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Students refuse to pay back loans to failed for-profit college

77 points by wcbeard10 12y ago

ChainsawSurgery 12y ago
> student-debt problem is so severe that it seems to be reducing the formation of new households Perfect! Housing bubble averted. In all seriousness, this + an influx of foreign investment into american real estate + a future generational aversion to debt (from experiencing first or secondhand how crippling student loan debt can be) will make for some interesting times in the upcoming decades.
- Shivetya 12y ago
  the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household. when it comes to school debt the Federal government would be best served by limiting what it loans based on the education desired, as they set limits on what they pay out for medical services there is little reason to not do the same for education. It might even help reign in the ever increasing costs that colleges charge which in itself a property of easy loans
  - ChainsawSurgery 12y ago
    > the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household. I can't pull up that data right now, but I remember reading (on here, no less) that most of that auto debt could be attributed to non-millenials. Credit card debt is an excellent point, though I'm not sure how meaningful per household is in this context (part of the article is pointing out that a decent portion of millenials aren't forming their own households). Remember that the oldest millenials are still in their early-mid thirties. > Federal government would be best served Ah, but there's the rub - a decent amount of this debt is private.
  - mikeash 12y ago
    $886 billion in auto loans doesn't seem like very much to me. There are about 254 million passenger vehicles in the US, so that's an average of $3,500 in debt per car (of course there will be huge variation there). You pretty much need a car to live in many places in this country, and in many more places you need a car to have a decent job. Most people can't afford to buy one outright, and in a case like that, it's sensible to take out a loan in order to purchase an asset that allows you to immediately start making money to pay it off. Taking out a loan for a low-end car so you can drive to work is pretty different from taking out $50,000 in loans for a degree that you hope will let you find better work years in the future.
    - awesome_work_ 12y ago
      I agree with mikeash, and wanted to just add my own personal experience. Most people I know, and what I also do personally, is buy a used car for less than $10k, and pay it off within 3 years. Then you live with it until it no longer becomes economically viable to keep it. So my wife and I own our cars at this point, which frees $400+ a month we can put towards something else with the understanding in 2-3 years we will need to budget for cars again. The basic cycle is 3 years of car debt, 3 years without. (I don't live in an area which has public transportation)
eat 12y ago
I always hear people say things like "we don't have debtors prisons in the U.S.". If enough people start doing this, I have a very strong feeling that that will change. As student loans become more of a crisis, we're sure to see more people simply deciding not to pay. What recourse to lenders have if this happens on a large scale?
- krschultz 12y ago
  They can start garnishing your wages, so unless you never want to hold a job again, creditors will get their money.
  - jschwartzi 12y ago
    With Federal loans they can also just take payment directly from your tax returns.
  - Zigurd 12y ago
    You can leave the country. Most of the people deeply in debt with degrees or training that won't pay the debt would find, for example, teaching English in China a relatively comfortable living. If you have the imagination to look beyond Europe, finding a gig that's better than debt slavery isn't too difficult.
    - lttlrck 12y ago
      The future repercussions may not be worth it. As a US citizen (or Green Card holder) you must a file an annual tax return wherever you live in the world, plus disclose foreign bank accounts. Failure to do so can have very harsh penalties. https://americansabroad.org/issues/taxation/us-taxes-while-living-abroad-faq/ https://americansabroad.org/issues/taxation/us-taxes-while-l...
      - toomuchtodo 12y ago
        http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit http://www.irs.gov/Individuals/International-Taxpayers/Forei... So, you're paying taxes to the local government, and getting a credit towards your US taxes. You'd still file your informational return with the IRS, but they don't touch a dime of your foreign income.
VLM 12y ago
“In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.” Wait till the law students and education students figure out that their schools intentionally overproduced about twice as many grads as the market can bear. And the PHD students and the ... well, basically every program in every school in the country except the ivy league CS programs. Its either debt jubilee time or admit the "higher ed magically provides a great job" was all a scam. When it comes to deciding between saving face and saving a buck, usually we save a buck, so I almost guarantee the proposed strategy will fail. So culturally we will momentarily see the death of "higher ed at all costs" as a gateway to a great job and all that propaganda.
vinceguidry 12y ago
It's a bit disingenuous to claim that you shouldn't pay back any of the debt incurred in earning your degree because the educational program was worthless when you're still seeking a career in the field requiring that degree. I agree she shouldn't have to pay all of the debt, but surely the degree isn't totally worthless.
- mattmanser 12y ago
  She got ripped off by a school, so should now give up her dreams of becoming a nurse. Great argument.
  - vinceguidry 12y ago
    No, she should start a career in whatever field she's best positioned to start one in. Oh is that nursing? I wonder why.
    - jessaustin 12y ago
      Presumably she had planned to become an LPN or RN. Her current position would not have required a degree, and to get to those other levels she must now still attend a different school. Corinthian wasted her time and her money.
    - mikeash 12y ago
      Post hoc ergo propter hoc is supposed to be a warning, not a guide!
- whafro 12y ago
  Only if the degree is the sole factor in getting the career she desired. If that's the case, I can send you a degree from WhafroU via PDF for a tidy sum within an hour. Get in touch, folks!
  - vinceguidry 12y ago
    You absolutely should start selling paper degrees if your 'students' can actually get jobs with them, as the person in the article was able to. I don't think people really understand what they're saying when they say that people shouldn't have to pay back these loans. The loans are going to get repayed, it's just a question of who. You can't take it out of the defunct college, those people, and that money, are gone. Basically you're saying that taxpayers should foot the bill. You want to pay the government back out of your own pocket? Because that's what this means.
Alex3917 12y ago
So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed. What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards? I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then extorting them for money, but at some point people still need to take responsibility for their actions.
- TomGullen 12y ago
  You said it yourself, they were preying on the vulnerable. To what extent exactly should these vulnerable people take personal responsibility? Why didn't you mention that these colleges need to take some responsibility as well?
  - Alex3917 12y ago
    > To what extent exactly should these vulnerable people take personal responsibility? I mean once they showed up and realized it wasn't a real college and they weren't being taught anything, that would have been the appropriate time to protest and try to get their money back, rather than staying for another 2-4 years to get the degree and hoping that no one notices that they didn't actually learn anything. > Why didn't you mention that these colleges need to take some responsibility as well? They should, but in this case they already got shut down. My feelings about for-profit colleges are basically the same as my feelings on the military. I.e. the military shouldn't be tricking kids into enlisting, but that that still doesn't give soldiers a free pass for going over to the middle east and killing innocent people.
    - cafard 12y ago
      > I mean once they showed up and realized it wasn't a real college and they weren't being taught anything, that would have been the appropriate time to protest [etc] The people signing up were probably not those best prepared to evaluate the quality of schooling. It might have seemed a continuation what they saw in high school
AndrewKemendo 12y ago
Is this the start of the student-loan bubble bursting? From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.
- whafro 12y ago
  Yeah, there's no risk of someone repossessing the education you received, like there is of the house you've defaulted on. And a reduction in the value of a bachelor's degree doesn't affect your family's net worth like that same reduction in the value of your home. Mass defaults (which you could argue we're already seeing at ~20%) would be terrible for lenders (private and public), and probably the schools involved, so there'd be an impact, but you wouldn't have the massive loss of aggregate wealth we saw impacting the middle class five to ten years ago.
  - cafard 12y ago
    If your bachelor's degree is from a for-profit college that has just gone out of business, what is its value?
    - whafro 12y ago
      Probably not far off from its value if it hadn't gone out of business. For-profit colleges aren't typically known for their deep alumni networks or stellar name recognition, so either way, the degree is basically valued by the education you managed to obtain while you were there.
- ChainsawSurgery 12y ago
  > doesn't threaten the rest of the economy in the same way that housing loans did I dunno about that - it's probably just a lot more insidious and less panic-y. Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on: 1) Savings/retirement/etc 2) Goods and services 3) Capital investment 4) Etc. Given the compounding nature of some of these things, and the fact that these payments constitute a higher % of your income early on (assuming steady career progression), it's a problem that may just slowly unravel as time goes on. Don't forget we live in a service economy - adults not spending money on a diverse set of services (as opposed to say, just student loan services) will hurt us in the long run.
deleted 12y ago
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sheepdestroyer 12y ago
A lot of countries have a free post secondary education system : https://en.wikipedia.org/wiki/Free_education#Partial_list_of_countries_with_free_post-secondary_education https://en.wikipedia.org/wiki/Free_education#Partial_list_of... It always astonish me to think it can be seen as normal, even more equitable, to require people to get so huge debts before even being trained to work.
- iopq 12y ago
  To pay for someone's education someone else must be taxed. Why is it better to tax a working person for every student's education instead of just having that person pay for the exact education they received?
  - redblacktree 12y ago
    Because we all benefit by living in a well-educated society. It's the same argument with public schools at lower levels. Would you advocate that these also be made exclusively private?
  - sheepdestroyer 12y ago
    Because taxing is low on low incomes while high on high incomes. And that you do not know before starting to work which king of income, if any, you will have. that's the big equity advantage of redistribution.
    - belovedeagle 12y ago
      Nonsense. Those who invest a lot into education (and yes, I would say this requires having a lot to invest---but people unwisely taking out student loans in the US prove that this isn't necessary) in an appropriate field will typically have higher incomes. So by taxing them more too, society is double-dipping.
  - DasIch 12y ago
    People with university education tend to have higher incomes and in countries with sane laws therefore pay more in taxes. On average they will pay more than they get from government. Apart from that I feel much more comfortable going to a doctor, knowing that she has gained that position by skill and not because her parents could afford it.
jobu 12y ago
It's odd that they don't mention the reason Corinthian is shutting down so many colleges - http://www.npr.org/blogs/ed/2014/07/08/329550897/the-collapse-of-corinthian-colleges http://www.npr.org/blogs/ed/2014/07/08/329550897/the-collaps... A relative of mine works there and said they were about to be sued by the Department of Education over fraud in their student loan department. The settlement forced the company to sell or close all of it's colleges and no senior management or administrative staff is allowed to stay with any of the colleges. It seems pretty clear that Corinthian did some bad things, and it's likely the clause the article mentions in federal loans might give _some_ students an way out of debt: “In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.” IANAL, but I think it's pretty unlikely the government would let all of the students off the hook. (For a billion dollars!)
- jessaustin 12y ago
  ...pretty unlikely... Eh, it's not "real" money. Students will have debts forgiven when it's politically expedient to do so.
  - crazy1van 12y ago
    > Eh, it's not "real" money Why not? It was real to the tax payers who paid it to the government and real to the Corinthian employees who were paid by the school and it will be real to the students as they struggle to pay it back over many years.
    - toomuchtodo 12y ago
      Because the Fed can add and remove dollars from the economy at will. See: Quantitive Easing with mortgage-backed bonds.
      - beagle3 12y ago
        Is any money real money, by that logic?
littletimmy 12y ago
Good. This bubble has to burst. The college education system in this country has gone completely insane. The cost of a year's worth of education is now $60000, when the cost for comparable universities in the UK is $10000 and in Germany is $0. Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore.
- maratd 12y ago
  > Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore. Public colleges are already substantially less than private institutions. I doubt subsidizing them further will have a substantial impact on private tuition. If we stop lending money to pay for education, the colleges will see substantially reduced demand at their inflated price levels and will quickly cut prices to adjust. Then again, they might not. They currently segregate their customers into groups by way of "scholarships" and essentially extract the maximum amount of money they can possibly get. I can't think of another industry where such disgusting behavior is tolerated or even celebrated as generosity.
TeMPOraL 12y ago
Isn't this the same college John Oliver criticized recently for their "quality education"? https://www.youtube.com/watch?v=P8pjd1QEA0c#t=562 https://www.youtube.com/watch?v=P8pjd1QEA0c#t=562 "We went to the museum of Scientology for our psychiatric rotation"...
discardorama 12y ago
"Most Corinthian students cover their tuition by taking out federal and private loans. That debt, it turns out, is far more resilient than Corinthian itself." This here is the problem. If Corinthian can get out from paying its debts, why can't the students?
rcarrigan87 12y ago
Mark Cuban wrote a great post about when colleges start going out of business. As a college grad with a lot of debt I advise everyone to avoid student loans at all costs. It's not worth it and there are always alternatives. http://blogmaverick.com/2013/01/26/will-your-college-go-out-of-business-before-you-graduate/ http://blogmaverick.com/2013/01/26/will-your-college-go-out-...
skizm 12y ago
Did the students get a loan from the college or a bank? Did the bank fail? Can I refuse to pay back my mortgage if my house burns down?
- bdcravens 12y ago
  There's insurance on your house. Perhaps the same should happen with eduction.
  - skizm 12y ago
    My point is just because the thing you bought with your loan money is now useless/worthless doesn't relieve you of your obligation to the bank.
    - bdcravens 12y ago
      In principle, I agree: when I see kids take out tens or hundreds of thousands in loans, and not get a productive career out of it (say the guy who couldn't pass the bar after going to law school), I don't have sympathy when they claim they shouldn't have to pay the loans back. In this situation, however, I believe those not paying are claiming they were deceived (and there are lawsuits as such). This isn't a matter of not paying your loans because your house burned down, as much as not paying your loans because the builder deceived you on the quality. Additionally, these aren't typical bank loans usually, but guaranteed by a quasi-government entity. To a certain degree, this means the government is guaranteeing some set of standards (I can't get a government-backed loan to do a code bootcamp, for example), and these students are banking on the idea that the loans will be forgiven without recourse, or at the very least, shining a light on this school with they are contacted, en masse, for failure to repay.
    - toomuchtodo 12y ago
      Walking away from mortgaged property is extremely easy compared to student loan debt.
bko 12y ago
I think the reason many students put up with increased costs is because they have access to subsidized loans, mainly from the government. The Consumer Financial Protection Bureau estimates that out of the $1.2 trillion in debt, $1 trillion are estimated to be guaranteed or held by the federal government [0] I may be in the minority opinion, but I think college is still pretty affordable. > In 2014-15, average published tuition and fee prices for in-state students at public four-year institutions range from $4,646 in Wyoming and $6,138 in Alaska to $14,419 in Vermont and $14,712 in New Hampshire. [1] CUNY for instance is $6,030 a year [2] The tuition is higher than it has been in the past but attending college is a lot more profitable as well. I know the state school I had attended has raised tuition over the years, but I can't help but look around and think that all the money went into a new stadium ($33 MM), new athletic gym and new (very impressive) dorms. The average student attending an expensive for-profit (less credible) college isn't the same person as someone attending a good state school. A lot of time these colleges attract more marginal students. The payoff for most colleges is still very high and worth the cost. But there should be some cost as to discourage less productive ventures and to have some skin in the game for the student. [0] http://www.consumerfinance.gov/newsroom/student-debt-swells-federal-loans-now-top-a-trillion/ http://www.consumerfinance.gov/newsroom/student-debt-swells-... [1] http://trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-sector-state-time http://trends.collegeboard.org/college-pricing/figures-table... [2] http://www.cuny.edu/admissions/tuition-fees.html http://www.cuny.edu/admissions/tuition-fees.html
remarkEon 12y ago
I really can't stress enough how these for-profit institutions seek to avoid any kind of responsibility otherwise assumed of an institution of higher learning. They consistently take advantage of veterans. Close to home, these companies actively and willfully take advantage of veterans benefits to reap in billions [0]. These schools actively recruit soldiers at military bases, who end up using up a good portion (or all) of their benefit without being able to get a job or before they can transfer it to their children or spouse. They're left with no education benefit, a degree that isn't transferable and, perhaps worst of all, a feeling of failure and embarrassment. PBS did an excellent show on the situation not long ago [1]. The standard argument I hear in favor of these schools is that the situation in the military is different, and a lot of veterans leaving the force already have families so going to a traditional college or university would be difficult or unmanageable. This is true, but distance learning has to become better. [0] http://fortune.com/2014/11/11/gi-bill-for-profit-colleges/ http://fortune.com/2014/11/11/gi-bill-for-profit-colleges/ [1] http://www.pbs.org/newshour/bb/gi-bill-benefitting-profit-colleges-instead-helping-veterans/ http://www.pbs.org/newshour/bb/gi-bill-benefitting-profit-co...
awesome_work_ 12y ago
I think the most important piece of information to come out of this article is "More than a fifth of borrowers of federal student loans go into default, but people who default tend not to announce their status publicly." This, to me, seems extremely high. Does anyone know what the default rate is on other types of loans?

77 points by wcbeard10 12y ago

> student-debt problem is so severe that it seems to be reducing the formation of new households Perfect! Housing bubble averted. In all seriousness, this + an influx of foreign investment into american real estate + a future generational aversion to debt (from experiencing first or secondhand how crippling student loan debt can be) will make for some interesting times in the upcoming decades.

Shivetya 12y ago
the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household. when it comes to school debt the Federal government would be best served by limiting what it loans based on the education desired, as they set limits on what they pay out for medical services there is little reason to not do the same for education. It might even help reign in the ever increasing costs that colleges charge which in itself a property of easy loans
- ChainsawSurgery 12y ago
  > the aversion to debt isn't occurring very fast considering that outstanding auto load debt is around 886 billion dollars. Credit card debt in 2014 was very similar, with an average of 7k per household. I can't pull up that data right now, but I remember reading (on here, no less) that most of that auto debt could be attributed to non-millenials. Credit card debt is an excellent point, though I'm not sure how meaningful per household is in this context (part of the article is pointing out that a decent portion of millenials aren't forming their own households). Remember that the oldest millenials are still in their early-mid thirties. > Federal government would be best served Ah, but there's the rub - a decent amount of this debt is private.
- mikeash 12y ago
  $886 billion in auto loans doesn't seem like very much to me. There are about 254 million passenger vehicles in the US, so that's an average of $3,500 in debt per car (of course there will be huge variation there). You pretty much need a car to live in many places in this country, and in many more places you need a car to have a decent job. Most people can't afford to buy one outright, and in a case like that, it's sensible to take out a loan in order to purchase an asset that allows you to immediately start making money to pay it off. Taking out a loan for a low-end car so you can drive to work is pretty different from taking out $50,000 in loans for a degree that you hope will let you find better work years in the future.
  - awesome_work_ 12y ago
    I agree with mikeash, and wanted to just add my own personal experience. Most people I know, and what I also do personally, is buy a used car for less than $10k, and pay it off within 3 years. Then you live with it until it no longer becomes economically viable to keep it. So my wife and I own our cars at this point, which frees $400+ a month we can put towards something else with the understanding in 2-3 years we will need to budget for cars again. The basic cycle is 3 years of car debt, 3 years without. (I don't live in an area which has public transportation)

eat 12y ago

I always hear people say things like "we don't have debtors prisons in the U.S.". If enough people start doing this, I have a very strong feeling that that will change. As student loans become more of a crisis, we're sure to see more people simply deciding not to pay. What recourse to lenders have if this happens on a large scale?

krschultz 12y ago
They can start garnishing your wages, so unless you never want to hold a job again, creditors will get their money.
- jschwartzi 12y ago
  With Federal loans they can also just take payment directly from your tax returns.
- Zigurd 12y ago
  You can leave the country. Most of the people deeply in debt with degrees or training that won't pay the debt would find, for example, teaching English in China a relatively comfortable living. If you have the imagination to look beyond Europe, finding a gig that's better than debt slavery isn't too difficult.
  - lttlrck 12y ago
    The future repercussions may not be worth it. As a US citizen (or Green Card holder) you must a file an annual tax return wherever you live in the world, plus disclose foreign bank accounts. Failure to do so can have very harsh penalties. https://americansabroad.org/issues/taxation/us-taxes-while-living-abroad-faq/ https://americansabroad.org/issues/taxation/us-taxes-while-l...
    - toomuchtodo 12y ago
      http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit http://www.irs.gov/Individuals/International-Taxpayers/Forei... So, you're paying taxes to the local government, and getting a credit towards your US taxes. You'd still file your informational return with the IRS, but they don't touch a dime of your foreign income.

VLM 12y ago

“In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.” Wait till the law students and education students figure out that their schools intentionally overproduced about twice as many grads as the market can bear. And the PHD students and the ... well, basically every program in every school in the country except the ivy league CS programs. Its either debt jubilee time or admit the "higher ed magically provides a great job" was all a scam. When it comes to deciding between saving face and saving a buck, usually we save a buck, so I almost guarantee the proposed strategy will fail. So culturally we will momentarily see the death of "higher ed at all costs" as a gateway to a great job and all that propaganda.

vinceguidry 12y ago

It's a bit disingenuous to claim that you shouldn't pay back any of the debt incurred in earning your degree because the educational program was worthless when you're still seeking a career in the field requiring that degree. I agree she shouldn't have to pay all of the debt, but surely the degree isn't totally worthless.

mattmanser 12y ago
She got ripped off by a school, so should now give up her dreams of becoming a nurse. Great argument.
- vinceguidry 12y ago
  No, she should start a career in whatever field she's best positioned to start one in. Oh is that nursing? I wonder why.
  - jessaustin 12y ago
    Presumably she had planned to become an LPN or RN. Her current position would not have required a degree, and to get to those other levels she must now still attend a different school. Corinthian wasted her time and her money.
  - mikeash 12y ago
    Post hoc ergo propter hoc is supposed to be a warning, not a guide!
whafro 12y ago
Only if the degree is the sole factor in getting the career she desired. If that's the case, I can send you a degree from WhafroU via PDF for a tidy sum within an hour. Get in touch, folks!
- vinceguidry 12y ago
  You absolutely should start selling paper degrees if your 'students' can actually get jobs with them, as the person in the article was able to. I don't think people really understand what they're saying when they say that people shouldn't have to pay back these loans. The loans are going to get repayed, it's just a question of who. You can't take it out of the defunct college, those people, and that money, are gone. Basically you're saying that taxpayers should foot the bill. You want to pay the government back out of your own pocket? Because that's what this means.

Alex3917 12y ago

So basically students enroll in a scam college to trick people into thinking they are well educated, and then complain when the scam is revealed. What's next, people who scam money from the elderly by pretending to be their grandchildren sue after only getting 25 cents with their birthday cards? I realize these colleges are also using high pressure sales tactics to trick vulnerable populations into enrolling and then extorting them for money, but at some point people still need to take responsibility for their actions.

TomGullen 12y ago
You said it yourself, they were preying on the vulnerable. To what extent exactly should these vulnerable people take personal responsibility? Why didn't you mention that these colleges need to take some responsibility as well?
- Alex3917 12y ago
  > To what extent exactly should these vulnerable people take personal responsibility? I mean once they showed up and realized it wasn't a real college and they weren't being taught anything, that would have been the appropriate time to protest and try to get their money back, rather than staying for another 2-4 years to get the degree and hoping that no one notices that they didn't actually learn anything. > Why didn't you mention that these colleges need to take some responsibility as well? They should, but in this case they already got shut down. My feelings about for-profit colleges are basically the same as my feelings on the military. I.e. the military shouldn't be tricking kids into enlisting, but that that still doesn't give soldiers a free pass for going over to the middle east and killing innocent people.
  - cafard 12y ago
    > I mean once they showed up and realized it wasn't a real college and they weren't being taught anything, that would have been the appropriate time to protest [etc] The people signing up were probably not those best prepared to evaluate the quality of schooling. It might have seemed a continuation what they saw in high school

AndrewKemendo 12y ago

Is this the start of the student-loan bubble bursting? From what I have read student loan debt, despite it's size, doesn't threaten the rest of the economy in the same way that housing loans did. Hopefully that is the case.

whafro 12y ago
Yeah, there's no risk of someone repossessing the education you received, like there is of the house you've defaulted on. And a reduction in the value of a bachelor's degree doesn't affect your family's net worth like that same reduction in the value of your home. Mass defaults (which you could argue we're already seeing at ~20%) would be terrible for lenders (private and public), and probably the schools involved, so there'd be an impact, but you wouldn't have the massive loss of aggregate wealth we saw impacting the middle class five to ten years ago.
- cafard 12y ago
  If your bachelor's degree is from a for-profit college that has just gone out of business, what is its value?
  - whafro 12y ago
    Probably not far off from its value if it hadn't gone out of business. For-profit colleges aren't typically known for their deep alumni networks or stellar name recognition, so either way, the degree is basically valued by the education you managed to obtain while you were there.
ChainsawSurgery 12y ago
> doesn't threaten the rest of the economy in the same way that housing loans did I dunno about that - it's probably just a lot more insidious and less panic-y. Adults repaying student loans aren't spending that money on other things. If you're paying $300 a month to Sallie Mae, that's $300 you're not spending on: 1) Savings/retirement/etc 2) Goods and services 3) Capital investment 4) Etc. Given the compounding nature of some of these things, and the fact that these payments constitute a higher % of your income early on (assuming steady career progression), it's a problem that may just slowly unravel as time goes on. Don't forget we live in a service economy - adults not spending money on a diverse set of services (as opposed to say, just student loan services) will hurt us in the long run.

deleted 12y ago

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sheepdestroyer 12y ago

A lot of countries have a free post secondary education system : https://en.wikipedia.org/wiki/Free_education#Partial_list_of_countries_with_free_post-secondary_education https://en.wikipedia.org/wiki/Free_education#Partial_list_of... It always astonish me to think it can be seen as normal, even more equitable, to require people to get so huge debts before even being trained to work.

iopq 12y ago
To pay for someone's education someone else must be taxed. Why is it better to tax a working person for every student's education instead of just having that person pay for the exact education they received?
- redblacktree 12y ago
  Because we all benefit by living in a well-educated society. It's the same argument with public schools at lower levels. Would you advocate that these also be made exclusively private?
- sheepdestroyer 12y ago
  Because taxing is low on low incomes while high on high incomes. And that you do not know before starting to work which king of income, if any, you will have. that's the big equity advantage of redistribution.
  - belovedeagle 12y ago
    Nonsense. Those who invest a lot into education (and yes, I would say this requires having a lot to invest---but people unwisely taking out student loans in the US prove that this isn't necessary) in an appropriate field will typically have higher incomes. So by taxing them more too, society is double-dipping.
- DasIch 12y ago
  People with university education tend to have higher incomes and in countries with sane laws therefore pay more in taxes. On average they will pay more than they get from government. Apart from that I feel much more comfortable going to a doctor, knowing that she has gained that position by skill and not because her parents could afford it.

jobu 12y ago

It's odd that they don't mention the reason Corinthian is shutting down so many colleges - http://www.npr.org/blogs/ed/2014/07/08/329550897/the-collapse-of-corinthian-colleges http://www.npr.org/blogs/ed/2014/07/08/329550897/the-collaps... A relative of mine works there and said they were about to be sued by the Department of Education over fraud in their student loan department. The settlement forced the company to sell or close all of it's colleges and no senior management or administrative staff is allowed to stay with any of the colleges. It seems pretty clear that Corinthian did some bad things, and it's likely the clause the article mentions in federal loans might give _some_ students an way out of debt: “In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.” IANAL, but I think it's pretty unlikely the government would let all of the students off the hook. (For a billion dollars!)

jessaustin 12y ago
...pretty unlikely... Eh, it's not "real" money. Students will have debts forgiven when it's politically expedient to do so.
- crazy1van 12y ago
  > Eh, it's not "real" money Why not? It was real to the tax payers who paid it to the government and real to the Corinthian employees who were paid by the school and it will be real to the students as they struggle to pay it back over many years.
  - toomuchtodo 12y ago
    Because the Fed can add and remove dollars from the economy at will. See: Quantitive Easing with mortgage-backed bonds.
    - beagle3 12y ago
      Is any money real money, by that logic?

littletimmy 12y ago

Good. This bubble has to burst. The college education system in this country has gone completely insane. The cost of a year's worth of education is now $60000, when the cost for comparable universities in the UK is $10000 and in Germany is $0. Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore.

maratd 12y ago
> Just make community college + state universities free for everyone to attend, and we should have no more problem with this debt nonsense anymore. Public colleges are already substantially less than private institutions. I doubt subsidizing them further will have a substantial impact on private tuition. If we stop lending money to pay for education, the colleges will see substantially reduced demand at their inflated price levels and will quickly cut prices to adjust. Then again, they might not. They currently segregate their customers into groups by way of "scholarships" and essentially extract the maximum amount of money they can possibly get. I can't think of another industry where such disgusting behavior is tolerated or even celebrated as generosity.

TeMPOraL 12y ago

Isn't this the same college John Oliver criticized recently for their "quality education"? https://www.youtube.com/watch?v=P8pjd1QEA0c#t=562 https://www.youtube.com/watch?v=P8pjd1QEA0c#t=562 "We went to the museum of Scientology for our psychiatric rotation"...

discardorama 12y ago

"Most Corinthian students cover their tuition by taking out federal and private loans. That debt, it turns out, is far more resilient than Corinthian itself." This here is the problem. If Corinthian can get out from paying its debts, why can't the students?

rcarrigan87 12y ago

Mark Cuban wrote a great post about when colleges start going out of business. As a college grad with a lot of debt I advise everyone to avoid student loans at all costs. It's not worth it and there are always alternatives. http://blogmaverick.com/2013/01/26/will-your-college-go-out-of-business-before-you-graduate/ http://blogmaverick.com/2013/01/26/will-your-college-go-out-...

skizm 12y ago

Did the students get a loan from the college or a bank? Did the bank fail? Can I refuse to pay back my mortgage if my house burns down?

bdcravens 12y ago
There's insurance on your house. Perhaps the same should happen with eduction.
- skizm 12y ago
  My point is just because the thing you bought with your loan money is now useless/worthless doesn't relieve you of your obligation to the bank.
  - bdcravens 12y ago
    In principle, I agree: when I see kids take out tens or hundreds of thousands in loans, and not get a productive career out of it (say the guy who couldn't pass the bar after going to law school), I don't have sympathy when they claim they shouldn't have to pay the loans back. In this situation, however, I believe those not paying are claiming they were deceived (and there are lawsuits as such). This isn't a matter of not paying your loans because your house burned down, as much as not paying your loans because the builder deceived you on the quality. Additionally, these aren't typical bank loans usually, but guaranteed by a quasi-government entity. To a certain degree, this means the government is guaranteeing some set of standards (I can't get a government-backed loan to do a code bootcamp, for example), and these students are banking on the idea that the loans will be forgiven without recourse, or at the very least, shining a light on this school with they are contacted, en masse, for failure to repay.
  - toomuchtodo 12y ago
    Walking away from mortgaged property is extremely easy compared to student loan debt.

bko 12y ago

I think the reason many students put up with increased costs is because they have access to subsidized loans, mainly from the government. The Consumer Financial Protection Bureau estimates that out of the $1.2 trillion in debt, $1 trillion are estimated to be guaranteed or held by the federal government [0] I may be in the minority opinion, but I think college is still pretty affordable. > In 2014-15, average published tuition and fee prices for in-state students at public four-year institutions range from $4,646 in Wyoming and $6,138 in Alaska to $14,419 in Vermont and $14,712 in New Hampshire. [1] CUNY for instance is $6,030 a year [2] The tuition is higher than it has been in the past but attending college is a lot more profitable as well. I know the state school I had attended has raised tuition over the years, but I can't help but look around and think that all the money went into a new stadium ($33 MM), new athletic gym and new (very impressive) dorms. The average student attending an expensive for-profit (less credible) college isn't the same person as someone attending a good state school. A lot of time these colleges attract more marginal students. The payoff for most colleges is still very high and worth the cost. But there should be some cost as to discourage less productive ventures and to have some skin in the game for the student. [0] http://www.consumerfinance.gov/newsroom/student-debt-swells-federal-loans-now-top-a-trillion/ http://www.consumerfinance.gov/newsroom/student-debt-swells-... [1] http://trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-sector-state-time http://trends.collegeboard.org/college-pricing/figures-table... [2] http://www.cuny.edu/admissions/tuition-fees.html http://www.cuny.edu/admissions/tuition-fees.html

remarkEon 12y ago

I really can't stress enough how these for-profit institutions seek to avoid any kind of responsibility otherwise assumed of an institution of higher learning. They consistently take advantage of veterans. Close to home, these companies actively and willfully take advantage of veterans benefits to reap in billions [0]. These schools actively recruit soldiers at military bases, who end up using up a good portion (or all) of their benefit without being able to get a job or before they can transfer it to their children or spouse. They're left with no education benefit, a degree that isn't transferable and, perhaps worst of all, a feeling of failure and embarrassment. PBS did an excellent show on the situation not long ago [1]. The standard argument I hear in favor of these schools is that the situation in the military is different, and a lot of veterans leaving the force already have families so going to a traditional college or university would be difficult or unmanageable. This is true, but distance learning has to become better. [0] http://fortune.com/2014/11/11/gi-bill-for-profit-colleges/ http://fortune.com/2014/11/11/gi-bill-for-profit-colleges/ [1] http://www.pbs.org/newshour/bb/gi-bill-benefitting-profit-colleges-instead-helping-veterans/ http://www.pbs.org/newshour/bb/gi-bill-benefitting-profit-co...

awesome_work_ 12y ago

I think the most important piece of information to come out of this article is "More than a fifth of borrowers of federal student loans go into default, but people who default tend not to announce their status publicly." This, to me, seems extremely high. Does anyone know what the default rate is on other types of loans?