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Nearly 5M Americans in Default on Student Loans

145 points by rayuela 9y ago

ianai 9y ago
In the US people can’t clear student loans in bankruptcy. It’s a shame, I think, given the constant upward tick in tuition and lack of resulting careers. They can even go after the students parents.
- whatshisface 9y ago
  Academia is a great example of what happens when you try to create a "market-free" zone: things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating. See: student loans/tuitions, pay-to-read journals (another front page HN topic). The student loan problem is a result of the generalized "prestige economy" that's driving the problems with journals (and whose failures include that cascade of replication crises). To see this, realize that the only reason so many people are going to university at all is because a good name on your resume is now a requirement for getting any reasonably well-paying job. See the parallels between that and how academics need good names on their CVs in order to compete? It's a prisoner's dillema where the cooperation-case would be that every person who doesn't need their degree for their career would drop out at the same time that every academic switched to open-access journals.
  - paulddraper 9y ago
    Exactly. If you wonder why education and health care costs explode: when the party deciding is not the party paying, that's what happens. I hadn't heard of pay-to-read journals being an attempt to create a "market-free zone".
    - whatshisface 9y ago
      The journals occupy a position where the quality of the service they provide has nothing to do with why a person chooses to do business with them. It's a market in that you can choose who to submit papers to, but the incentives are so misaligned that it doesn't work like a market.
  - ghostcluster 9y ago
    > things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating Don't forget the swelling of superfluous administration roles and salaries, including bureaucratic roles whose entire job entails manufacturing problems to justify the existence of their position. See: campus diversity officers https://www.theatlantic.com/education/archive/2016/09/americas-college-diversity-officers/499022/ https://www.theatlantic.com/education/archive/2016/09/americ...
    - anonymous5133 9y ago
      When I was in school the common trend they had was requiring some foreign language course for ALL students. It was sold with all the traditional rhetoric of making students more well rounded but at the same time you aren't getting more well rounded if you are adding an extra 1 grand to your student loan. It never got implemented though because they didn't have enough budget to implement it. Mind you, this requirement was in addition to all the existing courses you had to take (40 for a BA degree).
  - int_19h 9y ago
    This all doesn't explain why so many people pile up massive debt for a degree that doesn't pay well, if at all, in the current (and foreseeable future) job market - and they'd have to be very clueless to not know it in advance.
    - hjjiehebebe 9y ago
      They are kids
      - int_19h 9y ago
        When they go to college? They're grown up enough to be able to understand such things. This was certainly the case in my generation (mind you, in a different country) - if you asked college students why they're there, some would be actually interested in the subject, most would be there because they thought it would lead to a well-paid or at least stable job, and a few would be kids of rich parents parked away to get their requisite diploma on whatever. Consequently, for most, choosing where and what they are going to study would either be a research project in and of itself, or else they'd just pick one of the few specialties known to pay well. And we didn't even pay for college!
- nordsieck 9y ago
  > In the US people can’t clear student loans in bankruptcy. It’s a shame... Maybe you could explain this to me, because I really don't understand. Why do you think that it's a shame that people can't just discharge substantial, otherwise unsecured government loans? To me, the real shame is high school employees pushing college on marginal students. One of the few things worse than spending too much money on a not-particularly lucrative degree is spending the money, but not graduating. I believe the graduation rate at Bellevue College, the biggest and best community college* in WA state is around 25%. I'm sure they're not unusual in that regard. * It's technically not a community college, but for all intents and purposes, it is.
  - deleted 9y ago
    [deleted]
  - metilda 9y ago
    Bellevue College might be the biggest, but its far from the best. They tend to hire current UW professors to teach one class a quarter, stuff the rest of the dept with teachers that were able to get canned at the Seattle Colleges and UW satellites, and hope for the best. Many of my friends who went there have horror stories about their teachers which I'd be hard pressed to encounter at Seattle Central College or North Seattle College. Nearly every community college in the Puget Sound decided about a decade ago to shed the community branding and add a handful of 4 year degrees. Problem is the material you learn in upper level CS classes at UW and its satellites is quite different than what North Seattle College and Seattle Central College require (eg: a whole class on SQL Server, C# as the Intro CS class at Seattle Central rathr than the state mandated Python, etc).
    - prostoalex 9y ago
      US is pretty dismal at graduation rates overall - Department of Education is not even tracking the percent of graduates completing a 4-year degree in 4 years anymore, instead preferring a generous 6-year completion metric for a 4-year degree, which stands at 59% https://nces.ed.gov/fastfacts/display.asp?id=40 https://nces.ed.gov/fastfacts/display.asp?id=40 41% of all US undergraduate students have nothing material to show 6 years down the road except for the mounts of student debt. The quoted figure of 22% of those debts being in some kind of default starts looking optimistic.
- amorphid 9y ago
  USA checking in. I declared chapter 7 bankruptcy in 2010. Chapter 7 bankruptcy eliminates 100% of your dischargable debt. When the bankruptcy process had completed, I still owed ~200,000 USD, which was 140,000 USD in student loans and 60,000 USD in back taxes that were less than 3 years old, neither of which were dischargable.
  - SeoxyS 9y ago
    At this point, couldn't you just arbitrage it, and take out loans / mortgages / cash advances / credit cards just to pay off student loans and back taxes, after after which you'd actually declare bankruptcy.
    - lotsofpulp 9y ago
      If a lender is going to approve a sufficiently large loan to someone with $200k in student loans and tax debt, and without a high income, they would not be in business for long.
    - notfromhere 9y ago
      That's called fraud and you will go to prison for it.
      - mcntsh 9y ago
        How is that fraud?
        amorphid 9y ago
        If you borrow money, and it can be demonstrated you never intended to make a good faith effort to pay it back, you're going to have a bad time.
    - amorphid 9y ago
      I was already tapped out. There was no more money to be borrowed.
  - 9y ago
- prostoalex 9y ago
  You can make the student loans dischargeable in the event of a bankruptcy, but at that point their risk profile is no different than unsecured personal loans. Which for a person with low or non-existing credit history (i.e. any 18-year-old) would likely result in: * requirement for high down payment - perhaps 50 to 75% of the tuition being covered by student or his parents (through home equity loans or retirement account loans) * frequent and aggressive repayment schedule, starting perhaps 30 days after originating the loan * high interest rate, perhaps front-loaded into repayment schedule due to higher than normal default rates * aggressive monitoring of the events related to debt performance, where missed class, late homework, substandard grade or a behavioral citation could result in interest rate boost * incentives and price control mechanisms enforced by the lender - your computer science class will have a low interest rate, but that music appreciation class or gender studies gotta be out-of-pocket I think overall that would lower the enrollment rate and force the unbundling of academic offerings. Not necessarily a bad thing, but I can see some people being against it.
- csense 9y ago
  Most people starting college are 17-20 year old young adults with income and assets far below what would be needed to take out $30K-$100K+ in loans. Not enough lenders would want to take that risk, unless they have the taxpayer to back them up in case the borrower defaults. If the borrower's allowed to wipe their debt in bankruptcy, then a lot of students will simply declare bankruptcy as soon as they leave school. The students who play by the rules are burdened with debt, and you're subsidizing people who game the system to their advantage. The fairest thing to do, then, is either subsidize everybody, and have taxpayer-funded higher education (but that's expensive). Or subsidize nobody, and let people pay their own way (but that leaves behind students whose families can't afford it). Or fund the most promising students, and make everybody else pay (but that leaves behind students who don't have good academic record). Personally I don't like the idea that our society starts its newest members out with a huge debt burden.
  - ianai 9y ago
    I’d rather society “waste” resources on young peoples educations than many other things. For reasons similar to why I’d like to see NASA with DOD funding.
anon11082016 9y ago
Let's add another layer of abstraction and diversion, the trusty tax payer! /s This of course, totally ignoring that government backed (everybody gets one no matter what) loans got us here in the first place...
ggm 9y ago
Although by inclination what I want to do is rant about the iniquity of this kind of robo-debt in education, instead what I am thinking right now, is this: how does this compare overall to the rate of default in debt for other purposes? how does it compare to car loan debt? mortgage debt? I ask, because debt is the same, except in as much as student debt is in principle seeking a path to be able to repay it. The asset based debt invites a repo man: you can't suck knowledge back out of a graduates head (ancient egyptian practices to the contrary)
- downrightmike 9y ago
  That assumes the person wasn't working too many odd jobs and hours to scrape by, so that they did receive a decent education.
- bradleyjg 9y ago
  The overwhelming majority of student loan debt is government backed and eligible for some kind of income based repayment plan. There are four different kinds, but the most common two use a formula of 10% of income after 150% of the poverty level for the relevant household size. It is entirely possible to have a required payment of $0, before even getting into forbearance or deferral. Car loans and mortgage loans are not comparable. It's possible to simply be unable to pay those debts. So there's every good reason that the student loan default rate should be lower than those.
  - ggm 9y ago
    Assuming you don't deliberately hide income I guess. Some people have said that for those who get on the low interest, or non-accumulating interest loan schedules, its the best kind of debt you can have. The lein on income is a royal pain and for student debt, it often hits just at the point you want to use increased disposible income to do things like have kids, restart the cycle. I was lucky enough to go to university in the UK in the time of free study with grant so to me, this is all hypothetical not actual and to any current student facing a lifetime of debt, I apologize for the circumstances you have been put in, by people like me
dogruck 9y ago
Let’s simply tax the new BTC zillionaires, and pay down the student loan debts.
- AlexCoventry 9y ago
  We could just forgive the debts. We don't need a compensating tax when inflation is this low.
  - gicadin 9y ago
    This would be a slap in the face of some people who went to school and worked odd jobs to pay for tuition.
    - aaomidi 9y ago
      Not doing it would be devastating for the economy in the long run. It's a hard choice but macro is more important than micro in these decisions.
      - sintaxi 9y ago
        Its a mistake in the long run to socialize risk. These former students are defaulting because the courses they took have no value in the marketplace.
danjoc 9y ago
This is ruining America's future. That's 5M people who can't even qualify for a car loan now. The penalties for default are punishing. Even bankruptcy isn't a realistic option. This is ruinous for these people. They'll be in their mid-30s or early 40s before they can pay off. Starting that late to build a nest egg, they'll never recover. There's going to be an entire generation that has no secure retirement plans. It will also be a baby bust. By the time they are stable enough to think about starting families, they'll be biologically incapable to produce. Nobody will be around to fight off invaders. We're seriously toast in 50 years at this rate.
- metilda 9y ago
  Welcome to having America's latest STD! Its bigger than Hepatitis (at 3 million), and costs about the same to cure ($80k to $90k a person). Relationships are delayed, careers are set back and our economy is slowly bled. Much like healthcare!
  - djsumdog 9y ago
    Don't even get started on health care. I worked in health insurance for three years and lived outside the US for about the same time. I saw a lot of waste in our health insurance industry and a foreign market that was superior in almost every way, even for very serious conditions. I wrote a post about it a while back: http://fightthefuture.org/article/returning-to-america-and-the-unaffordable-care-act/ http://fightthefuture.org/article/returning-to-america-and-t...
- phil248 9y ago
  The age curve in the United States is actually doing pretty good thanks to the massive amounts of immigrants we attract. Japan and Germany wish they had our population growth rates.
  - Taniwha 9y ago
    yeah, but some guy is building a wall ... getting rid of green cards too
genzoman 9y ago
Before the internet, centralized places of knowledge were needed, and you'd need to attend that place to find said knowledge. Think about how access to music caused the price of albums to drop. Education had not seen a similar dip in cost even though the supply is 100 percent saturated. There's a dying class of professors who got in while tenure was still a thing that paid probably 1/10 of the cost for education kids are paying now. They have the rosiest glasses possible because they're making around 100k for zero competition in their workspace. The vast majority of the time now a TA teaches the course or certainly grades the paperwork. Well over half of college degrees obtained will never pay for themselves. A philosophy, social science or psychology degree are not important enough to pay 50k to get. Free college would be a complete disaster, and a massive waste of money. The education cartel places liberal , financial shackles on kids who are less than 1000 sunrises away from going to prom. The liberal arts is a complete disaster for young people's financial means. So, you get somebody 100k in debt for something they could learn on the internet and guess what? They'll ALWAYS vote to raise taxes on the rich. I worked at a state university for five years, doing research. The waste of extravagant, totally unsustainable. I was going to grad school free since I was an employee, dropped out to teach myself software and in four years I make nearly as much as the Phds. in a physical therapy department. All it cost me was time.
- mrtesthah 9y ago
  Nope, liberal arts majors earn as much as professional and pre-professional majors. https://www.chronicle.com/article/How-Liberal-Arts-Majors-Fare/144133 https://www.chronicle.com/article/How-Liberal-Arts-Majors-Fa...
  - ghostcluster 9y ago
    Only if they get graduate degrees. Otherwise they start at the lowest end of college degree holders. And the "high" 'professional and pre-professional degree' salaries are dwarfed by every STEM degree out of the gate. And like the OP said, there is now a glut of humanities degrees higher than the demand for positions.
- Top19 9y ago
rectang 9y ago
The relief of bankruptcy: only for entrepreneurs, not for students. Another instance of utterly corrupt selective application of theoretically sound conservative principles. Just like "deregulation" and Net Neutrality.
- lightbyte 9y ago
  There is a reason for that. If your business goes bankrupt it can be liquidated to settle debts. Once that is done you are left with nothing. The same cannot be done with an education. You can't "give back" knowledge to your school, or sell it to someone else.
  - edpazu 9y ago
    assuming any knowledge was actually gained.
  - rectang 9y ago
    Liquidation of course is often insufficient to pay back all creditors. The risks which have to be assessed before making student loans vs. business loans differ by degree, not kind. The systems of laws in our society are constructed. A choice has been made to privilege entrepreneurs over students.
yousufmyh 9y ago
Agreed
Camillo 9y ago
There is a simple and equitable solution, which is to transfer the debt to the universities where they studied.
- jstewartmobile 9y ago
  It's strange how an old-timey concept like a "money back guarantee" gets looked at as though it were full-blown communism these days...
- stapleten 9y ago
  I genuinely don't know why I haven't considered this perspective before seeing as how many colleges treat students as just bodies to stuff their money bags with. Oh, come to our college, take out $60000 in loans for a degree that will never pay that off, but we get to pocket it anyways because we have no decency? Sure thing! And don't forget to donate as an alumnus! I'm not exactly in this situation, but have seen it enough with people who had no business being at certain schools for certain degrees that I can't help but think universities should be held responsible for all this to some extent.
marcoperaza 9y ago
Tuition, especially at private colleges, is totally out of control. But class sizes are up, not down. And the number of full professors is not growing. So where is the money going? To an explosive growth of administrative staff. My alma mater has almost one employee per student. There are many dozens of administrative departments, each with multiple deans and assistant deans and staff, and sometimes subdivisions each with their own layer of bureaucracy. OPAL, for example, has a subdivision for each kind of minority on campus, each with its own assistant dean and staff. You can look at the list of departments: http://home.dartmouth.edu/administrative-offices http://home.dartmouth.edu/administrative-offices . Keep in mind that this is a very small college, with about 4000 undergrads and 2000 grad students. This monstrous growth is entirely a product of the last 30 to 40 years and is almost entirely responsible for the astronomic increases in tuition, currently $60,000. Even worse, the college claims that its actual cost per student is double that, with the shortfall made up from the endowment. There is NO legitimate reason that a college education should cost over $100,000 per year. The government needs to stop writing a blank check to these colleges in the form of unlimited loans for their students. The government needs to set a much lower cap on the number of loans it will give to each student per year. The colleges will accuse the party in power of trying to deny students the right to an education, but they will eventually surrender and start cutting the bloat.
- akkat 9y ago
  What's the reason for that. I know administrative staff like that that are getting paid, but what would the current one decide to hire more staff? Unless there was some benefit the staff would prefer to keep the money for themselves rather than hire more people.
  - marcoperaza 9y ago
    It is a law of bureaucracy that it always grows absent some constraining force. A few reasons come to mind: 1. Have a problem or a new political goal? Make a committee, open a new office, etc. This is how bureaucracies see the world. 2. Unproductive employees? You can't fire them because of HR policies and unionization, and more importantly, because there's no constraining force creating a culture of efficiency. So just hire more employees. 3. No one who rises to lead an organization then campaigns to diminish it in size. Everyone thinks they are important and that their work is important. Having more people working under you makes you more important. Having fewer makes you less important. These are problems in for-profit organizations, but the market provides a constraining force. An inefficient company won't be able to compete with a more efficient one and will eventually go out of business. Also, shareholders will demand that expenses are cut so profits, and dividends or share price, goes up.
AckSyn 9y ago
It's unfortunate that kids aren't taught this during high-school years, and the lie that you must go to college to "make something of yourself" is still perpetuated.
thisisit 9y ago
It is confusing for me how bankruptcies work. What happens if a corporate declares bankruptcy? Do they only pay less while keeping everything they invested/bought using the loan money, for example - buildings, equipment, stores etc? How does this compare to student loans?
- jacquesm 9y ago
  Assuming the bankruptcy isn't called off: The bankruptcy is handled by a liquidator or trustee in bankruptcy. That person / entity will attempt to liquidate the assets and will then pay a portion or all of the debts in order of preference. If there is a remainder (unlikely, but it could be) it will be returned to the shareholders. Depending on the country some creditors will receive automatic preference (such as the taxman). In some cases, for instance if it is believed the company is viable but has been managed badly it is possible that such a trustee will even attempt to keep the company running while they search for a buyer. If debts are re-negotiated or forgiven it is possible for a company to emerge relatively unscathed from bankruptcy proceedings, this all depends on what deals can be made with the creditors. It compares poorly to student loans because those are individual debts and unfortunately individual debts are far harder to discharge than corporate debts.
  - basicplus2 9y ago
    It doesn't really matter for corporations, as a company can be burnt and any debts left will never be paid, and a new company can be created with no debts. This is what structuring related entities is all about. The one that owes all the money (particularly the one paying and owing to employees) had nothing of real value in it.
jstewartmobile 9y ago
Ex-wife was an english prof at a state university. They had students who came in with a 16 on their ACT, which really means they should still be in high school. They'd take remedial classes for a couple years, then most eventually filed academic bankruptcy. Finance officer was telling me how for in-state students, the student is only paying around 20% of the actual tab, and that the state picks up the rest. Then there was the story from a few days ago where some poor lady ended up owing over $100k for a < $10k debt due to fees and penalty rates. Even my own degree, in the "allegedly" hard subject computer engineering, first day of class would fill an auditorium. After midterms, class size would drop to just a handful of people. So taxpayers on the hook for subsidies, former students paying obscene finance charges on a kind of debt that is almost unshakable, and little of that culminating in valuable skills and credentials... Excluding the more selective institutions, higher ed is a racket, and the financing of it is an even bigger one.
japhyr 9y ago
I'm a high school math teacher. As part of their high school math education, I encourage all of my students to do one of their projects on analyzing loans. I ask them to pick an item they might take a loan out for, such as a car, a boat (we live in a small fishing town in Alaska), a house, or a student loan. They pick a realistic loan amount, APR, and term length. Then they run the numbers on the loan. I demonstrate making a loan analysis spreadsheet, starting with an empty spreadsheet. Students then get the choice of making their own spreadsheet, modifying one that I've made with them, or using a loan calculator. By the end of a session, most of my students have become comfortable using a spreadsheet to analyze a loan. This lets them understand how all the various factors interact, and they can play with any loan they become interested in. Students start out with no idea how banks and lending institutions determine monthly payments. They end up understanding loans better than many adults. They move away from "all loans are bad and predatory" and "loans are free money" to "some loans are fair, some are predatory, and I need to ask myself if a specific loan sets me up for a better life. I wish someone had done this for me. When I took out student loans many years ago, I had no idea what my monthly payments would end up being. I was just told it would be worth while, and I trusted the people advising me. Students these days can't afford to blindly trust that student loans are going to make their lives better.
- mrhappyunhappy 9y ago
  Care to share your instructions? I’m an adult and I just use the web calculators haha.
  - japhyr 9y ago
    Here's a pdf version of the assignment: https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBsbQOx0/view?usp=sharing https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBs...
- oliwarner 9y ago
  I think it's hard to absolutely assess the value of a student loan —however predatory— without considering the prospects of having a higher education. Some degrees are worth a dodgy loan. Some really aren't. You could also say that many students wouldn't be in higher education without the loan. That is especially true here in the UK. That might not be a bad thing except that we've gone through an arms race so that every junior post needs five bachelor degrees and a decade of experience. Experience alone used to be enough. It'd be nice to get back there. Our focus on getting everybody into higher education —and underwriting indefinite liens on lifetime income— has also meant that universities care more about the number of students than the quality of teaching. That alone probably isn't news, what has been recently in the UK is the remuneration of higher management staff. They can apparently justify the 10-20× bump over senior lecturers (plus benefits like housing, cars, lunches) to their boards by saying they're the only people who can attract all the money from the students. It's disgusting and vicious cycle.
ikeyany 9y ago
This did not happen by chance. The answer isn't hard to arrive at--simply ask why college is so expensive compared to the 1990s, and why states cannot afford to offset these costs anymore. America is selling out its future by convincing young people that they should go into debt to pay for "the college experience". But why does "the college experience" need to include superfluous staff and wasteful resources? Follow the money.
- mfukar 9y ago
  > Follow the money Paint, for those of us with no familiarity with the US system, a picture.
  - CaptSpify 9y ago
    Insane administrative salaries, ridiculous sports budgets, new buildings and amenities that no student needs ( https://www.washingtonpost.com/sports/colleges/one-schools-formula-for-athletic-success-build-a-lazy-river-and-hope-the-recruits-will-come/2017/03/31/e1b7f5c8-1568-11e7-833c-503e1f6394c9_story.html https://www.washingtonpost.com/sports/colleges/one-schools-f... )
    - slg 9y ago
      Those things are easy scapegoats but they aren't the biggest cause of tuition increases. States simply aren't spending the money on colleges like they did in the past. [1] This is likely because of all the guaranteed loan money available so the states don't feel the same pressure to fund universities. For the specific case you linked above, $25m for athletic upgrades is really not that expensive for a school the size of UCF with over 64,000 students and an annual budget of $1.5b. [2] If you abandoned building the facilities and distributed the money evenly among all students you could cut costs for a single year by 2% for in state students and 1% for out of state students. [3] That isn't nothing and you can certainly debate whether athletic facilities are a smart use of $25m, but it is a drop in the bucket compared with the actual rise in costs. [1] - https://fivethirtyeight.com/features/fancy-dorms-arent-the-main-reason-tuition-is-skyrocketing/ https://fivethirtyeight.com/features/fancy-dorms-arent-the-m... [2]- https://www.ucf.edu/about-ucf/facts/ https://www.ucf.edu/about-ucf/facts/ [3]- https://admissions.ucf.edu/cost/ https://admissions.ucf.edu/cost/
mrhappyunhappy 9y ago
Time to get into crypto and pay them off. I know I’m going to get a ton of downvotes for saying that...
- zeep 9y ago
  probably still the fastest way to double your money...
Pokepokalypse 9y ago
I recently rejected a job offer at a major university, as a software developer for their IT department. The position did not pay, what their brochure was promising their computer science majors could expect to be paid, while at the same time, asking these computer science majors to accumulate 5 salary-years' worth of debt, for the honor and distinction of earning this degree. But they don't even pay their own staff that much.
matt_s 9y ago
Are there any studies that look at the costs of tuition compared to the rise in freely available equivalent information? I wonder if this is common in other markets where the companies recognize that a lot of their business is commoditized so they keep raising prices to help offset potential losses. I don't think student loans can collapse like mortgages because there isn't property involved. However, if there is a collapse in higher education in general - a sort of wave where people realize it is not worth it financially and enrollments drop dramatically, that would cause ripple effects in the economy.
- carlmr 9y ago
  The problem isn't what you learn, it's whether you can show the piece of paper proving you learned it. I learned most of my undergrad education on my own at home from the books suggested. My education cost me time + the price of the books. However to get the exams, grades and piece of paper in the end, it costs a lot of money. If we could decouple certification/exams from private institutions, autodidactic people could get their Bachelor's degree almost for free. For Master and PhD degrees I guess the point is more to do research.
ultim8k 9y ago
Someone is making good money there. What if People invested on learning coding instead of spending a fortune just to feed the uni market?
tenpoundhammer 9y ago
Student loans are the stupidest form of loans. Do people need a college education? Absolutely. What's the best way to provide it? I have no idea. Here's why student loans are dumb. 1. They are practically guaranteed to anyone who signs regardless of their future ability to pay it back. 2. The majority of people getting them are children and have are terrible at perceiving future outcomes. Ask any 18-year-old starting college if they will make more money than average after graduating, most will say yes. 3.College drop out rates are high. This site says 56% https://www.collegeatlas.org/college-dropout.html https://www.collegeatlas.org/college-dropout.html . Taking out a loan to help you make more money and then not making more money puts you at higher risk not to pay back. 4. Relatively speaking all majors are valued at the same cost within an institution. If I get a bachelors degree in computer science I pay the same tuition and costs as someone who gets a bachelors degree in ancient history, even though our potential earnings are vastly different. The entire student loan and college education market is a mess. I suspect this is a sign that college should be a public good or has been messed with by folks that think it should be.
notfromhere 9y ago
A big problem is that the gov't is double-dipping on the benefits of higher education. They both benefit from higher taxes on earnings as well as interest of education loans.
pascalxus 9y ago
Like so many things here, I think this is another case of monopoly. Accredited institutions can do whatever they want because there isn't enough competition and students are being taken advantage of (no one is giving them the right financial knowledge about interest rates and years of labor required to pay off the loan). Let's open up the playing field and allow more cheaper colleges like community colleges. And educate students about choosing those cheaper schools. Employers need to do their part too and stop being so elitist. Not every job requires a Stanford grad. And let's design the programs so millennials can still work and earn money durring the day and do some kind of part time bachelors program in the evening (that doens't take too much extra time). That way instead of going into debt, they can spend the time breaking even or even building up some savings.

145 points by rayuela 9y ago

In the US people can’t clear student loans in bankruptcy. It’s a shame, I think, given the constant upward tick in tuition and lack of resulting careers. They can even go after the students parents.

whatshisface 9y ago
Academia is a great example of what happens when you try to create a "market-free" zone: things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating. See: student loans/tuitions, pay-to-read journals (another front page HN topic). The student loan problem is a result of the generalized "prestige economy" that's driving the problems with journals (and whose failures include that cascade of replication crises). To see this, realize that the only reason so many people are going to university at all is because a good name on your resume is now a requirement for getting any reasonably well-paying job. See the parallels between that and how academics need good names on their CVs in order to compete? It's a prisoner's dillema where the cooperation-case would be that every person who doesn't need their degree for their career would drop out at the same time that every academic switched to open-access journals.
- paulddraper 9y ago
  Exactly. If you wonder why education and health care costs explode: when the party deciding is not the party paying, that's what happens. I hadn't heard of pay-to-read journals being an attempt to create a "market-free zone".
  - whatshisface 9y ago
    The journals occupy a position where the quality of the service they provide has nothing to do with why a person chooses to do business with them. It's a market in that you can choose who to submit papers to, but the incentives are so misaligned that it doesn't work like a market.
- ghostcluster 9y ago
  > things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating Don't forget the swelling of superfluous administration roles and salaries, including bureaucratic roles whose entire job entails manufacturing problems to justify the existence of their position. See: campus diversity officers https://www.theatlantic.com/education/archive/2016/09/americas-college-diversity-officers/499022/ https://www.theatlantic.com/education/archive/2016/09/americ...
  - anonymous5133 9y ago
    When I was in school the common trend they had was requiring some foreign language course for ALL students. It was sold with all the traditional rhetoric of making students more well rounded but at the same time you aren't getting more well rounded if you are adding an extra 1 grand to your student loan. It never got implemented though because they didn't have enough budget to implement it. Mind you, this requirement was in addition to all the existing courses you had to take (40 for a BA degree).
- int_19h 9y ago
  This all doesn't explain why so many people pile up massive debt for a degree that doesn't pay well, if at all, in the current (and foreseeable future) job market - and they'd have to be very clueless to not know it in advance.
  - hjjiehebebe 9y ago
    They are kids
    - int_19h 9y ago
      When they go to college? They're grown up enough to be able to understand such things. This was certainly the case in my generation (mind you, in a different country) - if you asked college students why they're there, some would be actually interested in the subject, most would be there because they thought it would lead to a well-paid or at least stable job, and a few would be kids of rich parents parked away to get their requisite diploma on whatever. Consequently, for most, choosing where and what they are going to study would either be a research project in and of itself, or else they'd just pick one of the few specialties known to pay well. And we didn't even pay for college!
nordsieck 9y ago
> In the US people can’t clear student loans in bankruptcy. It’s a shame... Maybe you could explain this to me, because I really don't understand. Why do you think that it's a shame that people can't just discharge substantial, otherwise unsecured government loans? To me, the real shame is high school employees pushing college on marginal students. One of the few things worse than spending too much money on a not-particularly lucrative degree is spending the money, but not graduating. I believe the graduation rate at Bellevue College, the biggest and best community college* in WA state is around 25%. I'm sure they're not unusual in that regard. * It's technically not a community college, but for all intents and purposes, it is.
- deleted 9y ago
  [deleted]
- metilda 9y ago
  Bellevue College might be the biggest, but its far from the best. They tend to hire current UW professors to teach one class a quarter, stuff the rest of the dept with teachers that were able to get canned at the Seattle Colleges and UW satellites, and hope for the best. Many of my friends who went there have horror stories about their teachers which I'd be hard pressed to encounter at Seattle Central College or North Seattle College. Nearly every community college in the Puget Sound decided about a decade ago to shed the community branding and add a handful of 4 year degrees. Problem is the material you learn in upper level CS classes at UW and its satellites is quite different than what North Seattle College and Seattle Central College require (eg: a whole class on SQL Server, C# as the Intro CS class at Seattle Central rathr than the state mandated Python, etc).
  - prostoalex 9y ago
    US is pretty dismal at graduation rates overall - Department of Education is not even tracking the percent of graduates completing a 4-year degree in 4 years anymore, instead preferring a generous 6-year completion metric for a 4-year degree, which stands at 59% https://nces.ed.gov/fastfacts/display.asp?id=40 https://nces.ed.gov/fastfacts/display.asp?id=40 41% of all US undergraduate students have nothing material to show 6 years down the road except for the mounts of student debt. The quoted figure of 22% of those debts being in some kind of default starts looking optimistic.
amorphid 9y ago
USA checking in. I declared chapter 7 bankruptcy in 2010. Chapter 7 bankruptcy eliminates 100% of your dischargable debt. When the bankruptcy process had completed, I still owed ~200,000 USD, which was 140,000 USD in student loans and 60,000 USD in back taxes that were less than 3 years old, neither of which were dischargable.
- SeoxyS 9y ago
  At this point, couldn't you just arbitrage it, and take out loans / mortgages / cash advances / credit cards just to pay off student loans and back taxes, after after which you'd actually declare bankruptcy.
  - lotsofpulp 9y ago
    If a lender is going to approve a sufficiently large loan to someone with $200k in student loans and tax debt, and without a high income, they would not be in business for long.
  - notfromhere 9y ago
    That's called fraud and you will go to prison for it.
    - mcntsh 9y ago
      How is that fraud?
      - amorphid 9y ago
        If you borrow money, and it can be demonstrated you never intended to make a good faith effort to pay it back, you're going to have a bad time.
  - amorphid 9y ago
    I was already tapped out. There was no more money to be borrowed.
- 9y ago
prostoalex 9y ago
You can make the student loans dischargeable in the event of a bankruptcy, but at that point their risk profile is no different than unsecured personal loans. Which for a person with low or non-existing credit history (i.e. any 18-year-old) would likely result in: * requirement for high down payment - perhaps 50 to 75% of the tuition being covered by student or his parents (through home equity loans or retirement account loans) * frequent and aggressive repayment schedule, starting perhaps 30 days after originating the loan * high interest rate, perhaps front-loaded into repayment schedule due to higher than normal default rates * aggressive monitoring of the events related to debt performance, where missed class, late homework, substandard grade or a behavioral citation could result in interest rate boost * incentives and price control mechanisms enforced by the lender - your computer science class will have a low interest rate, but that music appreciation class or gender studies gotta be out-of-pocket I think overall that would lower the enrollment rate and force the unbundling of academic offerings. Not necessarily a bad thing, but I can see some people being against it.
csense 9y ago
Most people starting college are 17-20 year old young adults with income and assets far below what would be needed to take out $30K-$100K+ in loans. Not enough lenders would want to take that risk, unless they have the taxpayer to back them up in case the borrower defaults. If the borrower's allowed to wipe their debt in bankruptcy, then a lot of students will simply declare bankruptcy as soon as they leave school. The students who play by the rules are burdened with debt, and you're subsidizing people who game the system to their advantage. The fairest thing to do, then, is either subsidize everybody, and have taxpayer-funded higher education (but that's expensive). Or subsidize nobody, and let people pay their own way (but that leaves behind students whose families can't afford it). Or fund the most promising students, and make everybody else pay (but that leaves behind students who don't have good academic record). Personally I don't like the idea that our society starts its newest members out with a huge debt burden.
- ianai 9y ago
  I’d rather society “waste” resources on young peoples educations than many other things. For reasons similar to why I’d like to see NASA with DOD funding.

anon11082016 9y ago

Let's add another layer of abstraction and diversion, the trusty tax payer! /s This of course, totally ignoring that government backed (everybody gets one no matter what) loans got us here in the first place...

ggm 9y ago

Although by inclination what I want to do is rant about the iniquity of this kind of robo-debt in education, instead what I am thinking right now, is this: how does this compare overall to the rate of default in debt for other purposes? how does it compare to car loan debt? mortgage debt? I ask, because debt is the same, except in as much as student debt is in principle seeking a path to be able to repay it. The asset based debt invites a repo man: you can't suck knowledge back out of a graduates head (ancient egyptian practices to the contrary)

downrightmike 9y ago
That assumes the person wasn't working too many odd jobs and hours to scrape by, so that they did receive a decent education.
bradleyjg 9y ago
The overwhelming majority of student loan debt is government backed and eligible for some kind of income based repayment plan. There are four different kinds, but the most common two use a formula of 10% of income after 150% of the poverty level for the relevant household size. It is entirely possible to have a required payment of $0, before even getting into forbearance or deferral. Car loans and mortgage loans are not comparable. It's possible to simply be unable to pay those debts. So there's every good reason that the student loan default rate should be lower than those.
- ggm 9y ago
  Assuming you don't deliberately hide income I guess. Some people have said that for those who get on the low interest, or non-accumulating interest loan schedules, its the best kind of debt you can have. The lein on income is a royal pain and for student debt, it often hits just at the point you want to use increased disposible income to do things like have kids, restart the cycle. I was lucky enough to go to university in the UK in the time of free study with grant so to me, this is all hypothetical not actual and to any current student facing a lifetime of debt, I apologize for the circumstances you have been put in, by people like me

dogruck 9y ago

Let’s simply tax the new BTC zillionaires, and pay down the student loan debts.

AlexCoventry 9y ago
We could just forgive the debts. We don't need a compensating tax when inflation is this low.
- gicadin 9y ago
  This would be a slap in the face of some people who went to school and worked odd jobs to pay for tuition.
  - aaomidi 9y ago
    Not doing it would be devastating for the economy in the long run. It's a hard choice but macro is more important than micro in these decisions.
    - sintaxi 9y ago
      Its a mistake in the long run to socialize risk. These former students are defaulting because the courses they took have no value in the marketplace.

danjoc 9y ago

This is ruining America's future. That's 5M people who can't even qualify for a car loan now. The penalties for default are punishing. Even bankruptcy isn't a realistic option. This is ruinous for these people. They'll be in their mid-30s or early 40s before they can pay off. Starting that late to build a nest egg, they'll never recover. There's going to be an entire generation that has no secure retirement plans. It will also be a baby bust. By the time they are stable enough to think about starting families, they'll be biologically incapable to produce. Nobody will be around to fight off invaders. We're seriously toast in 50 years at this rate.

metilda 9y ago
Welcome to having America's latest STD! Its bigger than Hepatitis (at 3 million), and costs about the same to cure ($80k to $90k a person). Relationships are delayed, careers are set back and our economy is slowly bled. Much like healthcare!
- djsumdog 9y ago
  Don't even get started on health care. I worked in health insurance for three years and lived outside the US for about the same time. I saw a lot of waste in our health insurance industry and a foreign market that was superior in almost every way, even for very serious conditions. I wrote a post about it a while back: http://fightthefuture.org/article/returning-to-america-and-the-unaffordable-care-act/ http://fightthefuture.org/article/returning-to-america-and-t...
phil248 9y ago
The age curve in the United States is actually doing pretty good thanks to the massive amounts of immigrants we attract. Japan and Germany wish they had our population growth rates.
- Taniwha 9y ago
  yeah, but some guy is building a wall ... getting rid of green cards too

genzoman 9y ago

Before the internet, centralized places of knowledge were needed, and you'd need to attend that place to find said knowledge. Think about how access to music caused the price of albums to drop. Education had not seen a similar dip in cost even though the supply is 100 percent saturated. There's a dying class of professors who got in while tenure was still a thing that paid probably 1/10 of the cost for education kids are paying now. They have the rosiest glasses possible because they're making around 100k for zero competition in their workspace. The vast majority of the time now a TA teaches the course or certainly grades the paperwork. Well over half of college degrees obtained will never pay for themselves. A philosophy, social science or psychology degree are not important enough to pay 50k to get. Free college would be a complete disaster, and a massive waste of money. The education cartel places liberal , financial shackles on kids who are less than 1000 sunrises away from going to prom. The liberal arts is a complete disaster for young people's financial means. So, you get somebody 100k in debt for something they could learn on the internet and guess what? They'll ALWAYS vote to raise taxes on the rich. I worked at a state university for five years, doing research. The waste of extravagant, totally unsustainable. I was going to grad school free since I was an employee, dropped out to teach myself software and in four years I make nearly as much as the Phds. in a physical therapy department. All it cost me was time.

mrtesthah 9y ago
Nope, liberal arts majors earn as much as professional and pre-professional majors. https://www.chronicle.com/article/How-Liberal-Arts-Majors-Fare/144133 https://www.chronicle.com/article/How-Liberal-Arts-Majors-Fa...
- ghostcluster 9y ago
  Only if they get graduate degrees. Otherwise they start at the lowest end of college degree holders. And the "high" 'professional and pre-professional degree' salaries are dwarfed by every STEM degree out of the gate. And like the OP said, there is now a glut of humanities degrees higher than the demand for positions.
Top19 9y ago

rectang 9y ago

The relief of bankruptcy: only for entrepreneurs, not for students. Another instance of utterly corrupt selective application of theoretically sound conservative principles. Just like "deregulation" and Net Neutrality.

lightbyte 9y ago
There is a reason for that. If your business goes bankrupt it can be liquidated to settle debts. Once that is done you are left with nothing. The same cannot be done with an education. You can't "give back" knowledge to your school, or sell it to someone else.
- edpazu 9y ago
  assuming any knowledge was actually gained.
- rectang 9y ago
  Liquidation of course is often insufficient to pay back all creditors. The risks which have to be assessed before making student loans vs. business loans differ by degree, not kind. The systems of laws in our society are constructed. A choice has been made to privilege entrepreneurs over students.

yousufmyh 9y ago

Agreed

Camillo 9y ago

There is a simple and equitable solution, which is to transfer the debt to the universities where they studied.

jstewartmobile 9y ago
It's strange how an old-timey concept like a "money back guarantee" gets looked at as though it were full-blown communism these days...
stapleten 9y ago
I genuinely don't know why I haven't considered this perspective before seeing as how many colleges treat students as just bodies to stuff their money bags with. Oh, come to our college, take out $60000 in loans for a degree that will never pay that off, but we get to pocket it anyways because we have no decency? Sure thing! And don't forget to donate as an alumnus! I'm not exactly in this situation, but have seen it enough with people who had no business being at certain schools for certain degrees that I can't help but think universities should be held responsible for all this to some extent.

marcoperaza 9y ago

Tuition, especially at private colleges, is totally out of control. But class sizes are up, not down. And the number of full professors is not growing. So where is the money going? To an explosive growth of administrative staff. My alma mater has almost one employee per student. There are many dozens of administrative departments, each with multiple deans and assistant deans and staff, and sometimes subdivisions each with their own layer of bureaucracy. OPAL, for example, has a subdivision for each kind of minority on campus, each with its own assistant dean and staff. You can look at the list of departments: http://home.dartmouth.edu/administrative-offices http://home.dartmouth.edu/administrative-offices . Keep in mind that this is a very small college, with about 4000 undergrads and 2000 grad students. This monstrous growth is entirely a product of the last 30 to 40 years and is almost entirely responsible for the astronomic increases in tuition, currently $60,000. Even worse, the college claims that its actual cost per student is double that, with the shortfall made up from the endowment. There is NO legitimate reason that a college education should cost over $100,000 per year. The government needs to stop writing a blank check to these colleges in the form of unlimited loans for their students. The government needs to set a much lower cap on the number of loans it will give to each student per year. The colleges will accuse the party in power of trying to deny students the right to an education, but they will eventually surrender and start cutting the bloat.

akkat 9y ago
What's the reason for that. I know administrative staff like that that are getting paid, but what would the current one decide to hire more staff? Unless there was some benefit the staff would prefer to keep the money for themselves rather than hire more people.
- marcoperaza 9y ago
  It is a law of bureaucracy that it always grows absent some constraining force. A few reasons come to mind: 1. Have a problem or a new political goal? Make a committee, open a new office, etc. This is how bureaucracies see the world. 2. Unproductive employees? You can't fire them because of HR policies and unionization, and more importantly, because there's no constraining force creating a culture of efficiency. So just hire more employees. 3. No one who rises to lead an organization then campaigns to diminish it in size. Everyone thinks they are important and that their work is important. Having more people working under you makes you more important. Having fewer makes you less important. These are problems in for-profit organizations, but the market provides a constraining force. An inefficient company won't be able to compete with a more efficient one and will eventually go out of business. Also, shareholders will demand that expenses are cut so profits, and dividends or share price, goes up.

AckSyn 9y ago

It's unfortunate that kids aren't taught this during high-school years, and the lie that you must go to college to "make something of yourself" is still perpetuated.

thisisit 9y ago

It is confusing for me how bankruptcies work. What happens if a corporate declares bankruptcy? Do they only pay less while keeping everything they invested/bought using the loan money, for example - buildings, equipment, stores etc? How does this compare to student loans?

jacquesm 9y ago
Assuming the bankruptcy isn't called off: The bankruptcy is handled by a liquidator or trustee in bankruptcy. That person / entity will attempt to liquidate the assets and will then pay a portion or all of the debts in order of preference. If there is a remainder (unlikely, but it could be) it will be returned to the shareholders. Depending on the country some creditors will receive automatic preference (such as the taxman). In some cases, for instance if it is believed the company is viable but has been managed badly it is possible that such a trustee will even attempt to keep the company running while they search for a buyer. If debts are re-negotiated or forgiven it is possible for a company to emerge relatively unscathed from bankruptcy proceedings, this all depends on what deals can be made with the creditors. It compares poorly to student loans because those are individual debts and unfortunately individual debts are far harder to discharge than corporate debts.
- basicplus2 9y ago
  It doesn't really matter for corporations, as a company can be burnt and any debts left will never be paid, and a new company can be created with no debts. This is what structuring related entities is all about. The one that owes all the money (particularly the one paying and owing to employees) had nothing of real value in it.

jstewartmobile 9y ago

Ex-wife was an english prof at a state university. They had students who came in with a 16 on their ACT, which really means they should still be in high school. They'd take remedial classes for a couple years, then most eventually filed academic bankruptcy. Finance officer was telling me how for in-state students, the student is only paying around 20% of the actual tab, and that the state picks up the rest. Then there was the story from a few days ago where some poor lady ended up owing over $100k for a < $10k debt due to fees and penalty rates. Even my own degree, in the "allegedly" hard subject computer engineering, first day of class would fill an auditorium. After midterms, class size would drop to just a handful of people. So taxpayers on the hook for subsidies, former students paying obscene finance charges on a kind of debt that is almost unshakable, and little of that culminating in valuable skills and credentials... Excluding the more selective institutions, higher ed is a racket, and the financing of it is an even bigger one.

japhyr 9y ago

I'm a high school math teacher. As part of their high school math education, I encourage all of my students to do one of their projects on analyzing loans. I ask them to pick an item they might take a loan out for, such as a car, a boat (we live in a small fishing town in Alaska), a house, or a student loan. They pick a realistic loan amount, APR, and term length. Then they run the numbers on the loan. I demonstrate making a loan analysis spreadsheet, starting with an empty spreadsheet. Students then get the choice of making their own spreadsheet, modifying one that I've made with them, or using a loan calculator. By the end of a session, most of my students have become comfortable using a spreadsheet to analyze a loan. This lets them understand how all the various factors interact, and they can play with any loan they become interested in. Students start out with no idea how banks and lending institutions determine monthly payments. They end up understanding loans better than many adults. They move away from "all loans are bad and predatory" and "loans are free money" to "some loans are fair, some are predatory, and I need to ask myself if a specific loan sets me up for a better life. I wish someone had done this for me. When I took out student loans many years ago, I had no idea what my monthly payments would end up being. I was just told it would be worth while, and I trusted the people advising me. Students these days can't afford to blindly trust that student loans are going to make their lives better.

mrhappyunhappy 9y ago
Care to share your instructions? I’m an adult and I just use the web calculators haha.
- japhyr 9y ago
  Here's a pdf version of the assignment: https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBsbQOx0/view?usp=sharing https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBs...
oliwarner 9y ago
I think it's hard to absolutely assess the value of a student loan —however predatory— without considering the prospects of having a higher education. Some degrees are worth a dodgy loan. Some really aren't. You could also say that many students wouldn't be in higher education without the loan. That is especially true here in the UK. That might not be a bad thing except that we've gone through an arms race so that every junior post needs five bachelor degrees and a decade of experience. Experience alone used to be enough. It'd be nice to get back there. Our focus on getting everybody into higher education —and underwriting indefinite liens on lifetime income— has also meant that universities care more about the number of students than the quality of teaching. That alone probably isn't news, what has been recently in the UK is the remuneration of higher management staff. They can apparently justify the 10-20× bump over senior lecturers (plus benefits like housing, cars, lunches) to their boards by saying they're the only people who can attract all the money from the students. It's disgusting and vicious cycle.

ikeyany 9y ago

This did not happen by chance. The answer isn't hard to arrive at--simply ask why college is so expensive compared to the 1990s, and why states cannot afford to offset these costs anymore. America is selling out its future by convincing young people that they should go into debt to pay for "the college experience". But why does "the college experience" need to include superfluous staff and wasteful resources? Follow the money.

mfukar 9y ago
> Follow the money Paint, for those of us with no familiarity with the US system, a picture.
- CaptSpify 9y ago
  Insane administrative salaries, ridiculous sports budgets, new buildings and amenities that no student needs ( https://www.washingtonpost.com/sports/colleges/one-schools-formula-for-athletic-success-build-a-lazy-river-and-hope-the-recruits-will-come/2017/03/31/e1b7f5c8-1568-11e7-833c-503e1f6394c9_story.html https://www.washingtonpost.com/sports/colleges/one-schools-f... )
  - slg 9y ago
    Those things are easy scapegoats but they aren't the biggest cause of tuition increases. States simply aren't spending the money on colleges like they did in the past. [1] This is likely because of all the guaranteed loan money available so the states don't feel the same pressure to fund universities. For the specific case you linked above, $25m for athletic upgrades is really not that expensive for a school the size of UCF with over 64,000 students and an annual budget of $1.5b. [2] If you abandoned building the facilities and distributed the money evenly among all students you could cut costs for a single year by 2% for in state students and 1% for out of state students. [3] That isn't nothing and you can certainly debate whether athletic facilities are a smart use of $25m, but it is a drop in the bucket compared with the actual rise in costs. [1] - https://fivethirtyeight.com/features/fancy-dorms-arent-the-main-reason-tuition-is-skyrocketing/ https://fivethirtyeight.com/features/fancy-dorms-arent-the-m... [2]- https://www.ucf.edu/about-ucf/facts/ https://www.ucf.edu/about-ucf/facts/ [3]- https://admissions.ucf.edu/cost/ https://admissions.ucf.edu/cost/

mrhappyunhappy 9y ago

Time to get into crypto and pay them off. I know I’m going to get a ton of downvotes for saying that...

zeep 9y ago
probably still the fastest way to double your money...

Pokepokalypse 9y ago

I recently rejected a job offer at a major university, as a software developer for their IT department. The position did not pay, what their brochure was promising their computer science majors could expect to be paid, while at the same time, asking these computer science majors to accumulate 5 salary-years' worth of debt, for the honor and distinction of earning this degree. But they don't even pay their own staff that much.

matt_s 9y ago

Are there any studies that look at the costs of tuition compared to the rise in freely available equivalent information? I wonder if this is common in other markets where the companies recognize that a lot of their business is commoditized so they keep raising prices to help offset potential losses. I don't think student loans can collapse like mortgages because there isn't property involved. However, if there is a collapse in higher education in general - a sort of wave where people realize it is not worth it financially and enrollments drop dramatically, that would cause ripple effects in the economy.

carlmr 9y ago
The problem isn't what you learn, it's whether you can show the piece of paper proving you learned it. I learned most of my undergrad education on my own at home from the books suggested. My education cost me time + the price of the books. However to get the exams, grades and piece of paper in the end, it costs a lot of money. If we could decouple certification/exams from private institutions, autodidactic people could get their Bachelor's degree almost for free. For Master and PhD degrees I guess the point is more to do research.

ultim8k 9y ago

Someone is making good money there. What if People invested on learning coding instead of spending a fortune just to feed the uni market?

tenpoundhammer 9y ago

Student loans are the stupidest form of loans. Do people need a college education? Absolutely. What's the best way to provide it? I have no idea. Here's why student loans are dumb. 1. They are practically guaranteed to anyone who signs regardless of their future ability to pay it back. 2. The majority of people getting them are children and have are terrible at perceiving future outcomes. Ask any 18-year-old starting college if they will make more money than average after graduating, most will say yes. 3.College drop out rates are high. This site says 56% https://www.collegeatlas.org/college-dropout.html https://www.collegeatlas.org/college-dropout.html . Taking out a loan to help you make more money and then not making more money puts you at higher risk not to pay back. 4. Relatively speaking all majors are valued at the same cost within an institution. If I get a bachelors degree in computer science I pay the same tuition and costs as someone who gets a bachelors degree in ancient history, even though our potential earnings are vastly different. The entire student loan and college education market is a mess. I suspect this is a sign that college should be a public good or has been messed with by folks that think it should be.

notfromhere 9y ago

A big problem is that the gov't is double-dipping on the benefits of higher education. They both benefit from higher taxes on earnings as well as interest of education loans.

pascalxus 9y ago

Like so many things here, I think this is another case of monopoly. Accredited institutions can do whatever they want because there isn't enough competition and students are being taken advantage of (no one is giving them the right financial knowledge about interest rates and years of labor required to pay off the loan). Let's open up the playing field and allow more cheaper colleges like community colleges. And educate students about choosing those cheaper schools. Employers need to do their part too and stop being so elitist. Not every job requires a Stanford grad. And let's design the programs so millennials can still work and earn money durring the day and do some kind of part time bachelors program in the evening (that doens't take too much extra time). That way instead of going into debt, they can spend the time breaking even or even building up some savings.