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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

#11

Post by Swizec »

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?

Professors in state funded schools get enough free time to run businesses on the side. They also get access to grant money. Also there's the prestige involved with being part of a University with 100+ years of tradition versus a college with 20 years of tradition at best.

Re: Why The Student Loan Market Is Insane

#12

Post by _broody »

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,…

Perhaps facing a crisis is what low-quality colleges need. The current system is a failure. It doesn't make sense that in an age where so many top-end study materials are available so ubiquitously, easily, and much cheaper than ever (even freely!), getting a diploma has become such an onerous undertaking, and that the accompanying tuition is proving to be increasingly inadequate to prepare its graduates for a cutthroat job market.

Throwing more money at the problem isn't going to solve anything when we don't even know what the hell the system is doing with all the cash funnelled into it in the first place.

Re: Why The Student Loan Market Is Insane

#13

Post by hkmurakami »

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…

Same with Japan. The national universities are much cheaper than private universities, and are held in much higher regard.

#1~6 are all national universities, and 8 out of the top 10 are national.

http://www.uscollegeranking.org/japan/top-japanese-universit...

Re: Why The Student Loan Market Is Insane

#14

Post by Tomte »

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?

In Germany the "rich" private schools are almost exclusively business schools. So it's only an option for you, if you're a professor of economics or finance, not if you're a physicist or a philosopher.

Well, I think there is one highly esteemed journalism school (not a university, but run by large media companies) and a pretty good law school.

(Interestingly enough all those "rich" private business schools here fail after a few years because they run out of money -- not without taking quite a bit of taxpayer's money trying to save them.)

Re: Why The Student Loan Market Is Insane

#15

Post by jadyoyster »

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?

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.

Re: Why The Student Loan Market Is Insane

#16

Post by hatbert »

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,…

I doubt the feedback loop would be very severe, simply because most tuition is not used to pay for faculty. Instead, most goes to the ever-increasing army of administrators whose actual responsibilities are harder and harder to pin down. The more likely scenario is that colleges would be required to trim the fat.

Re: Why The Student Loan Market Is Insane

#17

Post by waps »

bradleyjg wrote: post #4
ChuckMcM wrote: post #2

Is this surprising to anyone, structurally it is exactly the same as the mortgage issue in 2009 with Freddie and Fannie. The government finances the lending of money (by absorbing the risk) and gives banks money at a few percent which they loan out at 5 - 6% or more. You combine that with for profit universities which have discovered that the bank and their interests are aligned, they charge what ever they want for t…

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 get back their principal.

Why ? Because these companies weren't financed by the government, in true American style they loan on the public market, then reloan to the students. Right now they're rated AAA of course, and loan at very low interest to people who probably aren't even worth BBB rating. And they roll over debt. As soon as anyone finds a way to discharge large amounts of student loan debts, there's more than a trillion dollar of loans that go from AAA to < BBB. Then at the end of the month, these loans need to be rolled over ...

Re: Why The Student Loan Market Is Insane

#18

Post by pm24601 »

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 banks just get out of the student loan business?

Banks are make shitloads on the student loan program: all loans that default are insured.

Re: Why The Student Loan Market Is Insane

#19

Post by pjc50 »

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?

Nobody becomes a professor for the money.

Re: Why The Student Loan Market Is Insane

#20

Post by yulaow »

pjc50 wrote: post #19
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?

Nobody becomes a professor for the money.

Except those who want money and see being a professor as the means and not the purpose.

And those are usually VERY bad professors.

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