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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

#41

Post by Clubber »

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…

>Why was it necessary to change student loans to being non-dischargeable in bankruptcy?

I believe it was something along the lines of people borrowing for law degrees then discharging the debt right after graduation with the knowledge gained from their new degree. I'm sure it was done in other degrees as well.

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

#42

Post by sykick »

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…

When making comparisons with Sweden or other countries the cost of healthcare, housing, food, and transportation should be taken into account. Healthcare and transportation costs are much higher in the U.S. I think too we also have a higher per capita income and I don't know how things balance out. One thing for sure though. I'd rather be poor in Sweden than in the U.S.

There is also the fact that many students who start a four year degree end up never graduating. At the college I teach at it is clear that we are marketing to students who should not be going to college and shouldn't realistically expect to get a degree. But we need the money due to lack of state support and as a result standards for passing have gone down. What we have now is a system that has the incentives in the wrong place and this will have bad societal consequences years from now.

Like almost everyone else who comments on this topic I have ideas on how to make things better and like almost everyone else those ideas are largely naive.

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

#43

Post by hermitdev »

jrs235 wrote: post #26
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…

A lot of people got loans for degrees that don't pay. Or went a few years then dropped out. I went to a college known for its recreation management program. Cool industry. Not a lot of good paying jobs. I know a few universities with amazing turf programs... Only so many golf courses and turf fields that need someone with that kind of knowledge and that pay well. Most jobs in turf are mowing and applying chemicals th…

I think I remember hearing at one point that a degree in forestry was a very sought out degree at University of Montana. Enough so that they alone graduated more students with forestry degrees than there are annual opennings in US Gov or private industry.

I dont have a reference for this, just anecdotal from when I grew up near University of Montana.

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

#44

Post by the_watcher »

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…

> Why was it necessary to change student loans to being non-dischargeable in bankruptcy? That is a recent change

It was in 1976, not very recent.

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

#45

Post by Clubber »

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…

My understanding of the main issues are:

1. Private colleges that spend a lot on marketing, cost a lot, and don't provide a worthwhile degree, nor transferrable credits. Think about all the unaccredited "tech" school advertisements all over the TV a few years ago.

2. Getting degrees that aren't marketable outside academia, such as Mideval Literature, etc. As an incoming college student, I had no idea what was a marketable career and what wasn't. Universities probably don't undermine their own departments either, so it can be a crap shoot.

3. Very expensive private liberal arts colleges, like the one Steve Jobs dropped out of.

I'm sure there are other pain points, but a kid that gets an in-state, public college degree in something he can earn a living doing isn't much of an issue. Typically, it's the vultures that pray on government programs intended to help the citizens.

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

#46

Post by shantly »

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…

I'm guessing long-term unsecured debt in five to six figure amounts is ordinarily really hard for an 18- to 22-year-old to get, no matter what they're spending it on, and if they somehow manage it the interest rate would be very high. Making it non-dischargeable was likely intended to fix those problems. (not saying it's a good idea, but I'd imagine that was the plan)

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

#47

Post by rhino369 »

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…

>Why was it necessary to change student loans to being non-dischargeable in bankruptcy?

To keep interest rates on student loans low and to make sure the loans are available to 18 year olds with no credit history.

There was a real problem with medical students racking up huge sums, declaring bankruptcy when they were making low money during residency, but then making 6 figure salaries a few years later.

>It seems like student loans should be treated like any other unsecured loan.

Nobody loans 18-22 tens of thousands (and 22-26 years olds hundreds of thousands of dollars) in unsecured loans.

And look at the interest rates for other unsecured loans. My credit card rate is 19%. Earnest gave me LIBOR + 3% on 200,000 dollars of student loans.

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

#49

Post by cableshaft »

vonmoltke wrote: post #33
undefined3840 wrote: post #28

The problem is compounded by the fact that students do not get to choose who their loan servicer is and thus a few servicers like Navient have a government approved monopoly on that business. Can look up many reports on their incompetence and misleading information that funnels students into repayment plans that maximize their own revenue.

As far as I know Navient is the servicer for Federal loans. Who else is there since the change to DOE-only government loans?

Mine ended up getting shuffled around until it became Mohela. Once there it's stayed there.

Wikipedia: "The Higher Education Loan Authority of the State of Missouri, aka the Missouri Higher Education Loan Authority or MOHELA, is one of the largest holders and servicers of student loans nationwide."

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

#50

Post by runako »

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…

I'm curious on the timeframe here.

Depending on when you graduated, a couple of things changed:

- college pricing increased (duh), so a loan balance for a comparably situated student will just be higher for recent grads

- median incomes for college graduates have risen a lot slower than the increase in college costs, so repayment will be more difficult at the median. (Even in engineering, this is true. Starting software engineering salaries ca. 1996 were in the range of 1.5x all-in fees for a year at a top private college. This ratio has moved decisively against students. Carnegie Mellon is quoting $74k for a year of education now, so the ratio is closer to 1.1x. Obviously it's easier to pay back loans if you earn more relative to the cost of the education. The numbers will be worse for people not pursuing a select few STEM degrees.)

- employee health insurance premiums are frequently on top of these numbers, making the arithmetic worse for payback.

- I'm sure there are other factors, especially when you add that some students go on to pursue fields (e.g. law) where similar dynamics are at play as well.

So yeah, it's worse now than it was even a couple decades back.

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