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

260 points by umedzacharia 10y ago

devoply 10y ago
I am sure more education can fix this problem as well. Just a few more degrees and we'll be able to afford interest on that debt, that the government will be paying because the students are broke.
andrewclunn 10y ago
Queue the political debate over whether this is a failure to provide secondary education to our citizens, or an artificial inflation in its cost by attempting to do so.
- taurath 10y ago
  Other countries don't have this problem. There is no debate to be had - the US can't control costs
  - GarrisonPrime 10y ago
    Agreed. That's the same core problem with the US health care system as well. Yet in both cases, education and health care, control of costs is pretty much not discussed at all. The only narrative we seem to hear is along the lines of "find more money to pay for it".
    - taurath 10y ago
      Everything is a business in the US - which means middlemen everywhere between services and the people consuming them. The fact that costs are hidden in both places to the end user is a huge problem, and the government solution is literally to throw more money into the system instead of controlling costs through evil regulation. You just can't have it both ways - either you subsidize and regulate cost or you remove the middlemen and make the entity compete on the basis of cost. The problem with both health care and education is that the goods aren't elastic - they're required in most cases. This, they don't even compete on cost basis but instead quality, which drives prices ever higher.
- caf 10y ago
  "Cue", like in the theatre.
  - andrewclunn 10y ago
    Yep. Whoops.
- umanwizard 10y ago
  Nitpick, you probably mean post-secondary education.
meddlepal 10y ago
Anyone have any idea what the 20 to 50 year implications are for this? I imagine this will crush the economy eventually if millennials cannot pay it off.
- shmerl 10y ago
  Education can switch to a system that won't require any loans.
  - umanwizard 10y ago
    Can it? What's your plan for implementing this?
    - shmerl 10y ago
      Same as other countries which do it. Example: https://en.wikipedia.org/wiki/Education_in_Finland https://en.wikipedia.org/wiki/Education_in_Finland
      - nice1 10y ago
        Also Germany, many others in fact.
    - overcast 10y ago
      Working to pay for school, like everyone did prior to the Feds getting involved with loaning out cheap money.
- dublinben 10y ago
  Regardless of how much debt there is, this isn't a bubble. These loans are nearly impossible to discharge. Recent graduates will be on the hook for this debt whether they want to be or not. The largest negative effect of all this debt will be the drag it puts on consumption. Young people are already delaying major purchases like cars and houses due to all their student debt.
paulddraper 10y ago
The Wall Street bailout was only...what, a trillion? If we bailed out real estate speculators, I wouldn't be surprised if something happened with college grads. Unfortunately. I hate assuming responsibly for monetary decisions other than mine, but judging the trend, that's where we're headed.
- knz 10y ago
  It'll never happen. They couldn't even agree to refinance Federal loans during the great recession - students were/are paying 6.8% when interest rates are at historic lows.
- melling 10y ago
  Wasn't most of that money repaid with interest? https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...
  - aikah 10y ago
    > Wasn't most of that money repaid with interest? But how much did it cost to borrow the bailout money at first place ? I'm pretty sure the US government didn't have trillions in cash at that time.
    - maxerickson 10y ago
      The cost was very low, treasury rates dipped below 1%. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2008 https://www.treasury.gov/resource-center/data-chart-center/i...
      - toomuchtodo 10y ago
        Because the Federal Reseve printed trillions of dollars out of thin air.
      - TuringNYC 10y ago
toomanybeersies 10y ago
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 those who go to university. It also means that there's a disincentive to go to university if you don't need to, which I think is a good thing, however everyone is able to go to university if they want to/need to, without worrying about how it's being paid for. Our student loans are also paid off proportional to our income, I think at a rate of around 8% (and no repayments required if you earn less than $19k per year). This means that you only pay what you can, it's essentially another tax, rather than in the USA where you get people struggling to make payments on their student loan. Obviously, we also have the advantage of cheaper tuition, although it is rising. It costs around NZ$7,000 (~US$5,000) per year to go to university, it's not cheap, but it's not cripplingly expensive.
- marklyon 10y ago
  Even just reducing the interest rate can have a significant impact. I cut my rate from just over 7% to 4.71% and slightly increased my payment, moving my final payment from July 2, 2038 to December 1, 2025 (ignoring any additional payments I make) [1]. Just doing that made attacking my massive loan balance much more manageable. I don't expect (or want, actually) for my education to be free. I knew I was racking up debt and knew it would have to be paid. Being able to refinance, though, was a huge help. [1] https://marklyon.org/2016/05/refinancing-student-loans/ https://marklyon.org/2016/05/refinancing-student-loans/
  - andromeduck 10y ago
    Jesus! Just how big is your student loan?! I mean I paid for all my living and education expenses with loans too but I'm not sure I would if it would take 20+ years to pay off
    - marklyon 10y ago
krisroadruck 10y ago
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 for it, rather than getting a loan, just like there are qualifications for other loans, like auto or mortgages which look at both the value of the asset vs its sale price, and your ability to pay. If some kid takes out $100K in debt to pay for a degree in finger painting how is that anyone but the borrowers (and possibly the bank who approved it) fault? TL;DR - When handing out student loans, we should consider aptitude (how likely is the person to graduate) & the career potential of the degree as qualifiers.
- cstejerean 10y ago
  Because it cannot be discharged in bankruptcy. So there is no incentive for the lender to make sure your degree will earn you enough money to pay it back.
- chime 10y ago
  > I'm curious why we treat student loan debt as being special. Because you can no longer declare bankruptcy to erase student debt. > 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 for it, rather than getting a loan, just like there are qualifications for other loans, like auto or mortgages which look at both the value of the asset vs its sale price, and your ability to pay. Now only the rich can send their kids to art school. > TL;DR - When handing out student loans, we should consider aptitude (how likely is the person to graduate) & the career potential of the degree as qualifiers. So people like my wife who didn't do that great in high school because of poor family environment would never be able to prove their true abilities in college. She was the valedictorian of her masters program. Without student loans, she'd be making 1/5th of her salary but you couldn't tell that a decade ago.
  - umanwizard 10y ago
hartator 10y ago
> Officially, the nation owes $1.26 trillion in student loan debt. The nation doesn't owe anything, I would rather said past students who still have loans owe this money.
- colordrops 10y ago
  It's a synecdoche.
  - hartator 10y ago
    I don't think it is, to allow blur between the society and the individuals is not something without consequences.
  - deleted 10y ago
    [deleted]
known 10y ago
In real world this debt cascades to rest of the world bloom.bg/1O04ymn
Keverw 10y ago
I think the solution is ending loans for college. I don't think an 18-year-old with no assets, or even a stable job or no job at all should be given that much money for college. No bank would give them a loan for a house. At least you can foreclose on a house and take it back. You can't take back someone's education. Plus every time the department of education gives out more money, colleges raise prices. Imagine how much a television would cost if the government said everyone must have a television. They're older people who tell me back in their day they could work at a restaurant and pay for college debt free. Get the government out of the student loan business and let the free market decide. If no money is being printed for students to go to colleges, fewer people will go to college and therefore the schools will be forced to compete for student's business. Therefore college will be much more affordable for the people who wish to go. I totally agree with our President-Elect about getting rid of the DoE, along with Common core. Let things be up to the states.
- youdounderstand 10y ago
  That just means your parents wealth will dictate your future even more.
  - Keverw 10y ago
    What does parent wealth have to do with it? I watched this documentary years ago. https://www.youtube.com/watch?v=kC_RYgkkmcM https://www.youtube.com/watch?v=kC_RYgkkmcM I totally agree with this film. Apparently back in the old days you could work a part time job, and pay for college at night debt free. If the gov keeps handing out loans, then what incentive do schools have to keep their prices low and compete with each other? Oh and then the presidents of some colleges are paid more than the president of the United States. I guess appointing 4,000 people, managing the military, a bunch of departments across the country, etc is easier than managing a bunch of kids by their logic. Oh and don't forget we gotta build a nice stadium so I can put my name on it too!
    - 75j 10y ago
      > Apparently back in the old days you could work a part time job Even if that was true, it's not the old days anymore. The college I went to is now at 50,000$+ a year with compulsory room and board. Try paying that off with a part-time job and still competing well with your rich peers. No matter what, it's an enormous advantage to not have to work while in college. I know I wouldn't have done as well if I was working simultaneously, since I was still stressed out as is.
rayiner 10y ago
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 person. It would be better to spend that money figuring out how to improve the plight of working class people for whom college isn't in the cards.
- formula1 10y ago
  I would argue that the problem isn't "if the poor are screwed, bad. If the rich are screwed, ok." I think the problem is eqch individual is pushed to go to college to find a good job which raises demand of college, which raises price. But those good jobs are barely out there for the graduates. And the college institutions didnt guide people down paths of success, instead gave enough freedom to find their own path to failure. Now, you have a lot of intelligent hardworking (college is not easy) people who are in debt with a very abysmal perspective on their future. Their debt makes them worse off than working poor because any low income job would simply put them in the black. And the gov has their habds tied because america is a great believer in the free market yet a huge group of hardworking young people are effectively worthless and the coming generations are likely to fall in the same trap.
  - tptacek 10y ago
    It's really hard to work through the framing you've created here, where it's supposed that going to college is a requirement to find a good job, the rich are "screwed" by college debt, and the poor are... what? Screwed from multiple directions simultaneously? Further: if college is a necessity for a good job, and that's why students are going to college, and they're leaving college with a mountain of debt and no means to pay it off, then college is not achieving the promise of securing better jobs, and the answer isn't to plow even more money into the system but instead to stop sending kids to expensive colleges that have no positive impact on their financial futures. It would be nice if college in the US was free. If one could wave a magic wand and reach that outcome, one certainly would. But since we don't have magic wands, we have to prioritize, and we're generally not keen to prioritize the financial well-being of the wealthy before that of the less well-off. In matters other than finance, sure, we don't discriminate that way; we don't, for instance, send the rich off to wars first (we do rather the opposite).
pirocks 10y ago
I wonder how much money could be saved if the US got rid of its general education based system.
- umanwizard 10y ago
  General education requirements in American universities serves the purpose of getting people up to the level of academic high school students in Europe or Asia. We could get rid of it, but we'd have to fix high schools first. This would likely require admitting that a focus on academic subjects isn't appropriate for everyone. In many European countries, a majority of students go to trade-oriented secondary schools and the minority that goes to academic schools leading to university have to study quite rigorous material in secondary school. That's why their university programs can focus specifically on individual specialties. For example, the French academic high school diploma (called Baccalauréat Général) is normally considered equivalent to at least a year in a US university.
  - pirocks 10y ago
    Agreed. I think that changing the high schools would be the best way to go about this, instead of finding ways of paying massive amounts to colleges.
    - brianwawok 10y ago
      Why not just make colleges cheaper? I would argue that kids in America have a much better life than say kids in Japan or South Korea, with all night cram schools. And in the end, the innovation in the world is coming out of America not Japan and South Korea, so at least to some extent it must be working.
      - ryuker16 10y ago
        A lot of innovation occurs in Asia. Also, South Korea has a similar college funding issue as the USA with rising tuition. However it's blunted in Asia because parents are expected to pay for it so the loans are more bearable. Pay and status tends to be seniority based so the burden doesn't fall on the recent grad living at home.
newman314 10y ago
I can't begin to express the disgust I have over ever-increasing tuition. From what I can tell, a lot of it goes towards pointless fancy buildings, costs for other activities other than learning and the ever present college textbook scam. There was an interesting episode on Planet Money why college textbooks cost a ton but not high or middle school.
- marcelluspye 10y ago
  Administrators suck up a huge amount of money these days as well. That's the real scam, considering they only seem to make my life harder. My institution has the added administerial tax of those offices inhabiting all the nicest buildings on the quad. Really drives home the totem pole of who's most important on campus.
charlieflowers 10y ago
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 generation before they even have a chance. It's so obviously a "sold my soul to the company store" situation that I can't believe everyone doesn't see through it right away.
- nicksergeant 10y ago
  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.
  - JumpCrisscross 10y ago
    > They see through it. They just know they have no other option. To add to this, administrators know if they don't hire extensively they are likely to be replaced by someone who will. There is no control mechanism. Giving students a small periodic vote in respect of their top administration would go a long way towards ameliorating such corruption. The "Dictator's Handbook" covers such topics https://www.amazon.com/Dictators-Handbook-Behavior-Almost-Politics/dp/1610391845 https://www.amazon.com/Dictators-Handbook-Behavior-Almost-Po...
  - aggie 10y ago
    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.
godelski 10y ago
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] https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/ [2] https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS
- rahimnathwani 10y ago
  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.
  - refurb 10y ago
    There is no stock of assets that are suddenly going to fall in market value. Sure there is, the loans themselves. Right now a bunch of lenders have $1.3T worth of loans. If those loans don't get paid off, they are $1.3T poorer.
    - rahimnathwani 10y ago
      What would cause those assets to suddenly fall in value?
      - refurb 10y ago
        A huge uptick in default rates. The only reason why student loan paper has value is because there is an expectation that it will be paid off.
koga-ninja 10y ago
Tuition is very expensive in the U.S.. People take loans because they are banking on the future. They think that Even with debt they will come out ahead. I'm new on this site, but I assume that most people on this site are computer programmers or are tech savvy enough to get a job that pays a decent wage. I'm Canadian, but you should also look at the bright side Of US education. There is no Canadian Caltech. If you step out and start a business in America, it is Considered entrepreneurial and a good thing.
carsongross 10y ago
Debt expansion is no way to run a money supply.
skwosh 10y ago
There seems to be a strong sentiment in this thread that the only value provided by education is the contribution to career (e.g. that loans should only be provided for financially viable courses, that studying arts is as useful to one's career as studying finger painting, etc). This just seems so wrong. Optimising for vocational training means you're effectively tuning out the abstract arts and sciences and... oh, the humanities. These fields don't usually/directly translate into a financial success, but they broaden our perspective and deepen our experience. And in doing so provide the tools and language to more effectively analyse and engage with human culture. And to a certain extent, "true" art is antithetical to capitalism, in a similar way that "true" journalism is antithetical to surveillance (honesty/transparency vs main-stream popularity), and I'd argue equally as important. For that reason these fields absolutely should be subsidised, otherwise art becomes about marketing, journalism becomes about propaganda, and science becomes about start-ups...
- acchow 10y ago
  You really don't need to pay tuition to gain a rich education in art and humanities and sciences if you want one. There are resources aplenty - buy a book! I'd even go so far as to say the majority of college grads learned almost nothing during college, and the few who did would, after a few years of maturity, pick up a book of their own free will and enrich themselves. I think the costs of university (huge amounts of debt and enormous human and physical resources put into holding lectures in giant buildings that need to be maintained and heated, the social divide created between those who got to hang out among the privileged for 4 years and those who couldn't) generally outweighs the hypothetical benefits you mention that some people might gain during college. Except perhaps for a few fields (like medicine, or dramatical arts, or music) where you can't just pick up a textbook and learn it all.
  - skwosh 10y ago
    You could say that about anything though, and I'm sure many in engineering do (about everything from design patterns to category theory...). The value added by quality in-person tuition shouldn't be underrated though, not to mention access to equipment, studios, and like minds... Working and communicating in person is a hugely effective catalyst for productivity, creative evolution, etc. Artistic and scientific development is often accelerated by human interaction, which is why art movements and scientific advancements tend to cluster around communities (vs individuals).
tedunangst 10y ago
Does nobody care that the person holding a debt is the one that gets paid?
jonah 10y ago
“He who works with his hands is a laborer. He who works with his hands and his head is a craftsman. He who works with his hands and his head and his heart is an artist.” — American trial lawyer, Louis Nizer [1] [1] https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a-craftsman-or-an-artist/ https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a...
hackathonguy 10y ago
The system here in Israel is roughly as follows: The gov sponsors universities almost to 100%. The means going to university is almost free for me as a student - about $2500 per year. I can acquire a law degree and become a lawyer for less than $8000. The government is involved in the way the public universities are run so as to keep the subsidies manageable. Total government funding for university education in Israel is about $1.5B [1]. Since universities have high admission standards, many colleges have sprouted to service those who can't or don't want to go to one of the public universities. However, since university prices are so low, even private colleges are forced to operate with tuition fees of roughly $5000 per year, which means they are also very manageable for students. Even so, the quality of education in Israel is amongst of the highest in the world, especially when considering its tiny population. Hebrew University, Israel's best institution, has been ranked 26th in the world [2]. This system has attracted a lot of snark here in Israel, but from what I gather it's actually pretty effective. Israel is the 2nd most educated country in the world, with 46% of its population possessing a university degree [3]. :-) Sorry for the Hebrew sources! [1] Hebrew: https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.A1.D7.9C.D7.95.D7.9C.D7.99.D7.9D_.D7.9E.D7.99.D7.95.D7.97.D7.93.D7.99.D7.9D https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.... [2] Hebrew: http://www.calcalist.co.il/world/articles/0,7340,L-3693018,00.html http://www.calcalist.co.il/world/articles/0,7340,L-3693018,0... [3] Hebrew: http://mako.co.il/special-mako-news/Article-6489f432bb2f931006.htm http://mako.co.il/special-mako-news/Article-6489f432bb2f9310...
- logfromblammo 10y ago
  Every Jew I have ever known in the US, to the last individual, has always placed a high value on education. It would seem to be a cultural value--or at least it is among Ashkenazis. So it does not surprise me that Israel has a decent, functional higher education system. US culture, as a whole, does not value education for its own sake. We value education only as a business. And much of that business is to suck money from the pockets of those who do value education as intrinsically beneficial, and blow it along to those who provide the illusion of education at the lowest operating cost. If a greater proportion of the population valued real learning, the focus would be on making high school graduates more relevant and useful in the modern workforce, rather than using bachelor's degrees as an arbitrary qualification for jobs that clearly do not require them. If >25% of kids think they need to go to university to get a "good" job--or even to just not be considered a low-status, ignorant loser--it is not the university system that has failed, but the 12-13 years of public education that usually precedes it.
JohnGB 10y ago
So total student loan debt is something like 10% of the cost of the Iraq / Afghanistan war. Tell me again how it's not affordable to make college free, when it's affordable to spend so much money on an unnecessary military intervention?
- cmdrfred 10y ago
  I wasent privileged enough to go to college. Why isn't paying off my mortgage affordable instead?
teekert 10y ago
If you'd choose a more social system where the students costs are paid directly from taxes, taxes are higher, yes but you omit banks. The only thing banks do is collect interest because the people have decided, or have been told, that they can't collectively invest in the education of the next generation. And so their kids pay interest, to banks who do nothing but print the money and write down "you have dept" in return.
kriro 10y ago
Has there been extensive research or trials of corporate sponsorship (or are there any startups exploring this idea)? There are probably some principal/agent issues but by and large why can't Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports?). In some fields, big corporations already compete for talent, why not start the competition a level earlier (internships could be integrated as well). I can think of a lot of problems and reasons why this won't work...which makes it interesting :) Apart from "won't work for not highly competitive degrees" and "figuring out who to sponsor is as hard or harder than just hiring" and "how do you grantee the people actually stay with the company and are motivated" there's probably a lot more. I think the principle of reciprocality can make it work in principle though.
- ryuker16 10y ago
  General Assembly is a boot camp that does this. ROTC does this for the military. >Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports? They would probably try to get fired so they can get hired elsewhere for more money leaving Google holding the bag or be lazy as fucks. Non compete agreements are difficult to enforce....you cant create a wage slave and expect it to be enforced by the courts.
  - kriro 10y ago
    Weather or not the pro sports model is a good thing to aspire to...I'll leave that up to debate but that's a reference point where this model works. It could be adopted with slight modifications. The apprenticeship model also works decently well...at least I'm not consciously aware of many carpenters, bakers etc. job hopping once their education is complete. But like I said the more optimistic view is that employees might actually like your company and that the principle of reciprocality works in this setting. There's going to be a subset of people who are going to be pretty happy that you cared about them and financed their education (and there should certainly be strong mentoring on the side not just "here's your money, call us when you graduate"). If someone just hops away...well that's expensive but might be less expensive than having such a person at your company. Fail early etc. And I mean noone is forcing you to sign such a deal. If you want to argue evil employers and "wage slaves" (a term I personally think is fairly ridiculous, especially if applied in the context of IT jobs, but Chomsky gonna Chomsky) and say that starting your life with huge college debt isn't exactly going to set the workforce free either. You're pretty exploitable if you need to get rid of crippling debt.
dvfjsdhgfv 10y ago
"While an educated populous is a good thing, the number of those not making payments on their student loan debt as soared." - what language is that? Sounds like written by an undereducated populous...
partycoder 10y ago
Education makes extensive use of debt factoring for risky loans. Factoring is selling client debt at a discount for instant cash. The financial institutions that buy the debt are usually responsible for collecting unless they decide to pass it around again. So in a sense, universities are sort covered against losses from that kind of debt, not students.
throw2016 10y ago
A healthy and future ready society needs an educated and literate population. From that it becomes a social goal and a social good with multi generational run off effects that can't be measured in pure short term economics. That one of the richest countries in the world should shy away from this responsibility is a bit galling, more so because it seems to be purely so that bankers can make some money. You can't have a country purely of corporations and workers and the US has been moving in this dubious and dystopic direction for decades now. You need to build a society or everyone loses, eventually.
ainiriand 10y ago
There is something really flawed in a system that puts progress under bank's interests. The advancement of the whole society is beneficial for us all, so I dont see why it should not be subsidiced.
conanbatt 10y ago
Speaking from a purely market-driven position, the Student Loan Debt market has one issue that prevents colleges from not raising tuition prices: its the incapacity to default on loans. Its obvious a huge part of the loans are used for careers that will never make its money back, and the loans only collateral are the person itself(not his parents assets). So if someone had an arts degree that cost him 150k, and never made that money, he should be able to default on that loan. As he does that, colleges have a strong incentive to keep tuition matched with the income produced by that degree. My understanding is that college loans have a special protection by the government that makes them undefaultable. Dont subsidy college loans! Dont take more money from all(including under represented poor people) to put it in the pockets of colleges. Just make the loans defaultable, and you will see such a massive movement of defaults that colleges will never put unpayable debt ever again.
- andorov 10y ago
  What if the schools were required to underwrite the loans on behalf of each student? Incentives would be more in line.
  - conanbatt 10y ago
    Im not a policy expert, but I advocate for making things simpler. The capacity to default already exists and will always exist. Devise a new specific mechanism to offset another specific mechanism is like a patch to solve a patch on a bug.
- trgn 10y ago
  Is the $150k fine arts degree really that common? These are the anecdotes we see in the news, because they stoke populist outrage and generate rage clicks. But I think they barely register in the overall stats. My completely unfounded opinion based on personal experience is that most humanities or fine arts students come from families that actually more or less can afford it anyway.
  - Mathnerd314 10y ago
GFischer 10y ago
Free (1) tuition is an interesting option, but it's not the end all answer. We have basic tuition in Uruguay, and, while people don't leave university with crippling debt, we still have the problem of people spending 4 or 5 years of their lives and leaving with a worthless degree (as in, they cannot get a job in what they studied). And they do end up in debt because they have to pay for food and housing while they study. I feel very sad whenever I see a working class family breaking their backs to send their child to become an architect or a psychologist, because I know they won't be able to get a decent job (there's one architect per 400 citizens, and one in twelve in the workforce is a psychologist, they usually end up earning less than a store clerk if they don't set up a succesful practice). Another problem is the strain on infrastructure, in the Engineering faculty they only have capacity to train about 300 to 400 students but over 2000 enter each year. The solution is to have extremely hard and cruel first year courses so at least half drop out in the first year and another half in the second year (I dropped out in second year and enrolled in a private university). Another country with free university is Venezuela, and a problem I've noticed is that the quality of education is very uneven, there are graduates with titles that aren't worth the paper they're printed on. This doesn't happen in Uruguay that much because they force them to drop out (not a great solution either). (1) here in Uruguay it's not entirely free, it's deferred - graduates from the public university have to pay about half a normal salary each year from 5 years after they graduate until they retire, so it often ends up more expensive than a private university.
OliverJones 10y ago
The article is made suspect, in my view, by promoting this Credit Sesame thing. There's a service called http://annualcreditreport.com/ http://annualcreditreport.com/ that provides access to credit reports from the three major agencies without trying to sell anything, or using any black-hat user experience design to trick people into signing up for services.
OliverJones 10y ago
The consumer finance "reform" act of 2005 made it very difficult to discharge student debt in bankruptcy. It's time to undo that reform. It had a disastrous unintended consequence, by completely shifting the risk of an uncollectable loan away from the lender and onto the borrower. How so? When a lender carries risk, they underwrite those loans. That means they study them before making them. They pay attention to all kinds of things, including the borrower's ability to pay and the value of the thing being bought with the borrowed money. Underwriters are (usually) knowledgeable about the field they work in. They understand the value of both vocational and liberal education. Some of them even understand the value of giving under-served people a chance. So, when a school gets calls from underwriters saying "we're having a hard time justifying loans of US$100K to your students taking bachelor's degrees" the school takes notice. They restrain growth in tuition and fees. Maybe they even offer discounts, also known as "scholarships." Those calls, coming from skilled underwriters, are far more effective than student demonstrations against tuition increases. The 2005 reform made it possible for the lenders to be much lazier. Their underwriting is much more sloppy. The reform freed up a lot of tuition money that the educational institutions were happy to soak up. And their students are stuck with the bill for a lifetime. I'm aware of the libertarian view which emphasizes individual responsibility, and I have a lot of sympathy for it. I have a young friend who looked at the cost of her first-choice college (Syracuse, it was) a few years back, and wrote them a letter saying "sorry, you're too expensive. I regret that I must decline your offer of admission." That too puts downward pressure on educational costs. But she's rare: she has great presence of mind and forward-thinking parents. Plus, she listened to me. -:) Most high-school seniors get caught up in the mostly fake competitive admissions system. They aren't in a position to behave like hard-nosed underwriters. So, let's put some of the loan risk back on the lenders, and bring back the underwriters. This situation is analogous to the mortgage crisis, which shifted the risk of bad loans away from the mortgage originators. In that case the risk got shifted onto anonymous buyers of securitized mortgages, and onto AIG. In the case of educational loans the risk gets shifted onto the poor schlemiel who wants to be a schoolteacher.
nice1 10y ago
We are dealing with a modern form of slavery here.
mark_l_watson 10y ago
Is this news? The global elites harvest young people for profit just as they do older people with subprime mortgages, etc. Sorry for sounding cynical, but that is just the way I think the world works.
- Jtsummers 10y ago
  While not news, figures like this: In the past 12 years, we have added a trillion dollars to that amount and gained about 4% in the overall college graduation rate. are important to publish sometimes. I don't think many people realize the scope of modern student debt, which has obvious (?) negative implications for the national economy.
  - mark_l_watson 10y ago
    I agree, more people need to be aware of the magnitude of the problem.
bogomipz 10y ago
This is a quick read in case anyone is unfamiliar with student debt "onwership": http://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp http://www.investopedia.com/articles/personal-finance/081216...
overcast 10y ago
Welcome to cheap guaranteed federally backed money. Private institutions will continue to jack up education prices, because they know kids will be able to get loans from the government to pay for them. It's too late for me, and millions of others paying back enormous loans, but I dream of the day school becomes affordable. There was a time, you could work you way through college washing dishes. Schools existed WAAAAAY before federal assistance.
knightofmars 10y ago
This is an advertisement for "Credit Sesame".
Taylor_OD 10y ago
I was lucky to get out without any debt due to athletic and other scholarships. However the last two-three girls I've dated had 15K-25K in student loans. They all said, "At least I dont have K like my friend..." I cant believe do much is being lended to college students.
jazzyk 10y ago
This is another example of the law of unintended consequences. While the idea of helping people become more educated is obviously beneficial to both individuals and the society as a whole, government loans - which are supposed to "help" - are a huge factor fueling ever-raising costs. The loans, in effect, subsidize the higher-education complex, rather than students. Many of us have been brainwashed to think that higher education has to cost a lot of money. But it need not: all that great education requires are wise, passionate teachers and a bit of infrastructure: a whiteboard, a few books, and a laptop computer (with a couple of outliers). We don't need football/hockey teams with coaches paid $3-4M/year. We don't need armies of "Deans of Diversity & Inclusion" (and other phony administrative positions), who make $400K/year, we don't need manicured lawns and Olympics-quality sports facilities (these salaries are from the Univ of California - a state school!) If a good private university cost < $20K/year and a state university < $10K, we would not have endless discussions wrt who should pay, who should study what, etc.
- drzaiusapelord 10y ago
  Except its a program that can be managed correctly. The problem was that there were no incentives to do so. My understanding is that loans initially were smaller and helped with the cost of tuition at a time where tuition was more affordable, but still out of reach for many working class families. Now they can pay for all of tuition and the cost of tuition is just pegged to the max loan offer from the government. No one put in sane cost controls. No one told the universities that federal money wouldn't just increase to their whims. No one told students what its really like in real life to payback a 50k or 100k or even 150+k loan for a 4 year degree. What that means as an opportunity cost compared to cheaper schooling. My relatively modest loan is like making car payments on a decent car everything month... for 20 years. So 4 lower-end Lexus's if you consider interest. Or less to put in retirement. I have no idea how people with large loans get by. I imagine the recent Obama rules regarding loan repayment as percentage of salary helps with an 20 year payment forgiveness plan. Not sure if the new business friendly administration is going to keep that in place.
- lordCarbonFiber 10y ago
  I see this sentiment a lot, and I feel like you fundamentally misunderstand what is actually happening at universities. Discounting athletics, which in some places are revenue neutral and can be counted as marketing/local cultural artifact depending on who you talk to, the "wise passionate teachers" you praise so aren't there to teach idiot undergrads. Instead, they're hired to do research with the teaching as essentially a subset of that in most cases. Pure research, especially in a political climate that's increasingly anti-intellectual and anti science, is expensive and that cost gets offloaded to incoming students since the hard requirement for a college degree for many professional jobs creates inelastic demand. The "phony administrative positions", lawns, and student facilties you dismiss as pork are the school's way of competing for the piles of grant money replacement known as undergrads. Then further more, prices are already in the ball park of your supposed ideal. An instate student can go to a school like Georgia Tech (ranked 5 or so in engineering nationally depending on the year) for 12k before scholarships, essentially free if they don't piss away their grades. Private top tier schools cost more, but tend to offer more scholarships and grants so that's harder to compare between institutions. It's not that schools are expensive, it's that students are choosing to not go to the inexpensive schools, usually to get out of their state, or to be in an institution that specializes in their major, or go someplace with better student institutions. US research is what makes our schools the top in the world, and the actual education gained from an undergrad degree isn't the drive for most people. It's the networking, the exposure, and the certification, none of which can be duplicated in a dinky classroom with a whiteboard and an underpaid teacher. Just look at American High Schools if you want to see how that turns out.
scott_c 10y ago
The government-enforced student loan system is the problem. Universities know they can charge whatever they want for tuition, they will get their money up-front, and the students will be on the hook for it for life (and it can't be declared in a Bankruptcy). We need to revamp the system so universities can't charge us these ridiculous rates.
formula1 10y ago
Im glad I got someone with the shock value. Its clear you have a very unique perspective that I appreciate you sharing. Female in lower income bracket - I believe this. I think this is a rather heartbreaking reality so I am a ok not going into this. What I do know is that Ive met a few peoples whos moms work 16 hour days as much as possible. - chronically ill - the college educated are competing with the chronically ill for jobs - mentally ill - the college educated are competing with the mentally ill for jobs. - unable to afford - so they are working but cannot find housing. I believe it. I dont think 'bail out' is the solution. Its 'salvage and prevention'. Ensuring that future generations dont fall into the trap and if they do it is an educated risk. And salvaging multiple generations lives who were chasing after the american dream. Im all for helping those that cant help themselves. But Im also interested in getting those 60% there to 100%. If the "prividged" are having are hard time post graduation. The under privlidged have it even worse. We are talking about the future of basically educated children not just "foolish rich kids"
- Mz 10y ago
  Im all for helping those that cant help themselves. Yeah, no. This is incredibly insulting. I am not incapable of helping myself. I am working damn hard every single day to resolve my problems in the face of a hugely uphill battle that is compounded by sexism, housing designed solely for the rich and a whole bunch of other entrenched barriers to ordinary people making their lives work. You may be able to pretend that the homeless (and other poor people) are a bunch of utter and complete losers who can't help themselves, but your reply means you either didn't really listen or didn't really understand. As these problems deepen, larger numbers of people are being pushed out into the streets. Perhaps if homelessness hits 50%, the world will stop talking like it is merely a bunch of fringe losers who need our compassion and charity and realize that, no, actually, the system is deeply broken and actively screwing over a very high percentage of people and chewing them up and spitting them out. Or perhaps all the rich assholes will continue to be all LA LA LA NOT LISTENING, you must just be defective as it cannot possibly be the shitty company/policies I created that is somehow at fault.
  - formula1 10y ago
Vera527 10y ago
Congrats to all the students and recent grads out there.

260 points by umedzacharia 10y ago

I am sure more education can fix this problem as well. Just a few more degrees and we'll be able to afford interest on that debt, that the government will be paying because the students are broke.

andrewclunn 10y ago

Queue the political debate over whether this is a failure to provide secondary education to our citizens, or an artificial inflation in its cost by attempting to do so.

taurath 10y ago
Other countries don't have this problem. There is no debate to be had - the US can't control costs
- GarrisonPrime 10y ago
  Agreed. That's the same core problem with the US health care system as well. Yet in both cases, education and health care, control of costs is pretty much not discussed at all. The only narrative we seem to hear is along the lines of "find more money to pay for it".
  - taurath 10y ago
    Everything is a business in the US - which means middlemen everywhere between services and the people consuming them. The fact that costs are hidden in both places to the end user is a huge problem, and the government solution is literally to throw more money into the system instead of controlling costs through evil regulation. You just can't have it both ways - either you subsidize and regulate cost or you remove the middlemen and make the entity compete on the basis of cost. The problem with both health care and education is that the goods aren't elastic - they're required in most cases. This, they don't even compete on cost basis but instead quality, which drives prices ever higher.
caf 10y ago
"Cue", like in the theatre.
- andrewclunn 10y ago
  Yep. Whoops.
umanwizard 10y ago
Nitpick, you probably mean post-secondary education.

meddlepal 10y ago

Anyone have any idea what the 20 to 50 year implications are for this? I imagine this will crush the economy eventually if millennials cannot pay it off.

shmerl 10y ago
Education can switch to a system that won't require any loans.
- umanwizard 10y ago
  Can it? What's your plan for implementing this?
  - shmerl 10y ago
    Same as other countries which do it. Example: https://en.wikipedia.org/wiki/Education_in_Finland https://en.wikipedia.org/wiki/Education_in_Finland
    - nice1 10y ago
      Also Germany, many others in fact.
  - overcast 10y ago
    Working to pay for school, like everyone did prior to the Feds getting involved with loaning out cheap money.
dublinben 10y ago
Regardless of how much debt there is, this isn't a bubble. These loans are nearly impossible to discharge. Recent graduates will be on the hook for this debt whether they want to be or not. The largest negative effect of all this debt will be the drag it puts on consumption. Young people are already delaying major purchases like cars and houses due to all their student debt.

paulddraper 10y ago

The Wall Street bailout was only...what, a trillion? If we bailed out real estate speculators, I wouldn't be surprised if something happened with college grads. Unfortunately. I hate assuming responsibly for monetary decisions other than mine, but judging the trend, that's where we're headed.

knz 10y ago
It'll never happen. They couldn't even agree to refinance Federal loans during the great recession - students were/are paying 6.8% when interest rates are at historic lows.
melling 10y ago
Wasn't most of that money repaid with interest? https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.m.wikipedia.org/wiki/Troubled_Asset_Relief_Progra...
- aikah 10y ago
  > Wasn't most of that money repaid with interest? But how much did it cost to borrow the bailout money at first place ? I'm pretty sure the US government didn't have trillions in cash at that time.
  - maxerickson 10y ago
    The cost was very low, treasury rates dipped below 1%. https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2008 https://www.treasury.gov/resource-center/data-chart-center/i...
    - toomuchtodo 10y ago
      Because the Federal Reseve printed trillions of dollars out of thin air.
    - TuringNYC 10y ago

toomanybeersies 10y ago

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 those who go to university. It also means that there's a disincentive to go to university if you don't need to, which I think is a good thing, however everyone is able to go to university if they want to/need to, without worrying about how it's being paid for. Our student loans are also paid off proportional to our income, I think at a rate of around 8% (and no repayments required if you earn less than $19k per year). This means that you only pay what you can, it's essentially another tax, rather than in the USA where you get people struggling to make payments on their student loan. Obviously, we also have the advantage of cheaper tuition, although it is rising. It costs around NZ$7,000 (~US$5,000) per year to go to university, it's not cheap, but it's not cripplingly expensive.

marklyon 10y ago
Even just reducing the interest rate can have a significant impact. I cut my rate from just over 7% to 4.71% and slightly increased my payment, moving my final payment from July 2, 2038 to December 1, 2025 (ignoring any additional payments I make) [1]. Just doing that made attacking my massive loan balance much more manageable. I don't expect (or want, actually) for my education to be free. I knew I was racking up debt and knew it would have to be paid. Being able to refinance, though, was a huge help. [1] https://marklyon.org/2016/05/refinancing-student-loans/ https://marklyon.org/2016/05/refinancing-student-loans/
- andromeduck 10y ago
  Jesus! Just how big is your student loan?! I mean I paid for all my living and education expenses with loans too but I'm not sure I would if it would take 20+ years to pay off
  - marklyon 10y ago

krisroadruck 10y ago

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 for it, rather than getting a loan, just like there are qualifications for other loans, like auto or mortgages which look at both the value of the asset vs its sale price, and your ability to pay. If some kid takes out $100K in debt to pay for a degree in finger painting how is that anyone but the borrowers (and possibly the bank who approved it) fault? TL;DR - When handing out student loans, we should consider aptitude (how likely is the person to graduate) & the career potential of the degree as qualifiers.

cstejerean 10y ago
Because it cannot be discharged in bankruptcy. So there is no incentive for the lender to make sure your degree will earn you enough money to pay it back.
chime 10y ago
> I'm curious why we treat student loan debt as being special. Because you can no longer declare bankruptcy to erase student debt. > 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 for it, rather than getting a loan, just like there are qualifications for other loans, like auto or mortgages which look at both the value of the asset vs its sale price, and your ability to pay. Now only the rich can send their kids to art school. > TL;DR - When handing out student loans, we should consider aptitude (how likely is the person to graduate) & the career potential of the degree as qualifiers. So people like my wife who didn't do that great in high school because of poor family environment would never be able to prove their true abilities in college. She was the valedictorian of her masters program. Without student loans, she'd be making 1/5th of her salary but you couldn't tell that a decade ago.
- umanwizard 10y ago

hartator 10y ago

> Officially, the nation owes $1.26 trillion in student loan debt. The nation doesn't owe anything, I would rather said past students who still have loans owe this money.

colordrops 10y ago
It's a synecdoche.
- hartator 10y ago
  I don't think it is, to allow blur between the society and the individuals is not something without consequences.
- deleted 10y ago
  [deleted]

known 10y ago

In real world this debt cascades to rest of the world bloom.bg/1O04ymn

Keverw 10y ago

I think the solution is ending loans for college. I don't think an 18-year-old with no assets, or even a stable job or no job at all should be given that much money for college. No bank would give them a loan for a house. At least you can foreclose on a house and take it back. You can't take back someone's education. Plus every time the department of education gives out more money, colleges raise prices. Imagine how much a television would cost if the government said everyone must have a television. They're older people who tell me back in their day they could work at a restaurant and pay for college debt free. Get the government out of the student loan business and let the free market decide. If no money is being printed for students to go to colleges, fewer people will go to college and therefore the schools will be forced to compete for student's business. Therefore college will be much more affordable for the people who wish to go. I totally agree with our President-Elect about getting rid of the DoE, along with Common core. Let things be up to the states.

youdounderstand 10y ago
That just means your parents wealth will dictate your future even more.
- Keverw 10y ago
  What does parent wealth have to do with it? I watched this documentary years ago. https://www.youtube.com/watch?v=kC_RYgkkmcM https://www.youtube.com/watch?v=kC_RYgkkmcM I totally agree with this film. Apparently back in the old days you could work a part time job, and pay for college at night debt free. If the gov keeps handing out loans, then what incentive do schools have to keep their prices low and compete with each other? Oh and then the presidents of some colleges are paid more than the president of the United States. I guess appointing 4,000 people, managing the military, a bunch of departments across the country, etc is easier than managing a bunch of kids by their logic. Oh and don't forget we gotta build a nice stadium so I can put my name on it too!
  - 75j 10y ago
    > Apparently back in the old days you could work a part time job Even if that was true, it's not the old days anymore. The college I went to is now at 50,000$+ a year with compulsory room and board. Try paying that off with a part-time job and still competing well with your rich peers. No matter what, it's an enormous advantage to not have to work while in college. I know I wouldn't have done as well if I was working simultaneously, since I was still stressed out as is.

rayiner 10y ago

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 person. It would be better to spend that money figuring out how to improve the plight of working class people for whom college isn't in the cards.

formula1 10y ago
I would argue that the problem isn't "if the poor are screwed, bad. If the rich are screwed, ok." I think the problem is eqch individual is pushed to go to college to find a good job which raises demand of college, which raises price. But those good jobs are barely out there for the graduates. And the college institutions didnt guide people down paths of success, instead gave enough freedom to find their own path to failure. Now, you have a lot of intelligent hardworking (college is not easy) people who are in debt with a very abysmal perspective on their future. Their debt makes them worse off than working poor because any low income job would simply put them in the black. And the gov has their habds tied because america is a great believer in the free market yet a huge group of hardworking young people are effectively worthless and the coming generations are likely to fall in the same trap.
- tptacek 10y ago
  It's really hard to work through the framing you've created here, where it's supposed that going to college is a requirement to find a good job, the rich are "screwed" by college debt, and the poor are... what? Screwed from multiple directions simultaneously? Further: if college is a necessity for a good job, and that's why students are going to college, and they're leaving college with a mountain of debt and no means to pay it off, then college is not achieving the promise of securing better jobs, and the answer isn't to plow even more money into the system but instead to stop sending kids to expensive colleges that have no positive impact on their financial futures. It would be nice if college in the US was free. If one could wave a magic wand and reach that outcome, one certainly would. But since we don't have magic wands, we have to prioritize, and we're generally not keen to prioritize the financial well-being of the wealthy before that of the less well-off. In matters other than finance, sure, we don't discriminate that way; we don't, for instance, send the rich off to wars first (we do rather the opposite).

pirocks 10y ago

I wonder how much money could be saved if the US got rid of its general education based system.

umanwizard 10y ago
General education requirements in American universities serves the purpose of getting people up to the level of academic high school students in Europe or Asia. We could get rid of it, but we'd have to fix high schools first. This would likely require admitting that a focus on academic subjects isn't appropriate for everyone. In many European countries, a majority of students go to trade-oriented secondary schools and the minority that goes to academic schools leading to university have to study quite rigorous material in secondary school. That's why their university programs can focus specifically on individual specialties. For example, the French academic high school diploma (called Baccalauréat Général) is normally considered equivalent to at least a year in a US university.
- pirocks 10y ago
  Agreed. I think that changing the high schools would be the best way to go about this, instead of finding ways of paying massive amounts to colleges.
  - brianwawok 10y ago
    Why not just make colleges cheaper? I would argue that kids in America have a much better life than say kids in Japan or South Korea, with all night cram schools. And in the end, the innovation in the world is coming out of America not Japan and South Korea, so at least to some extent it must be working.
    - ryuker16 10y ago
      A lot of innovation occurs in Asia. Also, South Korea has a similar college funding issue as the USA with rising tuition. However it's blunted in Asia because parents are expected to pay for it so the loans are more bearable. Pay and status tends to be seniority based so the burden doesn't fall on the recent grad living at home.

newman314 10y ago

I can't begin to express the disgust I have over ever-increasing tuition. From what I can tell, a lot of it goes towards pointless fancy buildings, costs for other activities other than learning and the ever present college textbook scam. There was an interesting episode on Planet Money why college textbooks cost a ton but not high or middle school.

marcelluspye 10y ago
Administrators suck up a huge amount of money these days as well. That's the real scam, considering they only seem to make my life harder. My institution has the added administerial tax of those offices inhabiting all the nicest buildings on the quad. Really drives home the totem pole of who's most important on campus.

charlieflowers 10y ago

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 generation before they even have a chance. It's so obviously a "sold my soul to the company store" situation that I can't believe everyone doesn't see through it right away.

nicksergeant 10y ago
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.
- JumpCrisscross 10y ago
  > They see through it. They just know they have no other option. To add to this, administrators know if they don't hire extensively they are likely to be replaced by someone who will. There is no control mechanism. Giving students a small periodic vote in respect of their top administration would go a long way towards ameliorating such corruption. The "Dictator's Handbook" covers such topics https://www.amazon.com/Dictators-Handbook-Behavior-Almost-Politics/dp/1610391845 https://www.amazon.com/Dictators-Handbook-Behavior-Almost-Po...
- aggie 10y ago
  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.

godelski 10y ago

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] https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/ [2] https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS

rahimnathwani 10y ago
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.
- refurb 10y ago
  There is no stock of assets that are suddenly going to fall in market value. Sure there is, the loans themselves. Right now a bunch of lenders have $1.3T worth of loans. If those loans don't get paid off, they are $1.3T poorer.
  - rahimnathwani 10y ago
    What would cause those assets to suddenly fall in value?
    - refurb 10y ago
      A huge uptick in default rates. The only reason why student loan paper has value is because there is an expectation that it will be paid off.

koga-ninja 10y ago

Tuition is very expensive in the U.S.. People take loans because they are banking on the future. They think that Even with debt they will come out ahead. I'm new on this site, but I assume that most people on this site are computer programmers or are tech savvy enough to get a job that pays a decent wage. I'm Canadian, but you should also look at the bright side Of US education. There is no Canadian Caltech. If you step out and start a business in America, it is Considered entrepreneurial and a good thing.

carsongross 10y ago

Debt expansion is no way to run a money supply.

skwosh 10y ago

There seems to be a strong sentiment in this thread that the only value provided by education is the contribution to career (e.g. that loans should only be provided for financially viable courses, that studying arts is as useful to one's career as studying finger painting, etc). This just seems so wrong. Optimising for vocational training means you're effectively tuning out the abstract arts and sciences and... oh, the humanities. These fields don't usually/directly translate into a financial success, but they broaden our perspective and deepen our experience. And in doing so provide the tools and language to more effectively analyse and engage with human culture. And to a certain extent, "true" art is antithetical to capitalism, in a similar way that "true" journalism is antithetical to surveillance (honesty/transparency vs main-stream popularity), and I'd argue equally as important. For that reason these fields absolutely should be subsidised, otherwise art becomes about marketing, journalism becomes about propaganda, and science becomes about start-ups...

acchow 10y ago
You really don't need to pay tuition to gain a rich education in art and humanities and sciences if you want one. There are resources aplenty - buy a book! I'd even go so far as to say the majority of college grads learned almost nothing during college, and the few who did would, after a few years of maturity, pick up a book of their own free will and enrich themselves. I think the costs of university (huge amounts of debt and enormous human and physical resources put into holding lectures in giant buildings that need to be maintained and heated, the social divide created between those who got to hang out among the privileged for 4 years and those who couldn't) generally outweighs the hypothetical benefits you mention that some people might gain during college. Except perhaps for a few fields (like medicine, or dramatical arts, or music) where you can't just pick up a textbook and learn it all.
- skwosh 10y ago
  You could say that about anything though, and I'm sure many in engineering do (about everything from design patterns to category theory...). The value added by quality in-person tuition shouldn't be underrated though, not to mention access to equipment, studios, and like minds... Working and communicating in person is a hugely effective catalyst for productivity, creative evolution, etc. Artistic and scientific development is often accelerated by human interaction, which is why art movements and scientific advancements tend to cluster around communities (vs individuals).

tedunangst 10y ago

Does nobody care that the person holding a debt is the one that gets paid?

jonah 10y ago

“He who works with his hands is a laborer. He who works with his hands and his head is a craftsman. He who works with his hands and his head and his heart is an artist.” — American trial lawyer, Louis Nizer [1] [1] https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a-craftsman-or-an-artist/ https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a...

hackathonguy 10y ago

The system here in Israel is roughly as follows: The gov sponsors universities almost to 100%. The means going to university is almost free for me as a student - about $2500 per year. I can acquire a law degree and become a lawyer for less than $8000. The government is involved in the way the public universities are run so as to keep the subsidies manageable. Total government funding for university education in Israel is about $1.5B [1]. Since universities have high admission standards, many colleges have sprouted to service those who can't or don't want to go to one of the public universities. However, since university prices are so low, even private colleges are forced to operate with tuition fees of roughly $5000 per year, which means they are also very manageable for students. Even so, the quality of education in Israel is amongst of the highest in the world, especially when considering its tiny population. Hebrew University, Israel's best institution, has been ranked 26th in the world [2]. This system has attracted a lot of snark here in Israel, but from what I gather it's actually pretty effective. Israel is the 2nd most educated country in the world, with 46% of its population possessing a university degree [3]. :-) Sorry for the Hebrew sources! [1] Hebrew: https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.A1.D7.9C.D7.95.D7.9C.D7.99.D7.9D_.D7.9E.D7.99.D7.95.D7.97.D7.93.D7.99.D7.9D https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.... [2] Hebrew: http://www.calcalist.co.il/world/articles/0,7340,L-3693018,00.html http://www.calcalist.co.il/world/articles/0,7340,L-3693018,0... [3] Hebrew: http://mako.co.il/special-mako-news/Article-6489f432bb2f931006.htm http://mako.co.il/special-mako-news/Article-6489f432bb2f9310...

logfromblammo 10y ago
Every Jew I have ever known in the US, to the last individual, has always placed a high value on education. It would seem to be a cultural value--or at least it is among Ashkenazis. So it does not surprise me that Israel has a decent, functional higher education system. US culture, as a whole, does not value education for its own sake. We value education only as a business. And much of that business is to suck money from the pockets of those who do value education as intrinsically beneficial, and blow it along to those who provide the illusion of education at the lowest operating cost. If a greater proportion of the population valued real learning, the focus would be on making high school graduates more relevant and useful in the modern workforce, rather than using bachelor's degrees as an arbitrary qualification for jobs that clearly do not require them. If >25% of kids think they need to go to university to get a "good" job--or even to just not be considered a low-status, ignorant loser--it is not the university system that has failed, but the 12-13 years of public education that usually precedes it.

JohnGB 10y ago

So total student loan debt is something like 10% of the cost of the Iraq / Afghanistan war. Tell me again how it's not affordable to make college free, when it's affordable to spend so much money on an unnecessary military intervention?

cmdrfred 10y ago
I wasent privileged enough to go to college. Why isn't paying off my mortgage affordable instead?

teekert 10y ago

If you'd choose a more social system where the students costs are paid directly from taxes, taxes are higher, yes but you omit banks. The only thing banks do is collect interest because the people have decided, or have been told, that they can't collectively invest in the education of the next generation. And so their kids pay interest, to banks who do nothing but print the money and write down "you have dept" in return.

kriro 10y ago

Has there been extensive research or trials of corporate sponsorship (or are there any startups exploring this idea)? There are probably some principal/agent issues but by and large why can't Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports?). In some fields, big corporations already compete for talent, why not start the competition a level earlier (internships could be integrated as well). I can think of a lot of problems and reasons why this won't work...which makes it interesting :) Apart from "won't work for not highly competitive degrees" and "figuring out who to sponsor is as hard or harder than just hiring" and "how do you grantee the people actually stay with the company and are motivated" there's probably a lot more. I think the principle of reciprocality can make it work in principle though.

ryuker16 10y ago
General Assembly is a boot camp that does this. ROTC does this for the military. >Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports? They would probably try to get fired so they can get hired elsewhere for more money leaving Google holding the bag or be lazy as fucks. Non compete agreements are difficult to enforce....you cant create a wage slave and expect it to be enforced by the courts.
- kriro 10y ago
  Weather or not the pro sports model is a good thing to aspire to...I'll leave that up to debate but that's a reference point where this model works. It could be adopted with slight modifications. The apprenticeship model also works decently well...at least I'm not consciously aware of many carpenters, bakers etc. job hopping once their education is complete. But like I said the more optimistic view is that employees might actually like your company and that the principle of reciprocality works in this setting. There's going to be a subset of people who are going to be pretty happy that you cared about them and financed their education (and there should certainly be strong mentoring on the side not just "here's your money, call us when you graduate"). If someone just hops away...well that's expensive but might be less expensive than having such a person at your company. Fail early etc. And I mean noone is forcing you to sign such a deal. If you want to argue evil employers and "wage slaves" (a term I personally think is fairly ridiculous, especially if applied in the context of IT jobs, but Chomsky gonna Chomsky) and say that starting your life with huge college debt isn't exactly going to set the workforce free either. You're pretty exploitable if you need to get rid of crippling debt.

dvfjsdhgfv 10y ago

"While an educated populous is a good thing, the number of those not making payments on their student loan debt as soared." - what language is that? Sounds like written by an undereducated populous...

partycoder 10y ago

Education makes extensive use of debt factoring for risky loans. Factoring is selling client debt at a discount for instant cash. The financial institutions that buy the debt are usually responsible for collecting unless they decide to pass it around again. So in a sense, universities are sort covered against losses from that kind of debt, not students.

throw2016 10y ago

A healthy and future ready society needs an educated and literate population. From that it becomes a social goal and a social good with multi generational run off effects that can't be measured in pure short term economics. That one of the richest countries in the world should shy away from this responsibility is a bit galling, more so because it seems to be purely so that bankers can make some money. You can't have a country purely of corporations and workers and the US has been moving in this dubious and dystopic direction for decades now. You need to build a society or everyone loses, eventually.

ainiriand 10y ago

There is something really flawed in a system that puts progress under bank's interests. The advancement of the whole society is beneficial for us all, so I dont see why it should not be subsidiced.

conanbatt 10y ago

Speaking from a purely market-driven position, the Student Loan Debt market has one issue that prevents colleges from not raising tuition prices: its the incapacity to default on loans. Its obvious a huge part of the loans are used for careers that will never make its money back, and the loans only collateral are the person itself(not his parents assets). So if someone had an arts degree that cost him 150k, and never made that money, he should be able to default on that loan. As he does that, colleges have a strong incentive to keep tuition matched with the income produced by that degree. My understanding is that college loans have a special protection by the government that makes them undefaultable. Dont subsidy college loans! Dont take more money from all(including under represented poor people) to put it in the pockets of colleges. Just make the loans defaultable, and you will see such a massive movement of defaults that colleges will never put unpayable debt ever again.

andorov 10y ago
What if the schools were required to underwrite the loans on behalf of each student? Incentives would be more in line.
- conanbatt 10y ago
  Im not a policy expert, but I advocate for making things simpler. The capacity to default already exists and will always exist. Devise a new specific mechanism to offset another specific mechanism is like a patch to solve a patch on a bug.
trgn 10y ago
Is the $150k fine arts degree really that common? These are the anecdotes we see in the news, because they stoke populist outrage and generate rage clicks. But I think they barely register in the overall stats. My completely unfounded opinion based on personal experience is that most humanities or fine arts students come from families that actually more or less can afford it anyway.
- Mathnerd314 10y ago

GFischer 10y ago

Free (1) tuition is an interesting option, but it's not the end all answer. We have basic tuition in Uruguay, and, while people don't leave university with crippling debt, we still have the problem of people spending 4 or 5 years of their lives and leaving with a worthless degree (as in, they cannot get a job in what they studied). And they do end up in debt because they have to pay for food and housing while they study. I feel very sad whenever I see a working class family breaking their backs to send their child to become an architect or a psychologist, because I know they won't be able to get a decent job (there's one architect per 400 citizens, and one in twelve in the workforce is a psychologist, they usually end up earning less than a store clerk if they don't set up a succesful practice). Another problem is the strain on infrastructure, in the Engineering faculty they only have capacity to train about 300 to 400 students but over 2000 enter each year. The solution is to have extremely hard and cruel first year courses so at least half drop out in the first year and another half in the second year (I dropped out in second year and enrolled in a private university). Another country with free university is Venezuela, and a problem I've noticed is that the quality of education is very uneven, there are graduates with titles that aren't worth the paper they're printed on. This doesn't happen in Uruguay that much because they force them to drop out (not a great solution either). (1) here in Uruguay it's not entirely free, it's deferred - graduates from the public university have to pay about half a normal salary each year from 5 years after they graduate until they retire, so it often ends up more expensive than a private university.

OliverJones 10y ago

The article is made suspect, in my view, by promoting this Credit Sesame thing. There's a service called http://annualcreditreport.com/ http://annualcreditreport.com/ that provides access to credit reports from the three major agencies without trying to sell anything, or using any black-hat user experience design to trick people into signing up for services.

OliverJones 10y ago

The consumer finance "reform" act of 2005 made it very difficult to discharge student debt in bankruptcy. It's time to undo that reform. It had a disastrous unintended consequence, by completely shifting the risk of an uncollectable loan away from the lender and onto the borrower. How so? When a lender carries risk, they underwrite those loans. That means they study them before making them. They pay attention to all kinds of things, including the borrower's ability to pay and the value of the thing being bought with the borrowed money. Underwriters are (usually) knowledgeable about the field they work in. They understand the value of both vocational and liberal education. Some of them even understand the value of giving under-served people a chance. So, when a school gets calls from underwriters saying "we're having a hard time justifying loans of US$100K to your students taking bachelor's degrees" the school takes notice. They restrain growth in tuition and fees. Maybe they even offer discounts, also known as "scholarships." Those calls, coming from skilled underwriters, are far more effective than student demonstrations against tuition increases. The 2005 reform made it possible for the lenders to be much lazier. Their underwriting is much more sloppy. The reform freed up a lot of tuition money that the educational institutions were happy to soak up. And their students are stuck with the bill for a lifetime. I'm aware of the libertarian view which emphasizes individual responsibility, and I have a lot of sympathy for it. I have a young friend who looked at the cost of her first-choice college (Syracuse, it was) a few years back, and wrote them a letter saying "sorry, you're too expensive. I regret that I must decline your offer of admission." That too puts downward pressure on educational costs. But she's rare: she has great presence of mind and forward-thinking parents. Plus, she listened to me. -:) Most high-school seniors get caught up in the mostly fake competitive admissions system. They aren't in a position to behave like hard-nosed underwriters. So, let's put some of the loan risk back on the lenders, and bring back the underwriters. This situation is analogous to the mortgage crisis, which shifted the risk of bad loans away from the mortgage originators. In that case the risk got shifted onto anonymous buyers of securitized mortgages, and onto AIG. In the case of educational loans the risk gets shifted onto the poor schlemiel who wants to be a schoolteacher.

nice1 10y ago

We are dealing with a modern form of slavery here.

mark_l_watson 10y ago

Is this news? The global elites harvest young people for profit just as they do older people with subprime mortgages, etc. Sorry for sounding cynical, but that is just the way I think the world works.

Jtsummers 10y ago
While not news, figures like this: In the past 12 years, we have added a trillion dollars to that amount and gained about 4% in the overall college graduation rate. are important to publish sometimes. I don't think many people realize the scope of modern student debt, which has obvious (?) negative implications for the national economy.
- mark_l_watson 10y ago
  I agree, more people need to be aware of the magnitude of the problem.

bogomipz 10y ago

This is a quick read in case anyone is unfamiliar with student debt "onwership": http://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp http://www.investopedia.com/articles/personal-finance/081216...

overcast 10y ago

Welcome to cheap guaranteed federally backed money. Private institutions will continue to jack up education prices, because they know kids will be able to get loans from the government to pay for them. It's too late for me, and millions of others paying back enormous loans, but I dream of the day school becomes affordable. There was a time, you could work you way through college washing dishes. Schools existed WAAAAAY before federal assistance.

knightofmars 10y ago

This is an advertisement for "Credit Sesame".

Taylor_OD 10y ago

I was lucky to get out without any debt due to athletic and other scholarships. However the last two-three girls I've dated had 15K-25K in student loans. They all said, "At least I dont have K like my friend..." I cant believe do much is being lended to college students.

jazzyk 10y ago

This is another example of the law of unintended consequences. While the idea of helping people become more educated is obviously beneficial to both individuals and the society as a whole, government loans - which are supposed to "help" - are a huge factor fueling ever-raising costs. The loans, in effect, subsidize the higher-education complex, rather than students. Many of us have been brainwashed to think that higher education has to cost a lot of money. But it need not: all that great education requires are wise, passionate teachers and a bit of infrastructure: a whiteboard, a few books, and a laptop computer (with a couple of outliers). We don't need football/hockey teams with coaches paid $3-4M/year. We don't need armies of "Deans of Diversity & Inclusion" (and other phony administrative positions), who make $400K/year, we don't need manicured lawns and Olympics-quality sports facilities (these salaries are from the Univ of California - a state school!) If a good private university cost < $20K/year and a state university < $10K, we would not have endless discussions wrt who should pay, who should study what, etc.

drzaiusapelord 10y ago
Except its a program that can be managed correctly. The problem was that there were no incentives to do so. My understanding is that loans initially were smaller and helped with the cost of tuition at a time where tuition was more affordable, but still out of reach for many working class families. Now they can pay for all of tuition and the cost of tuition is just pegged to the max loan offer from the government. No one put in sane cost controls. No one told the universities that federal money wouldn't just increase to their whims. No one told students what its really like in real life to payback a 50k or 100k or even 150+k loan for a 4 year degree. What that means as an opportunity cost compared to cheaper schooling. My relatively modest loan is like making car payments on a decent car everything month... for 20 years. So 4 lower-end Lexus's if you consider interest. Or less to put in retirement. I have no idea how people with large loans get by. I imagine the recent Obama rules regarding loan repayment as percentage of salary helps with an 20 year payment forgiveness plan. Not sure if the new business friendly administration is going to keep that in place.
lordCarbonFiber 10y ago
I see this sentiment a lot, and I feel like you fundamentally misunderstand what is actually happening at universities. Discounting athletics, which in some places are revenue neutral and can be counted as marketing/local cultural artifact depending on who you talk to, the "wise passionate teachers" you praise so aren't there to teach idiot undergrads. Instead, they're hired to do research with the teaching as essentially a subset of that in most cases. Pure research, especially in a political climate that's increasingly anti-intellectual and anti science, is expensive and that cost gets offloaded to incoming students since the hard requirement for a college degree for many professional jobs creates inelastic demand. The "phony administrative positions", lawns, and student facilties you dismiss as pork are the school's way of competing for the piles of grant money replacement known as undergrads. Then further more, prices are already in the ball park of your supposed ideal. An instate student can go to a school like Georgia Tech (ranked 5 or so in engineering nationally depending on the year) for 12k before scholarships, essentially free if they don't piss away their grades. Private top tier schools cost more, but tend to offer more scholarships and grants so that's harder to compare between institutions. It's not that schools are expensive, it's that students are choosing to not go to the inexpensive schools, usually to get out of their state, or to be in an institution that specializes in their major, or go someplace with better student institutions. US research is what makes our schools the top in the world, and the actual education gained from an undergrad degree isn't the drive for most people. It's the networking, the exposure, and the certification, none of which can be duplicated in a dinky classroom with a whiteboard and an underpaid teacher. Just look at American High Schools if you want to see how that turns out.

scott_c 10y ago

The government-enforced student loan system is the problem. Universities know they can charge whatever they want for tuition, they will get their money up-front, and the students will be on the hook for it for life (and it can't be declared in a Bankruptcy). We need to revamp the system so universities can't charge us these ridiculous rates.

formula1 10y ago

Im glad I got someone with the shock value. Its clear you have a very unique perspective that I appreciate you sharing. Female in lower income bracket - I believe this. I think this is a rather heartbreaking reality so I am a ok not going into this. What I do know is that Ive met a few peoples whos moms work 16 hour days as much as possible. - chronically ill - the college educated are competing with the chronically ill for jobs - mentally ill - the college educated are competing with the mentally ill for jobs. - unable to afford - so they are working but cannot find housing. I believe it. I dont think 'bail out' is the solution. Its 'salvage and prevention'. Ensuring that future generations dont fall into the trap and if they do it is an educated risk. And salvaging multiple generations lives who were chasing after the american dream. Im all for helping those that cant help themselves. But Im also interested in getting those 60% there to 100%. If the "prividged" are having are hard time post graduation. The under privlidged have it even worse. We are talking about the future of basically educated children not just "foolish rich kids"

Mz 10y ago
Im all for helping those that cant help themselves. Yeah, no. This is incredibly insulting. I am not incapable of helping myself. I am working damn hard every single day to resolve my problems in the face of a hugely uphill battle that is compounded by sexism, housing designed solely for the rich and a whole bunch of other entrenched barriers to ordinary people making their lives work. You may be able to pretend that the homeless (and other poor people) are a bunch of utter and complete losers who can't help themselves, but your reply means you either didn't really listen or didn't really understand. As these problems deepen, larger numbers of people are being pushed out into the streets. Perhaps if homelessness hits 50%, the world will stop talking like it is merely a bunch of fringe losers who need our compassion and charity and realize that, no, actually, the system is deeply broken and actively screwing over a very high percentage of people and chewing them up and spitting them out. Or perhaps all the rich assholes will continue to be all LA LA LA NOT LISTENING, you must just be defective as it cannot possibly be the shitty company/policies I created that is somehow at fault.
- formula1 10y ago

Vera527 10y ago

Congrats to all the students and recent grads out there.