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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

#181

Post by muzz »

jerf wrote: post #168
muzz wrote: post #43

Earlier quoted context omitted.

Adding "$1 trillion in student loans to the federal balance sheet over a decade" is a result of direct lending, ie cutting out the middleman. It is also saving the taxpayer money to the tune of $70B over ten years.

It doesn't save the taxpayers any money if the government makes foolish loans that can't be repaid that nobody would have ever lent out if their own money was on the hook instead, nor does it save the taxpayers any money if the government provides easy, free money that causes unnaturally skyrocketing tuition followed by an unnatural higher ed crash. An awfully expensive $70B over ten years, I think.

You are not contradicting my post.

The savings of $70B comes from eliminating a profit layer that was enjoyed by the banks.

The government insured the loans before and after the change in 2010. So the taxpayer was on the hook for losses. Now it is still on the hook for losses, but also benefits from profits.

The $70B is simply from cutting out the middleman.

Re: The Student Loan Bubble is Starting To Burst

#182

Post by tsotha »

alwaysdoit wrote: post #42
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…

>This excess demand and fixed supply means that colleges can raise prices. If colleges raise prices, won't this make it more attractive/affordable for new colleges to open, thus increasing supply?

It would be if you assumed the purpose of college was to impart information. It's not. All that stuff about "teaching students to think" is just bullshit, frankly. The real reason you have to go to college to get a good job is the school you went to gives employers an indication of how smart you are.

Prior to Griggs v Duke Power employers could just give you an IQ test, and all the big ones did. If you wanted to work for IBM you could get a job even without a college degree if you did well on the IQ test. But with that single court ruling employers had to cast about for another way to rank applicants, and the most obvious solution was by college exclusivity.

So if you went to Harvard they want you. Not because you were likely to learn anything at Harvard you couldn't learn at State U. It's because they know you have to be pretty smart to get into Harvard as only one in about twenty applicants is actually accepted.

So Harvard (with the highest rejection ratio) can charge whatever it wants (and it's worth every penny), whereas schools that take everyone can't charge more than enough to keep the lights on.

It's hard to establish a new school. Parents will want to know "Is it a good school?" Since this is one of the biggest decisions in Junior's life, they're going to go conservative and try to get him into established colleges with solid reputations. Your new college has a chicken and egg problem - you can't get a lot of applicants unless you reject a lot of applicants.

Re: The Student Loan Bubble is Starting To Burst

#183

Post by jussij »

jlgreco wrote: post #59
slg wrote: post #51

Earlier quoted context omitted.

Playing devil's advocate, isn't it fair to remove the ability to discharge student loan debt and in term the default risk due to the fact that there is no collateral? Unlike a car loan or a mortgage, a bank can't repossess your education.

I assume a bank cannot reposes my liver either. What happens if I go into debt from medical expenses? Is there an exemption for medical debt as well?

From what I've read about the US health system, I thought you don't get much in the way of medical treatment unless you have medical insurance.

In other word the insurance covers the cost.

If that is the case, where is the debt?

Re: The Student Loan Bubble is Starting To Burst

#184

Post by muzz »

twoodfin wrote: post #151
muzz wrote: post #62

Earlier quoted context omitted.

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

Sure: Now they're funding the loan program directly. At the moment it's profitable, but if there are ever losses they'll come directly from the taxpayers' pockets. And there are indirect losses, too: Imagine the government started running a program to pay people $20K+/year (think grants + loans) not to work for four years, provided they paid some of it back at low, capped interest rates. Surely a lot of people would…

The government insured those loans before AND after the change. It was on the hook for loan losses before and after.

The indirect effects are MASSIVE BENEFITS for taxpayers, not losses. College graduates have lifetime income of $1M+ more than non-graduates, and this income is of course taxed at each individual's highest marginal rate. They have half the unemployment rate of non-graduates so they consume less unemployment and incur fewer other costs to government.

Re: The Student Loan Bubble is Starting To Burst

#185

Post by [deleted] »

noise wrote: post #177
tsotha wrote: post #173

Earlier quoted context omitted.

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?

[deleted]

Re: The Student Loan Bubble is Starting To Burst

#186

Post by cloverich »

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.

Am i the only person that see's those types of numbers, and correlates them with the type of students the school attracts - the student who did not - or could not - enter into an accredited 'regular' university?

Which is not to say that should necessarily impact the degree of scrutiny those schools receive. But perhaps worth considering - if they are serving students who are likely to get no education at all, is it better / worse? Honest, question - no implications here. Just think its something worth discussing.

Re: The Student Loan Bubble is Starting To Burst

#187

Post by tsotha »

noise wrote: post #177
tsotha wrote: post #173

Earlier quoted context omitted.

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?

Or you'd just tell your employer you had to give it up in a default. He's not going to care whether or not you still have your official slip of paper.

Re: The Student Loan Bubble is Starting To Burst

#189

Post by muzz »

druiid wrote: post #61

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 administrat…

40% of UC Berkeley undergrads pay no tuition [1]

These conspiracy theories are really interesting, especially in light of the facts.

[1] http://newscenter.berkeley.edu/2013/04/18/campus-announces-2...

Re: The Student Loan Bubble is Starting To Burst

#190

Post by muzz »

waps wrote: post #156
muzz wrote: post #100

Earlier quoted context omitted.

No, JP Morgan is NOT a middleman. These were cut out in 2010, and JP Morgan is lending directly now. Their loans are not subsidized nor backed by taxpayer money, and they are free to decide to stop lending, which is what appears to be happening now.

It also means that the government is now 1) the one making the laws 2) the organisation that would suffer if the assumptions ("guaranteed repayment") turn out less than perfect So now we have : debt slavery where your debtor is actually the one making laws. This could be really good or really bad. Really good if it is decided that transferring the education debt to all taxpayers is deemed acceptable, really bad if th…

Government now makes laws? Stop the presses! ...

No one is ever forced to borrow any kind of student loan. Using language like "debt slavery" is really over the top

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