8 ms·

Why? 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 lo

by ponsin 7y ago

Why? 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 ago
This 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 ago
This 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 ago
  Maybe 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.
- lotsofpulp 7y ago
  > 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." This was already known, but since simply providing taxpayer funded education results in increases of government expenses and hence higher taxes, we of course went with the Byzantine route of indebting people who don’t even know what amortization is to the tune of tens and hundreds of thousands of dollars.
  - frockington1 7y ago
    I don't think its unrealistic for an 18 year old to understand debt. Also, how are they being tricked into hundreds of thousands of dollars of ? State schools start around 15k/year and provide bachelors degrees. I've never understood these stories of people graduating (non-PhD/Lawyer)with so much debt
    - kalleboo 7y ago
      > I don't think its unrealistic for an 18 year old to understand debt It really shouldn't be, but here we are. The proof is in the pudding. Their high school education has failed them, parental and job market pressures to have a degree has failed them. Just standing around and going "well they should have known" isn't going to solve anything. Eventually they're going to be a big enough voting bloc to pass something like debt relief (example: old people and unsustainable pensions) and who's going to be stuck holding the bag? Better to solve the problem as early as possible instead of just standing around blaming them and not fixing anything.
    - lotsofpulp 7y ago
      I didn't claim they were tricked, I think anyone that comes graduates high school should be able to understand amortizations and model cash flows in a spreadsheet so they now how much they need to earn to pay for their loans. But they don't. And neither do their parents. And a few clicks later, they are given $50k+/year to go to whatever "school" they want.
    - godelski 7y ago
      > how are they being tricked into hundreds of thousands of dollars of [debt] > state schools start around 15k/year and provide bachelors degrees. Problem 1: School is expensive 15k*4 = 60k (assuming you do 4 years and not the average time of 6 years). So we're pretty close to $100k of debt. That is just in-state tuition! But that's not the total cost of school. Berkeley[0] estimates about $30k/yr for a student. So that's 120k-180k of debt for a bachelors. Now double that if you're out of state. Problem 2: School is getting more expensive But there's another problem that's happening. Cost of tuition is skyrocketing. Let's look at Berkeley from 2003-2012[1]. In 2003 the cost was $4336 (adjusting for inflation today that's ~$6050). In 2012 the cost was $12,834 ($14,340 2019 dollars). Today it is $14,184. So in 20 years the price has about increased ~2.5x. This means that those cases of $100k+ debt are increasing not just in total number (because population increase) but as a percent of graduating students (we'll say Gaussian curve of debt distribution). Problem 3: In-State isn't always the best option Let's say we live in Washington (state) and want to go to school for computer science. The field is fairly competitive so the higher ranked school we go to yields likely a better education (one up to date with modern techniques, funding, and equipment) and more network connections. So we'll say that we want to get into a top 100 school. That actually only leaves us 2 schools: UW(#6) and WSU(#75). We graduated pretty well with a 3.9 and a 1400 on our SAT. That might not get us into UW ([3] says 33% chance we don't get in) because it is a (inter)nationally competitive school and we don't have really any extra curricular activities. So what do we do? Our scores are high enough to get into a top 20, worst case top 50. Do we go to WSU or go to a school with more resources and a higher chance of earning more in the future? And if you think this is a fictitious scenario, play around with the other school acceptances (website uses same naming pattern as usnews: e.g. University-Of-California--Berkeley), UW is one of the least competitive schools in the top 20. There's plenty of states with even larger gaps. There's plenty of states where we're more competitive than the top instate school. There's plenty of other reasons a student might want to go out of state, and plenty of reasons that might be the best option for them. Problem 4: Age We're also talking about 18 year olds, which aren't known for making the best decisions. I don't know about you, but when I was 18 I was an idiot. I'm still pretty dumb but I've learned a lot since then. And if you don't think you were an idiot at 18, I'm calling bs or that you're under 23 and just don't know it yet. [0] https://admissions.berkeley.edu/cost https://admissions.berkeley.edu/cost [1] https://4.bp.blogspot.com/-wswpT9L7QXs/UMjqxuIbttI/AAAAAAAAAOY/Vs9ye53Vk1o/s1600/university-of-california-berkeley-10-year-tuition-chart.png https://4.bp.blogspot.com/-wswpT9L7QXs/UMjqxuIbttI/AAAAAAAAA... [2] https://www.usnews.com/best-graduate-schools/top-science-schools/computer-science-rankings https://www.usnews.com/best-graduate-schools/top-science-sch... [3] https://www.prepscholar.com/sat/s/colleges/University-of-Washington-SAT-scores-GPA https://www.prepscholar.com/sat/s/colleges/University-of-Was...
rumanator 7y ago
> Why? Because education is not a luxury service that can be postponed or outright skipped, like lifestyle-tailored tourism, and education costs in the US have become a major societal and economical problem. > In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. That's a tautology, and entirely misses the point. The point is that student loans are a colossal problem for the US, not only economical but also societal, and the problem is caused by the disconnection between the vicious cycle that leads to hikes in cost and the consequences of complying with the requirements to have an education. Complaining that universities should not feel any consequence for the need to take massive loans they force onto their student body is like complaining that petrochemical companies should not feel any consequence for the need to decontaminate the environment.
- ponsin 7y ago
  "Education" is necessary up to a certain point. In America, up to highschool education is free and for the most part required. Why draw the line at a bachelors degree? Should Masters and PhDs be free and partially required? Based on how I framed the question I assume that you can tell that I draw the line at highschool education. I can however see the argument for raising it to bachelor's. However I would expect the government to do much more than just give free money. Rather they would regulate it like they do to highschool. For example, required courses in English literature, American history, PE, and science. Mandatory attendance. Nationwide standardized tests. And others ... I personally am glad that I finish all of that in highschool and I now have the freedom to choose what and how I study. But to respond to your point directly, degrees such as gender studies, art history, and English literature are certainly a luxury service that can be postponed or outright skipped.
  - CathedralBorrow 7y ago
    > Based on how I framed the question I assume that you can tell that I draw the line at highschool education. I'm asking out of curiosity and not trying to make a point or win any argument: Why do you draw your line there? I wouldn't combine "free" and "partially required" though, as I don't see the need to conflate them. Where I live Masters and PhDs are free, but your required education is completed at age 15. Everything after that is completely optional, but free. as in no tuition, but there are some administrative fees and books you need to buy, etc.
joe_the_user 7y ago
If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. Aside from the other points, this isn't an honest of the overall situation of industries and credit. For example, The real estate industry and the car industry are highly focused on the buyer's ability to pay. The company might not be legally responsible for a buyer who defaults and it may a different company making the loan but the entire industry has to take a hit and they avoid taking those hits when they can (periodic easy-credit situations can distort this but still). Which is to say that the government giving student guaranteed credit for school certainly distorts things relative to other industries (even compared to housing, where the government is also involved heavily).
- sokoloff 7y ago
  In my experience, those two industries are highly focused on the buyer’s ability to qualify for the loan and much, much less concerned with the ability to pay the loan.
gambiting 7y ago
>>Why? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. Imagine if everyone in the United States who wanted to go on a cruise was guaranteed to be given a loan to go on a cruise, regardless of the cost of said cruise or their personal circumstances. In that scenario, obviously cruise companies would increase prices, since their clients will always get the money to pay for them, and like you yourself said - it's not their responsibility whether people can pay it back or not. That's pretty much how higher education works.
- dpau 7y ago
  not only that, in this scenario society would expect and pressure all young people to go on a cruise before they were eligible to join society.
  - linuxftw 7y ago
    Yeah, I wouldn't be in the same room as those dirty non-cruisers.
    - DuskStar 7y ago
      It's a cultural touchstone, the signal that you've come of age! How dare you suggest that 18 year olds not take out a loan for a 6-month luxury cruise, or that they compare prices for different ships! You go on the best ship that has space for you, everyone knows that!
thaumasiotes 7y ago
> In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. I suspect this isn't true. Amazon puts up some pretty intrusive financing offers on all kinds of products. Jewelry is commonly purchased with vendor financing. Electronics are commonly purchased with vendor financing. Cars are usually purchased with vendor financing. It's true that such vendor financing may be technically offered through a separate corporate form, but I don't think a company created by a retailer in order to offer financing specifically and exclusively on that retailer's products really counts as a "different company" in any real sense.
- dillonmckay 7y ago
  It is an entirely separate legal entity, that shares no legal risk with the vendor. Ally came from GMAC, which GM created to finance automobiles.

by ponsin 7y ago

swagasaurus-rex 7y ago

This 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 ago

This 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 ago
Maybe 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.
lotsofpulp 7y ago
> 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." This was already known, but since simply providing taxpayer funded education results in increases of government expenses and hence higher taxes, we of course went with the Byzantine route of indebting people who don’t even know what amortization is to the tune of tens and hundreds of thousands of dollars.
- frockington1 7y ago
  I don't think its unrealistic for an 18 year old to understand debt. Also, how are they being tricked into hundreds of thousands of dollars of ? State schools start around 15k/year and provide bachelors degrees. I've never understood these stories of people graduating (non-PhD/Lawyer)with so much debt
  - kalleboo 7y ago
    > I don't think its unrealistic for an 18 year old to understand debt It really shouldn't be, but here we are. The proof is in the pudding. Their high school education has failed them, parental and job market pressures to have a degree has failed them. Just standing around and going "well they should have known" isn't going to solve anything. Eventually they're going to be a big enough voting bloc to pass something like debt relief (example: old people and unsustainable pensions) and who's going to be stuck holding the bag? Better to solve the problem as early as possible instead of just standing around blaming them and not fixing anything.
  - lotsofpulp 7y ago
    I didn't claim they were tricked, I think anyone that comes graduates high school should be able to understand amortizations and model cash flows in a spreadsheet so they now how much they need to earn to pay for their loans. But they don't. And neither do their parents. And a few clicks later, they are given $50k+/year to go to whatever "school" they want.
  - godelski 7y ago
    > how are they being tricked into hundreds of thousands of dollars of [debt] > state schools start around 15k/year and provide bachelors degrees. Problem 1: School is expensive 15k*4 = 60k (assuming you do 4 years and not the average time of 6 years). So we're pretty close to $100k of debt. That is just in-state tuition! But that's not the total cost of school. Berkeley[0] estimates about $30k/yr for a student. So that's 120k-180k of debt for a bachelors. Now double that if you're out of state. Problem 2: School is getting more expensive But there's another problem that's happening. Cost of tuition is skyrocketing. Let's look at Berkeley from 2003-2012[1]. In 2003 the cost was $4336 (adjusting for inflation today that's ~$6050). In 2012 the cost was $12,834 ($14,340 2019 dollars). Today it is $14,184. So in 20 years the price has about increased ~2.5x. This means that those cases of $100k+ debt are increasing not just in total number (because population increase) but as a percent of graduating students (we'll say Gaussian curve of debt distribution). Problem 3: In-State isn't always the best option Let's say we live in Washington (state) and want to go to school for computer science. The field is fairly competitive so the higher ranked school we go to yields likely a better education (one up to date with modern techniques, funding, and equipment) and more network connections. So we'll say that we want to get into a top 100 school. That actually only leaves us 2 schools: UW(#6) and WSU(#75). We graduated pretty well with a 3.9 and a 1400 on our SAT. That might not get us into UW ([3] says 33% chance we don't get in) because it is a (inter)nationally competitive school and we don't have really any extra curricular activities. So what do we do? Our scores are high enough to get into a top 20, worst case top 50. Do we go to WSU or go to a school with more resources and a higher chance of earning more in the future? And if you think this is a fictitious scenario, play around with the other school acceptances (website uses same naming pattern as usnews: e.g. University-Of-California--Berkeley), UW is one of the least competitive schools in the top 20. There's plenty of states with even larger gaps. There's plenty of states where we're more competitive than the top instate school. There's plenty of other reasons a student might want to go out of state, and plenty of reasons that might be the best option for them. Problem 4: Age We're also talking about 18 year olds, which aren't known for making the best decisions. I don't know about you, but when I was 18 I was an idiot. I'm still pretty dumb but I've learned a lot since then. And if you don't think you were an idiot at 18, I'm calling bs or that you're under 23 and just don't know it yet. [0] https://admissions.berkeley.edu/cost https://admissions.berkeley.edu/cost [1] https://4.bp.blogspot.com/-wswpT9L7QXs/UMjqxuIbttI/AAAAAAAAAOY/Vs9ye53Vk1o/s1600/university-of-california-berkeley-10-year-tuition-chart.png https://4.bp.blogspot.com/-wswpT9L7QXs/UMjqxuIbttI/AAAAAAAAA... [2] https://www.usnews.com/best-graduate-schools/top-science-schools/computer-science-rankings https://www.usnews.com/best-graduate-schools/top-science-sch... [3] https://www.prepscholar.com/sat/s/colleges/University-of-Washington-SAT-scores-GPA https://www.prepscholar.com/sat/s/colleges/University-of-Was...

rumanator 7y ago

> Why? Because education is not a luxury service that can be postponed or outright skipped, like lifestyle-tailored tourism, and education costs in the US have become a major societal and economical problem. > In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. That's a tautology, and entirely misses the point. The point is that student loans are a colossal problem for the US, not only economical but also societal, and the problem is caused by the disconnection between the vicious cycle that leads to hikes in cost and the consequences of complying with the requirements to have an education. Complaining that universities should not feel any consequence for the need to take massive loans they force onto their student body is like complaining that petrochemical companies should not feel any consequence for the need to decontaminate the environment.

ponsin 7y ago
"Education" is necessary up to a certain point. In America, up to highschool education is free and for the most part required. Why draw the line at a bachelors degree? Should Masters and PhDs be free and partially required? Based on how I framed the question I assume that you can tell that I draw the line at highschool education. I can however see the argument for raising it to bachelor's. However I would expect the government to do much more than just give free money. Rather they would regulate it like they do to highschool. For example, required courses in English literature, American history, PE, and science. Mandatory attendance. Nationwide standardized tests. And others ... I personally am glad that I finish all of that in highschool and I now have the freedom to choose what and how I study. But to respond to your point directly, degrees such as gender studies, art history, and English literature are certainly a luxury service that can be postponed or outright skipped.
- CathedralBorrow 7y ago
  > Based on how I framed the question I assume that you can tell that I draw the line at highschool education. I'm asking out of curiosity and not trying to make a point or win any argument: Why do you draw your line there? I wouldn't combine "free" and "partially required" though, as I don't see the need to conflate them. Where I live Masters and PhDs are free, but your required education is completed at age 15. Everything after that is completely optional, but free. as in no tuition, but there are some administrative fees and books you need to buy, etc.

joe_the_user 7y ago

If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. Aside from the other points, this isn't an honest of the overall situation of industries and credit. For example, The real estate industry and the car industry are highly focused on the buyer's ability to pay. The company might not be legally responsible for a buyer who defaults and it may a different company making the loan but the entire industry has to take a hit and they avoid taking those hits when they can (periodic easy-credit situations can distort this but still). Which is to say that the government giving student guaranteed credit for school certainly distorts things relative to other industries (even compared to housing, where the government is also involved heavily).

sokoloff 7y ago
In my experience, those two industries are highly focused on the buyer’s ability to qualify for the loan and much, much less concerned with the ability to pay the loan.

gambiting 7y ago

>>Why? If I take out a loan in order to go on a cruise, the cruise company is not responsible if I default. Imagine if everyone in the United States who wanted to go on a cruise was guaranteed to be given a loan to go on a cruise, regardless of the cost of said cruise or their personal circumstances. In that scenario, obviously cruise companies would increase prices, since their clients will always get the money to pay for them, and like you yourself said - it's not their responsibility whether people can pay it back or not. That's pretty much how higher education works.

dpau 7y ago
not only that, in this scenario society would expect and pressure all young people to go on a cruise before they were eligible to join society.
- linuxftw 7y ago
  Yeah, I wouldn't be in the same room as those dirty non-cruisers.
  - DuskStar 7y ago
    It's a cultural touchstone, the signal that you've come of age! How dare you suggest that 18 year olds not take out a loan for a 6-month luxury cruise, or that they compare prices for different ships! You go on the best ship that has space for you, everyone knows that!

thaumasiotes 7y ago

> In fact, with almost every purchase that involves a loan, the company offering the loan is different than the company offering the product / service. I suspect this isn't true. Amazon puts up some pretty intrusive financing offers on all kinds of products. Jewelry is commonly purchased with vendor financing. Electronics are commonly purchased with vendor financing. Cars are usually purchased with vendor financing. It's true that such vendor financing may be technically offered through a separate corporate form, but I don't think a company created by a retailer in order to offer financing specifically and exclusively on that retailer's products really counts as a "different company" in any real sense.

dillonmckay 7y ago
It is an entirely separate legal entity, that shares no legal risk with the vendor. Ally came from GMAC, which GM created to finance automobiles.