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The Student Loan Bubble is Starting To Burst

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Re: The Student Loan Bubble is Starting To Burst

#141

Post by goostavos »

kilroy123 wrote: post #34
msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

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]…

My girlfriend attends a for profit school (because her employer covers it 100%), it's absolutely alarming how stunningly expensive these for profit schools are. As a comparison, the state school that I attend, even with over-priced books, sets me back about $1200/semester, and that's for 3 classes. A single class for her is billed at that same amount. Before books.

I don't know how anyone would look at the cost and their future earning potential and decide that paying for a for-profit is a good idea. I know people who have gone the that Full Sail program and ended up 100+k in debt, and with nothing useful to show for it.

Education in this country is in a terrible, terrible state.

Re: The Student Loan Bubble is Starting To Burst

#142

Post by msprague »

skylan_q wrote: post #136
MattGrommes wrote: post #45

Earlier quoted context omitted.

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 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. This is exactly what's going on. They're making the bet that they'll be in demand later and able to pay off their loans. Just like buying a house and being able to make money from it later. After all, everyone had a rationale as to why the price of their house wo…

Except that you can't declare bankruptcy and walk away from a student loan, like you can with a house. The idea of a bubble bursting is the idea that all of the money will disappear at once, but instead what will happen is people will be plagued with debt that they can't repay quickly causing long term growth problems because the college graduates will have less spending money.

Re: The Student Loan Bubble is Starting To Burst

#143

Post by muzz »

skylan_q wrote: post #133
muzz wrote: post #53

Earlier quoted context omitted.

If the government is making money off student loans, then how are they a subsidy? If profitable, that would imply that commenters calling loans a subsidy are simply incorrect.

Students are getting loans from the government on terms that they wouldn't be getting from the bank. That creates more effective demand for schools which drives up the price of tuition. If the banks did this and the student/graduate had to default, the bank would have to take a loss. The government isn't allowing default on the loans they themselves give the students, so they'll make sure they get their money back.

Private student loans are generally non-dischargeable in bankruptcy also, as they typically meet Section 221(d)(1) requirements.

Re: The Student Loan Bubble is Starting To Burst

#144

Post by unono »

jlgreco wrote: post #118
unono wrote: post #116

Earlier quoted context omitted.

No, this ain't non-profit, it's big profit stuff. Khan academy is definitely not it. They teach traditional curriculum which is isn't useful to business. The app is definitely isn't the easy part - it is basically the whole part. The current education system is a failure for 2 reasons - unanalyzed teaching - unmotivated students Apps solve both problems, every user interaction recorded and analyzed, gamification. You…

1) The absolute last thing this world needs is more for-profit education, particularly for-profit education that has somebody else foot the bill. Do yourself a favor and try to sell this idea as non-profit; I was giving you the benefit of the doubt by assuming it was. 2) An app that teaches people things but doesn't have anything to teach them is worthless. Of course the software is the easy part... If you really thi…

I think we'll keep disagreeing about this.

I think your argument comes from the traditional 'liberal arts' education angle.

I'm coming more from vocational type place. More of a rentacoder/odesk done more comprehensively.

Anyway, adios

Re: The Student Loan Bubble is Starting To Burst

#145

Post by dnautics »

rayiner wrote: post #126
dnautics wrote: post #117

Earlier quoted context omitted.

> What we should be doing is allowing lenders to discriminate by major and school. Good school with a good degree? Lend. Good school with a shitty degree? Lend with extreme caution caution. Fake school with any sort of degree? Tell them to kindly fuck off. No disagreement here. I don't want to give the perception that I think "for-profit" higher education is problem-free. I do think they have severe problems, but put…

No, for-profits are a problem. They account for 10-13% of students, but 25% of student loans, and 50% of defaults. They have no academic standards, because they have no concern for academic reputation in the way traditional institutions do, and can seek to enroll the largest possible classes without worrying about keeping up GPA/SAT medians.

I agree that for-profits are a problem.

To put my objection more clearly: Don't use the IRS designation to whitewash "non-profits", which are in many ways acting just as atrociously as "for-profits" anyway. Your statistics miss something important - the socioeconomic class that is consuming the non-profit product comes with some inherently lesser risks vis a vis default (for example: I presume more "non-profit" college consumers are going to be able to cover their asses, debt-wise, with help from their parents). What happens when you correct for that, what is the magnitude of difference? The "non-profit" statistics also encompass schools where you are clearly going to have less of a problem getting a job afterward. What happens if you look at the LOWEST tier of "non-profit" university and compare it to the "for-profit"? I would presume that you would find very little difference.

Re: The Student Loan Bubble is Starting To Burst

#146

Post by jlgreco »

unono wrote: post #144
jlgreco wrote: post #118

Earlier quoted context omitted.

1) The absolute last thing this world needs is more for-profit education, particularly for-profit education that has somebody else foot the bill. Do yourself a favor and try to sell this idea as non-profit; I was giving you the benefit of the doubt by assuming it was. 2) An app that teaches people things but doesn't have anything to teach them is worthless. Of course the software is the easy part... If you really thi…

I think we'll keep disagreeing about this. I think your argument comes from the traditional 'liberal arts' education angle. I'm coming more from vocational type place. More of a rentacoder/odesk done more comprehensively. Anyway, adios

I'm not worried about liberal arts education. I couldn't care less about that.

I'm just wondering how you think making an app would be the difficult part of teaching thermodynamics or fluid mechanics to people.

Re: The Student Loan Bubble is Starting To Burst

#147

Post by waps »

nchaimov wrote: post #124
msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

It isn't quite true that student loans can't be discharged through bankruptcy. Student loans are not excluded from discharge if excluding the debt would "impose an undue hardship on the debtor and the debtor's dependents": 11 USC 523(a) Exceptions to discharge ... (8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for -- an educ…

Why isn't this clause used, assuming people who go bankrupt actually tried to prevent that from happening ?

Re: The Student Loan Bubble is Starting To Burst

#148

Post by msandford »

comicjk wrote: post #112
msandford wrote: post #74

Earlier quoted context omitted.

Yeah that's a really good point. I'm not sure it really matters, though. The law allowed you to shed college loan debt through bankruptcy up until 1976/1978 and people went to college for at least 100 years prior to that law. Furthermore a cheap college degree might be so inexpensive that the hit to your credit isn't worth the expense dodged. Banks can loan on cars worth as little as $5k even though their cost to rep…

> people went to college for at least 100 years prior to that law. This is the fallacy of comparing the upper classes of one period with the masses of another. A far smaller fraction of people went to college in the century before 1976, and those who did go from lower-class origins often did so through direct scholarships like the GI bill. The college loan market was not very viable at this time. None other than Milt…

Yeah that's a really good point!

I've heard plenty of people talk about working their way through school by having a summer job to pay for room and board and tuition and that it was possible to do it that way, even if it was uncomfortable. That really sounds great but maybe a little bit too great: it's a good narrative about how things were better back in the olden days when things were still good and not fucked up. I WANT to believe it but I'm not sure that I should. And it's all anecdote, no data.

I did some searching for pricing and I found this: http://www.collegeview.com/admit/?p=1858 It looks like a decent summary. In 1960 the minimum wage was $1.00/hr and the cheapest tuition I'm seeing is $960 for the University of Texas. If you made minimum wage for three months of summer that's a total of 40 * 4 * 3 * $1 = $480 pre-tax. So definitely not enough to pay for a whole year of school from just the summer job. At an Ivy League school you're at about 1/4 of your yearly total.

Today if you work a minimum wage job for a whole summer you'd get 40 * 4 * 3 * $7.25 = $3480 (pre-tax of course) which wouldn't even pay for your tuition (nevermind room and board and other expenses, that's another $5k per year at least) at the University of Florida, arguably the best deal in college tuition in the last decade. Comparing it to an Ivy League these days, it's not the 25% it used to be but rather about 10% if you go to one of the cheaper schools.

Re: The Student Loan Bubble is Starting To Burst

#149

Post by 001sky »

ChrisBland wrote: post #94
RougeFemme wrote: post #77

Earlier quoted context omitted.

A lot of credit card debt has no collateral either, but that can be discharged in bankruptcy; why not student loans? And I suppose credit card companies could try to re-possess the goods purchased with credit cards (obviously not the services), but they don't. (And it makes sense not to; not worth it financially). FWIW, I have no student loan debt so I'm relatively neutral on this.

The issue is at the end of a normal Bankruptcy proceeding, assets are sold to repay the note. Lets say you go out and buy a rental property for $500k, if you never make a payment the bank can repossess the rental property and sell it to recover their loan. Your asset is gone, you have no way of making any kind of income from it after it has been repossessed. With student debt its different, if you went to undergrad a…

This is retarded (pardon my french). Assets are only relevant with respect to security interest held by the lender. Slavery is illegal, and it is not legal to attach security interests to peoples lives. Of course, by making the discharge of debt itself illegal, the lenders have placed their security interests in a default position aking to the states right to tax all future income. Which is a hillarious (although not funny) abdication of government authority in a democracy (as its unaccountable, not to mention opaque and non-transparent).

Re: The Student Loan Bubble is Starting To Burst

#150

Post by bobbydavid »

enraged_camel wrote: post #127
msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

>>Student loans only price in 1 & 2 because of the near impossibility of not paying the loans back. That, and there is virtually no way to accurately measure the default risk of those taking the loans. It would be very interesting to live in a world where your choice of major affected your loan rate. For example, as a political science major you would not be nearly as employable as a computer science major, which wou…

It's no problem for the bank of they can't accurately measure your risk of defaulting, as long as they can assess a group risk. So, say 4% of students fail to repay, the bank would use that number.

Just like car insurance when you first start driving. They don't know (or care) if you're a good driver so they just average beginner drivers and base the price around that average.

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