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The Student Loan Bubble is Starting To Burst

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Re: The Student Loan Bubble is Starting To Burst

#31

Post by danteembermage »

abdophoto wrote: post #10

Every kid I come across that plans to go to college I tell them to find the cheapest route possible. Start at either a good community college or go to a public in-state school. You can still go to a good college for a reasonable price, but it seems more and more that kids are taking the more expensive route (dorms, out-of-state, etc).

Unfortunately you public in-state advice is almost now outdated; many privates are cost-competitive with public schools and it's not because the private schools are cheap. e.g.:

http://www.nytimes.com/2011/09/29/nyregion/seton-hall-univer...

This is definitely a trend in private education pricing as sticker shock is a real problem for students considering private schools and the privates compete for the same students the publics do.

Re: The Student Loan Bubble is Starting To Burst

#32

Post by woah »

btilly wrote: post #26
abstractbill wrote: post #6

Earlier quoted context omitted.

This one is going to be messy. As someone who really hasn't thought about it very much, I'd love for someone to expand on this. What's the expected fallout? In the housing bubble, many people lost the places where they lived. But it's not like someone can "take back" your education if you default on the loan, so what happens instead?

The problem is that most money in circulation was manufactured by creating debt. When you destroy that debt through default, you destroy that money. The fiction of student loans is tricky because under Bush they changed bankruptcy rules to exclude student debt. But fundamentally when banks are forced to write down bad student debt, their rosy asset picture becomes non-rosy. When that happens they are required by regu…

As to the last part of your comment- it's all imaginary anyway.

Re: The Student Loan Bubble is Starting To Burst

#33

Post by everettForth »

PhasmaFelis wrote: post #28

I've got about $10,000 worth of student loans that I've been steadily paying off. What sort of effect might this have on me?

If your interest rates are not fixed, they are likely to go up next year. Sorry, if you were hoping for a handout.

Re: The Student Loan Bubble is Starting To Burst

#34

Post by kilroy123 »

msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

A large part of the problem is all the shitty for profit schools. They get students to take out large government backed loans, then are defaulting, since they can't actually get a job.

I knew several people I grew up with who went to these schools. They took out huge loans, 10k plus, and they never landed any kind of job with their "certificates" / degrees.

[1] Half of all defaults are from these kind of schools.

[1] http://www.businessinsider.com/career-education-corp-will-pa...

Re: The Student Loan Bubble is Starting To Burst

#35

Post by rprospero »

abdophoto wrote: post #10

Every kid I come across that plans to go to college I tell them to find the cheapest route possible. Start at either a good community college or go to a public in-state school. You can still go to a good college for a reasonable price, but it seems more and more that kids are taking the more expensive route (dorms, out-of-state, etc).

The best college advice I ever received was from my middle school history teacher: Go to the cheapest college you can. Harvard doesn't have a secret extra organ to teach you about.

Just about everything in undergraduate education is well established enough that you'll learn the same material anywhere. You'll find variation in the material covered (e.g. Catullus versus Ovid), but it's mostly window dressing on the same core concepts. By the time you get to a graduate level, it becomes important to pick the right institution to ensure that your personal area of research was well represented, but paying extra for undergrad is simply a waste of money.

Re: The Student Loan Bubble is Starting To Burst

#36

Post by loganfrederick »

drcode wrote: post #14
dmix wrote: post #5

Misplaced incentives all over the place. This one is going to be messy. But as many people have pointed out, much more slow moving than the previous financial bubble.

The solution is simple and obvious: All of us who have already paid off our loans are going to fund government-arranged loan forgiveness/reduction programs to those who over-leveraged their education. (I wish I was joking...)

As someone with student loans, I wish this wasn't the case for the previous generation. But at the same time, it's hard to blame current 23 year olds for decisions their parents and communities make about their kids' future finances when they're 16.

The majority of fault lies in the previous generation of parents, who both failed to vote out politicians supporting these policies and who pushed their kids into enslaving parts of their lives to lenders.

Re: The Student Loan Bubble is Starting To Burst

#37

Post by [deleted] »

msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

[deleted]

Re: The Student Loan Bubble is Starting To Burst

#39

Post by drcode »

loganfrederick wrote: post #36
drcode wrote: post #14

Earlier quoted context omitted.

The solution is simple and obvious: All of us who have already paid off our loans are going to fund government-arranged loan forgiveness/reduction programs to those who over-leveraged their education. (I wish I was joking...)

As someone with student loans, I wish this wasn't the case for the previous generation. But at the same time, it's hard to blame current 23 year olds for decisions their parents and communities make about their kids' future finances when they're 16. The majority of fault lies in the previous generation of parents, who both failed to vote out politicians supporting these policies and who pushed their kids into enslavi…

Agree 100%. I didn't mean to say the blame rests fully with the current generation, I'm just saying government policies going forward are just going to increase the moral hazard even more.

Re: The Student Loan Bubble is Starting To Burst

#40

Post by jobu »

kilroy123 wrote: post #34
msandford wrote: post #16

It's really too bad that the laws surrounding student loans make them artificially cheap. You can't get rid of college debt through bankruptcy so you're basically saddled for life. Normally the interest you pay is the combination of three things: 1. The (inherent) time value of money 2. Expenses the lender incurs to keep up with the debt 3. The average default risk of those taking the loans Student loans only price i…

A large part of the problem is all the shitty for profit schools. They get students to take out large government backed loans, then are defaulting, since they can't actually get a job. I knew several people I grew up with who went to these schools. They took out huge loans, 10k plus, and they never landed any kind of job with their "certificates" / degrees. [1] Half of all defaults are from these kind of schools. [1]…

Always ask if the school is Regionally Accredited in the degree you intend to take: http://en.wikipedia.org/wiki/Regional_accreditation#Regional...

If not, the credits are generally non-transferrable and many businesses will simply toss your resume.

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