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U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

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Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#111

Post by learc83 »

godelski wrote: post #91
krisroadruck wrote: post #13

I'm curious why we treat student loan debt as being special. We don't make a huge deal out of people taking on other debt and then being unable to pay for it. I think probably if anything, what we should have are better controls for what types of degrees you are allowed to take a loan out for. If your degree of choice is unlikely to yield the kind of return that will pay for it, then you should be required to save up…

The problem here is that because student loans are so protected this means they don't have to ask what degree the loan is for. To the banks there is little risk here. This is one of the many factors going into it, but that's why banks will hand out so much money and for whatever degree a young person that definitely knows what they want to do and has their whole future planned out. No risk to lenders.

The vast majority of student loans around 90% IIRC are directly from the federal government, not banks.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#112

Post by petre »

rayiner wrote: post #107
winter_blue wrote: post #105

Earlier quoted context omitted.

I think the problem is that there is no downward marker pressure on college costs (for some puzzling reason there). It seems like American students are willing to pay higher and higher tuitions. This is the root of the problem. If we had 0% interest loans, we might have students paying even more for college than now. Why can't these kids just think about the debt they're getting into?

Kids can't think rationally about debt because their parents and teachers have overinflated the importance of everyone going to college and have actively discouraged critical thinking on these issues.

So send them to college elsewhere? in Canada? Europe?

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#113

Post by laughfactory »

rahimnathwani wrote: post #81
toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

"Why are interest free student loans never floated as an option?" Imagine what would happen if the US government made student loans interest free. Who would gain, and who would lose? (1) Students could afford to take out larger loans (as the repayments would be more affordable with 0% interest vs. 4.66% interest) (2) As a result of (1) colleges could charge higher tuition fees, without reducing the number of students…

You're right on the money. In fact, I'd argue that almost no one is smart enough (or wise enough) to only borrow what they really need. I went to college when I was 30. I thought I was smart. I knew that new graduates typically make, maybe, $40K. Yet, I signed up for the full boat...taking every last cent they'd loan me. Consequently, my wife and I are now $250K in debt--and have just bachelor's degrees (plus incomplete master's degrees). Sigh. So much for being so smart.

Basically, I've come to the conclusion that college is not for all. We would be wise to get behind technical schools, and community colleges, and save the university for those pursuing subjects like medicine, science, math, law, etc. At a minimum we should change the paradigm of college--from being an "experience" (parties, socializing, sports), to academics. Getting rid of school sponsored sports would vastly change the perception of college. Plus, we should make it harder to graduate. Require a 3.0, and have controls in place to ensure grades don't inflate to enable everyone to achieve the new minimum. Basically, college should be 100% for learning. Sure, you'll still have friends, go to the occasional party, but on the whole you're only there to learn and do things you couldn't learn or do elsewhere. Right now it's almost day care for 20-somethings. This would also necessitate dropping easy programs and majors. Not that there isn't a place for the arts, but is a four year degree in English or Art History really a good idea?

But yeah, I've noticed the same thing: the more we incentivize people to go to college by way of grants and loans, the more expensive it gets. When was college cheapest? When there was virtually no aid/loans available to anyone, and a much smaller percentage of people went to college.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#114

Post by laughfactory »

rahimnathwani wrote: post #81
toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

"Why are interest free student loans never floated as an option?" Imagine what would happen if the US government made student loans interest free. Who would gain, and who would lose? (1) Students could afford to take out larger loans (as the repayments would be more affordable with 0% interest vs. 4.66% interest) (2) As a result of (1) colleges could charge higher tuition fees, without reducing the number of students…

You're right on the money. In fact, I'd argue that almost no one is smart enough (or wise enough) to only borrow what they really need. I went to college when I was 30. I thought I was smart. I knew that new graduates typically make, maybe, $40K. Yet, I signed up for the full boat...taking every last cent they'd loan me. Consequently, my wife and I are now $250K in debt--and have just bachelor's degrees (plus incomplete master's degrees). Sigh. So much for being so smart.

Basically, I've come to the conclusion that college is not for all. We would be wise to get behind technical schools, and community colleges, and save the university for those pursuing subjects like medicine, science, math, law, etc. At a minimum we should change the paradigm of college--from being an "experience" (parties, socializing, sports), to academics. Getting rid of school sponsored sports would vastly change the perception of college. Plus, we should make it harder to graduate. Require a 3.0, and have controls in place to ensure grades don't inflate to enable everyone to achieve the new minimum. Basically, college should be 100% for learning. Sure, you'll still have friends, go to the occasional party, but on the whole you're only there to learn and do things you couldn't learn or do elsewhere. Right now it's almost day care for 20-somethings. This would also necessitate dropping easy programs and majors. Not that there isn't a place for the arts, but is a four year degree in English or Art History really a good idea?

But yeah, I've noticed the same thing: the more we incentivize people to go to college by way of grants and loans, the more expensive it gets. When was college cheapest? When there was virtually no aid/loans available to anyone, and a much smaller percentage of people went to college.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#115

Post by pirocks »

School-Cotton wrote: post #56
pirocks wrote: post #41

I wonder how much money could be saved if the US got rid of its general education based system.

General education requirements in American universities serves the purpose of getting people up to the level of academic high school students in Europe or Asia. We could get rid of it, but we'd have to fix high schools first. This would likely require admitting that a focus on academic subjects isn't appropriate for everyone. In many European countries, a majority of students go to trade-oriented secondary schools an…

Agreed. I think that changing the high schools would be the best way to go about this, instead of finding ways of paying massive amounts to colleges.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#116

Post by foota »

toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

The reality is that providing tuition free loans does cost the government -- whatever the opportunity cost of using that money now was. Though you could argue that the externalities of having an educated population outweigh the opportunity cost.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#117

Post by skwosh »

There seems to be a strong sentiment in this thread that the only value provided by education is the contribution to career (e.g. that loans should only be provided for financially viable courses, that studying arts is as useful to one's career as studying finger painting, etc).

This just seems so wrong.

Optimising for vocational training means you're effectively tuning out the abstract arts and sciences and... oh, the humanities. These fields don't usually/directly translate into a financial success, but they broaden our perspective and deepen our experience. And in doing so provide the tools and language to more effectively analyse and engage with human culture.

And to a certain extent, "true" art is antithetical to capitalism, in a similar way that "true" journalism is antithetical to surveillance (honesty/transparency vs main-stream popularity), and I'd argue equally as important. For that reason these fields absolutely should be subsidised, otherwise art becomes about marketing, journalism becomes about propaganda, and science becomes about start-ups...

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#119

Post by andromeduck »

marklyon wrote: post #16
toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

Even just reducing the interest rate can have a significant impact. I cut my rate from just over 7% to 4.71% and slightly increased my payment, moving my final payment from July 2, 2038 to December 1, 2025 (ignoring any additional payments I make) [1]. Just doing that made attacking my massive loan balance much more manageable. I don't expect (or want, actually) for my education to be free. I knew I was racking up de…

Jesus! Just how big is your student loan?!

I mean I paid for all my living and education expenses with loans too but I'm not sure I would if it would take 20+ years to pay off

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#120

Post by refurb »

rahimnathwani wrote: post #86
godelski wrote: post #78

The thing that worries me most is the delinquency rate. It is at 11%[1]. For comparison the housing market delinquency rate went from 1.6% in 2006 and went to 11.26% in 2010 (height, 2008 went from 3% to 8%[2]). That's where I see the real bubble indicator. I really wonder how much more it can expand. And I don't hear serious talk about what to do WHEN it bursts. Because it is really a matter of when and not if. [1]…

This isn't a bubble. There is no stock of assets that are suddenly going to fall in market value. You can see education as an investment, but it's not a tradeable asset. If I buy an apartment, there's a market that (i) tells me the value of the apartment at any time, (ii) let's me (or the bank) liquidate the apartment and turn it into cash. University degrees aren't like that. Someone holding a degree doesn't suffer…

There is no stock of assets that are suddenly going to fall in market value.

Sure there is, the loans themselves.

Right now a bunch of lenders have $1.3T worth of loans. If those loans don't get paid off, they are $1.3T poorer.

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