7 ms·

Student-Loan Debt Is Crushing Millennials

42 points by koolhead17 8y ago

randyrand 8y ago
It'll be a good learning experience for the next generation.
- basch 8y ago
  we are on the next generation. there are people just escaping crushing debt ready to put kids into college. this didnt just start.
skh 8y ago
Often times when student loans come up people blame exclusively the borrower. We should keep in mind that in a properly functioning lending market both the borrower and lender take on risk. The lender should not left out of the equation on who to blame. Both parties are at fault. But we don’t have a properly function student loan industry. Lenders assume very little risk in this market but they should not be absolved of blame or have less outrage directed at them.
- Judgmentality 8y ago
  I agree. I feel like most of the problem would be solved by allowing student debt to be erased by declaring bankruptcy. It's absurd that isn't the case.
  - YinglingLight 8y ago
    What's absurd about that? The bank has no salvageable assets to claim. They can't claim 4 years of European Literature from your mind.
    - gdhbcc 8y ago
      Same thing happens w8tg a bankrupt business...
    - gerbal 8y ago
      Fortunately most of the debt is held by the US department of Education, and could easily be written off. (Minor inflationary effects asside).
      - thrill 8y ago
        So, your solution is to stick the taxpayers with the debt?
        Judgmentality 8y ago
        I feel like that's a small step towards rectifying the destruction of a generation. This country has too much inequality as it is.
        gerbal 8y ago
        The actual costs of student loan forgiveness is fairly marginal compared to the economic benefits [1]. Further the federal government can write off debt without anyone ever having to pay for it. Student loans are created by the Treasury for the Department of Ed, repayment just gets dumped onto a balance sheet in the treasury that has no relationship to reality. [1] http://www.levyinstitute.org/publications/the-macroeconomic-effects-of-student-debt-cancellation http://www.levyinstitute.org/publications/the-macroeconomic-...
    - Jtsummers 8y ago
      You can wipe out medical loans, which also have no assets to claim, with bankruptcy. Or do you think we need to make Repo Men a reality?
      - madengr 8y ago
        Medical loans? You can wipe out medical debt, but can you actually get a loan for medical procedures?
  - JumpCrisscross 8y ago
    > most of the problem would be solved by allowing student debt to be erased by declaring bankruptcy Going forward. It's tough to stomach retroactively applying this to existing loans.
    - LyndsySimon 8y ago
      The prohibition was retroactively applied to private loans already existing. My wife and I chose private loans specifically to retain bankruptcy protection in case of serious life issues. A couple years after we took them, the law changed and we were stuck with the higher interest rates of the private loans without those protections. For a time, we considered a Constiitutional challenge to that, as we believed it to be an ex post facto law. We didn’t want to incur the negatives of a bankrupty to gain standing, though, and couldn’t afford the astronomical legal fees that would certainly accompany that sort of case. As far as I know, no one has pursued it.
  - thrower123 8y ago
    If that was allowed, then the interest rates would have to float according to the likelihood that the loan was repaid. Good for CS and econ and engineering, not so good for lierature and gender studies.
  - dd36 8y ago
    Powerful interests have corrupted the legal mechanisms that make markets work efficiently. Here it is bankruptcy. In other markets it is forced arbitration and preventing groups of people from joining together to share legal expenses. Leaving all accountability mechanisms to the government is bad for free markets. Ideally, if you truly want to help low income people get an education through loans, it should be structured more like SBA loans. The lenders should take on a big enough % of the risk that they want to avoid defaults but not so little that they act recklessly and fund loans or schools that are unlikely to perform. I'm sure that if SBA loans were non-dischargeable, there would be an explosion in bad SBA loans that drag on the economy.
- mempko 8y ago
  "Both parties are at fault". Or we can have a tuition-free public education system like we used to. But you know...
  - skh 8y ago
    Yes. This is what I advocate.
- ant6n 8y ago
  The actual problem is high tuition.
  - graeme 8y ago
    Easy access to unlimited loans is a major comtributor to high tuition.
    - skh 8y ago
      I believe for public universities the cost driver has been an increase in administrators and a decrease in funding per student.
      - graeme 8y ago
        Right, but they're competing with private universities. And those are adding administrators, facilities, etc. The public universities are keeping up with that. Without no default loans, the dynamic would change.
  - shados 8y ago
    Yup. Which is partly because of near infinite free money that no one is really responsible for. Hindsight is 20/20, and not being American I don't have the whole history...but what I'm picturing with this situation is: "Omg, it costs $5000 to get a degree! That means only the rich have access to education and increase the gap between rich and poor! We need a solution!" "You can't just go giving education for free! Communism!" "We never said that! Let's lend up to $5000 to anyone without the mean to pay for education! That will level the playing field and in the long term we get back the money, it's win all around!" <fast forward a few years> "Omg, it costs $10,000 to get a degree! Poor people can get loans, but they have to repay them in addition to paying $5,000 out of pocket! That divides the rich and the poor, etc etc! We should load up to $10,000 to even out the playing field! win win!" <fast forward to now after a few cycle> "Omg, we have a student debt crisis!" Like, did someone really not see it coming? Without some form of cost control, this is just government sponsored cost inflation. Because of where Im from Im just used to government paid education. It's not always as good, and there are a lot of friction, but costs are kept a little more under control. I guess you could also, in theory, just not have the loans at all, or much fewer, and if it had been that way from the beggining, cost wouldn't have gone up nearly as fast.
- MaupitiBlue 8y ago
  I don’t “blame” anyone. Millennials made a decision based on their preferences. Now they’ve changed their mind and want me to pick up the tab. No thanks.
  - lovich 8y ago
    As a society we've decide that people <21 aren't responsible enough to have a beer, but are responsible enough to take on massive amounts of loans. All of this while having government propaganda and society telling them since childhood that if they don't get a college degree, they'll be poor their whole lives. Then the law was changed as well so only student debt was not dischargeable in bankruptcy while every other type of debt is. It's disengenous to imply that these were freely made choices. Well running capitalism relies on information parity between both sides and not interactions where it's all of society and a massive industry trying to convince undeveloped minds to make bad choices
  - lilactown 8y ago
    I would say that many millennials made a decision based on information that perhaps wasn't true, and perhaps was given even in bad faith. Source: am a millennial and experienced the huge pressure to go to college, especially an expensive one.
    - fetus8 8y ago
      I too, am a millennial. I grew up being told that the only serious option after high school was to go to college. That's just how life worked. I believed it, as most my family went to college immediately after high school. Not only did my family perpetuate this idea, but my middle class suburban high school did as well. Our guidance counselors actively were involved with the local state universities. They spent a lot of time shoving the idea of attending college down your throat. Maybe they only did this with the higher performing students. I even was going on college tours in 10th grade, through programs at my high school. At the time, I really didn't think there was another option aside from college after high school.
- matis140 8y ago
  I think our public education system is also to blame. We push kids down academic paths too often and many of those paths do not lead to professions that can sustain 45-80k debt after graduation. Too much easy credit is available driving up the price. Degrees are not properly valued. Degrees in social work should not cost the same as a degree in STEM because they are not worth the same. More kids should be going into trades like electricians, plumbers, and millwrites. Good careers that also pay through their apprenticeship programs and currently are looking for kids to train.
  - zelon88 8y ago
    > Good careers that also pay through their apprenticeship programs and currently are looking for kids to train. This isn't always viable either. I started in entry-level manufacturing and worked my way up to production control and IT specifically because even at the highest level of manufacturing I wasn't going to be satisfactorily compensated. I would have been working long overtime hours for a decade or two only to be replaced by CNC machines instead of ever hitting the bigtime anyway. If I hadn't swapped collars I was destined for a life of sub $50k hard labor with shitty insurance and constant threats of bodily injury. Reporting to a "boss" who probably made as much as the manager of McDonalds and drove a Rav-4. Yeah, that's real potential right there.
  - adamrezich 8y ago
    Most of my friends growing up were way into music... not just playing in bands in their spare time, but high school band, marching band, jazz band, drumline, etc., as well as composing and producing digital music in their spare time. A few of these friends pursued other careers in college but many of them went to the state college that's known for its music programs. There, they eventually came to realize the reality of the situation: if you want to continue pursuing music in a college capacity, you're looking at either education or performance. Performance is extremely demanding and unless you're the best of the best of the best... good luck finding work with that degree. If you go down the education route, then, being a state school, you're STRONGLY encouraged to teach at a school somewhere in the state... which has the lowest teacher wages in the country (correction: second-worst as of 2018, moving up!). Many of my friends didn't fully realize the reality of the situation until they'd already got their degrees. One ended up a high school band teacher in our hometown and truly loves it. Another decided to purse computer science instead and just completed his degree in that (and is now realizing how hard it is to find work as a fresh grad with no internship). Another quickly got a business minor and is doing well in the banking industry. Another is a bouncer and photographer. What I'm getting at is, these kids were all pushed into going to college and getting degrees in the thing they enjoyed doing in high school, without stopping to realize their career prospects with said degree. College is just a thing you do after high school, unless you're a loser (or you went to a trade school, which is "a step up but not college"). The whole system is completely broken for modern society in my opinion, we need something to shake the whole thing up and turn it on its head.
- JimboOmega 8y ago
  Do we, as a society want to let the free market decide what education is valuable and what education is not? Giving lenders a lifetime claim on the maximum wage garnishment is undeniably one of the most backwards ways to decide we don't want to let them pick which educations to fund. But if we want lenders to decide what educations are worth funding, and incentivize them to do so, what factors can they consider? You might find, for instance, that women get denied such loans more often - perhaps because of the degrees they pursue, or perhaps because they tend to get paid less. Is that fair? Again saddling somebody with a lifetime of debt (that will never, realistically, get repaid) because of an idealistic choice they made as a teenager feels like one of the most idiotic solutions possible to this problem. It encourages constant tuition creep because there's always more money to throw at it. But there is a lot of risk in letting a small cabal of lenders (as would inevitably emerge if it hasn't already) decide exactly who gets to have what educations.
  - skh 8y ago
    I don’t want lenders at all. Higher education is a public good in the same way k-12 is. I’m in favor of free higher education for qualified people.
  - moduspol 8y ago
    We're not headed toward dystopia by acknowledging some students / degrees have more financial potential than others, and I think we're already increasingly seeing the societal impacts of what happens when we let the idealistic and unrealistic choices of teenagers go unquestioned until their mid-twenties. Using taxpayer funds to make those idealistic and unrealistic choices more appealing and less immediately problematic doesn't help the student or society in the long term.
- moduspol 8y ago
  > Lenders [...] should not be absolved of blame or have less outrage directed at them. I was with you until this point. What part do you blame them for? The federal loan guarantees were created for the express purpose of allowing people who otherwise couldn't get the loans to get them. The lenders are doing exactly what they're supposed to, and would be expected. Lenders should be in the position of determining risk, but it's not their fault federal policy means they don't need to. They're not the ones raising the costs of higher education, they're just facilitating them as intended and expected. If your outrage is directed at the lenders, you're barking up the wrong tree. Put the lenders back in the business of evaluating risk (like they do for home, auto, business, and other loans) and they'll do that.
  - skh 8y ago
    Lenders, through lobbying and regulatory capture, created the system. At least as I see things.
    - moduspol 8y ago
      I don't doubt they contributed, but this isn't like a coal company getting emissions restrictions relaxed. There's a pretty common world view that financial viability should not even be a concern in young people's choices of what field to pursue, and subscribers to that are what created this policy. Lenders benefit, but this is driven by what a large group of people want society to look like. Even if the government subsidized all higher education and removed the lenders from the equation completely, we'd still have increasing numbers of young people graduating in their early and mid-twenties with degrees in fields like gender studies. They won't be in significant debt, but they're still comparatively behind by four years and woefully unprepared for the workforce. Are the students better off from being financially enabled to get in that situation? Is society better off from enabling thousands of people to do it? I don't think so.
      - skh 8y ago
        I can’t think of a reason why the number of gender studies students would increase under a universal higher education system for qualified students. Europe does not appear to be overwhelmed by gender studies graduates. Given the sexual harassment problem at Google, Uber, etc perhaps it would be good for there to be an increase in gender studies. California has free higher education until Reagan became governor. It worked well then and provided it is only available to qualified students I don’t see why it can’t work now.
MaupitiBlue 8y ago
Why do we encourage a group to vote who remind us daily about their inability to survey their options and make good decisions?
- mbbutler 8y ago
  I agree. Why do we let the Boomers vote as they continue to drive us ever closer towards the deleterious effects of severe climate change?
- vlunkr 8y ago
  To be fair, most people make the decision about where they go to school (and along with that, how much it costs) when they are barely adults and don't have a good grasp on finance. At least part of the blame falls on parents, and teachers who point them to expensive schools, and our culture which has praised expensive schools as a positive thing for a long time. I'm hoping the next generation will get better guidance.
  - MaupitiBlue 8y ago
    The only part I disagree with is that it is ALL the parents’ fault. My point wasn’t necessarily that millennials are uniquely stupid, rather that the voting age should be at least 25.
    - Pharmakon 8y ago
      It’s a mixed bag. On one hand young people put Corbyn in power, on the other they voted overwhelmingly against the Brexit old Boomers loved and voted for. I don’t think reducing the voting population is a good idea, especially to something absurd like 25, which is almost a decade after you can enlist to die abroad, drive a car, and drink alcohol.
- jdormit 8y ago
  I am so tired of the "Millennials are lazy and make bad decisions" narrative. You can't make blanket statements about an entire generation. Please stop.
thrower123 8y ago
There are just so many poor bastards that spent lots of money on useless degrees. It is kind of a problem in the marriage market, because more women go to college and end up with massive college debt, which makes them financially unattractive.
- thrower123 8y ago
  I am curious why this is a hugely unpopular fact.
  - jimktrains2 8y ago
    It's more the not-even-veiled misogyny than the statement about the relative worth of degrees that caused my down vote. Also, most/all of this generation are told that it doesn't matter what your degree is in, just that you get a degree. That idea combined with some generic distain for trades is what drives kids to college regardless of cost. Men are also taking out loans. We need to respect trades and respect that not everyone wants or needs to spend 4 more years in school. We also need to stop being misogynistic, but that should go without saying.
    - LyndsySimon 8y ago
      Is it necessarily misogynistic, though? At the population level, women’s degrees are worth less than men’s because women more often exit the job market to raise children. If someone wants to do that - and I 100% stand behind that being a valid and important decision, for either sex - then college debt would be a very poor financial decision. I’m not convinced it’s a systemic problem, but it would be interesting to see default rates broken down by gender.
      - jimktrains2 8y ago
        The comment was, yes. First, it isn't a problem that is specific to women in any way, shape, or form. Second, it paints women as only existing to find a mate, and this is hampering that. Why should women be singled out in this? They should be able to explore their intellectual side as well.
ataturk 8y ago
As someone who worked his way through college almost 100%, I have very little sympathy for people who take on huge debts in order to pay for their so-called education. Be smart with taking on any debt, understand how it ties your hands! You only have yourself to blame. And I'm not saying don't do it necessarily, but at least try, try to understand how loans work, what you're getting yourself into, and if you can't articulate how it serves your long-term plans, then for the love of Jesus (or whoever) DON'T DO IT!!!!!
maverick2007 8y ago
Student loans always did feel kind of predatory to me. We're asking 17 or 18 year olds whose brains haven't fully developed the ability to prioritize long term consequences to take on 10s or 100s of thousands of dollars in debt when in many cases, they don't even know their path through college (major etc). Now don't get me wrong, I don't have some sort of magic plan to fix this (maybe allow them to declare bankruptcy would be a start?) but the whole industry just felt a little predatory to me.
- johnm1019 8y ago
  Then I guess I have a "fully developed adult brain" (whatever that is) and certainly couldn't fully understand all the effects of taking out a $120k loan to take a risk on a degree in a subject I don't know (by definition, otherwise why am I going to school for it?) - let alone long term risks and opportunity cost assessments. I think it puts anyone looking to go to college and 'move up the ladder' in a very difficult position.
  - Jagat 8y ago
    Honest question. Why doesn't the lender require the borrower to explain how they plan to repay? Or why do they continue to lend large amounts for degrees where there's a low probability of getting a good salary after graduation. Or does the govt assume the risk of student loan defaults?
    - mikestew 8y ago
      Why doesn't the lender require the borrower to explain how they plan to repay? No lender ever asks that. Lenders ask themselves, "how will I be repayed? And in the case of default?" In most cases, the answers are "by the borrower" and "take the house or car, the sale of which will offset some of the loss". In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash". There is zero incentive to determine how the borrower will repay.
      - 8y ago
aglavine 8y ago
As a foreigner I don't get it. Why are students allowed to get a debt that they can't pay. Why they take it?
- empath75 8y ago
  You're told from the day you start school that if you don't go to college, you're not going to 'make it'. There aren't enough scholarships to go around. So people will pay literally anything. And since they can't discharge the debt in bankruptcy, lenders will throw money at them.
  - squirrelicus 8y ago
    Lenders are also required by the feds to throw money at them. They don't have a choice. Cost of money went dramatically down, so tuition inflated something like 4x
- skizm 8y ago
  It started as a way to give low income kids access to the same education opportunities as everyone else. Banks didn’t want to risk giving out loans to low income borrowers so the govt guaranteed the loans. Once this happened everyone started taking out loans to go to college since the banks now approved anyone since the repayment was guaranteed by the govt, and since schools now had so many more applicants they kept raising prices (supply and demand). Higher prices lead to more loans which lead to higher prices, etc.
- deleted 8y ago
  [deleted]
esotericn 8y ago
The normalisation of lending is a huge issue in general. There's a pervasive idea that being able to actually afford things is abnormal. That everyone should just take a loan out for education. For a car. For a house. For a cellphone. Yes, there are benefits to being able to get things 'earlier' than otherwise would be possible. And if everything goes right, the situation a borrower is in at the end of a loan may be better than had they not taken it. But the actual result of this seems to be that, for example, ~everyone in Britain is tied into full-time employment to pay off various creditors. It's commonly posted on here that the average American has savings amounting to effectively a bag of crisps. That's the obvious result if you use every available bit of income, even if it's "investing" for a future that never comes.
- nicoburns 8y ago
  Agreed, although student loans are a little different in this regard, as repayment us only due while earning.
- clairity 8y ago
  it’s very reasonable to take out a loan for an income producing asset (like education), as long as the expected return is greater than the cost of the loan. but those sensible loans have also normalized loans for non-income producing assets, and that’s where it’s better to be able to pay up-front (unless you get an interest rate below inflation or the fed rate).
  - esotericn 8y ago
    The variance is more important than the EV. An individual human is N=1. It's a single trial. You only live once. ;) An example would be taking out a mortgage. The highest EV is generally mortgaging yourself to the hilt. But in various circumstances, you'll then lose everything. Oh, and during the period you've basically given yourself a guaranteed annual cost you can't discharge without potentially taking huge losses on a house. (In the student loan example, you stay for the period, or you get no fancy bit of paper at all).
    - 8y ago
_ah 8y ago
There an interesting argument to be made around non-guaranteed loans with rates dependent on course of study. Want a degree in medicine? Enjoy your 3% loan since you'll probably be able to pay it back. Social Sciences? Get ready for 20% interest to compensate for a high default rate. Interest rates are an important signalling mechanism and could help stear students into educational fields with greater economic demand.
exabrial 8y ago
If creditors were allowed to discriminate based on risk factors [probably grades, attendance, degree field] we'd never be in this situation. But, since these are government backed loans, people are pretty much guaranteed to be funded, no matter their risk factors, are and the taxpayers are going to foot the bill when they default.
epx 8y ago
Student debt plus the skyrocket price of real estate worldwide is killing this generation. Low interest means no retirement, also. How lucky I was to be able to save money in the 90s. Worried about my kid, though.
mfringel 8y ago
I feel like banks and students should get a choice. A couple of assertions: A) Interest represents risk as well as the time-value of money B) A non-dischargeable loan is risk free to the lender. Given those, there should be two products: 1) Offering a loan dischargeable in bankruptcy, at whatever rate the market will bear. 2) Offering a non-dischargeable loan, with interest capped at the current rate for a 10-Year Treasury Note. If there's no risk, a bank doesn't get to add it in, and the money is cheap enough that the student can pay it back. If there's risk, a bank gets to charge whatever they can, and a student has recourse to bankruptcy.
abathur 8y ago
There are too many perverse incentives in the system; the incentives need to be realigned. The amount of money coming from students incentivizes a university to provide worse education to more students. Easy loan money discourages discernment all along the pipeline--at universities, lenders, students, parents...
- sjg007 8y ago
  The expansion of loans came because state governments cut funding to their universities and colleges.
madengr 8y ago
What a crap article. Are student loans 47% or 77% of federal assets; the text and graph contradict one another? Reduce student loans for the wealthy? Wait, earlier it said the wealthy don’t need loans. Forgive debt for those in 2008? What about +/- 5 years? Who decides that? Written by another entitled socialist.
yhavr 8y ago
Why don't people move to countries with cheaper/free education then? Two major possibilities come to my mind: - US employers don't accept non-US diplomas. - Studying in the US gives you networking opportunities. If you come back after Europe, you don't have enough connections to compete with local graduates.
- sjg007 8y ago
  I did.. went to college in the UK. Germany has free University too.. US employers accept the non-US diplomas. However, the networking issue may be a thing.. The real networking though is in sororities and fraternities I think. Or those secret societies... Then again you can always do an MBA.. ;)
purplezooey 8y ago
People aged 18-29 vote at a rate of twenty percent. Ain't nothing going to change for them, ever.
kisstheblade 8y ago
The figure 8% of GDP sounded mind boggling. But apparently it's true. Quoth the wiki: "Approximately 43 million have student loans, with an average balance of $30,000. In 2017, average student loan debt reached $39, 400, an increase of 6% compared to 2016. Americans owe more than $1.48 trillion (44 million borrowers) which is roughly $620 billion more than the overall credit card debt in the country." Just to compare to a communist I mean socialist country (Finland in this example), where we had an article about the massive increase in student loans (doubled in the last 10 years). 400 000 people with loans totalling 3 billion (about 7600eur per person). To scale that with the population of the US so about 60x we get the number 180 billion vs. 1480 billion. Man you have it tough there :) Good thing that you all will be multi billionaires (or so everyone apparently thinks when voting) so no need for tax reform or any other kind of communist/socialist crap :)

42 points by koolhead17 8y ago

randyrand 8y ago

It'll be a good learning experience for the next generation.

basch 8y ago
we are on the next generation. there are people just escaping crushing debt ready to put kids into college. this didnt just start.

skh 8y ago

Often times when student loans come up people blame exclusively the borrower. We should keep in mind that in a properly functioning lending market both the borrower and lender take on risk. The lender should not left out of the equation on who to blame. Both parties are at fault. But we don’t have a properly function student loan industry. Lenders assume very little risk in this market but they should not be absolved of blame or have less outrage directed at them.

Judgmentality 8y ago
I agree. I feel like most of the problem would be solved by allowing student debt to be erased by declaring bankruptcy. It's absurd that isn't the case.
- YinglingLight 8y ago
  What's absurd about that? The bank has no salvageable assets to claim. They can't claim 4 years of European Literature from your mind.
  - gdhbcc 8y ago
    Same thing happens w8tg a bankrupt business...
  - gerbal 8y ago
    Fortunately most of the debt is held by the US department of Education, and could easily be written off. (Minor inflationary effects asside).
    - thrill 8y ago
      So, your solution is to stick the taxpayers with the debt?
      - Judgmentality 8y ago
        I feel like that's a small step towards rectifying the destruction of a generation. This country has too much inequality as it is.
      - gerbal 8y ago
        The actual costs of student loan forgiveness is fairly marginal compared to the economic benefits [1]. Further the federal government can write off debt without anyone ever having to pay for it. Student loans are created by the Treasury for the Department of Ed, repayment just gets dumped onto a balance sheet in the treasury that has no relationship to reality. [1] http://www.levyinstitute.org/publications/the-macroeconomic-effects-of-student-debt-cancellation http://www.levyinstitute.org/publications/the-macroeconomic-...
  - Jtsummers 8y ago
    You can wipe out medical loans, which also have no assets to claim, with bankruptcy. Or do you think we need to make Repo Men a reality?
    - madengr 8y ago
      Medical loans? You can wipe out medical debt, but can you actually get a loan for medical procedures?
- JumpCrisscross 8y ago
  > most of the problem would be solved by allowing student debt to be erased by declaring bankruptcy Going forward. It's tough to stomach retroactively applying this to existing loans.
  - LyndsySimon 8y ago
    The prohibition was retroactively applied to private loans already existing. My wife and I chose private loans specifically to retain bankruptcy protection in case of serious life issues. A couple years after we took them, the law changed and we were stuck with the higher interest rates of the private loans without those protections. For a time, we considered a Constiitutional challenge to that, as we believed it to be an ex post facto law. We didn’t want to incur the negatives of a bankrupty to gain standing, though, and couldn’t afford the astronomical legal fees that would certainly accompany that sort of case. As far as I know, no one has pursued it.
- thrower123 8y ago
  If that was allowed, then the interest rates would have to float according to the likelihood that the loan was repaid. Good for CS and econ and engineering, not so good for lierature and gender studies.
- dd36 8y ago
  Powerful interests have corrupted the legal mechanisms that make markets work efficiently. Here it is bankruptcy. In other markets it is forced arbitration and preventing groups of people from joining together to share legal expenses. Leaving all accountability mechanisms to the government is bad for free markets. Ideally, if you truly want to help low income people get an education through loans, it should be structured more like SBA loans. The lenders should take on a big enough % of the risk that they want to avoid defaults but not so little that they act recklessly and fund loans or schools that are unlikely to perform. I'm sure that if SBA loans were non-dischargeable, there would be an explosion in bad SBA loans that drag on the economy.
mempko 8y ago
"Both parties are at fault". Or we can have a tuition-free public education system like we used to. But you know...
- skh 8y ago
  Yes. This is what I advocate.
ant6n 8y ago
The actual problem is high tuition.
- graeme 8y ago
  Easy access to unlimited loans is a major comtributor to high tuition.
  - skh 8y ago
    I believe for public universities the cost driver has been an increase in administrators and a decrease in funding per student.
    - graeme 8y ago
      Right, but they're competing with private universities. And those are adding administrators, facilities, etc. The public universities are keeping up with that. Without no default loans, the dynamic would change.
- shados 8y ago
  Yup. Which is partly because of near infinite free money that no one is really responsible for. Hindsight is 20/20, and not being American I don't have the whole history...but what I'm picturing with this situation is: "Omg, it costs $5000 to get a degree! That means only the rich have access to education and increase the gap between rich and poor! We need a solution!" "You can't just go giving education for free! Communism!" "We never said that! Let's lend up to $5000 to anyone without the mean to pay for education! That will level the playing field and in the long term we get back the money, it's win all around!" <fast forward a few years> "Omg, it costs $10,000 to get a degree! Poor people can get loans, but they have to repay them in addition to paying $5,000 out of pocket! That divides the rich and the poor, etc etc! We should load up to $10,000 to even out the playing field! win win!" <fast forward to now after a few cycle> "Omg, we have a student debt crisis!" Like, did someone really not see it coming? Without some form of cost control, this is just government sponsored cost inflation. Because of where Im from Im just used to government paid education. It's not always as good, and there are a lot of friction, but costs are kept a little more under control. I guess you could also, in theory, just not have the loans at all, or much fewer, and if it had been that way from the beggining, cost wouldn't have gone up nearly as fast.
MaupitiBlue 8y ago
I don’t “blame” anyone. Millennials made a decision based on their preferences. Now they’ve changed their mind and want me to pick up the tab. No thanks.
- lovich 8y ago
  As a society we've decide that people <21 aren't responsible enough to have a beer, but are responsible enough to take on massive amounts of loans. All of this while having government propaganda and society telling them since childhood that if they don't get a college degree, they'll be poor their whole lives. Then the law was changed as well so only student debt was not dischargeable in bankruptcy while every other type of debt is. It's disengenous to imply that these were freely made choices. Well running capitalism relies on information parity between both sides and not interactions where it's all of society and a massive industry trying to convince undeveloped minds to make bad choices
- lilactown 8y ago
  I would say that many millennials made a decision based on information that perhaps wasn't true, and perhaps was given even in bad faith. Source: am a millennial and experienced the huge pressure to go to college, especially an expensive one.
  - fetus8 8y ago
    I too, am a millennial. I grew up being told that the only serious option after high school was to go to college. That's just how life worked. I believed it, as most my family went to college immediately after high school. Not only did my family perpetuate this idea, but my middle class suburban high school did as well. Our guidance counselors actively were involved with the local state universities. They spent a lot of time shoving the idea of attending college down your throat. Maybe they only did this with the higher performing students. I even was going on college tours in 10th grade, through programs at my high school. At the time, I really didn't think there was another option aside from college after high school.
matis140 8y ago
I think our public education system is also to blame. We push kids down academic paths too often and many of those paths do not lead to professions that can sustain 45-80k debt after graduation. Too much easy credit is available driving up the price. Degrees are not properly valued. Degrees in social work should not cost the same as a degree in STEM because they are not worth the same. More kids should be going into trades like electricians, plumbers, and millwrites. Good careers that also pay through their apprenticeship programs and currently are looking for kids to train.
- zelon88 8y ago
  > Good careers that also pay through their apprenticeship programs and currently are looking for kids to train. This isn't always viable either. I started in entry-level manufacturing and worked my way up to production control and IT specifically because even at the highest level of manufacturing I wasn't going to be satisfactorily compensated. I would have been working long overtime hours for a decade or two only to be replaced by CNC machines instead of ever hitting the bigtime anyway. If I hadn't swapped collars I was destined for a life of sub $50k hard labor with shitty insurance and constant threats of bodily injury. Reporting to a "boss" who probably made as much as the manager of McDonalds and drove a Rav-4. Yeah, that's real potential right there.
- adamrezich 8y ago
  Most of my friends growing up were way into music... not just playing in bands in their spare time, but high school band, marching band, jazz band, drumline, etc., as well as composing and producing digital music in their spare time. A few of these friends pursued other careers in college but many of them went to the state college that's known for its music programs. There, they eventually came to realize the reality of the situation: if you want to continue pursuing music in a college capacity, you're looking at either education or performance. Performance is extremely demanding and unless you're the best of the best of the best... good luck finding work with that degree. If you go down the education route, then, being a state school, you're STRONGLY encouraged to teach at a school somewhere in the state... which has the lowest teacher wages in the country (correction: second-worst as of 2018, moving up!). Many of my friends didn't fully realize the reality of the situation until they'd already got their degrees. One ended up a high school band teacher in our hometown and truly loves it. Another decided to purse computer science instead and just completed his degree in that (and is now realizing how hard it is to find work as a fresh grad with no internship). Another quickly got a business minor and is doing well in the banking industry. Another is a bouncer and photographer. What I'm getting at is, these kids were all pushed into going to college and getting degrees in the thing they enjoyed doing in high school, without stopping to realize their career prospects with said degree. College is just a thing you do after high school, unless you're a loser (or you went to a trade school, which is "a step up but not college"). The whole system is completely broken for modern society in my opinion, we need something to shake the whole thing up and turn it on its head.
JimboOmega 8y ago
Do we, as a society want to let the free market decide what education is valuable and what education is not? Giving lenders a lifetime claim on the maximum wage garnishment is undeniably one of the most backwards ways to decide we don't want to let them pick which educations to fund. But if we want lenders to decide what educations are worth funding, and incentivize them to do so, what factors can they consider? You might find, for instance, that women get denied such loans more often - perhaps because of the degrees they pursue, or perhaps because they tend to get paid less. Is that fair? Again saddling somebody with a lifetime of debt (that will never, realistically, get repaid) because of an idealistic choice they made as a teenager feels like one of the most idiotic solutions possible to this problem. It encourages constant tuition creep because there's always more money to throw at it. But there is a lot of risk in letting a small cabal of lenders (as would inevitably emerge if it hasn't already) decide exactly who gets to have what educations.
- skh 8y ago
  I don’t want lenders at all. Higher education is a public good in the same way k-12 is. I’m in favor of free higher education for qualified people.
- moduspol 8y ago
  We're not headed toward dystopia by acknowledging some students / degrees have more financial potential than others, and I think we're already increasingly seeing the societal impacts of what happens when we let the idealistic and unrealistic choices of teenagers go unquestioned until their mid-twenties. Using taxpayer funds to make those idealistic and unrealistic choices more appealing and less immediately problematic doesn't help the student or society in the long term.
moduspol 8y ago
> Lenders [...] should not be absolved of blame or have less outrage directed at them. I was with you until this point. What part do you blame them for? The federal loan guarantees were created for the express purpose of allowing people who otherwise couldn't get the loans to get them. The lenders are doing exactly what they're supposed to, and would be expected. Lenders should be in the position of determining risk, but it's not their fault federal policy means they don't need to. They're not the ones raising the costs of higher education, they're just facilitating them as intended and expected. If your outrage is directed at the lenders, you're barking up the wrong tree. Put the lenders back in the business of evaluating risk (like they do for home, auto, business, and other loans) and they'll do that.
- skh 8y ago
  Lenders, through lobbying and regulatory capture, created the system. At least as I see things.
  - moduspol 8y ago
    I don't doubt they contributed, but this isn't like a coal company getting emissions restrictions relaxed. There's a pretty common world view that financial viability should not even be a concern in young people's choices of what field to pursue, and subscribers to that are what created this policy. Lenders benefit, but this is driven by what a large group of people want society to look like. Even if the government subsidized all higher education and removed the lenders from the equation completely, we'd still have increasing numbers of young people graduating in their early and mid-twenties with degrees in fields like gender studies. They won't be in significant debt, but they're still comparatively behind by four years and woefully unprepared for the workforce. Are the students better off from being financially enabled to get in that situation? Is society better off from enabling thousands of people to do it? I don't think so.
    - skh 8y ago
      I can’t think of a reason why the number of gender studies students would increase under a universal higher education system for qualified students. Europe does not appear to be overwhelmed by gender studies graduates. Given the sexual harassment problem at Google, Uber, etc perhaps it would be good for there to be an increase in gender studies. California has free higher education until Reagan became governor. It worked well then and provided it is only available to qualified students I don’t see why it can’t work now.

MaupitiBlue 8y ago

Why do we encourage a group to vote who remind us daily about their inability to survey their options and make good decisions?

mbbutler 8y ago
I agree. Why do we let the Boomers vote as they continue to drive us ever closer towards the deleterious effects of severe climate change?
vlunkr 8y ago
To be fair, most people make the decision about where they go to school (and along with that, how much it costs) when they are barely adults and don't have a good grasp on finance. At least part of the blame falls on parents, and teachers who point them to expensive schools, and our culture which has praised expensive schools as a positive thing for a long time. I'm hoping the next generation will get better guidance.
- MaupitiBlue 8y ago
  The only part I disagree with is that it is ALL the parents’ fault. My point wasn’t necessarily that millennials are uniquely stupid, rather that the voting age should be at least 25.
  - Pharmakon 8y ago
    It’s a mixed bag. On one hand young people put Corbyn in power, on the other they voted overwhelmingly against the Brexit old Boomers loved and voted for. I don’t think reducing the voting population is a good idea, especially to something absurd like 25, which is almost a decade after you can enlist to die abroad, drive a car, and drink alcohol.
jdormit 8y ago
I am so tired of the "Millennials are lazy and make bad decisions" narrative. You can't make blanket statements about an entire generation. Please stop.

thrower123 8y ago

There are just so many poor bastards that spent lots of money on useless degrees. It is kind of a problem in the marriage market, because more women go to college and end up with massive college debt, which makes them financially unattractive.

thrower123 8y ago
I am curious why this is a hugely unpopular fact.
- jimktrains2 8y ago
  It's more the not-even-veiled misogyny than the statement about the relative worth of degrees that caused my down vote. Also, most/all of this generation are told that it doesn't matter what your degree is in, just that you get a degree. That idea combined with some generic distain for trades is what drives kids to college regardless of cost. Men are also taking out loans. We need to respect trades and respect that not everyone wants or needs to spend 4 more years in school. We also need to stop being misogynistic, but that should go without saying.
  - LyndsySimon 8y ago
    Is it necessarily misogynistic, though? At the population level, women’s degrees are worth less than men’s because women more often exit the job market to raise children. If someone wants to do that - and I 100% stand behind that being a valid and important decision, for either sex - then college debt would be a very poor financial decision. I’m not convinced it’s a systemic problem, but it would be interesting to see default rates broken down by gender.
    - jimktrains2 8y ago
      The comment was, yes. First, it isn't a problem that is specific to women in any way, shape, or form. Second, it paints women as only existing to find a mate, and this is hampering that. Why should women be singled out in this? They should be able to explore their intellectual side as well.

ataturk 8y ago

As someone who worked his way through college almost 100%, I have very little sympathy for people who take on huge debts in order to pay for their so-called education. Be smart with taking on any debt, understand how it ties your hands! You only have yourself to blame. And I'm not saying don't do it necessarily, but at least try, try to understand how loans work, what you're getting yourself into, and if you can't articulate how it serves your long-term plans, then for the love of Jesus (or whoever) DON'T DO IT!!!!!

maverick2007 8y ago

Student loans always did feel kind of predatory to me. We're asking 17 or 18 year olds whose brains haven't fully developed the ability to prioritize long term consequences to take on 10s or 100s of thousands of dollars in debt when in many cases, they don't even know their path through college (major etc). Now don't get me wrong, I don't have some sort of magic plan to fix this (maybe allow them to declare bankruptcy would be a start?) but the whole industry just felt a little predatory to me.

johnm1019 8y ago
Then I guess I have a "fully developed adult brain" (whatever that is) and certainly couldn't fully understand all the effects of taking out a $120k loan to take a risk on a degree in a subject I don't know (by definition, otherwise why am I going to school for it?) - let alone long term risks and opportunity cost assessments. I think it puts anyone looking to go to college and 'move up the ladder' in a very difficult position.
- Jagat 8y ago
  Honest question. Why doesn't the lender require the borrower to explain how they plan to repay? Or why do they continue to lend large amounts for degrees where there's a low probability of getting a good salary after graduation. Or does the govt assume the risk of student loan defaults?
  - mikestew 8y ago
    Why doesn't the lender require the borrower to explain how they plan to repay? No lender ever asks that. Lenders ask themselves, "how will I be repayed? And in the case of default?" In most cases, the answers are "by the borrower" and "take the house or car, the sale of which will offset some of the loss". In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash". There is zero incentive to determine how the borrower will repay.
    - 8y ago

aglavine 8y ago

As a foreigner I don't get it. Why are students allowed to get a debt that they can't pay. Why they take it?

empath75 8y ago
You're told from the day you start school that if you don't go to college, you're not going to 'make it'. There aren't enough scholarships to go around. So people will pay literally anything. And since they can't discharge the debt in bankruptcy, lenders will throw money at them.
- squirrelicus 8y ago
  Lenders are also required by the feds to throw money at them. They don't have a choice. Cost of money went dramatically down, so tuition inflated something like 4x
skizm 8y ago
It started as a way to give low income kids access to the same education opportunities as everyone else. Banks didn’t want to risk giving out loans to low income borrowers so the govt guaranteed the loans. Once this happened everyone started taking out loans to go to college since the banks now approved anyone since the repayment was guaranteed by the govt, and since schools now had so many more applicants they kept raising prices (supply and demand). Higher prices lead to more loans which lead to higher prices, etc.
deleted 8y ago
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esotericn 8y ago

The normalisation of lending is a huge issue in general. There's a pervasive idea that being able to actually afford things is abnormal. That everyone should just take a loan out for education. For a car. For a house. For a cellphone. Yes, there are benefits to being able to get things 'earlier' than otherwise would be possible. And if everything goes right, the situation a borrower is in at the end of a loan may be better than had they not taken it. But the actual result of this seems to be that, for example, ~everyone in Britain is tied into full-time employment to pay off various creditors. It's commonly posted on here that the average American has savings amounting to effectively a bag of crisps. That's the obvious result if you use every available bit of income, even if it's "investing" for a future that never comes.

nicoburns 8y ago
Agreed, although student loans are a little different in this regard, as repayment us only due while earning.
clairity 8y ago
it’s very reasonable to take out a loan for an income producing asset (like education), as long as the expected return is greater than the cost of the loan. but those sensible loans have also normalized loans for non-income producing assets, and that’s where it’s better to be able to pay up-front (unless you get an interest rate below inflation or the fed rate).
- esotericn 8y ago
  The variance is more important than the EV. An individual human is N=1. It's a single trial. You only live once. ;) An example would be taking out a mortgage. The highest EV is generally mortgaging yourself to the hilt. But in various circumstances, you'll then lose everything. Oh, and during the period you've basically given yourself a guaranteed annual cost you can't discharge without potentially taking huge losses on a house. (In the student loan example, you stay for the period, or you get no fancy bit of paper at all).
  - 8y ago

_ah 8y ago

There an interesting argument to be made around non-guaranteed loans with rates dependent on course of study. Want a degree in medicine? Enjoy your 3% loan since you'll probably be able to pay it back. Social Sciences? Get ready for 20% interest to compensate for a high default rate. Interest rates are an important signalling mechanism and could help stear students into educational fields with greater economic demand.

exabrial 8y ago

If creditors were allowed to discriminate based on risk factors [probably grades, attendance, degree field] we'd never be in this situation. But, since these are government backed loans, people are pretty much guaranteed to be funded, no matter their risk factors, are and the taxpayers are going to foot the bill when they default.

epx 8y ago

Student debt plus the skyrocket price of real estate worldwide is killing this generation. Low interest means no retirement, also. How lucky I was to be able to save money in the 90s. Worried about my kid, though.

mfringel 8y ago

I feel like banks and students should get a choice. A couple of assertions: A) Interest represents risk as well as the time-value of money B) A non-dischargeable loan is risk free to the lender. Given those, there should be two products: 1) Offering a loan dischargeable in bankruptcy, at whatever rate the market will bear. 2) Offering a non-dischargeable loan, with interest capped at the current rate for a 10-Year Treasury Note. If there's no risk, a bank doesn't get to add it in, and the money is cheap enough that the student can pay it back. If there's risk, a bank gets to charge whatever they can, and a student has recourse to bankruptcy.

abathur 8y ago

There are too many perverse incentives in the system; the incentives need to be realigned. The amount of money coming from students incentivizes a university to provide worse education to more students. Easy loan money discourages discernment all along the pipeline--at universities, lenders, students, parents...

sjg007 8y ago
The expansion of loans came because state governments cut funding to their universities and colleges.

madengr 8y ago

What a crap article. Are student loans 47% or 77% of federal assets; the text and graph contradict one another? Reduce student loans for the wealthy? Wait, earlier it said the wealthy don’t need loans. Forgive debt for those in 2008? What about +/- 5 years? Who decides that? Written by another entitled socialist.

yhavr 8y ago

Why don't people move to countries with cheaper/free education then? Two major possibilities come to my mind: - US employers don't accept non-US diplomas. - Studying in the US gives you networking opportunities. If you come back after Europe, you don't have enough connections to compete with local graduates.

sjg007 8y ago
I did.. went to college in the UK. Germany has free University too.. US employers accept the non-US diplomas. However, the networking issue may be a thing.. The real networking though is in sororities and fraternities I think. Or those secret societies... Then again you can always do an MBA.. ;)

purplezooey 8y ago

People aged 18-29 vote at a rate of twenty percent. Ain't nothing going to change for them, ever.

kisstheblade 8y ago

The figure 8% of GDP sounded mind boggling. But apparently it's true. Quoth the wiki: "Approximately 43 million have student loans, with an average balance of $30,000. In 2017, average student loan debt reached $39, 400, an increase of 6% compared to 2016. Americans owe more than $1.48 trillion (44 million borrowers) which is roughly $620 billion more than the overall credit card debt in the country." Just to compare to a communist I mean socialist country (Finland in this example), where we had an article about the massive increase in student loans (doubled in the last 10 years). 400 000 people with loans totalling 3 billion (about 7600eur per person). To scale that with the population of the US so about 60x we get the number 180 billion vs. 1480 billion. Man you have it tough there :) Good thing that you all will be multi billionaires (or so everyone apparently thinks when voting) so no need for tax reform or any other kind of communist/socialist crap :)