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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

#71

Post by m463 »

hermitdev wrote: post #56
m463 wrote: post #39

Earlier quoted context omitted.

> Is there any data on if folks with student loans are living above their means? Literally every single friend of mine bought a new car when they graduated from college and got a job. Anecdotal, but I suspect it is more common than people realize. It doesn't mean they were living above their means, but I think buying a new car at the start might be a financial misstep.

I think it depends on the car and the job. I graduated in 2003 and had to buy a car. I was driving an 88 Chevy Blazer that was starting to hit around $750 per month in maintenance. Final straw was when a cylinder was losing compression. This was already on an SUV that had its engine rebuilt and had more than 165K miles on it. It had a Kelly Blue Book value of about $100. So, couple months out of college, I bought a m…

> I think it might be a lack of personal financial maturity

Just think, the whole student loan thing is decided when they're even younger.

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

#72

Post by sykick »

Mirioron wrote: post #57
sykick wrote: post #42

Earlier quoted context omitted.

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 s…

Why would transportation costs be higher in the US? Gasoline is two times cheaper in the US than in Sweden. Food is roughly the same price, depending of what you eat.

Public transportation is very bad in the U.S. Even in major cities. For the vast majority of people a car is a necessity in the U.S. Most Americans end up in debt to buy a car. Then there is insurance and the opportunity cost of the government having to spend a great deal of money on road maintenance that could otherwise be spent on things like education.

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

#73

Post by h5er4ah45eaq »

WizardAustralis wrote: post #70
rotrux wrote: post #34

People have been talking about this for at least a decade & I wonder when the shoe will actually drop.

I forgot who said it but "bubbles grow far bigger than is rationally thought possible, and fall far faster than anyone expects". These bubble can go on for decades but once it bursts, the bottom of the bucket drops out and all the water goes with it.

Probably should be that the pop fast, not fall fast. In real life bubbles fall quite slowly.

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

#74

Post by vinniejames »

gwright wrote: post #69
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.

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

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

#75

Post by Izkata »

swagasaurus-rex wrote: post #59
Mirioron wrote: post #57

Earlier quoted context omitted.

Why would transportation costs be higher in the US? Gasoline is two times cheaper in the US than in Sweden. Food is roughly the same price, depending of what you eat.

Cars are required in most cities in the US to hold a job due to lack of public transportation. Cars are required in most rural areas in the US because there is no other way around.

On that second point, a perspective note for non-US people who don't realize: Sweden has about the same geographic area as just California. Only covers about 5% of the whole contiguous US.

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

#76

Post by brewdad »

rotrux wrote: post #34

People have been talking about this for at least a decade & I wonder when the shoe will actually drop.

With my luck, in about 5.5 years when my kid is done with his bachelor's degree.

Free college for all coming in Fall 2025!

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

#77

Post by tptacek »

swagasaurus-rex wrote: post #62
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.

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

I think you're using the word "risk" idiosyncratically. Student loans are unsecured, and most people are done with them by the time they're 23. If they're dischargeable in bankruptcy, for a lot of people, it's irrational not to default on them; the bankruptcy is gone long before your credit history matters.

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

#78

Post by godelski »

ponsin wrote: post #63
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…

Why? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. If responsibility fell on the university, then they could just refuse to accept people who take out loans. The result being that only rich people could go to colleg…

This is part of the issue. Loan providers pretty much have to give everyone loans. But the only way this can happen is by guaranteeing these loans, federally and legally. So our solution to a problem backfired and we found out that federally guaranteed loans aren't the solution to "college should be available to everyone." Maybe it is time to look for a different solution. And maybe time to clean up the mess that the last "solution" created.

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

#79

Post by ryannevius »

Izkata wrote: post #75
swagasaurus-rex wrote: post #59

Earlier quoted context omitted.

Cars are required in most cities in the US to hold a job due to lack of public transportation. Cars are required in most rural areas in the US because there is no other way around.

On that second point, a perspective note for non-US people who don't realize: Sweden has about the same geographic area as just California. Only covers about 5% of the whole contiguous US.

Size comparison, for reference: https://thetruesize.com/#?borders=1~!MTM4NDAyOTc.MTA5MjczODQ...

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

#80

Post by Gwypaas »

Izkata wrote: post #75
swagasaurus-rex wrote: post #59

Earlier quoted context omitted.

Cars are required in most cities in the US to hold a job due to lack of public transportation. Cars are required in most rural areas in the US because there is no other way around.

On that second point, a perspective note for non-US people who don't realize: Sweden has about the same geographic area as just California. Only covers about 5% of the whole contiguous US.

And there's 40 million people in California compared to 10 million in Sweden. So comparatively California is a densely populated mecca.
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