21 ms·

The Student Debt Problem Is Worse Than We Imagined

222 points by boulos 8y ago

wpdev_63 8y ago
Reminder: Your future employers care more about side projects and experience than some writing on a piece of paper. You don't need to go to college to be a kick ass programmer.
- rgbrenner 8y ago
  Programmers account for 1-2% of jobs. Sadly there are a great many careers where a degree is required. Many of those probably don't need a degree, but the number of jobs requiring it has grown, in the same way the number of jobs requiring licensing has grown.
  - redleggedfrog 8y ago
    1-2%? For some reason that seems high to me. Certainly one out of every 100 people I meet aren't programmers.
    - rgbrenner 8y ago
      US workforce is 160m IT occupations: https://www.bls.gov/ooh/computer-and-information-technology/home.htm https://www.bls.gov/ooh/computer-and-information-technology/... 'Computer programmers', 'software developers' and 'web developers' will get you to 1%. I think wpdev_63's message applies to some additional IT positions than just programmers, so I think 1-2% is about right.
      - user5994461 8y ago
        IT is much much wider than software developers.
- Kephael 8y ago
  It's very difficult to start your career at leading companies such as Google, Facebook, etc without going to a reputable school.
  - IMTDb 8y ago
    That's why you usually do not start there. Google might require a degree, but your local hairdresser does not ask for one as long as you can create his website. Then move your way up from there. After several years recruiters will be more interested in your experience, projects and contributions than your non existing degree. EDIT: other options include working at startups/smaller companies, contributing to open source to get social validation of your abilities, learning some skills through coursera/online courses, ...
    - Kephael 8y ago
      That's absurd, you're much better off going to a reputable school, working hard, grinding leetcode, completing internships, and then getting a $150k+/yr TC job to start. You'll come out far ahead by going to a good school. If you're able to start at Google while you're still in high school, that's a different story.
      - drb91 8y ago
        This seems like a rather expensive way to experiment whether you’re well suited for something and like it.
      - prolikewh0a 8y ago
        I have plenty of friends that dropped out of College with no degrees and now work for large tech companies like Facebook, Google, and Amazon. It's not really tough to come in as an E1 and work your way up, especially if you have a great GitHub/Gitlab and possibly experience as a dev at another smaller company. I see a lot of women coming in as E1's off of those 12 week software engineer bootcamps as well.
        8y ago
- danaur 8y ago
  a fair number of companies require that an individual has a degree or is working on one in order to work in their programming or engineering departments. Typically people who get around these requirements have a strong network which is not necessarily easy unless you were transitioning to programming from another profession.
- hrktb 8y ago
  Fun fact: some countries will make it pretty hard to enter as knowledge worker if you don’t have a degree (in some case they won’t even care which degree, you just need one from an official university) That’s one specific case, but there’s miriades of other super corner cases.
- fzeroracer 8y ago
  A basic bachelors degree in computer science opens a lot of doors if you want to work abroad. That said if a recession hits there's gonna be some really, really nasty side effects as the predatory student loan industry destroys a large amount of the workforce.
- harlanji 8y ago
  I agreed for most of my career. As a Senior Eng in SF it seems that contiguous experience and prior credentials are king, to the point where my side projects haven’t come up in interviews in years.
- mynameishere 8y ago
  No idea where this guy is coming from. Most companies absolutely require a degree, and most companies absolutely won't bother look at your side projects. .... On the original topic, I went to an extremely cheap school and could not figure out where the money was going. It seemed like they must have been paying the professors $800/hour or something, with all the money involved. Of course they weren't. They were just pissing it away. With what college costs, a student should be able to have a private set of teachers in the manner of royalty--but then you wouldn't have those lovely dormitories they tear down and rebuild every few years.
- Delmania 8y ago
  For a Silicon Valley startup, sure. Most companies outside SV won't look at your resume with some form of CS or SE degree.
- walshemj 8y ago
  Are you sure back when I left school (uk) maybe in 2018 not so much. Also many other countries have much more stratified systems and degrees are mandatory
IMTDb 8y ago
The VERY worrying part is that those number have started to be recorded in 2012 - just after the previous crisis, when the economy was booming. Current unemployment rates in the US are very very low. When they start going up again the share of student struggling to replay will be out of control/
brink 8y ago
The article says the average is $22k, but Forbes says the average for 2016 students is $37k. https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/ https://www.forbes.com/sites/zackfriedman/2018/06/13/student...
- paulmd 8y ago
  Forbes doesn't say that (as noted by the popup, opinions of contributors are their own), someone who blogs for Forbes says that. Forbes is just Medium with a financial slant, these days, there are no qualifications required to be a contributor and there is no editorial oversight.
lowpro 8y ago
Still being in college, so many people I know just assume debt is no issue. It's not a concept that hits close to home, and most people seem to be fine with repaying them forever, like buying a new phone every 2 years or a new car every 3. I've never known anyone who couldn't get a loan, no matter how bad their grades or weak their employment after college looks. I don't really understand how that works and who would loan them money in the first place, but I feel bad that so many just assume they debt they take on will be automatically paid for. Many I know use their loans for not just school, but life. They spend money like they're rich and already have jobs when they're broke college students living off loans, and it just seems to me either the government, the banks loaning the money, or the schools, are using this monetary ignorance to their advantage. It'll fold some day I assume, considering student debt is 50% of the assets of the Federal Government [0], if those default rates rise to high that could wreck havoc in the trust of the financial well being of the US government (Disclaimer: I'm a student, I don't really understand most of what's happening here) [0] https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1521231220079-studloanpie.png https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1521231...
- user68858788 8y ago
  The favorite phrase of the president of Ringling College of Art and Design is, "the myth of the starving artist." He says this with a straight face as students graduate with 150,000 in debt and less than a 10% chance of getting a hired for their major. So yeah, I'd say colleges are exploiting students and parents.
- user5994461 8y ago
  >>> I've never known anyone who couldn't get a loan, no matter how bad their grades or weak their employment after college looks. Student loans are risk free for the lender and very profitable. They will always be granted.
  - nafey 8y ago
    What are the consequences of non payment? Debtor's prison?
acjohnson55 8y ago
It's a damn shame we've let this crisis reach this scale. Along with healthcare, climate change, the debt, our inauguration, and so on, we've been essentially frozen for most of my life as politicians concern themselves more so with existential power struggle. The right wants to bring us back to the gilded age, the left makes headlines but is barely relevant, and the center is trying to squeeze bandaid solutions while just trying to fend off populism on both sides. It shouldn't be controversial that we need an educated population and we need young people who aren't in debt up to their eyeballs. It's time for some hard choices, because the wheels are falling off.
- ransom1538 8y ago
  Just let students default. The problem would be solved in a week. Poor investments should get poor returns. You should be able to default on any loan out of human dignity.
  - vilmosi 8y ago
    > Just let students default. It's not that easy. What's to stop everyone from defaulting?
    - ransom1538 8y ago
      Good question. EG Why doesn’t everyone default on a loan? This is asking “how do loans work”. Typically, a loan with interest is a gamble. You want to get your money back with a return. If you loan money you want to ensure you will get your money back by qualifying the applicant. There is a risk though because they might not pay it back, thus you increase the interest rate according to how qualified the loan is. Good investors really focus on getting a qualified applicant (one that can pay it back). Sometimes they don't get their money back and they are forced to write it off - it is apart of the loan business. Basically, I am not trying to be insulting but I will end up explaining how a loan works - so I will stop there. With college loans ALL basic loan concepts are wrong. You cannot default on a college loan by law. It follows you through marriage, bankruptcy, or even service in Afghanistan. The people which made these poor loans know they made poor loans backed by the US government. Thus, they have lobbyists pushing congress to ensure student loans are 'unforgivable'. SO! Investing in a student loan is a damn good deal. You have 0 chance of someone defaulting because it is illegal to default. The loan has zero risk. This is why tuition has exploded and why we have a crisis. So, if you want to major in 18th century French Dance at Yale for 190k - there isn't an investor willing to stop you.
dev_dull 8y ago
There really needs to be some “free market” ideology injected into the way loans are dispersed. First of all students need a way to declare bankruptcy. Second, we must take into consideration future earnings potential when deciding how much and at what rate.
- pmarreck 8y ago
  Permitting bankruptcy would instantly add more risk to the lender and thus instantly boost the interest rate on the loan, potentially pricing it out of the range of the student.
  - wycs 8y ago
    And permiting indenture is better? College is a signalling racket status good. Cut the loans and watch as tuition magically decreases to maintain equilibrium.
    - pmarreck 8y ago
      I actually fully agree. I wasn't arguing my personal point, just stating a fact
  - belorn 8y ago
    If we accept that the risk of student loan is covered by the state in any rate and not by the bank then we can just cut out the middle man and have the state give out the loan in the first place under what ever condition that satisfy the public who is paying for it. Sweden has that system. Can't say it is that terrible.
    - pmarreck 8y ago
      Sounds good!
  - pwned1 8y ago
    Precisely. Then we'd get true price discovery.
smitch1000009 8y ago
The most worrying thing is the concluding paragraph. We somehow need to give schools more money to fix the problem?
Simulacra 8y ago
The problem of universities selling overpriced degrees that have little to no market value, while using students as a cash cow to gouge with the costs of books, classes that are not needed, parking fees, and everything else is far worse than anyone can imagine.
carc1n0gen 8y ago
I consider myself very lucky to of had the ability to live at home for my 3 years of college. Then after my first year, I was able to get a job as a web developer at the college through a special program they do. Thanks to that job, I was able to pay for year 2 and 3 myself and had very little debt to pay off.
pwned1 8y ago
With PAYE and IBR, it seems like one could permanently take a couple of classes, receive all of the loan money for "living expenses," and then run up an unlimited amount of student loans... and they never have to pay back more than just a percentage of your income...
- ben1040 8y ago
  Any amount forgiven at the end of an IBR term is considered taxable income, so at some point you're going to just trade your student loan servicer's payment plan for an installment plan with the IRS. And if your IBR payment isn't enough to cover the interest as it accrues, your balance at the end might be pretty big. There was a story in the WSJ about a dentist who currently has $1MM in student loan balances and is on IBR. When the IBR period expires, he'd be likely to have a $2MM balance forgiven and consequently a $700K tax liability. https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975 https://www.wsj.com/articles/mike-meru-has-1-million-in-stud...
  - pwned1 8y ago
    Generally the IRS will not tax you on a forgiven debt to the extent that you are insolvent. Insolvent to the IRS mean more liabilities than assets. https://www.irs.gov/newsroom/what-if-i-am-insolvent https://www.irs.gov/newsroom/what-if-i-am-insolvent
fzeroracer 8y ago
In a fit of irony I managed to graduate college because I was too poor to pay for college. FAFSA covered everything I needed, although I had to make large medical sacrifices along the way. Needless to say student debt in America is out of control. We told kids endlessly that they should chase their dream and become who they want while pulling the rug out from under them and using predatory loaning practices. It's another ticking timebomb that when it goes off it's going to cripple a large amount of Americans. We need to be funneling more money into our school system and actually make college free.
- Delmania 8y ago
  I don't think making college free would solve the issue. We have this narrative that you need college to get ahead when there are many quality trade schools, on the job training, and (perhaps a bit controversial) the military. I think we need to give seniors the full picture of options.
  - fzeroracer 8y ago
    The first two options are only viable in a couple of sectors and increasingly (in my opinion) we've seen on the job training for low-experience workers vanish in the software sector. Not everyone is going to want to go the trade school route and again, limiting educational options by wealth is why we're in this situation in the first place. And the military is a no-go. We already use it as a welfare gate for poor Americans, creating a society where the poor have to serve in the military to survive while the rich skip out. This is a dystopian ideal to me.
l1ambda 8y ago
You used to be able to apprentice for just about any profession at all, often earning money while doing so. Perhaps social norms need to adjust and bring back apprenticeship. Perhaps we are on that course now having reached the tipping point of student loan debt and with the death of the 4 year degree. Education is free (MIT has free courses, and there are lots of opportunities nowadays for self-study); it's a degree that's expensive.
- walshemj 8y ago
  Not really apprenticeship's tended to be only for skilled trades and technicians and where designed for the working class kids who left school at 14-16 Not sure degrading the status of the "professional" jobs we do is going to help even more so now that Walmart and co are taking the piss by abusing apprenticeship's to get cheap shelfstackers. In some countries used to be all but impossible for those on the apprentice track to go to university at all (Germany and Austria for example)
- realo 8y ago
  Hi. Old grumpy engineer here. Most young people we hire straight out of the university are at about the level of “apprentice” anyway. The best just learn faster later on. The university degree in E.E. is just a ticket to being apprentice somewhere.
booleandilemma 8y ago
It’s alright, I can assure everyone here that the government will cover all outstanding student loans the same day I’m finished paying mine off.
phil248 8y ago
"...averaging $22,000 in debt by graduation" That is not very much money. That's a modest new car or a down payment on a small home in a cheap zip code. At low enough interest rates, that monthly bill will be less than most people's cell phone or cable bill. I think that's a reasonable price for something as unique and transformative as a college experience. There is obviously a serious problem here, but not necessarily for those students who end up with less than 30k in student debt and do not default. That appears to be the majority of students. I'd like to know how many students are earning a bachelor's degree with more than $30k in debt, and how many of those students attended public universities.
- Amorymeltzer 8y ago
  I think there are a few main issues with the arguments you're presenting here on the numbers. First off, $22,000 isn't nothing. According to this[1], the rate for subsidized undergraduate Stafford loans climbed from 4.45% to 5.04%. Taking 4.5% over 25 and 10 years[2] gives monthly payments[3] of $122.28 and $228, respectively. That's definitely more than what my spouse and I pay each month for our phone bill (US, two smartphones, mid-tier data, major carrier). The total cost for 25 and 10 years at 4.5% comes to $36,685 and $27,361. Second, saying that amount is just a "new car or down payment" might be true but those are major events and expenditures. Put another way, if it is equivalent to a nice new car or a down payment, having student loans means they can't do one of those things. That's the cost — not just the money, but something that affects their life for years because they've had to delay some other important purchase. The ripple effect means they build equity later, save less for retirement, etc. Regardless of value or difficulty, the fact remains that these kids are indeed defaulting. TFA says that one out of every eight public school kids defaults on their loans, and there is no sign that rate it doing anything but increasing. As you say, this is a serious problem. 1: https://www.washingtonpost.com/news/grade-point/wp/2018/05/10/interest-rates-on-federal-student-loans-set-to-rise-for-the-second-year-in-a-row/?noredirect=on&utm_term=.f88611e9eba9 https://www.washingtonpost.com/news/grade-point/wp/2018/05/1... 2: https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid... 3: https://www.bankrate.com/calculators/mortgages/loan-calculator.aspx https://www.bankrate.com/calculators/mortgages/loan-calculat...
- 8y ago
ProfessorLayton 8y ago
Student loans are a huge drag on the economy, as it postpones other key events in one’s life, such as buying a home. But something else is going on as well. Lots of these articles talk about student loans as an average, however, the median defaulter looks very different — The median defaulter does so with a loan of Just under 10k [1] and not the average of 22k as shown in this article. It is worth discussing why the median defaulter is unable to pay roughly $100 per month (assuming a 10y payment plan), and how to address that issue. When viewed from this perspective, the problem does not seem insurmountable. I was lucky enough to not need to borrow more than the average amount and pay it off quickly. [1] https://www.americanprogress.org/issues/education-postsecondary/reports/2017/12/14/444011/student-loan-defaulters/ https://www.americanprogress.org/issues/education-postsecond...
theLotusGambit 8y ago
Perspective (anecdote) from a high school student: There is a real push for college. It's an unstated assumption that you're going to go, and the topic of debt seems to be passively avoided ("Don't worry, it'll all work out!"). We receive a grade for the college application process, so you can't not apply. College is still probably a good deal the majority of the time I think, but I wish there was some acknowledgement that it is less important in some fields than others. As for me, I think I'll take a pass on it, for now anyway. There's always time to change my mind later on.
- karmelapple 8y ago
  There is a high school class dedicated to applying to college, with the “final project” being that you applied somewhere? Wow... this is surprising to me! Can you apply to any school, including trade schools for, say, welding?
  - theLotusGambit 8y ago
    I'll be honest, I have no idea! I can't remember the topic of trade schools ever being brought up in class or otherwise. I think you could probably do it, but it would be very unconventional.
    - OkGoDoIt 8y ago
      So they have an actual class dedicated to teaching you about this, and that class fails to enumerate all of your options? That seems like a sub-optimal situation. Sounds like my sex-ed class in Georgia which never even discussed birth control.
      - throwawayjava 8y ago
        > So they have an actual class dedicated to teaching you about this, and that class fails to enumerate all of your options? Two thoughts: (1) such courses are often opt-in and don't necessarily have tons of free time for off-topic discussions; and (2) many schools with such courses do in fact have robust CC-tracked options that all-honors students are not exposed to. 1. A class like this was offered by my high school (years and years ago...) I didn't take it. However, from what I remember talking with friends, our school's course was explicitly for people who were planning on going to college. So it'd be kind of weird to discuss alternatives. That would be like mentioning in a Biology course that Physics or English are also legitimate fields of study. You'd think such a course would be wishy-washy and have plenty of time for discussing alternatives, but actually it was quite a serious thing.. Most of the students who took the course thought they were on-track for ivy league applications and then got a dose of reality in the form of a below-average standardized test score. They had a couple months to learn how to pattern-match and flash-card their way into the 90th percentile starting from the 50th percentile. I distinctly remember more than one person dropping AP Calc so they could focus on the college prep course... (In other news, grade inflation and subjective grading are harmful because they are sparse & deceptive reward signals!) 2. Community college was very much not looked down upon; in fact, we had a robust partnership with the regional CC system and many students would spend junior and senior years splitting their week between HS and CC. However, if you were honors/AP/college-tracked, then you wouldn't really know that those students even existed unless you socialized with those students. I only knew about these programs because of my friend group. At a recent reunion, I talked with some guys who I recognized from my AP courses. They were complaining that our high school didn't offer non-college-tracked options. I mentioned the various programs my friends had made use of and they were shocked and swore up and down that those programs didn't exist when we were in school. I wonder if either of these two things is true for OP. IME it's fairly rare for an entire high school -- let alone an entire school district -- to not have robust options for CC-tracked students. Maybe in super-affluent areas? > Sounds like my sex-ed class in Georgia which never even discussed birth control. Yeah... state law. Same for me. I had a teacher who risked her job to give us good info. If that was the case for anyone else reading this, consider looking up that teacher and sending a gift card or something their way. Doing so is a huge personal and professional risk.
bogomipz 8y ago
Can someone say at what point does delinquency turn into default? Also I was under the impression that student loan debt could not be charged off, even in bankruptcy.
- debtfreer 8y ago
  Default usually occurs around 120 days after the last payment has been made. Federal student loans typically have mechanisms (deferment, forbearance, income-based repayment plans) that make it nearly impossible to truly default on the loans. Private student loans are similar to unsecured consumer debt. Once the unpaid mark crosses 120 days or so, the loan is effectively collected like any other debt (though debt collectors, collection attorneys, and lawsuits). Student loan debt is presumably not dischargeable in bankruptcy, unless the debtor can prove that the debt would create an undue hardship and other factors which are very difficult to achieve (see the Brunner Test for most jurisdictions or the Totality of the Circumstances test for the 8th Circuit).
  - bogomipz 8y ago
    >"Federal student loans typically have mechanisms (deferment, forbearance, income-based repayment plans) that make it nearly impossible to truly default on the loans." Ah ok, so the default referred to in the article is "default" as a status designation and not defaulted in the sense that the lender is taking a loss. I think this is what I wasn't understanding. Thanks.
Jupe 8y ago
Perhaps I'm missing something, but it seems a big leap to base such exaggerated projections from only 2 years worth of data. All the graphs have 0 (zero) as their first year data point (2012) and indicate that tracking ceased in 2014.
danschumann 8y ago
I hated having student debt. It was abysmal. Dave Ramsey got me healed up though.
gamechangr 8y ago
I co-signed a loan for a friend who worked in as a Chemical Engineer for GE. Long story short, he had his Visa revoked, so I ended up on the hook for $16k of his student loans. I took a look at some of the financing terms and they are completely ridiculous. He paid $130 a month and at the end of the year he had only paid down $70 in principal. These terms should be criminal.
- harryh 8y ago
  (130 * 12 - 70) / 16,000 = 9.375% That's a bit high but doesn't seem totally out of line for an unsecured loan.
  - user5994461 8y ago
    Student loans are secure. They cannot be discharged through bankruptcy.
    - gnicholas 8y ago
      That’s not what “secured” refers to. It means that if a loan is in default, the lender can seize an asset, like a house or some receivables. The fact that student loans can’t be discharged in bankruptcy makes them less risky, but not nearly as safe as a secured loan where there is an asset backing it up.
      - user5994461 8y ago
        Incorrect. Bankruptcy is more secure. When the student can't pay, the abusive interest rate accrues fast enough that it becomes a perpetual loan. It's a guaranteed lifetime earning for the bank. It's also a misnomer to call that defaulting. The principal can be covered many times over by the interest. It's very profitable.
        deleted 8y ago
        [deleted]
  - 8y ago
ChuckMcM 8y ago
The 'for profit' chart there is the whole story. If your business model is that you can give someone money and then force them to pay it back without any ability to discharge it, you have essentially re-invented indentured servitude. And it attracts scumbags more strongly than a half dead bleeding seal attracts sharks. We have gone through a couple of very public shutdowns as some of these for profit schools lose their accreditation (and thus their ability to sucker students into student loans). It hurts people who are trying to do the right thing (get an education so that they can improve their job prospects) and it fails to punish the real problem which are people who sell these worthless degrees for over inflated prices.
- wtvanhest 8y ago
  It is certainly not the whole story. For profit is a problem, but its a very small problem vs public school debt. You need to multiply the avg by the number of debtors.
- throwawayjava 8y ago
  8.5% of private non-profit students default, and 13.5% of public non-profit students default. Those are both pretty high numbers, and those are just the defaults; i.e., the worst-case scenario. It's not counting the tens of thousands of people who defer housing, defer saving for retirement, defer saving for their own children's education, or end up on a perpetual treadmill of loan payments that will destroy their ability to retire. We are heading is the worst possible direction wrt regulation of private for-profit institutions; the available data incontrovertibly demonstrates they should be subject to more scrutiny, not less. But that's definitely not the whole story.
- ChuckMcM 8y ago
  I tend to integrate under the curve[1]. Sub prime mortgages didn't tell the whole story either, but what they did was take an at risk population (people who wanted to own a house but didn't have the credit to get a loan) and fix them up with loans they couldn't repay. That doesn't have anything to say about the folks who could qualify for home loans on their own under the stricter rules and could pay them off. That business was fine as well. There are large numbers of for-profit schools who have taken that playbook and replicated it exactly, find people who "want college" but have either not been able to qualify for a state school, and provide a "college product" bundled with a "loan product" knowing that many of those students will never be able to repay the loans. But everyone in the pipeline gets a bit richer in the churn, and the people who take it in the shorts are tax payers and these poor kids who have a bunch of debt and still no way to pay it off. [1] 88 percent of graduates from for-profit colleges had loans (average debt of $39,950) -- https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/
forapurpose 8y ago
I know it's oversimplified, but it results from American business' assertion that the 'free market' is the best solution to all problems, and American acquiescence to it. In other words, it comes from try to squeeze profit from every damn thing, from people's health, to education, to privacy, to government services (i.e., 'privatization') to everything else. I think the free market is a great tool, but like every tool it is good for some problems and not for others, and also it's a means to accomplish our goals, not an end in itself.
- pakitan 8y ago
  Except that, the way education works in USA, has little to do with the "free market". The free market is vastly distorted by the government guaranteeing student loans. I can assure you the picture would be very different if lenders had to actually assess every single loan candidate and applicants had to put up some collateral for the loan. The endless stream of free money to the universities would then stop and the students will get more careful with choosing a college and a degree. I'm not saying free market is the best way to go about education but it's certainly better than what USA has now.
  - forapurpose 8y ago
    IMO, this is yet another conservative argument to put more money in their own pockets (by reducing taxes, accomplished by reducing investment in education). No matter how cynical, the results of the argued policies are always the same. Colleges are not victims of some Godlike invisible economic hand; they set their prices as they wish, and before this dogmatic obsession with the market, they set the prices to education as many people as they could - that was their mission, not money. Instead, they are acting as market participants selling a service for which there is inelastic demand - their customers almost can't say no; education is almost invaluable. Therefore they can raise their prices indefinitely - similar to health care. The problem is not that we are funding students. The problem is market pricing for education.
sb8244 8y ago
One of the best decisions, in hindsight, was going to a smaller state school in PA rather a larger private or non state funded school. It was probably 30% the price of Penn State and the fact that no one has heard of the school outside of the state hasn't affected me since graduation. I can't imagine a private school that charges upwards of 50k per semester all in. However, that was the norm around the area I grew up in.
magnusss 8y ago
It seems like the majority of the commenters here are missing the point. The huge overhang of student loan debt is not a result of kids who go to a four year college, graduate with an unmarketable degree in philosophy, fall on hard times and then default. It's kids who go to barber school (and the like) taking on $30k of debt, then realizing they don't make enough money cutting hair to support themselves, much less pay back a loan. There's a huge population of people like that. Source: https://www.ed.gov/news/press-releases/us-department-education-releases-national-student-loan-fy-2014-cohort-default-rate https://www.ed.gov/news/press-releases/us-department-educati...
- njarboe 8y ago
  Or going to college for a year or two, drop out, and have no degree with $30k debt.
- anjc 8y ago
  > There's a huge population of people like that. The problem is the lender, surely
  - alistairSH 8y ago
    The problem is that the lender exists in the first place. Becoming a barber shouldn’t require a five-figure investment. At most, it should be a few weeks of classroom and “lab” training, followed by a short apprenticeship.
- raesene9 8y ago
  Just in case this is useful to anyone else. I had no idea that there was such a thing as "barber college" where the expected cost of the programme was $42k (including living expenses) but https://larrysbarbercollege.com/wp-content/uploads/2018/05/Catalog-104-website-5.18.pdf https://larrysbarbercollege.com/wp-content/uploads/2018/05/C... there you go. And it's noticable how heavily they push federal financial aid for students https://larrysbarbercollege.com/financial-aid/ https://larrysbarbercollege.com/financial-aid/
yuhong 8y ago
What is fun is paying off debt by selling Bitcoin, and students by definition would know more about Bitcoin than the average person.
njarboe 8y ago
"nearly 1.3 million borrowers — were not in default, but were either severely delinquent or not paying their loans." I wonder what "in default" means if it does not mean "severely delinquent or not paying their loans". I did not see any explanation in the article.
- onetimemanytime 8y ago
  default might mean x months behind, (6?) or when the lender has to take the loan off the books since it's not likely to be collected at face value.
lxe 8y ago
Is interest included in the "$23 billion owed?" A $20k Stafford loan at 6.8% generates around $7,000 in interest over the 10 year repayment plan. That's around 38% of the principal.
olivermarks 8y ago
NYT headline reminds me of the 2008 housing bubble crash. There were hundreds of other articles and blogs on how corrupt US mortgage lending, repossessions and banking was from about 2003 on, but the NYT didn't go near it until the collapse. Now we have this...'Worse than we imagined' - who's we? The NYT? Lots of commentary on this reality already as well...
bernardino 8y ago
I wonder how startups like Sofi (https://www.sofi.com https://www.sofi.com) and Sixup (https://sixup.com https://sixup.com) play into this. Are they better options than what the school offers in terms of loans, etc?
- chiefofgxbxl 8y ago
  (Strictly speaking for myself, and my experience may not be representative of what others are experiencing). I investigated Sofi as an option to consolidate my several loans into one. This would simplify my payments, and get me a lower interest rate. Sofi's offer was actually a poor one for me. They would've provided one large loan as opposed to the numerous loans I have, but the rate was skewed so much toward the highest end of the spectrum. I rejected the offer out of concern that I would be locked in to a single high-rate loan that looked good on paper because the rate was slightly lower than my highest rate. The nice thing about having numerous loans as I do now is that they are "compartmentalized". If I want to pay one of the loans off I can do that and lower my total monthly payments. But if I consolidated and had one large loan, if I pay 50% of that loan, it's not like 50% of my monthly payments go away. Hopefully this makes sense. I'm not a financial guru, so maybe there's something I'm missing in this equation.
krnsll 8y ago
Student loan terms and agreements should start accounting for a person's performance before taking on the loan (so high school, undergrad, whatever previous degrees) along with projected capacity to repay based on : -family record on debt repayment; -the projected choice of area of study and standard earnings projections of these degrees. The system as currently constituted does not incentivize rational and pragmatic decision making on part of the students. Part of it will have to come from a change in the undergrad model: make people choose/apply a major or a broad area of study and allow for a certain amount of wiggle room. This way, for many undergrad will possibly be shortened and focussed or more vocational for others. We also need to find some way to force educational institutions to put skin in the game-- they currently get all their money without offering any guarantees on employability. Presently, as a recent college grad, I saw far too many people on debt pursuing degrees unlikely to result in immediate or high paying employment -- eg., Any humanities field ending in "-studies". These people likely will not be in a position to pay the full value of their debt back anytime soon, nor will their degree hold any value (beyond sentimental) if they don't choose to go to grad school. Moreover, by giving them the same interest rates, we are implicitly penalizing/shifting burden on STEM students who essentially subsidize their credit/risk calculus.
goolulusaurs 8y ago
It is obvious the college education system is flawed just from it's incentive structure. Colleges don't get paid based on the amount that you learn, they get paid based on the amount of your time they take up. Up to a point they even have a disincentive to aid learning, since they make more money when their students have to repeat classes. Each additional semester gives the colleges many more opportunities to get money from students, so it should be no surprise that an environment of wastefulness flourishes, where students are encouraged to change majors midway through their degree programs and classes are taught by grad students who have never been trained as educators. If we really want to fix education we have to find some way of ensuring that universities interest are actually aligned with educating their students. Maybe a way to do this would be to separate teaching from testing. Have testing be established by some external body, and make it so both the university and the student receive a payout when the student succeeds on the test. Something like that would clearly require big changes in the way that people pay for college, but it seems likely that major changes will be needed anyway.
- dstaley 8y ago
  > Maybe a way to do this would be to separate teaching from testing. Have testing be established by some external body, and make it so both the university and the student receive a payout when the student succeeds on the test. This is basically what standardized testing is all about, and it's a significant contributor to the inadequacy of education in the United States. We haven't figured out a scalable way to measure classroom outcomes.
  - lotsofpulp 8y ago
    How does standardized testing contribute to the inadequacy of education? If anything, it shows which students need help, as opposed to grade inflation and throwing out A grades to everyone that hands in a homework assignment on time. Local parents can influence grades, but they can’t get past standardized testing (which is why colleges use SAT/ACT/AP grades to filter rather than GPA). Perhaps funding as a result of standardized testing is a problem and distracts from teaching. But the actual problem is children who grow up in unsupportive environments with lack of parental guidance. That socioeconomic class divide exposed by standardized testing isn’t going to be fixed by getting rid of standardized testing.
Proven 8y ago
The title is a lie. Those who borrowed did so hoping eventually everyone will be bailed out by the government. Those who lent did so because they too know they would be bailed out. And education institutions encouraged it because it keeps the bubble going.
chadcmulligan 8y ago
I'm not in the US, but whatever happened to student activism, protests and so on? There's no way they're going to rollover and say sure, don't worry about it, same with health care, working conditions and everything else that seems to be on here regularly. You guys invented the protest movement, seems like some marches on DC would get these things fixed, complaining on Internet forums doesn't really make a difference.
ur-whale 8y ago
Where is this a problem apart from the US? Any folks from countries where education is for sale want to chime in on what it looks like at their end of the woods?
- kazen44 8y ago
  In the Netherlands they recently (3 years ago) scrapped the "studiefinanciering" (study financing) which was a grant gifted to college student to support them in their living. It was replaced by a loan type system where students are able to lend money from the goverment against a 0% (for now) interest rate. You have 35 years to pay back the loan, with an interest rate set every 5 years. You only start paying back the loan if you make more then the the minimum wage (or if you make more then 143% of the minimum wage if you have children)[1]. Defaulting on the loan is possible, although i have no clue how easy that is. (It probably involves being placed under "Schuldsanering"[2]) The system has been highly critized as getting a loan is extremely easy and many first year students just loan the maximum amount allows. (which is a staggering 1300 euro a month, for comparison, the old system was a grant of rougly 400 euro a month). College costs itself is funded mainly by the goverment, as both Universities of applied science and universities of science have major oversight from the goverment. The subsidized collegecosts are the same for everyone regardless of major(2000 euro a year roughly). This subsidizing only applies on your first bachelor of first masters though. If you want to do more then one bachelor/masters, you pay the full price, which is depend on major. 1: https://duo.nl/particulier/studieschuld-terugbetalen/terugbetalingsregels.jsp https://duo.nl/particulier/studieschuld-terugbetalen/terugbe... 2: http://www.financieelbewind.nl/wnsp-wat-is-schuldsanering.html http://www.financieelbewind.nl/wnsp-wat-is-schuldsanering.ht...
Gustomaximus 8y ago
I've wondered if an good way to fund universities would be offer them x% of a students tax return for X years after graduation. That way universities would likely focus their courses on areas that get people employed, while cross subsidising some areas they feel add value to the educational environment. Or require popular courses that dont deliver returns as for some upfront payment. Even use data if it's that granular to even see what department heads or other facets create the best results.
- mschuster91 8y ago
  > That way universities would likely focus their courses on areas that get people employed, while cross subsidising some areas they feel add value to the educational environment. As if that would happen! The "unproductive" courses (aka everything but STEM) will all be eliminated as there isn't money for them. Society will lose as a result. Fund everything by taxpayers instead like Europe does.
  - assblaster 8y ago
    What do you think about these data for the number of students in Europe stratified by course of study compared to the United States? https://ec.europa.eu/eurostat/statistics-explained/images/2/20/Number_of_tertiary_education_graduates_by_field%2C_2015_%28thousands%29_YB17.png https://ec.europa.eu/eurostat/statistics-explained/images/2/... https://nces.ed.gov/fastfacts/display.asp?id=37 https://nces.ed.gov/fastfacts/display.asp?id=37 Your assertion that society will lose if gender studies majors for instance decrease in output is debatable. In fact, a decent argument can be made that certain majors have a role in indoctrination that make society worse off because of increased fractionation, division, and tribalism.
    - mschuster91 8y ago
      > In fact, a decent argument can be made that certain majors have a role in indoctrination that make society worse off because of increased fractionation, division, and tribalism. Or maybe because minorities actually (thanks to social media and progressive whites) have a meaningful voice now? Of course white men are frightened by the prospects of them no longer being the sole rulers. > Your assertion that society will lose if gender studies majors for instance decrease in output is debatable. It's not just about "gender studies". How can you, for example, quantify the "productivity" of an archaeologist, a historian, or an artist? You can't.
deleted 8y ago
[deleted]
purplezooey 8y ago
Sorry this is the baby boomers' fault. They got educated for free when state budgets were flush and times were good. Since then, all they do is vote in wildly ineffective hard right people and vote down any kind of bond or tax. This leaves colleges with no state support, so the burden is passed to students. Hoping the next generation does better in their political choices.
m1573rp34130dy 8y ago
its unfortunate that so many individuals, AND institutions have fallen prey to social engineering with regard to the college/university scam/paradigm... the pricetag of an education is artificial, the physical experience of exposure to tech and mech is not however... ...being of an independent learning persuasion, is underated... the movie g00dw1ll hun7in6 depicts a talented person that has assumed a wide base of rounded education independently and eventually is endorsed by the academic community... that person is not a myth, there are many like that character, the academic community however is a good old boy mentality, and the possibility that someone may present challange to the degree program is almost nonexistent... at best a selected set of year1 courses may be waived...THERE ARE PEOPLE THAT HAVE THE CEREBRAL FORTITUDE TO WALK INTO A UNIVERSITY AND SAY I DESERVE A PhD PLEASE GIVE ME MY SHINGLE AFTER I DEMONSTRATE MY OPINION IS BASED IN FACT! Far too many of these people are turned away, or left to languish in an academically feeble learning institution. A greater number are imprisoned financially by the debt trap that is unlike any other loan... learning is free has no costs and is only limited by the self... EDUCATION IS A TRAP! its time to rethink the value of real learning versus education

222 points by boulos 8y ago

Reminder: Your future employers care more about side projects and experience than some writing on a piece of paper. You don't need to go to college to be a kick ass programmer.

rgbrenner 8y ago
Programmers account for 1-2% of jobs. Sadly there are a great many careers where a degree is required. Many of those probably don't need a degree, but the number of jobs requiring it has grown, in the same way the number of jobs requiring licensing has grown.
- redleggedfrog 8y ago
  1-2%? For some reason that seems high to me. Certainly one out of every 100 people I meet aren't programmers.
  - rgbrenner 8y ago
    US workforce is 160m IT occupations: https://www.bls.gov/ooh/computer-and-information-technology/home.htm https://www.bls.gov/ooh/computer-and-information-technology/... 'Computer programmers', 'software developers' and 'web developers' will get you to 1%. I think wpdev_63's message applies to some additional IT positions than just programmers, so I think 1-2% is about right.
    - user5994461 8y ago
      IT is much much wider than software developers.
Kephael 8y ago
It's very difficult to start your career at leading companies such as Google, Facebook, etc without going to a reputable school.
- IMTDb 8y ago
  That's why you usually do not start there. Google might require a degree, but your local hairdresser does not ask for one as long as you can create his website. Then move your way up from there. After several years recruiters will be more interested in your experience, projects and contributions than your non existing degree. EDIT: other options include working at startups/smaller companies, contributing to open source to get social validation of your abilities, learning some skills through coursera/online courses, ...
  - Kephael 8y ago
    That's absurd, you're much better off going to a reputable school, working hard, grinding leetcode, completing internships, and then getting a $150k+/yr TC job to start. You'll come out far ahead by going to a good school. If you're able to start at Google while you're still in high school, that's a different story.
    - drb91 8y ago
      This seems like a rather expensive way to experiment whether you’re well suited for something and like it.
    - prolikewh0a 8y ago
      I have plenty of friends that dropped out of College with no degrees and now work for large tech companies like Facebook, Google, and Amazon. It's not really tough to come in as an E1 and work your way up, especially if you have a great GitHub/Gitlab and possibly experience as a dev at another smaller company. I see a lot of women coming in as E1's off of those 12 week software engineer bootcamps as well.
      - 8y ago
danaur 8y ago
a fair number of companies require that an individual has a degree or is working on one in order to work in their programming or engineering departments. Typically people who get around these requirements have a strong network which is not necessarily easy unless you were transitioning to programming from another profession.
hrktb 8y ago
Fun fact: some countries will make it pretty hard to enter as knowledge worker if you don’t have a degree (in some case they won’t even care which degree, you just need one from an official university) That’s one specific case, but there’s miriades of other super corner cases.
fzeroracer 8y ago
A basic bachelors degree in computer science opens a lot of doors if you want to work abroad. That said if a recession hits there's gonna be some really, really nasty side effects as the predatory student loan industry destroys a large amount of the workforce.
harlanji 8y ago
I agreed for most of my career. As a Senior Eng in SF it seems that contiguous experience and prior credentials are king, to the point where my side projects haven’t come up in interviews in years.
mynameishere 8y ago
No idea where this guy is coming from. Most companies absolutely require a degree, and most companies absolutely won't bother look at your side projects. .... On the original topic, I went to an extremely cheap school and could not figure out where the money was going. It seemed like they must have been paying the professors $800/hour or something, with all the money involved. Of course they weren't. They were just pissing it away. With what college costs, a student should be able to have a private set of teachers in the manner of royalty--but then you wouldn't have those lovely dormitories they tear down and rebuild every few years.
Delmania 8y ago
For a Silicon Valley startup, sure. Most companies outside SV won't look at your resume with some form of CS or SE degree.
walshemj 8y ago
Are you sure back when I left school (uk) maybe in 2018 not so much. Also many other countries have much more stratified systems and degrees are mandatory

IMTDb 8y ago

The VERY worrying part is that those number have started to be recorded in 2012 - just after the previous crisis, when the economy was booming. Current unemployment rates in the US are very very low. When they start going up again the share of student struggling to replay will be out of control/

brink 8y ago

The article says the average is $22k, but Forbes says the average for 2016 students is $37k. https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/ https://www.forbes.com/sites/zackfriedman/2018/06/13/student...

paulmd 8y ago
Forbes doesn't say that (as noted by the popup, opinions of contributors are their own), someone who blogs for Forbes says that. Forbes is just Medium with a financial slant, these days, there are no qualifications required to be a contributor and there is no editorial oversight.

lowpro 8y ago

Still being in college, so many people I know just assume debt is no issue. It's not a concept that hits close to home, and most people seem to be fine with repaying them forever, like buying a new phone every 2 years or a new car every 3. I've never known anyone who couldn't get a loan, no matter how bad their grades or weak their employment after college looks. I don't really understand how that works and who would loan them money in the first place, but I feel bad that so many just assume they debt they take on will be automatically paid for. Many I know use their loans for not just school, but life. They spend money like they're rich and already have jobs when they're broke college students living off loans, and it just seems to me either the government, the banks loaning the money, or the schools, are using this monetary ignorance to their advantage. It'll fold some day I assume, considering student debt is 50% of the assets of the Federal Government [0], if those default rates rise to high that could wreck havoc in the trust of the financial well being of the US government (Disclaimer: I'm a student, I don't really understand most of what's happening here) [0] https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1521231220079-studloanpie.png https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1521231...

user68858788 8y ago
The favorite phrase of the president of Ringling College of Art and Design is, "the myth of the starving artist." He says this with a straight face as students graduate with 150,000 in debt and less than a 10% chance of getting a hired for their major. So yeah, I'd say colleges are exploiting students and parents.
user5994461 8y ago
>>> I've never known anyone who couldn't get a loan, no matter how bad their grades or weak their employment after college looks. Student loans are risk free for the lender and very profitable. They will always be granted.
- nafey 8y ago
  What are the consequences of non payment? Debtor's prison?

acjohnson55 8y ago

It's a damn shame we've let this crisis reach this scale. Along with healthcare, climate change, the debt, our inauguration, and so on, we've been essentially frozen for most of my life as politicians concern themselves more so with existential power struggle. The right wants to bring us back to the gilded age, the left makes headlines but is barely relevant, and the center is trying to squeeze bandaid solutions while just trying to fend off populism on both sides. It shouldn't be controversial that we need an educated population and we need young people who aren't in debt up to their eyeballs. It's time for some hard choices, because the wheels are falling off.

ransom1538 8y ago
Just let students default. The problem would be solved in a week. Poor investments should get poor returns. You should be able to default on any loan out of human dignity.
- vilmosi 8y ago
  > Just let students default. It's not that easy. What's to stop everyone from defaulting?
  - ransom1538 8y ago
    Good question. EG Why doesn’t everyone default on a loan? This is asking “how do loans work”. Typically, a loan with interest is a gamble. You want to get your money back with a return. If you loan money you want to ensure you will get your money back by qualifying the applicant. There is a risk though because they might not pay it back, thus you increase the interest rate according to how qualified the loan is. Good investors really focus on getting a qualified applicant (one that can pay it back). Sometimes they don't get their money back and they are forced to write it off - it is apart of the loan business. Basically, I am not trying to be insulting but I will end up explaining how a loan works - so I will stop there. With college loans ALL basic loan concepts are wrong. You cannot default on a college loan by law. It follows you through marriage, bankruptcy, or even service in Afghanistan. The people which made these poor loans know they made poor loans backed by the US government. Thus, they have lobbyists pushing congress to ensure student loans are 'unforgivable'. SO! Investing in a student loan is a damn good deal. You have 0 chance of someone defaulting because it is illegal to default. The loan has zero risk. This is why tuition has exploded and why we have a crisis. So, if you want to major in 18th century French Dance at Yale for 190k - there isn't an investor willing to stop you.

dev_dull 8y ago

There really needs to be some “free market” ideology injected into the way loans are dispersed. First of all students need a way to declare bankruptcy. Second, we must take into consideration future earnings potential when deciding how much and at what rate.

pmarreck 8y ago
Permitting bankruptcy would instantly add more risk to the lender and thus instantly boost the interest rate on the loan, potentially pricing it out of the range of the student.
- wycs 8y ago
  And permiting indenture is better? College is a signalling racket status good. Cut the loans and watch as tuition magically decreases to maintain equilibrium.
  - pmarreck 8y ago
    I actually fully agree. I wasn't arguing my personal point, just stating a fact
- belorn 8y ago
  If we accept that the risk of student loan is covered by the state in any rate and not by the bank then we can just cut out the middle man and have the state give out the loan in the first place under what ever condition that satisfy the public who is paying for it. Sweden has that system. Can't say it is that terrible.
  - pmarreck 8y ago
    Sounds good!
- pwned1 8y ago
  Precisely. Then we'd get true price discovery.

smitch1000009 8y ago

The most worrying thing is the concluding paragraph. We somehow need to give schools more money to fix the problem?

Simulacra 8y ago

The problem of universities selling overpriced degrees that have little to no market value, while using students as a cash cow to gouge with the costs of books, classes that are not needed, parking fees, and everything else is far worse than anyone can imagine.

carc1n0gen 8y ago

I consider myself very lucky to of had the ability to live at home for my 3 years of college. Then after my first year, I was able to get a job as a web developer at the college through a special program they do. Thanks to that job, I was able to pay for year 2 and 3 myself and had very little debt to pay off.

pwned1 8y ago

With PAYE and IBR, it seems like one could permanently take a couple of classes, receive all of the loan money for "living expenses," and then run up an unlimited amount of student loans... and they never have to pay back more than just a percentage of your income...

ben1040 8y ago
Any amount forgiven at the end of an IBR term is considered taxable income, so at some point you're going to just trade your student loan servicer's payment plan for an installment plan with the IRS. And if your IBR payment isn't enough to cover the interest as it accrues, your balance at the end might be pretty big. There was a story in the WSJ about a dentist who currently has $1MM in student loan balances and is on IBR. When the IBR period expires, he'd be likely to have a $2MM balance forgiven and consequently a $700K tax liability. https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975 https://www.wsj.com/articles/mike-meru-has-1-million-in-stud...
- pwned1 8y ago
  Generally the IRS will not tax you on a forgiven debt to the extent that you are insolvent. Insolvent to the IRS mean more liabilities than assets. https://www.irs.gov/newsroom/what-if-i-am-insolvent https://www.irs.gov/newsroom/what-if-i-am-insolvent

fzeroracer 8y ago

In a fit of irony I managed to graduate college because I was too poor to pay for college. FAFSA covered everything I needed, although I had to make large medical sacrifices along the way. Needless to say student debt in America is out of control. We told kids endlessly that they should chase their dream and become who they want while pulling the rug out from under them and using predatory loaning practices. It's another ticking timebomb that when it goes off it's going to cripple a large amount of Americans. We need to be funneling more money into our school system and actually make college free.

Delmania 8y ago
I don't think making college free would solve the issue. We have this narrative that you need college to get ahead when there are many quality trade schools, on the job training, and (perhaps a bit controversial) the military. I think we need to give seniors the full picture of options.
- fzeroracer 8y ago
  The first two options are only viable in a couple of sectors and increasingly (in my opinion) we've seen on the job training for low-experience workers vanish in the software sector. Not everyone is going to want to go the trade school route and again, limiting educational options by wealth is why we're in this situation in the first place. And the military is a no-go. We already use it as a welfare gate for poor Americans, creating a society where the poor have to serve in the military to survive while the rich skip out. This is a dystopian ideal to me.

l1ambda 8y ago

You used to be able to apprentice for just about any profession at all, often earning money while doing so. Perhaps social norms need to adjust and bring back apprenticeship. Perhaps we are on that course now having reached the tipping point of student loan debt and with the death of the 4 year degree. Education is free (MIT has free courses, and there are lots of opportunities nowadays for self-study); it's a degree that's expensive.

walshemj 8y ago
Not really apprenticeship's tended to be only for skilled trades and technicians and where designed for the working class kids who left school at 14-16 Not sure degrading the status of the "professional" jobs we do is going to help even more so now that Walmart and co are taking the piss by abusing apprenticeship's to get cheap shelfstackers. In some countries used to be all but impossible for those on the apprentice track to go to university at all (Germany and Austria for example)
realo 8y ago
Hi. Old grumpy engineer here. Most young people we hire straight out of the university are at about the level of “apprentice” anyway. The best just learn faster later on. The university degree in E.E. is just a ticket to being apprentice somewhere.

booleandilemma 8y ago

It’s alright, I can assure everyone here that the government will cover all outstanding student loans the same day I’m finished paying mine off.

phil248 8y ago

"...averaging $22,000 in debt by graduation" That is not very much money. That's a modest new car or a down payment on a small home in a cheap zip code. At low enough interest rates, that monthly bill will be less than most people's cell phone or cable bill. I think that's a reasonable price for something as unique and transformative as a college experience. There is obviously a serious problem here, but not necessarily for those students who end up with less than 30k in student debt and do not default. That appears to be the majority of students. I'd like to know how many students are earning a bachelor's degree with more than $30k in debt, and how many of those students attended public universities.

Amorymeltzer 8y ago
I think there are a few main issues with the arguments you're presenting here on the numbers. First off, $22,000 isn't nothing. According to this[1], the rate for subsidized undergraduate Stafford loans climbed from 4.45% to 5.04%. Taking 4.5% over 25 and 10 years[2] gives monthly payments[3] of $122.28 and $228, respectively. That's definitely more than what my spouse and I pay each month for our phone bill (US, two smartphones, mid-tier data, major carrier). The total cost for 25 and 10 years at 4.5% comes to $36,685 and $27,361. Second, saying that amount is just a "new car or down payment" might be true but those are major events and expenditures. Put another way, if it is equivalent to a nice new car or a down payment, having student loans means they can't do one of those things. That's the cost — not just the money, but something that affects their life for years because they've had to delay some other important purchase. The ripple effect means they build equity later, save less for retirement, etc. Regardless of value or difficulty, the fact remains that these kids are indeed defaulting. TFA says that one out of every eight public school kids defaults on their loans, and there is no sign that rate it doing anything but increasing. As you say, this is a serious problem. 1: https://www.washingtonpost.com/news/grade-point/wp/2018/05/10/interest-rates-on-federal-student-loans-set-to-rise-for-the-second-year-in-a-row/?noredirect=on&utm_term=.f88611e9eba9 https://www.washingtonpost.com/news/grade-point/wp/2018/05/1... 2: https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsidized https://studentaid.ed.gov/sa/types/loans/subsidized-unsubsid... 3: https://www.bankrate.com/calculators/mortgages/loan-calculator.aspx https://www.bankrate.com/calculators/mortgages/loan-calculat...
8y ago

ProfessorLayton 8y ago

Student loans are a huge drag on the economy, as it postpones other key events in one’s life, such as buying a home. But something else is going on as well. Lots of these articles talk about student loans as an average, however, the median defaulter looks very different — The median defaulter does so with a loan of Just under 10k [1] and not the average of 22k as shown in this article. It is worth discussing why the median defaulter is unable to pay roughly $100 per month (assuming a 10y payment plan), and how to address that issue. When viewed from this perspective, the problem does not seem insurmountable. I was lucky enough to not need to borrow more than the average amount and pay it off quickly. [1] https://www.americanprogress.org/issues/education-postsecondary/reports/2017/12/14/444011/student-loan-defaulters/ https://www.americanprogress.org/issues/education-postsecond...

theLotusGambit 8y ago

Perspective (anecdote) from a high school student: There is a real push for college. It's an unstated assumption that you're going to go, and the topic of debt seems to be passively avoided ("Don't worry, it'll all work out!"). We receive a grade for the college application process, so you can't not apply. College is still probably a good deal the majority of the time I think, but I wish there was some acknowledgement that it is less important in some fields than others. As for me, I think I'll take a pass on it, for now anyway. There's always time to change my mind later on.

karmelapple 8y ago
There is a high school class dedicated to applying to college, with the “final project” being that you applied somewhere? Wow... this is surprising to me! Can you apply to any school, including trade schools for, say, welding?
- theLotusGambit 8y ago
  I'll be honest, I have no idea! I can't remember the topic of trade schools ever being brought up in class or otherwise. I think you could probably do it, but it would be very unconventional.
  - OkGoDoIt 8y ago
    So they have an actual class dedicated to teaching you about this, and that class fails to enumerate all of your options? That seems like a sub-optimal situation. Sounds like my sex-ed class in Georgia which never even discussed birth control.
    - throwawayjava 8y ago
      > So they have an actual class dedicated to teaching you about this, and that class fails to enumerate all of your options? Two thoughts: (1) such courses are often opt-in and don't necessarily have tons of free time for off-topic discussions; and (2) many schools with such courses do in fact have robust CC-tracked options that all-honors students are not exposed to. 1. A class like this was offered by my high school (years and years ago...) I didn't take it. However, from what I remember talking with friends, our school's course was explicitly for people who were planning on going to college. So it'd be kind of weird to discuss alternatives. That would be like mentioning in a Biology course that Physics or English are also legitimate fields of study. You'd think such a course would be wishy-washy and have plenty of time for discussing alternatives, but actually it was quite a serious thing.. Most of the students who took the course thought they were on-track for ivy league applications and then got a dose of reality in the form of a below-average standardized test score. They had a couple months to learn how to pattern-match and flash-card their way into the 90th percentile starting from the 50th percentile. I distinctly remember more than one person dropping AP Calc so they could focus on the college prep course... (In other news, grade inflation and subjective grading are harmful because they are sparse & deceptive reward signals!) 2. Community college was very much not looked down upon; in fact, we had a robust partnership with the regional CC system and many students would spend junior and senior years splitting their week between HS and CC. However, if you were honors/AP/college-tracked, then you wouldn't really know that those students even existed unless you socialized with those students. I only knew about these programs because of my friend group. At a recent reunion, I talked with some guys who I recognized from my AP courses. They were complaining that our high school didn't offer non-college-tracked options. I mentioned the various programs my friends had made use of and they were shocked and swore up and down that those programs didn't exist when we were in school. I wonder if either of these two things is true for OP. IME it's fairly rare for an entire high school -- let alone an entire school district -- to not have robust options for CC-tracked students. Maybe in super-affluent areas? > Sounds like my sex-ed class in Georgia which never even discussed birth control. Yeah... state law. Same for me. I had a teacher who risked her job to give us good info. If that was the case for anyone else reading this, consider looking up that teacher and sending a gift card or something their way. Doing so is a huge personal and professional risk.

bogomipz 8y ago

Can someone say at what point does delinquency turn into default? Also I was under the impression that student loan debt could not be charged off, even in bankruptcy.

debtfreer 8y ago
Default usually occurs around 120 days after the last payment has been made. Federal student loans typically have mechanisms (deferment, forbearance, income-based repayment plans) that make it nearly impossible to truly default on the loans. Private student loans are similar to unsecured consumer debt. Once the unpaid mark crosses 120 days or so, the loan is effectively collected like any other debt (though debt collectors, collection attorneys, and lawsuits). Student loan debt is presumably not dischargeable in bankruptcy, unless the debtor can prove that the debt would create an undue hardship and other factors which are very difficult to achieve (see the Brunner Test for most jurisdictions or the Totality of the Circumstances test for the 8th Circuit).
- bogomipz 8y ago
  >"Federal student loans typically have mechanisms (deferment, forbearance, income-based repayment plans) that make it nearly impossible to truly default on the loans." Ah ok, so the default referred to in the article is "default" as a status designation and not defaulted in the sense that the lender is taking a loss. I think this is what I wasn't understanding. Thanks.

Jupe 8y ago

Perhaps I'm missing something, but it seems a big leap to base such exaggerated projections from only 2 years worth of data. All the graphs have 0 (zero) as their first year data point (2012) and indicate that tracking ceased in 2014.

danschumann 8y ago

I hated having student debt. It was abysmal. Dave Ramsey got me healed up though.

gamechangr 8y ago

I co-signed a loan for a friend who worked in as a Chemical Engineer for GE. Long story short, he had his Visa revoked, so I ended up on the hook for $16k of his student loans. I took a look at some of the financing terms and they are completely ridiculous. He paid $130 a month and at the end of the year he had only paid down $70 in principal. These terms should be criminal.

harryh 8y ago
(130 * 12 - 70) / 16,000 = 9.375% That's a bit high but doesn't seem totally out of line for an unsecured loan.
- user5994461 8y ago
  Student loans are secure. They cannot be discharged through bankruptcy.
  - gnicholas 8y ago
    That’s not what “secured” refers to. It means that if a loan is in default, the lender can seize an asset, like a house or some receivables. The fact that student loans can’t be discharged in bankruptcy makes them less risky, but not nearly as safe as a secured loan where there is an asset backing it up.
    - user5994461 8y ago
      Incorrect. Bankruptcy is more secure. When the student can't pay, the abusive interest rate accrues fast enough that it becomes a perpetual loan. It's a guaranteed lifetime earning for the bank. It's also a misnomer to call that defaulting. The principal can be covered many times over by the interest. It's very profitable.
      - deleted 8y ago
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ChuckMcM 8y ago

The 'for profit' chart there is the whole story. If your business model is that you can give someone money and then force them to pay it back without any ability to discharge it, you have essentially re-invented indentured servitude. And it attracts scumbags more strongly than a half dead bleeding seal attracts sharks. We have gone through a couple of very public shutdowns as some of these for profit schools lose their accreditation (and thus their ability to sucker students into student loans). It hurts people who are trying to do the right thing (get an education so that they can improve their job prospects) and it fails to punish the real problem which are people who sell these worthless degrees for over inflated prices.

wtvanhest 8y ago
It is certainly not the whole story. For profit is a problem, but its a very small problem vs public school debt. You need to multiply the avg by the number of debtors.
throwawayjava 8y ago
8.5% of private non-profit students default, and 13.5% of public non-profit students default. Those are both pretty high numbers, and those are just the defaults; i.e., the worst-case scenario. It's not counting the tens of thousands of people who defer housing, defer saving for retirement, defer saving for their own children's education, or end up on a perpetual treadmill of loan payments that will destroy their ability to retire. We are heading is the worst possible direction wrt regulation of private for-profit institutions; the available data incontrovertibly demonstrates they should be subject to more scrutiny, not less. But that's definitely not the whole story.
ChuckMcM 8y ago
I tend to integrate under the curve[1]. Sub prime mortgages didn't tell the whole story either, but what they did was take an at risk population (people who wanted to own a house but didn't have the credit to get a loan) and fix them up with loans they couldn't repay. That doesn't have anything to say about the folks who could qualify for home loans on their own under the stricter rules and could pay them off. That business was fine as well. There are large numbers of for-profit schools who have taken that playbook and replicated it exactly, find people who "want college" but have either not been able to qualify for a state school, and provide a "college product" bundled with a "loan product" knowing that many of those students will never be able to repay the loans. But everyone in the pipeline gets a bit richer in the churn, and the people who take it in the shorts are tax payers and these poor kids who have a bunch of debt and still no way to pay it off. [1] 88 percent of graduates from for-profit colleges had loans (average debt of $39,950) -- https://studentloanhero.com/student-loan-debt-statistics/ https://studentloanhero.com/student-loan-debt-statistics/

forapurpose 8y ago

I know it's oversimplified, but it results from American business' assertion that the 'free market' is the best solution to all problems, and American acquiescence to it. In other words, it comes from try to squeeze profit from every damn thing, from people's health, to education, to privacy, to government services (i.e., 'privatization') to everything else. I think the free market is a great tool, but like every tool it is good for some problems and not for others, and also it's a means to accomplish our goals, not an end in itself.

pakitan 8y ago
Except that, the way education works in USA, has little to do with the "free market". The free market is vastly distorted by the government guaranteeing student loans. I can assure you the picture would be very different if lenders had to actually assess every single loan candidate and applicants had to put up some collateral for the loan. The endless stream of free money to the universities would then stop and the students will get more careful with choosing a college and a degree. I'm not saying free market is the best way to go about education but it's certainly better than what USA has now.
- forapurpose 8y ago
  IMO, this is yet another conservative argument to put more money in their own pockets (by reducing taxes, accomplished by reducing investment in education). No matter how cynical, the results of the argued policies are always the same. Colleges are not victims of some Godlike invisible economic hand; they set their prices as they wish, and before this dogmatic obsession with the market, they set the prices to education as many people as they could - that was their mission, not money. Instead, they are acting as market participants selling a service for which there is inelastic demand - their customers almost can't say no; education is almost invaluable. Therefore they can raise their prices indefinitely - similar to health care. The problem is not that we are funding students. The problem is market pricing for education.

sb8244 8y ago

One of the best decisions, in hindsight, was going to a smaller state school in PA rather a larger private or non state funded school. It was probably 30% the price of Penn State and the fact that no one has heard of the school outside of the state hasn't affected me since graduation. I can't imagine a private school that charges upwards of 50k per semester all in. However, that was the norm around the area I grew up in.

magnusss 8y ago

It seems like the majority of the commenters here are missing the point. The huge overhang of student loan debt is not a result of kids who go to a four year college, graduate with an unmarketable degree in philosophy, fall on hard times and then default. It's kids who go to barber school (and the like) taking on $30k of debt, then realizing they don't make enough money cutting hair to support themselves, much less pay back a loan. There's a huge population of people like that. Source: https://www.ed.gov/news/press-releases/us-department-education-releases-national-student-loan-fy-2014-cohort-default-rate https://www.ed.gov/news/press-releases/us-department-educati...

njarboe 8y ago
Or going to college for a year or two, drop out, and have no degree with $30k debt.
anjc 8y ago
> There's a huge population of people like that. The problem is the lender, surely
- alistairSH 8y ago
  The problem is that the lender exists in the first place. Becoming a barber shouldn’t require a five-figure investment. At most, it should be a few weeks of classroom and “lab” training, followed by a short apprenticeship.
raesene9 8y ago
Just in case this is useful to anyone else. I had no idea that there was such a thing as "barber college" where the expected cost of the programme was $42k (including living expenses) but https://larrysbarbercollege.com/wp-content/uploads/2018/05/Catalog-104-website-5.18.pdf https://larrysbarbercollege.com/wp-content/uploads/2018/05/C... there you go. And it's noticable how heavily they push federal financial aid for students https://larrysbarbercollege.com/financial-aid/ https://larrysbarbercollege.com/financial-aid/

yuhong 8y ago

What is fun is paying off debt by selling Bitcoin, and students by definition would know more about Bitcoin than the average person.

njarboe 8y ago

"nearly 1.3 million borrowers — were not in default, but were either severely delinquent or not paying their loans." I wonder what "in default" means if it does not mean "severely delinquent or not paying their loans". I did not see any explanation in the article.

onetimemanytime 8y ago
default might mean x months behind, (6?) or when the lender has to take the loan off the books since it's not likely to be collected at face value.

lxe 8y ago

Is interest included in the "$23 billion owed?" A $20k Stafford loan at 6.8% generates around $7,000 in interest over the 10 year repayment plan. That's around 38% of the principal.

olivermarks 8y ago

NYT headline reminds me of the 2008 housing bubble crash. There were hundreds of other articles and blogs on how corrupt US mortgage lending, repossessions and banking was from about 2003 on, but the NYT didn't go near it until the collapse. Now we have this...'Worse than we imagined' - who's we? The NYT? Lots of commentary on this reality already as well...

bernardino 8y ago

I wonder how startups like Sofi (https://www.sofi.com https://www.sofi.com) and Sixup (https://sixup.com https://sixup.com) play into this. Are they better options than what the school offers in terms of loans, etc?

chiefofgxbxl 8y ago
(Strictly speaking for myself, and my experience may not be representative of what others are experiencing). I investigated Sofi as an option to consolidate my several loans into one. This would simplify my payments, and get me a lower interest rate. Sofi's offer was actually a poor one for me. They would've provided one large loan as opposed to the numerous loans I have, but the rate was skewed so much toward the highest end of the spectrum. I rejected the offer out of concern that I would be locked in to a single high-rate loan that looked good on paper because the rate was slightly lower than my highest rate. The nice thing about having numerous loans as I do now is that they are "compartmentalized". If I want to pay one of the loans off I can do that and lower my total monthly payments. But if I consolidated and had one large loan, if I pay 50% of that loan, it's not like 50% of my monthly payments go away. Hopefully this makes sense. I'm not a financial guru, so maybe there's something I'm missing in this equation.

krnsll 8y ago

Student loan terms and agreements should start accounting for a person's performance before taking on the loan (so high school, undergrad, whatever previous degrees) along with projected capacity to repay based on : -family record on debt repayment; -the projected choice of area of study and standard earnings projections of these degrees. The system as currently constituted does not incentivize rational and pragmatic decision making on part of the students. Part of it will have to come from a change in the undergrad model: make people choose/apply a major or a broad area of study and allow for a certain amount of wiggle room. This way, for many undergrad will possibly be shortened and focussed or more vocational for others. We also need to find some way to force educational institutions to put skin in the game-- they currently get all their money without offering any guarantees on employability. Presently, as a recent college grad, I saw far too many people on debt pursuing degrees unlikely to result in immediate or high paying employment -- eg., Any humanities field ending in "-studies". These people likely will not be in a position to pay the full value of their debt back anytime soon, nor will their degree hold any value (beyond sentimental) if they don't choose to go to grad school. Moreover, by giving them the same interest rates, we are implicitly penalizing/shifting burden on STEM students who essentially subsidize their credit/risk calculus.

goolulusaurs 8y ago

It is obvious the college education system is flawed just from it's incentive structure. Colleges don't get paid based on the amount that you learn, they get paid based on the amount of your time they take up. Up to a point they even have a disincentive to aid learning, since they make more money when their students have to repeat classes. Each additional semester gives the colleges many more opportunities to get money from students, so it should be no surprise that an environment of wastefulness flourishes, where students are encouraged to change majors midway through their degree programs and classes are taught by grad students who have never been trained as educators. If we really want to fix education we have to find some way of ensuring that universities interest are actually aligned with educating their students. Maybe a way to do this would be to separate teaching from testing. Have testing be established by some external body, and make it so both the university and the student receive a payout when the student succeeds on the test. Something like that would clearly require big changes in the way that people pay for college, but it seems likely that major changes will be needed anyway.

dstaley 8y ago
> Maybe a way to do this would be to separate teaching from testing. Have testing be established by some external body, and make it so both the university and the student receive a payout when the student succeeds on the test. This is basically what standardized testing is all about, and it's a significant contributor to the inadequacy of education in the United States. We haven't figured out a scalable way to measure classroom outcomes.
- lotsofpulp 8y ago
  How does standardized testing contribute to the inadequacy of education? If anything, it shows which students need help, as opposed to grade inflation and throwing out A grades to everyone that hands in a homework assignment on time. Local parents can influence grades, but they can’t get past standardized testing (which is why colleges use SAT/ACT/AP grades to filter rather than GPA). Perhaps funding as a result of standardized testing is a problem and distracts from teaching. But the actual problem is children who grow up in unsupportive environments with lack of parental guidance. That socioeconomic class divide exposed by standardized testing isn’t going to be fixed by getting rid of standardized testing.

Proven 8y ago

The title is a lie. Those who borrowed did so hoping eventually everyone will be bailed out by the government. Those who lent did so because they too know they would be bailed out. And education institutions encouraged it because it keeps the bubble going.

chadcmulligan 8y ago

I'm not in the US, but whatever happened to student activism, protests and so on? There's no way they're going to rollover and say sure, don't worry about it, same with health care, working conditions and everything else that seems to be on here regularly. You guys invented the protest movement, seems like some marches on DC would get these things fixed, complaining on Internet forums doesn't really make a difference.

ur-whale 8y ago

Where is this a problem apart from the US? Any folks from countries where education is for sale want to chime in on what it looks like at their end of the woods?

kazen44 8y ago
In the Netherlands they recently (3 years ago) scrapped the "studiefinanciering" (study financing) which was a grant gifted to college student to support them in their living. It was replaced by a loan type system where students are able to lend money from the goverment against a 0% (for now) interest rate. You have 35 years to pay back the loan, with an interest rate set every 5 years. You only start paying back the loan if you make more then the the minimum wage (or if you make more then 143% of the minimum wage if you have children)[1]. Defaulting on the loan is possible, although i have no clue how easy that is. (It probably involves being placed under "Schuldsanering"[2]) The system has been highly critized as getting a loan is extremely easy and many first year students just loan the maximum amount allows. (which is a staggering 1300 euro a month, for comparison, the old system was a grant of rougly 400 euro a month). College costs itself is funded mainly by the goverment, as both Universities of applied science and universities of science have major oversight from the goverment. The subsidized collegecosts are the same for everyone regardless of major(2000 euro a year roughly). This subsidizing only applies on your first bachelor of first masters though. If you want to do more then one bachelor/masters, you pay the full price, which is depend on major. 1: https://duo.nl/particulier/studieschuld-terugbetalen/terugbetalingsregels.jsp https://duo.nl/particulier/studieschuld-terugbetalen/terugbe... 2: http://www.financieelbewind.nl/wnsp-wat-is-schuldsanering.html http://www.financieelbewind.nl/wnsp-wat-is-schuldsanering.ht...

Gustomaximus 8y ago

I've wondered if an good way to fund universities would be offer them x% of a students tax return for X years after graduation. That way universities would likely focus their courses on areas that get people employed, while cross subsidising some areas they feel add value to the educational environment. Or require popular courses that dont deliver returns as for some upfront payment. Even use data if it's that granular to even see what department heads or other facets create the best results.

mschuster91 8y ago
> That way universities would likely focus their courses on areas that get people employed, while cross subsidising some areas they feel add value to the educational environment. As if that would happen! The "unproductive" courses (aka everything but STEM) will all be eliminated as there isn't money for them. Society will lose as a result. Fund everything by taxpayers instead like Europe does.
- assblaster 8y ago
  What do you think about these data for the number of students in Europe stratified by course of study compared to the United States? https://ec.europa.eu/eurostat/statistics-explained/images/2/20/Number_of_tertiary_education_graduates_by_field%2C_2015_%28thousands%29_YB17.png https://ec.europa.eu/eurostat/statistics-explained/images/2/... https://nces.ed.gov/fastfacts/display.asp?id=37 https://nces.ed.gov/fastfacts/display.asp?id=37 Your assertion that society will lose if gender studies majors for instance decrease in output is debatable. In fact, a decent argument can be made that certain majors have a role in indoctrination that make society worse off because of increased fractionation, division, and tribalism.
  - mschuster91 8y ago
    > In fact, a decent argument can be made that certain majors have a role in indoctrination that make society worse off because of increased fractionation, division, and tribalism. Or maybe because minorities actually (thanks to social media and progressive whites) have a meaningful voice now? Of course white men are frightened by the prospects of them no longer being the sole rulers. > Your assertion that society will lose if gender studies majors for instance decrease in output is debatable. It's not just about "gender studies". How can you, for example, quantify the "productivity" of an archaeologist, a historian, or an artist? You can't.

deleted 8y ago

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purplezooey 8y ago

Sorry this is the baby boomers' fault. They got educated for free when state budgets were flush and times were good. Since then, all they do is vote in wildly ineffective hard right people and vote down any kind of bond or tax. This leaves colleges with no state support, so the burden is passed to students. Hoping the next generation does better in their political choices.

m1573rp34130dy 8y ago

its unfortunate that so many individuals, AND institutions have fallen prey to social engineering with regard to the college/university scam/paradigm... the pricetag of an education is artificial, the physical experience of exposure to tech and mech is not however... ...being of an independent learning persuasion, is underated... the movie g00dw1ll hun7in6 depicts a talented person that has assumed a wide base of rounded education independently and eventually is endorsed by the academic community... that person is not a myth, there are many like that character, the academic community however is a good old boy mentality, and the possibility that someone may present challange to the degree program is almost nonexistent... at best a selected set of year1 courses may be waived...THERE ARE PEOPLE THAT HAVE THE CEREBRAL FORTITUDE TO WALK INTO A UNIVERSITY AND SAY I DESERVE A PhD PLEASE GIVE ME MY SHINGLE AFTER I DEMONSTRATE MY OPINION IS BASED IN FACT! Far too many of these people are turned away, or left to languish in an academically feeble learning institution. A greater number are imprisoned financially by the debt trap that is unlike any other loan... learning is free has no costs and is only limited by the self... EDUCATION IS A TRAP! its time to rethink the value of real learning versus education