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Why The Student Loan Market Is Insane

businessweek.com

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Re: Why The Student Loan Market Is Insane

#21

Post by netcan »

pm24601 wrote: post #18

Gee cry me a river: 'As a result, “the government has made it difficult for banks to price to default rates,” says Mike Cagney, founder of Social Finance, a socially based student lending operation known informally as SoFi. “By accepting FDIC insurance, banks lose pricing flexibility and can’t charge interest rates commensurate with the quality of schools—and default rates vary widely by schools.”' How about the bank…

The meat of the article is about the follow on effects from that. Higher default should mean higher interest rates is a higher cost which would push down enrollment in those underperforming schools (which also underperform for students) and/or push the the school's price down. To the extent that loans are insured, the banks profits aren't really affected by incorrectly priced risk.

I'm very skeptical of free market solutions to higher education affordability issues. I think it's nonsense. But, screaming your slogan (fuck banks!) at a sentence from an article making a point about a different point of view is basically youtube comments.

Re: Why The Student Loan Market Is Insane

#22

Post by gambiting »

aianus wrote: post #9
Swizec wrote: post #8

Earlier quoted context omitted.

And yet in much of Europe (or at least where I'm from), colleges where you pay tuition are considered substandard whereas colleges without tuition are considered high quality. Mostly to do with the expectation that if you pay tuition they will make bloody certain you get that degree, whereas colleges without tuition fail some 50% of their students. Hell, Universities don't even want to accept tuition-based colleges u…

This just seems bizarre to me. How can state funded schools compete for good professors with rich private schools?

Same here in Poland. Only the free universities are the good ones. Any paid-for private university is immediately considered worse and is very unlikely to result in a good job. All top 100 universities in the country are completely free.

And like the commenter above said - private universities will push through 90% of their students, so the degrees they get are worth close to nothing,no matter how much they paid. Meanwhile, the most prestigious schools in the country lose over 50% of the students in the first year because requirements are so high,and because they are not afraid of letting people go(they are not paying, so they are not entitled to anything). Out of 200 people signing up for an engineering course,only 20-30 people will actually graduate(and those engineers are sought after by every company in the country,because they are guaranteed to be good).

Re: Why The Student Loan Market Is Insane

#23

Post by netcan »

aluhut wrote: post #10

I would love to know when this "why"-titles fashion finaly ends.

I like it. It sets out a format that I think works well. 'Why' means 'This article is going to argue that xyz'

Much better than the 'is' titles which usually mean 'This article is going to ramble vaguely about xyz and avoid even attempting to answer the question in the title (even though the answer is obviously no)'

Re: Why The Student Loan Market Is Insane

#24

Post by szatkus »

jadyoyster wrote: post #15
aianus wrote: post #9

Earlier quoted context omitted.

This just seems bizarre to me. How can state funded schools compete for good professors with rich private schools?

The private schools don't care about having good academics, just about making money. Good professors want to be associated with the trusted and traditional publicly funded universities.

Excactly, "clients" would complain if getting a degree was too hard.

Re: Why The Student Loan Market Is Insane

#25

Post by doctorKrieger »

gambiting wrote: post #22
aianus wrote: post #9

Earlier quoted context omitted.

This just seems bizarre to me. How can state funded schools compete for good professors with rich private schools?

Same here in Poland. Only the free universities are the good ones. Any paid-for private university is immediately considered worse and is very unlikely to result in a good job. All top 100 universities in the country are completely free. And like the commenter above said - private universities will push through 90% of their students, so the degrees they get are worth close to nothing,no matter how much they paid. Mea…

oh you must be joking, i'm graduating from top1 polish university and even the professors are saying the quality of education is piss poor -but well whan can you expect when the TA's are getting paid around 1500 zloty (500$) and the professors are grabbing ~4000zloty (a bit more than 1000$). But there are parts in which you are right - the graduation rate is 30% and the quality of education in paid unis is even worse. And no we're not sought after in the country because we tend to leave it.

Re: Why The Student Loan Market Is Insane

#27

Post by mgkimsal »

rbobby wrote: post #5

So kids that can't afford/qualify for a top school would also face much higher student loan interest rates. Humm... that doesn't seem that much different from "tax the poor" style of economics. Perhaps schools with a lower default rate should get a higher interest rate... the banks are leaving money on the table. Students attending schools with a higher default rate should get the lowest rate and more government supp…

"(i.e. increase the amount of loans available for engineering, compsci, whatever fields will be important in 10 to 20 years)."

If fed govt tries to do this, it's "meddling in the market" (or "distorting the market"). If a private co does this, it's smart/fwd thinking. ?

Re: Why The Student Loan Market Is Insane

#28

Post by Paul_S »

doctorKrieger wrote: post #25
gambiting wrote: post #22

Earlier quoted context omitted.

Same here in Poland. Only the free universities are the good ones. Any paid-for private university is immediately considered worse and is very unlikely to result in a good job. All top 100 universities in the country are completely free. And like the commenter above said - private universities will push through 90% of their students, so the degrees they get are worth close to nothing,no matter how much they paid. Mea…

oh you must be joking, i'm graduating from top1 polish university and even the professors are saying the quality of education is piss poor -but well whan can you expect when the TA's are getting paid around 1500 zloty (500$) and the professors are grabbing ~4000zloty (a bit more than 1000$). But there are parts in which you are right - the graduation rate is 30% and the quality of education in paid unis is even worse…

The problem with leaving the country is that your very good degree is now almost worthless. I got mine (from a good technical uni) issued in English, I even wrote my thesis in English. Not a single employer wanted to look at it. Yet, I earn the same as my colleague with a PhD from a local uni. Turns out no one cares about degrees in software engineering. Maybe it's different in your industry.

Re: Why The Student Loan Market Is Insane

#29

Post by greenmountin »

Swizec wrote: post #8
beloch wrote: post #3

Parts of this article bother me. Let's say that banks could set rates based on risk and this did force lower quality colleges to reduce their tuition. Those colleges would bring in less revenue and program quality would likely suffer, possibly resulting in a feedback loop. Meanwhile, ivy league universities that are funded primarily by endowments would be able to raise their tuition without burdening their students,…

And yet in much of Europe (or at least where I'm from), colleges where you pay tuition are considered substandard whereas colleges without tuition are considered high quality. Mostly to do with the expectation that if you pay tuition they will make bloody certain you get that degree, whereas colleges without tuition fail some 50% of their students. Hell, Universities don't even want to accept tuition-based colleges u…

This is an interesting difference to bring up. I would trace the push for high graduation rates in the US to its inclusion as a parameter in the canonical US News college ranking equations. The oft-stated reasoning is that a top-flight college that allows even 10% of its students to leave without a degree in 5-years is failing them somehow.

To some extent, this is true -- I have personally seen brilliant friends drop out of a stressful college when clearly the university was not serving their reasonable needs.

Re: Why The Student Loan Market Is Insane

#30

Post by jlcummings »

The missing link is insurance or a hedge with buyers/students opting for protection from the schools product or service if not delivered in spirit or letter of its premised promise (aka marriage of warranty/collision-comprehensive). Secondly insurance or hedge against themselves as students/buyers for when life happens or they otherwise screw up delaying, discontinuing, rerouting their pursuit (liability).

The fix for one sided finance is to add a second dimension in an equal and opposite direction.

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