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The College-Cost Calamity

economist.com

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Re: The College-Cost Calamity

#41

Post by stephencanon »

pbiggar wrote: post #21
HCIdivision17 wrote: post #20

Earlier quoted context omitted.

While I certainly don't think college debt is quite indentured servitude (you certainly can leave work while still in debt), it's worth noting that US bankruptcy laws are specifically not generous with student loan debt. It's very rare to have it forgiven. Worse, if the loans have a cosigner, the debt can continue to harass them, and they'll typically be a family member. Of course, it's not going to follow for genera…

To say that it's the same is to say that any debt is indentured servitude. Prisons making you borrow money would be indentured servitude. College loans is taking a loan. There could be a case made for credit cards being indentured servitude, due to their unreasonably high interest rate and the fact that they entrap you by just issuing them. Far more so than college loans.

Credit card debt is dischargeable.

Re: The College-Cost Calamity

#43

Post by mcherm »

College tuition is too high and rising too fast -- that's nothing new. But this article wasn't (primarily) about that, this article was about how borrowing by colleges and universities is shooting up.

In their defense, I want to say that I think it is an example of wise financial management with a long-term view. Most institutions struggle to consider any time horizon beyond the current year (if not just the current quarter), but often schools can take a longer view. And right now, interest rates are hitting a once-a-century record low. I contend that an institution would be WISE to borrow as much as possible on a long-term basis. In a few years that 2% loan may be LESS than they are making on their investments (if their investments were locked in years ago, it may be less right now). Do all the building possible right now, then plan to ride out a couple of decades.

The article suggested that taking on this debt wasa sign of mismanagement and recklessness, but it seems to me like a sign of long-term vision. What do you think?

Re: The College-Cost Calamity

#44

Post by SideburnsOfDoom »

cpunks wrote: post #42

My hope is that programs like Khan, edX, and Udacity will address this.

The article hardly even mentions a very real risk to Ivy league Universities - that they will be challenged from below by Khan, Coursera, and Udacity and the like. Ivy-covered buildings and in-person lectures cost a lot to keep going. As the article states, Universities are typically in debt and student fees are rising.

"Disruption" is an overused buzzword but it may apply in this case. Universities trade of the fact that their expensive product is important and exclusive. What happens when it isn't exclusive or expensive any more?

Re: The College-Cost Calamity

#45

Post by 16s »

My advice is to go to a college that you can afford. I spent my first two years at a local community college and transferred 60 credit hours (about half of what's needed to graduate) to a large state university where I graduated Phi Beta Kappa with honors and I only had about 15K in student loan debt. I could have avoided the loans entirely if I had worked a few more part time jobs.

You don't have to go to a high-priced private university for four years to have a good career (that you enjoy) and live a nice life.

Re: The College-Cost Calamity

#46

Post by icegreentea »

dfc wrote: post #13
stevencorona wrote: post #9

The craziest part, IMO, is that I had to make a decision whether or not to take on $175,000 in debt (I went to RIT, it costs $44,000 per year) when I was 18 years old and had never handled more than $300. Sure! Sign me up! I couldn't even imagine what that much money would look like, let alone feel like to pay back- at that time, it was as equally mysterious as $10,000 or $1,000,000. Luckily, I left after my 2nd year…

Why did two years cost $50k but four years costs $175k? (2/4 != 50/175) As far as the $300 goes I take it you never worked in high school?

He went to RIT, so he might been in a coop program. Not sure how RIT's works, but if its similar to uwaterloo's (which I've been told is so), after 2 calender years, he may have had only 3 school terms and 3 work terms. That's ~65k for school minus whatever he managed to save from his work terms.

Re: The College-Cost Calamity

#47

Post by rsheridan6 »

rblackwater wrote: post #37
stevencorona wrote: post #9

The craziest part, IMO, is that I had to make a decision whether or not to take on $175,000 in debt (I went to RIT, it costs $44,000 per year) when I was 18 years old and had never handled more than $300. Sure! Sign me up! I couldn't even imagine what that much money would look like, let alone feel like to pay back- at that time, it was as equally mysterious as $10,000 or $1,000,000. Luckily, I left after my 2nd year…

I think the craziest part is actually that declaring bankruptcy doesn't cancel student loan debt, so there's no failsafe if you don't get a decent job afterwards.

If you have federal loans, you can use income-based repayment, where you pay a tolerable fraction of your pay and the loan is forgiven after 25 years. If you have private loans, you're pretty well screwed for life.

Re: The College-Cost Calamity

#48

Post by steverb »

16s wrote: post #45

My advice is to go to a college that you can afford. I spent my first two years at a local community college and transferred 60 credit hours (about half of what's needed to graduate) to a large state university where I graduated Phi Beta Kappa with honors and I only had about 15K in student loan debt. I could have avoided the loans entirely if I had worked a few more part time jobs. You don't have to go to a high-pri…

Also, if you weren't the best student in high school, community college will give you a chance to establish a better track record.

I was an average student in HS (3.0 GPA), but I buckled down at CC and got my GPA up high enough to score an academic scholarship (full tuition) when I moved on to university through Phi Theta Kappa.

Re: The College-Cost Calamity

#49

Post by rscale »

mcherm wrote: post #43

College tuition is too high and rising too fast -- that's nothing new. But this article wasn't (primarily) about that, this article was about how borrowing by colleges and universities is shooting up. In their defense, I want to say that I think it is an example of wise financial management with a long-term view. Most institutions struggle to consider any time horizon beyond the current year (if not just the current…

I had the same immediate reaction. Low-cost debt is a very useful tool for long-lived institutions. I'm certain that a few institutions are using it naively or foolishly, but the existence of debt doesn't prove the existence of a problem.

The graphs they chose for the article are also absolutely uninformative. As an example, the top graph indicates that long-term debt grew substantially faster than instruction costs from 2002-2008, but that's exactly what I would expect given that instruction costs were relatively static, but interest rates plummeted.

Re: The College-Cost Calamity

#50

Post by jonnathanson »

mcherm wrote: post #43

College tuition is too high and rising too fast -- that's nothing new. But this article wasn't (primarily) about that, this article was about how borrowing by colleges and universities is shooting up. In their defense, I want to say that I think it is an example of wise financial management with a long-term view. Most institutions struggle to consider any time horizon beyond the current year (if not just the current…

Generally, and within reasonable limits, I would agree. With interest rates the way they are, debt financing is remarkably cheap right now, while saving is comparatively expensive.

That said, borrowing "as much as possible" can be problematic. Debt should be used to finance only what is necessary. Problems arise when institutions (or people) take on as much debt as they can, figuring they'll put it to use eventually.

You shouldn't stock more food in your pantry, so to speak, than you can eat in a reasonable timeframe. The stuff you don't get around to eating will start to spoil.

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