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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

#321

Post by pnutjam »

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…

Went to school after my 1st child was born (back to school). Racked up debts to ITT tech (mistake) and it took me over 10 years to get to the income they promised in their sales spiel. About 18 years later I climbed out of the 2x poverty hole and I'm still looking at renting for the rest of my life. I've paid little on my loans and my oldest daughter is going to college next year. Alot of these student loans are to non-traditional students who were promised more then they were delivered.

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

#322

Post by pnutjam »

zdragnar wrote: post #302
smcl wrote: post #134

Earlier quoted context omitted.

Well the problem is that while $400/month may seem to you like a reasonable amount of cash to set aside, for many people it's not possible. It's quite funny you chose $400 actually - since there was a story recently about how a substantial amount of americans couldn't get their hands on $400 in a one-off emergency ( https://www.bloomberg.com/news/articles/2019-05-23/almost-40... ) let alone once a month for seven yea…

It is reasonably small for a debt load for someone who has a degree, has been frugal, and is on an income based repayment plan. Most americans are not those things, and too few are frugal. I recall my grandfather being proud of only having a $25 electricity bill... granted, it was about 20 years ago, so prices were a bit lower, but it was for a two story house. Edit- also, that $400 was chosen for the payoff period,…

I'm guessing you own your own home, locked in around 20 years ago. You do know what rents are now, right? If you have to carry family health insurance, that's another huge chunk of money.

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

#323

Post by [deleted] »

mAEStro-paNDa wrote: post #299
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…

It's insane to me how quick some folks are to dismiss what they deem "bullshit degrees". It's our culture that has turned education into some kind of "investment" in future job prospects. To put it simply, education was never intended to be that way, nor should it. It's as if studying the arts is some kind of luxury for those who are already financially well-off. Education is supposed to be about learning just for th…

[deleted]

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

#324

Post by pnutjam »

dsfyu404ed wrote: post #209
eirini1 wrote: post #108

Earlier quoted context omitted.

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 yo…

How many recent grads are making $90k? Not the majority.

That's in the 83rd percentile of income Nationwide and 72nd percentile for Boston.

source: https://dqydj.com/income-percentile-by-city-calculator/

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

#325

Post by gwright »

vinniejames wrote: post #74
gwright wrote: post #69

Earlier quoted context omitted.

That sounds nice but it requires there to be a definition of "societally high-reward education". That is difficult. Even if you find some methodology to identify the quality programs that have an appropriate "societal reward" you have to deal with the problem that the costs for those programs will inevitably rise in lock step to the amount of tax dollars used to subsidize them. (See https://www.newyorkfed.org/mediali…

The more you "favor" particular degrees, the faster you you saturate the market with new graduates. The eventual outcome being those jobs are no longer in high demand, nor pay a decent salary

Yep. That is called "the market". And I think the government shouldn't get in the way and "favor" anything. Let people decide their own careers and interests and let them balance the pros and cons.

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

#326

Post by gwright »

pinkfoot wrote: post #116
gwright wrote: post #69

Earlier quoted context omitted.

That sounds nice but it requires there to be a definition of "societally high-reward education". That is difficult. Even if you find some methodology to identify the quality programs that have an appropriate "societal reward" you have to deal with the problem that the costs for those programs will inevitably rise in lock step to the amount of tax dollars used to subsidize them. (See https://www.newyorkfed.org/mediali…

Steve Jobs had an English degree. Would most STEM obsessed industrialised file that under 'favoured'?

Who knows? Like I said that is a difficult decision and I'd rather those decisions be made by individuals. They can decide if taking out a loan to get an English degree is worthwhile. And if they can't find someone to loan them the money, they may have find a different approach.

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

#327

Post by gwright »

listenallyall wrote: post #97
swagasaurus-rex wrote: post #62

Earlier quoted context omitted.

The missing wisdom here is that maybe the government should take on a high-risk, societally high-reward investment like education.

It does, to an extent. Stafford and Perkins loans are direct from the government. This article says 90% of student loans are from the gov't, so it appears it currently does exactly what you're suggesting. https://www.nationalreview.com/2017/02/student-loans-governm...

The loan programs don't adjust the interest rates for the risk/reward involved. As a taxpayer I don't want to fund someone for 4 years in college and then have them default or be be unqualified for a job that would make them self sufficient.

I'd rather have non of my tax dollars allocated that way, but if I don't have a choice then there should be some attempt to invest in people and skills that produce self-sufficient citizens.

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

#328

Post by gwright »

eli_gottlieb wrote: post #127
gwright wrote: post #54

Earlier quoted context omitted.

Because it is an unsecured loan. It would be too easy for a newly minted graduate to declare bankruptcy, discharge the loan, and move on with their life. The only entity stupid enough to loan money to students in that world would be the government.

So what? If making a loan would be stupid, that loan shouldn't be made.

Right, but that doesn't stop the government. Student loans are not approved based on any risk/reward mechanism that I'm aware of (currently).

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

#329

Post by bumby »

Gunax wrote: post #273
rsj_hn wrote: post #144

Earlier quoted context omitted.

> 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…

Does 'US government' include states? I am too lazy to look up stats, but I imagine most education costs are borne by states in the US.

I'm too lazy to do anything but a cursory search, but it looks like it breaks down like this for higher education spending, according to a 2015 report:

Federal: $75.6 billion

State: $72.7 billion

Local: $9.2 billion

Although the funding between State and Federal are similar, the way those funds are spent may be different:

"The federal government mostly provides financial assistance to individual students and funds specific research projects, while states typically fund the general operations of public institutions, with smaller amounts appropriated for research and financial aid."

https://www.pewtrusts.org/~/media/assets/2015/06/federal_sta...

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

#330

Post by candybar »

mAEStro-paNDa wrote: post #299
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…

It's insane to me how quick some folks are to dismiss what they deem "bullshit degrees". It's our culture that has turned education into some kind of "investment" in future job prospects. To put it simply, education was never intended to be that way, nor should it. It's as if studying the arts is some kind of luxury for those who are already financially well-off. Education is supposed to be about learning just for th…

My understanding was that this idea of education being about learning for its own sake was from an era when only the children of the privileged class received higher education and since their future as part of the future elite was more or less guaranteed from their upbringing and connections and it was thought important than the future members of the elite class are broadly well-educated, not merely specialists in their roles.

The reality now is that education is more or less for everyone and most people, even at elite institutions, don't have a clear path to being a member of the elite without working super hard for specific career goals. It would be odd, then, for some of those students to continue to pretend that they have a clear path to being a member of the elite and learn the kinds of things that are disproportionately important for the members of the elite, when they have to accomplish a lot to get there. The world is simply far more competitive.

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