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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

#341

Earlier quoted context omitted.

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?

Sure they have, but studying for standardized tests (and tests in general) does not take significant financial resources. A diligent student only needs a few review books and the internet to study for standardized tests.

Is it harder for poor students? Of course. But is it prohibitively harder for a smart, poor student to do well in school and demonstrate their ability? Absolutely not.

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

#342

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…

Why is education supposed to be about learning just for the sake of learning? It should be purpose-directed.

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

#343
post #18

Earlier quoted context omitted.

Yes. To default just don't pay. What I think you meant to ask was is there a way to escape repayment (get the debts wiped out in bankruptcy). Yes. It is possible to ask and get a judge to wipe out the student debt loan but the bar is usually fairly high and unlikely. Can it be done en masses or exploited. Not likely. You'd likely need Congress' involvement. Good luck with that and good luck with Devos.

I have wondered if the right person in the right place could go Mr Robot on the Dept of Education’s loan data, nuking all borrower data (prod, backups, everything). “Non Congressional Sanctioned Forgiveness” thought experiment.

Assuming that is a legitimate question: No. That data resides in many places... with the loan servicers, the NSLDS, the Guarantors... spread in locations around the country.

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

#344
post #275
post #150

Earlier quoted context omitted.

Maybe American voters don't want to pay more for college education because they know how much it costs, and they feel they are already paying enough? I think they are correct. Reforming higher education means cutting spending first and foremost. Shut down half the universities, lay off 1/3 of the staff in the rest, seize the endowments, close all the sports stadiums, fire most of the admins, force students to finish…

Besides the draconian tone, why should university students get a full-ride in tuition and trade students be required to pay 1/3?

It's just one proposal, but generally trade school is much shorter and is usually a paid apprenticeship situation, or turns into one very quickly. If there is no apprenticeship, then sure can make it like Unis.

The tone is draconian because you have a whole class of people ripping students off, ripping taxpayers off, providing very little value, and yet being extremely sanctimonious about why more spending is needed. The hypocrisy and amorality of the higher education industry in the US is stunning, so a draconian approach is called for.

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

#345
post #270
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…

> we would be better off adopting a German style trade school system We would also need to remove the social stigma that has plagued the trades for the last 30+ years.

Agreed. I think it is going away, or at least I can't imagine anyone being looked down upon if they say they are a carpenter, plumber, electrician, or mechanic. And nowadays these will make more money than your average university graduate.

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

#346
post #122

Earlier quoted context omitted.

It doesn't matter who is responsible for the situation, if it presents a large risk to the economy it should be mitigated.

Alcohol, tobacco, obesity, and general unhealthy lifestyle likely underpins more risk to the economy than student lending. It’s perhaps more “priced in”, but otherwise seems much more serious. Drug abuse is less long-term priced in and likely also has higher aggregate risk as well.

There's a difference between risk and harm. Risks are something that represent an unknown future harm to the economy, likely in the form of a potential recession. The things you list undoubtedly waste resources, both from loss of productivity and from spending resources that otherwise could have been utilized for something else, but they're known quantities.

In a sense the things you list are kind of like the broken windows fallacy. The increase in healthcare spending shows up in our GDP, but isn't an efficient use of the resources.

I also imagine that student loan debt could reduce local growth. If you have a graduate using most of their income on repaying loans, that's money that may have been spent locally and is instead sent to the bank. Of course the opposite is true before graduation, where inflated costs of education result in more money in the local economy. However due to interest it may be the case that the former outweighs the latter.

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

#347

Earlier quoted context omitted.

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…

Why is education supposed to be about learning just for the sake of learning? It should be purpose-directed.

Who should decide on the purpose?

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

#348
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…

Regarding 1. and 2. : In France 100% of high school graduates are (by definition) admitted to University, and more than half of them indeed decide to take that path. "Typical" university education lasts 5 years. (Though I wouldn't be surprised if only a minority actually makes it.) It's mostly free, students from poor families get grants, though there are limits on how many times you can retry university years while…

So France is an example where they spend 1.12% of GDP on tertiary education, about 12% more than Germany, and as a result they get a lot more university students, but their labor market overall is less skilled, and French schools -- similar to Italian schools -- are broke and their employees are paid less.

So these are the kinds of trade offs to make -- e.g. what percent of your labor force do you need to have a college degree? This is going to be a characteristic of your economy and providing college degrees to more people than this is going to create a skills mismatch.

A lot of people think the reverse is true -- e.g. that if you train a lot of people to build bridges, then you will have a bridge building economy. But I am of the opinion that knowledge is activity specific, so if you want to have a lot of people who are bridge builders, then you need to actually build bridges, and the university diplomas you need will follow as people scramble to learn how to build bridges to get the good bridge building jobs they see in the economy.

So why does Germany have a more skilled economy even though fewer attend university? Because it's an export monster, that swells the number of high skilled jobs needed to much more than would be the case if they were producing only for their own market.

China is in a similar position -- they want a hundred million engineers, and if that means building a bridge across every river in Africa then that's what they will do. The Belt and Road Initiative is nothing more than an attempt to export infrastructure because they've already covered their own country with empty apartment buildings, unnecessary airports, and so they need to build infrastructure elsewhere. Curiously only 5% of the population attend university in China, and yet they are an economic powerhouse by doing -- and learning by doing -- rather than academic diplomas.

India is an example where they overtrain lots of people in IT relative to domestic demand, and of course what happens is that people emigrate to where the jobs are. Again, you don't transform your economy with university education, anymore than you can transform your car by washing it. You transform your economy by cultivating productive ecosystems and then making sure there is demand for their output.

Whereas we in the US think that we can shut down manufacturing, outsource jobs, and yet have a high skilled economy if everyone goes to university. It's not the case, we have a much lower skilled labor force than Europe and the university graduates have a hard time finding good jobs and repaying their student loans.

So bottom line, the goal should not be to send everyone to college, but to send those people who need to go to college, and if you want more people to need to go, than work on cultivating more high skilled employment in your economy rather than building more universities.

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

#349

Earlier quoted context omitted.

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?

Sure they have, but studying for standardized tests (and tests in general) does not take significant financial resources. A diligent student only needs a few review books and the internet to study for standardized tests. Is it harder for poor students? Of course. But is it prohibitively harder for a smart, poor student to do well in school and demonstrate their ability? Absolutely not.

Because it is so easy for poor people to “lift them up by their bootstraps” surely explains why income mobility is so great in the US.

If they could “all learn from books”, I guess no one needs teachers.

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

#350
post #346

Earlier quoted context omitted.

Alcohol, tobacco, obesity, and general unhealthy lifestyle likely underpins more risk to the economy than student lending. It’s perhaps more “priced in”, but otherwise seems much more serious. Drug abuse is less long-term priced in and likely also has higher aggregate risk as well.

There's a difference between risk and harm. Risks are something that represent an unknown future harm to the economy, likely in the form of a potential recession. The things you list undoubtedly waste resources, both from loss of productivity and from spending resources that otherwise could have been utilized for something else, but they're known quantities. In a sense the things you list are kind of like the broken…

Isn’t student loan repayment harm rather than risk as well, then? It seems like they’re also well known quantities.
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