5 ms·

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

by 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.
    - dragonwriter 8y ago
      > In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash". No, it's not. While private student loans are still offered (sometimes, by predatory scammy for-profit schools themselves), none of them for quite a few years have been government guaranteed. The former government guaranteed loan program has for some time had exactly one lender by law, the federal government itself.
    - Gibbon1 8y ago
      > No lender ever asks that. I just bought a house and you're utterly wrong.
  - jniedrauer 8y ago
    Student loan debt can't be discharged by bankruptcy. Lending in this situation is decently low risk. You're basically rent seeking with humans instead of land. Once you've got one, you can siphon off their excess productivity for decades. You'll get your money back in the long run.
    - dragonwriter 8y ago
      > Student loan debt can't be discharged by bankruptcy. Yes it can, though it is more difficult to do so than it is for other unsecured debt.
ant6n 8y ago
Solution: lower tuition.
- squirrelicus 8y ago
  Which was the status quo before federal student loans.
  - Kevguy 8y ago
    I know the standard talking point is that easily available student loans is the only cause of tuition increasing so much over the years. But this ignores the massive drop of state funding that used to go to most colleges, and (IMO even more important) demand vs supply. It used to be that college was one of several valid options after high school, but now everyone is supposed to go to college and there is a lot of societal pressure to go, without regard to what a person wants to do with their life. This allows colleges to keep increasing tuition almost without limit, because you _have_ to get a degree so cost doesn't stop people from going.
  - JimboOmega 8y ago
    I'm just curious, before federal loans, were private lenders willing to fund anybody, or only degrees they found lucrative? Or was the tuition so low it didn't matter? (E.g., somebody who gets a psychology degree and winds up making $40k/year doing data entry still can afford to pay the relatively small amount)?
    - jki275 8y ago
      I don't remember the exact numbers, but tuition in the 90s was very low in comparison. Here's a link that shows 2-3x increase in adjusted dollars: https://www.cnbc.com/2017/11/29/how-much-college-tuition-has-increased-from-1988-to-2018.html https://www.cnbc.com/2017/11/29/how-much-college-tuition-has...
    - derekp7 8y ago
      From what I recall, parents had to save for their kids college, and if you didn't have a college savings fund then you worked your butt off in high school in order to qualify for scholarships. And you worked a side job to pay your way through college. And a lot of people didn't go to college, because a lot of people could get really good (decent paying) jobs without it.
codyb 8y ago
Not only that but they're being pushed into college by a generation for whom college tuition was something like 400% less (I believe that's after inflation is calculated in but would have to look it up). The fact is, while college administrators and presidents are doing just wonderfully, the actual discernible education has not become much greater for the student to warrant this increase. So you're pushed in by a generation for whom the benefits were great, and the costs affordable to a college education where the costs are exorbitant and the benefits less so.
dontJudge 8y ago
> bankruptcy would be a start? Yes. This is the start and the end. Bankruptcy will stop lenders from making predatory loans. It puts risk on both sides. Tuition costs will naturally (and quickly) drop. Because there will be fewer people able to pay a crazy loan fueled price without a crazy loan given to them.
- linuxftw 8y ago
  Precisely. Same applies to mortgage market as well.
- CPLX 8y ago
  Maybe. The other option is that higher education will just be for the global rich. It’s a myth that markets need everyone, in fact it’s a core tenet of modern economics that markets can hum along just fine while excluding a large class of people, with no incentive to bring them into the fold.

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.
  - dragonwriter 8y ago
    > In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash". No, it's not. While private student loans are still offered (sometimes, by predatory scammy for-profit schools themselves), none of them for quite a few years have been government guaranteed. The former government guaranteed loan program has for some time had exactly one lender by law, the federal government itself.
  - Gibbon1 8y ago
    > No lender ever asks that. I just bought a house and you're utterly wrong.
- jniedrauer 8y ago
  Student loan debt can't be discharged by bankruptcy. Lending in this situation is decently low risk. You're basically rent seeking with humans instead of land. Once you've got one, you can siphon off their excess productivity for decades. You'll get your money back in the long run.
  - dragonwriter 8y ago
    > Student loan debt can't be discharged by bankruptcy. Yes it can, though it is more difficult to do so than it is for other unsecured debt.

ant6n 8y ago

Solution: lower tuition.

squirrelicus 8y ago
Which was the status quo before federal student loans.
- Kevguy 8y ago
  I know the standard talking point is that easily available student loans is the only cause of tuition increasing so much over the years. But this ignores the massive drop of state funding that used to go to most colleges, and (IMO even more important) demand vs supply. It used to be that college was one of several valid options after high school, but now everyone is supposed to go to college and there is a lot of societal pressure to go, without regard to what a person wants to do with their life. This allows colleges to keep increasing tuition almost without limit, because you _have_ to get a degree so cost doesn't stop people from going.
- JimboOmega 8y ago
  I'm just curious, before federal loans, were private lenders willing to fund anybody, or only degrees they found lucrative? Or was the tuition so low it didn't matter? (E.g., somebody who gets a psychology degree and winds up making $40k/year doing data entry still can afford to pay the relatively small amount)?
  - jki275 8y ago
    I don't remember the exact numbers, but tuition in the 90s was very low in comparison. Here's a link that shows 2-3x increase in adjusted dollars: https://www.cnbc.com/2017/11/29/how-much-college-tuition-has-increased-from-1988-to-2018.html https://www.cnbc.com/2017/11/29/how-much-college-tuition-has...
  - derekp7 8y ago
    From what I recall, parents had to save for their kids college, and if you didn't have a college savings fund then you worked your butt off in high school in order to qualify for scholarships. And you worked a side job to pay your way through college. And a lot of people didn't go to college, because a lot of people could get really good (decent paying) jobs without it.

codyb 8y ago

Not only that but they're being pushed into college by a generation for whom college tuition was something like 400% less (I believe that's after inflation is calculated in but would have to look it up). The fact is, while college administrators and presidents are doing just wonderfully, the actual discernible education has not become much greater for the student to warrant this increase. So you're pushed in by a generation for whom the benefits were great, and the costs affordable to a college education where the costs are exorbitant and the benefits less so.

dontJudge 8y ago

> bankruptcy would be a start? Yes. This is the start and the end. Bankruptcy will stop lenders from making predatory loans. It puts risk on both sides. Tuition costs will naturally (and quickly) drop. Because there will be fewer people able to pay a crazy loan fueled price without a crazy loan given to them.

linuxftw 8y ago
Precisely. Same applies to mortgage market as well.
CPLX 8y ago
Maybe. The other option is that higher education will just be for the global rich. It’s a myth that markets need everyone, in fact it’s a core tenet of modern economics that markets can hum along just fine while excluding a large class of people, with no incentive to bring them into the fold.