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We need to get rid of student loans. The problem is that Universities don't ever need to worry about a student defaulting and can keep increasing the prices of
by planetzero 7y ago
We need to get rid of student loans. The problem is that Universities don't ever need to worry about a student defaulting and can keep increasing the prices of tuition with impunity. If they default, they don't care, because the money is already in the bank.
If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done due to free market forces.
- McTossOut 7y agoUniversities need to be well rounded because students don't know what they're doing. Interests and motivation wax and wane during formative years. And ultimately degree plans stick due to publishing and research grants. (unless you're at a technical school in sheep's clothing)
- vishalzone2002 7y agoThis is a good idea. Even if there is shaming by ranking universities with most to least number of student loan defaulters or alumni loans will be a good start here.
- planetzero 7y agoNot just shaming. They should be the ones actually loaning the money out to students.
- azhenley 7y agoSome universities have started doing income share agreements. They front the tuition cost for a portion of your future income. Depending on your degree program, they will take X percentage for Y years. Purdue was in the news for being one of the first: https://www.purdue.edu/dfa/types-of-aid/income-share-agreement/index.html https://www.purdue.edu/dfa/types-of-aid/income-share-agreeme... Planet Money had a nice podcast about how they work: https://www.npr.org/sections/money/2019/03/29/708152566/episode-903-a-new-way-to-pay-for-college https://www.npr.org/sections/money/2019/03/29/708152566/epis...
- rblatz 7y agoHow does that work for people who receive a large portion of their compensation in things like equity in a private company that is extremely hard to value? Would these plans result in the proliferation of odd compensation schemes to get around these repayment plans?
- azhenley 7y agoI'm not exactly sure. These programs are still in there trial phase anyway. The one program that I looked into had a relatively low cap on it, like $60,000, so they only take a cut of the first 60k. Plus the majority of people (i.e., outside of engineering) don't get equity anyway.
- afarrell 7y agoCouldn't they just look at Adjusted Gross Income?
- SeanAppleby 7y agoCouldn't you just use income reported to the IRS? Then any odd payment scheme to get around repayment terms would necessarily be tax evasion, which is much more serious and lets you lean on the IRS for enforcement and legislation.
- Accujack 7y agoMany forms of what you call "tax evasion" are in fact legal in the US. Lots of very, very wealthy people have no "income" at all, which means they don't pay taxes. The problem is that "income" is narrowly defined (for a reason) so things like someone owning a large corporation which triples in value over a year making them a billionaire on paper don't even show up on taxes because officially that person hasn't "made" that money until they sell the corporation. Even when they do, it's taxed at a lower rate than "income" because it's a different "kind" of money.
- oarabbus_ 7y agoIt's based off salary, not equity.
- luxuryballs 7y agoYeah this is a problem that caused itself. Price fixing always breaks a market, and this loan backing by fiat is like a cancerous version of price fixing.
- ponsin 7y agoWhy? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. If responsibility fell on the university, then they could just refuse to accept people who take out loans. The result being that only rich people could go to college.
- swagasaurus-rex 7y agoThis appears to be the primary difference. Lenders are no longer on the hook defaulting student loans. These loans are not dischargeable in bankruptcy, and it reflects on the sheer amount of loans given to sub-prime borrowers.
- godelski 7y agoThis is part of the issue. Loan providers pretty much have to give everyone loans. But the only way this can happen is by guaranteeing these loans, federally and legally. So our solution to a problem backfired and we found out that federally guaranteed loans aren't the solution to "college should be available to everyone." Maybe it is time to look for a different solution. And maybe time to clean up the mess that the last "solution" created.
- petre 7y agoMaybe partially state/federal funded education programs or free college education is the solution. We have that in Europe with some limits (only the first degree can be free) and it's working just fine. If you want private education and you can pay for it, that's fine.
- distances 7y ago> with some limits (only the first degree can be free) Some countries do, some don't. I know several people with two free master's degrees, and some people basically collect them and PhDs as a hobby through their lifetimes -- a very small minority obviously, as most are quite done after the first.
- Fakira 7y agoThe brighter side is when the shit hits the fan both the universities and bullshit degree holders will be the losers. Economy will recover in a few years and we will have a better economy.
- eggie 7y ago> If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done due to free market forces. This is a hypothetical but classic example of how regulation is required to support a free market.
- roenxi 7y agoA free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.
- bumby 7y agoI heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of
- docdeek 7y agoAustralia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).
- bocklund 7y agoThis is how some of the coding boot camps like Lambda School work.
- 7y ago
- dna_polymerase 7y agoWhat I read and heard in the past few weeks about this hints at another solution. Instead of getting rid of student loans and college tuition fees, we need to improve the situation for students and open the market for other players. Apparently the Department of Education chooses the loan service for borrowers, thus enabling a de-facto monopoly for Navient [0]. Now, if we had a functioning market people could choose better solutions, and better standards would prevail. Also data could be made public enabling students to choose a college that showed better performance for graduates careers [1]. [0]: https://www.youtube.com/watch?v=RjWWTTMj0xw https://www.youtube.com/watch?v=RjWWTTMj0xw [1]: https://www.theguardian.com/money/2017/sep/06/us-student-debt-loans-navient-sallie-mae https://www.theguardian.com/money/2017/sep/06/us-student-deb...
- vonmoltke 7y agoHow does the servicer affect this? They're just the intermediary for the DoE to get their money back.
- JMTQp8lwXL 7y agoCapping the amount colleges raise tuition by each year might help.
- faet 7y agoSome of it is making up for state cuts. For example, between 2008 and 2018 Louisiana reduced high education funding by about $5k per student. Even if LSU didn't "Raise their tuition" that $5k gap needs to be made up somewhere.
- greedo 7y agoState cuts have made a huge difference, especially in the UC system. When I went to UCSD in 1982, tuition was roughly $310/quarter for a full-time student ($825 in 2019 dollars). California contributed roughly 90% of the cost of a student, keeping fees manageable. I was able to earn enough each summer to pay for tuition. Now California contributes roughly 30% to the cost of a student, and the costs themselves has risen (better accommodations, increased admin staff etc etc.)
- beamatronic 7y agoI keep thinking about the circa 1991 recession. Everything was cheap. Everyone was poor. Everyone was happy living a basic life. Cause there was no other choice.
- adventskalender 7y agoWhy wouldn't it be the responsibility of the students to not take out loans for stupid degrees? And also the responsibility of the banks for giving out the loans only for useful studies? I don't see any party here that needs rescuing by the government.
- lotsofpulp 7y agoYes, the whole situation fixes itself by removing taxpayer guaranteed loans. If taxpayers want to assist in education, taxpayers should provide scholarships.
- foota 7y agoIt doesn't matter who is responsible for the situation, if it presents a large risk to the economy it should be mitigated.
- sokoloff 7y agoAlcohol, tobacco, obesity, and general unhealthy lifestyle likely underpins more risk to the economy than student lending. It’s perhaps more “priced in”, but otherwise seems much more serious. Drug abuse is less long-term priced in and likely also has higher aggregate risk as well.
- C1sc0cat 7y agoDepends how you implement the UK';s system is basically a graduate tax which seems fairer. I suspect that Labours ideas of scraping it will just lead to higher taxes for all ie poorer non graduates subsidising middle calss kids, or they will ration degree places
- nicoburns 7y agoI feel like this would be unfair on non-graduates, but only because government support for alternative career paths is so poor (e.g. apprenticeship schemes are a joke in this country). But really nobody should be entering working life in debt.
- phatfish 7y agoWhy would it be just "poor non-graduates" subsidising "middle class kids"? An potential extra tax burden can be allocated from wherever the government sees fit. Like a digital services tax or closing loopholes that are conveniently left open for global corporations. Do you worry that the healthy poor people are subsidising the middle class sick ones through the NHS? Or that poor careful drivers are subsidising the cost of accidents for the middle class careless ones via their insurance company?
- C1sc0cat 7y agoEveryone benefits from the NHS. The moral hazard is non graduates (including pensioners) subsiding graduates.
- fjp 7y agoThough it's less direct than the NHS benefit, I think it's a pretty good argument that everyone benefits from an educated society, even if you can't point at every single person with a degree and say they're contributing to the greater good. Educated people design infrastructure, products, services, (public and private) that affects every aspect of everyone's life.
- qrbLPHiKpiux 7y agoAs an employer, I take resumes and CV’s very seriously. I do not even consider an online degree or a Cracker Jack one, also.
- SantalBlush 7y agoUniversities are not just job training programs. They offer degrees that will enhance one's expertise in pretty much any sphere of human knowledge. If you want a job in accounting, don't get a degree in philosophy.
- vxxzy 7y agoThis is simply untrue. They do care. For institutions with high default rates (greater than 30%), they risk missing out on the federal student loans (imo gravy train). [0]. It appears that this time around, a good number of technical/trade related institutions lost out. [0] [0]: https://www.ed.gov/news/press-releases/national-federal-student-loan-cohort-default-rate-continues-decline https://www.ed.gov/news/press-releases/national-federal-stud...
- turk73 7y agoUgh, no they don't! The banksters got them wired in to the con and they are enjoying all the fruits of the tainted system. What do you think fueled the massive construction boom on all these campuses? I mean, UNC alone constructed an obscene amount of new buildings and that's a "state" University. The amount of money flowing is obscene. As usual, the little people are the ones being harmed. My daughter is three years from college and I frankly don't know what to even think of all this nonsense. I have a PhD, I value higher education, or at least, I want to value higher education, but it's become such a farce. I might better take that $300K or whatever and buy a small business for her to own and operate. I don't want her to be a government employee, we have more than enough of those, I don't want her in software development, I don't care if she goes into medicine with how screwed up healthcare is. What else is there? Law? No... And the other thing is, I have two kids and will not qualify for anything except loans, but we aren't rich by any stretch. Something has to give, education is valuable, but not some end all be all. We have plenty of "educated" imbeciles running our government right now.
- linuxftw 7y agoNo. They've completely gamed the system, so technically most people aren't 'defaulting' they're just paying almost nothing, forever [1]. 1: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
- nostromo 7y ago30%! If a bank had a 30% default rate on mortgages they’d immediately cease to be a bank.
- mhb 7y agoIf universities had to worry about students defaulting Not just that. You can imagine additional benefits if the incentives of the parties involved are realigned. It would be in the interest of lenders to evaluate the readiness of students to attend college. This would potentially lead to better, less gamable testing. It might make less sense, from a lender's perspective, for a student to go straight from high school to college. Instead perhaps they would want to see evidence from a couple of years of life outside of school that their loan would be repaid. The potential student would need to make a case to the lender and herself.
- mAEStro-paNDa 7y agoIt's insane to me how quick some folks are to dismiss what they deem "bullshit degrees". It's our culture that has turned education into some kind of "investment" in future job prospects. To put it simply, education was never intended to be that way, nor should it. It's as if studying the arts is some kind of luxury for those who are already financially well-off. Education is supposed to be about learning just for the sake of learning, which benefits all of us. If there is not a place for people from certain fields of study, that's a failure of our economy and priorities. Yet it seems that too many have just accepted the current reality as "just the way things are".
- bumby 7y agoI agree that the previous role of education was not intended to be strictly vocational, but that role changed with the industrial revolution following policies like the Morrill Land-Grant Act calling for institutions that focus on more vocationally-minded tracks, like agriculture and engineering, to support the economy. We can debate if this was in the better interest of society, but I think the role of education is allowed to change.
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- candybar 7y agoMy understanding was that this idea of education being about learning for its own sake was from an era when only the children of the privileged class received higher education and since their future as part of the future elite was more or less guaranteed from their upbringing and connections and it was thought important than the future members of the elite class are broadly well-educated, not merely specialists in their roles. The reality now is that education is more or less for everyone and most people, even at elite institutions, don't have a clear path to being a member of the elite without working super hard for specific career goals. It would be odd, then, for some of those students to continue to pretend that they have a clear path to being a member of the elite and learn the kinds of things that are disproportionately important for the members of the elite, when they have to accomplish a lot to get there. The world is simply far more competitive.
- 7y ago
- golergka 7y agoDidn't student loans appear exactly because of american populism of "making college affordable"?
- fzeroracer 7y agoThe fact that we have to look at education from the perspective of whether or not we can find a job contributing to the coffers of rich executives is remarkably warped. Education should be done for educations sake. Actual bullshit degrees come from universities seeking profit over education and even if you removed government loans from the equation they would still exist. The idea that everything would somehow be fixed if loans were removed is a delusional one as long as there is a profit motivation for universities. Because it's easy to create McDegrees and sell them.