10 ms·

> Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of High

> Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of Higher Education Resources, a lobbying group that represents student debt collectors and servicers. That means the Education Department is paying its debt collectors up to $1,710 per borrower to collect around $45, regardless of whether the borrower continues to make her payments. In other words, the government is paying through the nose in order to artificially reduce actual default numbers.

astrodust 9y ago
Here (Canada) you can get your loan forgiven if you can plead your case. This only applies to government loans and not private ones made directly through banks. Tuition fees are still outrageous compared to what they used to be, the subsidies are slashed to nearly nothing, but at least you're not going to be bled dry if you can't get a job when you graduate.
- jzwinck 9y ago
  Don't you see the connection? School fees are high partly because people can get free money to pay them. This of course screws the people who do not take the free money by defaulting on loans.
  - StudentStuff 9y ago
    Pretty much, why is an "inexpensive" college over $12k a year, with community colleges charging upwards of $7k a year? Seems crazy that the minimum you can spend on college is $40k, how is that accessible to the average person?
    - misingnoglic 9y ago
      Financial aid, scholarships, and Federal loans (to an extent) help a lot for sure.
    - tw04 9y ago
      Well, when you consider the average car price in the US was $33k in 2016, it doesn't seem that unreasonable.
      - HarryHirsch 9y ago
        Average car or average new car?
      - notimetorelax 9y ago
        I doubt that students: 1. Have money to buy a new car 2. Can buy a new car every year
        labster 9y ago
        They could buy a new car every year if they give up avocados. But you know college kids, they're all high on guac.
        chillwaves 9y ago
        While that comment is ridiculous, I live where the cost of avocado spread on toast is around $6 after tax and a cup of coffee is around $4-5 after tax. The point is not entirely without merit. This is a major city but not like SF or somewhere crazy.
        quickben 9y ago
        That was a story that I found outrageous. I recall my distant relative and another few of my friends got a house here in Toronto when they were 1/4 - 1/3 of what they are now. All while their salary being maybe 10% less. And then the older generation starts lecturing us... Completely disconnected with the current reality.
        randomdata 9y ago
        Of course, the houses were cheap back then because it was a petty undesirable place to be. Incremental change tends to be less noticeable if you see it every day, but as someone who visits Toronto just a handful of times per year it blows me away how much the city has changed in even just the last 10 years. Once old and run down neighbourhoods that I wouldn't ever want to live in are now highly desirable places to be. While I'm a bit too young to have much perspective on the situation 20-30 years ago, from what I've learned from those who lived in those neighbourhoods back then, it was even sadder and even scary to live there. I am surprised they were only 1/4 of what they are now.
  - koolba 9y ago
    Not partly, it's single handedly responsible for it.
    - pmiller2 9y ago
      No. Pretty much every aspect of higher education is subject to some degree of Baumol's cost disease, as well.
      - danjayh 9y ago
        Not completely true. With the advent of ScanTron, Blackboard, online tests and quizzes, etc. much of the 'manual' work of teaching can be automated. Couple this with online classes, and one professor can run WAY more sections of a class than he could if he had to physically teach all of these classes. Even with in-person lectures and automated grading, labor productivity has increased dramatically in the last decade or two.
        pmiller2 9y ago
        It is true that "running sections" has gotten more efficient, but that has nothing to do with education. Lectures have repeatedly been shown to be the worst method of teaching, and being able to speed up exam grading does nothing for that. It's also impossible for our lone professor to grade homework in a mega-section without an army of TAs (who cost money).
        chongli 9y ago
        Baumol's cost disease concerns jobs whose labour productivity does not increase. It's obvious that teaching has increased in productivity. So where is the money going? Administration and capital expenditure. Universities compete for the top students. They spend huge amounts of money on elaborate buildings and fancy landscaping. They hire more and more staff to run these facilities and cater to students' every little need. The pool of top students is limited, making this a zero-sum game. This is why tuition keeps going up.
  - astrodust 9y ago
    The connection is that as subsidies have dropped, fees have skyrocketed. When I was in school the tuition was $3500/yr. and I was in one of the most expensive programs in the whole university. I knew people in other programs paying as little as $2000/yr. Foreign students, who didn't receive any subsidies, paid about $19,000 for the same thing. That was the kind of money you could easily make over the summer even at a mundane job if you were careful about saving. Now for a basic arts degree get ready to fork out $10,000 or more. Some CS people are paying $16K a year. I'm not sure how you'd come up with that kind of scratch except with a student loan. Education is not something that should be driven by demand pricing. Of course there's demand for education, society demands it, and as such, society should help offset the costs. Would you rather live in a place where half the people had a university education or where half the people had barely finished high school?
rama_dan 9y ago
> In other words, the government is paying through the nose With our money, one might add.
the_why_of_y 9y ago
No, the government is paying private contractors to advise debtors, which is a market-based approach utilizing efficient private enterprise. Hence the 38 to 1 ratio is quite obviously the most efficient that can be done - this is just economics 101. Just imagine if the government would simply employ people to advise debtors directly, how inefficient that would be, how unhelpful the advice would be, how much money would be wasted! They'd probably spend more money on that bureaucracy than what little revenue they'd bring in!
- chillwaves 9y ago
  I too am thankful for the efficiency of the market. Contracting works a lot like this as well. Efficiency uber alles, as I like to say.

astrodust 9y ago

Here (Canada) you can get your loan forgiven if you can plead your case. This only applies to government loans and not private ones made directly through banks. Tuition fees are still outrageous compared to what they used to be, the subsidies are slashed to nearly nothing, but at least you're not going to be bled dry if you can't get a job when you graduate.

jzwinck 9y ago
Don't you see the connection? School fees are high partly because people can get free money to pay them. This of course screws the people who do not take the free money by defaulting on loans.
- StudentStuff 9y ago
  Pretty much, why is an "inexpensive" college over $12k a year, with community colleges charging upwards of $7k a year? Seems crazy that the minimum you can spend on college is $40k, how is that accessible to the average person?
  - misingnoglic 9y ago
    Financial aid, scholarships, and Federal loans (to an extent) help a lot for sure.
  - tw04 9y ago
    Well, when you consider the average car price in the US was $33k in 2016, it doesn't seem that unreasonable.
    - HarryHirsch 9y ago
      Average car or average new car?
    - notimetorelax 9y ago
      I doubt that students: 1. Have money to buy a new car 2. Can buy a new car every year
      - labster 9y ago
        They could buy a new car every year if they give up avocados. But you know college kids, they're all high on guac.
        chillwaves 9y ago
        While that comment is ridiculous, I live where the cost of avocado spread on toast is around $6 after tax and a cup of coffee is around $4-5 after tax. The point is not entirely without merit. This is a major city but not like SF or somewhere crazy.
        quickben 9y ago
        That was a story that I found outrageous. I recall my distant relative and another few of my friends got a house here in Toronto when they were 1/4 - 1/3 of what they are now. All while their salary being maybe 10% less. And then the older generation starts lecturing us... Completely disconnected with the current reality.
        randomdata 9y ago
        Of course, the houses were cheap back then because it was a petty undesirable place to be. Incremental change tends to be less noticeable if you see it every day, but as someone who visits Toronto just a handful of times per year it blows me away how much the city has changed in even just the last 10 years. Once old and run down neighbourhoods that I wouldn't ever want to live in are now highly desirable places to be. While I'm a bit too young to have much perspective on the situation 20-30 years ago, from what I've learned from those who lived in those neighbourhoods back then, it was even sadder and even scary to live there. I am surprised they were only 1/4 of what they are now.
- koolba 9y ago
  Not partly, it's single handedly responsible for it.
  - pmiller2 9y ago
    No. Pretty much every aspect of higher education is subject to some degree of Baumol's cost disease, as well.
    - danjayh 9y ago
      Not completely true. With the advent of ScanTron, Blackboard, online tests and quizzes, etc. much of the 'manual' work of teaching can be automated. Couple this with online classes, and one professor can run WAY more sections of a class than he could if he had to physically teach all of these classes. Even with in-person lectures and automated grading, labor productivity has increased dramatically in the last decade or two.
      - pmiller2 9y ago
        It is true that "running sections" has gotten more efficient, but that has nothing to do with education. Lectures have repeatedly been shown to be the worst method of teaching, and being able to speed up exam grading does nothing for that. It's also impossible for our lone professor to grade homework in a mega-section without an army of TAs (who cost money).
      - chongli 9y ago
        Baumol's cost disease concerns jobs whose labour productivity does not increase. It's obvious that teaching has increased in productivity. So where is the money going? Administration and capital expenditure. Universities compete for the top students. They spend huge amounts of money on elaborate buildings and fancy landscaping. They hire more and more staff to run these facilities and cater to students' every little need. The pool of top students is limited, making this a zero-sum game. This is why tuition keeps going up.
- astrodust 9y ago
  The connection is that as subsidies have dropped, fees have skyrocketed. When I was in school the tuition was $3500/yr. and I was in one of the most expensive programs in the whole university. I knew people in other programs paying as little as $2000/yr. Foreign students, who didn't receive any subsidies, paid about $19,000 for the same thing. That was the kind of money you could easily make over the summer even at a mundane job if you were careful about saving. Now for a basic arts degree get ready to fork out $10,000 or more. Some CS people are paying $16K a year. I'm not sure how you'd come up with that kind of scratch except with a student loan. Education is not something that should be driven by demand pricing. Of course there's demand for education, society demands it, and as such, society should help offset the costs. Would you rather live in a place where half the people had a university education or where half the people had barely finished high school?

rama_dan 9y ago

> In other words, the government is paying through the nose With our money, one might add.

the_why_of_y 9y ago

No, the government is paying private contractors to advise debtors, which is a market-based approach utilizing efficient private enterprise. Hence the 38 to 1 ratio is quite obviously the most efficient that can be done - this is just economics 101. Just imagine if the government would simply employ people to advise debtors directly, how inefficient that would be, how unhelpful the advice would be, how much money would be wasted! They'd probably spend more money on that bureaucracy than what little revenue they'd bring in!

chillwaves 9y ago
I too am thankful for the efficiency of the market. Contracting works a lot like this as well. Efficiency uber alles, as I like to say.