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Students refuse to pay back loans to failed for-profit college

newyorker.com

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Re: Students refuse to pay back loans to failed for-profit college

#41

Post by sheepdestroyer »

iopq wrote: post #33
sheepdestroyer wrote: post #21

A lot of countries have a free post secondary education system : https://en.wikipedia.org/wiki/Free_education#Partial_list_of... It always astonish me to think it can be seen as normal, even more equitable, to require people to get so huge debts before even being trained to work.

To pay for someone's education someone else must be taxed. Why is it better to tax a working person for every student's education instead of just having that person pay for the exact education they received?

Because taxing is low on low incomes while high on high incomes. And that you do not know before starting to work which king of income, if any, you will have. that's the big equity advantage of redistribution.

Re: Students refuse to pay back loans to failed for-profit college

#42

Post by mikeash »

Shivetya wrote: post #5
ChainsawSurgery wrote: post #2

> student-debt problem is so severe that it seems to be reducing the formation of new households Perfect! Housing bubble averted. In all seriousness, this + an influx of foreign investment into american real estate + a future generational aversion to debt (from experiencing first or secondhand how crippling student loan debt can be) will make for some interesting times in the upcoming decades.

the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household. when it comes to school debt the Federal government would be best served by limiting what it loans based on the education desired, as they set limits on what they pay out for medical services there is little reason to…

$886 billion in auto loans doesn't seem like very much to me. There are about 254 million passenger vehicles in the US, so that's an average of $3,500 in debt per car (of course there will be huge variation there).

You pretty much need a car to live in many places in this country, and in many more places you need a car to have a decent job. Most people can't afford to buy one outright, and in a case like that, it's sensible to take out a loan in order to purchase an asset that allows you to immediately start making money to pay it off. Taking out a loan for a low-end car so you can drive to work is pretty different from taking out $50,000 in loans for a degree that you hope will let you find better work years in the future.

Re: Students refuse to pay back loans to failed for-profit college

#44

Post by mikeash »

eat wrote: post #3

I always hear people say things like "we don't have debtors prisons in the U.S.". If enough people start doing this, I have a very strong feeling that that will change. As student loans become more of a crisis, we're sure to see more people simply deciding not to pay. What recourse to lenders have if this happens on a large scale?

They wouldn't have a lot of recourse, I imagine. Perhaps this will teach lenders to be more careful about unsecured loans.

Re: Students refuse to pay back loans to failed for-profit college

#45

Post by Alex3917 »

TomGullen wrote: post #27
Alex3917 wrote: post #11

So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed. What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards? I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then…

You said it yourself, they were preying on the vulnerable. To what extent exactly should these vulnerable people take personal responsibility? Why didn't you mention that these colleges need to take some responsibility as well?

> To what extent exactly should these vulnerable people take personal responsibility?

I mean once they showed up and realized it wasn't a real college and they weren't being taught anything, that would have been the appropriate time to protest and try to get their money back, rather than staying for another 2-4 years to get the degree and hoping that no one notices that they didn't actually learn anything.

> Why didn't you mention that these colleges need to take some responsibility as well?

They should, but in this case they already got shut down. My feelings about for-profit colleges are basically the same as my feelings on the military. I.e. the military shouldn't be tricking kids into enlisting, but that that still doesn't give soldiers a free pass for going over to the middle east and killing innocent people.

Re: Students refuse to pay back loans to failed for-profit college

#46

Post by ChainsawSurgery »

iopq wrote: post #37
ChainsawSurgery wrote: post #26

Earlier quoted context omitted.

> doesn't threaten the rest of the economy in the same way that housing loans did I dunno about that - it's probably just a lot more insidious and less panic-y. Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on: 1) Savings/retirement/etc 2) Goods and services 3) Capital investment 4) Etc. Given the compounding natu…

Yes, but when going to college a lot of college employees got paid using that money. Current students paying money to the college is stimulating the economy, while former students paying the debt off is shrinking the economy.

> Current students paying money to the college is stimulating the economy

Ehh, it's stimulating the higher education economy.

And even that's debatable depending on how that influx of money gets spent: Paying 100 extra student workers $10/hr isn't really stimulating the economy since most of that money's going right back to the college.

Plus, it's not smart to put all of your stimulus eggs in one market basket, ya know?

Re: Students refuse to pay back loans to failed for-profit college

#47

Post by discardorama »

"Most Corinthian students cover their tuition by taking out federal and private loans. That debt, it turns out, is far more resilient than Corinthian itself."

This here is the problem. If Corinthian can get out from paying its debts, why can't the students?

Re: Students refuse to pay back loans to failed for-profit college

#48

Post by ssharp »

ChainsawSurgery wrote: post #26
AndrewKemendo wrote: post #16

Is this the start of the student-loan bubble bursting? From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.

> doesn't threaten the rest of the economy in the same way that housing loans did I dunno about that - it's probably just a lot more insidious and less panic-y. Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on: 1) Savings/retirement/etc 2) Goods and services 3) Capital investment 4) Etc. Given the compounding natu…

We financed almost all of my wife's law school and decided once she graduated and had a job, that we'd pay off her loans as quickly as possible. We're almost done, but it's been two long years of getting by on one paycheck. That, along with having twins, means that we're not spending money like we did in our DINK days.

However, the extra financial discipline has been very beneficial. We've learned to coupon a lot of stuff for next to nothing, redid our retirement savings, set up savings for the babies, and have put together a financial roadmap for the next few years. I'm sure having the kids had a lot to do with it, but cutting your net income in almost half makes you reconsider a lot of things.

Doing things this way will save over $150,000 in interest over the next 30 years. The government will gladly hand you a 30-year refinancing of your loans, with an attractive monthly rate, but the amount of interest that you end up paying is staggering. I know most people graduating aren't in the same position we were in to aggressively pay down the debt and those who can't are starting out life in a financial pit.

Seeing that type of amortization and interest on anything other than a house (and even then...) is pretty eye opening, especially when the amortization schedule has your name on it!

Re: Students refuse to pay back loans to failed for-profit college

#49

Post by ls66 »

TomGullen wrote: post #27
Alex3917 wrote: post #11

So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed. What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards? I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then…

You said it yourself, they were preying on the vulnerable. To what extent exactly should these vulnerable people take personal responsibility? Why didn't you mention that these colleges need to take some responsibility as well?

I think anyone who is capable of graduating from a college, even a flawed one, as she did, has a hard time portraying themselves as vulnerable. At what point is someone responsible. She even graduated, so she has a degree and can legally state that. While I'm happy to see educational institutions being viewed with more skepticism as to their value, I think her situation is pretty cut and dried. Many of us had the experience of getting out of college and for a number of reasons, like the economy, not being able to find a job in the field and having to find another way.

Re: Students refuse to pay back loans to failed for-profit college

#50

Post by AndrewKemendo »

ChainsawSurgery wrote: post #26
AndrewKemendo wrote: post #16

Is this the start of the student-loan bubble bursting? From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.

> doesn't threaten the rest of the economy in the same way that housing loans did I dunno about that - it's probably just a lot more insidious and less panic-y. Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on: 1) Savings/retirement/etc 2) Goods and services 3) Capital investment 4) Etc. Given the compounding natu…

My question was, what is the macro impact of them defaulting on student loans.

Seems like based on your point, everyone would be better off because PPP would go up slightly. I'm not sure I agree, but only because I am not sure of the impact massive student loan default would have on capital markets for debt holders.

Basically would mean that Sallie Mae could tank significantly.

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