9 ms·

White House rolls back protections for people in default on student loans

96 points by daegloe 10y ago

smkellat 10y ago
It doesn't matter if it was a nice idea but if it was adopted outside the normal and proper means of adopting regulations then it is not okay. Forms of action matter regardless of the desirability of the substance. However, nothing prevents this being adopted again in the proper fashion under the Administrative Procedures Act.
- andr 10y ago
  From the article it sounds like the regulation comes from a court precedent. The court sought advice from the Obama administration. It was not an executive order.
  - smkellat 10y ago
    Not quite. The use of "Dear Colleague" letters by the US Department of Education have dubious status in terms of being regulations let alone being binding. It didn't play a role in a court case directly. A court sought clarification after a settlement was reached between litigants but it wasn't necessarily required to be issued in that fashion by the case.
yummyfajitas 10y ago
This is probably a good idea. It's ridiculous that we coddle people who wastefully took out loans with the goal of improving human capital, and then failed to take advantage of them. Previously student loans were a socialized losses, privatized gains situation. This gives borrowers some skin in the game and will hopefully give them more reason to carefully evaluate whether college is really a good idea for them.
- imsofuture 10y ago
  What? Borrowers already have skin in the game. Lenders have none. Make student loans dischargeable and suddenly a lot more people are thinking about the actual utility of college and it's costs.
  - nhangen 10y ago
    I agree with the downvote and the fact that borrowers have skin in the game, but not that lenders have none. Debt should not be dischargeable, else it's not debt at all.
    - deleted 10y ago
      [deleted]
    - HarryHirsch 10y ago
      Of course debt can be written off. Out there in the real world contracts are renegotiated all the time. More of that would be advantageous in the face of information asymmetry, the party with better insight would be less tempted to exploit their position.
      - nhangen 10y ago
        You're talking about corporate debt not personal debt. Show me an example of personal date that is frequently discharged (outside of bankruptcy) and I'll adjust my position. If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. It should be.
        icebraining 10y ago
        If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. How else would they be dischargeable? I assume you were talking about bankruptcy.
aresant 10y ago
The actual protection being rolled back: "That [protection] forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default."
- notadoc 10y ago
  16% interest on student loans is basically usury
  - distances 10y ago
    For loans you can't default on it should be the market rate plus a tiny margin. So maybe 2% or so nowadays.
    - zeroer 10y ago
      The lendee can't default, but that doesn't mean the loan gets paid. Some people just don't have money/income/assets to seize, and courts will not garnish poverty wages.
BucketSort 10y ago
After a few years of unemployment and being treated for bipolar depression my loans were in default. Due to the grace of the system at the time, I was able to bring my loans out of default and I now pay them like everyone else. This type of thing punishes the downtrodden even more. There must be a set of checks and balances that at least attempts to differentiate between deadbeats and broke people that don't need a higher hill to climb. The loans never go away. You can't escape them with bankruptcy. Let's not make this a living hell for people that got educated and fell on hard times.
- UpDownLeftRight 10y ago
  I don't pay student loans. Do you know why? I don't have them. I went to an inexpensive local school, worked while going to school, and took the public bus to and from it. (I was fortunate enough to be able to live with my parents.) While I don't know your situation, it's hard for me to feel sorry for someone who went to an expensive private school, lived on campus in a "country club" atmosphere, and then expects the Taxpayers to cover it.
  - enraged_camel 10y ago
    >>I was fortunate enough to be able to live with my parents. Um, you added this as an afterthought, but it's by far the biggest expense. We're talking probably around $500 per month on average (if you live with others) plus utilities, not to mention food. So you were able to save around $1000 per month living with parents - and that's a conservative estimate. Many people aren't so fortunate.
    - scarface74 10y ago
      And many people are but decide they want the "freedom" of being out of their parents house and the local cheap college is g good enough for them.
  - saboot 10y ago
    What are you covering? Student loans can't be discharged. The govt makes a substantial amount of money from student loans as it currently is.
oniMaker 10y ago
How far HN has fallen when an intelligent comment like this is downvoted. Yes, I expect mine will be too. I no longer care about the opinions of this community.
- dang 10y ago
  You've posted like this repeatedly but all it does is make the site even worse, so please don't. We detached this comment from https://news.ycombinator.com/item?id=13903065 https://news.ycombinator.com/item?id=13903065 and marked it off-topic.
  - oniMaker 10y ago
    You're just another censoring gatekeeper.
    - deleted 10y ago
      [deleted]
nhangen 10y ago
I'm surprised by the comments here. I am a fiscal conservative, but having taken and struggled to pay for student loans, and having hired people in the same situation, find that the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result. Do I think people should pay their debt? Yes, but these lenders are the same lenders that get bailed out time and time again. They are in no peril. It is our students that assume this risk. The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. It was not until I left the Army and started my own business that I finally started to claw my way out. Our education system is broken. We know this. So lets stop punishing kids for doing what they've been told do to throughout K-12, and instead help them find a way out of the rat race. Kids swimming in debt are of no service to this country. We have to do better.
- brianwawok 10y ago
  > The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. Okay, so then I must ask: What did you major in, what was your total debt, and did you research the career prospects of your major BEFORE going to college? Sometimes I think a basic mandatory form that came with your college acceptance letter would do wonders for student debt. You have chosen to apply to be a history major at private school X. Our graduation rate for the program is 95%. Your total student debt upon graduation will be approximately $145,000. That is a monthly payment of $2000. Our 25th, 50th, and 75th percentile wages for graduates with this degree are $20,000, $25,000, and $30,000. This means you can expect to pay about 107% of your income towards servicing your loan for the first 10 years after graduation.
  - Kluny 10y ago
    That would be a great idea. Universities won't do this unless they're legally required to. Student ignorance drives their business model.
artursapek 10y ago
I keep seeing people say that the student loan crisis will be the next "bubble pop". It seems like colleges and lenders both got greedy and created a mass of debt to them that will never be paid off. That, and I imagine the current generation will send their own kids to college at a much lower rate than their parents did. The "college bubble" is going to pop.
- nhangen 10y ago
  I have two teenagers and a 7 year old. The oldest is 15 and doesn't even think about college. I don't nudge him either way, but find it interesting he has not even considered it. My daughter is 13 and wants to go to college, but only because TV says that's where you go to meet boys and get married.
  - artursapek 10y ago
    Hah. I have a 3 year old and am very curious what the "college scene" will look like in 15 years.
    - HarryHirsch 10y ago
      A lot less than Sweetbriar and much more like Virginia Commonwealth University. Stanford and MIT will be fine, the University of California won't be. Sweetbriar: https://www.nytimes.com/2015/04/23/fashion/the-independent-women-of-sweet-briar.html https://www.nytimes.com/2015/04/23/fashion/the-independent-w... The very top will survive the cuts in federal funding, but research at lower tiers won't survive. The larger sectarian colleges will survive, the smaller ones will die. Notre Dame will remain, Seton Hall and the Franciscan University of Steubenville will go away, that's a good thing.
- madenine 10y ago
  Its going to be a really rough bubble. There's no one source to point the finger at, but we've got ourselves in a spiral where: -More people are going to school -University costs have skyrocketed (mostly due to expanded administration services), which has increased the need for students to secure loans -Wage growth has been low/flat for a long time -A college degree has replaced a high school diploma/GED as a minimum requirement for most middle class jobs -New grads are coming out of school to lower paying jobs relative to the cost of their education than ever before, driving defaults. -As college matriculation becomes more and more necessary, even great high schools pivot towards a goal of getting students into college, instead of providing them great educations which have a secondary effect of getting them into college. Further decreasing the value of high school as someone's highest degree of education. The last one is very worrisome for me, and something I hear a lot about. I have family and friends who are college professors - even those at ivy league universities are saying their students are just as smart as before, but on average now they're not as generally educated and way less prepared for serious academic work. They can't handle the same work loads, don't write or research as well, require more oversight/direction - things like that. How do you fix that without blowing everything up and probably destroying the lives for a huge group of people who's only crime was being born in a certain set of years? Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?
muhfuhkuh 10y ago
Ironically, the head of the Dept. of Ed. invested over a hundred million dollars in a debt collection agency that tacks on these usurious fees and rates.
- bluejekyll 10y ago
  I don't think that's irony. That is corruption.
- eli_gottlieb 10y ago
  That's not ironic; it's just evil.
UpDownLeftRight 10y ago
There's a trillion dollars of liability we're talking about. I'm OK with some forgiveness, but if and only if the Government gets out of the student loan business. (Watch tuition drop like a rock if this happens!)
- dkrich 10y ago
  And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Essentially move the 100% of the risk that borrowers currently have and move a nice portion of it to the lenders so they both bear the burden of the loans can't be repaid. Imagine if banks had zero risk when providing home loans. I don't think it would be too difficult to buy a house you couldn't afford and quickly the price on homes would be driven up. The student loan industry is so completely fucked and needs to be reformed before it ruins our economy.
  - DrScump 10y ago
    And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Then why would the loan companies do student loans at all except at exorbitant rates (thereby making the responsible students pay more for those who aren't excluded altogether)?
    - dkrich 10y ago
      They wouldn't. That's the point. You shouldn't be able to borrow $150k+ without some collateral or a 20% down payment. I believe that if this happened, you'd see tuition rates plummet. But it won't until some catastrophic economic event occurs because the student loan industry is predatory and corrupt. Essentially ruining people's lives by selling them a lie in the name of "investing in your future."
brogrammer2 10y ago
Sometimes I do wonder why American Universities charge exorbitant tuition fee? Education being the bedrock of an advanced society, isn't but natural the developed economies like US should be able to subsidize education to such an extant that youth of country don't have to worry about paying their tuition fee and focus more on learning and innovation that will take everyone forward. It is but a reflection on the sad state of affairs that our higher education system has fallen into!! What do you people think?
- brianwawok 10y ago
  > Sometimes I do wonder why American Universities charge exorbitant tuition fee? Students demand a lot. Good profs. Dorms with AC. Sports teams. Medical care. All that cost a lot. States and federal gov't pays less each year. The difference has to come from somewhere? In any case, its not perfect but I will take US colleges 100x over Japanese Colleges or Chinese Colleges or Mexican Colleges or 98% of the colleges in the world.
  - WaxProlix 10y ago
    Sports teams are generally a net positive. You and I see the $3.5M salary for a football coach at a public university and think it's absurd, but the football program itself pulls in tons of cash directly and indirectly and is probably more than 'worth it' to the school overall. edit: Looks like this is generally wrong. I'll leave it up but see below comment.
    - brianwawok 10y ago
      I hear that sound byte (bite?) here a lot. It does not seem to be true based on the news I read. Perhaps you have better sources than I. From what I see, 20 out of 1,083 NCAA schools made money on sports. The other 1,063 lost money. http://www.ncaa.org/about/resources/media-center/news/athletics-departments-make-more-they-spend-still-minority http://www.ncaa.org/about/resources/media-center/news/athlet... Only 24 FBS schools generated more revenue than they spent in 2014, according to the NCAA Revenues and Expenses of Division I Intercollegiate Athletics Programs Report. That figure jumped from 20 schools in 2013, but it has remained relatively consistent through the past decade. Don't forget to account for scholarships. You are giving free tuition to the football team, ladies soccer team, lacrosse team, ladies cross country, swimming, etc. etc. etc. http://www.politifact.com/virginia/statements/2014/dec/22/jim-moran/moran-says-only-20-colleges-make-profit-sports/ http://www.politifact.com/virginia/statements/2014/dec/22/ji... Only two sports were profitable at FBS schools, according to the report. Football programs netted a median profit of slightly more than $3 million and men’s basketball netted a median $340,000. But the profits at most schools quickly vanished after paying for a long list of other intercollegiate teams, all of which lose money. The median loss among of athletic departments was $11.6 million.
throwaway2016a 10y ago
I've always wondered if the fact we make it so essentially students are forced to repay their student debt (even if they are otherwise insolvent) contributes to higher cost of education. After all, you have a captive market that has to buy your service or deal with a higher risk of unemployment and a lending institution that doesn't take on any risk. What if we let students default on their loans? My bet: - Less people will go to college (not necessarily a bad thing) - The cost of college will go down because the demand is stifled If the government works to guarantee you will get paid, you can charge whatever you want and that might be what we are seeing.
- LeifCarrotson 10y ago
  Absolutely. There are three parties here: Schools, students, and lenders. Schools set the price based on what they can get students to pay, which is a function of the willingness of lenders to give the students money. Lenders approve borrowing students based on their likeliness to repay, which is currently very large due to the legal framework. Students select college programs and loans based on a convoluted mix of 17-year-old wisdom, well-meaning advice suggesting they pursue their dreams, their ability to get the loan, and a hazy idea of future employment, income, and repayment. It's obvious that increasing the penalties to the students after graduation is about the least effective measure you can take. If students were allowed to discharge student loans through bankruptcy, that would still be a hefty penalty. Lenders would be less willing to give them money. With less money available, schools would have to charge less.
cromwellian 10y ago
Costs of increased military spending in Trump's budget: $54 billion Estimated costs to make college tuition free for every citizen: $62 billion
- rsync 10y ago
  Cost of second Iraq War = 2+ Trillion and counting: https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War
  - deleted 10y ago
    [deleted]
- aianus 10y ago
  > Estimated costs to make college tuition free for every citizen: $62 billion How? There are ~20 million Americans enrolled in college so $62 billion is only $3,000 per person. In comparison, the US spends about $12,000 per year per high school student.
  - jsmeaton 10y ago
    I'm not disagreeing, but presumably at least some portion of those expenses would be paid back in some way. The Australian model has the government provide the student loan. The interest rate is fixed to CPI and repayments are garnished directly from salary provided you earn over a certain amount (something like 50k). Students also get discounts via copaying which was about $500 per year from memory. The government obviously never breaks even directly from this scheme. I think they've begun to exclude certain degrees that don't have good prospects which is a big debate at the moment.
- grogenaut 10y ago
  Not a correction but I'd point out that if uni was free, it would cost more than $62 Billion as more people would go.
  - 10y ago
neves 10y ago
This USA student loan scheme is one of the most brilliant machines of social control ever devised. People get of college already owing a lot money, now they have to work for shit, and put up with their asshole bosses do. They can't have the option to spend couple of months searching for jobs or they will have to default their debt and mess all their future life. Nothing like a well behaved society where the workers can't complain. Brilliant!!
- AlexCoventry 10y ago
  "...a cynic might argue that we haven't really abolished slavery; we've just relabeled it. The cynic would have a point: an ancient Greek would certainly have seen the distinction between a slave and an indebted wage laborer as, at best, a legal nicety." https://books.google.com/books?id=lliTBQAAQBAJ&pg=PT275 https://books.google.com/books?id=lliTBQAAQBAJ&pg=PT275
  - ryanmaynard 10y ago
    Thank you for the citation; I've ordered the book. Would you happen to have any other book recommendations on the topic, or adjacent topics?
    - AlexCoventry 10y ago
      Bailout by Neil Barofsky is very good. https://www.amazon.com/dp/B00818J57W https://www.amazon.com/dp/B00818J57W For critical responses to Graeber's book, the Crooked Timber seminar on it is well worth reading. http://crookedtimber.org/category/david-graeber-debt-seminar/ http://crookedtimber.org/category/david-graeber-debt-seminar...
    - AlexCoventry 10y ago
      Also, Soros's The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, though Graeber's book is what really brought Soros's claims into focus for me. https://www.amazon.com/dp/B004HKIFR4 https://www.amazon.com/dp/B004HKIFR4
hermitdev 10y ago
Good. I paid the $120K for my education and co-signed a loan for a friend (big mistake) for $10k for her education that I ended up paying off because she was a dead beat. There has been a huge disturbing trend in the US in the last 30 years or so: you're not responsible for your actions; it's always some one else's fault. You choose to go to a high priced school and study something that offers no marketable skills or is hyper competitive and only a few positions exist, why should I, as a taxpayer, fund that? - that is your choice. I wanted to study physics, because I love the subject, but when I entered college, I evaluated that my job prospects were low, especially with merely an undergrad degree. Instead, I studying electrical & computer engineering, and I paid off my student loan debt 4 or 5 years after leaving college.
- dikdik 10y ago
  So you are against the ability for people to declare bankruptcy then? Many boomers that spent beyond their means and lost their homes in 2008 were able to walk away from their loans. While they had a house to "give back", that asset probably lost 50-300K depending. Many people every year get expensive medical care and are unable to pay it off. They cannot "give back" a medical procedure, so the cost is written off and/or they declare bankruptcy. This negatively affects everyone else that pays for healthcare. But when it comes to education, it's a different story? I have a feeling the different story is: educational debt primarily effects the young, housing/medical debt primarily effects the older generations. Educational debt used to be like other debt, but then the boomers went to college and got into positions of power...
jmcdiesel 10y ago
I guess I'm just simpleminded and think that you should just pay your debt that you agreed to acquire..
masonic 10y ago
Two things to note on this: 1) the Obama policy (not even official administrative rule with any weight of enforcement, just a memo with a veiled threat of negative attention if flouted with any frequency) was only in place for his last 1.5 years. This letter just pulls that back to the first 6.5 years of his reign. 2) Note this quote: "The withdrawal of the Obama administration memo arrives the same week as a report from the Consumer Federation of America (CFA) showing that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. " In other words, after this rule was put in place, millions of loan recipients stopped making any payment altogether and 14% more entered default despite added mechanisms for avoiding default. This article doesn't even go into the huge taxpayer bailout of students of closed and failing for-profit diploma mills[0]. It was an unprecedented windfall for those affected, the entire debt was forgiven, they took no hit on their credit, and the debt forgiveness wasn't counted as income by the IRS (like debt forgiveness normally works). Taxpayers paid for it all. It was a great buy-off of new voters. An obvious small mitigation would have been to instead have their debt applied against a replacement degree program (e.g. you owe $20,000, you go to a new school at $10,000 tuition per year, then your first two years' tuition payments wipe out that debt, with interest charges stopped while in school). [0] https://www.usnews.com/education/blogs/student-loan-ranger/2015/12/09/pursue-a-federal-student-loan-discharge-as-a-victim-of-college-fraud https://www.usnews.com/education/blogs/student-loan-ranger/2... [EDIT]: Here is the original Obama FFEL memo: https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf

96 points by daegloe 10y ago

It doesn't matter if it was a nice idea but if it was adopted outside the normal and proper means of adopting regulations then it is not okay. Forms of action matter regardless of the desirability of the substance. However, nothing prevents this being adopted again in the proper fashion under the Administrative Procedures Act.

andr 10y ago
From the article it sounds like the regulation comes from a court precedent. The court sought advice from the Obama administration. It was not an executive order.
- smkellat 10y ago
  Not quite. The use of "Dear Colleague" letters by the US Department of Education have dubious status in terms of being regulations let alone being binding. It didn't play a role in a court case directly. A court sought clarification after a settlement was reached between litigants but it wasn't necessarily required to be issued in that fashion by the case.

yummyfajitas 10y ago

This is probably a good idea. It's ridiculous that we coddle people who wastefully took out loans with the goal of improving human capital, and then failed to take advantage of them. Previously student loans were a socialized losses, privatized gains situation. This gives borrowers some skin in the game and will hopefully give them more reason to carefully evaluate whether college is really a good idea for them.

imsofuture 10y ago
What? Borrowers already have skin in the game. Lenders have none. Make student loans dischargeable and suddenly a lot more people are thinking about the actual utility of college and it's costs.
- nhangen 10y ago
  I agree with the downvote and the fact that borrowers have skin in the game, but not that lenders have none. Debt should not be dischargeable, else it's not debt at all.
  - deleted 10y ago
    [deleted]
  - HarryHirsch 10y ago
    Of course debt can be written off. Out there in the real world contracts are renegotiated all the time. More of that would be advantageous in the face of information asymmetry, the party with better insight would be less tempted to exploit their position.
    - nhangen 10y ago
      You're talking about corporate debt not personal debt. Show me an example of personal date that is frequently discharged (outside of bankruptcy) and I'll adjust my position. If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. It should be.
      - icebraining 10y ago
        If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. How else would they be dischargeable? I assume you were talking about bankruptcy.

aresant 10y ago

The actual protection being rolled back: "That [protection] forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default."

notadoc 10y ago
16% interest on student loans is basically usury
- distances 10y ago
  For loans you can't default on it should be the market rate plus a tiny margin. So maybe 2% or so nowadays.
  - zeroer 10y ago
    The lendee can't default, but that doesn't mean the loan gets paid. Some people just don't have money/income/assets to seize, and courts will not garnish poverty wages.

BucketSort 10y ago

After a few years of unemployment and being treated for bipolar depression my loans were in default. Due to the grace of the system at the time, I was able to bring my loans out of default and I now pay them like everyone else. This type of thing punishes the downtrodden even more. There must be a set of checks and balances that at least attempts to differentiate between deadbeats and broke people that don't need a higher hill to climb. The loans never go away. You can't escape them with bankruptcy. Let's not make this a living hell for people that got educated and fell on hard times.

UpDownLeftRight 10y ago
I don't pay student loans. Do you know why? I don't have them. I went to an inexpensive local school, worked while going to school, and took the public bus to and from it. (I was fortunate enough to be able to live with my parents.) While I don't know your situation, it's hard for me to feel sorry for someone who went to an expensive private school, lived on campus in a "country club" atmosphere, and then expects the Taxpayers to cover it.
- enraged_camel 10y ago
  >>I was fortunate enough to be able to live with my parents. Um, you added this as an afterthought, but it's by far the biggest expense. We're talking probably around $500 per month on average (if you live with others) plus utilities, not to mention food. So you were able to save around $1000 per month living with parents - and that's a conservative estimate. Many people aren't so fortunate.
  - scarface74 10y ago
    And many people are but decide they want the "freedom" of being out of their parents house and the local cheap college is g good enough for them.
- saboot 10y ago
  What are you covering? Student loans can't be discharged. The govt makes a substantial amount of money from student loans as it currently is.

oniMaker 10y ago

How far HN has fallen when an intelligent comment like this is downvoted. Yes, I expect mine will be too. I no longer care about the opinions of this community.

dang 10y ago
You've posted like this repeatedly but all it does is make the site even worse, so please don't. We detached this comment from https://news.ycombinator.com/item?id=13903065 https://news.ycombinator.com/item?id=13903065 and marked it off-topic.
- oniMaker 10y ago
  You're just another censoring gatekeeper.
  - deleted 10y ago
    [deleted]

nhangen 10y ago

I'm surprised by the comments here. I am a fiscal conservative, but having taken and struggled to pay for student loans, and having hired people in the same situation, find that the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result. Do I think people should pay their debt? Yes, but these lenders are the same lenders that get bailed out time and time again. They are in no peril. It is our students that assume this risk. The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. It was not until I left the Army and started my own business that I finally started to claw my way out. Our education system is broken. We know this. So lets stop punishing kids for doing what they've been told do to throughout K-12, and instead help them find a way out of the rat race. Kids swimming in debt are of no service to this country. We have to do better.

brianwawok 10y ago
> The only reason I was able to pay my loans was because the Army paid them for me after I completed my term of service. I tried for years to find employment that could help me escape a life of poverty but could not. Okay, so then I must ask: What did you major in, what was your total debt, and did you research the career prospects of your major BEFORE going to college? Sometimes I think a basic mandatory form that came with your college acceptance letter would do wonders for student debt. You have chosen to apply to be a history major at private school X. Our graduation rate for the program is 95%. Your total student debt upon graduation will be approximately $145,000. That is a monthly payment of $2000. Our 25th, 50th, and 75th percentile wages for graduates with this degree are $20,000, $25,000, and $30,000. This means you can expect to pay about 107% of your income towards servicing your loan for the first 10 years after graduation.
- Kluny 10y ago
  That would be a great idea. Universities won't do this unless they're legally required to. Student ignorance drives their business model.

artursapek 10y ago

I keep seeing people say that the student loan crisis will be the next "bubble pop". It seems like colleges and lenders both got greedy and created a mass of debt to them that will never be paid off. That, and I imagine the current generation will send their own kids to college at a much lower rate than their parents did. The "college bubble" is going to pop.

nhangen 10y ago
I have two teenagers and a 7 year old. The oldest is 15 and doesn't even think about college. I don't nudge him either way, but find it interesting he has not even considered it. My daughter is 13 and wants to go to college, but only because TV says that's where you go to meet boys and get married.
- artursapek 10y ago
  Hah. I have a 3 year old and am very curious what the "college scene" will look like in 15 years.
  - HarryHirsch 10y ago
    A lot less than Sweetbriar and much more like Virginia Commonwealth University. Stanford and MIT will be fine, the University of California won't be. Sweetbriar: https://www.nytimes.com/2015/04/23/fashion/the-independent-women-of-sweet-briar.html https://www.nytimes.com/2015/04/23/fashion/the-independent-w... The very top will survive the cuts in federal funding, but research at lower tiers won't survive. The larger sectarian colleges will survive, the smaller ones will die. Notre Dame will remain, Seton Hall and the Franciscan University of Steubenville will go away, that's a good thing.
madenine 10y ago
Its going to be a really rough bubble. There's no one source to point the finger at, but we've got ourselves in a spiral where: -More people are going to school -University costs have skyrocketed (mostly due to expanded administration services), which has increased the need for students to secure loans -Wage growth has been low/flat for a long time -A college degree has replaced a high school diploma/GED as a minimum requirement for most middle class jobs -New grads are coming out of school to lower paying jobs relative to the cost of their education than ever before, driving defaults. -As college matriculation becomes more and more necessary, even great high schools pivot towards a goal of getting students into college, instead of providing them great educations which have a secondary effect of getting them into college. Further decreasing the value of high school as someone's highest degree of education. The last one is very worrisome for me, and something I hear a lot about. I have family and friends who are college professors - even those at ivy league universities are saying their students are just as smart as before, but on average now they're not as generally educated and way less prepared for serious academic work. They can't handle the same work loads, don't write or research as well, require more oversight/direction - things like that. How do you fix that without blowing everything up and probably destroying the lives for a huge group of people who's only crime was being born in a certain set of years? Not to mention the economic implications of an entire generation going into middle age already carrying massive debt - how are they going to generate asset wealth?

muhfuhkuh 10y ago

Ironically, the head of the Dept. of Ed. invested over a hundred million dollars in a debt collection agency that tacks on these usurious fees and rates.

bluejekyll 10y ago
I don't think that's irony. That is corruption.
eli_gottlieb 10y ago
That's not ironic; it's just evil.

UpDownLeftRight 10y ago

There's a trillion dollars of liability we're talking about. I'm OK with some forgiveness, but if and only if the Government gets out of the student loan business. (Watch tuition drop like a rock if this happens!)

dkrich 10y ago
And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Essentially move the 100% of the risk that borrowers currently have and move a nice portion of it to the lenders so they both bear the burden of the loans can't be repaid. Imagine if banks had zero risk when providing home loans. I don't think it would be too difficult to buy a house you couldn't afford and quickly the price on homes would be driven up. The student loan industry is so completely fucked and needs to be reformed before it ruins our economy.
- DrScump 10y ago
  And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Then why would the loan companies do student loans at all except at exorbitant rates (thereby making the responsible students pay more for those who aren't excluded altogether)?
  - dkrich 10y ago
    They wouldn't. That's the point. You shouldn't be able to borrow $150k+ without some collateral or a 20% down payment. I believe that if this happened, you'd see tuition rates plummet. But it won't until some catastrophic economic event occurs because the student loan industry is predatory and corrupt. Essentially ruining people's lives by selling them a lie in the name of "investing in your future."

brogrammer2 10y ago

Sometimes I do wonder why American Universities charge exorbitant tuition fee? Education being the bedrock of an advanced society, isn't but natural the developed economies like US should be able to subsidize education to such an extant that youth of country don't have to worry about paying their tuition fee and focus more on learning and innovation that will take everyone forward. It is but a reflection on the sad state of affairs that our higher education system has fallen into!! What do you people think?

brianwawok 10y ago
> Sometimes I do wonder why American Universities charge exorbitant tuition fee? Students demand a lot. Good profs. Dorms with AC. Sports teams. Medical care. All that cost a lot. States and federal gov't pays less each year. The difference has to come from somewhere? In any case, its not perfect but I will take US colleges 100x over Japanese Colleges or Chinese Colleges or Mexican Colleges or 98% of the colleges in the world.
- WaxProlix 10y ago
  Sports teams are generally a net positive. You and I see the $3.5M salary for a football coach at a public university and think it's absurd, but the football program itself pulls in tons of cash directly and indirectly and is probably more than 'worth it' to the school overall. edit: Looks like this is generally wrong. I'll leave it up but see below comment.
  - brianwawok 10y ago
    I hear that sound byte (bite?) here a lot. It does not seem to be true based on the news I read. Perhaps you have better sources than I. From what I see, 20 out of 1,083 NCAA schools made money on sports. The other 1,063 lost money. http://www.ncaa.org/about/resources/media-center/news/athletics-departments-make-more-they-spend-still-minority http://www.ncaa.org/about/resources/media-center/news/athlet... Only 24 FBS schools generated more revenue than they spent in 2014, according to the NCAA Revenues and Expenses of Division I Intercollegiate Athletics Programs Report. That figure jumped from 20 schools in 2013, but it has remained relatively consistent through the past decade. Don't forget to account for scholarships. You are giving free tuition to the football team, ladies soccer team, lacrosse team, ladies cross country, swimming, etc. etc. etc. http://www.politifact.com/virginia/statements/2014/dec/22/jim-moran/moran-says-only-20-colleges-make-profit-sports/ http://www.politifact.com/virginia/statements/2014/dec/22/ji... Only two sports were profitable at FBS schools, according to the report. Football programs netted a median profit of slightly more than $3 million and men’s basketball netted a median $340,000. But the profits at most schools quickly vanished after paying for a long list of other intercollegiate teams, all of which lose money. The median loss among of athletic departments was $11.6 million.

throwaway2016a 10y ago

I've always wondered if the fact we make it so essentially students are forced to repay their student debt (even if they are otherwise insolvent) contributes to higher cost of education. After all, you have a captive market that has to buy your service or deal with a higher risk of unemployment and a lending institution that doesn't take on any risk. What if we let students default on their loans? My bet: - Less people will go to college (not necessarily a bad thing) - The cost of college will go down because the demand is stifled If the government works to guarantee you will get paid, you can charge whatever you want and that might be what we are seeing.

LeifCarrotson 10y ago
Absolutely. There are three parties here: Schools, students, and lenders. Schools set the price based on what they can get students to pay, which is a function of the willingness of lenders to give the students money. Lenders approve borrowing students based on their likeliness to repay, which is currently very large due to the legal framework. Students select college programs and loans based on a convoluted mix of 17-year-old wisdom, well-meaning advice suggesting they pursue their dreams, their ability to get the loan, and a hazy idea of future employment, income, and repayment. It's obvious that increasing the penalties to the students after graduation is about the least effective measure you can take. If students were allowed to discharge student loans through bankruptcy, that would still be a hefty penalty. Lenders would be less willing to give them money. With less money available, schools would have to charge less.

cromwellian 10y ago

Costs of increased military spending in Trump's budget: $54 billion Estimated costs to make college tuition free for every citizen: $62 billion

rsync 10y ago
Cost of second Iraq War = 2+ Trillion and counting: https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War
- deleted 10y ago
  [deleted]
aianus 10y ago
> Estimated costs to make college tuition free for every citizen: $62 billion How? There are ~20 million Americans enrolled in college so $62 billion is only $3,000 per person. In comparison, the US spends about $12,000 per year per high school student.
- jsmeaton 10y ago
  I'm not disagreeing, but presumably at least some portion of those expenses would be paid back in some way. The Australian model has the government provide the student loan. The interest rate is fixed to CPI and repayments are garnished directly from salary provided you earn over a certain amount (something like 50k). Students also get discounts via copaying which was about $500 per year from memory. The government obviously never breaks even directly from this scheme. I think they've begun to exclude certain degrees that don't have good prospects which is a big debate at the moment.
grogenaut 10y ago
Not a correction but I'd point out that if uni was free, it would cost more than $62 Billion as more people would go.
- 10y ago

neves 10y ago

This USA student loan scheme is one of the most brilliant machines of social control ever devised. People get of college already owing a lot money, now they have to work for shit, and put up with their asshole bosses do. They can't have the option to spend couple of months searching for jobs or they will have to default their debt and mess all their future life. Nothing like a well behaved society where the workers can't complain. Brilliant!!

AlexCoventry 10y ago
"...a cynic might argue that we haven't really abolished slavery; we've just relabeled it. The cynic would have a point: an ancient Greek would certainly have seen the distinction between a slave and an indebted wage laborer as, at best, a legal nicety." https://books.google.com/books?id=lliTBQAAQBAJ&pg=PT275 https://books.google.com/books?id=lliTBQAAQBAJ&pg=PT275
- ryanmaynard 10y ago
  Thank you for the citation; I've ordered the book. Would you happen to have any other book recommendations on the topic, or adjacent topics?
  - AlexCoventry 10y ago
    Bailout by Neil Barofsky is very good. https://www.amazon.com/dp/B00818J57W https://www.amazon.com/dp/B00818J57W For critical responses to Graeber's book, the Crooked Timber seminar on it is well worth reading. http://crookedtimber.org/category/david-graeber-debt-seminar/ http://crookedtimber.org/category/david-graeber-debt-seminar...
  - AlexCoventry 10y ago
    Also, Soros's The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, though Graeber's book is what really brought Soros's claims into focus for me. https://www.amazon.com/dp/B004HKIFR4 https://www.amazon.com/dp/B004HKIFR4

hermitdev 10y ago

Good. I paid the $120K for my education and co-signed a loan for a friend (big mistake) for $10k for her education that I ended up paying off because she was a dead beat. There has been a huge disturbing trend in the US in the last 30 years or so: you're not responsible for your actions; it's always some one else's fault. You choose to go to a high priced school and study something that offers no marketable skills or is hyper competitive and only a few positions exist, why should I, as a taxpayer, fund that? - that is your choice. I wanted to study physics, because I love the subject, but when I entered college, I evaluated that my job prospects were low, especially with merely an undergrad degree. Instead, I studying electrical & computer engineering, and I paid off my student loan debt 4 or 5 years after leaving college.

dikdik 10y ago
So you are against the ability for people to declare bankruptcy then? Many boomers that spent beyond their means and lost their homes in 2008 were able to walk away from their loans. While they had a house to "give back", that asset probably lost 50-300K depending. Many people every year get expensive medical care and are unable to pay it off. They cannot "give back" a medical procedure, so the cost is written off and/or they declare bankruptcy. This negatively affects everyone else that pays for healthcare. But when it comes to education, it's a different story? I have a feeling the different story is: educational debt primarily effects the young, housing/medical debt primarily effects the older generations. Educational debt used to be like other debt, but then the boomers went to college and got into positions of power...

jmcdiesel 10y ago

I guess I'm just simpleminded and think that you should just pay your debt that you agreed to acquire..

masonic 10y ago

Two things to note on this: 1) the Obama policy (not even official administrative rule with any weight of enforcement, just a memo with a veiled threat of negative attention if flouted with any frequency) was only in place for his last 1.5 years. This letter just pulls that back to the first 6.5 years of his reign. 2) Note this quote: "The withdrawal of the Obama administration memo arrives the same week as a report from the Consumer Federation of America (CFA) showing that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. " In other words, after this rule was put in place, millions of loan recipients stopped making any payment altogether and 14% more entered default despite added mechanisms for avoiding default. This article doesn't even go into the huge taxpayer bailout of students of closed and failing for-profit diploma mills[0]. It was an unprecedented windfall for those affected, the entire debt was forgiven, they took no hit on their credit, and the debt forgiveness wasn't counted as income by the IRS (like debt forgiveness normally works). Taxpayers paid for it all. It was a great buy-off of new voters. An obvious small mitigation would have been to instead have their debt applied against a replacement degree program (e.g. you owe $20,000, you go to a new school at $10,000 tuition per year, then your first two years' tuition payments wipe out that debt, with interest charges stopped while in school). [0] https://www.usnews.com/education/blogs/student-loan-ranger/2015/12/09/pursue-a-federal-student-loan-discharge-as-a-victim-of-college-fraud https://www.usnews.com/education/blogs/student-loan-ranger/2... [EDIT]: Here is the original Obama FFEL memo: https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf