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More Americans Are Falling Behind on Student Loans, and Nobody Quite Knows Why

• quuquuquu 9y ago
  >unemployment is low Yes, but many people have been designsted as "having stopped looking for work", which means the statistic doesn't count them. Additionally, those who are employed perhaps are underemployed, working as an Uber driver or bartender or chipotle or etc. >the economy has improved For the top 6% of Americans that are millionaires, it absolutely has improved. Most of their income is from capital gains, dividends, and business equity. The average person with student loans has almost none of these things. They are relying on a wage from a job that requires them usually to pay rent, own a car, buy a monthly transport card, and so on. When you are only making $1400-2000 per month after tax, and $1,000 of that is out the door on work-related expenses alone (rent, transport, insurance, phone), there isn't much left over for a $300 per month student loan payment. Disclaimer: Don't shoot the messenger. These are merely my thoughts on what is happening. Please reply with criticism.
  • deleted 9y ago
    [deleted]
  • miketery 9y ago
    Well put. It's always nagged me how we can say the economy has improved without taking the distribution into account. It's like saying one person gained five bucks and three people lost a dollar. Sure there is two more dollars but the community/society isn't necessarily better for it.
    • derekp7 9y ago
      It used to be that when someone at the top got a bit richer, they would invest that money. Which meant opening up a factory, creating jobs as a side effect. Now, it seems the better investments happen to be things that don't create as much jobs.
      • tiggybear 9y ago
        Well why would anyone invest in companies that cater to the middle and lower classes? Those people don't have any money to spend.
  • seanmcdirmid 9y ago
    Those numbers are all computed, and they've all been getting better as core unemployment has (that is, they are trending together). The only number that is getting worse is the number of people retiring out at 65/67. I do agree that we have to look more at wealth equality to see what's going on.
  • bmh_ca 9y ago
    For further reading on this, look to articles about how the Phillips Curve (the theoretical link between inflation and underemployment) is broken (if it ever worked). e.g. http://www.cbc.ca/news/business/inflation-canada-outlook-1.4167888 http://www.cbc.ca/news/business/inflation-canada-outlook-1.4...
    • tpeo 9y ago
      The Phillips Curve, at least in it's older formulations, was just a description of a certain regularity in the data. So it isn't a "theoretical" link, strictly speaking.
  • tpeo 9y ago
    Besides all that, I'd add that the unemployment rate is an aggregate measure. There's no guarantee that the unemployment rate for arbitrary subsets of the population (e.g. college graduates) is the same as the aggregate unemployment rate defined over the whole population. So, supposing that college educated workers actually were more likely to be unemployed than the average worker (they aren't), looking at the national unemployment rate would be just ... looking at the wrong place. But here's a "nice" graph (the graph is nice, but the trend is worrying): https://fred.stlouisfed.org/series/LNS11327662 https://fred.stlouisfed.org/series/LNS11327662. Labor force participation for college educated workers fell by 3.9 percent points since 2009. This is rather massive compared with the actual unemployment. I really wish the people at statistics offices would come up with some new measure of unemployment. Sometimes I feel a scalar doesn't cut it.
  • bmcusick 9y ago
    This, exactly. I don't know why you're getting down-votes. It's indisputable that both (1) the economy improving on average and (2) the distribution of those gains is highly skewed to the right-side of the income/wealth table. Stories based on average numbers lose a great deal of the details that matter.
    • quuquuquu 9y ago
      Completely agree, especially when the USA has nearly 330 million people! Last year according to credit Suisse, the median wealth of the typical American actually /decreased/! And if I remember correctly, it was by quite a sizeable chunk, from 49,000 usd to 45,000 usd. And the median excludes children, so it is adults only. I have all the statistics in the world to back up what I'm saying, but even more important for me is anecdotal stuff that inspires me to dig deeper. When you see the sheer number of young kids working chipotle or retail; when you see the demographics of uber drivers vs big 5 software engineers; when you realize that so much of the wealth in the US is old money that continues to centralize, pool, and grow (much like gravity); when you realize all that, at the very least, it makes you say "hmmm... I need to rethink and dig deeper into this topic on my own".
  • H1Supreme 9y ago
    The amount of people I know with degrees who work in retail, or something completely unrelated is staggering. From my observations, I'd guess "underemployment" is the biggest contributor to the late payments. This is just another example of why I urge any young people I know (high school age) to think long and hard before choosing to go to a 4 year college. When I graduated high school in 99', we were primed to think "college degree == good job". Of course, that is anything but the truth. And, it only serves to put someone in serious debt without any guarantees. Hands on technical jobs like electrician, plumber, welder, are many times more lucrative than some bullshit business degree. A friend of mine's son is 22 or 23, and making a hell of a living welding. Granted, he's exceptional at it. But, that doesn't change the fact that his 2-year trade school investment was a good one. Or, teach yourself a skill. Like lots of us on here, I'm a self taught programmer. It took years of doing small projects in the evenings, but I make a living from it now with $0 in student loan debt.
    • gbacon 9y ago
      The key is a marketable college degree. In fields such as aerospace and defense where the credential is the key to open the door, get the credential as cheaply as possible. Do a couple of years at a community college and then finish at a state school. Name-brand degrees bring no extra value. Oh yeah, and get your master’s while you’re still in the zone. The idea that trade school somehow is lower tier or oppressive is a staggering disservice. Just like every college-bound high schooler is not med school material, not every high schooler is college material. Put a wrench or saw or blowtorch in the hands of a doctor or engineer, and crummy is the likely result. Skilled trades are an honorable, respectable way to earn a good living. Forcing people into tracks for their own supposed good but where they feel hopeless is horrible social engineering.
      • KekDemaga 9y ago
        Not only what you said, trades can also lead you down a path of owning your own business. If that is the direction you go often you can exceed the incomes of the college educated quite handily.
  • coldtea 9y ago
    > Yes, but many people have been designsted as "having stopped looking for work", which means the statistic doesn't count them. Additionally, those who are employed perhaps are underemployed, working as an Uber driver or bartender or chipotle or etc. Yes. In most countries I know of, employment statistics are more about making economy/government look good and hitting targets, and less about giving any real numbers that people can use to understand the big picture.
  • lucozade 9y ago
    > which means the statistic doesn't count them They do, they're called "not in labor force" [0] If you include the unemployed as well as those who want a job but aren't actively looking, it's around 5% which is considered low. But the point of the article is that the unemployment rate is moving in the opposite direction to the arrears rate. Unless the basis for these figures has changed recently, this would require that an abnormal number of graduates aree becoming less emlpoyed while an abnormal, and larger, number of grads are becoming employed. Seems unlikely. > ...perhaps are underemployed Are you sure? I'm not totally familiar with the exact counting mechanism in the US but, in the UK, if someone is in part-time work but is looking for more hours or full-time work, then they count as unemployed, not employed. [0] https://www.bls.gov/cps/cpsaat35.htm https://www.bls.gov/cps/cpsaat35.htm
  • astura 9y ago
    TFA mentions that underemployed people can get income based payments matched to their earnings.
• Overtonwindow 9y ago
  Is it possible that some graduates are realizing that for all that money, their education was not what they were promised, and a bit of resentment has led them to make the decision not to pay?
  • mdorazio 9y ago
    I feel like it might actually be somewhat socially related as well. If people see that their friends/coworkers with large student loans are simply deciding not to pay and nothing horrible is happening to them while at the same time they are living more extravagant lifestyles with the student loan money they're not paying, that's an encouragement to not pay yourself as well. Pair this with the last administration taking steps to limit student loan repayment responsibilities (William D. Ford Direct Loan program), and it starts looking like maybe not paying your loans off is a pretty decent option.
    • macawfish 9y ago
      Extravagant? Is this related to avocados?
    • bilbo0s 9y ago
      I don't know man? Social pressures are more complicated than that, and they come from many different directions. I mean, in the hip-hop world, "I Finished Paying Sally Mae Off!" is one of the top rated songs right now. And listening to that song, it's clear that the rapper had fallen behind on his loans from time to time. So if that "pay it off" attitude has made it down to the hip-hop world, it must be prevalent in the larger society as well. And that's just one "for instance" when you're talking about social pressures around student loans other than the desire to walk away from them.
      • jelly 9y ago
        Alternatively, perhaps fully paying off your loans has become such an unusual thing that it has joined the ranks of "things rappers brag about in their lyrics"
      • 9y ago
• j_m_b 9y ago
  Due to government involvement, there is a lack of a true market pressure when student loans are underwritten. Not surprising in the least that this bubble is starting to pop.
  • ep103 9y ago
    This is such a silly meme. Its not "due to government involvement." Its "due to the manner of government involvement." Loans that are guaranteed by the government, for all students, that can't be discharged by bankruptcy, is an idea clearly put together by lenders. If we wanted government subsidies for private education, there are plenty of alternatives. Here's one: government guaranteed loans for all students; but repayment of those loans is capped as a percentage of the person's income, and interest rate is capped well beneath that. This would allow the government to subsidize students to go to college, while providing market pressure against universities raising their tuition yearly. It would also allow students who went to expensive institutions to pursue careers that aren't at the top of the financial spectrum, like, say, teaching.
    • frgtpsswrdlame 9y ago
      Or we could make public college free, just like we did with high school.
      • gbrown 9y ago
        That's far too direct and obvious, we prefer expensive, obfuscated "solutions" here.
      • deleted 9y ago
        [deleted]
      • krapp 9y ago
        You need to remember what country "we" are discussing, and adjust your expectations accordingly.
      • KekDemaga 9y ago
• mikeash 9y ago
  Have they actually investigated? I see a lot of speculation in this article, but if it's actually important to know, shouldn't they go find out?
• jaclaz 9y ago
  In a nutshell, as a generic reasoning, say that a few years ago the student loan was about US$ 100,000 and once you got the degree you had - on average - a higher pay of around US$ 10,000 per year (net). You could repay it in 10 years time while living at the same level of your non-graduated friends. Now say that the student loan averages US$ 150,000 and - still on average - the increase in annual wages is US$ 7,500 (net). So you can either: 1) live as before BUT repay it in 20 years instead. 2) live at a 7,500 US$/year lower level than your friends and still repay it in 10 years. 3) live at a 7,500 US$/year (or 10,000 or 15,000) higher level and never repay it. I suspect that besides the lessened "value" of the university degree on the labour market, there is also an increased number of people that choose option #3 over option #2 or #1 (whether out of need or because of other reasons doesn't really matter).
  • fhood 9y ago
    Speaking of lessened "value" of degrees, University's need to be held accountable for some of the debt that they are encouraging students to take on. For example, at my public university, STEM students were charges several thousand dollars a year more than humanities students. STEM programs also did their best to discourage enrollment. Meanwhile the anthropology department is literally begging students to stay and get a masters or phd with them.
    • tyrw 9y ago
      Why should this be the case? They offer a service with hundreds of competing options (other schools), so it's hard to argue they're not offering market rate.
      • fhood 9y ago
        Do they though? Do public universities really have competition? Maryland has College Park and not much else. All the other public schools are much much smaller, and generally lower quality.
        • Godel_unicode 9y ago
• empath75 9y ago
  The reason is that people have been spending absurd amounts of money on worthless degrees and can’t afford to pay them back.
  • cwkoss 9y ago
    Would be interesting to see a breakdown of repayment rate by major
    • maxk42 9y ago
      And also graduation rate.
• qntty 9y ago
  The share of Americans at least 31 days late on loans from the U.S. Department of Education ticked up to 18.8 percent as of June 30, up from 18.6 percent the same time last year Is this newsworthy?
  • bigheadpercoli 9y ago
    The uptick isn't. But if 1/5 student loans are more than 30 DPD, that will be a problem.
    • tyrw 9y ago
      Honest question: why is 1/5 that much more of a problem than 18.8%?
      • bigheadpercoli 9y ago
        ~18.8% is roughly 20% or every fifth student loan in the country. If 20% of your portfolio can't repay it's debt that's usually a bad portfolio. In a simplified model : Assume you give 100 dollar to five people with the intent to earn 5 dollar on interest of each (total 25 dollar interest income.) If now one of them can't pay back the 100 dollar you lose the 100 dollar and the five dollar interest income. So instead of 25 dollar income you get (20-100-5 = -85 dollar). To avoid this situation you start calling the guy (collections activities). Effecting your earnings again. Of course one months in arrears is not immediately the road to immediate doom, but it is an early warning indicator. Especially if you look into trends to understand the behavior of the portfolio. In this case the early-stage delinquencies have been improving since 2014 and starting 2017 reversed that trend. So if the trend continues this portfolio segment will grow again leading to more losses and collection activities.
    • godelski 9y ago
      Just for some perspective mortgage delinquency rages (90+ days overdue) were highest at 11.5%[1]. But there's a lot of factors to consider, so I wouldn't necessarily say this is the sign that the bubble is going to pop soon. [1] https://fred.stlouisfed.org/series/DRSFRMACBS https://fred.stlouisfed.org/series/DRSFRMACBS
• valj 9y ago
  From the article: "Department of Education ticked up to 18.8 percent as of June 30, up from 18.6 percent the same time last year, new federal data show." There's your answer - 0.2pp is totally insubstantial, which makes the title borderline clickbait. The economy doesn't uniformly grow or distribute wealth, so a change so small could just be from the distribution of college leavers in a particular year being overindexed towards sectors that aren't growing. Further to that point, it typically takes years for people to adjust their majors towards sectors of the economy that are particularly productive, so we shouldn't expect to see such a quick change in the numbers.
  • brewdad 9y ago
    I wouldn't say it's totally insubstantial. The economy is growing at some of the fastest rates we've seen since the beginning of the 21st Century. At the same time, delinquency rates are continuing to rise. If young people are still falling behind when times are "good" what happens to them during the next recession?
  • tdeck 9y ago
    Here are more depressing statistics: https://www.cbpp.org/research/state-budget-and-tax/funding-down-tuition-up https://www.cbpp.org/research/state-budget-and-tax/funding-d... tl;dr: States have been cutting back on funding public education even as it's gotten much more expensive every year.
    • Fomite 9y ago
      This. States slashed higher education spending during the recession, and it's not coming back. At the same time, federal grant money got tighter. Student tuition is literally the only dial left that can be moved.
      • pmorici 9y ago
        Have you considered that universities might be able to operate more cost efficiently? Purdue University has manged to freeze tuition for the past 5 years for example. https://www.purdue.edu/newsroom/releases/2016/Q2/purdue-plans-fifth-straight-year-without-tuition-increase.html https://www.purdue.edu/newsroom/releases/2016/Q2/purdue-plan...
• deleted 9y ago
  [deleted]
• rdtsc 9y ago
  A few reasons I can think of: * Wage garnishment is limited, maybe the ruined the credit score and the max % of garnished monthly paycheck (%15) is less than what they are already paying? * The type of majors and students background who graduated changed. Maybe universities 4 years ago decided to accept more students into majors which are having a hard time finding employment. Universities don't care, they just want more students with 6 figure approved loans to roll in. * It is possibly there was a hint or signal of debt forgiveness being implemented. It doesn't have to be true, just a rumor but it can start to self-perpetuate because people really want to believe it. * Also everyone is pretty connected these day via social media so maybe if someone bragged about not paying and "look a few months later, nothing happened to me" others might start thinking, hmm, well maybe it's ok. Certainly nobody wants to be left still paying like a fool if all their cool friend stopped and they still seem to be doing ok, kind of attitude.
• lasermike026 9y ago
  Banging my head against the table. Wages and benefits are too low, tuition is too high, cost of living is too high, and student loans are a scam. Tuition is a scam. http://studentdebtcrisis.org/ http://studentdebtcrisis.org/ The rent is too damn high! ;)
  • taw55 9y ago
    It's a rentier economy, by and for. Just don't actually tell anyone or you'll be labeled a crank.
• ghaff 9y ago
  As this other Bloomberg piece notes [1], it's probably useful to break out the type of school and degree when looking at debt. It's not clear that basic undergraduate degrees are an issue with ballooning debt as much as for-profit schools and graduate degrees that don't do much for employment prospects. (The latter not just being a case of "useless" degrees but professional degrees like MBAs and JDs from low-tier or even just non-top-tier schools.) [1] https://www.bloomberg.com/view/articles/2017-09-27/it-shouldn-t-be-so-easy-to-go-to-grad-school https://www.bloomberg.com/view/articles/2017-09-27/it-should...
• tbirrell 9y ago
  Serious question: Who loses out if all the student debt got canceled? Not the colleges, I assume, because they already got the tuition. And not the students. So would it be loan companies and the US government? Would such an action be catastrophic?
  • mholmes680 9y ago
    I think the "cancelling" action you're saying would be some way to pay the loan companies off with US govt funding. So, as a US taxpayer who is almost done paying his student loans, I lose out. Twice, i think.
  • Rainymood 9y ago
    I think this is kind of a nonsensical question but please feel free to correct me if I'm wrong. Imagine you and I agree to a deal, both verbally and contractually (i.e. on paper). I give you 10 euros and you pay me back 11 euros in exactly 1 year. Now 6 months into the deal you suddenly ask yourself: "Well who would lose out when this debt gets cancelled?" Do you see now why I think it is a nonsensical question?
    • tbirrell 9y ago
      Sure, it would seem obvious that the loaner is the one to lose out. The things it, I'm not sure who all the various loaners are these days or how much the economy itself would be affected by these people suddenly not having $1.3 trillion (or whatever the figure is these days) coming to them.
      • jononor 9y ago
        The question is can future students get any loans to finance their studies then (or at what rates/conditions? Good chance they would lose out too.
    • brianwawok 9y ago
      What happened if you sold the default risk as a swap to a 3rd party. Who loses now?
• user68858788 9y ago
  There are some pretty hostile laws against borrowers. A relatively recent one caps the tax write-off on interest at $2,500. Anyone who went to a private or out of state college will hit that cap easily.
• skc 9y ago
  They probably still have the latest Apple gear though.
• AutomationTool 9y ago
  This one is easy. People are buying things that they can't afford. Throwing it into a loan and then partying their way through school. Since that worked out so well, then they do that with their car, house, furniture, cell phones, and car rims. You aren't entitled to 100,000 dollar education. You aren't entitled to go down to Mexico every spring break. you aren't entitled to eat pizza and hit the bar every weekend. You aren't entitled to a college education. Go learn a trade, get scholarships, join the military, work for a company that will pay for your education, start your own business. Instate tuition at VA Tech is 13k for the year, if you live in Texas, UT is 4-5k a semester. While not cheap, this is far from unaffordable. I have zero sympathy for junior who goes to some 150,000 a year liberal arts college and gets a degree that makes no money or requires another 2-4 years of school.
  • Bjartr 9y ago
    What fraction of the 18.8% delinquent loans are held by people like those your describe? If you can't answer that you're only saying these things to disparage others to make yourself feel superior. You might as well have been complaining about avocado toast.
  • ghostbrainalpha 9y ago
    Everyone knows deep down you are right. Just like we know diamonds have no real value, and you shouldn't go into debt to buy an engagement ring or have a big wedding. But try offering your fiance a $5,000 bond instead of a fancy ring. It doesn't go well. Social pressure is a real thing, and colleges are taking advantage of all of us by setting up expectations for normal that we just can't afford. This is why I never really got behind Bernie's free college plan. We don't need the government to help make college free. We need to change why these costs are getting so out of control in the first place. How are people spending over 50k in the first two years of undergrad? Basically wherever you go the core requirements that first year or two are the same before you pick your major. We need to be leveraging the best teachers and online classes to bring these costs down, especially for your basic "Philosophy 101" class that you are just taking to test the waters.
  • user68858788 9y ago
• curun1r 9y ago
  A couple of question with answers we'll never get: - What is the breakdown across for-profit vs traditional school graduates? Are University of Phoenix grads defaulting at the same rate as ivy league grads? (obviously no, but the disparity would be good to know) - What are the statistics if you include SoFi (and other similar refinancers that cherry-pick borrowers most likely to repay) borrowers that get removed from the public numbers?
• didip 9y ago
  I will forever wonder why Americans don’t go to Europe to study higher education. I heard its much cheaper, if not free, there.
  • Jach 9y ago
    Is it really cheaper or free for non-Europeans? (http://exchangestudentworld.com/student/costs/ http://exchangestudentworld.com/student/costs/) Can it be easily done without going through an exchange service? Anyway, some other possible factors for why more Americans don't do it: not many European schools actually wanting them for various reasons (such as academic performance (or as sibling notes there may be an entrance exam), they're full enough with the locals, or would rather have non-American foreign exchange students), most Americans don't know a foreign language very well (and those that do are most likely to know only Spanish), most Americans stay in the same state of their birth, and lots of college students like being able to visit friends and family from their original location and that's a lot more difficult with an ocean in the way -- flights are expensive.
  • Mediterraneo10 9y ago
    Take Finland, a country has free education. Entering a university from the total beginning in Finland requires taking a highly competitive entrance exam, and the exam is in Finnish. How many 18-year-old Americans do you think can manage that?
  • morgtheborg 9y ago
    My sister did this. Not cheaper. Or at least St. Andrews wasn't :)
• shmerl 9y ago
  With constantly rising real estate prices, this is hardly surprising. Rent is crazy. Time to switch to free high education system.
  • Avshalom 9y ago
    Are there any recent studies that crunch the numbers on how much that would cost? Because as a debt free college grad earning ~16000 pre tax I'm still willing to commit a fair amount, call it 500 a year? but I have no idea if that's even close to enough if we assume it's progressive at the same rate as income tax.
    • shmerl 9y ago
      I'd be interested in that too. There are countries which implement it effectively.
    • dnautics 9y ago
      it may cost more than just dollars and cents. I worry that the adage of "you get what you pay for" may start to apply.
      • Avshalom 9y ago
        I don't know if there are many countries with fully subsidized college but there are at least a few who don't seem to see any worse outcomes than the US's existing partial subsidization by loans and grants.
        • dnautics 9y ago
          those countries typically also have entrance requirements to college that would not sit well with the US, which values the perception of egalitarianism.
      • billmalarky 9y ago
        Many students aren't getting what they pay for now. Better to be debt free.
• 1_2__4 9y ago
  I hate sounding both old and weird but I cannot shake the feeling that much of the claims of economic health and growth in the US is... if not fake (I’m not totally nuts) but not accurate. My most charitable interpretation if I’m right is that we’re using the wrong metrics (possibly intentionally) that give a distorted view of the economy. But I keep hearing employment is great, productivity is great, stock market is great, and yet it seems like most anecdotal evidence I see and read about suggest this is all hollow, and things are actually really bad for the average American. I don’t know. I know how it sounds. But I can’t stop thinking that stuff isn’t adding up. And this article is one more to add to the pile of “how can this be happening if the economy is actually healthy, at least in a way that means people’s financial lives are healthy and prosperous?”
  • kozikow 9y ago
    The top captures all the economic growth: http://time.com/money/4371332/income-inequality-recession/ http://time.com/money/4371332/income-inequality-recession/ .
    • rconti 9y ago
      This doesn't give me a great feeling for whether they're recapturing losses from the downturn (from which the rich 'suffered' disproportionately due to their heavy involvement in asset markets), or whether that 85% of the gains is in proportion to what they already took home in proportion of total dollars. It could be they're taking home 95% of the income so capturing 85% of the growth is actually relatively low. I just don't know.
      • linkregister 9y ago
        The poorest quintile suffered disproportionately, particularly minority workers.
        • rconti 9y ago
          I'm sorry, I meant in absolute dollar terms (which is why I put 'suffered' in quotes for the rich). That's not meant to minimize the fact that the poorest had the most actual suffering. (and, likely, on average, the greatest % decrease in earned income due to unemployment).
• bluetwo 9y ago
  Why have MOOCs provided no real competition?
  • maxk42 9y ago
    Because they don't have a sales team.
  • ticviking 9y ago
    Turns out that accountability is easier on a campus than remotely.
    • taw55 9y ago
      Well, that and the fact that the lower barrier to entry might incentivize trying-out of subjects. I know I have.
  • winslow 9y ago
    They are starting to. GaTech's OSMCS program cost (~$8k total) a fraction of the on campus (~$30k year in-state). With any entrenched system it takes a while to see change. Especially something like Education that is afraid of change and is very slow to change existing ways. I even wonder if much will change with colleges and higher education by the time I have kids and they then are college age. A lot will change from now until ~20 years when my potential kids will be college bound. However, I'll definitely be looking at biggest potential on ROI for tuition costs etc.
  • observation 9y ago
    Because universities are mostly about class signaling. Peter Thiel talks about it at length.
• calvinbhai 9y ago
  Tie student loans to educational institutions where the study takes place. If the student fails to repay, a %age of the student loan debt should be paid for, by the edu institution where he/she graduated from. Would be great if it is 50%. Even if university doubles the price, demand/supply economics will ensure universities cannot bump fees up at will. Without holding the educational institutions and the students as equally responsible for the debt, edu institutions have no incentive to not-ripoff students. Factor in the repayment history by graduates of a program at an institution to decide the percentage of debt the university is liable for. If STEM grads are having lesser default, the school is responsible for 10% of the debt. If a grads of <some esoteric program> have a higher default rate, school owes closer to 50%
  • AcerbicZero 9y ago
    I've never thought of it that way. I don't know if there wouldn't be some second or third order issues from something like this, but at first glance this seems like a good idea. Why shouldn't the school take on some of the risk?
    • Kadin 9y ago
      The schools would undoubtedly respond that in doing so, they would necessarily have to stop educating people from anything less than the most privileged (and thus low-risk) backgrounds. You'd need to cook up some sort of risk-pooling scheme if you wanted schools to extend that credit to anyone coming from a background that made payment statistically less-likely. And once you started doing that you'd have to be careful not to distort the market so much that the original intent -- to allow market forces to have more say on what majors college students go into, and who (and how many people) colleges admit -- would be totally lost. It's a difficult problem and I don't know if it's better to have the schools/colleges trying to underwrite the loans. It might be better to leave that to specialists rather than force it onto schools (though forcing schools to release the data that an underwriter would need to rationally price loans for students to go there would be good). If you didn't have the government backstopping student loans, and in some cases making them non-dischargeable in bankruptcy, that would probably have much the same effect. The government backing and unique legal treatment are what makes a "student loan" different than a giant personal loan. The justification has always been that without this treatment and guarantee, nobody would make a $100k+ personal loan to an 18-year-old, which is probably true. But I think we're starting to see the other side of the coin, which is that maybe there are some good reasons why that's the case.
• cprayingmantis 9y ago
  Purely anecdotal but I have several friends who have told me they don't worry about paying their student loans on time due to the fact that they feel like they'll never go away. They feel like they'll never pay them off, and they can never get them discharged. So there's no motivation for them to pay them off.
• jaunkst 9y ago
  All good points, but the only real answer is... Paying for an education is a gamble and gambling with our future is dumb. If we pay taxes for anything, anything at all the number 1 priority should be to provide an education to anyone. That doesn't mean pay for their housing, or anything else. One has to invest their time into an education, its already very expensive.
• olalonde 9y ago
  I firmly believe that university is way, way overpriced in a world of free, high quality MOOCs. It just makes zero economic sense and I believe the market will correct this sooner or later. Think about how utterly inefficient it all is: you have hundreds of professors around the world, each mechanically teaching the same subject semester after semester to new students (I know, they do a bit more than that). Some will say it is about signaling but in a free market, smart companies will eventually start to pick up on better signals. People who attempt to justify the cost of university really just seem unimaginative.
  • almano 9y ago
    Christ, I've been struggling with this all month. I finished college in 2014, worked in industry for three years, then came back to school for a PhD. I am now completely shocked that these undergrads are paying $60k/year to come here to listen to the same cookie-cutter lectures that are being given at thousands of other institutions across the country. I almost feel embarrassed for the professors as well, having to act like they're doing something useful or valuable by giving this lecture, when in reality its just a mechanical performance. I feel like you need 20-30 different MOOCs for each class. You need a tier 1 (MIT etc) level difficulty Physics I class, then a tier 2 class, and so on. This would even be advantageous for students at 'top' schools (if they still exist), as it would be easier for a physics major to acquire cs skills if they don't have to go through their schools theoretically biased curriculum. Its completely insane...
    • olalonde 9y ago
      Yep, agreed. It's not really that universities are bad, just that they're outrageously overpriced and inefficient. And from my personal experience, most professors don't seem that passionate about educating (many of them rightfully think their time would be better spent elsewhere). I think the two missing pieces for university alternatives to pick up steam are industry acceptance and a more curriculum based format (vs single courses).
  • intended 9y ago
    Quite the opposite! > According to a visualization of MOOC completion rates assembled by Katy Jordan (2013), the 50 investigated MOOCs have generated 50.000 enrollments on average, with the typical completion rate hovering below 10%. Put it somewhere around 7.5%, or 3.700 completions per 50.000 enrollments. Meyer (2012) reported that the dropout rates of MOOCs offered by Stanford, MIT and UC Berkley were 80-95%. For example, only 7% of the 50.000 students completed who took the Coursera-UC-Berkeley course in Software Engineering. There is a similar reported dropout rate in Coursera’s Social Network Analysis class where only 2% of participants earned a basic certificate and 0.17% earned the higher level programming with distinction certificate. MOOCs are not the solution. Matter of fact, MOOCs turned out to be the counterfactual that clearly illustrate the depth of problems we have with education - and more importantly re-training. MOOCs are in so many ways ideal. When Khan academy lectures were first made available online, I had huge hopes for the future of education and therefore humanity. Education/re-training is a critical lynch pin of the modern model of economic development. Innovation -> job loss -> retraining -> people return to well paying jobs. But it turns out, that this was not happening, and that education and training is a lot harder than anticipated. MOOCs had it all - convenience (always on the net), not time constrained (you can read/watch classes whenever), accessible (taught by the good teachers), high quality (same teacher, able to use visual and other aids) and self-selected by people who wanted to finish the course. They should have been a massive success. The self-selected, interested student part should alone, have resulted in large numbers of newly trained students. It hasn't. Which meant the importance of those factors in educational results was overstated. This also means, that our current education system, may well be the better state of the art option we have. OR worse, a large chunk of humanity may not be able to transition to new subjects, and therefore new roles. This is a huge bloody problem, because that means if coal miners lose jobs, the economy will stall. This in turn puts huge political pressure to avoid following economics, and instead fight for protectionism, which also doesn't work. ---- Side note/silver lining: Perhaps the intransingence of education is a good thing. If it becomes easier to teach a person how to learn X details, perhaps it can become a lot easier to also indoctrinate a person in Y religion, or belief. In the end, a technique which has a high success rate in teaching students X subject, could easily be used to teach any subject. The difficulty in teaching people could well be a natural impediment to mass scale conversion, or invasion of ideas/propaganda.
• gwatch 9y ago
  There is an obvious explanation that people are missing on this thread. These graduates are under employed. The salary is too low to pay back student loans. They have gotten degrees in useless disciplines. This is the danger of government giving out student loans. Since government is answerable to no one, it is like a giant pot of money that students can just borrow. As a result they end up spending the money on degrees that have very little return on investment. If it is a private entity giving out student loans, the loan officer will not give loans to someone majoring in useless liberal arts degrees. Since it is cheap to get student loans colleges have become more expensive, which means students are taking out bigger loans. This is the problem with socialism. It does not even work in theory.
• jhoechtl 9y ago
  They are busy paying their bills to netflix, amazon prime and other distractions
• eighthnate 9y ago
  Have they looked at the ACA and people having to pay a lot more for insurance now? And service industry moving more towards part-time jobs since they don't deal with full-time employees given the push towards increasing hourly wages to $15?