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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

#201

Post by bayesianhorse »

zanny wrote: post #19
bayesianhorse wrote: post #9

Just because people shout "bubble" at any exponential growth phenomenon doesn't really mean we can tell when "the bubble bursts". Crashes in growth curves are always unpredictable. You can predict that there will be a crash, but telling when it's going to happen, that's the hard part....

Student loans look like they should be easier to predict than anything else. You can't see a bubble burst untill the inability to default is lifted. Until then, there is no defaulting, so there is no loss of confidence. The only metric to measure is how few payments people are making on their outstanding loans. For example, I only pay the minimum since I'm unemployed. I've drained around $300 of my savings just on mi…

At some point the banks will recognize that you won't ever pay all of the loan back, and then they have to write off a large portion of that debt.

If that realization happens too quickly for too many student loans, then there might be a sudden crash. Doesn't look like it yet though.

Re: The Student Loan Bubble is Starting To Burst

#202

Post by mjmahone17 »

muzz wrote: post #179
tsotha wrote: post #178

Earlier quoted context omitted.

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...

Stanford may now have more students on scholarship than off. But I know many of the Ivies have 40%+ of their students receiving no scholarship money, and it takes a family income of 150k+ (often more like 200k+) to not receive scholarship or loans. That means more than 40% of these schools' students come from families earning in the top 5% of household income (the 95th percentile is ~$190k). That is to say, the schools that offer the best aid, that have the potential to be the most affordable, aren't typically serving those who could most take advantage of the lower prices. Instead, private universities that do not guarantee to meet a student's need, state schools and for-profits tend to serve those students. Those are the schools where the sticker price is more likely to be the real price.

Re: The Student Loan Bubble is Starting To Burst

#203

Post by mjmahone17 »

bradleyjg wrote: post #180
msandford wrote: post #171

Earlier quoted context omitted.

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…

Harvard could afford to charge nothing for any of its students. However, by having a form of price discrimination where they gouge the wealthy, they then get to subsidize their low-income students, so that they don't have to miss out on as many of the non-economic opportunities that their classmates engage in, and still provide all the amenities (nice gyms, libraries, clubs and activities) that the upper-class students expect.

The issue is, after the most endowed schools ($/student), there is a steep drop where schools suddenly aren't able to provide the same opportunities for their low-income students, but still compete for students capable of paying in full. This leads to escalating costs, as schools construct nicer gyms, study areas and dorms, pricing out the mid-to-low income students.

Re: The Student Loan Bubble is Starting To Burst

#204

Post by ahsanhilal »

muzz wrote: post #176
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.

Government subsidies towards student loans is a well known fact. Just like government subsidized the cost of borrowing for mortgages, so has it inculcated a perverse system of college financing. Evidence of this can be seen in the largest increase in student defaults since 1990 at around 9.1%. whereas car, mortgage and credit card default rates are around 1-4%. That is called adverse selection run by a government system that is incentivized to give out bad loans due to the profit it sees in the long term.

Colleges, in a theoretical free market might compete on cost, but in real-life they actually are competing on providing amenities and extra curriculars, not in any way associated with how well kids are educated. College prices, inflation adjusted, have gone up by 120-130% in real terms, while median family income is stagnant. Most of the increase in Net revenues in colleges is NOT spent on paying educators since their wages and teacher/student ratios have been increasing linearly. The rise is mostly attributed to budgetary items for Other Employees, coaches adminstrators etc and large infrastructure funding.

Re: The Student Loan Bubble is Starting To Burst

#205

Post by PhasmaFelis »

everettForth wrote: post #33
PhasmaFelis wrote: post #28

I've got about $10,000 worth of student loans that I've been steadily paying off. What sort of effect might this have on me?

If your interest rates are not fixed, they are likely to go up next year. Sorry, if you were hoping for a handout.

Hah, do I look stupid? I was just wondering how bad I'll get burned.

Re: The Student Loan Bubble is Starting To Burst

#207

Post by gurumeditation »

unono wrote: post #159
jlgreco wrote: post #146

Earlier quoted context omitted.

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.

Khan got famous for explaining concepts really well. There were plenty of online stuff covering it already. He just did a superior product. Same with the app. It needs to be excellent, something Steve Jobs would be proud of, and it will make dent in the universe. This is big, heady, stuff, and we'll kill the ed business with it. I like nothing better than to see government jobs disappear.

Why would it need to be an app at all? It has zero benefits over being a website and requires students to buy an expensive piece of hardware to access it.

Re: The Student Loan Bubble is Starting To Burst

#209

Post by chris11 »

bradleyjg wrote: post #180
msandford wrote: post #171

Earlier quoted context omitted.

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…

I've had the impression that Harvard is very affordable for most applicants. They limit parental contribution to 10% at $150,000/yr, and require no parental contribution at less than $65,000/yr. And they do not bundle loans in there financial aid packages.

http://ofr.harvard.edu/site/policies-issues/financial-aid/

So that seems to me to say that if a family is in the bottom half of average household income, Harvard is free.

Re: The Student Loan Bubble is Starting To Burst

#210

Post by kalleboo »

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…

Because simply blaming it on the people signing the loans isn't productive, it's just a statement of the status-quo with no solutions (shaming people isn't going to change anything).
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