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Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

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Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#111

Post by neuronic »

apatters wrote: post #102
magnusss wrote: post #83

It seems like the majority of the commenters here are missing the point. The increasing rate of student loan default is not a result of kids who go to a four year college, graduate with an unmarketable degree in philosophy, fall on hard times and then can’t pay their bills. It's kids who go to barber or cosmetology school, take on $30k of debt, then realize they don't make enough money cutting hair to support themsel…

Sure, the most relatable problem is that a lot of college grads have debts they can't pay off. That's not really the focus of the article though, which is an introduction to a potentially calamitous systemic problem. The 2008 crash happened because there were about $1.7T of mortgage-backed securities (MBS) floating around in the financial system. These were essentially sliced up pieces of numerous mortgages that had…

> I don't know what will happen, you can't simplify the workings of the economy into tweets and soundbites.

Honestly, thank you so much for adding this bit to your post.

It's incredible how everything is just treated as if you could handle it in 140 characters or whatever the Twitter character increase has been.

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#112

Post by adventskalender »

planetzero wrote: post #15

We need to get rid of student loans. The problem is that Universities don't ever need to worry about a student defaulting and can keep increasing the prices of tuition with impunity. If they default, they don't care, because the money is already in the bank. If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done…

Why wouldn't it be the responsibility of the students to not take out loans for stupid degrees? And also the responsibility of the banks for giving out the loans only for useful studies?

I don't see any party here that needs rescuing by the government.

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#113

Post by apatters »

avalys wrote: post #110
apatters wrote: post #107

Earlier quoted context omitted.

Also to supply some context for those numbers (this is probably way too simple and wrong in some way though) The size of the US economy in 2008 (US GDP) was around $20T. There were $1.7T of MBS. That's about 8.5% of the economy which mostly didn't exist, it was all debt for which the collateral was a fiction because the borrowers didn't have the money to pay off their mortgages. The size of the US economy today is ar…

You’re not comparing equivalent quantities. GDP is an annual figure (Gross Domestic Product ), and you are comparing it to total outstanding debts that are paid off over decades. Total asset value of the US economy is about $270T with about $150T in outstanding debt. So the relative proportions are not as extreme as you’re representing.

I knew there would be some sort of issue with that comparison, thanks!

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#114

Post by adventskalender »

sykick wrote: post #42
rayiner wrote: post #30

All this talk about student loan forgiveness is an unnecessary solution to a problem that’s not really that bad: https://www.nytimes.com/2018/04/02/upshot/an-international-f... Average BA holders in the US graduate with $28,000 in debt, versus $21,000 in Sweden. The Swedish system is basically like our income-based-repayment, which we have had since the 1980s. Except, as you’d expect with Sweden, there is less paperw…

When making comparisons with Sweden or other countries the cost of healthcare, housing, food, and transportation should be taken into account. Healthcare and transportation costs are much higher in the U.S. I think too we also have a higher per capita income and I don't know how things balance out. One thing for sure though. I'd rather be poor in Sweden than in the U.S. There is also the fact that many students who s…

But taxes are much lower in the US. Is healthcare even cheaper in Sweden, if you figure in taxes?

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#115

Post by coryrc »

swagasaurus-rex wrote: post #62
gwright wrote: post #54

Earlier quoted context omitted.

Because it is an unsecured loan. It would be too easy for a newly minted graduate to declare bankruptcy, discharge the loan, and move on with their life. The only entity stupid enough to loan money to students in that world would be the government.

The missing wisdom here is that maybe the government should take on a high-risk, societally high-reward investment like education.

12 years is enough, if we wanted it to mean something instead of day care.

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#116

Post by pinkfoot »

gwright wrote: post #69
swagasaurus-rex wrote: post #62

Earlier quoted context omitted.

The missing wisdom here is that maybe the government should take on a high-risk, societally high-reward investment like education.

That sounds nice but it requires there to be a definition of "societally high-reward education". That is difficult. Even if you find some methodology to identify the quality programs that have an appropriate "societal reward" you have to deal with the problem that the costs for those programs will inevitably rise in lock step to the amount of tax dollars used to subsidize them. (See https://www.newyorkfed.org/mediali…

Steve Jobs had an English degree. Would most STEM obsessed industrialised file that under 'favoured'?

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#117

Post by afarrell »

rblatz wrote: post #51
azhenley wrote: post #27

Earlier quoted context omitted.

Some universities have started doing income share agreements. They front the tuition cost for a portion of your future income. Depending on your degree program, they will take X percentage for Y years. Purdue was in the news for being one of the first: https://www.purdue.edu/dfa/types-of-aid/income-share-agreeme... Planet Money had a nice podcast about how they work: https://www.npr.org/sections/money/2019/03/29/7081…

How does that work for people who receive a large portion of their compensation in things like equity in a private company that is extremely hard to value? Would these plans result in the proliferation of odd compensation schemes to get around these repayment plans?

Couldn't they just look at Adjusted Gross Income?

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#118

Post by lotsofpulp »

adventskalender wrote: post #112
planetzero wrote: post #15

We need to get rid of student loans. The problem is that Universities don't ever need to worry about a student defaulting and can keep increasing the prices of tuition with impunity. If they default, they don't care, because the money is already in the bank. If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done…

Why wouldn't it be the responsibility of the students to not take out loans for stupid degrees? And also the responsibility of the banks for giving out the loans only for useful studies? I don't see any party here that needs rescuing by the government.

Yes, the whole situation fixes itself by removing taxpayer guaranteed loans. If taxpayers want to assist in education, taxpayers should provide scholarships.

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#119

Post by Gibbon1 »

adventskalender wrote: post #114
sykick wrote: post #42

Earlier quoted context omitted.

When making comparisons with Sweden or other countries the cost of healthcare, housing, food, and transportation should be taken into account. Healthcare and transportation costs are much higher in the U.S. I think too we also have a higher per capita income and I don't know how things balance out. One thing for sure though. I'd rather be poor in Sweden than in the U.S. There is also the fact that many students who s…

But taxes are much lower in the US. Is healthcare even cheaper in Sweden, if you figure in taxes?

Scuttlebutt is actual healthcare expenditures in places like Sweden are about half that in the US.

Re: Student Loans a Lot Like the Subprime Mortgage Debacle, Watchdog Says

#120

Post by lotsofpulp »

rumanator wrote: post #87
ponsin wrote: post #63

Earlier quoted context omitted.

Why? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. If responsibility fell on the university, then they could just refuse to accept people who take out loans. The result being that only rich people could go to colleg…

> Why? Because education is not a luxury service that can be postponed or outright skipped, like lifestyle-tailored tourism, and education costs in the US have become a major societal and economical problem. > In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. That's a tautology, and entirely misses the point. The point…

Then taxpayers should pay for education itself. No reason for taxpayers to become lenders.

The real problem is voters want lower taxes, and some genius figured out a way to tout lower taxes and tax payer assistance to students, hence student loan debt.

And, inevitably, like all times that society is enabled to pass the buck onto future generations or ignore externalities, society will take and consume all it can until the breaking point. Same story with defined benefit pensions, student loans, environmental damage. We are simply starting to see the effects of pushing the costs into the future, now that the future is here.

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