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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

#121

Post by afarrell »

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?

From data collected over 2014-2018, the US spent $10,586 USD/capita on healthcare and Sweden spent $5,447 USD/capita on healthcare.

Source: https://data.oecd.org/healthres/health-spending.htm

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

#122

Post by foota »

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.

It doesn't matter who is responsible for the situation, if it presents a large risk to the economy it should be mitigated.

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

#123

Post by adventskalender »

Gibbon1 wrote: post #119
adventskalender wrote: post #114

Earlier quoted context omitted.

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.

I find such figures difficult to interpret, though (like here: https://www.healthsystemtracker.org/chart-collection/health-...)

It could be that richer countries simply have more money to spend on health care, so why wouldn't they spend it.

On the other hand many health outcomes may also depend on wealth - for example over-consumption leading to obesity, which might affect health more than spending on health care can compensate.

In that example, a rich country could spend more money on health care and still have worse average health than poorer countries.

Not saying that is exactly what is going on, just that it makes sense to be careful with judging.

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

#124

Post by eli_gottlieb »

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…

Right, so the difference here is that you can be foreclosed on, and the bank takes your house. You can even go bankrupt when you lose your house.

But you can't get out of student loan debt via bankruptcy, nor lose the education. I figure the banks figure they're going to be fine, because rather than the SLABS market collapsing, it'll just suffer a correction: the enforced debt peonage of making payments all one's life will ensure those "securities" represent (forcibly and fraudulently extracted) income streams.

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

#125

Post by lotsofpulp »

godelski wrote: post #78
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…

This is part of the issue. Loan providers pretty much have to give everyone loans. But the only way this can happen is by guaranteeing these loans, federally and legally. So our solution to a problem backfired and we found out that federally guaranteed loans aren't the solution to "college should be available to everyone." Maybe it is time to look for a different solution. And maybe time to clean up the mess that the…

> So our solution to a problem backfired and we found out that federally guaranteed loans aren't the solution to "college should be available to everyone."

This was already known, but since simply providing taxpayer funded education results in increases of government expenses and hence higher taxes, we of course went with the Byzantine route of indebting people who don’t even know what amortization is to the tune of tens and hundreds of thousands of dollars.

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

#126

Post by the-dude »

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.

If the value disappears overnight, wouldn't it be fair to compare it to the yearly figures?

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

#127

Post by eli_gottlieb »

gwright wrote: post #54
diogenescynic wrote: post #38

Earlier quoted context omitted.

Why was it necessary to change student loans to being non-dischargeable in bankruptcy? That is a recent change and it shifts the burden from banks having to evaluate the loans they are making which would likely mean fewer loans and thus less money earned from interest. It seems like student loans should be treated like any other unsecured loan. And really student loans shouldn’t even be necessary for public universit…

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.

So what? If making a loan would be stupid, that loan shouldn't be made.

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

#128

Post by gambiting »

ponsin wrote: post #63
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? 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? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default.

Imagine if everyone in the United States who wanted to go on a cruise was guaranteed to be given a loan to go on a cruise, regardless of the cost of said cruise or their personal circumstances. In that scenario, obviously cruise companies would increase prices, since their clients will always get the money to pay for them, and like you yourself said - it's not their responsibility whether people can pay it back or not.

That's pretty much how higher education works.

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

#129

Post by xorfish »

lotsofpulp wrote: post #118
adventskalender wrote: post #112

Earlier quoted context omitted.

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.

Or make it affordable.

Tuition for ETH Zurich around 800 francs per semester.

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

#130

Post by lotsofpulp »

Gwypaas wrote: post #80
Izkata wrote: post #75

Earlier quoted context omitted.

On that second point, a perspective note for non-US people who don't realize: Sweden has about the same geographic area as just California. Only covers about 5% of the whole contiguous US.

And there's 40 million people in California compared to 10 million in Sweden. So comparatively California is a densely populated mecca.

Transportation costs for most individuals are related to density at a city level, not a nation level, so I don’t see the relevance of comparing density of a nation.
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