5 ms·

Sorry for being dense, but how are student loans bad/worse than any other debt? My wife and I had maybe $15k worth of student loans. We paid them off in 7 or 8

by scottw 17y ago

Sorry for being dense, but how are student loans bad/worse than any other debt? My wife and I had maybe $15k worth of student loans. We paid them off in 7 or 8 years (the interest rates were ridiculously low, iirc) and got the monkey off our backs. It was a choice we made. We could have taken on a lot more debt, but chose to work most of our way through college instead. Graduation took longer, we never went out to eat, and drove a crappy old car. Isn't that what "having no disposable income" is supposed to look like?

pw0ncakes 17y ago
You can't discharge student loans in bankruptcy.
- yummyfajitas 17y ago
  If you could, every college graduate would go bankrupt. Then there would be no student loans.
  - pw0ncakes 17y ago
    Which is why student loans were a dumb-assed idea in the first place. Unlike with a car or house loan, there's nothing to guarantee the loan except for human capital. Which means that we have to choose between an inhumanity (using a person as collateral, which is effectively what the current system entails) and student loans turning into bad debt on a system-wide scale. Neither's acceptable, so let's get rid of the whole thing.
    - sokoloff 17y ago
      What exactly is inhumane about allowing an individual to take on personal, non-dischargable debt in exchange for an education? How would the world be a better place if no one had access to this (generally very low-interest) source of funding for their education? I may be biased because I put myself through college on a combination of ROTC and loans, both of which were in different ways using my own time and labor (present and future) as a way of investing in my future. There was no other way I was going to be able to attend MIT, a dream I'd had since I was about 8 years old and saw a PBS special about the 2.70 design contest. Sure, some people take loans and don't spend the money wisely (fail to graduate, choose an expensive school for a very low paying career, max out their loans and gamble or fritter it away). Those are all personal choices and I don't have a problem with those people suffering the consequences in exchange for what I perceive to be the greater good: that a motivated kid from middle or lower income family (such as I was) is able to attend MIT, thrive there, and as a result go on to have a substantially more fulfilling life. Oh and by the way, as part of that life, you'll have to pay back that money that someone fronted you when you were penniless, unemployable outside a mall context, no credit history, no significant employment history, etc. Taking that opportunity away from all such kids, in exchange for having no one be able to make a poor choice specifically around student loans, is not a good trade, IMO.
      - timwiseman 17y ago
        Beautifully put, and I fully agree. There is a flip side though. There are people who made every effort and did everything right and still did not graduate because of things such as major family issues, accidents leading to disability, or simply failing out despite their efforts. They are then shackled to student loans without the benefit of the degree. Granted, these tend to be a very small minority but in discussing the system the edge cases should not be forgotten.
        sokoloff 17y ago
        You make an excellent point there, and I have to admit that I don't have a good answer. Your username is apt, and I wish I could double up-vote you for reminding me of the outliers on the downside. The cold-hearted realist in me says "Well, some people are going to struggle and fail in life, ulimately dying in debt and this is just a different mechanism that manifests in that sliver of folks with stupendously bad luck." The compassionate human in me says "There ought to be a way to let people not have to suffer the rest of their life for stupendously bad luck when they were young." The realist then worries about how to make that almost as gaming-proof as the current system where you have to die or at least fake your own death and create a new identity (either of which would "game" any system). I would go so far as to donate to a charity setup to payoff the loans in those exceptional cases you describe (ideally at a negotiated discount, reflecting that those loans were unlikely to be paid anyway). Perhaps requiring that the person declare "normal" bankruptcy as well, and then that "qualifies" them to apply for a hearing of some sort before this new charity's board where they can state their case and answer questions. The forcing of "normal" bankruptcy as a qualifier is intended not to punish the individual but rather to ensure that it's not undertaken lightly and that the charity is hearing few frivolous cases. You ahve shaken my belief system enough (in a good way), that you may have literally given me a direction to focus my future charitable endeavors. Thank you...
      - pw0ncakes 17y ago
        People wouldn't have to take loans if tuitions weren't ridiculously high. The bulk of the talent is always going to come from the middle class, by nature of it's being 100 times the size of the upper class, and of the fact that, by and large, upper-class people aren't much smarter than the rest of us. If MIT wants to stay MIT, it'll find a way to get smart people in even if non-discharageable loans are abolished.
    - earl 17y ago
      Right. Because who should get an education but the rich?
  - earl 17y ago
    Sadly... no. Do you know that student loans were dischargeable in bankruptcy until very recently? They were! See http://www2.ed.gov/offices/OSFAP/DCS/loan.cancellation.discharge.html http://www2.ed.gov/offices/OSFAP/DCS/loan.cancellation.disch... And there was no wave of bankruptcy before this law; the banks merely saw a chance to utterly screw a certain segment of the population. And really, why not change this so you can then market such loans to people who probably oughtn't get them and then ruin their lives for forever?
- scottw 17y ago
  Thank you; I noticed that but it must not have stuck. Fwiw, the national student loan default rate for 2007 was only 6.7% (http://www2.ed.gov/offices/OSFAP/DCS/default.html http://www2.ed.gov/offices/OSFAP/DCS/default.html and http://www2.ed.gov/offices/OSFAP/defaultmanagement/2007staterates.pdf http://www2.ed.gov/offices/OSFAP/defaultmanagement/2007state... for per-state rates). The low interest rates on Federal loans (hovering between 1.5% and 2.5% last I checked) make them far more attractive to the alternatives, especially since the vast majority of students pay off their loans. Scrapping Federal student loans entirely would only benefit the people who default.
  - stjarnljuset 17y ago
    Where did you find 1.5% - 2.5%? My federal Stafford loan interest rates are at 5.6% (down from 6.8% when I first started college).

by scottw 17y ago

pw0ncakes 17y ago

You can't discharge student loans in bankruptcy.

yummyfajitas 17y ago
If you could, every college graduate would go bankrupt. Then there would be no student loans.
- pw0ncakes 17y ago
  Which is why student loans were a dumb-assed idea in the first place. Unlike with a car or house loan, there's nothing to guarantee the loan except for human capital. Which means that we have to choose between an inhumanity (using a person as collateral, which is effectively what the current system entails) and student loans turning into bad debt on a system-wide scale. Neither's acceptable, so let's get rid of the whole thing.
  - sokoloff 17y ago
    What exactly is inhumane about allowing an individual to take on personal, non-dischargable debt in exchange for an education? How would the world be a better place if no one had access to this (generally very low-interest) source of funding for their education? I may be biased because I put myself through college on a combination of ROTC and loans, both of which were in different ways using my own time and labor (present and future) as a way of investing in my future. There was no other way I was going to be able to attend MIT, a dream I'd had since I was about 8 years old and saw a PBS special about the 2.70 design contest. Sure, some people take loans and don't spend the money wisely (fail to graduate, choose an expensive school for a very low paying career, max out their loans and gamble or fritter it away). Those are all personal choices and I don't have a problem with those people suffering the consequences in exchange for what I perceive to be the greater good: that a motivated kid from middle or lower income family (such as I was) is able to attend MIT, thrive there, and as a result go on to have a substantially more fulfilling life. Oh and by the way, as part of that life, you'll have to pay back that money that someone fronted you when you were penniless, unemployable outside a mall context, no credit history, no significant employment history, etc. Taking that opportunity away from all such kids, in exchange for having no one be able to make a poor choice specifically around student loans, is not a good trade, IMO.
    - timwiseman 17y ago
      Beautifully put, and I fully agree. There is a flip side though. There are people who made every effort and did everything right and still did not graduate because of things such as major family issues, accidents leading to disability, or simply failing out despite their efforts. They are then shackled to student loans without the benefit of the degree. Granted, these tend to be a very small minority but in discussing the system the edge cases should not be forgotten.
      - sokoloff 17y ago
        You make an excellent point there, and I have to admit that I don't have a good answer. Your username is apt, and I wish I could double up-vote you for reminding me of the outliers on the downside. The cold-hearted realist in me says "Well, some people are going to struggle and fail in life, ulimately dying in debt and this is just a different mechanism that manifests in that sliver of folks with stupendously bad luck." The compassionate human in me says "There ought to be a way to let people not have to suffer the rest of their life for stupendously bad luck when they were young." The realist then worries about how to make that almost as gaming-proof as the current system where you have to die or at least fake your own death and create a new identity (either of which would "game" any system). I would go so far as to donate to a charity setup to payoff the loans in those exceptional cases you describe (ideally at a negotiated discount, reflecting that those loans were unlikely to be paid anyway). Perhaps requiring that the person declare "normal" bankruptcy as well, and then that "qualifies" them to apply for a hearing of some sort before this new charity's board where they can state their case and answer questions. The forcing of "normal" bankruptcy as a qualifier is intended not to punish the individual but rather to ensure that it's not undertaken lightly and that the charity is hearing few frivolous cases. You ahve shaken my belief system enough (in a good way), that you may have literally given me a direction to focus my future charitable endeavors. Thank you...
    - pw0ncakes 17y ago
      People wouldn't have to take loans if tuitions weren't ridiculously high. The bulk of the talent is always going to come from the middle class, by nature of it's being 100 times the size of the upper class, and of the fact that, by and large, upper-class people aren't much smarter than the rest of us. If MIT wants to stay MIT, it'll find a way to get smart people in even if non-discharageable loans are abolished.
  - earl 17y ago
    Right. Because who should get an education but the rich?
- earl 17y ago
  Sadly... no. Do you know that student loans were dischargeable in bankruptcy until very recently? They were! See http://www2.ed.gov/offices/OSFAP/DCS/loan.cancellation.discharge.html http://www2.ed.gov/offices/OSFAP/DCS/loan.cancellation.disch... And there was no wave of bankruptcy before this law; the banks merely saw a chance to utterly screw a certain segment of the population. And really, why not change this so you can then market such loans to people who probably oughtn't get them and then ruin their lives for forever?
scottw 17y ago
Thank you; I noticed that but it must not have stuck. Fwiw, the national student loan default rate for 2007 was only 6.7% (http://www2.ed.gov/offices/OSFAP/DCS/default.html http://www2.ed.gov/offices/OSFAP/DCS/default.html and http://www2.ed.gov/offices/OSFAP/defaultmanagement/2007staterates.pdf http://www2.ed.gov/offices/OSFAP/defaultmanagement/2007state... for per-state rates). The low interest rates on Federal loans (hovering between 1.5% and 2.5% last I checked) make them far more attractive to the alternatives, especially since the vast majority of students pay off their loans. Scrapping Federal student loans entirely would only benefit the people who default.
- stjarnljuset 17y ago
  Where did you find 1.5% - 2.5%? My federal Stafford loan interest rates are at 5.6% (down from 6.8% when I first started college).