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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

#241

Post by vonmoltke »

sokoloff wrote: post #191
apatters wrote: post #165

Earlier quoted context omitted.

Except that all of those angry debtors can vote, and elect representatives who change the applicable laws. So one way things are different this time around is that government action could precipitate events in unpredictable ways. Remember Bernie is talking about straight up forgiveness: the debt just disappears. He probably won't be the next President but student loan reform (including existing loans) is a hot topic…

Any forgiveness is likely to be executed by the forgiving entity paying off the loans. The federal government is not going to use a pen to steal trillions of dollars from lenders holding contracts for repayment. That’s a banana republic action.

The federal government is the one holding all that debt, so that is exactly what is going to happen.

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

#242

Post by froindt »

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.

We like to at least have the allusion that you can start anywhere on the socioeconomic scale and end up better (sometimes far better) than you started. Education has long been one of the best ways to increase your lifetime earning potential, and having the government backing allows someone who had little growing up to receive the same education as the kid whose parents are paying for everything, and to go as far in life as they possibly can.

There are obviously holes in this narrative, but we like telling ourselves this can happen.

While there's not enough value in 17th century art history for the US to graduate 200k scholars per year and expect in-field employment, there is value to society in general to not losing our history and learning more. Letting the banks decide who gets loans will instantly mean those who can't pay cash cannot pursue that education or need to go on cheaper routes for college. They may or may not be viewed as a comparable education and quality candidate.

I'm not a fan of our current system, but a purely utilitarian system I see proposed seems likely to continue the spreading the social divides between the rich, middle class, and poor.

I'm an advocate for cutting a lot of the unnecessary fluff and expenses from college. Administrative overhead is excessive. Dorms are way nicer than they need to be. Alas, other colleges have nice dorms, so a single college choosing to go cheap on the dorms will probably decrease admissions and thereby revenue.

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

#243

Post by scarface74 »

corporate_shi11 wrote: post #233
scarface74 wrote: post #230

Earlier quoted context omitted.

Right. Only people with money should get an education.

Someone without means but with demonstrated ability would be able to get a private loan.

Because students have never “demonstrated more ability” because their parents were able to afford expensive test tutors.

Besides, “private student loans” would be based on an ability to pay. Guess who that leaves out?

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

#244

Post by vonmoltke »

diogenescynic wrote: post #38
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…

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…

The switch to non-dischargeable loans came along with cutting banks out of the federal student loan system. Non-dischargeable loans are issued and owned by the Department of Education, and only them.

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

#246

Post by vxxzy »

The value of secondary education has been diluted by the massive pool of "paper" floating around. There is quite the oversupply of "educated" (papered) individuals. The value of a secondary education has been diminished because of this oversupply. We've seen it in the tech scene: A good bit of companies equally value experience vs education (and some value experience more!) - and why not, the goal is to leverage labor for profit - in the case of tech; to create more utility.

Unfortunately, we've done a disservice to ourselves: Instead of teaching others how to think, we've taught them what to think. Most graduates coming out of the ivory tower of education lack the ability to bootstrap their own intellectual development. Historically, universities served a purpose: the higher-level of information and application could only be consumed through them (gatekeepers). We are in a new era of information. Information is abundant. We'd be better off as a society if we focused on the "how to think" than the "what to think".

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

#247

Post by bumby »

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

Found a link. Basically, if someone makes more than $25k they owe 5% of their income for 15 years:

https://nationswell.com/venture-capital-college-student-debt...

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

#248

Post by greedo »

faet wrote: post #208
JMTQp8lwXL wrote: post #88

Earlier quoted context omitted.

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.

State cuts have made a huge difference, especially in the UC system. When I went to UCSD in 1982, tuition was roughly $310/quarter for a full-time student ($825 in 2019 dollars). California contributed roughly 90% of the cost of a student, keeping fees manageable. I was able to earn enough each summer to pay for tuition.

Now California contributes roughly 30% to the cost of a student, and the costs themselves has risen (better accommodations, increased admin staff etc etc.)

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

#249

Post by raxxorrax »

moduspol wrote: post #189
eggie wrote: post #172

Earlier quoted context omitted.

> 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.

It's federally guaranteed student loans that got us here! It wasn't like this for our parents. This comment is an example of how any amount of problems caused by government intervention can be framed as a need for more government intervention.

Government contribution made it possible to get my degree for free basically. We don't have a student loan bubble while still having a pretty high educational standard, even if that suffered in recent years.

We might not have the most tenured professors though, since those a drawn to centralize in institution with high prestige. But with the free flow of information today, this centralization of excellence becomes less important.

But anyway it probably isn't a problem with too much/too few government intervention and more of a problem of intervention being constructive or not. Bad intervention is probably worse than no intervention, I agree.

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

#250

Post by ipsi »

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

Student Loans in the UK can work like this - you repay, I think, 9% above £25,000, and it's wiped after 30 years, regardless of how much is left. Some details may be different depending on exactly when the loan was issued.

So if you have a huge loan but a small income, it's more like a 30-year graduate tax than a loan you expect to fully repay.

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