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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

#231

Post by douche »

oblio wrote: post #173
Pyxl101 wrote: post #164

Earlier quoted context omitted.

> 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…

> 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. How about inherited wealth? Large groups of people are excluded from your wonderful vision of society.

I don't understand the hate inherited wealth gets here sometimes. It is the only realistic way to improve your family's lot in life over the generations.

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

#232

Post by OliverJones »

The consumer finance "reform" act of 2005 made it very difficult to discharge student debt in bankruptcy. It's time to undo that reform.

It had a disastrous unintended consequence, by completely shifting the risk of an uncollectable loan away from the lender and onto the borrower. How so?

When a lender carries risk, they underwrite those loans. That means they study them before making them. They pay attention to all kinds of things, including the borrower's ability to pay and the value of the thing being bought with the borrowed money. Underwriters are (usually) knowledgeable about the field they work in. They understand the value of both vocational and liberal education. Some of them even understand the value of giving under-served people a chance.

So, when a school gets calls from underwriters saying "we're having a hard time justifying loans of US$100K to your students taking bachelor's degrees" the school takes notice. They restrain growth in tuition and fees. Maybe they even offer discounts, also known as "scholarships." Those calls, coming from skilled underwriters, are far more effective than student demonstrations against tuition increases.

The 2005 reform made it possible for the lenders to be much lazier. Their underwriting is much more sloppy. The reform freed up a lot of tuition money that the educational institutions were happy to soak up. And their students are stuck with the bill for a lifetime.

I'm aware of the libertarian view which emphasizes individual responsibility, and I have a lot of sympathy for it. I have a young friend who looked at the cost of her first-choice college (Syracuse, it was) a few years back, and wrote them a letter saying "sorry, you're too expensive. I regret that I must decline your offer of admission." That too puts downward pressure on educational costs. But she's rare: she has great presence of mind and forward-thinking parents. Plus, she listened to me. -:)

Most high-school seniors get caught up in the mostly fake competitive admissions system. They aren't in a position to behave like hard-nosed underwriters.

So, let's put some of the loan risk back on the lenders, and bring back the underwriters.

This situation is analogous to the mortgage crisis, which shifted the risk of bad loans away from the mortgage originators. In that case the risk got shifted onto anonymous buyers of securitized mortgages, and onto AIG. In the case of educational loans the risk gets shifted onto the poor schlemiel who wants to be a schoolteacher.

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

#233

Post by Lazare »

huxley wrote: post #210
Lazare wrote: post #184

Earlier quoted context omitted.

Okay, but how does that translate into policy? Fact 1: Education in the US is very expensive, in large part because the ready availability of loans removes most downwards pressure on prices. Fact 2: If you are loaned money to obtain a degree which is not economically valued then you will not be able to pay it back. Fact 3: If you loan people money without expecting people to pay it back, then it's not a loan, it's a…

Those aren't facts, they are premises It is as likely that tying a university degree as the minimum pre-requisite for a decently paying career is driving the price upwards. Increased competition for desirable placements is the classic limited supply high demand scenario. The problem isn't the availability of loans which are just a side effect but the focus of education as a gate to future success. BTW from ancient ti…

Alright. Can you dispute them though?

> Increased competition for desirable placements is the classic limited supply high demand scenario.

I would suggest that if you believe the issue facing the US higher education system is a limited supply of places, you may not understand the US higher education system. In fact, if you look globally you'll find that the countries with low tuition are the ones who ruthlessly control the number of places.

In the US in particular you'll note that we went from around 45% of high school grads enrolling in college in 1970, to 70% enrolling in 2010, even as tuition climbed far faster than inflation. If 70% of all high school grads represents a "limited supply", what do you think the demand is?

(The number of places at elite schools is limited. It's actually not hard to explain why Harvard is expensive; the question is why everywhere else is too.)

> patronage

That was my point; I took skwosh to be arguing against a system where the wealthy purchased art/science/journalism for their own ends; my point is that this is the system we've always had: Private individuals (and latterly, corporations) being patrons of the arts, publishing newspapers, and funding scientific investigation. I believe skwosh was suggesting we move to a system where society as a whole should fund such things via taxation; I was pointing out that we've never had that.

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

#234

Post by maxerickson »

TuringNYC wrote: post #99
maxerickson wrote: post #60

Earlier quoted context omitted.

The cost was very low, treasury rates dipped below 1%. https://www.treasury.gov/resource-center/data-chart-center/i...

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…

Treasury rates are set by a market auction, the Fed can't drive them down just by printing money. If investors anticipate inflation, they will factor it into their bids.

I guess whether you think the negative effect of the bailout on savings and such were worth it depends on whether you think the entire insurance market almost collapsed.

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

#235

Post by dingo_bat »

toomanybeersies wrote: post #6

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…

5000 USD per year is extremely cheap.

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

#236

Post by matwood »

JulianMorrison wrote: post #204
Lazare wrote: post #184

Earlier quoted context omitted.

Okay, but how does that translate into policy? Fact 1: Education in the US is very expensive, in large part because the ready availability of loans removes most downwards pressure on prices. Fact 2: If you are loaned money to obtain a degree which is not economically valued then you will not be able to pay it back. Fact 3: If you loan people money without expecting people to pay it back, then it's not a loan, it's a…

Basic income. Free tuition. An outright grant, no repayments. Literally zero barriers except ability for anyone, for any level of academic achievement in anything. Result: a culture with a lot more understanding of the real world, and the preservation of human and humane values, rather than a laser focus on the hand-to-mouth of Jobs Right Now.

Basic income I think is going to have to happen at some point in our lifetime. There are just simply not enough jobs.

Please stop saying 'free' tuition. It's not free, it is just not paid by the student. Keep in mind that many states already have just this setup for in state students to use lottery money.

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

#237

Post by venomsnake »

Godel_unicode wrote: post #160
hueving wrote: post #141

Earlier quoted context omitted.

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…

This. Banks give home/auto/business loans based on value of the home and ability to pay. Why not have similar metrics for education?

Because student loans are harder to shed during bankruptcy. They have less incentive to evaluate proper risk.

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

#238

Post by lr4444lr »

Lazare wrote: post #184
skwosh wrote: 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…

Okay, but how does that translate into policy? Fact 1: Education in the US is very expensive, in large part because the ready availability of loans removes most downwards pressure on prices. Fact 2: If you are loaned money to obtain a degree which is not economically valued then you will not be able to pay it back. Fact 3: If you loan people money without expecting people to pay it back, then it's not a loan, it's a…

Variable interest levels for different courses of study commensurate with default or late payment likelihood. Required post-graduate government service for those who struggle but are ready to sacrifice. Critical demand area bonuses. There are practical ways to measure and respond to these problems.

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

#239

Post by matwood »

conanbatt wrote: post #215
hueving wrote: post #144

Earlier quoted context omitted.

>Going to college poor (actually poor) is nearly impossible. This is not true. If you are poor (actually poor), there are so many government grants and scholarships for low income students that it's much easier financially than if you are middle class. If you are middle class, your parents frequently have to give up half a year's salary to help pay. Good luck going to college if you're not a top tier student and your…

Reality doesnt match your expectation. http://www.pewresearch.org/fact-tank/2014/01/15/college-enro... And note there are more low-income people than high-income people demographically.

There may be less poor people in college, but it can be easier for poor people to pay. There is sort of this no man's land where a person (or their family) makes just too much for assistance, but not really enough to pay. My family fell into this area while in college, and I worked 20-30 hours/week on top of a normal 12-15 hour course load. To make up when I took 12 hours, I also went to both summer sessions each year. It was a long 4 years as I had maybe 3-4 weeks out of school each year, and zero time out of work.

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

#240

Post by matwood »

winter_blue wrote: post #105
toomanybeersies wrote: post #6

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…

I think the problem is that there is no downward marker pressure on college costs (for some puzzling reason there). It seems like American students are willing to pay higher and higher tuitions. This is the root of the problem. If we had 0% interest loans, we might have students paying even more for college than now. Why can't these kids just think about the debt they're getting into?

> Why can't these kids just think about the debt they're getting into?

Some other people in this thread have mentioned that it's because parents have beaten into kids heads how important college is. That may be in part true, but I think a bigger truth is that people are simply bad with money. College is not the only debt many people have. Look at things like credit card debt[1], and car loans. The populace as a whole makes poor financial decisions every single day, so why would college be any different? At least college can be looked at as a type of investment, unlike that new car or PS4.

[1] https://www.valuepenguin.com/average-credit-card-debt

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