5 ms·

Or, track the loan payback percentage for each degree, let’s say 5 years after graduation. Publish those results, and stop making loans for programs where the

by jmpman 7y ago

Or, track the loan payback percentage for each degree, let’s say 5 years after graduation. Publish those results, and stop making loans for programs where the repayment is less than X%. Then, basket weaving degrees won’t get loans, the cost for basket weaving programs will go down, as only those with parent’s stupid money will pay for basket weaving degrees. Students will be directed by market forces to degrees that actually pay, and repayment percentages will go up.

belltaco 7y ago
That will automatically happen because lending banks will do it, just like car, home and health insurance.
- vonmoltke 7y ago
  There are no lending banks. The money comes directly from the Department of Education.
  - colejohnson66 7y ago
    Even a student loan from Wells Fargo?
  - dredmorbius 7y ago
    There are both US-government, and nongoverment private bank, student loans, in the US.
    - vonmoltke 7y ago
      Which are not guaranteed by the government. When speaking of government-backed student loans, which this discussion is, there are no banks.
      - deleted 7y ago
        [deleted]
      - dredmorbius 7y ago
        OK. That's confusing, and some brief DDGing finds a bit of a mess. Got any recommended references?
        vonmoltke 7y ago
        The relevant Wikipedia article to start: https://en.wikipedia.org/wiki/Student_loans_in_the_United_States#Loans_to_students https://en.wikipedia.org/wiki/Student_loans_in_the_United_St... The relevant paragraph: > Prior to 2010, Federal loans included both direct loans—originated and funded directly by the United States Department of Education—and guaranteed loans—originated and funded by private investors, but guaranteed by the federal government. Guaranteed loans were eliminated in 2010 through the Student Aid and Fiscal Responsibility Act and replaced with direct loans because of a belief that guaranteed loans benefited private student loan companies at taxpayers expense, but did not reduce costs for students.
chrischattin 7y ago
That already happens. Lenders just don't care because they can't lose money on those loans b/c reasons stated above.
jmpman 7y ago
This will of course cause universities to encourage student loans for students with wealthy parents who could have paid up front, as they’re more likely to pay, even if employed as a barista. For every rule, it will be gamed in some way.
julienb_sea 7y ago
More likely, the basket weaving program would entirely go away. Wealthy parents generally aren't idiots and don't encourage their children to waste away in pointless degrees. Well, the ultra-wealthy might not care, but there aren't too many of those. In any event, congrats, you just made a whole set of degrees inaccessible to anyone except the wealthy. The progressives are really going to love you for that.
- big_chungus 7y ago
  It's wise to view a degree of such cost which is unlikely to re-pay itself as a luxury good. We call most other quarter-million dollar products that have little investment potential, such as yachts, luxuries. The whole point of free college is to give everyone a shot at the middle class. Personally I think we'll just get degree inflation; college has been used as a distinguishing factor because there are a limited number of such jobs. That aside, basket-weaving degrees don't move people into the middle class. Would anyone, progressives included, contend that everyone ought to get a free yacht (or other luxury good of your choice)? A free stem degree is at least much more likely to lead to long-term, multi-generational success. Markets provided some balance here, but were taken out of the picture. No thoughtful lender provides equal capital at equal interest rates to a poetry and a business major. This is reasonable, as the business major has a significantly higher lifetime earning potential. Making more capital available at lower rates to higher-earning majors is a good strategy because it helps to push people into higher-earning jobs. The invisible hand seems better-equipped to do this than a central planner. I haven't seen ISAs (income-share agreements) mentioned much here, which is a pity. The obvious solution is to modify the incentive structure such that colleges have a strong financial interest in the success of their students, which ISAs accomplish. If you want to read more, I recommend this article: https://reason.org/commentary/a-better-path-to-dealing-with-student-debt-problems/ https://reason.org/commentary/a-better-path-to-dealing-with-... Purdue is currently offering them, so we'll hopefully get some real-world data on how they work, but they seem very promising on paprer.
  - learc83 7y ago
    The federal government directly issues loans now, and they won't give you $250k in student loans. The private lenders who will don't have government backing. So if they give someone $250k for a basketweaving degree, they are unlikely to ever see that money fully repaid. No one serious thinks private universities that cost $60k+ a year should be free btw. Also most STEM degrees are about as economically viable as liberal arts degrees if you don't go to grad school. Computer Science and any degree that can get you into CS are outliers.

by jmpman 7y ago

belltaco 7y ago

That will automatically happen because lending banks will do it, just like car, home and health insurance.

vonmoltke 7y ago
There are no lending banks. The money comes directly from the Department of Education.
- colejohnson66 7y ago
  Even a student loan from Wells Fargo?
- dredmorbius 7y ago
  There are both US-government, and nongoverment private bank, student loans, in the US.
  - vonmoltke 7y ago
    Which are not guaranteed by the government. When speaking of government-backed student loans, which this discussion is, there are no banks.
    - deleted 7y ago
      [deleted]
    - dredmorbius 7y ago
      OK. That's confusing, and some brief DDGing finds a bit of a mess. Got any recommended references?
      - vonmoltke 7y ago
        The relevant Wikipedia article to start: https://en.wikipedia.org/wiki/Student_loans_in_the_United_States#Loans_to_students https://en.wikipedia.org/wiki/Student_loans_in_the_United_St... The relevant paragraph: > Prior to 2010, Federal loans included both direct loans—originated and funded directly by the United States Department of Education—and guaranteed loans—originated and funded by private investors, but guaranteed by the federal government. Guaranteed loans were eliminated in 2010 through the Student Aid and Fiscal Responsibility Act and replaced with direct loans because of a belief that guaranteed loans benefited private student loan companies at taxpayers expense, but did not reduce costs for students.

chrischattin 7y ago

That already happens. Lenders just don't care because they can't lose money on those loans b/c reasons stated above.

jmpman 7y ago

This will of course cause universities to encourage student loans for students with wealthy parents who could have paid up front, as they’re more likely to pay, even if employed as a barista. For every rule, it will be gamed in some way.

julienb_sea 7y ago

More likely, the basket weaving program would entirely go away. Wealthy parents generally aren't idiots and don't encourage their children to waste away in pointless degrees. Well, the ultra-wealthy might not care, but there aren't too many of those. In any event, congrats, you just made a whole set of degrees inaccessible to anyone except the wealthy. The progressives are really going to love you for that.

big_chungus 7y ago
It's wise to view a degree of such cost which is unlikely to re-pay itself as a luxury good. We call most other quarter-million dollar products that have little investment potential, such as yachts, luxuries. The whole point of free college is to give everyone a shot at the middle class. Personally I think we'll just get degree inflation; college has been used as a distinguishing factor because there are a limited number of such jobs. That aside, basket-weaving degrees don't move people into the middle class. Would anyone, progressives included, contend that everyone ought to get a free yacht (or other luxury good of your choice)? A free stem degree is at least much more likely to lead to long-term, multi-generational success. Markets provided some balance here, but were taken out of the picture. No thoughtful lender provides equal capital at equal interest rates to a poetry and a business major. This is reasonable, as the business major has a significantly higher lifetime earning potential. Making more capital available at lower rates to higher-earning majors is a good strategy because it helps to push people into higher-earning jobs. The invisible hand seems better-equipped to do this than a central planner. I haven't seen ISAs (income-share agreements) mentioned much here, which is a pity. The obvious solution is to modify the incentive structure such that colleges have a strong financial interest in the success of their students, which ISAs accomplish. If you want to read more, I recommend this article: https://reason.org/commentary/a-better-path-to-dealing-with-student-debt-problems/ https://reason.org/commentary/a-better-path-to-dealing-with-... Purdue is currently offering them, so we'll hopefully get some real-world data on how they work, but they seem very promising on paprer.
- learc83 7y ago
  The federal government directly issues loans now, and they won't give you $250k in student loans. The private lenders who will don't have government backing. So if they give someone $250k for a basketweaving degree, they are unlikely to ever see that money fully repaid. No one serious thinks private universities that cost $60k+ a year should be free btw. Also most STEM degrees are about as economically viable as liberal arts degrees if you don't go to grad school. Computer Science and any degree that can get you into CS are outliers.