7 ms·

I agree. Loans aren't at the root of the problem, but they're also a bad solution. An even worse solution is getting rid of loans. The only solution worse than

I agree. Loans aren't at the root of the problem, but they're also a bad solution. An even worse solution is getting rid of loans. The only solution worse than that? Blaming students. This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. I'm not going to be the one that screws an entire generation out of a worthwhile education in the name of "loans are bad!"

twoodfin 13y ago
This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. Loans for the sake of loans seem to be the key problem here: If students who intended to get a "degree in bullshit" at a gussied up diploma mill faced difficulty finding a loan for that purpose, they might reevaluate their decision. And besides: Who's seriously advocating for the total elimination of student loans?
- ethanbond 13y ago
  And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation. We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.
  - twoodfin 13y ago
    And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Surely this isn't that difficult a problem to solve. President Obama thinks his administration could start to address it: http://www.insidehighered.com/news/2013/02/13/obama-calls-more-attention-price-value-accreditation-state-union http://www.insidehighered.com/news/2013/02/13/obama-calls-mo...
  - coffeemug 13y ago
    The market. Right now, the government loan programs treat all degrees interchangeably. If you introduce market forces into the equation, the lenders will run some basic stat calculations and you'll quickly end up with the following scenario: 1. Useful degrees from good universities will be easy and cheap for good students to fund. 2. Everything else will get harder/more expensive to fund, in proportion to its statistical returns. That's all you really need to fix the system.
    - twoodfin 13y ago
      As I understand it, the problem with this approach is that even the pre-2010 system put the risk of default more or less completely on the Feds, as it is now. If you leave that risk there, then market players have no incentive to set rates themselves: It's up to the Feds to decide which loans at which rates they're willing to backstop or acquire. Not really a "market". But if you move the risk of default onto the "market" via private lenders, then, the theory goes, the rates a student can expect will be swamped by other factors than the value of their prospective education, notably whether they have a sufficiently credit-worthy parent to cosign. Maybe the best bet is to have market rates that are "cushioned" by the Feds in a need-based scheme.
    - 108 13y ago
      Do they? If government loan programs treat all degrees interchangeably, why do you have differential pricing for STEM degrees and Liberal arts, with the latter being cheaper and STEM, law and medicine degrees being the most expensive.
      - TheCoelacanth 13y ago
        They are more expensive because the programs cost more to run. The professors have more job prospects outside of academia, so that drives up their wages. They also need more expensive resources (labs, legal libraries, etc.).
  - bradleyjg 13y ago
    The schools are in the best position to underwrite loans. They should be the ones loaning out educations. That also has the advantage of giving the schools a stake in the marketability of their graduates.
    - twoodfin 13y ago
      How do you avoid the problem of schools only/mostly handing out loans to students with rich parents to cosign? That's the underlying cause of all this conflict: We want the best colleges and universities to be accessible to everyone, and not have existing class distinctions weigh too heavily on the scale.
      - danielweber 13y ago
        I can see why we worried about it, but most schools are so leftist they would never come close to only letting in rich kids. I don't think the choice is "lend the kids a whole bunch of money to let them in" vs "don't let them in at all." It's "lend the kids a whole bunch of money" vs "don't lend them a bunch of money, and still let them in." It's possible I'm wrong about this, but we've definitely went too far in the other direction.
        twoodfin 13y ago
        Sure, the problem is not the Ivies and top tech schools, most of which have basically committed to paying full tuition for any admitted student who demonstrates they couldn't attend without it. But for the many excellent schools without massive endowments, the risk of letting in more qualified "Caa3" applicants over "Aaa" applicants could make a substantial difference on the margins.
      - bradleyjg 13y ago
        It's an important consideration and so a good question. A couple of points: First I don't think such a school would remain the best very long. There was a time when CCNY and the CUNY system in general had a fantastic reputation largely because it served an immigrant population that the Harvards of the world refused to take on as students or faculty. CCNY's fortunes turned around for many reasons, but one of them was that the traditional top schools dropped their racial/ethnic quota systems and introduced aggressive need based scholarships. Second, I think we a society need to move away from the idea that 18-22+ year olds are still members of their parents' economic unit. In Sweden college tuition is free, yet the percentage of students taking out loans is higher than the US because there is no expectation that parents will pay living costs. Perhaps banning co-signers for such student loans is going too far, but perhaps not.
  - macspoofing 13y ago
    >And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? If you're a responsible lender, you sure as hell should look at the risk profile of the borrower. If the borrower is asking $200,000 to go to a private college for a liberal arts degree, you may want to assign a higher risk to him, then if he was going to Med school. In other words, you may want to go through the same exercise you go through to approve small business or real-estate loans. The problem is that you don't need to be a responsible student loan lender since the federal government will just guarantee you the loan anyway.
  - jlgreco 13y ago
    If lenders had any significant risk, then lenders would evaluate the value of a school/degree combination (value being determined by the likelihood that they could be paid back). High-tier school with a degree that has great employment potential? Throw a loan at that kid, that is a good investment. High-tier school with a degree that has great employment potential... but the program has a 99% dropout rate? Think twice about throwing a loan at that kid, if he is in that 99% then you will have a hard time getting your money. Shit school with a vanity degree? Tell that kid to get lost. If he wants a vanity degree, he can pay for it himself.
nawitus 13y ago
> An even worse solution is getting rid of loans. A good solution is making loans optional like in Scandinavia. Universities are pretty much free, but some students take loans to get by.
- ethanbond 13y ago
  So you're saying, "A good solution is to lower the price of education." I agree. I think we all would. But how? Loans are already very optional - that's a nonsolution.
  - nawitus 13y ago
    Make the government pay for education.
    - hyperventilator 13y ago
      You will not make things more efficient by having them run by the government, you will only create another unfunded mandate. While it may seem that it is free if the government pays for it, obviously someone pays. The least cost effective way to run something is through a government bureaucracy, that should be pretty clear by now.
    - danielweber 13y ago
      You still need price pressure on the schools. If tuition keeps on going through the roof but no one cares because it's "free" we're still blowing a lot of money that could better be spent elsewhere.
      - nawitus 13y ago
        I'm not sure how it's done in Scandinavia. I think the government can simply fund public universities with a lump sump (per student), and disallow any tuition charges. Universities could then raise additional private money to use as they see fit.
AnIrishDuck 13y ago
> Loans aren't at the root of the problem Loans absolutely are at the root of the problem. Not the abstract concept of loaning money, but the current implementation. The student loans legally allowed today are borderline usary. They provide a convenient way for lenders to sidestep bankruptcy protection. This leaves students with exact same problems society had before bankruptcy: it's far too easy for the unwary to sign their life away to crushing debt. They essentially become an indentured servant for the rest of their life, destined to die in poverty. These issues are a practically daily occurrence on r/personalfinance [1]. I personally know several people in this situation. Naive kids get too far over their head in debt, and the traditional protections for that situation have been taken away from them. Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. That's the only way I can imagine tuition levels reverting to a sane level. 1. for a recent example, see http://redd.it/1kavq7 http://redd.it/1kavq7
- ethanbond 13y ago
  The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). > Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the same trap most solutions do, though. What's "a reasonable expectation," and who decides it?
  - burntsushi 13y ago
    > The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). Did you read the article? It provided a fairly sound argument supporting the conclusion that the availability of student loans and the price of tuition are quite related.
    - sp332 13y ago
      Fixing the lending problem might influence the overspending, but fixing the overspending would solve the problem much more directly.
Symmetry 13y ago
Getting rid of loans isn't really on the table, people are generally free to loan each other money and there doesn't need to be a special government program for student loans to exist. But we do have a lot of laws and programs around student loans and I'm not sure that they do more good than harm, on net.
- lawnchair_larry 13y ago
  I think removing bankruptcy immunity would go a long way. It forces lenders to actually consider risk, and fixes a lot of perverse incentives. As it stands, there is no reason not to loan far more than someone could ever repay. You pay until you die, bankruptcy or not, and then your estate pays. And, it's guaranteed by the federal government. Why wouldn't you push as many of them everywhere you possibly could? There is no better asset on your balance sheet as a lender. It's guaranteed free money. But there is no asset, so it's even worse than the subprime mortgage scandal. I know a few baristas in their 30s with six figure loans. Similar story for all of them. Barely 18, pressure to go to a good college, parents proud of their kid who encourage it more, who themselves are not the most financially savvy either. Throughout their college years, school administration makes it very easy to help them request another 10k or so at a time. Between parents, loan officers, and school administration, everyone is just whisking them through to sign and the money is theirs. Since it seems so normal and unquestioned, by people who are supposed to be providing guidance, many kids don't seriously consider the feasibility of the whole thing. I'm a believer in personal responsibility, but I think when it becomes adversarial and systemically designed to provide all the rope necessary to hang themselves, it's hard to put the blame on some of the kids.
bradleyjg 13y ago
Like so much else the baby boomers ruined this. When they went to college it was inexpensive enough to work your way through and most of the faculty was full time moderately paid professors. Now tuition at many places is more than the national median household income, and the most of the faculty is made up of very poorly paid adjutants with a thin gerontocracy layer of tenured professors taking up most of the faculty salary pie. And they're all loaded to the gills with deanlets and deanlings.
- danielweber 13y ago
  I don't think the boomers ruined this one, although they were in the right place at the right time to blame them. When 1) employers are allowed to discriminate against the non-college educated, 2) going to college becomes the default instead of the exception, and 3) there is no downward price pressure on educational costs, I think the results are inevitable. Here is something really shocking we could do: make education something that most employers are not allowed to consider, like marital status or a handful of other things. (They mostly cannot consider IQ, because of Griggs v Duke, but they can use your degree, which uses an IQ test (the SAT) to decide if you get in.)
  - fnordfnordfnord 13y ago
    >I don't think the boomers ruined this one, although they were in the right place at the right time to blame them. Who then? Boomers have had all of the political power for the last thirty years. They will probably hold it for another decade.
lawnchair_larry 13y ago
On the contrary - the way to screw an entire generation is to give them these loans. The loans are the problem. They don't have to be - loans are not inherently bad - but the current system is the problem.
Fargren 13y ago
Free college subsidized by taxes? We have had that in Argentina for a long time, and for some time we had the best education you could get in Latin America. I'll admit nowadays we are pretty much average, but still free. I can't really explain the reasons for the decline in the quality of our education, and it may be related to our lack of monetization.
- MBCook 13y ago
  Without any kind of price control or accountability on the cost of the education, that's just cutting out the middle man in the cash flow problem. Sure no one will have student loans, but taxes will have to be raised to make up the difference. As the article points out, all those new buildings they're always building aren't free and the posh dorms are unnecessary. But everyone is paying for them anyway, because why not?
  - Fargren 13y ago
    Well, we don't have dorm rooms in college, since the buildings are in the cities or very close to them. That dorm room situation is very weird to me, I don't really see the benefits. But more to the point, the problem is pretty much the opposite of what you describe. Since money for education comes from taxes, education doesn't get nearly as much money as it does in the US. Some buildings are in a pretty lousy state, and teachers don't get paid much. The private sector sometimes invests in universities that will prepare people for the jobs they need, but even that is sometimes protested by the faculty and students since it can be seen as influencing in the curricula. Not to say it's all bad. We certainly could use more money, but we are still giving some of the best education this country offers, for free. In a lot of fields, the only reason to go to a private college is because it's easier to graduate.

twoodfin 13y ago

This is why, until there's some radical, radical change, I'll always vote for the people perpetuating student loans. Loans for the sake of loans seem to be the key problem here: If students who intended to get a "degree in bullshit" at a gussied up diploma mill faced difficulty finding a loan for that purpose, they might reevaluate their decision. And besides: Who's seriously advocating for the total elimination of student loans?

ethanbond 13y ago
And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Libertarians tend to like the idea. But short of that, it's difficult to vote for reform that lands between perpetuate-the-problem and screw-an-entire-generation. We can fix the problem of paying for education, but that solution isn't going to be found anywhere near the student loan debate.
- twoodfin 13y ago
  And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? Surely this isn't that difficult a problem to solve. President Obama thinks his administration could start to address it: http://www.insidehighered.com/news/2013/02/13/obama-calls-more-attention-price-value-accreditation-state-union http://www.insidehighered.com/news/2013/02/13/obama-calls-mo...
- coffeemug 13y ago
  The market. Right now, the government loan programs treat all degrees interchangeably. If you introduce market forces into the equation, the lenders will run some basic stat calculations and you'll quickly end up with the following scenario: 1. Useful degrees from good universities will be easy and cheap for good students to fund. 2. Everything else will get harder/more expensive to fund, in proportion to its statistical returns. That's all you really need to fix the system.
  - twoodfin 13y ago
    As I understand it, the problem with this approach is that even the pre-2010 system put the risk of default more or less completely on the Feds, as it is now. If you leave that risk there, then market players have no incentive to set rates themselves: It's up to the Feds to decide which loans at which rates they're willing to backstop or acquire. Not really a "market". But if you move the risk of default onto the "market" via private lenders, then, the theory goes, the rates a student can expect will be swamped by other factors than the value of their prospective education, notably whether they have a sufficiently credit-worthy parent to cosign. Maybe the best bet is to have market rates that are "cushioned" by the Feds in a need-based scheme.
  - 108 13y ago
    Do they? If government loan programs treat all degrees interchangeably, why do you have differential pricing for STEM degrees and Liberal arts, with the latter being cheaper and STEM, law and medicine degrees being the most expensive.
    - TheCoelacanth 13y ago
      They are more expensive because the programs cost more to run. The professors have more job prospects outside of academia, so that drives up their wages. They also need more expensive resources (labs, legal libraries, etc.).
- bradleyjg 13y ago
  The schools are in the best position to underwrite loans. They should be the ones loaning out educations. That also has the advantage of giving the schools a stake in the marketability of their graduates.
  - twoodfin 13y ago
    How do you avoid the problem of schools only/mostly handing out loans to students with rich parents to cosign? That's the underlying cause of all this conflict: We want the best colleges and universities to be accessible to everyone, and not have existing class distinctions weigh too heavily on the scale.
    - danielweber 13y ago
      I can see why we worried about it, but most schools are so leftist they would never come close to only letting in rich kids. I don't think the choice is "lend the kids a whole bunch of money to let them in" vs "don't let them in at all." It's "lend the kids a whole bunch of money" vs "don't lend them a bunch of money, and still let them in." It's possible I'm wrong about this, but we've definitely went too far in the other direction.
      - twoodfin 13y ago
        Sure, the problem is not the Ivies and top tech schools, most of which have basically committed to paying full tuition for any admitted student who demonstrates they couldn't attend without it. But for the many excellent schools without massive endowments, the risk of letting in more qualified "Caa3" applicants over "Aaa" applicants could make a substantial difference on the margins.
    - bradleyjg 13y ago
      It's an important consideration and so a good question. A couple of points: First I don't think such a school would remain the best very long. There was a time when CCNY and the CUNY system in general had a fantastic reputation largely because it served an immigrant population that the Harvards of the world refused to take on as students or faculty. CCNY's fortunes turned around for many reasons, but one of them was that the traditional top schools dropped their racial/ethnic quota systems and introduced aggressive need based scholarships. Second, I think we a society need to move away from the idea that 18-22+ year olds are still members of their parents' economic unit. In Sweden college tuition is free, yet the percentage of students taking out loans is higher than the US because there is no expectation that parents will pay living costs. Perhaps banning co-signers for such student loans is going too far, but perhaps not.
- macspoofing 13y ago
  >And who is going to decide what's a "degree in bullshit" and what's a "gussied up diploma mill?" What metrics would they use? If you're a responsible lender, you sure as hell should look at the risk profile of the borrower. If the borrower is asking $200,000 to go to a private college for a liberal arts degree, you may want to assign a higher risk to him, then if he was going to Med school. In other words, you may want to go through the same exercise you go through to approve small business or real-estate loans. The problem is that you don't need to be a responsible student loan lender since the federal government will just guarantee you the loan anyway.
- jlgreco 13y ago
  If lenders had any significant risk, then lenders would evaluate the value of a school/degree combination (value being determined by the likelihood that they could be paid back). High-tier school with a degree that has great employment potential? Throw a loan at that kid, that is a good investment. High-tier school with a degree that has great employment potential... but the program has a 99% dropout rate? Think twice about throwing a loan at that kid, if he is in that 99% then you will have a hard time getting your money. Shit school with a vanity degree? Tell that kid to get lost. If he wants a vanity degree, he can pay for it himself.

nawitus 13y ago

> An even worse solution is getting rid of loans. A good solution is making loans optional like in Scandinavia. Universities are pretty much free, but some students take loans to get by.

ethanbond 13y ago
So you're saying, "A good solution is to lower the price of education." I agree. I think we all would. But how? Loans are already very optional - that's a nonsolution.
- nawitus 13y ago
  Make the government pay for education.
  - hyperventilator 13y ago
    You will not make things more efficient by having them run by the government, you will only create another unfunded mandate. While it may seem that it is free if the government pays for it, obviously someone pays. The least cost effective way to run something is through a government bureaucracy, that should be pretty clear by now.
  - danielweber 13y ago
    You still need price pressure on the schools. If tuition keeps on going through the roof but no one cares because it's "free" we're still blowing a lot of money that could better be spent elsewhere.
    - nawitus 13y ago
      I'm not sure how it's done in Scandinavia. I think the government can simply fund public universities with a lump sump (per student), and disallow any tuition charges. Universities could then raise additional private money to use as they see fit.

AnIrishDuck 13y ago

> Loans aren't at the root of the problem Loans absolutely are at the root of the problem. Not the abstract concept of loaning money, but the current implementation. The student loans legally allowed today are borderline usary. They provide a convenient way for lenders to sidestep bankruptcy protection. This leaves students with exact same problems society had before bankruptcy: it's far too easy for the unwary to sign their life away to crushing debt. They essentially become an indentured servant for the rest of their life, destined to die in poverty. These issues are a practically daily occurrence on r/personalfinance [1]. I personally know several people in this situation. Naive kids get too far over their head in debt, and the traditional protections for that situation have been taken away from them. Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. That's the only way I can imagine tuition levels reverting to a sane level. 1. for a recent example, see http://redd.it/1kavq7 http://redd.it/1kavq7

ethanbond 13y ago
The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). > Maybe it's time to cap total outstanding student debt to some reasonable expectation of when they can be repaid. I think that's a good start. Kind of resembling a loan-forgiveness mechanism (which there are already a few). It falls into the same trap most solutions do, though. What's "a reasonable expectation," and who decides it?
- burntsushi 13y ago
  > The overall price of education is the root of the problem, and the price of education has little correlation to the availability of student loans (contrary to popular belief). Did you read the article? It provided a fairly sound argument supporting the conclusion that the availability of student loans and the price of tuition are quite related.
  - sp332 13y ago
    Fixing the lending problem might influence the overspending, but fixing the overspending would solve the problem much more directly.

Symmetry 13y ago

Getting rid of loans isn't really on the table, people are generally free to loan each other money and there doesn't need to be a special government program for student loans to exist. But we do have a lot of laws and programs around student loans and I'm not sure that they do more good than harm, on net.

lawnchair_larry 13y ago
I think removing bankruptcy immunity would go a long way. It forces lenders to actually consider risk, and fixes a lot of perverse incentives. As it stands, there is no reason not to loan far more than someone could ever repay. You pay until you die, bankruptcy or not, and then your estate pays. And, it's guaranteed by the federal government. Why wouldn't you push as many of them everywhere you possibly could? There is no better asset on your balance sheet as a lender. It's guaranteed free money. But there is no asset, so it's even worse than the subprime mortgage scandal. I know a few baristas in their 30s with six figure loans. Similar story for all of them. Barely 18, pressure to go to a good college, parents proud of their kid who encourage it more, who themselves are not the most financially savvy either. Throughout their college years, school administration makes it very easy to help them request another 10k or so at a time. Between parents, loan officers, and school administration, everyone is just whisking them through to sign and the money is theirs. Since it seems so normal and unquestioned, by people who are supposed to be providing guidance, many kids don't seriously consider the feasibility of the whole thing. I'm a believer in personal responsibility, but I think when it becomes adversarial and systemically designed to provide all the rope necessary to hang themselves, it's hard to put the blame on some of the kids.

bradleyjg 13y ago

Like so much else the baby boomers ruined this. When they went to college it was inexpensive enough to work your way through and most of the faculty was full time moderately paid professors. Now tuition at many places is more than the national median household income, and the most of the faculty is made up of very poorly paid adjutants with a thin gerontocracy layer of tenured professors taking up most of the faculty salary pie. And they're all loaded to the gills with deanlets and deanlings.

danielweber 13y ago
I don't think the boomers ruined this one, although they were in the right place at the right time to blame them. When 1) employers are allowed to discriminate against the non-college educated, 2) going to college becomes the default instead of the exception, and 3) there is no downward price pressure on educational costs, I think the results are inevitable. Here is something really shocking we could do: make education something that most employers are not allowed to consider, like marital status or a handful of other things. (They mostly cannot consider IQ, because of Griggs v Duke, but they can use your degree, which uses an IQ test (the SAT) to decide if you get in.)
- fnordfnordfnord 13y ago
  >I don't think the boomers ruined this one, although they were in the right place at the right time to blame them. Who then? Boomers have had all of the political power for the last thirty years. They will probably hold it for another decade.

lawnchair_larry 13y ago

On the contrary - the way to screw an entire generation is to give them these loans. The loans are the problem. They don't have to be - loans are not inherently bad - but the current system is the problem.

Fargren 13y ago

Free college subsidized by taxes? We have had that in Argentina for a long time, and for some time we had the best education you could get in Latin America. I'll admit nowadays we are pretty much average, but still free. I can't really explain the reasons for the decline in the quality of our education, and it may be related to our lack of monetization.

MBCook 13y ago
Without any kind of price control or accountability on the cost of the education, that's just cutting out the middle man in the cash flow problem. Sure no one will have student loans, but taxes will have to be raised to make up the difference. As the article points out, all those new buildings they're always building aren't free and the posh dorms are unnecessary. But everyone is paying for them anyway, because why not?
- Fargren 13y ago
  Well, we don't have dorm rooms in college, since the buildings are in the cities or very close to them. That dorm room situation is very weird to me, I don't really see the benefits. But more to the point, the problem is pretty much the opposite of what you describe. Since money for education comes from taxes, education doesn't get nearly as much money as it does in the US. Some buildings are in a pretty lousy state, and teachers don't get paid much. The private sector sometimes invests in universities that will prepare people for the jobs they need, but even that is sometimes protested by the faculty and students since it can be seen as influencing in the curricula. Not to say it's all bad. We certainly could use more money, but we are still giving some of the best education this country offers, for free. In a lot of fields, the only reason to go to a private college is because it's easier to graduate.