12 ms·

The Great College Loan Swindle

93 points by wolfgke 9y ago

jimhefferon 9y ago
As the price of college he lists the sticker price, not the price after whatever deal is worked out (it is often quite significantly less). But that is a nit. It is a very real, very big, problem. A country needs an educated work force. But the vultures have turned that need into pure profit, at a great cost to people just trying to have a good life.
- finaliteration 9y ago
  > As the price of college he lists the sticker price, not the price after whatever deal is worked out (it is often quite significantly less). I’m not sure to which “deals” you are referring. When I went to college I paid the sticker price for tuition and then some (for housing, books, administrative fees, etc.). I feel like this is another harmful myth that scholarships and grants significantly lower the cost of college when, in reality, for most students they don’t.
  - rbcgerard 9y ago
    I think the OP’s point is that the money a college spends per student does not equal the tuition sticker price (it may be higher or lower), and the average price incurred (cash tuition + debt incurred) for the student is often less then the sticker price...
    - jimhefferon 9y ago
      Yes, thanks. I know that the pricing situation is nuts, everyone knows it is nuts (I'm a prof, but not at all involved in admissions or financial aid). The model is to list a large sticker price and give a lot of that back. My college's web site is an example. https://www.smcvt.edu/admissions/financial-aid-and-tuition/tuition-resources.aspx https://www.smcvt.edu/admissions/financial-aid-and-tuition/t... (I understand that all schools in the US have to have such a page.) It lists the bottom-line summary of the sticker price and then gives you a link to a calculator that you use to figure what it will really cost you, which is typically much less. For example, overall we give back more than half and I assume that our peer institutions do also. (And, yes, a loan is different than a grant, which is different than work study. My only point is that the end price is often much less than the sticker price.) All this is not to say that the point of the article is wrong. It is not wrong. I said it was a nit, and I meant that.
      - protomyth 9y ago
        All accredited colleges in the US are required to provide tuition information - we had to put a ‘Net Price Calculator’ on our website. There are actually a bunch of student notices required by the government and accreditation groups.
  - LanceH 9y ago
    Are you sure you didn't have a $500 something in there, so they could claim 95% receive financial aid? I did. Of course sticker price takes into account that they're granting virtually everyone $500. This was the game in the early 90's; I'm sure it has grown since then.
    - readams 9y ago
      Loans count as financial aid in their view
rbcgerard 9y ago
The article doesn’t seem to address a few things: First is that all colleges are not the same,with some colleges offering next to no marginal benefit vs. a high school diploma. Which means there are huge price discrepancies based on quality (DeVry ~$16k/year online vs Ucal @ ~14k/year on campus (instate)). Also not addressed is mean salary of entry level jobs in your area of study - is it worth spending 100k to get a an accounting degree from a decent program where you can probably get an entry level job that pays $50k? Probably. Same $100k on a degree in social work where the entry level job is $30k? Maybe not?
rayiner 9y ago
It’s interesting that the real perpetrators don’t get much of Taibbi’s scorn. The loan industry are just opportunists, and for the most part students loans have been taken over by the government anyway. The real criminals here are teachers, parents, and employers, who have created a culture where people are compelled to get completely unnecessary higher education. Here, you need a college degree to be an administrative assistant in an office. In Germany, in contrast, young people can get many white collar jobs after age 16, plus three years of apprenticeships during which they get paid.
- katzgrau 9y ago
  The employers are free to require whatever they'd like for a job. But the teachers and parents are often uneducated on the topic themselves and parrot the prevailing wisdom that a college degree is essential. Neither of my parents have a college degree, but they were insistent that their children got one - any one. It's the prevailing blue collar logic and it's hard to shake it when you're surrounded by it.
- watwut 9y ago
  Quoting the article: "Going to college doesn't guarantee a good job, far from it, but the data show that not going dooms most young people to an increasingly shallow pool of the very crappiest, lowest-paying jobs. There's a lot of stick, but not much carrot, in the education game. [...] the squeeze on the un-degreed grows tighter, increasing further that original negative incentive: Don't go to college, and you'll be standing on soup lines by age 25. " The article itself explains why teachers and parents and students themselves still seek degree - because alternative is nothing good either. It is competitions and if you dont compete, you loose for sure.
  - empath75 9y ago
    I didn’t go to college and I’m making 6 figures as a software developer. I’d say half the people I work with never went to college either.
    - 9y ago
chesimov 9y ago
Why would it be in a university's interests to accumulate such a large amount of cash?
- baccredited 9y ago
  Because they are basically becoming hedge funds with an university attached. 'I was going to donate money to Yale. But maybe it makes more sense to mail a check directly to the hedge fund of my choice' - Malcolm Gladwell tweet https://www.thenation.com/article/universities-are-becoming-billion-dollar-hedge-funds-with-schools-attached/ https://www.thenation.com/article/universities-are-becoming-...
  - chesimov 9y ago
    Do the admin and faculty staff see a share of the returns in their salaries, or are there outside investors? Or is it more about ensuring a long-term and improving ability to pay for top researchers and fund cutting edge research, raising the university's profile?
  - QML 9y ago
    I think this statement only holds for private universities -- public ones are struggling financially. https://www.theatlantic.com/business/archive/2017/10/midwestern-public-research-universities-funding/542889/ https://www.theatlantic.com/business/archive/2017/10/midwest...
    - baccredited 9y ago
      UVA - $5 Billion http://endowments.com/university-of-virginia/ http://endowments.com/university-of-virginia/
- LanceH 9y ago
  Status.
- deleted 9y ago
  [deleted]
indubitable 9y ago
The lead of this article is very hyperbolic. Even if a person competely defaults and allows default judgement against them, the maximum allowed penalty is a garnishment of 15% of income after tax. On a salary of $18,000 that would be at most $2,700 or $225 a month. That will be a never ending payment, but it's hardly time to go seppuku. Aside from the hyperbole, I do think the article has a fair point. And there's a very simple solution. Align the interests of lenders with borrowers. There are a lot of ways to do this. One would be to enable borrowers to declare bankruptcy meaning lenders would not be throwing money around like beads at Mardis Gras. Another option is to change the terms of students loans to be as special as their permanence is. Require student loans be paid back in terms of x% of income for the x% of years after graduation. This would heavily incentivize loan agencies into ensuring a college education does actually lead to a good job. The reduction in lending would also reduce the cost of education as a whole. As the article mentions, the bloating in tuition and other rates is mostly just a factor of greed. If you offer a product valued as practically priceless, and a consumer's available income is x then your price is going to approach x. 'Mardi gras lenders' push x higher and higher to no end. Ultimately there are lots of solutions. But I expect we'll do nothing. As the 15% I mentioned above gaurantees that even 'bad loans' are good, from the perspective of a lender. Even if somebody gets stuck working in aggregate $30k jobs (inflation adjusted) for the next 50 years, that's $1.5 million with 15% there equaling out to $225k. That's an extremely healthy profit even on defaults. To New Orleans we go!
- Overtonwindow 9y ago
  Default would tank your credit score and possibly jepordize future job, housing, and banking opportunities. Even if it's brutal, I think it's better to avoid default if at all possible.
  - indubitable 9y ago
    Completely agreed which is why I think it's bizarre that the loans cannot be dismissed. Bankruptcy has similar effects and lasts for 10 years! The reason I mention it is he was talking about $471/month with 0 principal progress on a salary of $18,000 was driving him to literal suicide. At that point taking the 15% and consequences is undoubtedly a better solution.
Overtonwindow 9y ago
Most scorn of universities and loan programs never seem to address a serious problem: Students taking on debt to fund degrees with little market value, or few job prospects. Racking up $100k to get an interdisciplinary degree in women and gender studies might sound awesome, but not at the cost of a school like NYU.[0] I think schools should be required to press upon students prior to taking out these loans honest and factual statistics about their future job prospects, needs for advanced education, and the average graduates ability to pay back the loan. [0]. https://mobile.nytimes.com/2010/05/29/your-money/student-loans/29money.html https://mobile.nytimes.com/2010/05/29/your-money/student-loa...
- wolfgke 9y ago
  If you do some kind of investment (say, in stocks of some company), you first read up on investment, the market this company works in, products this company is planning etc. in particular if you go in debt for this investment. So why can't one simply expect from grown-up people to do the same for the degree that ones planes do get?
  - Joe-Z 9y ago
    One can, but we're talking about 18-year-olds fresh out of high school here.
    - wolfgke 9y ago
      But the parents are surely not 18 years old and just out of highschool.
      - hkmurakami 9y ago
        I mean this is why you have Asian immigrant parents insisting that the only acceptable areas of study are premed, prelaw, and (more recently) engineering. Some will refuse to pay for tuition unless their children agree. (I think there's a famous anecdote by Bobby Jindal where his father told him that he could be anything he wanted to be -- any kind of doctor that is) Heavy-handed? Yes. Effective? Also yes.
deleted 9y ago
[deleted]
deleted 9y ago
[deleted]
deleted 9y ago
[deleted]
readams 9y ago
Because of government loan guarantees, the cost of tuition will eventually rise to match the entire net present value of the expected lifetime earnings premium. This could easily be in the millions. Also, we can expect income-based repayment to become the norm, since most will not be able to afford the payments
- KGIII 9y ago
  I'm kind of fond of the idea of people paying a percentage of their income after they get their degree and for X number of years. I think that's a fantastic idea. For needed professions, it could be X - Y number of years. Inexpensive and attainable education would be a good thing, I should imagine.
  - pinot 9y ago
    The x-years and y-% could be based on their future earnings. A sort of tiered system with “marginal” rates. I wonder if such a system could exist.
    - sordidasset 9y ago
      Is this a tongue-in-cheek discussion you guys are having about taxes?
  - Pete_D 9y ago
    This is sort of how it works in the UK. You pay 9% of what you earn over £X for 25 years (with X and other details like interest depending on when you started borrowing). In theory, this stops when you pay off your loan, but the most recent estimate I know of[0] predicts that 60% of graduates under the current system will never get there, so while it's technically a loan, it feels more like a graduate tax. [0] http://www.telegraph.co.uk/education/educationnews/10747315/Six-in-10-students-will-have-their-debts-written-off.html http://www.telegraph.co.uk/education/educationnews/10747315/... (2014)
  - readams 9y ago
    This is the law in the us right now
Clubber 9y ago
For kids preparing for college lucky enough to read these comments, and parents with kids preparing to go to college, consider this advice: 1. Always go in-state public funded college and university, it's much, much cheaper. In-state meaning the state the student is currently a resident. 2. If you must go out of state, make sure the student registers as a state resident after their first year (most states require a year waiting period). This way, you only pay out-of-state tuition for a year. Generally out of state tuitions are 4x or so higher than in-state (it's been a while since I've examined this, so it might be higher or lower). 3. The cheapest path is to get your AA degree at in-state public community college, then your remaining 2 years at university. Not only is this cheaper, but this allows the student two years to decide their major after some realistic exposure to the various fields and what they pay. 4. Never attend private colleges without a scholarship, unless you are wealthy. There are two types of private colleges: old and new. The older colleges like Harvard, etc are expensive but bona fide, then new private colleges like ITT Tech, Trump university, etc are generally scammy schools that spend way more on marketing than education. Stay away from these at all costs, they are traps. 5. Make no mistake, a college education is a huge leg up in the marketplace for jobs. It's no guarantee, but not having one is much, much worse, and will be more so in the future. We live in a service economy, and service jobs require degrees for the most part. 6. If your field requires a Master's or Ph.D to be employed, that is a big red flag, and you should consider another field. This requirement generally means the field is supersaturated with applicants so much that employers can require an advanced degree for hiring and it's very difficult to not only land the first job, but also move to different employers. Remember, you have 40 years of work in your lifetime. 7. Outside of perhaps Ivy League, the college you attend doesn't matter. Employers generally want to check a box that says you've earned a degree in your relevant field and that's it.
- EliRivers 9y ago
  8. Consider studying somewhere with relatively miniscule tuition fees. Parts of Europe, for example. There are universities teaching in English and charging a couple of thousand Euros a term, or even less. I sometimes think about taking a year or two off to do that just for the fun of it.
- YaxelPerez 9y ago
nnfy 9y ago
How does anyone expect high school graduates to make responsible decisions regarding loans and choice of major when the overwhelming majority of his grads exit highschool financially illiterate, with the nonsensical idea that any college degree is good enough? How many times have you heard the expression "do what you love, and the money will come?" The culture in the U.S. is in dire need of a return to merit, as well as drastic changes to our education system; and, no, the answer is not more funding. Also I believe that government aid should be restricted to degrees with a minimum relative ROI. Education for the sake of culture is no longer useful when you have an increasingly incompetent workforce.
johnnyb9 9y ago
How is this the fault of banks? Isn't the federal government the largest underwriter of loans these days?
Maarten88 9y ago
I am always amazed at the level of acceptance for these types of injustice there is in the US. Even here, most discussion is about the economics of college degrees, and how to deal with it on an individual level. While the problem, it seems to me, is entirely one of political choice and justice, and the current situation seems very unfair. Young people from poorer backgrounds seem to be destined for slavery for a large part of their lives, unless they get extremely lucky. People argue: but his degree is not worth it. On a meta-level that is simply impossible: the guy is a teacher, by definition in his lifetime he will produce much more to society than his education cost. If he can't reasonably pay of his loans the system cannot be fair. He was shortchanged and then punished for it. Also it seems strange that 10 years after default he still has to pay rehabilitation and his debt is still growing. Is nobody in the US protecting people like him? I know in a situation like that where I live (NL) municipality instances will be all over you and your live will suck for 3 years, but after that your debt will be gone and you can start over.
- cryoshon 9y ago
  the silence you hear is rage, not acceptance
- ejnulls 9y ago
  No, no one in the US is protecting people like them. Even in this site, most likely will not have much empathy for the people mentioned in the article. Welcome to America, worship those above you and look down on those below. Then tell yourself you're a good person and go contribute to a company with shaky ethics (at best). Eat, sleep, repeat.
- Clubber 9y ago
  My question is why hasn't he been able to land a full time teaching job in ~14 years? It seems like a full time teaching job would alleviate a lot of that pressure, but the article doesn't seem to mention it. I understand teachers probably make the lowest salaries in any degree required field, but they can keep their heads above water if they are fully employed. Many family members are teachers, and it's noble but thankless work.
opticalflow 9y ago
It's an interesting conundrum (for my family at least). My father was very highly educated (Professor Emeritus of semiconductor physics/EE at a major University, you've likely heard of it). I started out putting a couple of years in toward a BSCE at that same University, but I abandoned it because I already had work experience, and the BSCE was just a consolation prize -- the only value it would have had is if I was going to pursue a doctorate/academic career. That would have come with a prospect of a lot of student debt. As it turned out, I ended up in a career making more than a trauma surgeon, but without a mountain of $250K student loans. Today, I have 6 kids, and the two oldest are at the ages where they need to contemplate college. One definitely has their sights on University, the other is ambivalent. What I tell all of them is that there is nothing wrong with wanting to become an Electrician, Plumber, Pipefitter or any of the other work trades. All are worthy careers and can be very lucrative.
cryoshon 9y ago
as soon as we are angry enough to riot, they will find the money to forgive our loans. yes, it has come to this.
touchofevil 9y ago
It seems like the root problem is that students cannot declare bankruptcy on student loans. If they could do that then lenders would adjust for risk accordingly which would lower the availability of loans, which would in turn drive tuition down. I know there's an argument that students will just declare bankruptcy after graduating, but if that's the case then the solution would be to make bankruptcy less appealing via disincentives (more penalties for declaring bankruptcy). Making student loans exempt from bankruptcy is distorting the loan markets and, in turn, tuition. If restricting the availability of loans creates a situation in which the higher education is unavailable to students without financial means, then the state should make free or very low cost higher education available to offset this. The solutions are so obvious that it's pretty clear that the financing of student loans is a giant con at this point.
- leetcrew 9y ago
  if students could declare bankruptcy there would probably be no student loans. there are already very few private loans available to students without substantial credit history or a cosigner. how could the numbers possibly work out? to graduate in four years from a state university (paying in-state tuition) costs about $44k. a typical college freshman has close to zero assets and no credit. if they have any income, it's probably a part-time minimum wage job. assuming they don't qualify for any aid, these people need to borrow about $10k each year and likely won't pay any of it back until they get a degree. now let's pause for a moment. how many ways can you get an unsecured $10k loan with limited to no credit history? they basically don't exist. you would need to build credit for a long time before you got a limit anywhere near that on a credit card, and their whole business model revolves around loaning people more money than they should. now consider that in the US, about 40% of students fail to get their bachelors in 6 years. obviously these people will not be able to use the degree to obtain employment, and probably will not ever pay down the debt in full unless they enter a lucrative trade that didn't require the degree in the first place. if we assume that the students who graduate are able to repay the loan, they have to pay a significant amount of interest before the lender breaks even on the group of loans. and keep in mind that there's no guarantee that a student who graduates has acquired a degree that actually improves their earning potential. so tl;dr: it is really hard to offer a reasonable loan of that size to an 18yo with no skills/assets who stands a substantial chance of either not finishing or finishing with a valueless (to the market) degree.
QML 9y ago
> Tuition for a halfway decent school now frequently surpasses $50,000 a year. Where is the source for this statistic? The only universities which I know to charge that high are small private liberal arts colleges or the Ivies.
cbennett 9y ago
http://rollingjubilee.org http://rollingjubilee.org

93 points by wolfgke 9y ago

As the price of college he lists the sticker price, not the price after whatever deal is worked out (it is often quite significantly less). But that is a nit. It is a very real, very big, problem. A country needs an educated work force. But the vultures have turned that need into pure profit, at a great cost to people just trying to have a good life.

finaliteration 9y ago
> As the price of college he lists the sticker price, not the price after whatever deal is worked out (it is often quite significantly less). I’m not sure to which “deals” you are referring. When I went to college I paid the sticker price for tuition and then some (for housing, books, administrative fees, etc.). I feel like this is another harmful myth that scholarships and grants significantly lower the cost of college when, in reality, for most students they don’t.
- rbcgerard 9y ago
  I think the OP’s point is that the money a college spends per student does not equal the tuition sticker price (it may be higher or lower), and the average price incurred (cash tuition + debt incurred) for the student is often less then the sticker price...
  - jimhefferon 9y ago
    Yes, thanks. I know that the pricing situation is nuts, everyone knows it is nuts (I'm a prof, but not at all involved in admissions or financial aid). The model is to list a large sticker price and give a lot of that back. My college's web site is an example. https://www.smcvt.edu/admissions/financial-aid-and-tuition/tuition-resources.aspx https://www.smcvt.edu/admissions/financial-aid-and-tuition/t... (I understand that all schools in the US have to have such a page.) It lists the bottom-line summary of the sticker price and then gives you a link to a calculator that you use to figure what it will really cost you, which is typically much less. For example, overall we give back more than half and I assume that our peer institutions do also. (And, yes, a loan is different than a grant, which is different than work study. My only point is that the end price is often much less than the sticker price.) All this is not to say that the point of the article is wrong. It is not wrong. I said it was a nit, and I meant that.
    - protomyth 9y ago
      All accredited colleges in the US are required to provide tuition information - we had to put a ‘Net Price Calculator’ on our website. There are actually a bunch of student notices required by the government and accreditation groups.
- LanceH 9y ago
  Are you sure you didn't have a $500 something in there, so they could claim 95% receive financial aid? I did. Of course sticker price takes into account that they're granting virtually everyone $500. This was the game in the early 90's; I'm sure it has grown since then.
  - readams 9y ago
    Loans count as financial aid in their view

rbcgerard 9y ago

The article doesn’t seem to address a few things: First is that all colleges are not the same,with some colleges offering next to no marginal benefit vs. a high school diploma. Which means there are huge price discrepancies based on quality (DeVry ~$16k/year online vs Ucal @ ~14k/year on campus (instate)). Also not addressed is mean salary of entry level jobs in your area of study - is it worth spending 100k to get a an accounting degree from a decent program where you can probably get an entry level job that pays $50k? Probably. Same $100k on a degree in social work where the entry level job is $30k? Maybe not?

rayiner 9y ago

It’s interesting that the real perpetrators don’t get much of Taibbi’s scorn. The loan industry are just opportunists, and for the most part students loans have been taken over by the government anyway. The real criminals here are teachers, parents, and employers, who have created a culture where people are compelled to get completely unnecessary higher education. Here, you need a college degree to be an administrative assistant in an office. In Germany, in contrast, young people can get many white collar jobs after age 16, plus three years of apprenticeships during which they get paid.

katzgrau 9y ago
The employers are free to require whatever they'd like for a job. But the teachers and parents are often uneducated on the topic themselves and parrot the prevailing wisdom that a college degree is essential. Neither of my parents have a college degree, but they were insistent that their children got one - any one. It's the prevailing blue collar logic and it's hard to shake it when you're surrounded by it.
watwut 9y ago
Quoting the article: "Going to college doesn't guarantee a good job, far from it, but the data show that not going dooms most young people to an increasingly shallow pool of the very crappiest, lowest-paying jobs. There's a lot of stick, but not much carrot, in the education game. [...] the squeeze on the un-degreed grows tighter, increasing further that original negative incentive: Don't go to college, and you'll be standing on soup lines by age 25. " The article itself explains why teachers and parents and students themselves still seek degree - because alternative is nothing good either. It is competitions and if you dont compete, you loose for sure.
- empath75 9y ago
  I didn’t go to college and I’m making 6 figures as a software developer. I’d say half the people I work with never went to college either.
  - 9y ago

chesimov 9y ago

Why would it be in a university's interests to accumulate such a large amount of cash?

baccredited 9y ago
Because they are basically becoming hedge funds with an university attached. 'I was going to donate money to Yale. But maybe it makes more sense to mail a check directly to the hedge fund of my choice' - Malcolm Gladwell tweet https://www.thenation.com/article/universities-are-becoming-billion-dollar-hedge-funds-with-schools-attached/ https://www.thenation.com/article/universities-are-becoming-...
- chesimov 9y ago
  Do the admin and faculty staff see a share of the returns in their salaries, or are there outside investors? Or is it more about ensuring a long-term and improving ability to pay for top researchers and fund cutting edge research, raising the university's profile?
- QML 9y ago
  I think this statement only holds for private universities -- public ones are struggling financially. https://www.theatlantic.com/business/archive/2017/10/midwestern-public-research-universities-funding/542889/ https://www.theatlantic.com/business/archive/2017/10/midwest...
  - baccredited 9y ago
    UVA - $5 Billion http://endowments.com/university-of-virginia/ http://endowments.com/university-of-virginia/
LanceH 9y ago
Status.
deleted 9y ago
[deleted]

indubitable 9y ago

The lead of this article is very hyperbolic. Even if a person competely defaults and allows default judgement against them, the maximum allowed penalty is a garnishment of 15% of income after tax. On a salary of $18,000 that would be at most $2,700 or $225 a month. That will be a never ending payment, but it's hardly time to go seppuku. Aside from the hyperbole, I do think the article has a fair point. And there's a very simple solution. Align the interests of lenders with borrowers. There are a lot of ways to do this. One would be to enable borrowers to declare bankruptcy meaning lenders would not be throwing money around like beads at Mardis Gras. Another option is to change the terms of students loans to be as special as their permanence is. Require student loans be paid back in terms of x% of income for the x% of years after graduation. This would heavily incentivize loan agencies into ensuring a college education does actually lead to a good job. The reduction in lending would also reduce the cost of education as a whole. As the article mentions, the bloating in tuition and other rates is mostly just a factor of greed. If you offer a product valued as practically priceless, and a consumer's available income is x then your price is going to approach x. 'Mardi gras lenders' push x higher and higher to no end. Ultimately there are lots of solutions. But I expect we'll do nothing. As the 15% I mentioned above gaurantees that even 'bad loans' are good, from the perspective of a lender. Even if somebody gets stuck working in aggregate $30k jobs (inflation adjusted) for the next 50 years, that's $1.5 million with 15% there equaling out to $225k. That's an extremely healthy profit even on defaults. To New Orleans we go!

Overtonwindow 9y ago
Default would tank your credit score and possibly jepordize future job, housing, and banking opportunities. Even if it's brutal, I think it's better to avoid default if at all possible.
- indubitable 9y ago
  Completely agreed which is why I think it's bizarre that the loans cannot be dismissed. Bankruptcy has similar effects and lasts for 10 years! The reason I mention it is he was talking about $471/month with 0 principal progress on a salary of $18,000 was driving him to literal suicide. At that point taking the 15% and consequences is undoubtedly a better solution.

Overtonwindow 9y ago

Most scorn of universities and loan programs never seem to address a serious problem: Students taking on debt to fund degrees with little market value, or few job prospects. Racking up $100k to get an interdisciplinary degree in women and gender studies might sound awesome, but not at the cost of a school like NYU.[0] I think schools should be required to press upon students prior to taking out these loans honest and factual statistics about their future job prospects, needs for advanced education, and the average graduates ability to pay back the loan. [0]. https://mobile.nytimes.com/2010/05/29/your-money/student-loans/29money.html https://mobile.nytimes.com/2010/05/29/your-money/student-loa...

wolfgke 9y ago
If you do some kind of investment (say, in stocks of some company), you first read up on investment, the market this company works in, products this company is planning etc. in particular if you go in debt for this investment. So why can't one simply expect from grown-up people to do the same for the degree that ones planes do get?
- Joe-Z 9y ago
  One can, but we're talking about 18-year-olds fresh out of high school here.
  - wolfgke 9y ago
    But the parents are surely not 18 years old and just out of highschool.
    - hkmurakami 9y ago
      I mean this is why you have Asian immigrant parents insisting that the only acceptable areas of study are premed, prelaw, and (more recently) engineering. Some will refuse to pay for tuition unless their children agree. (I think there's a famous anecdote by Bobby Jindal where his father told him that he could be anything he wanted to be -- any kind of doctor that is) Heavy-handed? Yes. Effective? Also yes.

deleted 9y ago

[deleted]

deleted 9y ago

[deleted]

deleted 9y ago

[deleted]

readams 9y ago

Because of government loan guarantees, the cost of tuition will eventually rise to match the entire net present value of the expected lifetime earnings premium. This could easily be in the millions. Also, we can expect income-based repayment to become the norm, since most will not be able to afford the payments

KGIII 9y ago
I'm kind of fond of the idea of people paying a percentage of their income after they get their degree and for X number of years. I think that's a fantastic idea. For needed professions, it could be X - Y number of years. Inexpensive and attainable education would be a good thing, I should imagine.
- pinot 9y ago
  The x-years and y-% could be based on their future earnings. A sort of tiered system with “marginal” rates. I wonder if such a system could exist.
  - sordidasset 9y ago
    Is this a tongue-in-cheek discussion you guys are having about taxes?
- Pete_D 9y ago
  This is sort of how it works in the UK. You pay 9% of what you earn over £X for 25 years (with X and other details like interest depending on when you started borrowing). In theory, this stops when you pay off your loan, but the most recent estimate I know of[0] predicts that 60% of graduates under the current system will never get there, so while it's technically a loan, it feels more like a graduate tax. [0] http://www.telegraph.co.uk/education/educationnews/10747315/Six-in-10-students-will-have-their-debts-written-off.html http://www.telegraph.co.uk/education/educationnews/10747315/... (2014)
- readams 9y ago
  This is the law in the us right now

Clubber 9y ago

For kids preparing for college lucky enough to read these comments, and parents with kids preparing to go to college, consider this advice: 1. Always go in-state public funded college and university, it's much, much cheaper. In-state meaning the state the student is currently a resident. 2. If you must go out of state, make sure the student registers as a state resident after their first year (most states require a year waiting period). This way, you only pay out-of-state tuition for a year. Generally out of state tuitions are 4x or so higher than in-state (it's been a while since I've examined this, so it might be higher or lower). 3. The cheapest path is to get your AA degree at in-state public community college, then your remaining 2 years at university. Not only is this cheaper, but this allows the student two years to decide their major after some realistic exposure to the various fields and what they pay. 4. Never attend private colleges without a scholarship, unless you are wealthy. There are two types of private colleges: old and new. The older colleges like Harvard, etc are expensive but bona fide, then new private colleges like ITT Tech, Trump university, etc are generally scammy schools that spend way more on marketing than education. Stay away from these at all costs, they are traps. 5. Make no mistake, a college education is a huge leg up in the marketplace for jobs. It's no guarantee, but not having one is much, much worse, and will be more so in the future. We live in a service economy, and service jobs require degrees for the most part. 6. If your field requires a Master's or Ph.D to be employed, that is a big red flag, and you should consider another field. This requirement generally means the field is supersaturated with applicants so much that employers can require an advanced degree for hiring and it's very difficult to not only land the first job, but also move to different employers. Remember, you have 40 years of work in your lifetime. 7. Outside of perhaps Ivy League, the college you attend doesn't matter. Employers generally want to check a box that says you've earned a degree in your relevant field and that's it.

EliRivers 9y ago
8. Consider studying somewhere with relatively miniscule tuition fees. Parts of Europe, for example. There are universities teaching in English and charging a couple of thousand Euros a term, or even less. I sometimes think about taking a year or two off to do that just for the fun of it.
YaxelPerez 9y ago

nnfy 9y ago

How does anyone expect high school graduates to make responsible decisions regarding loans and choice of major when the overwhelming majority of his grads exit highschool financially illiterate, with the nonsensical idea that any college degree is good enough? How many times have you heard the expression "do what you love, and the money will come?" The culture in the U.S. is in dire need of a return to merit, as well as drastic changes to our education system; and, no, the answer is not more funding. Also I believe that government aid should be restricted to degrees with a minimum relative ROI. Education for the sake of culture is no longer useful when you have an increasingly incompetent workforce.

johnnyb9 9y ago

How is this the fault of banks? Isn't the federal government the largest underwriter of loans these days?

Maarten88 9y ago

I am always amazed at the level of acceptance for these types of injustice there is in the US. Even here, most discussion is about the economics of college degrees, and how to deal with it on an individual level. While the problem, it seems to me, is entirely one of political choice and justice, and the current situation seems very unfair. Young people from poorer backgrounds seem to be destined for slavery for a large part of their lives, unless they get extremely lucky. People argue: but his degree is not worth it. On a meta-level that is simply impossible: the guy is a teacher, by definition in his lifetime he will produce much more to society than his education cost. If he can't reasonably pay of his loans the system cannot be fair. He was shortchanged and then punished for it. Also it seems strange that 10 years after default he still has to pay rehabilitation and his debt is still growing. Is nobody in the US protecting people like him? I know in a situation like that where I live (NL) municipality instances will be all over you and your live will suck for 3 years, but after that your debt will be gone and you can start over.

cryoshon 9y ago
the silence you hear is rage, not acceptance
ejnulls 9y ago
No, no one in the US is protecting people like them. Even in this site, most likely will not have much empathy for the people mentioned in the article. Welcome to America, worship those above you and look down on those below. Then tell yourself you're a good person and go contribute to a company with shaky ethics (at best). Eat, sleep, repeat.
Clubber 9y ago
My question is why hasn't he been able to land a full time teaching job in ~14 years? It seems like a full time teaching job would alleviate a lot of that pressure, but the article doesn't seem to mention it. I understand teachers probably make the lowest salaries in any degree required field, but they can keep their heads above water if they are fully employed. Many family members are teachers, and it's noble but thankless work.

opticalflow 9y ago

It's an interesting conundrum (for my family at least). My father was very highly educated (Professor Emeritus of semiconductor physics/EE at a major University, you've likely heard of it). I started out putting a couple of years in toward a BSCE at that same University, but I abandoned it because I already had work experience, and the BSCE was just a consolation prize -- the only value it would have had is if I was going to pursue a doctorate/academic career. That would have come with a prospect of a lot of student debt. As it turned out, I ended up in a career making more than a trauma surgeon, but without a mountain of $250K student loans. Today, I have 6 kids, and the two oldest are at the ages where they need to contemplate college. One definitely has their sights on University, the other is ambivalent. What I tell all of them is that there is nothing wrong with wanting to become an Electrician, Plumber, Pipefitter or any of the other work trades. All are worthy careers and can be very lucrative.

cryoshon 9y ago

as soon as we are angry enough to riot, they will find the money to forgive our loans. yes, it has come to this.

touchofevil 9y ago

It seems like the root problem is that students cannot declare bankruptcy on student loans. If they could do that then lenders would adjust for risk accordingly which would lower the availability of loans, which would in turn drive tuition down. I know there's an argument that students will just declare bankruptcy after graduating, but if that's the case then the solution would be to make bankruptcy less appealing via disincentives (more penalties for declaring bankruptcy). Making student loans exempt from bankruptcy is distorting the loan markets and, in turn, tuition. If restricting the availability of loans creates a situation in which the higher education is unavailable to students without financial means, then the state should make free or very low cost higher education available to offset this. The solutions are so obvious that it's pretty clear that the financing of student loans is a giant con at this point.

leetcrew 9y ago
if students could declare bankruptcy there would probably be no student loans. there are already very few private loans available to students without substantial credit history or a cosigner. how could the numbers possibly work out? to graduate in four years from a state university (paying in-state tuition) costs about $44k. a typical college freshman has close to zero assets and no credit. if they have any income, it's probably a part-time minimum wage job. assuming they don't qualify for any aid, these people need to borrow about $10k each year and likely won't pay any of it back until they get a degree. now let's pause for a moment. how many ways can you get an unsecured $10k loan with limited to no credit history? they basically don't exist. you would need to build credit for a long time before you got a limit anywhere near that on a credit card, and their whole business model revolves around loaning people more money than they should. now consider that in the US, about 40% of students fail to get their bachelors in 6 years. obviously these people will not be able to use the degree to obtain employment, and probably will not ever pay down the debt in full unless they enter a lucrative trade that didn't require the degree in the first place. if we assume that the students who graduate are able to repay the loan, they have to pay a significant amount of interest before the lender breaks even on the group of loans. and keep in mind that there's no guarantee that a student who graduates has acquired a degree that actually improves their earning potential. so tl;dr: it is really hard to offer a reasonable loan of that size to an 18yo with no skills/assets who stands a substantial chance of either not finishing or finishing with a valueless (to the market) degree.

QML 9y ago

> Tuition for a halfway decent school now frequently surpasses $50,000 a year. Where is the source for this statistic? The only universities which I know to charge that high are small private liberal arts colleges or the Ivies.

cbennett 9y ago

http://rollingjubilee.org http://rollingjubilee.org