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

Re: The Student Loan Bubble is Starting To Burst

#171

Post by msandford » Tue, Sep 10, 2013, 3:15 AM UTC

bradleyjg wrote: post #161

msandford wrote: post #148

Earlier quoted context omitted.

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.…

My dad worked his way though state schools (SUNY) for undergraduate and law school from 1968 - 1975. A few things about your calculations. First back then, unlike now, no college degree didn't mean automatic minimum wage job. Second, he worked while in school, not just over the summer. Third small scholarships back then actually made a difference. Today if you get the national merit scholarship for doing well on the…

Yeah I'm not suggesting that I have a definitive answer to the question. I just wanted to do some back-of-the-envelope calculations to see the scale of the thing.

So if you work 15 hours/week during the year and 40/week during the summer and take the winter break completely off that would be 40 * 4 * 3 + 15 * 4 * 8 = 1140 hours. If you manage to bring in $2.00/hr that would be enough to pay your way at Harvard.

That sounds doable for a person who isn't a genius and willing to sleep only three hours a night or otherwise make really big sacrifices. Truly exceptional people will always be able to bootstrap. But one thing I think is important is to make it possible for those who are talented but not insanely talented (I don't know what the percentages are) to get a degree and learn enough to be useful to society. It's remarkable that people really could (at least in some cases) do that without going into debt.

Re: The Student Loan Bubble is Starting To Burst

#172

Post by acjohnson55 » Tue, Sep 10, 2013, 3:22 AM UTC

jack-r-abbit wrote: post #162

It is amazing the number of comments that talk about the problems of defaulting on loans and then place the blame in all sorts of places other than the people defaulting on loans. Unless you were forced at gun point to sign loan papers (or other scandalous things transpired), there isn't a lot that can convince me you are not solely responsible for your loan. I don't care if it is for an education, a house, a car or…

I've never heard of anyone who planned on defaulting on their student loans. Most people go to school hoping to end up upwardly bound in a fulfilling and financially rewarding career, drawn in by stories highly slanted with survivor bias. Many end up in dead-end jobs or underemployed. They don't know anything about who they're competing with in these fields or what these employers want. Kids sign these papers barely 18 years old that will quite likely set them in a gigantic financial hole for their foreseeable adult lives. Not to mention the fact that much of this debt is held by people who had no major reason to believe that the economy would drop from underneath their feet.

And what's the viable alternative? Not going to college? The survivor's bias for people who that's worked out for is even worse!

Sure, people willingly sign these loan papers, but we should also be honest about the level of agency and information the average aspiring adult has.

Re: The Student Loan Bubble is Starting To Burst

#173

Post by tsotha » Tue, Sep 10, 2013, 3:27 AM UTC

noise wrote: post #158

ChrisBland wrote: post #94

Earlier quoted context omitted.

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…

I'm not advocating this, but why couldn't they take your degree away? They can't take your education away, but the degree is just an agreement/contract that says you upheld your part of the bargain - passed tests, etc, and paid the university, and they in turn give you a certificate of achievement. If you default on the loan which was a substantial portion of the payment clause of that contract , why can't they revok…

If they could, what would be the point? They don't want to punish you; they want their money back. It's not like they could sell your degree to someone else.

Re: The Student Loan Bubble is Starting To Burst

#174

Post by pyre » Tue, Sep 10, 2013, 3:39 AM UTC

muzz wrote: post #135

rayiner wrote: post #126

Earlier quoted context omitted.

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.

Agreed. Article in San Jose Mercury News just yesterday: http://www.mercurynews.com/education/ci_24041125/profit-coll... The good news: "Last year California cut from its tuition aid program more than 130 private colleges with low graduation rates and too many student loan defaults. Some wonder if the federal government will follow the state's lead to hold colleges responsible for their performance. Today, only 50 fo…

> low graduation rates

> hold colleges responsible for their performance

Sounds like a recipe for lowered standards...

Re: The Student Loan Bubble is Starting To Burst

#175

Post by acjohnson55 » Tue, Sep 10, 2013, 3:40 AM UTC

tokenadult wrote: post #75

The pervasive third-party payment in higher education results in many distortions in incentives. Consultants to colleges advise setting high list prices, and offering "merit scholarships" that simply roll back the apparent price of the college to near its actual value as a revenue-maximizing strategy.[1] Very few parents shop for colleges with the free online resource from Education Trust, the College Results website…

I'm going to push a little further.

Maybe, just maybe, the root problem is our financial scheme for higher ed, in particular, the idea of foisting the cost on the student prior to enrollment (let alone graduation, or gainful employment). Say what you want about our K-12 system, but its costs haven't spiraled completely out of control. Nor have the costs of highly state-subsidized public universities in many other parts of the world. I don't think enough people are seriously considering the idea that we have shot ourselves in the feet by demanding that the government and private industry make a return on investment on a basic service that provided all sorts of positive externalities when people have access to it. We've encouraged colleges to compete with one another for market share.

Maybe the incentives that aren't working for us are a result of our cultural infatuation with winner-take-all competition.

Re: The Student Loan Bubble is Starting To Burst

#176

Post by muzz » Tue, Sep 10, 2013, 3:51 AM UTC

ahsanhilal wrote: post #107

The worst part of this thing is that students loans do not need to be that high because college costs should not be that high. Student loans are artificially high because of two reasons: 1. Government subsidies 2. Increasing college costs Government subsidies are there because the government knows that a kid who goes to college will be able to give a better return on it 'public' investment, since lifetime earnings fo…

1. Government profits from student loans. I.e., it does not subsidize them as a whole-- rather, it makes money off them.

2. In theory, colleges compete on cost as well as other factors. There exist private colleges and even for-profit private colleges (although the data shows us that for-profit private colleges often have the worst outcomes).

It's easy to blame government for problems. Easy, but not always correct.

Re: The Student Loan Bubble is Starting To Burst

#177

Post by noise » Tue, Sep 10, 2013, 3:53 AM UTC

tsotha wrote: post #173

noise wrote: post #158

Earlier quoted context omitted.

I'm not advocating this, but why couldn't they take your degree away? They can't take your education away, but the degree is just an agreement/contract that says you upheld your part of the bargain - passed tests, etc, and paid the university, and they in turn give you a certificate of achievement. If you default on the loan which was a substantial portion of the payment clause of that contract , why can't they revok…

If they could, what would be the point? They don't want to punish you; they want their money back. It's not like they could sell your degree to someone else.

I suppose just as an incentive to not default. If you keep the degree, in theory you are more employable. If you have to give it up to default on the debt, maybe you'd think twice?

Re: The Student Loan Bubble is Starting To Burst

#178

Post by tsotha » Tue, Sep 10, 2013, 3:55 AM UTC

msandford wrote: post #148

comicjk wrote: post #112

Earlier quoted context omitted.

> 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 went to one of the University of California campuses in the late '80s. Back then fees were about $500 per quarter my freshman year, and minimum wage was $3.35. I was able to cover all my fees and most of my living expenses by working summers at a job that paid about double the minimum (with lots of overtime). A job in the campus cafeteria during the school year covered the rest. I took out one $2500 student loan for a rainy day fund but never spent the money.

There are a few things that have changed since back then:

* College tuition has gone up faster than anything else in the economy. Anything. The UC system was a great deal at $1500/yr, but back then you could go to Stanford for $13k or so. The increase has been driven mostly by easy money from student loans, but also by administrative bloat related to government dictates. Books have become an extortion racket - $150 for a stack of unbound pages?

* Almost 20 million illegal aliens have entered the country since I went to college, completely wiping out the low end of the job market. My 1986 summer job is now done by illegals in their late 20s, and they're making about $0.50 more per hour than I made 25 years ago. My old employer doesn't pay more because he doesn't have to.

* The rise of unpaid internships. You work a summer for free so there's a chance you can get a job when you graduate. I think this is another consequence of easy loan money. If you offered me (or my classmates) an unpaid internship we would have declined - we needed to get paid so we could afford to go to school in the fall. Between the low wages and easy loan money today you can almost see the wheels turning - "What the hell. It's not like a job at Burger King will make a dent in my debt."

Re: The Student Loan Bubble is Starting To Burst

#179

Post by muzz » Tue, Sep 10, 2013, 4:03 AM UTC

tsotha wrote: post #178

msandford wrote: post #148

Earlier quoted context omitted.

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 went to one of the University of California campuses in the late '80s. Back then fees were about $500 per quarter my freshman year, and minimum wage was $3.35. I was able to cover all my fees and most of my living expenses by working summers at a job that paid about double the minimum (with lots of overtime). A job in the campus cafeteria during the school year covered the rest. I took out one $2500 student loan fo…

College tuition sticker price has gone up a lot. The actual amount that students pay hasn't gone up as much.

A half-decade ago, Stanford waived tuition for students from families of income less than $100k [1]. Median household income in the country is roughly $57k.

[1] http://www.reuters.com/article/2008/02/21/us-education-stanf...

Re: The Student Loan Bubble is Starting To Burst

#180

Post by bradleyjg » Tue, Sep 10, 2013, 4:06 AM UTC

msandford wrote: post #171

bradleyjg wrote: post #161

Earlier quoted context omitted.

My dad worked his way though state schools (SUNY) for undergraduate and law school from 1968 - 1975. A few things about your calculations. First back then, unlike now, no college degree didn't mean automatic minimum wage job. Second, he worked while in school, not just over the summer. Third small scholarships back then actually made a difference. Today if you get the national merit scholarship for doing well on the…

Yeah I'm not suggesting that I have a definitive answer to the question. I just wanted to do some back-of-the-envelope calculations to see the scale of the thing. So if you work 15 hours/week during the year and 40/week during the summer and take the winter break completely off that would be 40 * 4 * 3 + 15 * 4 * 8 = 1140 hours. If you manage to bring in $2.00/hr that would be enough to pay your way at Harvard. That…

I have a different perspective. Rather than thinking it's remarkable that they could do that back then, I think it's a disgrace that we can't do that today.

Harvard's tuition back then adjusted for inflation is around $18,700. Assuming 10 classes a year an using an average class size of 40 students (which is what Harvard reports), that's a budget of $74,800 per class. You should be able to run a college on that, even taking into account some overhead for libraries and such. Yet Harvard today charges more than twice that.