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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

#201

Post by BlueTemplar »

rsj_hn wrote: post #144
lotsofpulp wrote: post #120

Earlier quoted context omitted.

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 unti…

> 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. The facts don't support this claim. U.S. government spending on tertiary education is 0.91% of GDP compared to Germany's 1.0% and Japan's 0.45% (source: https://data.oecd.org/eduresource/public-spending-on-educati... ) Rather, university education in the U…

Regarding 1. and 2. :

In France 100% of high school graduates are (by definition) admitted to University, and more than half of them indeed decide to take that path.

"Typical" university education lasts 5 years. (Though I wouldn't be surprised if only a minority actually makes it.)

It's mostly free, students from poor families get grants, though there are limits on how many times you can retry university years while still getting a grant.

The result : in 2014, 45% of the 25-34 year old French had a university (or other superior education) degree, compared to 28% of the Germans. (OTOH I suspect that the quality of that education is not nearly as good ?)

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

#202

Post by xyst »

glad I realized that I needed to refinance my variable interest rate loans into a single fixed loan at ~2% APR after graduating.

I think I would have been screwed in this current climate.

IIRC, I received those loans at an advertised “teaser” rate of 1-2% APR, but since they were variable the percentage tended to increase over the years - 5-6% APR before refinancing.

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

#203

Post by jbc1 »

eggie wrote: post #172
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…

> 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 due to free market forces. This is a hypothetical but classic example of how regulation is required to support a free market.

Could you elaborate please?

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

#204

Post by dsfyu404ed »

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…

>At the college I teach at it is clear that we are marketing to students who should not be going to college and shouldn't realistically expect to get a degree.

It seems like almost all 4yr colleges do this to some extent nowadays. Freshman lecture halls with 500+ students and one adjunct faculty ratio are a money maker. Capstone classes with 40 students and one tenured professor are a money loser. You'd have to hire really bad bean counters to miss the obvious way to exploit that situation for monetary gain.

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

#205

Post by docdeek »

bumby wrote: post #183
roenxi wrote: post #173

Earlier quoted context omitted.

A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.

I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of

Australia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).

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

#206

Post by tuukkah »

xorfish wrote: post #129
lotsofpulp wrote: post #118

Earlier quoted context omitted.

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.

What does that cover, or is it just a nominal tuition?

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

#207

Post by bocklund »

bumby wrote: post #183
roenxi wrote: post #173

Earlier quoted context omitted.

A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.

I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of

This is how some of the coding boot camps like Lambda School work.

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

#208

Post by faet »

JMTQp8lwXL wrote: post #88
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…

Capping the amount colleges raise tuition by each year might help.

Some of it is making up for state cuts. For example, between 2008 and 2018 Louisiana reduced high education funding by about $5k per student. Even if LSU didn't "Raise their tuition" that $5k gap needs to be made up somewhere.

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

#209

Post by dsfyu404ed »

eirini1 wrote: post #108
psaux wrote: post #23

My wife and I lived a very simple lifestyle for years (7ish) after college so we could pay off student loan debt. Awesome Ford Tempo car, local honeymoon, Studio apt for first 5 years, limited eating out. She has a masters (more loans), and is a teacher. So that made it even tighter. Is there any data on if folks with student loans are living above their means? I.e new TV’s, new car lease, vacations, ordering out. I…

living in your own studio (as opposed to a double room in a shared appartment), owning a car and going eating out on occasion definitely sounds much more luxurious than how most college graduates that I know of live right now. I think if you were to graduate today this would be unfeasible considering housing costs.

Assuming ~90k of household income before taxes what he describes is definitely possible in the Boston area (which I know is not the most overpriced city but it's definitely on the leader board). You just can't be too good to live in an apartment where you see occasional mice and go out to eat at the Chinese buffet of questionable quality and drink mass produced domestic light beer. Basically you have to live below your means, not the way someone who's making STEM money is expected to live.

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

#210

Post by RickJWagner »

bumby wrote: post #183
roenxi wrote: post #173

Earlier quoted context omitted.

A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.

I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of

I can imagine the graduated students would quickly become indignant and look for ways to default.

Sort of like those radio ads that say they'll help you "not pay the greedy credit card companies that trapped you".

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