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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

#221

Post by fnordfnordfnord »

jlgreco wrote: post #193
pyre wrote: post #174

Earlier quoted context omitted.

> low graduation rates > hold colleges responsible for their performance Sounds like a recipe for lowered standards...

That's why you factor in job placement rates. Degree-mills are already a problem.

For "workforce training" in Texas, we have a rolling average criteria (along with several other metrics). Which is good, because economic fluctuations affect the job market. Some classes just can't seem to catch a break.

To add to that, they tighten the noose with every legislative session. It appears to be the intention to make our pay proportional to "graduate success"; which will likely end up meaning GPA. That would put the same incentives in place for public college instructors that have existed in for-profit schools.

Re: The Student Loan Bubble is Starting To Burst

#222

Post by VLM »

tsotha wrote: post #187
noise wrote: post #177

Earlier quoted context omitted.

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.

If you implement it properly, there will be no transcripts or verification if bills are not paid.

I went to Harvard, its just I lost the degree in bankruptcy, so they claim I didn't go. Just call my references (which are actually burner phones held by my brothers)

Interestingly higher ed already requires all bills to be paid to graduate... they don't care if you default on your credit card the week after graduation, but you aren't getting the diploma until the library fees and tuition are paid off by "someone, somehow". Once its the loan servicers problem, they don't care and you get your diploma. I vaguely recall having to get a slip from some different offices proving I owe no money to the school, in order to graduate, and threats they wouldn't provide transcripts to students in collections, etc.

Re: The Student Loan Bubble is Starting To Burst

#223

Post by onebaddude »

r00fus wrote: post #199
jlgreco wrote: post #81

Earlier quoted context omitted.

How many people go to real schools, and how many go to fake 'for profit' schools? And isn't the median student debt something like 25k? Not really "much much more" in my book. Anyone with a real degree should be able to handle that sort of debt. 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 cau…

This is similar to a proposal by the Obama administration to prevent loan-milling by Wall St. owned private schools.

When will a "Godwin's Law" type rule be introduced for the inevitability that the problem being discussed eventually gets blamed on Wall Street?

Re: The Student Loan Bubble is Starting To Burst

#224

Post by onebaddude »

jlgreco wrote: post #114
ShabbyDoo wrote: post #82

Earlier quoted context omitted.

What percentage of the issued student loans were taken out by those attending for-profit institutions?

"Despite dismal outcomes and high defaults, for-profit colleges enroll between 10 and 13 percent of students but receive 25 percent of all federal financial aid dollars. In 2009-10, this amounted to 25 percent of the total Department of Education student aid program funds." http://www.harkin.senate.gov/help/forprofitcolleges.cfm

I'm not sure that "student aid" and student loans are the same.

This discussion also seems to be missing the fact that students who attend many of these for-profit schools are poorer and thus more likely to default, regardless of the quality of education obtained. Any study is useless without an adjustment made for median household income of the student (and perhaps high school GPA).

Re: The Student Loan Bubble is Starting To Burst

#225

Post by coldpie »

drcode wrote: post #14
dmix wrote: post #5

Misplaced incentives all over the place. This one is going to be messy. But as many people have pointed out, much more slow moving than the previous financial bubble.

The solution is simple and obvious: All of us who have already paid off our loans are going to fund government-arranged loan forgiveness/reduction programs to those who over-leveraged their education. (I wish I was joking...)

I'm okay with it, although that's quite a lot of inefficiency to achieve the end-goal of free higher education.

Re: The Student Loan Bubble is Starting To Burst

#226

Post by rnernento »

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…

Actually it is. Easy credit and the sentiment that any degree will pay off in the long run have inflated tuition prices to the point where they are not necessarily worth the investment. Similar to the house that was worth 600k and is now worth 300k the degree that costs 200k doesn't meet that value. It could potentially be worse than the housing market because there is no asset, just a piece of paper. Just like you said you can't buy and sell college degrees.

The point here is that banks are starting to get it. Just because you can't walk away from student loan debt doesn't mean you have to pay it. Sometimes the numbers just don't work out. The odds of someone with 400k in student loans from a PhD in Philosophy paying them off in a lifetime with their job is a barista are very low.

Re: The Student Loan Bubble is Starting To Burst

#227

Post by jrokisky »

goostavos wrote: post #141
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]…

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 t…

The public university I attended was not much better. Tuition + Room and Board was 24k a year and rising. At the same time, an incredible amount of new university buildings are being built.

Re: The Student Loan Bubble is Starting To Burst

#228

Post by Simple1234 »

loganfrederick wrote: post #36
drcode wrote: post #14

Earlier quoted context omitted.

The solution is simple and obvious: All of us who have already paid off our loans are going to fund government-arranged loan forgiveness/reduction programs to those who over-leveraged their education. (I wish I was joking...)

As someone with student loans, I wish this wasn't the case for the previous generation. But at the same time, it's hard to blame current 23 year olds for decisions their parents and communities make about their kids' future finances when they're 16. The majority of fault lies in the previous generation of parents, who both failed to vote out politicians supporting these policies and who pushed their kids into enslavi…

I'm in the same boat. In the hospital, on the day of my birth my mother looked at me and said "college". Needless to say I did not do the proper cost/benefit analysis at the age of 17. I'm hoping my debt gets forgiven after 25 years. Being 80 years old and making student loan payments does not sound fun.

Re: The Student Loan Bubble is Starting To Burst

#229

Post by JackFr »

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 house of a certain niceness is (everything else equal) going to cost the same amount of money per month whether the interest rate is 1% or 15%. A $1500/mo mortgage buys you $250k of house at 4% but only $150k of house at 9% and only $95k of house at 15% like in the early 80s."

That doesn't make sense. In the short term, we can hold the housing stock and income as fixed, and as the interest rate varies, the amount of capital available to buy homes varies as does the price. That isn't to say it is the primary effect -- income, net household formation and the housing stock are the other main determinants -- but the level of interest rates is important.

Re: The Student Loan Bubble is Starting To Burst

#230

Post by ctdonath »

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]…

As a sometime prof at a for-profit school, may I observe that 1/3rd of my students (on average) failed - not for any guilt by the school (me included), but because they just didn't do the work. Really, they didn't even try; I can't grade what's not submitted. Methinks there's a significant correlation between your complaint and the reality I observed, a correlation which nobody is taking into account.
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