote: post #17

No, it's not. Not even close, and this is really terrible reporting. It's unfortunate that so many young people are carrying large amounts of student loan debt, but there is no sign of a "bubble" bursting any time soon. I don't even understand how the notion of a "student loan bubble" makes sense, since people don't "speculate" on college like they speculate on real estate. There are so many things wrong with the ide…

There is already a bubble popping, but it's not measurably in the students finances since they have little assets to "pop". Look at the performance of for-profit colleges lately, and the desperate attempts of public schools to raise tuition. The easy money has caused many colleges to expand irresponsibly, and they could be one MOOC away from collapse once a percentage of students figure out they have an alternative. It's not a dramatic stock market style crash, but a drawn out deflating not unlike the housing "pop".

Re: The Student Loan Bubble is Starting To Burst

#67

Post by jack-r-abbit » Mon, Sep 09, 2013, 10:30 PM UTC

This might be a foreign concept to some people, but banks are for-profit businesses. If one of their products is not making them (enough) money, they'll dump it... just like other businesses. The article describes JPMorgan's announcement as "spin". They aren't spinning anything. They are just end-of-lifing a poor performing product. Get over it.

Re: The Student Loan Bubble is Starting To Burst

#68

Post by btilly » Mon, Sep 09, 2013, 10:30 PM UTC

woah wrote: post #32

btilly wrote: post #26

Earlier quoted context omitted.

The problem is that most money in circulation was manufactured by creating debt. When you destroy that debt through default, you destroy that money. The fiction of student loans is tricky because under Bush they changed bankruptcy rules to exclude student debt. But fundamentally when banks are forced to write down bad student debt, their rosy asset picture becomes non-rosy. When that happens they are required by regu…

As to the last part of your comment- it's all imaginary anyway.

Imaginary, sure. But with very real consequences for very real people.

Just ask the people who have been long-term unemployed since 2008 about that.

Re: The Student Loan Bubble is Starting To Burst

#69

Post by pessimizer » Mon, Sep 09, 2013, 10:30 PM UTC

I'm going to leave this here: http://my.firedoglake.com/deanbaker/2012/03/11/student-loan-...

It's Dean Baker's critique on coverage of this type from the Post. The most important thing to take from it is that the housing bubble popping turned $22 trillion of household wealth into $14 trillion. The sum of all student loans add up to around $1 trillion.

Banks getting out of an industry because they don't find it profitable anymore (since the government turned off the free guarantee taps) has nothing to do with cascading defaults due to excessive leverage and lack of regulation.

If there's a bubble out there, it's in Asset Backed Securities (ABS) like auto loans and credit card debt. And housing is currently looking like the bubble that wouldn't die.

Re: The Student Loan Bubble is Starting To Burst

#70

Post by muzz » Mon, Sep 09, 2013, 10:32 PM UTC

MattGrommes wrote: post #45

everettForth wrote: post #17

No, it's not. Not even close, and this is really terrible reporting. It's unfortunate that so many young people are carrying large amounts of student loan debt, but there is no sign of a "bubble" bursting any time soon. I don't even understand how the notion of a "student loan bubble" makes sense, since people don't "speculate" on college like they speculate on real estate. There are so many things wrong with the ide…

I'm not arguing since you know way more about this than I do but I'm curious: I've thought of a lot of the problem with the college loan situation as exactly "speculation" since people are gambling that the job they get on the other side is going to let them pay off the giant loans easily. No, people don't buy and sell degrees but isn't there a lot of speculation type behavior going on?

I agree that that is exactly the gamble that a student is taking, that when finished there will be earning ability that will enable them to pay off the loans.

Is this a reasonable bet to make? What is the earning potential of someone with a college degree? Isn't it something like a $1M+ increase over one's lifetime?