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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

#161
post #142

Earlier quoted context omitted.

The cost was not low -- rates dipped below 1% because the Fed printed money. But printing money is not free. The common person pays for it by earning less on savings and in the form of inflation, especially retirees who diligently saved through their lives hoping to earn and live off interest in their old age. Every person purchasing a house pays more for low rates because housing prices go up, so do all the associat…

It all depends on whether you're a net debtor or a creditor, and at what rates. Printing money tends to increase interest rates, which benefits debtors (anyone who owes money on a credit card, student loan, or a mortgage - which is pretty much everyone). If inflation is happening, you get to pay back your today-money-debts in weaker-future-money which means you pay less in real terms. Regardless, not all that much of…

"not all that much of the quantitative easing money actually entered the economy"

Consider housing prices being at enormous highs throughout the country -- that is directly related to low interest rates. It affects all people who dont own a home. It benefits land and home owners. It is a lop-sided benefit bourne by the young and poor.

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

#162
post #146

Earlier quoted context omitted.

What would cause those assets to suddenly fall in value?

A huge uptick in default rates. The only reason why student loan paper has value is because there is an expectation that it will be paid off.

Ok, then what would cause a huge uptick in default rates?

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

#163
post #117

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, t…

When it comes to student loans though, they should be given on someone's potential ability to actually pay them back, which is dependent on future career prospects. I'm not against Arts or offering scholarships/grants for them. What I'm against is allowing a person to take out $160,000 of debt at 6% interest for an education that will land them a job as an administrative assistant. They will most likely carry that de…

Part of the problem here is that the terms/interest is so crippling that they can't take out another $160K debt to "pivot" into something more financially practical.

Further, I think having the availability/flexibility of studying multiple degrees can be immensely useful/rewarding. Particularly as industries get more advanced/sophisticated (and others get automated/downscaled), I wouldn't be surprised if there's a cultural shift towards continuous reeducation (at least, as much is financially practical/possible).

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

#164
post #117

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, t…

I feel like the value of adversity is lost sometimes on HN. We should be especially familiar with it. Earning a high level of income makes life extraordinarily comfortable, to the point where it is easy to become complacent and stop trying to really contribute to society in a meaningful way. Some times a struggle is not a bad thing. Not to the point where one should be homeless or starving of course, but having every…

> Earning a high level of income makes life extraordinarily comfortable, to the point where it is easy to become complacent and stop trying to really contribute to society in a meaningful way.

Earning a high level of income in general already signifies that a person is contributing to society in a meaningful way. Their income is reflective of the service provided to others.

All corporations exist to better the lives of people. Their purpose is to earn profit for shareholders (ultimately, people), but how do they accomplish that? Mostly, by making useful goods or selling useful services. A consumer will then buy one of these goods or services because that consumer has decided the value of the good/service to them is greater than the value of the dollars they'd need to pay for it. E.g., If you have decided to buy a car for $10k cash, then you have decided that having the car now is more valuable to you than having $10K USD now. The fact that the car exists and is available for sale has thus enriched your life, by giving you the option to buy it. The car's makers are providing a service to others.

As a result of each purchase, both sides ends up with greater total value than they had before. When people trade, both are better off.

A tremendous income generally comes from delivering tremendous value in the world to others. There are many layers of indirection involved, so it's difficult to see for one's self how one's job (like an office job or financial job) improves the lives of others in the general case, but through trickle-down effects it always does if you follow cause and effect through enough steps.

Or for a clear and notable example, consider the game of Minecraft. It was largely developed by a single individual, Markus Persson aka Notch. He sat down and used his game development skills to produce something marvelous. Many people came along and each decided to pay Markus $X for his game Minecraft, and since over 100 million copies have been sold, Markus became a billionaire. Many people found great enjoyment in the game, and Markus gained a great number of dollars.

In general, tremendous income results from delivering tremendous value. Our society is working correctly and incentivizing the right things if this is the result of ethical business dealing. Sometimes people get rich through scams, fraud, theft, and other shady dealings, but in a society with law and order, this is the exception rather than the rule.

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

#165
The system here in Israel is roughly as follows:

The gov sponsors universities almost to 100%. The means going to university is almost free for me as a student - about $2500 per year. I can acquire a law degree and become a lawyer for less than $8000. The government is involved in the way the public universities are run so as to keep the subsidies manageable. Total government funding for university education in Israel is about $1.5B [1]. Since universities have high admission standards, many colleges have sprouted to service those who can't or don't want to go to one of the public universities. However, since university prices are so low, even private colleges are forced to operate with tuition fees of roughly $5000 per year, which means they are also very manageable for students. Even so, the quality of education in Israel is amongst of the highest in the world, especially when considering its tiny population. Hebrew University, Israel's best institution, has been ranked 26th in the world [2].

This system has attracted a lot of snark here in Israel, but from what I gather it's actually pretty effective. Israel is the 2nd most educated country in the world, with 46% of its population possessing a university degree [3]. :-)

Sorry for the Hebrew sources!

[1] Hebrew: https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7....

[2] Hebrew: http://www.calcalist.co.il/world/articles/0,7340,L-3693018,0...

[3] Hebrew: http://mako.co.il/special-mako-news/Article-6489f432bb2f9310...

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

#166
post #25

We don't need student debt reform (and I say that as someone who has a lot of student debt). Student loan debt is a middle/upper middle class problem. 2/3 of millennials don't have a college degree, disproportionately in the lower and lower middle class. The majority have no student debt. Public money spent on college or debt reform would be a regressive benefit to those who are already better off than the median per…

>We don't need student debt reform (and I say that as someone who has a lot of student debt). Student loan debt is a middle/upper middle class problem. 2/3 of millennials don't have a college degree, disproportionately in the lower and lower middle class. The majority have no student debt

You comment basically boils down to "not too many people even go to college, let's not do anything to improve that".

What a shame, you really don't want to improve anything.

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

#167
post #146

Earlier quoted context omitted.

A huge uptick in default rates. The only reason why student loan paper has value is because there is an expectation that it will be paid off.

Ok, then what would cause a huge uptick in default rates?

People's inability to service/pay their loans, due to not having enough income, due to the job market collapsing, due to a recession (which is already overdue).

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

#168
post #70

Earlier quoted context omitted.

equal parts administrator and the state, since as I understand it the tuition hikes track funding cuts at the government level for higher ed. that is the real killer. so, do the taxpayers see the money as reduced sales and property tax?

>> since as I understand it the tuition hikes track funding cuts at the government level for higher ed. that is the real killer. No, that isn't the real killer. That's the educrat line you've been trained to regurgitate. The truth is that higher-ed is getting about the same percent GDP it's been getting since the 70's [1]. The "real killer" is the annual 3.5% above inflation tuition increases [2] that are inflicted t…

Those universities in the seventies served far fewer students. In case you haven't noticed enrollment is up as a proportion of the population. Funding as a portion of GDP should've matched it as well.

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

#169
post #117

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, t…

Where you are wrong is that it's not just about money, it's about accountability.

Smart investing is the same whether the returns are financial or something else (citizenship, etc.): Someone needs to make good decisions about which investments are good and which aren't. If I believed your romantic notion of the humanities reflected reality in the classroom, that would be a great investment. But I don't believe that's true for many students.

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

#170

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…

Just for those who aren't aware, the UK[0] system is kind of a mixture between NZ and US.

Firstly, all loans are provided by the government and they do charge interest. With the current system (for loans since 2012), the interest rate is based on how much you earn - it varies from 1.6% to 4.6%.

The amount you repay is based on how much you earn. If you earn under £21k you don't pay anything. Above that you pay 9% of your income (pre-tax) - if you are an employee it's taken directly from your salary.

Although it's a loan, it isn't typically classed as debt the same as a credit card or mortgage. If you want a mortgage to buy a house, the bank will want to know how much you pay each month, but they won't factor in how much you have left to pay, on the decision to give you a mortgage.

The amount a high education institute can charge is capped at £9,000/year, however a lot of universities charge less, and if you are from a poor background you can usually get a good amount of funding from the government.

After 30 years if you haven't repayed everything, the rest of the loan will be written off.

[0] Scotland is different in that they have no fees for Scottish and EU students, where as students from the rest of the UK have to pay the usual fees.

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