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Why should lenders not be punished for financing the useless degree? After all the availability of easy financing drives up the price of the useless education.

Why should lenders not be punished for financing the useless degree? After all the availability of easy financing drives up the price of the useless education. Remember, the "moral hazard" spoken of in financial bailouts is that the lenders aren't being punished for taking bad risks.

asabjorn 10y ago
I agree. A little bit more demand constraint for taking out debt for degrees that provide little opportunity return would be great. Would save a lot of people from great stress.
gibbitz 10y ago
I wish I would have been turned down for the loans that paid for my MFA. I'll be paying $450/month until I'm in my 10th year of retirement on that loan. But then again, the school that I went to would probably not exist if it weren't for these loans (Graduate Art School). Considering the caliber and notoriety of the graduates of this university, national culture would suffer as a result of these regulations. I have to agree that somehow the risk and the student's motivation and achievement are inversely related though there was never any inquiry into my records in the process outside of verifying that my university was on the up-and-up. But beneath this is a more fundamental question. Why can't we as a country afford the things that are important (our health, our education and our homes) when we make so much more than the developing world where they have the same basic needs? What have we actually gained (aside from creature comforts) from our high incomes as it relates to living our lives. We're borrowing money to pay for almost everything and then paying the interest the rest of our lives.
hermitdev 10y ago
Much like the housing collapse, banks have been mandated to finance to people that can't afford it for student loans. The blame doesn't solely lay with the banks. The government is at least equally to blame.
- scarface74 10y ago
  That banks were "mandated" to finance people who couldn't afford housing is nothing more than a conservative talking point. The risky loans that banks took on -- no doc loans, interest only loans, negative amortization loans, sub prime high interest loans -- were "non conforming". "Non conforming loans" by definition were not government backed loans. People who were taking advantage of those loans generally fell into a few categories. Investors who were buying real estate to flip. People who were getting houses appraised at more than they were worth and were illegally getting cash out and people with money that were buying over priced houses to live in but to sell later.

asabjorn 10y ago

I agree. A little bit more demand constraint for taking out debt for degrees that provide little opportunity return would be great. Would save a lot of people from great stress.

gibbitz 10y ago

I wish I would have been turned down for the loans that paid for my MFA. I'll be paying $450/month until I'm in my 10th year of retirement on that loan. But then again, the school that I went to would probably not exist if it weren't for these loans (Graduate Art School). Considering the caliber and notoriety of the graduates of this university, national culture would suffer as a result of these regulations. I have to agree that somehow the risk and the student's motivation and achievement are inversely related though there was never any inquiry into my records in the process outside of verifying that my university was on the up-and-up. But beneath this is a more fundamental question. Why can't we as a country afford the things that are important (our health, our education and our homes) when we make so much more than the developing world where they have the same basic needs? What have we actually gained (aside from creature comforts) from our high incomes as it relates to living our lives. We're borrowing money to pay for almost everything and then paying the interest the rest of our lives.

hermitdev 10y ago

Much like the housing collapse, banks have been mandated to finance to people that can't afford it for student loans. The blame doesn't solely lay with the banks. The government is at least equally to blame.

scarface74 10y ago
That banks were "mandated" to finance people who couldn't afford housing is nothing more than a conservative talking point. The risky loans that banks took on -- no doc loans, interest only loans, negative amortization loans, sub prime high interest loans -- were "non conforming". "Non conforming loans" by definition were not government backed loans. People who were taking advantage of those loans generally fell into a few categories. Investors who were buying real estate to flip. People who were getting houses appraised at more than they were worth and were illegally getting cash out and people with money that were buying over priced houses to live in but to sell later.