25 ms·

Subprime loans for college hiding in plain sight

161 points by lxm 4y ago

1vuio0pswjnm7 4y ago
https://web.archive.org/web/20220917134216if_/https://www.nytimes.com/2022/09/17/your-money/parent-plus-loans.html/ https://web.archive.org/web/20220917134216if_/https://www.ny...
debacle 4y ago
"If you default, the federal government helps itself to a chunk of your Social Security check." This, to me, is the buried lede. This is worse than payday lending, and it's being perpetrated by our government upon desperate parents.
- xwdv 4y ago
  I don’t know, given that social security will likely be totally bankrupt and unable to make payments in the future, this seems like a smart move to default early. Government won’t be able to take a chunk out of $0.
  - gamegoblin 4y ago
    Could you explain the mechanism by which social security would go bankrupt, given that it is just an institution of USG? And why does such a mechanism not apply to other large institutions such as the military?
    - alistairSH 4y ago
      It’s an old right wing trope. Fewer babies, fewer people paying into the system, eventual bankruptcy. Completely ignoring that we can just increase the tax.
      - junofan 4y ago
        You’re saying old people could vote themselves more money? Sure, in theory.
      - VictorPath 4y ago
        Also ignoring that social security payments as a percentage of GDP is not hitting some limit it has not over the past eight decades. The US was able to pay out social security in 1942 with a much smaller economy, there is no reason it should be unable to in the future. Some groups have been complaining about social security for eighty years - probably because it is the one benefit the average worker gets back from the federal government.
        rayiner 4y ago
        Social security expenditures will grow from 4% of gdp to 6% of gdp from 2000-2035. By 2035 Medicare will grow to 8% of GDP. So in a bit over a decade, one out of every six dollars produced in the economy will be going to take care of retired people.
        VictorPath 4y ago
        Social security was a higher percentage of gdp in the early 1980s than it is now. Even if it goes back up it is to a level it was at before. People can come to different estimates about what future gdp growth rates will be and have different estimated. All health care costs in the US are going up. The US government has to pay HMO corporation profits, Americans have to pay higher drug prices unlike other countries. The government can continue paying current Medicare rates, or it can hand more money to health companies if it wants to. As the government is still handing extra money to health companies apparently no one thinks it is a problem as of yet.
      - spiderice 4y ago
        I wouldn't call it a trope if the "solution" is "just increase the tax". That's exactly what many many people want to avoid. Just because you don't see an issue with raising taxes, doesn't mean people aren't justified in wanting to avoid it.
    - gbear605 4y ago
      Social security, unlike all the rest of the US Government welfare programs, draws from a separate trust. It currently has roughly $3 trillion in the trust. When you pay income tax, there’s a portion (usually noted on the paystub) that goes directly to the trust. If they continue current payments, the income of everyone stays the same, and the tax percentage stays the same, then it will run out of funds after a while (currently predicted to be 2035). However, I would bet pretty strongly that one of those constraints won’t hold - probably the amount paid out to each person will be lowered, although the tax percentage could also increase.
      - eek2121 4y ago
        xapata 4y ago
        One solution is to invite more immigration to balance the falling birth rate. More workers means more tax revenue.
        bdcravens 4y ago
        Or raise taxes. This could take the form of raising the percentage, or increase the yearly cap, so that high earners contribute more.
        whoooooo123 4y ago
        Immigrants get old too.
        xapata 4y ago
        The USA has plenty of land and food. We can invite more immigrants for a long time. https://www.penguinrandomhouse.com/books/636499/one-billion-americans-by-matthew-yglesias/ https://www.penguinrandomhouse.com/books/636499/one-billion-...
        alistairSH 4y ago
    - voodootrucker 4y ago
      Because the military doesn't have any assets to speak of. It's a government program funded each year by taxes. The social security program is separate from the federal budget [0], and that's why you see it as a separate tax on your paycheck (if you're American). Every dollar you pay into it, goes into a trust fund, whose sole asset is US Government bonds. Social security can go bankrupt if the US defaults on it's debt, which although almost unthinkable (see Russia as a recent example of paying bonds despite being under heavy sanctions, and having to pay them in another currency) comes up every few years [1]. [0] https://www.reuters.com/article/us-column-miller-socialsecurity/social-security-and-the-u-s-deficit-separating-fact-from-fiction-idUSKCN1N64GR https://www.reuters.com/article/us-column-miller-socialsecur... [1] https://www.cnbc.com/2021/12/16/biden-signs-debt-ceiling-increase-preventing-first-ever-us-default.html https://www.cnbc.com/2021/12/16/biden-signs-debt-ceiling-inc...
  - alistairSH 4y ago
    Social Security only goes bankrupt if we fail to fund it.
    - deleted 4y ago
      [deleted]
  - javagram 4y ago
    Under current laws of social security “defaults” it will still pay out something like 70-80% of authorized benefits. There is no reason to believe it will ever be 0% as the benefits are paid out of taxes that are continually collected from current workers.
    - AngryData 4y ago
      The only reason to believe it will still exist in the future is because people believe it should exist and should pay out from the government pocket even if it technically doesn't have the money. The problem is many millennials and Gen Z have already given up on social security, do not believe in it in the future, and will not vote to keep a dead or dieing SS program alive when they themselves had abandoned it long ago. And once they hit critical mass the SS can actually die without voters to backup it up and along with it all the terrible old precedences of that program will disappear. That will leave a huge hole for retirement funds, but it also means a new program can be implimented into its place, something like a basic income that has become more popular or just another social security model that has different specifics and rules. Current social security is relying heavily on population rising or at the least not falling, but even that is very questionable at this point and could end up being the nails in its coffin.
      - infamouscow 4y ago
        > The problem is many millennials and Gen Z have already given up on social security, do not believe in it in the future, and will not vote to keep a dead or dieing SS program alive when they themselves had abandoned it long ago. Good. Let's be brutally honest and ask who's really to blame for this.
        pessimizer 4y ago
        All the people who say that Social Security is in danger usually then elaborately explain that it's in danger because they themselves are going to try their best to dismantle and defund it.
  - bdcravens 4y ago
    Bankruptcy doesn't always mean complete dissolution. Typically the obligations are altered to ensure continued existence, especially when there is continued revenue coming in.
  - trashtester 4y ago
    If they modify the COLA, they can let inflation take care of the social security bomb. I'm guessing they will adjust this next year, due to the elections this year.
bradleyjg 4y ago
My understanding is that the new income driven repayment rules include parent plus loans via the double consolidation loophole. https://www.studentloanplanner.com/parent-plus-double-consolidation/ https://www.studentloanplanner.com/parent-plus-double-consol...
- runnerup 4y ago
  When baby boomers were getting these same degrees they mostly led to well-paying middle management careers. There was a transition stretching across Gen X and Millennials where degrees like "social work" steadily lost value as supply of these degrees gradually outpaced demand, and wages slowly stagnated. Gen Z seems to be much, much more aware of this issue and as a result the number of STEM majors in colleges have exploded. Although it does also seem like the rigor has gone down acutely. I'm getting my second bachelors in Computer Science now, my first was in Chemical Engineering 12 years earlier. The amount of rampant cheating and seeming inability for the schools to "fail" a student is completely foreign to me compared to my first degree, which took me 8 years to achieve across three schools, so I definitely got a somewhat decent sample of school cultures.
  - catgary 4y ago
    > There was a transition stretching across Gen X and Millennials where degrees like "social work" steadily lost value as supply of these degrees gradually outpaced demand, and wages slowly stagnated. Isn’t the US in the middle of multiple drug crises (opioids, meth) and a mental health crisis?
    - ianbutler 4y ago
      My father worked in addictions counseling and basically it pays nothing, is rampant with corruption, power tripping and general toxicity. So while the US does have these problems, unless you find it to be your calling to help folks like my father did in the second half of his career, the majority of competent people will steer well clear of these types of fields. It leaves a particular set of people behind, abusers and people who will be abused. My father is a good man and generally fell into that second category so as soon as he hit retirement age he got out.
aortega 4y ago
The defaulted loans are not for STEM careers, that have little trouble paying back, the problem is in humanities, arts, etc. colleges offered useless degrees to people that do not need them except for vanity, without any plan about how to pay for them. This is one of the biggest scams in history.
- xapata 4y ago
  Yet, we shouldn't abandon humanities education.
  - rayiner 4y ago
    We don’t have to abandon it. But we don’t need to subsidize it with public funding.
    - analog31 4y ago
      Choosing which degrees to support faces all of the problems of central planning. One problem is that if colleges are told to create more STEM degrees than the number of students who are already capable of studying for those degrees, it will encourage the creation of empty "STEM" degrees like "bachelor of arts in information studies" that are even more useless than an English major because everybody will know why those degree were created. It also creates boom-and-bust cycles. I graduated with a degree in physics, just as the Cold War collapsed and mandatory retirement for professors was outlawed. There was an absolute glut of physicists all looking for jobs at once.
      - rayiner 4y ago
        When you’re talking about public subsidization, you have to engage in central planning.
        JamesBarney 4y ago
        Or at least should engage in central planning. If you're spending billions of dollars, maybe a little planning is a good thing, even if it's centralized.
forrestthewoods 4y ago
The federal government needs to get out of the college loan business. The government needs to either pay for college (like they do for K-12) or GTFO out. The problem with college is it's too expensive. The government has done nothing to make it cheaper. Their backing and forgiveness of student loans only makes it more expensive. It's infuriating. All the government needs to do is literally nothing. Just get out of the way!
- armada651 4y ago
  The problem with doing nothing is that college defaults to a system where it is simply not affordable for a significant section of the population. The system in the US is for sure flawed, but doing nothing and letting the market decide will not solve the social equity problem either.
  - mixmastamyk 4y ago
    The solution given is to create cheap public universities, not do nothing. It would bring prices down instead of up... which is what doling out pallets of money does.
- ClumsyPilot 4y ago
  > All the government needs to do is literally nothing. Just get out of the way! If the government gets out of the way everywhere, the class system and caste system will be back withing 3 months People think free market capitalism is the natural - thats just propaganda. Feudalism is natural, thats why it existed for 10 thousand years.
  - forrestthewoods 4y ago
    It's a good thing I didn't propose they get out of the way everywhere. I also suggested the government could simply pay for college directly. The loan model is the worst of both worlds.
    - pessimizer 4y ago
endisneigh 4y ago
main issue with education is that the cost of education is not commiserate with the income potential. for those looking just to learn for learnings sake, there's community college. for the majority who do it for income reasons, ideally it would be designed to not take you more than say, 8 years to pay off, given the median income for the major and area. this alone would resolve most of the issues. there is value in someone majoring in English. issue is the median English major, given their inclinations are unlikely to make as much as the median, say, Economics major, in a given area. these disparities would ideally and should be reflected in the cost. the result would be: 1. when you apply to college you should apply to a major and that should be part of your application 2. different majors should cost different amounts of money 3. acceptance rates should differ based on major 4. classes of different types should cost different amounts of money beyond some gratuity (say, 8 classes).
- tsujamin 4y ago
  (this sounds like undergraduate university programs in australia…)
- analog31 4y ago
  There are already separate acceptance requirements for STEM majors based on things like the math prerequisites and minimum GPA requirements. At the university near my house, you need at least a "B" average on your freshman transcript to be accepted into the College of Engineering. Many of the engineering and medical courses have extra fees on top of tuition. Also, the parents of these kids have already paid more by living in school districts with high property valuations, that can provide the necessary preparatory coursework. A not insignificant number of college students have no hope of majoring in STEM even if all of the economics are screaming at them, which they are.
  - endisneigh 4y ago
    The fees you’re describing are not really proportional with the median pay difference, which is more or less my point. The acceptance difference isn’t really that great, either. Not sure what property valuations have to do with anything. For example at all of the ivy leagues there’s no significant difference in tuition for major nor is there really a substantial difference in acceptance rate. Some, like Columbia have different schools, but even within them majors, and prospects, differ.
6stringmerc 4y ago
Student Loans in the US are but another generational wealth transfer where the Baby Boomers spent more than they had, mortgaged their present and future, then decided to make the next generations financially indentured servants. Nobody under 40 came up with this godforsaken system.
- christophilus 4y ago
  Student loans are a good example of second-order effects. The way the system is constructed, you are almost guaranteed a bubble-like ratcheting of prices even though that wasn’t the direct goal of the responsible policies.
jschveibinz 4y ago
This is your uncle giving you some advice… Community college is the answer regardless of what your degree aspirations are. You will end up saving half of not more of the tuition and boarding expenses compared to spending all four years at a major university, and you get excellent instructors at the most critical time of higher education. Instructors at major universities for 100-200 classes are usually assistants, not professionals. And you STILL end up with a diploma from a Major university. You like football games? Put on team colors and pay for a ticket. Most big schools make you pay now, anyway. You want to go to parties? Then take a year off and have a blast. Get it out of your system. Then go to school. Here is a link to the list of community colleges in the US: http://www.applyingtoschool.com/forms/ComCol-State.aspx http://www.applyingtoschool.com/forms/ComCol-State.aspx
- the_jeremy 4y ago
  It is significantly easier to make friends being an incoming freshmen in the dorms, as everyone else in your cohort also has no friends and is always around. If you're outgoing, this isn't much of a problem, but as a sophomore transfer student who never lived on campus, I struggled with this pretty heavily. It's probably not worth >$10k between tuition / room and board to be able to make friends easily, but there is a downside. (I transferred from another university, not from community college, so I do have a point of comparison.)
- deleted 4y ago
  [deleted]
- hcks 4y ago
  I would qualify this type of online comment as infohazard. If you have ambition and have the potential to get into a nice school, then going to community college is ackin to shooting yourself in the foot. Sure, you can still have a nice career afterwards, but you're cutting yourself from many more opportunities you would have had otherwise. "excellent instructors" depends purely on luck wherever you end up to, and pretending they are automatically better in CC is deception. Most importantly, how bright are your classmates is the #1 thing that drives higher achievement in my experience, as the learning material is all over the internet anyway. I would like to add that in the sort of signalling game that higher education is, making "rational" bets such as "taking a year to get partying out of your system" is very much inferior to just doing what is deemed socially acceptable (which is partying while in college).
lordnacho 4y ago
Seems to me that intermediation is the problem, though I'm not sure if I understand the US system very well. Imagine if you couldn't get a loan from a third party, where the university lets you owe it the fees, but you cannot borrow the money from some student loans company or the government. Then the university would figure out which people it thought would be likely to pay back the money, and which are perhaps worthwhile to fund without monetary reward. And the uni would be well placed to make such decisions. If the money comes from a third party, the uni gets the money regardless and doesn't need to care. The lender can't be defaulted on, and so they don't care either.
- phkahler 4y ago
  >> If the money comes from a third party, the uni gets the money regardless and doesn't need to care. The lender can't be defaulted on, and so they don't care either. This is exactly the problem. The government guarantees "student loans" made by 3rd parties. Tuition costs have seen huge inflation over the last 25 years, second only to medical costs in the U.S. I also don't think students realize simple things like... Since money is fungible, that $5 coffee is also being paid for by the loan. They're really borrowing to pay for their lifestyle as well and don't think about that.
  - lotsofpulp 4y ago
    > The government guarantees "student loans" made by 3rd parties. Not since 2010. https://en.wikipedia.org/wiki/Health_Care_and_Education_Reconciliation_Act_of_2010 https://en.wikipedia.org/wiki/Health_Care_and_Education_Reco...
    - pclmulqdq 4y ago
      The US government now just gives out student loans. It's functionally equivalent from the student's perspective.
    - phkahler 4y ago
      Oh thanks! I didn't know about that.
exabrial 4y ago
Extending $100k to an 18 year old in general ought to be rethought.
- Spivak 4y ago
  Extending a 400k mortgage to a 27 year old should also be rethought. Jesus people, if you’re argument is that “but mortgages have collateral” then at least address why 20% of someone’s discretionary income over 20 years for federal loans or your lifetime income via non-dischargeability for private loans doesn’t count. I don’t give two shits about the financial solvency of the lender, if you have to repo the house the system has failed. Throwing a massive amount of money to someone who’s probably on their second big boy job ever betting 15/30 years of income stability to pay it off is insane.
  - wodenokoto 4y ago
    If you think the house will appreciate and you have the money, I think it’s fine to extent the loan as long as you’re willing to take the risk on the appreciation you don’t really even need to risk assess the 27 year old.
    - Retric 4y ago
      Transaction costs offset significant appreciation in the short term. This makes such loans surprisingly risky even if homes are appreciating.
    - SOLAR_FIELDS 4y ago
      Right - this is fundamentally different than the education argument - the house is a tangible asset that can be repossessed. The education is not.
      - deleted 4y ago
        [deleted]
    - Spivak 4y ago
parkingrift 4y ago
No mention of regulating public universities. Infinite divisive racial rhetoric and handwringing. Shocking. The federal government should use the power of the purse. A public school can only receive public funds if tuition and fees for US residents is $5,000 per year or less for 30 credit hours. Additionally, private schools should not be eligible for public funds at all. Or, if people are just way too upset about this, private schools are eligible for a max of $5,000 per student per year. There, I’ve solved the actual problem of infinite runaway costs.
- kube-system 4y ago
  The flip side is that these loans exist because the constituency wanted poor students to be able to go to any school they wanted.
  - parkingrift 4y ago
    That's fine. With caps on public university tuition and fees poor students would be able to attend any public school they wanted. There is no need to even consider whether private schools are affordable. The public should not directly fund private schools in any way at all.
LatteLazy 4y ago
Loans are a terrible way to fund education. They combine all the worst elements including: * Massive Inflation * Misappropriation of funds and miss selling of the overall product * Regressive taxation * Short termism * High costs to the state and students, low funding for institutions It's just a huge mess and a terrible system for everyone.
ur-whale 4y ago
https://archive.ph/FG2j9 https://archive.ph/FG2j9
elashri 4y ago
I always wonder why it is so hard in US to make high education free by default. Or at least very small fee like other countries in EU. The US government and states are paying for universities (directly or indirectly) and it might be even cheaper to just make it free/subsidized. Correct me if my assumption is wrong
- lotsofpulp 4y ago
  It would be cheaper long term across the whole tax base, but it is cheaper in the short term to give out loans. If you proposed funding colleges with taxpayer funds and reducing tuition costs, it gets reflected in the budget today, and you get attacked for causing higher taxes. If you proposed giving out loans, then you can even sell it as lowering taxes because the government now owns an asset that will earn a return. Same story with deferred compensation like pensions and retire healthcare for government employees. Reduce cash expense now, fudge the numbers for future expenses to make it seem less expensive, promise lower taxes, and win elections. The current voters will mostly only care about today’s costs.
- junofan 4y ago
  We have community college. It’s just a different set of tradeoffs. Having attended both, I found EU schools aren’t directly comparable to US schools.
rel2thr 4y ago
The article ignores the recent Biden admin student loan forgiveness plan You only have to pay 5% of your disposable income to your student debt. These parents with parent plus loans are going to be fine with that In fact that’s a loophole that some are talking about that by will make college very cheap for middle class parents at the right life stage. Parents take out a big loan for their kids and then retire so their income becomes very low and the 5% payment becomes almost nothing and then after 10-20 years the remaining balance is totally forgiven
- gnicholas 4y ago
  What happens when a different administration rolls back this new rule?

161 points by lxm 4y ago

https://web.archive.org/web/20220917134216if_/https://www.nytimes.com/2022/09/17/your-money/parent-plus-loans.html/ https://web.archive.org/web/20220917134216if_/https://www.ny...

debacle 4y ago

"If you default, the federal government helps itself to a chunk of your Social Security check." This, to me, is the buried lede. This is worse than payday lending, and it's being perpetrated by our government upon desperate parents.

xwdv 4y ago
I don’t know, given that social security will likely be totally bankrupt and unable to make payments in the future, this seems like a smart move to default early. Government won’t be able to take a chunk out of $0.
- gamegoblin 4y ago
  Could you explain the mechanism by which social security would go bankrupt, given that it is just an institution of USG? And why does such a mechanism not apply to other large institutions such as the military?
  - alistairSH 4y ago
    It’s an old right wing trope. Fewer babies, fewer people paying into the system, eventual bankruptcy. Completely ignoring that we can just increase the tax.
    - junofan 4y ago
      You’re saying old people could vote themselves more money? Sure, in theory.
    - VictorPath 4y ago
      Also ignoring that social security payments as a percentage of GDP is not hitting some limit it has not over the past eight decades. The US was able to pay out social security in 1942 with a much smaller economy, there is no reason it should be unable to in the future. Some groups have been complaining about social security for eighty years - probably because it is the one benefit the average worker gets back from the federal government.
      - rayiner 4y ago
        Social security expenditures will grow from 4% of gdp to 6% of gdp from 2000-2035. By 2035 Medicare will grow to 8% of GDP. So in a bit over a decade, one out of every six dollars produced in the economy will be going to take care of retired people.
        VictorPath 4y ago
        Social security was a higher percentage of gdp in the early 1980s than it is now. Even if it goes back up it is to a level it was at before. People can come to different estimates about what future gdp growth rates will be and have different estimated. All health care costs in the US are going up. The US government has to pay HMO corporation profits, Americans have to pay higher drug prices unlike other countries. The government can continue paying current Medicare rates, or it can hand more money to health companies if it wants to. As the government is still handing extra money to health companies apparently no one thinks it is a problem as of yet.
    - spiderice 4y ago
      I wouldn't call it a trope if the "solution" is "just increase the tax". That's exactly what many many people want to avoid. Just because you don't see an issue with raising taxes, doesn't mean people aren't justified in wanting to avoid it.
  - gbear605 4y ago
    Social security, unlike all the rest of the US Government welfare programs, draws from a separate trust. It currently has roughly $3 trillion in the trust. When you pay income tax, there’s a portion (usually noted on the paystub) that goes directly to the trust. If they continue current payments, the income of everyone stays the same, and the tax percentage stays the same, then it will run out of funds after a while (currently predicted to be 2035). However, I would bet pretty strongly that one of those constraints won’t hold - probably the amount paid out to each person will be lowered, although the tax percentage could also increase.
    - eek2121 4y ago
      - xapata 4y ago
        One solution is to invite more immigration to balance the falling birth rate. More workers means more tax revenue.
        bdcravens 4y ago
        Or raise taxes. This could take the form of raising the percentage, or increase the yearly cap, so that high earners contribute more.
        whoooooo123 4y ago
        Immigrants get old too.
        xapata 4y ago
        The USA has plenty of land and food. We can invite more immigrants for a long time. https://www.penguinrandomhouse.com/books/636499/one-billion-americans-by-matthew-yglesias/ https://www.penguinrandomhouse.com/books/636499/one-billion-...
        alistairSH 4y ago
  - voodootrucker 4y ago
    Because the military doesn't have any assets to speak of. It's a government program funded each year by taxes. The social security program is separate from the federal budget [0], and that's why you see it as a separate tax on your paycheck (if you're American). Every dollar you pay into it, goes into a trust fund, whose sole asset is US Government bonds. Social security can go bankrupt if the US defaults on it's debt, which although almost unthinkable (see Russia as a recent example of paying bonds despite being under heavy sanctions, and having to pay them in another currency) comes up every few years [1]. [0] https://www.reuters.com/article/us-column-miller-socialsecurity/social-security-and-the-u-s-deficit-separating-fact-from-fiction-idUSKCN1N64GR https://www.reuters.com/article/us-column-miller-socialsecur... [1] https://www.cnbc.com/2021/12/16/biden-signs-debt-ceiling-increase-preventing-first-ever-us-default.html https://www.cnbc.com/2021/12/16/biden-signs-debt-ceiling-inc...
- alistairSH 4y ago
  Social Security only goes bankrupt if we fail to fund it.
  - deleted 4y ago
    [deleted]
- javagram 4y ago
  Under current laws of social security “defaults” it will still pay out something like 70-80% of authorized benefits. There is no reason to believe it will ever be 0% as the benefits are paid out of taxes that are continually collected from current workers.
  - AngryData 4y ago
    The only reason to believe it will still exist in the future is because people believe it should exist and should pay out from the government pocket even if it technically doesn't have the money. The problem is many millennials and Gen Z have already given up on social security, do not believe in it in the future, and will not vote to keep a dead or dieing SS program alive when they themselves had abandoned it long ago. And once they hit critical mass the SS can actually die without voters to backup it up and along with it all the terrible old precedences of that program will disappear. That will leave a huge hole for retirement funds, but it also means a new program can be implimented into its place, something like a basic income that has become more popular or just another social security model that has different specifics and rules. Current social security is relying heavily on population rising or at the least not falling, but even that is very questionable at this point and could end up being the nails in its coffin.
    - infamouscow 4y ago
      > The problem is many millennials and Gen Z have already given up on social security, do not believe in it in the future, and will not vote to keep a dead or dieing SS program alive when they themselves had abandoned it long ago. Good. Let's be brutally honest and ask who's really to blame for this.
      - pessimizer 4y ago
        All the people who say that Social Security is in danger usually then elaborately explain that it's in danger because they themselves are going to try their best to dismantle and defund it.
- bdcravens 4y ago
  Bankruptcy doesn't always mean complete dissolution. Typically the obligations are altered to ensure continued existence, especially when there is continued revenue coming in.
- trashtester 4y ago
  If they modify the COLA, they can let inflation take care of the social security bomb. I'm guessing they will adjust this next year, due to the elections this year.

bradleyjg 4y ago

My understanding is that the new income driven repayment rules include parent plus loans via the double consolidation loophole. https://www.studentloanplanner.com/parent-plus-double-consolidation/ https://www.studentloanplanner.com/parent-plus-double-consol...

runnerup 4y ago
When baby boomers were getting these same degrees they mostly led to well-paying middle management careers. There was a transition stretching across Gen X and Millennials where degrees like "social work" steadily lost value as supply of these degrees gradually outpaced demand, and wages slowly stagnated. Gen Z seems to be much, much more aware of this issue and as a result the number of STEM majors in colleges have exploded. Although it does also seem like the rigor has gone down acutely. I'm getting my second bachelors in Computer Science now, my first was in Chemical Engineering 12 years earlier. The amount of rampant cheating and seeming inability for the schools to "fail" a student is completely foreign to me compared to my first degree, which took me 8 years to achieve across three schools, so I definitely got a somewhat decent sample of school cultures.
- catgary 4y ago
  > There was a transition stretching across Gen X and Millennials where degrees like "social work" steadily lost value as supply of these degrees gradually outpaced demand, and wages slowly stagnated. Isn’t the US in the middle of multiple drug crises (opioids, meth) and a mental health crisis?
  - ianbutler 4y ago
    My father worked in addictions counseling and basically it pays nothing, is rampant with corruption, power tripping and general toxicity. So while the US does have these problems, unless you find it to be your calling to help folks like my father did in the second half of his career, the majority of competent people will steer well clear of these types of fields. It leaves a particular set of people behind, abusers and people who will be abused. My father is a good man and generally fell into that second category so as soon as he hit retirement age he got out.

aortega 4y ago

The defaulted loans are not for STEM careers, that have little trouble paying back, the problem is in humanities, arts, etc. colleges offered useless degrees to people that do not need them except for vanity, without any plan about how to pay for them. This is one of the biggest scams in history.

xapata 4y ago
Yet, we shouldn't abandon humanities education.
- rayiner 4y ago
  We don’t have to abandon it. But we don’t need to subsidize it with public funding.
  - analog31 4y ago
    Choosing which degrees to support faces all of the problems of central planning. One problem is that if colleges are told to create more STEM degrees than the number of students who are already capable of studying for those degrees, it will encourage the creation of empty "STEM" degrees like "bachelor of arts in information studies" that are even more useless than an English major because everybody will know why those degree were created. It also creates boom-and-bust cycles. I graduated with a degree in physics, just as the Cold War collapsed and mandatory retirement for professors was outlawed. There was an absolute glut of physicists all looking for jobs at once.
    - rayiner 4y ago
      When you’re talking about public subsidization, you have to engage in central planning.
      - JamesBarney 4y ago
        Or at least should engage in central planning. If you're spending billions of dollars, maybe a little planning is a good thing, even if it's centralized.

forrestthewoods 4y ago

The federal government needs to get out of the college loan business. The government needs to either pay for college (like they do for K-12) or GTFO out. The problem with college is it's too expensive. The government has done nothing to make it cheaper. Their backing and forgiveness of student loans only makes it more expensive. It's infuriating. All the government needs to do is literally nothing. Just get out of the way!

armada651 4y ago
The problem with doing nothing is that college defaults to a system where it is simply not affordable for a significant section of the population. The system in the US is for sure flawed, but doing nothing and letting the market decide will not solve the social equity problem either.
- mixmastamyk 4y ago
  The solution given is to create cheap public universities, not do nothing. It would bring prices down instead of up... which is what doling out pallets of money does.
ClumsyPilot 4y ago
> All the government needs to do is literally nothing. Just get out of the way! If the government gets out of the way everywhere, the class system and caste system will be back withing 3 months People think free market capitalism is the natural - thats just propaganda. Feudalism is natural, thats why it existed for 10 thousand years.
- forrestthewoods 4y ago
  It's a good thing I didn't propose they get out of the way everywhere. I also suggested the government could simply pay for college directly. The loan model is the worst of both worlds.
  - pessimizer 4y ago

endisneigh 4y ago

main issue with education is that the cost of education is not commiserate with the income potential. for those looking just to learn for learnings sake, there's community college. for the majority who do it for income reasons, ideally it would be designed to not take you more than say, 8 years to pay off, given the median income for the major and area. this alone would resolve most of the issues. there is value in someone majoring in English. issue is the median English major, given their inclinations are unlikely to make as much as the median, say, Economics major, in a given area. these disparities would ideally and should be reflected in the cost. the result would be: 1. when you apply to college you should apply to a major and that should be part of your application 2. different majors should cost different amounts of money 3. acceptance rates should differ based on major 4. classes of different types should cost different amounts of money beyond some gratuity (say, 8 classes).

tsujamin 4y ago
(this sounds like undergraduate university programs in australia…)
analog31 4y ago
There are already separate acceptance requirements for STEM majors based on things like the math prerequisites and minimum GPA requirements. At the university near my house, you need at least a "B" average on your freshman transcript to be accepted into the College of Engineering. Many of the engineering and medical courses have extra fees on top of tuition. Also, the parents of these kids have already paid more by living in school districts with high property valuations, that can provide the necessary preparatory coursework. A not insignificant number of college students have no hope of majoring in STEM even if all of the economics are screaming at them, which they are.
- endisneigh 4y ago
  The fees you’re describing are not really proportional with the median pay difference, which is more or less my point. The acceptance difference isn’t really that great, either. Not sure what property valuations have to do with anything. For example at all of the ivy leagues there’s no significant difference in tuition for major nor is there really a substantial difference in acceptance rate. Some, like Columbia have different schools, but even within them majors, and prospects, differ.

6stringmerc 4y ago

Student Loans in the US are but another generational wealth transfer where the Baby Boomers spent more than they had, mortgaged their present and future, then decided to make the next generations financially indentured servants. Nobody under 40 came up with this godforsaken system.

christophilus 4y ago
Student loans are a good example of second-order effects. The way the system is constructed, you are almost guaranteed a bubble-like ratcheting of prices even though that wasn’t the direct goal of the responsible policies.

jschveibinz 4y ago

This is your uncle giving you some advice… Community college is the answer regardless of what your degree aspirations are. You will end up saving half of not more of the tuition and boarding expenses compared to spending all four years at a major university, and you get excellent instructors at the most critical time of higher education. Instructors at major universities for 100-200 classes are usually assistants, not professionals. And you STILL end up with a diploma from a Major university. You like football games? Put on team colors and pay for a ticket. Most big schools make you pay now, anyway. You want to go to parties? Then take a year off and have a blast. Get it out of your system. Then go to school. Here is a link to the list of community colleges in the US: http://www.applyingtoschool.com/forms/ComCol-State.aspx http://www.applyingtoschool.com/forms/ComCol-State.aspx

the_jeremy 4y ago
It is significantly easier to make friends being an incoming freshmen in the dorms, as everyone else in your cohort also has no friends and is always around. If you're outgoing, this isn't much of a problem, but as a sophomore transfer student who never lived on campus, I struggled with this pretty heavily. It's probably not worth >$10k between tuition / room and board to be able to make friends easily, but there is a downside. (I transferred from another university, not from community college, so I do have a point of comparison.)
deleted 4y ago
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hcks 4y ago
I would qualify this type of online comment as infohazard. If you have ambition and have the potential to get into a nice school, then going to community college is ackin to shooting yourself in the foot. Sure, you can still have a nice career afterwards, but you're cutting yourself from many more opportunities you would have had otherwise. "excellent instructors" depends purely on luck wherever you end up to, and pretending they are automatically better in CC is deception. Most importantly, how bright are your classmates is the #1 thing that drives higher achievement in my experience, as the learning material is all over the internet anyway. I would like to add that in the sort of signalling game that higher education is, making "rational" bets such as "taking a year to get partying out of your system" is very much inferior to just doing what is deemed socially acceptable (which is partying while in college).

lordnacho 4y ago

Seems to me that intermediation is the problem, though I'm not sure if I understand the US system very well. Imagine if you couldn't get a loan from a third party, where the university lets you owe it the fees, but you cannot borrow the money from some student loans company or the government. Then the university would figure out which people it thought would be likely to pay back the money, and which are perhaps worthwhile to fund without monetary reward. And the uni would be well placed to make such decisions. If the money comes from a third party, the uni gets the money regardless and doesn't need to care. The lender can't be defaulted on, and so they don't care either.

phkahler 4y ago
>> If the money comes from a third party, the uni gets the money regardless and doesn't need to care. The lender can't be defaulted on, and so they don't care either. This is exactly the problem. The government guarantees "student loans" made by 3rd parties. Tuition costs have seen huge inflation over the last 25 years, second only to medical costs in the U.S. I also don't think students realize simple things like... Since money is fungible, that $5 coffee is also being paid for by the loan. They're really borrowing to pay for their lifestyle as well and don't think about that.
- lotsofpulp 4y ago
  > The government guarantees "student loans" made by 3rd parties. Not since 2010. https://en.wikipedia.org/wiki/Health_Care_and_Education_Reconciliation_Act_of_2010 https://en.wikipedia.org/wiki/Health_Care_and_Education_Reco...
  - pclmulqdq 4y ago
    The US government now just gives out student loans. It's functionally equivalent from the student's perspective.
  - phkahler 4y ago
    Oh thanks! I didn't know about that.

exabrial 4y ago

Extending $100k to an 18 year old in general ought to be rethought.

Spivak 4y ago
Extending a 400k mortgage to a 27 year old should also be rethought. Jesus people, if you’re argument is that “but mortgages have collateral” then at least address why 20% of someone’s discretionary income over 20 years for federal loans or your lifetime income via non-dischargeability for private loans doesn’t count. I don’t give two shits about the financial solvency of the lender, if you have to repo the house the system has failed. Throwing a massive amount of money to someone who’s probably on their second big boy job ever betting 15/30 years of income stability to pay it off is insane.
- wodenokoto 4y ago
  If you think the house will appreciate and you have the money, I think it’s fine to extent the loan as long as you’re willing to take the risk on the appreciation you don’t really even need to risk assess the 27 year old.
  - Retric 4y ago
    Transaction costs offset significant appreciation in the short term. This makes such loans surprisingly risky even if homes are appreciating.
  - SOLAR_FIELDS 4y ago
    Right - this is fundamentally different than the education argument - the house is a tangible asset that can be repossessed. The education is not.
    - deleted 4y ago
      [deleted]
  - Spivak 4y ago

parkingrift 4y ago

No mention of regulating public universities. Infinite divisive racial rhetoric and handwringing. Shocking. The federal government should use the power of the purse. A public school can only receive public funds if tuition and fees for US residents is $5,000 per year or less for 30 credit hours. Additionally, private schools should not be eligible for public funds at all. Or, if people are just way too upset about this, private schools are eligible for a max of $5,000 per student per year. There, I’ve solved the actual problem of infinite runaway costs.

kube-system 4y ago
The flip side is that these loans exist because the constituency wanted poor students to be able to go to any school they wanted.
- parkingrift 4y ago
  That's fine. With caps on public university tuition and fees poor students would be able to attend any public school they wanted. There is no need to even consider whether private schools are affordable. The public should not directly fund private schools in any way at all.

LatteLazy 4y ago

Loans are a terrible way to fund education. They combine all the worst elements including: * Massive Inflation * Misappropriation of funds and miss selling of the overall product * Regressive taxation * Short termism * High costs to the state and students, low funding for institutions It's just a huge mess and a terrible system for everyone.

ur-whale 4y ago

https://archive.ph/FG2j9 https://archive.ph/FG2j9

elashri 4y ago

I always wonder why it is so hard in US to make high education free by default. Or at least very small fee like other countries in EU. The US government and states are paying for universities (directly or indirectly) and it might be even cheaper to just make it free/subsidized. Correct me if my assumption is wrong

lotsofpulp 4y ago
It would be cheaper long term across the whole tax base, but it is cheaper in the short term to give out loans. If you proposed funding colleges with taxpayer funds and reducing tuition costs, it gets reflected in the budget today, and you get attacked for causing higher taxes. If you proposed giving out loans, then you can even sell it as lowering taxes because the government now owns an asset that will earn a return. Same story with deferred compensation like pensions and retire healthcare for government employees. Reduce cash expense now, fudge the numbers for future expenses to make it seem less expensive, promise lower taxes, and win elections. The current voters will mostly only care about today’s costs.
junofan 4y ago
We have community college. It’s just a different set of tradeoffs. Having attended both, I found EU schools aren’t directly comparable to US schools.

rel2thr 4y ago

The article ignores the recent Biden admin student loan forgiveness plan You only have to pay 5% of your disposable income to your student debt. These parents with parent plus loans are going to be fine with that In fact that’s a loophole that some are talking about that by will make college very cheap for middle class parents at the right life stage. Parents take out a big loan for their kids and then retire so their income becomes very low and the 5% payment becomes almost nothing and then after 10-20 years the remaining balance is totally forgiven

gnicholas 4y ago
What happens when a different administration rolls back this new rule?