U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt • Hacker News Board

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#81

Post by rahimnathwani » Mon, Nov 21, 2016, 4:32 AM UTC

toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

"Why are interest free student loans never floated as an option?"

Imagine what would happen if the US government made student loans interest free. Who would gain, and who would lose?

(1) Students could afford to take out larger loans (as the repayments would be more affordable with 0% interest vs. 4.66% interest)

(2) As a result of (1) colleges could charge higher tuition fees, without reducing the number of students would could afford to pay

(3) The government would pay interest to the banks (interest that's paid by students under the current system).

Based on what we've seen in the past, increasing access to credit for students mostly benefits colleges. Students end up paying the same monthly payments. Just like how lower interest rates make house prices go up.

This is indeed a sad situation. I'm generally in favour of free-market solutions, but most 18-year-olds don't have sufficient information or ability to act as a rational market participant. So the situation in the UK, where undergraduate education is mostly funded by the government, and prices are centrally capped, seems much better for students.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#82

Post by dikdik » Mon, Nov 21, 2016, 4:32 AM UTC

rayiner wrote: post #25

We don't need student debt reform (and I say that as someone who has a lot of student debt). Student loan debt is a middle/upper middle class problem. 2/3 of millennials don't have a college degree, disproportionately in the lower and lower middle class. The majority have no student debt. Public money spent on college or debt reform would be a regressive benefit to those who are already better off than the median per…

This reminds me of something Laurence on Project Runway recently said, "Either I'm going to be rich or I'm going to be poor, but I'm not gonna be in between."

Why work so hard when your discretionary income is barely higher than those on welfare?

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#83

Post by prostoalex » Mon, Nov 21, 2016, 4:35 AM UTC

toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

What's the motivation fo recipients of such funds (universities, faculty, staff, facility builders) to reduce their prices? They operate in a quasi-monopolistic environment where system adjusts to absorb larger budgets thrown at them.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#84

Post by dikdik » Mon, Nov 21, 2016, 4:38 AM UTC

wernercd wrote: post #37

krisroadruck wrote: post #13

I'm curious why we treat student loan debt as being special. We don't make a huge deal out of people taking on other debt and then being unable to pay for it. I think probably if anything, what we should have are better controls for what types of degrees you are allowed to take a loan out for. If your degree of choice is unlikely to yield the kind of return that will pay for it, then you should be required to save up…

> Why we treat student loan debt debt as being different Where is the collateral? You buy a house, don't pay... you lose the house. You buy an education, don't pay... you... lose the education? No bank is going to give money for degrees without a realistic change of getting paid back. They have no fear of getting paid back because you CANT remove the debt via bankruptcy. I think there needs to be a different approach…

> Where is the collateral? You buy a house, don't pay... you lose the house.

And what happens when the bubble bursts and the house is now worth 200k less than what it was originally purchased for? The bank writes it off.

So I propose we give everyone a paperclip with their degree and then if they file for bankruptcy they can give the paperclip, which depreciated 50-100k, back to the bank. It works for boomers so I think it'll work for millennials.

...I'm only half kidding with this comment.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#85

Post by godelski » Mon, Nov 21, 2016, 4:40 AM UTC

charlieflowers wrote: post #65

This is so obviously a scam that I don't see how it can hold up. Tuition has gone to sky high levels, and who is getting that money? Not the professors, let's get real. They have probably gotten sweet raises, but nowhere near the growth rate of tuition. The armies of "administrators" are getting huge salaries, but the main point of the whole bubble is that it is a great way to proactively enslave a whole new generati…

At this point it is still "worth it" though. Might be in huge debt but you can get a job that you can afford that debt though. Now I personally don't think this is a good environment for a healthy economy, but for many it is still "worth it". It'll crash when it isn't, and I think we're getting close to that.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#86

Post by rahimnathwani » Mon, Nov 21, 2016, 4:40 AM UTC

godelski wrote: post #78

The thing that worries me most is the delinquency rate. It is at 11%[1]. For comparison the housing market delinquency rate went from 1.6% in 2006 and went to 11.26% in 2010 (height, 2008 went from 3% to 8%[2]). That's where I see the real bubble indicator. I really wonder how much more it can expand. And I don't hear serious talk about what to do WHEN it bursts. Because it is really a matter of when and not if. [1]…

This isn't a bubble. There is no stock of assets that are suddenly going to fall in market value. You can see education as an investment, but it's not a tradeable asset. If I buy an apartment, there's a market that (i) tells me the value of the apartment at any time, (ii) let's me (or the bank) liquidate the apartment and turn it into cash.

University degrees aren't like that. Someone holding a degree doesn't suffer additionally when people stop realising that this type of degree isn't worth the sticker price. He's not selling his degree to new students. Whatever his experience is in the job market is not affected by the price new students pay for their degrees.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#87

Post by caseysoftware » Mon, Nov 21, 2016, 4:41 AM UTC

jerf wrote: post #68

toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

We could also make college a lot cheaper. Maybe split things back out into "college" and "university" more clearly, and let more people do something other than ship out to a four (or more) year boarding school to have someone more or less through classes that are more or less someone holding your hand through reading a text book that you may neither want nor need to read. (Yes, the exceptions immediately leap to your…

I have a 7 week old and a 22 month old and am convinced that - outside of certain fields - college will be entirely optional to them. Even now, there are many things that can/should be learned through apprenticeship or online or via other means and that is only going to increase in the next 15+ years.

Please note: I said "college" not education. I believe education will always be vital, no matter what. A piece of paper "proving" it may not be.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#88

Post by aggie » Mon, Nov 21, 2016, 4:42 AM UTC

nicksergeant wrote: post #67

charlieflowers wrote: post #65

This is so obviously a scam that I don't see how it can hold up. Tuition has gone to sky high levels, and who is getting that money? Not the professors, let's get real. They have probably gotten sweet raises, but nowhere near the growth rate of tuition. The armies of "administrators" are getting huge salaries, but the main point of the whole bubble is that it is a great way to proactively enslave a whole new generati…

They see through it. They just know they have no other option. Educators raise rates because they can, students pay the rates because they have to. It's the same problem we have in healthcare. Until employers start scrutinizing education in terms other than "No degree? No thanks.", then we will continue to have this problem, in my opinion.

Many students pay way more than they have to. I graduated from a top-10 public school (in-state) after transferring from community college and my total bill was about $35k. That's not nothing, but also not a ball-and-chain six-figure mark that some people accrue.

There are better options than a lot of people have taken. To me the solution has to involve better financial and career counseling for high school graduates.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#89

Post by eli_gottlieb » Mon, Nov 21, 2016, 4:43 AM UTC

charlieflowers wrote: post #65

This is so obviously a scam that I don't see how it can hold up. Tuition has gone to sky high levels, and who is getting that money? Not the professors, let's get real. They have probably gotten sweet raises, but nowhere near the growth rate of tuition. The armies of "administrators" are getting huge salaries, but the main point of the whole bubble is that it is a great way to proactively enslave a whole new generati…

>Not the professors, let's get real. They have probably gotten sweet raises, but nowhere near the growth rate of tuition.

Actually, at most institutions, professors' raises barely match the rate of inflation, and the majority of teaching has been moved onto adjunct faculty who have no job security.

Re: U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt

#90

Post by Daishiman » Mon, Nov 21, 2016, 4:45 AM UTC

nickjarboe wrote: post #80

toomanybeersies wrote: post #6

Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition. Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand. It means that people who don't do tertiary education, or who do a trade, don't subsidise…

The US has a very complicated system of multiple, income-based, student loan repayment schemes[1]. 20 to 25 years of repayment based on many factors. It is so complicated the government has created a "Repayment Estimator"[2] to help people choose the best plan. At a glance it looks similar to the New Zealand 8%. Seems like most systems evolve to where they are impossible for a human understand. See tax code, social s…

> Seems like most systems evolve to where they are impossible for a human understand. See tax code, social security, Obamacare, etc.

That's because the US is characterized by a Republican party with wholly obstructionist goals which make the worst possible consessions for those who do wish for an effective social safety net to be in place, effectively being able to say "I told you so" when the watered-down systems inevitably fail.

In countries where those systems are not points of contention they end up working quite well. See the German education system, NHS, and a long list of other programs around the world.