America's pensions can't beat Vanguard but they can close a hospital • Hacker News Board

Re: America's pensions can't beat Vanguard but they can close a hospital

#201

Post by rurp » Tue, Feb 17, 2026, 5:13 PM UTC

aresant wrote: post #51

From first principles public pension funds are broken. The "Safe Withdrawal Rate" assumed by many private individuals planning for their own retirement assumes a withdrawal rate in the 3 - 4% range based on the "trinity study" - https://en.wikipedia.org/wiki/Trinity_study Meanwhile, American public pensions are structurally engineered around a 7%+ SWR - this was recently confirmed again by the median goal by the Nati…

Employee pensions are a tiny portion of overall government spending. There are any number of ways to handle a modest increase in costs there.

Re: America's pensions can't beat Vanguard but they can close a hospital

#202

Post by gruez » Tue, Feb 17, 2026, 5:13 PM UTC

zbentley wrote: post #160

Aurornis wrote: post #123

Earlier quoted context omitted.

I’m always surprised that student loan forgiveness appeals to anyone who should otherwise be able to think about all of the bad second order effects. The more we inject money into the education system, the higher prices go. Setting a precedent that the government will just pay off your loans if you don’t pay them off only encourages more people to take out loans without thinking about paying them back. There are so m…

Maybe, but that precedent has been set before for other types of loans, and in a limited way for student loans, and the sky didn’t fall. The upward price pressure on university prices is far more influenced by other factors (which should be fixed!). Loan forgiveness probably is a drop in the bucket, I suspect.

>Maybe, but that precedent has been set before for other types of loans.

what is this referring to?

Re: America's pensions can't beat Vanguard but they can close a hospital

#203

Post by wahern » Tue, Feb 17, 2026, 5:14 PM UTC

mschuster91 wrote: post #143

codexb wrote: post #68

Earlier quoted context omitted.

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells borrowers that they can make risky loans without a chance of default. It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them. The solution is to allow judges the discretion to default them in bankruptcy…

That's not a solution at all, because it will price out way too many students. The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).

Most states already have affordable tuition for in-state residents. California is middle of the pack, and CSU tuition is less than $10k/year. (Nationwide, public in-state 4-year tuition ranges from ~$5k/yr to ~$15k/yr.)

For most students at public 4-year universities in the US, room & board costs significantly more than tuition. Even in those EU countries where tuition is free, average student loan debt is often >$20k USD because of this. By way of comparison, average student loan debt in the US is ~$40k USD, and that includes private school and out-of-state student tuition as well as room & board. Note that at least for the US, $40k is the mean; the median debt is Perhaps one of the best ways to address the college affordability "crisis" would be to build more dormitories. The capital expenses could be publicly funded, and then charge students maintenance costs. But for various reasons, including NIMBY development barriers as well as modern expectations (see, e.g., the vitriol spewed about the windowless UCSB Munger Hall bedrooms), schools have long ago neglected this aspect.

Re: America's pensions can't beat Vanguard but they can close a hospital

#204

Post by rootusrootus » Tue, Feb 17, 2026, 5:14 PM UTC

horsawlarway wrote: post #169

TimorousBestie wrote: post #148

Earlier quoted context omitted.

What are the second-order effects of a subclass of citizens permanently encumbered by debt that (with rare exceptions) cannot be discharged through bankruptcy? Perhaps your analysis of second-order effects is not thorough and complete? Have you really considered all of them?

Not really sure why this is getting downvoted. I don't really think we need to forgive student loans - I think they should absolutely be dischargeable through bankruptcy, though. Bankruptcy isn't a "get out of jail free" card - it puts a huge burden on a student relatively soon after graduating that makes it harder to start a family or buy a home. So it incentives are still aligned for the students taking the loans.…

Yeah it's pretty amazing that we have loans which you can never escape and yet have high interest rates in spite of that. If I cannot declare bankruptcy, then at the least the interest rate should be 0%, appropriately reflecting the risk.

Re: America's pensions can't beat Vanguard but they can close a hospital

#205

Post by thatcat » Tue, Feb 17, 2026, 5:16 PM UTC

AnthonyMouse wrote: post #176

drakythe wrote: post #124

Earlier quoted context omitted.

That's why it should be a one time event in conjunction with reworking the whole system. Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? The system needs reformed, and we need to do something for the people still on the hook of the old system (and I say this as someo…

> Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? Because you took the money promising to pay it back, spent it on something you wanted, and now it's gone and someone has to pay the money you spent. It's like saying why can I, as an 18 year old, purposely drive a car…

The money can't be spent on a house or any useful asset that could be resold. They wouldn't give you a loan for that at 18 because it'd be irresponsible since they know you don't know anything about finance or economics as you likely don't have an education yet. They'll give you a high interest credit card with a 500 dollar limit to buy what you want though.

Re: America's pensions can't beat Vanguard but they can close a hospital

#206

Post by rootusrootus » Tue, Feb 17, 2026, 5:16 PM UTC

mschuster91 wrote: post #143

codexb wrote: post #68

Earlier quoted context omitted.

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells borrowers that they can make risky loans without a chance of default. It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them. The solution is to allow judges the discretion to default them in bankruptcy…

That's not a solution at all, because it will price out way too many students. The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).

That is what we did in the past, and why my undergrad degree didn't cost me nearly as much as someone would pay to get the same degree today from the same university. We've decimated state funding for public universities.

Re: America's pensions can't beat Vanguard but they can close a hospital

#207

Post by cj » Tue, Feb 17, 2026, 5:16 PM UTC

AnthonyMouse wrote: post #158

cj wrote: post #107

Earlier quoted context omitted.

Allowing student debt to be canceled during bankruptcy would be a good first step (possibly even better than canceling student debt across the board). To your point, making it easy to cancel debt teaches borrowers that debt isn’t a serious thing. Requiring someone go through bankruptcy (and all of the associated negatives on your credit score, etc) seems like a good tradeoff. Allows you to get out from under the debt…

Bankruptcy affects your credit score for 7-10 years. Someone who graduates from college in their early 20s with six figures in debt could file for bankruptcy immediately and have it be off their credit history by the time they've saved up a down payment and want to get a mortgage. There is also the obvious drawback that if more people can discharge the debt, the interest rate goes up, and then everyone else has to pa…

Imagine a world where lenders charged different interest rates depending on the risk profile of each school.

Lower interest rates for schools where graduates repay their debt, higher interest for schools where many people default.

Assuming it wouldn’t disproportionately affect disadvantaged populations, that could be an interesting way to incentivize schools to get their shit together and prepare students for starting their career

Re: America's pensions can't beat Vanguard but they can close a hospital

#208

Post by aresant » Tue, Feb 17, 2026, 5:17 PM UTC

jltsiren wrote: post #141

aresant wrote: post #51

From first principles public pension funds are broken. The "Safe Withdrawal Rate" assumed by many private individuals planning for their own retirement assumes a withdrawal rate in the 3 - 4% range based on the "trinity study" - https://en.wikipedia.org/wiki/Trinity_study Meanwhile, American public pensions are structurally engineered around a 7%+ SWR - this was recently confirmed again by the median goal by the Nati…

Individuals saving for retirement must deal with the risk that they live to an old age and their savings must last for decades. Pension plans have a higher safe withdrawal rate, because people on the average have average lifespans. When a plan member dies early, their remaining contributions can be used (partially or in full) to fund other members' pensions.

Really good comment and fair point

But mortality credits (pooling) don't solve the math of the discount rate - they add 100 - 150 basis points of reduction so retarget to 5.5% vs 4% if generous

So they are still structurally designed where they HAVE to allocate towards risk to meet their targets which is at core of issue

Re: America's pensions can't beat Vanguard but they can close a hospital

#209

Post by gruez » Tue, Feb 17, 2026, 5:18 PM UTC

chasd00 wrote: post #172

downrightmike wrote: post #118

Earlier quoted context omitted.

Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. There is no risk in the current state of student loans. Therefore they should never-ever charge interest. Also schools need to be reigned in, if GA et al can pay each student athlete $40,000 a month, they MUST be held accountable for burdening the students and the state with unscrupulous debt.

> Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. you make a good point, if there's no risk there should be no interest. Or at worst, the interest rate should track COLA adjustments to social security. Some basic adjustment relative to inflation so the lender gets back what they lent out. Now that schools can pay their athletes I hope the rest of…

>you make a good point, if there's no risk there should be no interest.

Even loans to the US government pays interest. If you meant "no premium beyond the risk-free rate", why would anyone want to lend to students, when they have to deal with the hassle of dealing with lenders and the political risk of it getting discharged, when they can just led to the federal government instead?

Re: America's pensions can't beat Vanguard but they can close a hospital

#210

Post by derekp7 » Tue, Feb 17, 2026, 5:18 PM UTC

AnthonyMouse wrote: post #176

drakythe wrote: post #124

Earlier quoted context omitted.

That's why it should be a one time event in conjunction with reworking the whole system. Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? The system needs reformed, and we need to do something for the people still on the hook of the old system (and I say this as someo…

> Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? Because you took the money promising to pay it back, spent it on something you wanted, and now it's gone and someone has to pay the money you spent. It's like saying why can I, as an 18 year old, purposely drive a car…

Except that no one has been preaching at you for your entire academic life that you MUST drive a car into someone's house at 18 in order to be able to get more than a minimum wage hard labor job.