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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

#41

Post by viraptor »

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…

While free universities are the default and fairly good quality in Poland, your post has some mistakes:

- there's no top 100, since only 83 universities qualify to even be included in the ranking

- place 15 in 2013: Akademia Leona Koźmińskiego - not free

- place 43 in 2013: PJWSTK - not free, costs around $330 / semester

- It's not uncommon to fail exams at private universities, because you pay extra to retake them. Same as in "free" ones (they're only free as long as you don't fail anything, or don't want to continue)

source: http://www.perspektywy.pl/portal/index.php?option=com_conten...

Re: Why The Student Loan Market Is Insane

#42

Post by ceejayoz »

tn13 wrote: post #7

Only if Mr. Obama would stay out of education market half the problems would get solved automatically. Few NBA players make million dollars a year. But that does not mean if government provides cheaper loans for basketball training it would produce more millionaires or even increase overall quality living. If government meddles in education, forces banks to give cheaper loans it only means one thing. A big "Student L…

Half the problems would get solved by the President staying out of it? Why were they problems at all before he started pushing for the reforms, then?

Re: Why The Student Loan Market Is Insane

#43

Post by gambiting »

ceejayoz wrote: post #39
Paul_S wrote: post #28

Earlier quoted context omitted.

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.

Software engineering is probably one of the specialties better suited for an apprenticeship-style program rather than a degree-based one.

Yeah. I got my job in the games industry as an intern programmer before even graduating. When I finally did graduate, they were like "oh , cool", and that's it. I guess that even if I dropped out of uni they wouldn't care - I was doing my job and that's what was important.

Re: Why The Student Loan Market Is Insane

#44

Post by IgorPartola »

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,…

Random aside: I was under the impression that very few schools were funded by endowments in any significant way. Harvard was a big exception to that rule, which hit them really hard in 2008. They had a team of high profile Wall Street traders who did a pretty good job raising their endowment to the point where it funded at least a third of their operations. With this newfound wealth, Harvard started a whole lot of construction projects which were then cut short in 2008. Another response to the financial crisis: Harvard stopped offering their students free coffee.

Re: Why The Student Loan Market Is Insane

#45

Post by aluhut »

netcan wrote: post #23
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) '

To me it seems most of the times like the author had no idea how to make up a title that would describe the text in one sentence. It becomes even worse if the answer to the question is not really there in the end.

Re: Why The Student Loan Market Is Insane

#46

Post by aluhut »

TheOtherHobbes wrote: post #26
aluhut wrote: post #10

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

Better than Gawker style: "The finance industry decided to screw over the nation's university students. You won't believe what happened next!"

Hehe yes there are ways to make it worse ;)

Re: Why The Student Loan Market Is Insane

#47

Post by Amezarak »

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,…

> North of the border, university tuition is subsidied by provincial governments and regulated by them as well. It varies from province to province, but average tuition in Canada is far lower than it is in the U.S..

One thing that often goes unmentioned is that public universities in the United States are subsidized by state governments. In fact, the rapid fall in state subsidies is one major reason for rising tuition costs. Most states also fairly strictly regulate public universities; you'll probably find there's something along the lines of a Commission or Board of Trustees appointed by the state governor to oversee and regulate universities. The difference, of course, is the degree, kind, and aims of our subsidies and regulation.

Furthermore, most every public university offers free tuition if the in-state student scores sufficiently high on the ACT or SAT. I think these factors are important when comparing the US system to other countries, as is likely to happen in this thread.

Re: Why The Student Loan Market Is Insane

#48

Post by bradleyjg »

waps wrote: post #17
bradleyjg wrote: post #4

Earlier quoted context omitted.

That's not how the system works anymore. FFEL which was the government guaranteed but bank issued student loans was ended in 2010. Now almost all student loans are made directly by the government (Stafford, PLUS, & Perkins), with a small rump private student loan industry. Those loans are non-dischargeable but not government guaranteed. If this had been an actual article rather than a puff piece for SoFi, presumably…

Translation: they're government guaranteed by making the students seel themselves into loan slavery instead of by taxpayer money. Note the evolution of public finances since this started : expenses increased. Same thing will happen : government will bow to public pressure to make these things dischargeable, and suddenly the loans aren't worth their interest rate anymore. The government's companies panic and try to ge…

There are no seperate bond issues that back federal lending to students. They are funded out of general obligation debt (i.e. treasuries). Despite being warned over and over again that bond vigilantes are just around the corner, for the better part of a decade now investors have been willing to take near zero interest on them. There's no reason to believe that a few hundred billion in lost repayment over 10-30 years, would move the needle at all.

Re: Why The Student Loan Market Is Insane

#49

Post by waps »

bradleyjg wrote: post #48
waps wrote: post #17

Earlier quoted context omitted.

Translation: they're government guaranteed by making the students seel themselves into loan slavery instead of by taxpayer money. Note the evolution of public finances since this started : expenses increased. Same thing will happen : government will bow to public pressure to make these things dischargeable, and suddenly the loans aren't worth their interest rate anymore. The government's companies panic and try to ge…

There are no seperate bond issues that back federal lending to students. They are funded out of general obligation debt (i.e. treasuries). Despite being warned over and over again that bond vigilantes are just around the corner, for the better part of a decade now investors have been willing to take near zero interest on them. There's no reason to believe that a few hundred billion in lost repayment over 10-30 years,…

That's actually true. Greece demonstrated what happens after a default, and then Cyprus did. In both cases it didn't prevent them from reissuing bonds and selling out.

Re: Why The Student Loan Market Is Insane

#50

Post by rlucas »

netcan wrote: post #21
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 s…

The "meat" of the article is PR hamburger for SoFi.

(Not that SoFi aren't doing something genuinely interesting. But this is a straight-up advertisement. I'd bet a nickel that SoFi's agency even made the graphs for it.)

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