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I am going to split hairs... and honestly, this idea/concept isnt fully thought out so maybe someone can help me out here. Student loans would be an investment

I am going to split hairs... and honestly, this idea/concept isnt fully thought out so maybe someone can help me out here. Student loans would be an investment if like other investments, it could be removed from someone's 'portfolio'. IMO the fact that student loans are not dischargable means they are not an investment. Not sure what we should call student loans, but 'investment' seems like the wrong word.

tptacek 10y ago
"Not dischargable" means you can't rid yourself of them easily through bankruptcy. It's the nature of most loans that you can't remove them from your portfolio; you have to pay them off.
- wtvanhest 10y ago
  I agree, but no one looks at the other forms of consumer debt as investments. If we are going to call student loans investments, we might as well call autoloans investments. The same logic could be applied. A car helps you get to a job and gives you a return.
  - rtx 10y ago
    It's an investment if it used to improve your economic condition, otherwise an expense.
    - Spivak 10y ago
      Maybe better phrasing would be you expect investments to appreciate in value. Although student loans could be viewed this way as investments they certainly not investments in the typical sense. You take out a car loan because you expect to extract more value from the car than its price plus interest. You take out a student loan for the same reason. If student loans were buying a some percentage of your monetary worth or income then I could see investment angle but that's basically owning a person which I couldn't support.
- cylinder 10y ago
  The loan is a liability, the degree is the asset. If the degree is unable to land the person a job, or the earnings of the job over the career do not stack up to the price of the degree, then it is an "upside down investment" just like a house with negative equity.
  - uiri 10y ago
    A house isn't an investment either though. An investment is an asset which is expected to go up in value faster than inflation. Housing prices track inflation. This is, on average, generally true; I'm not talking about a specific local market here. In order for something to be an investment, it must generate a return. After transaction costs, property taxes and other upkeep expense, the RoI of real estate is not great. Real estate has low liquidity, low diversification and high leverage requirements. Shelter is an expense. Like many things, you can own it or you can rent it. Owning it means you're holding an asset that (hopefully) won't depreciate but it is also unlikely to meaningfully appreciate (outside of certain local market conditions that are the exception rather than the rule). Back to the original point: in order for an education to be an investment, the degree - the asset - must have a reasonable expectation of going up in value over time. The value of your degree goes down over time as you gain work experience; its peak value is right after you graduate. An argument could be made that the return on investment is a rise in earning potential but that too is a one time boost. A degree also shares all the bad qualities of housing as an investment: high leverage, even worse - zero! - liquidity, and low diversification. It might make financial sense to borrow money in order to fund a degree, but that by no means makes education an investment.
    - curtis 10y ago
      > A house isn't an investment either though. An investment is an asset which is expected to go up in value faster than inflation. Most people who own homes only own the one they live in. If they did not own that home they would have to pay rent. So to figure out the overall value of the investment, you'd need to add up not just all the money it's going to cost the owner, but also subtract all the money the the owner did not have to pay in rent.

tptacek 10y ago

"Not dischargable" means you can't rid yourself of them easily through bankruptcy. It's the nature of most loans that you can't remove them from your portfolio; you have to pay them off.

wtvanhest 10y ago
I agree, but no one looks at the other forms of consumer debt as investments. If we are going to call student loans investments, we might as well call autoloans investments. The same logic could be applied. A car helps you get to a job and gives you a return.
- rtx 10y ago
  It's an investment if it used to improve your economic condition, otherwise an expense.
  - Spivak 10y ago
    Maybe better phrasing would be you expect investments to appreciate in value. Although student loans could be viewed this way as investments they certainly not investments in the typical sense. You take out a car loan because you expect to extract more value from the car than its price plus interest. You take out a student loan for the same reason. If student loans were buying a some percentage of your monetary worth or income then I could see investment angle but that's basically owning a person which I couldn't support.
cylinder 10y ago
The loan is a liability, the degree is the asset. If the degree is unable to land the person a job, or the earnings of the job over the career do not stack up to the price of the degree, then it is an "upside down investment" just like a house with negative equity.
- uiri 10y ago
  A house isn't an investment either though. An investment is an asset which is expected to go up in value faster than inflation. Housing prices track inflation. This is, on average, generally true; I'm not talking about a specific local market here. In order for something to be an investment, it must generate a return. After transaction costs, property taxes and other upkeep expense, the RoI of real estate is not great. Real estate has low liquidity, low diversification and high leverage requirements. Shelter is an expense. Like many things, you can own it or you can rent it. Owning it means you're holding an asset that (hopefully) won't depreciate but it is also unlikely to meaningfully appreciate (outside of certain local market conditions that are the exception rather than the rule). Back to the original point: in order for an education to be an investment, the degree - the asset - must have a reasonable expectation of going up in value over time. The value of your degree goes down over time as you gain work experience; its peak value is right after you graduate. An argument could be made that the return on investment is a rise in earning potential but that too is a one time boost. A degree also shares all the bad qualities of housing as an investment: high leverage, even worse - zero! - liquidity, and low diversification. It might make financial sense to borrow money in order to fund a degree, but that by no means makes education an investment.
  - curtis 10y ago
    > A house isn't an investment either though. An investment is an asset which is expected to go up in value faster than inflation. Most people who own homes only own the one they live in. If they did not own that home they would have to pay rent. So to figure out the overall value of the investment, you'd need to add up not just all the money it's going to cost the owner, but also subtract all the money the the owner did not have to pay in rent.