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If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have n

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were given the option. Since a degree is not tangible, there is nothing to secure it with, they can't foreclose on your education like they can a piece of property. Without anything to secure it, there would be 0 market for college loans except for the privileged who can pay out of pocket for their education. IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%. Then it forces the school to look at costs, as well as expected outcomes of the program. At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?

distances 9y ago
Or alternatively, you could make sure there's an affordable public option for university level education for qualifying students, to avoid the need for a loan in the first place. It was feasible before, and I'm sure there isn't any non-political reason why it'd be impossible now.
- maxerickson 9y ago
  The percentage of the population that enrolls in college has increased dramatically, so a given level of individual support has become more expensive in total. (I don't mean the above to really try to address whether it is feasible, just to point out that the situation has changed)
  - harryh 9y ago
    In addition to this very good point, Baumol's cost disease makes education ever more expensive as long as it is a labor intensive practice.
  - briandear 9y ago
    However, university cost inflation is even greater than health care costs. One of the only logical reasons is that as more “free” or “cheap” government money enters the system, the more inflation. Ready availability of student loans has made universities much more insulated from market pressures than “normal” industries. If you were to eliminate student loans, costs would drop like a rock. You wouldn’t have universities hiring endless Vice Provosts of Some Bullshit Initiative or spending 10s of millions building “Student Life Centers” or luxury-level athletic facilities for sports that aren’t revenue self-sustaining. Universities are like the military — they pay the privates (adjunct professors) almost nothing while spending huge money on things like the Crusader Artilley System (insert random boondoggle university initiative here.) Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, it’s clear universities are running quite a racket. And we haven’t even touched on the insanity that is textbook pricing.
    - whatshisface 9y ago
      >Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, Woah. Maybe a few freshmen should band together and hire some PhDs to assemble a fire-and-forget university. If you can pay for one professor per student, a class of 20 students who want to major in the same thing could easily fund 4-6 classes/year and have a factor of five left over to rent a nice room in the community center. Obviously this isn't about education anymore.
baybal2 9y ago
> At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money? Surely it isn't If no major banks will give student loans, than it will be smaller, low tier loan sharks at higher rates. As some states in US, and other countries do have some programs where the state is either the guarantor or a partial payer, that will make things worse for the taxpayers. Invention of student loans has unleashed the genie from the bottle. No way back, just as it was with state backed mortgages that did just 2 things: made buying houses for cash patently impossible for an average Joe, made an average Joe having to pay for foreclosures and mortgage interest of another average Joe with his tax money.
dangero 9y ago
Putting the school on the hook for a percentage seems like it will cause schools to raise prices even more.
morogop 9y ago
Student debt used to be dischargeable through bankruptcy, and abuse was exceedingly rare. I understand that the moral hazard existed in theory, but in practice it was exceedingly minimal. It is abhorrent that people like you support a vile and abusive system that prioritizes careless lenders over humanity; and that you do so based on theory, when actual data is available. Go fuck yourself.
turc1656 9y ago
"If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job" Yeah, but that's exactly why no one would ever lend that amount in the first place. That, I believe, was the OP's point. College should not cost what it does. And part of that reason is federal guarantees upon the debt. So colleges can raise the price and since the debt is guaranteed creditors are happy to lend. Essentially, there is no check and balance on the price of education that exists for pretty much everything else that might be financed (i.e. a car). "IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%." Totally disagree. That seems to violate every notion of contract law that exists. The colleges are not taking part in the loan process. They are not agreeing to take any monetary risk on the individual. They are simply offering a service at a (bloated) price. The debtor agrees to take on debt to pay for the service and the creditor agrees to take the risk. The college should not be brought into that totally separate contractual agreement. That's like holding an employer responsible for debts that an employee defaults upon because the employer had cutbacks and laid off the employee.
- ChrisBland 9y ago
  Education costs have risen faster than health care costs, you have to try to find some way to contain it or every generation becomes more indebted. As long as the feds are going to throw free money at this, we need to find some way of controlling costs. IMO asking the university staff to tighten their belts and be fiscally prudent is going to get you about as far as trying to build 1000 new mid rise apt buildings in SF. So, what ideas do you have? I don't want to limit federal funds or limit access to education, but we can't have skyrocketing tuition like we have seen for the past 20 years.
  - turc1656 9y ago
    I agree that universities are not going to tighten the purse strings unless they have no choice. The cause, as you mention, is the feds throwing money at the education system. Therefore, the only logical solution is to remove that. You say you don't want to limit access to education, but the world isn't perfect. If you want everyone to have access (meaning having access to funding via loans) then you must accept the consequences of that. I, personally, don't have an issue with limiting access. Education that involves universities with buildings, faculty, land to maintain, etc. are not infinite resources. The natural check on the usage of resources is cost. Presumably, you don't sit around letting your sink run all day because you would wind up with a massive water bill. If people want to go to college and get an education, there is a cost involved. There are always going to be those who are unable to pay due to extreme financial situations. But that's why there are scholarship programs, grants, etc. that exist. The education system used to work fairly well in this country several decades ago. You used to be able to go to college and pay for it in a very reasonable amount of time even through minimum wage jobs. Loans weren't even necessary. And when the end user pays the bills, the connection to cost is there so people pay attention to what it really costs because they bare the brunt of it right away and it's not hidden (so to speak) from them through loans that are paid off over 10-20 years. It was only when the government decided that something was "wrong" and needed to be improved that the system started going to shit and getting ever more expensive and the product (education) getting worse and worse - the quality of the education people are paying for nowadays is abysmal half the time. I discussed this recently in another thread with some specific numbers attached to my explanation: https://news.ycombinator.com/item?id=15647956 https://news.ycombinator.com/item?id=15647956
AdamJacobMuller 9y ago
> put the school on the hook While I agree with that (a lot), you can repossess a degree. The school can choose to disavow knowledge of a student. Employer tries to verify your degree, nope, don't know you. You cannot repossess an education, but you can repossess a degree. How important that is, I'm not sure. Your other solution (clawing back money from the schools for useless/overpriced degrees) is far more elegant IMO.
- Y_Y 9y ago
  Apart from being libelous to deny that a student had received an education, they should still be able to demonstrate knowledge, provide a graduation photo etc.
  - AdamJacobMuller 9y ago
    Ok, so, don't libel. "We refuse to confirm or deny" Or "We see that person in our records, but, we aren't allowed to disclose if they did/did not complete a degree (and what that degree might be) because their account is blocked." There are lots of ways that it can be tweaked to be legal. I still think it's not as good of an idea as clawing money back from the schools. They created the mess, they can fix it.
avs733 9y ago
>At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money? This seems to be some undying myth that is really effective because it allows individuals to gloss over personal value judgements about individual's educational choices under the guise of economics. It massively oversummarizes college education AND market economics. It is a bad idiom used to undermine any area of thought (e.g., when I heard it applied to mechanical engineering "because mechE's don't code") that it requires more than two neurons to see the value to society from. The role of education is to provide value to society, not simply provide labor to company's who create one form of value (i.e., capital).
- Joe-Z 9y ago
  As mentioned in a similar thread yesterday the role of universities has shifted to providers of vocation rather than education. That's why so many people make that point. I totally agree with you, everybody should study what they find interesting and the role of universities should be to provide education rather than vocation. But if someone knows they are gonna rack up $100k+ in debts, they should seriously weigh their interest in a subject against the expected (monetary) outcome of getting that degree.
amorphid 9y ago
> You'd be 29 by the time the bankruptcy fell off your credit report 7 years for chapter 13, 10 years for chapter 7
Posibyte 9y ago
The bank should be entirely at fault here. If they looked at a student's request for a loan that said I'm taking a basket-weaving class at Cornell and I need $120k to attend then it's the bank's prerogative to look into the student's past performance, the rate of return for basket weavers, and the bias to which Cornell would prompt higher or lower returns in this area. Just like any area of lending, it's on the bank to assess the risk of lending. (And as an aside and I say down below: This is why I feel banks shouldn't be in this position.)
- mattnewton 9y ago
  That’s a great way to cut people from disadvantaged backgrounds out of college degrees, and therefore social mobility.
  - Posibyte 9y ago
    I agree fully, and as I commented above, I don't personally believe this is a place for banks to be for that reason. It's shoehorning a profit-focused entity almost as a charity in my eyes. It incentivizes banks to go after borrowers as if they were a failed business when in reality they're just trying to improve themselves (which is good for all of us).
  - bluGill 9y ago
    Which disadvantaged? The smart person who is born poor or a minority will do just fine as their grades will carry them. Thus a bank should give them a loan - based on their high school report card. The "stupid" person regardless of background is unlikely to do well and should not get a loan.
    - mattnewton 9y ago
      I don’t think that banks should solely be in charge of who gets a chance in this country. Furthermore the myth of the good grades regardless of home life is just not realistic in my experience- many people need to grow into adulthood later because of instability, malnutrition, or the ability of the school they went to to prepare them for standardized testing.
emodendroket 9y ago
Being unable to easily get credit or rent an apartment in your 20s doesn't exactly sound like a walk in the park.
castlecrasher2 9y ago
If we didn't prevent it then prospective students would be directed to make better decisions with their future than to get tens of thousands in debt and a useless degree because it's so easy. "At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?" I think this burden should be on the lender first then the student. Banks don't just hand out money to an 18 year old for a business venture but they do for school because the government guarantees they can get it back.
eli_gottlieb 9y ago
>If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). If you'd be stupid not to do it, how many people have actually done it? If it was actually done at a certain rate, why wasn't that rate priced in? >IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%. This is a pretty good proposal.
- ChrisBland 9y ago
  You can't discharge student debt in bankruptcy so no one has done it
  - dragonwriter 9y ago
    > You can't discharge student debt in bankruptcy Yes, you can, it's just more difficult than other unsecured debt. This is a distressing popular myth which leads people to fail to explore their options. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/bankruptcy https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
  - eli_gottlieb 9y ago
    Once upon a time it was legal, so if it was smart, people would have done it back then.
lgleason 9y ago
I agree with this. As part of the underwriting for the loan the school has to have skin in the game and is responsible for at least some of the default and no extra recourse to go after the debtor beyond what the original lender already did. It would definitely change the admissions criteria for the better and also incentivize institutions to to spend more wisely.
bluGill 9y ago
I do think students should be able to discharge student loans in bankruptcy. However to balance it out, you lose all rights to use any schooling. Try to register for any class again and your loans are reinstated with back interest. HR departments will be required to check the blacklist to ensure that your schooling is not relevant to any position you apply or might be promoted to. (you cannot raise to something like master plumber because a master plumber is expected to have some skills that you might learn in college even though most learn on the job) Of course the HR blacklist needs to be protected by HIPPA like laws against misuse. A company should expect to sometimes hire someone and then find out they cannot promote them very far.
- EADGBE 9y ago
  HR Blacklist? Terrible idea. Just because you made a mistake 20 years ago doesn't mean you should never be allowed again. We're not talking about murder; and this is directly messing with someone's livelihood.
  - bluGill 9y ago
    Then pay your tuition loans.

distances 9y ago

Or alternatively, you could make sure there's an affordable public option for university level education for qualifying students, to avoid the need for a loan in the first place. It was feasible before, and I'm sure there isn't any non-political reason why it'd be impossible now.

maxerickson 9y ago
The percentage of the population that enrolls in college has increased dramatically, so a given level of individual support has become more expensive in total. (I don't mean the above to really try to address whether it is feasible, just to point out that the situation has changed)
- harryh 9y ago
  In addition to this very good point, Baumol's cost disease makes education ever more expensive as long as it is a labor intensive practice.
- briandear 9y ago
  However, university cost inflation is even greater than health care costs. One of the only logical reasons is that as more “free” or “cheap” government money enters the system, the more inflation. Ready availability of student loans has made universities much more insulated from market pressures than “normal” industries. If you were to eliminate student loans, costs would drop like a rock. You wouldn’t have universities hiring endless Vice Provosts of Some Bullshit Initiative or spending 10s of millions building “Student Life Centers” or luxury-level athletic facilities for sports that aren’t revenue self-sustaining. Universities are like the military — they pay the privates (adjunct professors) almost nothing while spending huge money on things like the Crusader Artilley System (insert random boondoggle university initiative here.) Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, it’s clear universities are running quite a racket. And we haven’t even touched on the insanity that is textbook pricing.
  - whatshisface 9y ago
    >Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, Woah. Maybe a few freshmen should band together and hire some PhDs to assemble a fire-and-forget university. If you can pay for one professor per student, a class of 20 students who want to major in the same thing could easily fund 4-6 classes/year and have a factor of five left over to rent a nice room in the community center. Obviously this isn't about education anymore.

baybal2 9y ago

> At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money? Surely it isn't If no major banks will give student loans, than it will be smaller, low tier loan sharks at higher rates. As some states in US, and other countries do have some programs where the state is either the guarantor or a partial payer, that will make things worse for the taxpayers. Invention of student loans has unleashed the genie from the bottle. No way back, just as it was with state backed mortgages that did just 2 things: made buying houses for cash patently impossible for an average Joe, made an average Joe having to pay for foreclosures and mortgage interest of another average Joe with his tax money.

dangero 9y ago

Putting the school on the hook for a percentage seems like it will cause schools to raise prices even more.

morogop 9y ago

Student debt used to be dischargeable through bankruptcy, and abuse was exceedingly rare. I understand that the moral hazard existed in theory, but in practice it was exceedingly minimal. It is abhorrent that people like you support a vile and abusive system that prioritizes careless lenders over humanity; and that you do so based on theory, when actual data is available. Go fuck yourself.

turc1656 9y ago

"If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job" Yeah, but that's exactly why no one would ever lend that amount in the first place. That, I believe, was the OP's point. College should not cost what it does. And part of that reason is federal guarantees upon the debt. So colleges can raise the price and since the debt is guaranteed creditors are happy to lend. Essentially, there is no check and balance on the price of education that exists for pretty much everything else that might be financed (i.e. a car). "IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%." Totally disagree. That seems to violate every notion of contract law that exists. The colleges are not taking part in the loan process. They are not agreeing to take any monetary risk on the individual. They are simply offering a service at a (bloated) price. The debtor agrees to take on debt to pay for the service and the creditor agrees to take the risk. The college should not be brought into that totally separate contractual agreement. That's like holding an employer responsible for debts that an employee defaults upon because the employer had cutbacks and laid off the employee.

ChrisBland 9y ago
Education costs have risen faster than health care costs, you have to try to find some way to contain it or every generation becomes more indebted. As long as the feds are going to throw free money at this, we need to find some way of controlling costs. IMO asking the university staff to tighten their belts and be fiscally prudent is going to get you about as far as trying to build 1000 new mid rise apt buildings in SF. So, what ideas do you have? I don't want to limit federal funds or limit access to education, but we can't have skyrocketing tuition like we have seen for the past 20 years.
- turc1656 9y ago
  I agree that universities are not going to tighten the purse strings unless they have no choice. The cause, as you mention, is the feds throwing money at the education system. Therefore, the only logical solution is to remove that. You say you don't want to limit access to education, but the world isn't perfect. If you want everyone to have access (meaning having access to funding via loans) then you must accept the consequences of that. I, personally, don't have an issue with limiting access. Education that involves universities with buildings, faculty, land to maintain, etc. are not infinite resources. The natural check on the usage of resources is cost. Presumably, you don't sit around letting your sink run all day because you would wind up with a massive water bill. If people want to go to college and get an education, there is a cost involved. There are always going to be those who are unable to pay due to extreme financial situations. But that's why there are scholarship programs, grants, etc. that exist. The education system used to work fairly well in this country several decades ago. You used to be able to go to college and pay for it in a very reasonable amount of time even through minimum wage jobs. Loans weren't even necessary. And when the end user pays the bills, the connection to cost is there so people pay attention to what it really costs because they bare the brunt of it right away and it's not hidden (so to speak) from them through loans that are paid off over 10-20 years. It was only when the government decided that something was "wrong" and needed to be improved that the system started going to shit and getting ever more expensive and the product (education) getting worse and worse - the quality of the education people are paying for nowadays is abysmal half the time. I discussed this recently in another thread with some specific numbers attached to my explanation: https://news.ycombinator.com/item?id=15647956 https://news.ycombinator.com/item?id=15647956

AdamJacobMuller 9y ago

> put the school on the hook While I agree with that (a lot), you can repossess a degree. The school can choose to disavow knowledge of a student. Employer tries to verify your degree, nope, don't know you. You cannot repossess an education, but you can repossess a degree. How important that is, I'm not sure. Your other solution (clawing back money from the schools for useless/overpriced degrees) is far more elegant IMO.

Y_Y 9y ago
Apart from being libelous to deny that a student had received an education, they should still be able to demonstrate knowledge, provide a graduation photo etc.
- AdamJacobMuller 9y ago
  Ok, so, don't libel. "We refuse to confirm or deny" Or "We see that person in our records, but, we aren't allowed to disclose if they did/did not complete a degree (and what that degree might be) because their account is blocked." There are lots of ways that it can be tweaked to be legal. I still think it's not as good of an idea as clawing money back from the schools. They created the mess, they can fix it.

avs733 9y ago

>At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money? This seems to be some undying myth that is really effective because it allows individuals to gloss over personal value judgements about individual's educational choices under the guise of economics. It massively oversummarizes college education AND market economics. It is a bad idiom used to undermine any area of thought (e.g., when I heard it applied to mechanical engineering "because mechE's don't code") that it requires more than two neurons to see the value to society from. The role of education is to provide value to society, not simply provide labor to company's who create one form of value (i.e., capital).

Joe-Z 9y ago
As mentioned in a similar thread yesterday the role of universities has shifted to providers of vocation rather than education. That's why so many people make that point. I totally agree with you, everybody should study what they find interesting and the role of universities should be to provide education rather than vocation. But if someone knows they are gonna rack up $100k+ in debts, they should seriously weigh their interest in a subject against the expected (monetary) outcome of getting that degree.

amorphid 9y ago

> You'd be 29 by the time the bankruptcy fell off your credit report 7 years for chapter 13, 10 years for chapter 7

Posibyte 9y ago

The bank should be entirely at fault here. If they looked at a student's request for a loan that said I'm taking a basket-weaving class at Cornell and I need $120k to attend then it's the bank's prerogative to look into the student's past performance, the rate of return for basket weavers, and the bias to which Cornell would prompt higher or lower returns in this area. Just like any area of lending, it's on the bank to assess the risk of lending. (And as an aside and I say down below: This is why I feel banks shouldn't be in this position.)

mattnewton 9y ago
That’s a great way to cut people from disadvantaged backgrounds out of college degrees, and therefore social mobility.
- Posibyte 9y ago
  I agree fully, and as I commented above, I don't personally believe this is a place for banks to be for that reason. It's shoehorning a profit-focused entity almost as a charity in my eyes. It incentivizes banks to go after borrowers as if they were a failed business when in reality they're just trying to improve themselves (which is good for all of us).
- bluGill 9y ago
  Which disadvantaged? The smart person who is born poor or a minority will do just fine as their grades will carry them. Thus a bank should give them a loan - based on their high school report card. The "stupid" person regardless of background is unlikely to do well and should not get a loan.
  - mattnewton 9y ago
    I don’t think that banks should solely be in charge of who gets a chance in this country. Furthermore the myth of the good grades regardless of home life is just not realistic in my experience- many people need to grow into adulthood later because of instability, malnutrition, or the ability of the school they went to to prepare them for standardized testing.

emodendroket 9y ago

Being unable to easily get credit or rent an apartment in your 20s doesn't exactly sound like a walk in the park.

castlecrasher2 9y ago

If we didn't prevent it then prospective students would be directed to make better decisions with their future than to get tens of thousands in debt and a useless degree because it's so easy. "At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?" I think this burden should be on the lender first then the student. Banks don't just hand out money to an 18 year old for a business venture but they do for school because the government guarantees they can get it back.

eli_gottlieb 9y ago

>If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). If you'd be stupid not to do it, how many people have actually done it? If it was actually done at a certain rate, why wasn't that rate priced in? >IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%. This is a pretty good proposal.

ChrisBland 9y ago
You can't discharge student debt in bankruptcy so no one has done it
- dragonwriter 9y ago
  > You can't discharge student debt in bankruptcy Yes, you can, it's just more difficult than other unsecured debt. This is a distressing popular myth which leads people to fail to explore their options. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/bankruptcy https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
- eli_gottlieb 9y ago
  Once upon a time it was legal, so if it was smart, people would have done it back then.

lgleason 9y ago

I agree with this. As part of the underwriting for the loan the school has to have skin in the game and is responsible for at least some of the default and no extra recourse to go after the debtor beyond what the original lender already did. It would definitely change the admissions criteria for the better and also incentivize institutions to to spend more wisely.

bluGill 9y ago

I do think students should be able to discharge student loans in bankruptcy. However to balance it out, you lose all rights to use any schooling. Try to register for any class again and your loans are reinstated with back interest. HR departments will be required to check the blacklist to ensure that your schooling is not relevant to any position you apply or might be promoted to. (you cannot raise to something like master plumber because a master plumber is expected to have some skills that you might learn in college even though most learn on the job) Of course the HR blacklist needs to be protected by HIPPA like laws against misuse. A company should expect to sometimes hire someone and then find out they cannot promote them very far.

EADGBE 9y ago
HR Blacklist? Terrible idea. Just because you made a mistake 20 years ago doesn't mean you should never be allowed again. We're not talking about murder; and this is directly messing with someone's livelihood.
- bluGill 9y ago
  Then pay your tuition loans.