Obama Forgives Student Debt Of 400,000 Americans | Hacker News Reader

Obama Forgives Student Debt Of 400,000 Americans

marketwatch.com

242 pointsrandomname2266 comments

Government-guaranteed loans are a fantastic way to force prices to spiral out of control. The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present.

With income-based repayment, where your loan balance is forgiven after 20 years, there is no limit to how high it can go.

Government-subsidized mortages and mortgage interest deductions have a similarly terrible effect on housing, a basic good that government policy should try to make as cheap as possible. Instead, government policy is to make it as expensive as possible.

The way student loans were before...

No.

Tuition went up to compensate for the removal of state subsidizing tuition. Almost 1:1. In fact, with the removal of state support, we're merely seeing the true costs of school for the first time.

Loans got nutty because of unnecessary privatization and deregulation. But rent seeking, so it was inevitable, right?

Once tuitions were nutty, parents demanded value for their dollar, begatting grade inflation and transmuting dorms into resort hotels, fueling continued rising costs.

Source: Worked in higher ed. This is common knowledge.

(I don't know enough to explain the textbook racket. Collusion?)

mortgage interest deductions have a similarly terrible effect on housing...

No.

Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

Source: Help friends who work on affordable housing policy. This is common knowledge.

In conclusion, yes, simplistic Freedom Markets (tm) explanations are seductive. But they're also mostly wrong. Tuition and loans went bonkers when government pulled out of the business, allowing the predators to take over.

You're missing the forest for the trees. What are ''the true costs of school''? Someone who loves to teach sitting in a classroom teaching. It can be dirt cheap or it can be very expensive. Supply and demand sorts out the details. As more money flowed into the system, administration bloated and became its own entrenched interest group, with very little connection to actual education.[1] Does the UC system need 500 administrators making >$500k year each?[2] As it stands, college for most of my friends was a 4 year social safari interrupted by infrequent periods of intense cramming in between high school and joining the work force. Do you think the average 18-21 year old at a state school is a scholar passionately indulging their love of learning? Almost all education is self education at the end of the day. As soon as we solve for the credentialing/pedigree/signaling problem, online education will destroy a huge amount of offline education and rightly so.

As for the mortgage interest deduction, how wouldn't it boost housing prices? It effectively lowers the mortage rate by your marginal tax bracket which is close to 50% in California. So instead of a 3.5% 30 year rate I'm now below 2%. Cheaper money stimulates borrowing. It doesn't matter how low NIMBYism pushes supply in the face of overwhelming demand, each individual still has a maximum price they can pay, and subsidized interest rates raise that price point.

[1] http://reclaimuc.blogspot.com/2011/09/senior-administrators-...

[2] http://www.latimes.com/local/education/la-me-uc-spending-201...

> Does the UC system need 500 administrators making >$500k year each?

This statistic is incorrect. In 2014, there were 445 UC employees making >$500K/year each. This includes everybody, not just administrators.

You can get a list of them all here [1]. I didn't go through the whole list, but from sampling a few random pages, I'd guess that there are <20 administrators making >$500K. They are mostly medical school professors, some athletic coaches, and, e.g., the Chief Investment Officer. There are also some CFOs and Executive Deans, and maybe I missed something, so feel free to correct me.

[1] https://ucannualwage.ucop.edu/wage/

> This statistic is incorrect. In 2014, there were 445 UC employees making >$500K/year each. This includes everybody, not everybody, not just administrators.

Not the OP, but what you're saying just proves him/her right. You're basically saying that he/she had provided a number with only 10% margin of error (which on the Internets is not bad) and then went all semantics on him/her, I'm talking about the part with the people not being "administrators". For better or for worse you can call a person earning >$500k a janitor on her/his employment papers, but I'm still 99.99% sure that person is still doing highly administrative tasks (like setting up golf matches in his/her google calendar) and not mopping the floors.

And the part where you say that artificially subsidizing a finite product (in this case houses) does not cause its price to go up makes me wish that you're not in any way related to the economics discipline. Because if you were then I'd say that the future does not look bright for students of economics.

There is a vast, non-semantic difference between having 500 rich administrators/functionaries and having 445 employees. How exactly do you hire someone capable of instructing surgeons without paying them like a surgeon? Once you take out the highly skilled/specialist doctors, it's not a very damning list for a vast school system.

I stand corrected. I actually visited https://ucannualwage.ucop.edu/wage/ and played with the search settings a little and found out that out of the 445 employees with earnings >$500k about 380 or so have "prof" in their title, so I guess you're right.

Fact is that the cost of university is still too damn high. If it's not the teachers' salaries then what might the reason be?

Mind you, I'm not directly involved in this as I live half a globe away from the States and I'm a former college dropout now in my mid-30s, I'm just thinking that there are huge opportunity costs that we might pay, as a species, for not letting the brightest people attend University based on intellectual merits alone. I know that there are countless "help-the-poor-attend-university" programs, but, as far as I can tell, in order to be part of one you need make no mistakes, as in you need to pass all the exams in order for the financial help to keep coming (I might be wrong on this). Plus, there's all the bright lower-middle-class people whose parents are "too rich" for their kids to receive any financial help but too poor to afford to pay their kids' university. You risk losing these people's minds big time.

As a solution I would impose only having access to University if you pass an entry exam, and everything to be subsidized by the State. It doesn't matter if your dad is the President of America or the CIA chief, it doesn't matter if your dad has paid $100 million to the University, it doesn't matter if you're white, black, yellow or purple-colored. Only your intellectual ability should count.

The UC system should be paying exactly $0 to football coaches and investment officers. It's an education system. The NFL and Wall Street are perfectly capable of taking care of football and investments without the UC's help.

I don't know about UC, but it's my understanding that in many universities, the football programs pay for themselves and then some.

As for the investment officers, someone has to manage the universities' endowments. Certainly, they could just liquidate their endowments and spend it immediately on, say, urgent needs and tuition reduction. But then when they need to, e.g., renovate a dorm, they will lack the money to do so.

At any decent team this is the case (that football pays for itself, plus the other sports programs). Shit even at my alma mater which was awful (at football), this was still the case, and the head coach brought in like $1m/yr. Lot of money there.

Not enough to pay for that fancy new stadium though...

The fancy new stadium was likely paid for almost entirely with donations, though. Those don't tend to be paid for by the universities.

I think UC would still do well to publicly announce a pay cap. Maybe $1M and say nobody makes above that amount.

Once the superstars are limited to $1M, I think others will fall in line as well. Don't like it? Quit.

just stay in new jersey. we don't want our schools losing more professors to USC and Stanford.

I'm sorry but there's no other way. The cost of education has to come down and that means professors, coaches, and administrators have to pay themselves less.

We're already cutting cost at the lower end of the spectrum with adjuncts. Why not do the same at the top? On second thought $1M is actually too high. It should be lower. Probably a cap of $750k is fairer.

Professors already make less in academia than they would typically make in the industry. I don't think the best of them would stick around if they were handed a 20% pay cut.

Similarly for administrators and coaches, meaningful pay cuts would just push many of them out the door to greener pastures.

The cure for high tuition is unlikely to come just from cutting salaries.

Not just from cutting salaries but cutting salaries shows they are serious about it. I stand by it.

I've hinted at this elsewhere. There is no reason that anyone should be making more than 100x the minimum a full time worker should be making. I'd propose increasing the marginal rate to something obscene like 90% on income above that point. I stand by it as well.

If we are to make college education free of cost, we have to make them cheaper. I draw parallels here between higher education and healthcare. Yes, customer service will become worse in the process. However, I think if we manage expectations, we can do some serious cost-cutting while maintaining a certain minimum standard. This is true in both education and health care. Anyone who aevocates single payer without conceding that the list of options patient/student shrinks is probably not being honest. But this shrinking is OK.

First thing that should shrink is the obnoxious attachment to collegiate athletics. Even if it were true that college athletics is a net positive for a university's balance sheets, I don't think it is a university's place. This is a part of the overall "remove bling" from education. Other efforts could be trying to find ways to make housing less expensive and not as fancy.

Second thing that should shrink is the myriad of regulations from dozens of sources imposed on universities. I didn't know how many things they have to comply to. This is insane.

But coming to point, professors won't quit if wages go down. If they do, that's fine. There are other professors.

I think you're focused on really superficial stuff that isn't going to do much. "Remove bling"? This isn't a fiscal policy. You just don't like athletics, which I guess is fine, but also not very relevant. I personally am not athletic and so those programs did not appeal to me when I was a student, but collegiate athletics have a long history and serve useful purposes.

For the dorms, I don't know where you went to school, but my dorms were pretty basic. When I visited friends at other universities, their dorms were also pretty basic. When I studied abroad in Germany, the student housing was actually nicer than what we have in the US. Could we spend less on dorms? Probably. Would it make a meaningful change in cost? Probably not.

And again, coming back to the idea of cutting salaries, I don't know why you think there is an endless line of potential professors waiting to take jobs for no money. Good professors are valuable and would command high salaries in industry. If the end result of cutting tuition is that education quality declines proportionally, it's probably not worth it.

I also don't know why you're so hung up on the few people who are extremely highly paid. Bloated salaries or not, that group is not large and it's not a major factor in overall cost. Additionally, very few if any professors are in that group.

Not true. This assumption only works when one decides that all professors are equally employable both in colleges and private industry. It also assumes an unlimited number of jobs.

Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

People are quick to bitch and bemoan medical costs from pills to services and pointing overseas "SEE SEE SEE" about how their costs are lower.

Well guess what, education will be even cheaper because the student doesn't have to travel to get the world class education. All that needs to change is regulations which will prevent it.

> Not true. This assumption only works when one decides that all professors are equally employable both in colleges and private industry. It also assumes an unlimited number of jobs.

For highly-paid professors, it's generally true that they are equally employable in private industry. Similarly, for highly-paid professors, there are plenty of available jobs in industry, hence the high pay.

If you disagree, I'd be interested in hearing what professors you believe are simultaneously overpaid in academia and would face difficultly finding industry work with equivalent pay.

> Worse for college professors they have no choice in having their salaries come down because it won't be a decade before college education done online becomes the main alternative. With the pay scales differences across the world being what they are the fact is you will likely have may opportunities for professors in India and elsewhere teach course with the same expertise.

I seriously doubt this is actually going to happen. There are plenty of accredited online universities already and enrollment in traditional universities has not dropped. Online courses mostly provide an option for people who would otherwise be unable to attend. Sure, some people will choose online studies even if they would be able to attend a traditional university, but I expect them to be in the minority.

Also, I don't expect lower professor pay to be a significant cost reduction for online courses. Employing Indian professors instead of American ones will probably not drop the cost to produce an online course significantly, because the costs can be spread across so many students. If anything, I think online courses might strongly favor native speakers because the language barrier is reduced at such a low cost.

> As it stands, college for most of my friends was a 4 year social safari

And that's what costs money, insofar as it raises people's social class and gives them connections. Learning is a trivial cost in comparison, and can be ignored in the calculation; it's something you effectively get "for free" with the price of admission to the social-class-higher-than-yours practicum that is university.

Note that community colleges, which have just as much "learning" but no potential for class-raising, don't have spiralling costs. Community college costs what learning costs.

And yet, despite more and more people getting an education, class stratification getting worse in one of the common talking points. How do you explain that?

The people who are now "getting a [university] education" who previously weren't, are people already in the social upper-middle class, going to upper-middle class universities where they just end up enculturating further to the class they're already in.

People in the upper-middle class will only experience social-class mobility by going to an upper-class university (e.g. one of the Ivies, and even then only certain programs that haven't already been flooded by other upper-middle class entrants.)

Meanwhile, very few people in the lower-middle class go to university; they "get an education" by going to a trade-school or to community college, thus also avoiding enculturation. And people truly in the lower class (e.g. immigrant agricultural workers) don't even consider higher education to be an option, despite government student loan programs being aimed at them (with the explicit goal of enculturation!) more than anyone else.

Generally, though, mobility between any two classes becomes more difficult as the size-ratio between the source and destination class increases, because every place an individual could go to attempt to immerse themselves in the destination class, is already full of other people of the source class attempting the same thing. The previous mobility from lower-middle to upper-middle class has created a bulging upper-middle, which has killed the ability for people to become upper class. (Though it's easier than ever to enculturate to the upper-middle class, this being basically what happens by default when anyone with a lower-middle-class background finds themselves spending a lot of time on the internet—the internet [outside of own-class-reflecting echo chambers like Facebook] being a universally-accessible upper-middle-class microcosm.)

Thank you for posting this - it more or less summed up my thoughts exactly. It should also be noted, however, that these "upper-class universities" are increasingly trying to court the "lower-middle class" by offering extremely generous financial aid (usually full rides) to those who have a household income less than 60-80k/yr–though these students make up the vast minority of those in attendance, though a higher amount than upper-middle class students. The result is a sort of unofficial idea of "If you're not already in the 1%, you soon will be."

Columbia University, for example, has its current tuition at around $70k/yr, which is over 2.5 times the average American individual of $26k/yr. Columbia and its peer institutions rarely offer merit based financial awards, thus incentivizing the wealthy who can afford it and the poor who it's essentially free for, while avoiding a large part of the American middle-class altogether.

Another group of schools, besides the Ivies, that primarily serve the upper class are the prestigious small liberal arts colleges, such as Williams, Pomona, Amherst, Middlebury, etc. These are some of the smallest schools in the country, yet have the largest endowments per capita (Pomona's has the fourth largest endowment per student in the country, for example, at $1.5 million / student, which is above both Princeton and Harvard). Taken in conjunction with ~$65-70k/yr tuitions (and increasing at an average of 5% a year!), the results are institutions that cater primarily toward the upper class yet put forward the idea they server everybody by enrolling a token amount of lower class students (as many admitted students unfortunately discover they cannot afford to attend).

Source: I studied this topic at, yes, one of these very institutions. I believe the entire university system–financing especially–needs vast reform.

Harvard also released an [infographic](http://features.thecrimson.com/2015/senior-survey/) on their graduating class of 2015 "by the numbers"–notably, 2% of the nation earns $250k+/yr, but at Harvard they made up 30% of the class. That statistic is increasing, not decreasing.

It should also be noted that international students are generally not eligible for any financial aid whatsoever through FAFSA (and the "need-blind" admissions process available to domestic students in which these institutions cannot see your financial status in the application process is not available to international students), thus the international students that do attend these institutions are more often than not within the top socioeconomic bracket of their respective country.

(This is a set of notes for future reference, not something anyone should read, ever) my apologies.

Intuitively I agree - but what struck me was what do we mean by "class"?

I can sniff some circular reasoning here.

If we say class is culture - and it's easier to hold a certain set of views (liberal market based, empirical lead?) if one is independnatly wealthy and educated in the above market/science combo.

Then upper middle class is probably the "top" of the tree.

Economic is easy - the UK aristocracy is generally marked out by independant wealth - certainly a number of titles gambled their way out of the aristocracy whereas a title is not needed to be considered upper class (see Branson etc). Perhaps a better term is "establishment"

The upper middle class perhaps is those in the 1% still who must work for income. Doctors perhaps?

I would suggest anyone who has seen their wages increase in real terms in past thirty years gets to stay middle class after that and those stagnating can be "working" class. (Quotes are sarcastic)

If I then suggest that the existence of a billionaire is a symptom of a market failure somewhere, then I am probably arguing that the "upper class" is now a fiction created by market failures - that we can and should erode it till the top of the tree is upper middle class.

For example - is a daughter of the revolution, with a Park Avenue address or two upper class? Or is Barack Obama?

I would argue that a new driver for social mobility would then be the compulsory draft - military or civilian.

I think the best viewpoint I've encountered on what people mean by "class" is this:

Two families are of the same social class if a marriage between them would be unsurprising. Money is a sideshow.

Fussell's 'Class' book, although dated, is a useful guide for many of these questions. And a hilarious read.

Have you written a book or research publications on this topic? I've always wanted an update to Fussell's 'Class' for the internet generations, and this post is as close to that as I've seen. If you know others who have written on the topic, please list them here. Thank you.

Class stratification (social mobility) is becoming worse in the United states. This is not a global first world problem although education has been following similar trends in other first world countries (most notably the UK and Australia)

According to you second link, the UC system has a budget of $27 billion. You could fire all those administrators making over $500k and you wouldn't even save 1% of the annual budget. Is administrative bloat a problem? Sure. But blaming it for the tuition increases we have seen is like blaming the national debt on inefficiencies in the EPA.

That particular statistic is used for effect, and the article admits it's not the biggest problem:

> While big paychecks for those in UC's senior management group — including the president, the chancellors and other top administrators — attract the most attention, they comprise less than 1% of the $27-billion budget, officials say.

> It is the next layer of well-paid administrators that has grown most significantly over the last two decades. From 2004 to 2014, the management and senior professionals ranks swelled by 60%, to about 10,000, UC data show.

There are indirectly related tidbits all over the article and I couldn't find what I'd really like to see: a histogram of administration salaries and another of faculty salaries.

Anyway, here's another unrelated but interesting tidbit from that article:

> Efficiency experts brought in to assess the UC Berkeley bureaucracy a few years ago concluded it was top-heavy. Bain & Co. consultants tallied 11 layers of management between the chancellor and front-line employees, suggesting that the organization had too many bosses. More than half of all managers — about 1,000 — had three or fewer direct reports, and 471 were in charge of exactly one person each.

Isn't it funny that they had to hire top-dollar big-name consultants to find out they have way too many middle managers ... some of these managers should have the time to figure out how many layers of management there are and how silly some of them are. But then again, of course they didn't: more managers results in more politics results in less effective management.

> senior professionals

Do they mean medical professionals? If you actually look at the highest-paid (and $100k+, for that matter) staff lists, there are really a tremendous amount of doctors. That should not be surprising at all, since UCSF, UCLA and UC Davis operate huge hospitals.

It's wildly inappropriate to lump the "senior professionals" in with management. The hospital system, with the exception of the training it provides for the medical schools, is effectively orthogonal to the educational mission of most of the UC system.

Bloat increasing is natural for any growing bureaucracy and the UC system is certainly growing. The article cites enrollment has grown by 77,000 students over the last 15 years. That works out to almost a 50% growth rate (although it was a longer time period than the admin growth rate used). So a 60% growth in middle managers doesn't seem completely unreasonable. I am sure there is plenty of waste there, but once again it isn't nearly enough to explain the type of tuition increases that have happened over recent decades.

Supply and demand sorts out the details.

Maybe.

I place more weight on incentives. Design of the markets. Checks and balances. Transparency and accountability.

need 500 administrators...?

The insufferable waste I witnessed in higher ed is no different than any where else I've worked. Biggest factors are scale and bureaucracies.

As terrible as higher ed is, I'm certain I don't want it to become more business like, assembly line efficient. Whatever magic is to be found in higher ed is because its weird, chaotic, diverse.

As for the mortgage interest deduction, how wouldn't it boost housing prices?

Second order effect.

And one of the most magical things about US higher ed is that it just swallowed 400,000 loans funded by taxpayers without as much as a burp.

Spot on. It's becoming increasingly clear that the student debt bubble will blow up, no differently than the housing bubble.

And just like the housing bubble, the clever ones are going to end up getting Uncle Sugar to pay off their loans, while a large majority will end up 'doing the right thing' to their own disadvantage. Of course, the big banks and financial entities that own these loans will come out just fine.

Then we can move on to the next staple to financialize, perhaps unborn generations since there's not much left.

Higher ed already got their money. The banks got stuffed.

Pretty much spot on I think.

There is a mentality I see in a lot of young people that they think they need someone to teach them. If people can get over this and use something like an interactive and visual web page they can learn much faster and easier than through a lecture or through books.

What about private tuition? Also, every other source, other than your common sense, seems to find the opposite of what you think.

https://fee.org/articles/student-loan-subsidies-cause-almost...

http://www.theatlantic.com/education/archive/2015/05/the-rea...

http://www.forbes.com/sites/timworstall/2015/08/03/increased...

I agree that land use decisions are also an important contributor to the problems in the mortgage market, especially in places like the peninsula. But without federal loan support, the market could not have reached the heights that is has since ultimately people can only afford to pay so much per month. If interest rates are much lower, then you can afford a higher principle amount for the same monthly payment. In a housing market with shortages, this allows prices to be bid higher.

But of course those land use policies are also exactly the kind of first-order thinking about government policy that I decried in my post above.

re The Real Cost of College

Scanned article, will parse it later.

From the hip: Direct != indirect subsidizes and shouldn't be conflated. Direct subsidizes lowers the retail cost.

Outsiders need to understand that, just like business, higher ed has been reducing costs aggressively. Most faculty and staff have been taking it in the teeth. Meanwhile, admins and coaches and select faculty have been getting outsized compensation. No different than any where else.

Edit: If I had to guess, tuition at private institutions went up because it could. Charge what the market will bear. Maintain appearance of a premium quality product. Differentiate oneself from the plebes.

Edit 2: Chewed on the other two articles. Tim Worstall confuses cause and effect. Both he and Alex Tabarrok ignore that tuition costs were just fine before state subsidies (to the institutions) were removed. Drives me nuts. Further, why the American-centric exceptionalism? There are plenty of other nations with a variety of systems. A god-given natural experiment. So we can compare and contrast. Why are their costs and outcomes ignored?

If interest rates are much lower...

Changing access and cost of capital won't free up land to be redeveloped, therefore increasing supply.

You are using the arguments of supply and demand and free market economics where it is convenient, and saying the market fails higher education in other posts where it is convenient. Which is it?

> Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

Affordable housing policy advocates are not an unbiased source for this "common knowledge".

There are piles of cash to be made in affordable housing, in the form of outright grants, tax credits, zoning variances, etc, all in exchange for the creation of a small percentage of permanent rental units that the developer will turn a profit on, indefinitely. Any loss is mitigated by increasing the price of non-affordable units.

This incentivizes government-backed arbitrage opportunities, e.g., by allowing developers to buy land for a lower price based on current zoning, and then (in partnership with the local housing authority) appeal to local planning authorities for variances.

This unsurprisingly a revolving door between government housing entities, local planning boards, development companies, affordable housing tax credit brokerages, and the lobbyists for the above.

Here, for example, the local housing authority is trying to push through a high-density upzoning variance, for a project represented by a former housing authority executive, financially backed by an out-of-state firm specializing in tax credit financing that is one of the primary lobbyists against tax credit reforms that would eliminate their value extracting brokerage position in Missouri:

http://www.stltoday.com/business/local/is-missouri-s-costly-...

Upzoning in high-demand areas increases land value. Period. This raises market entrance costs to a level in which only large development companies can build. They build rental units. The government provides them grants and variances that private home buyers could only dream of. Housing becomes less affordable, not more, and fewer people are able to build up equity.

No contest.

I've met my share of wishful thinkers still pushing for set asides and subsidies. And we also have our share of cheaters. The irony is when those well intentioned set asides get perverted for profit.

But I like to think we're seeing a sea change on the topic. Better data. Broad coalitions. Commitment to finding win/win solutions.

Let's check back together in two years. See if my optimism was rewarded.

Interesting that you want blame everything except the actual major source of expanding costs at colleges: an explosion in the number of administrators and administrative departments. Rising tuition is being spent on bringing more and more aspects of students' lives under the control of college administrators. Scandalously, almost none of the new money has gone to hiring more professors. Something is rotten in the state of higher education and it's the bureaucrats running the colleges, set free from financial reality by heavily-subsidized student loans.

Similar skepticism of the "Freedom Markets (tm)" (Can I license your trademark :)). That said, can't one make the argument that the government providing lots of financing without adequately using the leverage that financing gave to bargain down prices distorted things?

Belated response. US Govt forfeited their leverage. They made two big changes. First, they subsidized higher ed, tuition was set mostly by fiat. Second, they stopped handling student loans, allowed banks to raise interest rates, excluded student loans from bankruptcy, moving all the risks of lending onto the borrower.

Said another way, we used to treat education as a public good and mostly paid for it. Now its a racket for Wall St to bind students in usury.

There are so many other examples in our society. Privatizing prisons. The school to prison pipeline. Privatizing water. War profiteering.

It's just goofball Reaganomics run amok, aka Freedom Markets (tm).

Yeah I'd also add that the mortgage system has been in existence since the New Deal and housing prices across America tracked inflation until recently.

With both education and housing there's a fear of missing out involved, where people see the door to the traditional definition of middle class America slamming shut. So demand ends up being incredibly inelastic because if you don't get in now you're Literally Fucked Forever.

When my boomer parents where young you went to college if you wanted to be an academic or a professional, and if you didn't you'd get a job and buy a reasonably-priced house with a 15 year mortgage in one of the thousands of economically successful towns that dotted this country.

> Source: Worked in higher ed. This is common knowledge.

> Source: Help friends who work on affordable housing policy. This is common knowledge.

You might be surprised how much of what's common knowledge isn't even vaguely related to the truth.

The tuition rise is no where even closely explained by states providing less funding. the simplest explanation is that the near freedom of money allows many unqualified people to enter college with no hope of completing the courses and colleges are not held to any standard with regards to them actually getting the degree.

The simplest solution. Treat it like the government treats medicade and medicare. Pay a set amount of dollars per course hour determined by course. Higher rates are set based on the needs of the course and degree, meaning you are likely to have an easier time getting a loan to be a teacher than if you wanted to study art. Set maximum costs on course materials as well.

I am quite certain a very large number of colleges would come up with degree programs to fit under the rules to continue to be able to accept students with federal loans.

"mortgage interest deductions have a similarly terrible effect on housing...

No.

Scarcity caused by NIMBY land use policy is driving up housing costs. The fix is aggressive upzoning.

Source: Help friends who work on affordable housing policy. This is common knowledge."

Genuine question - do you mean for this to apply to municipalities that are not San Fransisco? While downtowns are getting more dense across the U.S., not every city is quite so opposed to new construction. San Fransisco is a weird corner-case in terms of housing.

CA State Legislature thought the problem common enough to make a comprehensive report. Seattle and Vancouver BC are similarly afflicted.

I just read an opinion piece, which now I can't find (grrr), that argued the land-use issue needs to be solved at the state level. Their tweak to the law, which I guess is common, is to permit multi-family redevelopment every where, thereby letting the (re)developers (and the fabled market) decide. If I find the article, I'll update this comment.

As for me, I'm content with everyone properly identifying cause and effect, then acting accordingly. I don't care if SF or Seattle fixes their messes. Because if it gets too bad, people and companies will go somewhere else. So ultimately its a self-correcting problem. Alas, the lag in adjustment is painful. For instance, finding suitable housing for so many homeless. Well, okay, I guess I'm conflicted. I know I'll be fine. I have options. But for those less fortunate, ya, aggressive upzoning everywhere as needed, so should be fast tracked.

So what do you think is the solution to bringing prices back down to reasonable amounts?

Doesn't matter, the objective of bringing prices back down is politically untenable in most developed countries, so the means to accomplish it are never discussed.

If it happens by market crash, well, it's another matter. This requires no planned political action, just continuation of status quo.

Your post is economically illiterate and no economist in their right mind would claim that school tuition spike is the result of privatization and deregulation. Car loans are privatized too. That didn't drive up the prices for cars because the "predators" control the industry.

In fact, economists show that government backed loans have driven up tuition prices[1]

[1] http://www.nber.org/chapters/c13711.pdf

"As column 4 demonstrates, the demand shocks- which consist mostly of changes in nancial aid-account for the lion's share of the higher tuition. Specifically, with demand shocks alone, equilibrium tuition rises by 102%, almost fully matching the 106% from the benchmark. By contrast, with all factors present except the demand shocks (column 7), net tuition only rises by 16%."

This, a thousand times.

What a lot of people do not understand, is that when demand for an asset goes down, prices come down and adjust to market (although in real-estate, the process takes a bit longer).

The best way to promote home ownership is to make sure people can get decent paying jobs. Promote economic growth and stop outsourcing jobs.

People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters. I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries. There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development, of which foreign investment is one of the best sources.

I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US. Once this is accomplished (and the challenges in front of us for doing so are enormous!), outsourced jobs won't be a problem.

Rather than being opposed to trade and globalization (which are, frankly, unstoppable) we should be focused on mitigating losses for those affected. Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.

> I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries.

They aren't. But the primary concern of U.S. government policy should be the well-being of U.S. citizens. Otherwise why have a country?

In the same vein: citizens of other countries are just as entitled to health care as U.S. citizens. That doesn't mean the U.S. government should expand Medicaid/Medicare to non-citizens.

> People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters.

Or, alternatively, they have a right-sized vision of what the size of their stewardship is. While I certainly think a state as powerful as the US should consider the impacts of its actions elsewhere carefully, and even act benevolently outside its borders where it can, on principle the idea that societies focus on managing general welfare within seems like a pretty good one.

> I want to see a world where there aren't poor countries and rich countries, but rather a global economy where someone born in (e.g.) Africa has opportunity and education similar to someone born in the US.

I'm interested in that too. Whether barrier-free global-focus trade is the way doesn't seem to me to be a settled question.

https://books.google.com/books?id=xEmKBAAAQBAJ&pg=PA192&lpg=...

> Rather than being opposed to trade and globalization

Almost nobody is "opposed to trade." Some people may be in favor limits on trade (if you don't believe that there should be assassination markets, you're one of them). Similarly, when it comes to globalization, few people want to make any border entirely non-porous (except as a weapon, as the US has with Cuba), but there's arguments such as Schweitzer's that are compelling.

> (which are, frankly, unstoppable)

It's certainly not possible to absolutely ban any activity humans might want to engage in for any reason. It's entirely possible to discourage many things substantially enough that the scope/frequency becomes limited.

> we should be focused on mitigating losses for those affected.

This is a grand idea.

> Erecting barriers to trade will only make US industry uncompetitive, our economy smaller, and those same workers, ultimately, worse off.

Any barrier? Or just some?

> I don't see any particular reason why workers in the US are more entitled to good jobs than workers in other countries.

There are things you can only do in the presence of inequality because inequality is necessary for specialization. If we require everyone in the world to have the same education then it averages out to something less than a high school education, which means we have no scientists or engineers or doctors.

Once you allow specialization it becomes advantageous to have geographic concentrations. This happens naturally -- Silicon Valley (computers), Detroit (cars), New York (finance), etc.

Exporting jobs increases inefficiency. People working on the same projects have to contend with timezone differences, people waste more time traveling, it's harder for the engineers to talk to the factory workers, etc.

The thing that makes more sense is to give US citizenship to promising engineers in other countries and let them move here, and let other countries specialize in other things (like agriculture or mining).

If exporting jobs is inefficient, let people try to do it and fail - of course they will get outcompeted by the people who aren't exporting jobs, right?

Your comment gives an extremely weak argument in favor of regulation - paraphrased, it seems like you're saying "companies are stupid and don't know how to make money, so we should regulate them to force them to be more profitable". It's hard to say that sentence with a straight face :-)

Businesses, in particular corporations, only operate in the context of some government.

Plenty of folks who think competition is the best and that competition brings out the best in everything still believe that you still have to first organize markets and make sure they are competitive, i.e. It is not the natural state of things in each and every realm of life. We do not force companies to be profitable, we force them to play by a set of rules that we agree allows society to extract the most value from the companies rather than the other way around.

> If exporting jobs is inefficient, let people try to do it and fail - of course they will get outcompeted by the people who aren't exporting jobs, right?

Not if China manipulates currency to overcome the effect.

Fine - let them give the US cheap shit. They're subsidizing American consumers. By the way, the sentence you quoted was rhetorical - I don't actually believe that doing all manufacturing in America is actually productive, profitable, useful or desirable.

Go back and read the first post. Think about what happens if all the manufacturing happens in China.

If they get to the point where they can start designing things there then they have the advantage.

What America should be doing is highly promoting domestic automated manufacturing. Even if it created exactly zero manufacturing jobs, having the factory here would provide a local advantage. Local mills would have a cost advantage because the materials wouldn't have to be shipped halfway across the world and back. Product designers could actually see how their products are being made and improve the process without international air travel, etc.

...let other countries specialize in other things (like agriculture or mining).

What if USA has more comparative advantage in agriculture and mineral resource extraction than in the industries you favor? Everywhere I go in Asia, restaurants brag about beef from USA, and many commodities are exported. Saudi is more concerned about frackers on the Great Plains than about the state oil ministries of Russia or Venezuela, which is why they crashed the petro market last year rather than e.g. five years ago.

You are arguing against Last Place Aversion [0] and even if your argument makes sense, I think it simply will not succeed.

If you imagine everyone in the world has a "quality of life" score and this is distributed normally, then outsourcing jobs tends to help people in the bottom quartile, at the expense of people in the second quartile.

It is like pinching up a little bit of the probability mass living way out in the left tail, and folding it over into the second quartile region. Some of the people in the second quartile have to be displaced (in an ordinal sense) to the left, thus losing status.

We'd like to pretend like material well-being of, say, impoverished third-worlders, matters more than social pecking order status of poor-but-mostly-OK first worlders. Would you like to go first? Would you like to ensure your children have no access to decent education or a college with a social network that could raise their social status? Yeah, sure, you'll have acceptable food and someone will throw you some afterthough scraps in terms of feigned medical care. You'll have a middling life, mostly unpleasant, lots of mental health issues and lots of risk to you and your family of getting caught up in substance abuse or drugs, but you'll live into your 60s or 70s before you die.

Status really impacts health. Status affects your attitude about your own health, your willingness and access to seek help. It's not solely about material resource.

So I certainly sympathize. Why aren't we extracting wealth from the top quartile as a means for delivering aid to third world workers? Why instead are we extracting wealth from the second quartile to pay for the first quartile?

In this sense, your comment comes off as a little bit naive and insensitive. I'm sure down to brass tacks that people living in the second quartile understand what you are saying and feel compassion for people who have it even worse.

But how can you ask them to lay down and agree to be the lowest status group willingly? Yes, please outsource my already-degrading-and-menial job, reducing me into the bottom quartile of a slightly right-translated distribution. We're all slightly better off in absolute material terms, but now I'm worse off in relative status terms (which really, physically, affects my health and opportunity).

It's ... complicated.

[0] < http://www.nber.org/papers/w17234 >

That's the small view of humanity again. Nobody in the US is in the bottom quartile. You also see this as a zero-sum game: a process of extracting wealth from someone and handing it to someone else. Trade increases the overall amount of wealth. It's important for policy to recognize, as I said, that there are winners and losers and mitigate the negative effects for the losers. But this can come from the new wealth generated by the trade. Remember: this is new wealth, created entirely from nothing, that did not exist before.

> Nobody in the US is in the bottom quartile.

Did you read my comment? I said they are in the second quartile, and they foot the bill for a lot of the ways that wealth improvement reaches people in the first quartile.

Although, across the part of the country where I am from, Appalachia, there actually are people in the bottom quartile, especially after you take addiction-related QALY metrics into account. I'd argue your knee-jerk "just cause they are inside America's borders means they don't have it comparably bad" attitude, which sounds like you're just regurgitating some Giving What We Can blog post or something, is more of the small view.

> You also see this as a zero-sum game: a process of extracting wealth from someone and handing it to someone else. Trade increases the overall amount of wealth.

You really did not read my comment. I said that we translate the whole distribution to the right (that is the part about making everyone materially better off) but by doing so we shuffle some people from the second quartile into the first quartile, or at least shuffle them to lowered status within the second quartile.

In terms of ordinal status, it is, by definition, a zero-sum game. If, no matter how much total wealth there is, the thing people care about is where they rank in wealth, then it is zero sum. You can't manufacture more ranks. And, the evidence (which you don't seem interested in) really does suggest that it is the rank that people care about (especially when you are ranked second-to-last), even if preserving your rank means denying yourself better overall conditions from a material point of view.

But people don't only care about rank in wealth. I think you're focusing too much on that one aspect. A rising tide lifting all boats has a lot more impact to how nice it is to live in the world than a short-term shuffling of social status.

I think relative to the kinds of wealth increases the bottom 50% of the world is permitted to realize (e.g. access to ad-drenched web services and internet devices, entertainment consumables, heavily processed food, clearly-second-class medical care), the loss in status matters more.

People might be willing to accept a lessened station in life if the offsetting overall increases in wealth that they get to see are significant in their lives. The fact that at least 50% of the population is more concerned with rank than with overall well-being is, for me, a shameful indictment of how little we actually use societal wealth to improve impoverished lives to any degree, let alone a degree that would justify setting aside primal Last Place Aversion.

I agree with your assessment of how it moves the area around, and people's reluctance for them to be the ones to 'distribute' their wealth as opposed to the next guy up,but I just want to point out that even though there is a lot of press against how little (percent-wise) the top quartile pay in taxes (1%-ers), the top 5% paid 57% of all tax revenue in 2011. The top 1% paid 35% of all tax revenue in 2011.

Disclaimer: I am very, very far from the top 25%!

I don't see why these figures are considered useful in this context. The total amount of tax revenue needs to be larger (and more efficiently distributed), and that increase in tax revenue needs to come about almost exclusively through increased taxation of those hoarding wealth.

"The top 5% paid 57% ..." makes it sound like they are doing more than their fair share, but that's a gross mistake. It doesn't matter what the raw percentage is without also looking at how much of the income the op 5% took. If they take 99% of the total income, but only pay 57% of the tax revenue, it still amounts to a deep unfairness. (I'm not saying that tax revenue paid has to be 1:1 with income, only that taking 99% income while paying for 57% of the tax revenue is deeply unfair in favor of that wealthy 5%).

>People who are against outsourcing of jobs because it hurts workers have what appears to me to be a small view of the set of humanity that matters.

Then get rid of nation states, allow complete freedom of movement, eliminate all the world's militaries, and use the money saved to improve living and working conditions for everyone on the planet.

>There is no force more powerful for improving the quality of life and well-being of _billions_ of people than economic development

And no force more likely to destroy quality of life and well-being of everyone than predatory nationalist capitalism.

You can't have this one both ways.

Oh - and the US economy is already incredibly uncompetitive, with vast surplus capacity. Why is moving that capacity to China and India better than using the full economic capacities of both China, India, and the US?

Frankly, to a representative elected by a certain set of humanity, only one set of humanity should matter.

Not if that set of humanity's interests extend to the rest of humanity. A politician elected by a country consisting of purely rational altruists should be very interested in global trade, because it serves the interests of his constituents.

Also, stop subsidizing low interest rates and the mortgage interest tax deduction. These are further distortions in the housing market.

Absolutely.

Many of my friends look at me as if I just lost my mind - "but, but... low interest rates are good for everybody, right?".

It is an uphill battle, but I keep at it :-)

By low interest rates, do you mean Federal Funds, or the bond market?

My impression is that mortgage rates tend to track the 10 year bond rate, given most people refi/sell before then. These and long term rates have been on a multi-decade decline. I'm not sure how much influence recent policy has had.

Federal GSEs (Fannie, Freddie, FHA) and the Federal Reserve's QE activities (artificially propping up housing).

Demand is a function of price. Prices for a good or service only go down reliably as a result of decreases in demand if supply is constant. If supply isn't constant, then the change in price is a function of the fixed versus variable costs of production, and the price elasticity of demand for the product. If fixed costs dominate the equation, prices will go down so producers can recoup their capital investment; on the other hand, if variable costs dominate the equation and the price elasticity of demand for the product is low, the price may not change, or may even increase.

I think you mean 'offshoring.' Eliminating outsourcing would close down every software consultancy, independent accounting firm and outside counsel firm.

As far as 'offshoring' -- I can't afford to pay onshore engineers $200+ and hour by hiring a consultancy for a short term project. So that project would never happen. With offshoring, I can afford to pay to get the project built. Once the project is built and actually generating revenue, then I can afford to hire onshore employees for the long term.

Don't be so quick to dismiss offshoring as a 'job killer' because there's a good chance that if it couldn't be done cheaply, it just wouldn't be done at all. Those things that are built by offshore teams-- those are going to result in dozens of eventual salespeople, marketing people as well as money for infrastructure and future development. All the the goes to zero if I can't use a lower cost offshore team at the outset. Most of us building software products don't have the luxury of a VC cousin in the incestuous circle jerk that is Silicon Valley venture capital. Some of us build companies using money we saved.

That concept certainly pisses off the Bernie and Trump voters who think labor protectionism is a good thing, but we don't live in the 1950s where creating a business involved having a factory and 'workers.' Creating a business should be easy and do By things like restricting offshoring is pretty close to the $15 minimum wage in sheer economic stupidity. If I can't offshore, then I will just do nothing. That capital just sits on the sidelines when it could be actually creating wealth. People seem to think jobs are created by huge companies with million dollar CEOs. That isn't the case. It's the small business owner that does most of the job creating -- not the big companies and not the government. It's the man or woman that puts their capital at risk to try to build something. We should be making that process easier. Start fast, fail fast. Yet when people talk about eliminating outsourcing and offshoring, they really don't think about that. They see business as some 'Dr. Evil' entity. The see the economy like fatalist Marxists: finite classes of workers and "the rich." The 'rich' are only looking to exploit people and keep then oppressed. That's bullshit 19th century thinking.

We need to make offshoring even easier! That will spur economic growth.

Slightly tangential, but a good eye opener for me was the Cash for Clunkers program...

To perform an average rebate of $4000 per car, cost the taxpayers and industry $24,000 per car.

Anything the government gets into, with some notable exceptions (e.g., highway construction in the 60s), ends up with little net gains and usually a 5x overrun in costs.

The $24,000 is per "stimulated" car, the 125,000 sales that Edmunds.com decided were added by the program, not per rebated car.

The actual spend on the 690,000 rebated vehicles was much closer to $4,000 per.

Citation for this because the analysis I read says that gap was ~$2000 per car but about $0.10 per job saved.

http://web.archive.org/web/20090927101631/http://www.freep.c...

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...

http://www.brookings.edu/research/papers/2013/10/cash-for-cl...

"Almost anything would have been better stimulus than 'Cash for Clunkers'."

"Cash for Clunkers a near-total failure."

"Obama's Cash for Clunkers harmed the industry it was meant to help."

You have to take the overall effect into it.

But that might not be the best of examples. I would have rather mentioned a more touchy subject (the ACA), but that has not gone well for me in the past here.

Interesting quotations you included - where did they come from? I didn't find them in the report you cited. The following is from the conclusion of the Brookings report you cited,

"The evidence suggests that the program did indeed incentivize the sale of more fuel efficient vehicles by pulling sales forward from the near-term future. This resulted in a small and short-lived increase in production, GDP, and job creation. However, the implied cost per job created was much higher than alternative fiscal stimulus policies. ... The CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol."

They aren't saying it was great, but they are not saying it was a failure or that it harmed the industry.

The first link provided above is a Google search URL for the terms "cash for clunkers cost".

Those are article quotes from the front page results.

On the one hand a detailed report and the other a bunch of random quotes.

I think I'll trust Brookings.

Those quotes have details behind them. Such as that sales where mostly all shifted in from the future, less cars where sold overall (hurting the industry), the fuel economy savings resulted in mere single-digit days of gasoline saved over the lifetime of the vehicles sold, and a bunch of other not so great things.

Either way, the Brookings report ends with this quote - "In the event of a future economic recession, we would not recommend repeating the CARS program."

There is a reason for that.

I fail to understand the logic behind all of this. Why not give the money to the universities directly? It seems super inefficient to create a whole industry around funding university education. Even more so when this system needs to be backed by government bailout guarantees.

With 'efficient' I mean converting a large percentage of high school kids into university degrees / or better a highly skilled work force. Handing >$10^6 in debt to these kids doesn't seem appealing at all. One might argue that the economic pressure of the debt increases the overall productivity of a workforce. However, doesn't it rather create a predominantly sad workforce?

> The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present.

Given zero competition, maybe. With multiple schools all competing to be the ones to take your money, and also competing to get the most lucrative future alumni, you have a complex market where there exists downward price pressure. In the end, given two relatively equivalent schools the cheaper school will have a better pick of students.

Market forces will intervene eventually, but in the subsidized-student-loan regime, that has been some time coming. ISTM the impasse won't be broken by cheaper colleges, but rather by private firms providing rigorous standardized testing. If a MOOC student feels her 18 months of online study is equivalent to a four-year degree, and has the test results that prove it, smart employers will embrace the future.

I can't wait until somebody comes up with a lifetime subscription for higher education, observing where business everywhere is going...

On the other hand, government guarantees expand the available credit to consumers who would be just as likely to be shut out of homeownership (for example) by higher interest rates, save for a thunderous government program to ensure housing for every citizen. With the exception of the subprime mortgage crisis, it is usually a good way to help people become homeowners without too much taxpayer burden or onerous bureaucratic micromanagement.

That's exactly the sort of thinking that leads to this sort of problem. When you consider only first-order effects, many very bad ideas seem like a good idea. When you consider that all policy choices have second-order effects and unintended consequences, you can make more intelligent policy decisions.

Any policy can result in negative n-order effects as time passes.

Postwar housing policy mostly worked well (if you were white). The global population was smaller and the devastation of Europe and Japan made America the sole economic superpower. So what makes sense (and actually gets hammered out by perennially bickering politicians) in the 50s might make sense today, it might not. But nothing in politics is correct forever.

Just saying "consider second-order effects" without concrete evidence or a plan to mitigate changes in technology/laws/markets/social norms doesn't really add value.

You're making my point for me :-)

It is vital to consider higher-order effects and unintended consequences if you want to make good public policy. And not just "prove there are negative consequences:" it is incumbent on policy makers to understand these effects before enacting policy.

Consider price controls, such as rent control. Problem: prices are too high. Solution: legislate lower prices. First-order effect: prices go down. Hooray! Second-order effect: shortages. Third-order effect: decline in investment and maintenance. End result after many years can be disastrous. You get Venezuela.

In a scope of logic alone, yes, you are absolutely correct.

An example I like to raise regularly is the farm subsidies put in place by the Roosevelt Administration to prevent overproduction. Was there a better way for farms to stay in business and for food to be affordable to consumers? Maybe. But this way worked to solve problems created by the Great Depression.

Now I'm sure as you know, farm subsidies now are sweeter than high fructose corn syrup. There is even sitting republican senator who makes millions from the federal government paying him to not plant cotton. Few can argue this policy still works as intended, but it so politically locked-in that it's almost impossible to shake out. Same with the tons of unnecessary military hardware and property sitting around solely because representatives in those districts want to be re-elected by their core constituencies.

To me the problem isn't about getting it right the first time, it's about changing something that has outlived its usefulness when powerful beneficiaries fight to keep the wasteful status quo.

A metaphor: bandages are useful for flesh wounds, but after the wound has healed the bandage must be removed and the skin must be cleaned or it will rot.

It seems we are in violent agreement :-)

That doesn't account for the access driven by the decrease in the price of housing that comes from removing the artificial credit subsidy. What you might call a "second-order" effect, though because it's an effect of "doing nothing" it's both more natural and more efficient.

If anything, driving up prices(by subsidizing credit) such that houses can only be bought on credit and not outright does the most to increase housing inequities! Cuz we all know how that shit works :/

How so? As far as I can tell, the mortgage interest tax deduction only "benefits" those buying houses expensive enough for the interest to exceed the standard deduction (or who itemize for other reasons).

And it doesn't even benefit them, because all buyers in the market can afford x% "more house" and hence the housing gets bid up by exactly that amount.

while what you say makes intuitive sense, at least for the schools I want to go to? Tuition is extremely cheap for what it is.

http://financialaid.stanford.edu/undergrad/budget/

Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas. And while I've never owned a Tesla (or a college degree) I do imagine an undergrad from Stanford would be more fun than two Teslas, and it would certainly impress people more.

If you are an area computer nerd, even one without any degree at all, two teslas is a reasonable thing to own on what you can expect to get paid.

Berkeley? If you are an Engineer with no business ambitions, it's very nearly as good as Stanford (and some would argue better, but the majority view seems to be 'very nearly as good but not quite') Berkeley is under $15K/yr

http://financialaid.berkeley.edu/cost-attendance

I would be super happy to pay twice that, if they'd let me in.

That's the thing, I don't qualify for either of those institutions; and I can't imagine anyone who could compete with me job wise having a hard time paying for either one.

Of course, I understand that economics are vastly different outside of the computer industry, but I can't really speak to that, because I've never lived in that world.

I also think that the balance gets way different as you move down the rankings; I think that most of the colleges that would accept someone like me aren't worth the opportunity cost of the time I'd spend not working, at least if we're talking about economics. People are going to be way more impressed by four years at google or facebook than they will be impressed by a degree from a mid to low end school.

"Seriously, $50K/yr tuition for Stanford? my undergrad would cost less than two Teslas."

This might be a nitpick, but this is a bad analogy. If you have $50k * 4 years sitting around to pay for it, sure, it's probably worth it. That's not how it works, though.

You have a giant pool of 17-18 year old kids with 0 assets and minimal skills. These kids, in general, need to borrow to go to school. If they have to borrow $50k/year for 4 years, that's $200k in loans, plus they graduate with accumulated interest over those 4 years.

The better analogy would be selling an 18 year old kid getting a loan for a $200k car that they get in 4 years. Where this isn't accurate is that after 4 years, you can repossess the car if they don't make payments. With a college degree, there is no tangible asset. If the kid decides after 4 years that he wants a bicycle, he can turn in the car. If after 4 years at Stanford, a person decides to do something that doesn't pay the bills, now what do you do?

And, since the loan is up-front, all of this risk has to be accounted for. Right now it means saying that the loans can't (easily) be discharged. To me this seems somewhat fair, with the argument being that nobody forced the kid to go to Stanford (pay $200k for the Porsche), they could have gone to some state school (the used honda civic).

My point is that it's extraordinarily cheap compared to what I'd expect to pay for a "best in the world" anything else, not that it's affordable.

It would be crazy, I think, to expect a 'best in the world' education without it costing a substantial amount of money.

I'm not saying it's fair to a kid making that decision, and personally, I think that bankruptcy laws are central to civilization. I'm just saying that it's amazing how cheap a 'best in the world' education is.

Certainly, I don't oppose the government just paying for colleges; after all, that's a big part of why Berkeley is so cheaper. I'm just saying that running a good school takes money, and the fact that the best in the world schools (at least by my perception) are so cheap is a counterpoint to this idea that costs are spiraling out of control.

Well, by definition, very few people are best in the world. And we still want most of the rest to get a college education. Not to mention "the best in the world" schools tend to attract students from very wealthy families, who don't need tuition support as much.

>Well, by definition, very few people are best in the world. And we still want most of the rest to get a college education.

Why is that? speaking as someone who doesn't have a college education, I'm fairly certain I would be less wealthy, by a good bit, had I gone to a mediocre school rather than no school at all. I mean, there are non-monetary benefits to school, too, and while I'm looking to go to college now - I just wasn't ready at 17.

It seems to me like the problem is the number of jobs that look for a degree even though college is little more than a class filter for them.

Costs have increased a ton, so unless the quality has also increased a ton, it doesn't seem crazy to expect a "best in the world" education for substantially less money.

And the whole non-computer world matters a lot, here. Most people go their entire lives without ever having the means to buy two high-end cars. Start paying that when you're 18 and the cost of financing goes up substantially, too.

>You have a giant pool of 17-18 year old kids with 0 assets and minimal skills.

No you don't. People who get charged $50k for Stanford (and other top-ranked schools) have enormous family income/wealth, and for better or worse the social contract of our system is that parents contribute to their children's education commensurate to their ability to pay. The only people stuck borrowing the full amount are those whose parents could pay but refuse to.

You do get stuck borrowing that kind of money if you go to an expensive but not very good private school (how much help is available to middle-class kids scales with quality). A middle-class kid borrowing through a state flagship school (who generally gets no assistance) is more like $100k.

Great, but how is that a positive? Stanford is a top level university, but it's simply out of reach for those who cannot afford it. University admissions should be purely merit based in my opinion.

Many elite schools practice need-blind admissions - Harvard, Yale, Princeton, etc. Financial standing has no merit on admissions, and if you can get in, you get to attend regardless of the financial support you require.

Its a great system, but it unfortunately falls apart for the less-elite schools which don't have massive endowments to rely on.

University admissions are need-blind when you're playing at this level, and qualified students from families who can't afford it are given aid packages that make it free or nearly free.

Compared to many other institutions, Stanford does a good job of dealing with that issue. 85% of students receive some form of financial aid. There is no family financial burden for incomes $60k/year and lower.

Stanford is not a fantastic example. It is very rare that a Stanford degree or UCB degree doesn't pay off

Stanford also heavily reduces total cost of attendance for people that make middle class salaries.

Stanford (or other big name schools) are probably a bad example, because if you get accepted, they'll ensure that you can attend regardless of your financial situation. Most "big name" schools have instituted programs in the last couple of years whereby they'll cover your tuition without (or with very minimal) student loans. For example https://nobarriers.uchicago.edu/

The problem is the the rest of the schools out there - 50K might be on the high end, but 20-30K is quite common, and having attended those, you might end up with a huge loan and a worthless degree.

That's exactly right: https://collegescorecard.ed.gov/school/?243744-Stanford-Univ...

Expand the "Costs" section and you can see that if your family income is less than $100K, you're probably going to pay a small fraction of $50K.

If your parents make a lot of money but won't pay for college, you get stuck with the full bill. One of the many big wholes in the financial aid game.

Anytime a pervasive worldwide, nationwide, or statewide problem has been reduced to a fairly rare intra-family problem, that's still a great thing.

Is it fairly rare? I know a lot of upper middle class friends who's parents had 0 savings and could not help at all with college, but by income guidelines they were expected to contribute a lot.

I have no data on how rare it is. My anecdotes suggest that it's more a matter of how the family prioritizes and allocates the income they have. There is a very tight spot in the curve where you make a "good income" but your associated lifestyle expenses are such that all of that income is allocated before any is earmarked for college. I still view that as a choice, though.

Oh it's a choice.. but it is a choice of the parent screwing the kid.

College is one of the first real things you do as an adult. i.e. you may sign up for giant loans you owe the rest of your life. Silly that the kid is responsible for the loan side, but if he has irresponsible parents he gets no financial aid.

If the alternative was every kid got money just based on the parents saying they wouldn't pay, it would take me less than one clock cycle to conclude I wouldn't pay for my kids either...

It's just not that impressive. If you want to work at a startup in SF, your output and immediate impact are most important.

Why would I want to work late hours to take some kid out of college under my wing and clean up his mess?

OR I can take the guy with open source, who can demonstrate his coding chops in a pairing session, that will have an immediate impact to the project?

If you think the prestige of an A-List school is going to get you on the fast track to a job, save your 200K, start contributing to some major open projects, and build a real portfolio.

> It's just not that impressive. If you want to work at a startup in SF, your output and immediate impact are most important.

First, my experience is that startups are good for 'entry level work' - they pay a lot less than the big companies do. Unless you are at the very top (and in that case, a degree from an elite school matters a lot to VC, I am told) you are better off at a larger company, unless you don't care about money. And SF is... well, it's SF. Especially if you are like me, an unstylish, overweight nerd[1], you are much more of a 'cultural fit' in the valley. (it's stupid that sort of thing matters, but it does.)

Next? at least at the big companies, while a degree in general doesn't make all that much difference (I don't have a degree myself, and I'm at google right now, though I'm a contractor. I don't think a degree from a easy to get into school would make any difference to my pay rate) - a degree from Stanford or Berkeley is a different sort of thing. Half the big companies in the valley came out of Stanford, and we still use little bits of BSD every day. Lots of people at the big companies were educated at those schools, but almost none of them are down with the marginal folks, the contractors like me. (to be clear, I'm only marginal at one of the top-tier big companies like google. At Yahoo, for instance, I was pretty good. Not the best of the best, certainly, but well out of the marginal category I am in now. I suspect I might be good enough to be an employee at Facebook or Linkedin, even, though that has yet to be tested. Everything is relative, especially standards.)

[1]https://prgmr.com/~lsc/images/luke_at_2972.png

It's misleading to quote only the tuition number. Most people will have to pay for lodging, food, and other necessities, so those numbers are the better ones to use.

If you didn't go to college for those 4-ish years, you'd still have to pay for lodging, food, and other necessities, so it depends on what you're trying to analyze which number is better to use.

Okay, but if you didn't go to college those 4 years, you'd have a full-time job to pay for those things. For most people, 4 years of college implies 4 years of not working, or 4 years of low paying part time jobs.

A lot of people cover those costs with student loan money, so they're relevant to a conversation about student loans.

Agreed, but IMO they're not relevant to a more general "cost of college is less than 2 Teslas" conversation, which is why there are two different treatments that are reasonable.

As with medicine, college is now an industry with third-party payment and no third-party control.

In other words, the student (patient) and the university (doctor/hospital/pharmacy) agree to do business, and the government (insurance company) pays regardless of the price.

That obviously creates major price distortions. Expect college to get a lot more expensive before it gets cheaper.

The obvious solution would be a private lending market. Such a market exists for credit-worthy students that go to prestigious universities in majors that are economical. SoFi runs such a program and can often undercut the government which doesn't care too much about the credit quality of the students. The problem is that private companies such as SoFi will never be competitive for higher risk borrowers as long as the government is giving them fairly generous terms. Also, the nice thing is that bankruptcy is a possibility for those that lend through private institutions rather than the government.

The obvious solution would be a private lending market.

No, actually the obvious solution - at least in most of the western world - is more public Universities.

Now, since that goes against the american way of thinking you must come up with other solutions that involve private enterprises, but it's surely not the obvious solution.

As you say, such a market today is restricted to certain classes of students and certain majors which are economical.

But without government intervention, why would this suddenly also work for majors which are not economical (but relevant for society) or for students which have a less good probability of success?

My fear is that an exclusively private program could in the end kill those majors and/or keep a lot of people from studying that are still able to do so today.

It's not that it doesn't work for less economical majors in less competitive schools. It's just that the market is crowded out by the availability of credit from government loans. If there were no government loans or were less restricted, banks would offer credit to those less credit worthy, however the interest rates would be higher (higher than those the government now offers).

So incoming freshmen might see options like this:

State school, engineering 5% interest

State school, lib arts 8% interest

Private school, engineering 7%

Private school, lib arts 12%

This would also be a huge signal in terms of assessing the value of a degree from a school. I'm not saying that those with higher interest rates are less desirable, but in terms of an investment, they are a riskier. The interest rates would be mostly determined by historical loan performance of those that went to those schools and majored in those fields.

That would certainly make economic sense for the lenders. But in effect it would impose a penalty for certain "bad-performing" majors. The criteria by which loans are granted, rejected or are given a higher interest rate would also be intransparent and not subject to public discussion.

More importantly, it would demand the highest interest rates from the group of students that will presumably have the most trouble paying them. You say yourself that the interest rates would probably be higher than they are today. That sounds to me as if it would make crippling student debt more likely, not less.

> But in effect it would impose a penalty for certain "bad-performing" majors.

Is that necessarily a bad thing? I think it'd be a great idea for the market to send you signals that paying $50k for an art history degree is probably a terrible idea.

And if we as a society believe that art history really is important, then we should subsidize jobs that employ art history majors. But the student loan part of the process can sort itself out privately.

I think it'd be a great idea for the market to send you signals that paying $50k for an art history degree is probably a terrible idea.

That's a hard question. It gets into the much larger matter of whether the market is a good arbiter of what has social and cultural value, or whether the government needs to step in and subsidise certain things because it really does know better than the wisdom of the masses, who will always prefer Cheetos and ballgames to polenta and Shakespeare.

I'm no libertarian: there are definitely plenty of cases of market failure, where the market fails to provide enough of goods with positive societal and cultural externalities. Art history might even be one of them.

But, as pc2g4d notes, the right way to deal with that is for the government to directly stimulate demand for art history. Not to give cheap loans for students to study art history and then live the rest of their lives in debt.

Personally, I don't buy that the world needs more music and film majors. We seem to have far more music and film than we need already. I can understand why economically irrational young people might think it's fun to spend 4 years watching films, but I don't think we should be subsidizing that choice.

the right way to deal with that is for the government to directly stimulate demand for art history. Not to give cheap loans for students to study art history and then live the rest of their lives in debt.

I would certainly concur with that. I think we're in agreement.

> the government needs to step in and subsidise certain things

It does — but in the right place. Pay a lot to librarians, professors and historians, and then they'll be able to pay commercial rates for their education and banks will offer better loan terms.

Requiring universities to underwrite part of student loans would increase their incentive to retain students, and to keep prices from rising too rapidly.

> not economical (but relevant for society)

That's the problem you should be fixing. Not giving out education for free, but make education that is relevant for society be economical.

> or for students which have a less good probability of success?

Well, to put it frankly, why would you want to finance their education in the first place? Regardless of who's paying, a bank or a government, it just doesn't make a lot of sense.

This happens to any good or service that everyone needs but that we stubbornly refuse to fund publically.

I'm not sure that everyone needs to go to college. Does a plumber, or electrician, or some other craftsperson that can learn via mentoring really need to spend fours at university? I don't really think so.

That's always been my beef with the "college for everyone" movements. That instantly de-values jobs that don't require a college education.

Craft/vocational schools are a different type of college that should also be funded.

I'd wager to say though that jobs without college education are much more likely to be outsourced/automated than jobs with one. (The opposite is not true - a lot of jobs with college education might be automated as well)

But anyway, your statement may be true but how do you determine who "needs" to go to college and who doesn't?

If I (as a European) remember correctly, one of the US core values is the pursuit of happiness. That would imply to me that everyone should at least be given the chance to go to college - whether or not they decide to go (and graduate) is a different question.

How do you outsource an electrician, or a carpenter?

I don't disagree with this, necessarily. I disagree with rhetoric that implies if you don't go to college, you are a second class citizen.

How do you outsource an electrician, or a carpenter?

I have no idea. But a few years ago, you could have said the same about truck or taxi drivers - and now it seems feasible that those jobs will be automated away in ten years.

For electricians, you could imagine that IoT/home automation tech will change a lot: Home electrics could become more complex and more locked-down, requiring additional qualifications. In the worst case, independent electricians could find themselves in a similar situation that independent car repair shops are today.

Or a company like TaskRabbit could employ their own electricians/plumbers/carpenters/etc... (at worse conditions) and decide to roll up the market.

Those are wild guesses. But my point is that jobs may change quickly in the future. having a broad education and additional qualifications gives you a better chance to deal with "disruption" in your area.

I disagree with rhetoric that implies if you don't go to college, you are a second class citizen.

That's not what I wanted to tell. But I don't think we are in a position to decide that. And I don't think it's correct to simply assume that college education plays no role and to conclude from that assumption that it's OK if certain people never get the choice to go to college.

I would see this going in the direction of some auto mechanics--that you have to be certified by a particular company in order to work on their equipment. But, yes, as you point out, independent electricians, as a vocation, aren't going anywhere soon. There are too many homes (particularly in the east) with very old wiring.

Why are those jobs more likely to be automated than the jobs college graduates take? Are college graduates better able to deal with disruption, or do employers simply presume they are?

The rough framing business has gotten a lot more productive over the years. Nail guns and now precut lumber or factory made sub-assemblies or whatever.

A computer can do a lot of the pre-cutting.

I think this problem comes from something a little deeper. The U.S. is still very classist, giving prestige to "white collar" jobs, and considering "blue collar" work to be inferior. I think college education is often thought of as a means to "white collar" work.

Anecdotally, I think these tides may be slowly changing. I feel like a lot of people are beginning to see the value in craft (bakers, mechanics, carpenters, beer brewers, etc.)

For the residential construction industry, a lot more could be done in manufactured housing. Not necessarily complete mobile homes, but major chunks of real houses could be build in automated factories perhaps located in foreign countries. Then it only takes a few workers on the construction site to bolt the chunks together. This is already being done to some extent and will increase as building codes are updated and traditional construction practices die off.

You are confused about the word "need". People need food. But that doesn't mean caviar and champagne.

People need education. They don't need an expensive social club that happens to teach.

A need would be something more like a community college and less like Harvard. Or maybe if you are going into research, community college + graduate school at university.

And that's a very generous definition of need.

At the risk of being a pedant, people don't need education either, it's just a very effective way of improving their quality of life. In particular, further education (after high school) - including community college - definitely isn't needed by any one individual (maybe it's needed by society, but that's different).

(Personal experience tells me that champagne improves my quality of life, though I don't have a further education experience to compare it to.)

> This happens to any good or service that everyone needs but that we stubbornly refuse to fund publically.

It also happens to any good or service we decide to fund publicly: the civil servants' unions which provide it insure that their members capture as much money as they can.

Providing it publicly doesn't at all mean that it will be provided cheaply.

No, most items which people want or need are provided through private exchange, and the prices do not spiral out of control. Examples of this include computers, televisions, food, and clothing.

How does housing fit into this view ?

Housing that is artificially controlled by government loan interest rates, or by local government ensuring new housing doesn't get built?

Like transportation?

Surely you have heard of public transit?

Public transit is actually a very good example. The government is funding a service, which then has to compete with other providers. What the government does not do is pay for all transport, regardless of price.

An analogy in education would be, government funds a certain jumber of public, free or low-cost universities, but you can also pay more to go to a better, private school (without the government paying/guaranteeing for it).

Yes, that seems like a great idea! The government should fund local universities throughout the country to ensure that cheap education is available for anyone who wants it. These low-cost universities should be in communities everywhere.

Jokes aside, what we really should do is get government out of the business of paying for private education. In theory, joint public and private efforts sound good. In practice, they have all the flaws of both the private and public sectors and end up being inefficient, ineffective, and expensive. (cf. housing, military contractors, etc.)

> In practice, they have all the flaws of both the private and public sectors and end up being inefficient, ineffective, and expensive. (cf. housing, military contractors, etc.)

Depends in which practice. In Europe (e.g. Slovenia), public universities are reasonably good, cheap (free), and serve the majority of the population. In the UK, I think council housing was a great idea - until they started selling it off (i.e. privatizing it).

I'm not sure you understand what I was referring to. Public-private partnerships are where the government works in concert with private enterprise to do something (such as paying for it, while the enterprise actually does the work).

Public universities are simply public. There's no problem with them and they can in fact be both good and cheap.

> In the UK, I think council housing was a great idea - until they started selling it off (i.e. privatizing it).

Exactly. If the government wants to operate public housing, that's fine. The problem is when the government starts giving private enterprises control of the housing and the opportunity to make profits while government still foots the bill.

Aha, so we agree. I thought that you were being sarcastic in the first part of your post.

Both. I was being sarcastic because there already is a low-cost community college system in the US. We just need to allow them to offer bachelor's degrees.

This title is incredibly misleading. All the Obama administration is doing is providing a streamlined process to people who are already eligible to have their debt forgiven.

For the people moaning about "wealth redistribution" or wasting taxpayer money: These are people who are already unable to repay their loans. If anything this will save money since it will cut down the overhead from the government garnishing social security checks to repay its self (which would be laughable if it wasn't happening to real people).

Everyone is so high up on their soap box they can't seem to make out the text of the article. Has nothing to do with new monies being distributed. This is just the government proactively filing out the paperwork for currently eligible people.

Of course if you read these comments its obvious forgiving loans to the disabled is going to skyrocket education prices. /s

"already eligible to have their debt forgiven"

Without checking their documentation through the normal process.

Their documentation has already been checked by the Social Security Administration.

An agency that is in the middle of a scandal involving fraudulent disability adjudications: http://www.washingtontimes.com/news/2016/apr/11/social-secur...

Education is cheap. Teachers aren't often paid very much, good books and other materials are usually not very expensive, and a building is just a building. Labs can be pricey, but only required for some subjects.

So universities are like expensive social clubs that build your network and enhance your social standing, and they also happen to teach. Remember that when it becomes a "need" that should be "accessible to everyone".

The community college system is great. Cheap, available to everyone, and high quality teaching (in my experience). Why not allow them to handle education up to a bachelor's degree and universities can handle the functions of research and undergraduate social club for people who can pay?

One compromise approach would be to deny federal loans (or undischargable private student loans) for university until they have completed all the relevant classes at a community college (possibly with loans).

(And no, I don't think community college should be free. I think that will destroy them.)

I almost agree, but this: universities are like expensive social clubs, I think glosses over the source of their unique position.

Their monopoly comes from them being the de facto certification authority (not just de-facto - many professions have statutory licensing requirements, making them a government-enforced authority). You don't (normally) go to university to get an education, you go to get a degree.

Universities will grant you the degree, but they require you to buy their in-house very very expensive education packages first, whether or not you need them. If I could ace every final exam tomorrow, I'd still have to pay for all the courses, for all that totally superfluous education, before they'd certify me.

This will not change until universities are no longer both the certification authority and the education provider. Only then will they have to actually compete on whether they are (as they claim) the most cost-effective way of being educated to a required standard.

There's legal restrictions on other forms of competing for jobs, which creates a vacuum that higher education fills.

Consider IQ. It's very relevant for job performance, particularly entry-level. Companies will generally get sued if they try to directly measure and test IQ of job applicants.

On the other hand, companies are generally allowed to look at which university you went to. Those universities make admissions decisions, in part, by looking at your SAT score. That SAT score is highly correlated with general intelligence.

So, as a hiring manager, you have a choice between, say, a Stanford graduate and someone who went to an average state school. You can guess the relative IQ of the applicants, and should have a preference over them.

The funny thing is that this hiring preference is completely independent of anything that Stanford does, outside of its admissions department. It could literally do nothing but put the kind of people who get accepted into Stanford into a room together, and you'd still want to preferentially hire them.

This makes no sense. Companies routinely use SAT scores in hiring. And even if they didn't, a school is under the same anti-discrimination laws (ADA, less relevant ADEA).

> Companies will generally get sued

Presumably you can back this up with cases. The USSC ruling in Griggs vs Duke Power [1] is pretty clear.

IQ isn't used because it is a dubious measure, not 'very relevant' for anything. Actually useful metrics can be and are used.

Your broader point is correct: colleges are, of course, forms of signalling. But IQ is a undifferentiated example. 'Top' schools mostly screen on the basis of wealth and social class. But my point is not about 'top' schools specifically, 99% of graduates are not at Stanford, despite what the valley tries to imply.

[1] http://caselaw.findlaw.com/us-supreme-court/401/424.html

IIRC the company can prove ahead of time that IQ is related to job performance, and then they are allowed to use IQ as a way to select candidates.

That depends on what you mean by "allowed". "Will beat a discrimination lawsuit" is a different standard than "will get sued for discrimination".

That's why the trick is to get into Stanford and drop out your first semester. You get the signaling for free. :)

That universities are expensive social clubs, and have a monopoly on the certification process are not mutually exclusive. The certification is a stamp of approval from the expensive social club. The value of certifications vary wildly depending on how exclusive the social club.

Boy are those debtors going to get a surprise when the 1099 comes for forgiven debt. (they mention trying to eliminate the tax burden for the disability folks, but no mention of anybody else.)

Edit: Or in plain english- the IRS thinks forgiven debt is income.

This is specifically addressed in the article:

Eligible borrowers who do decide to take advantage of the discharge option should be aware that the forgiven debt may be considered taxable income. The Obama administration asked Congress in its 2017 budget proposal to get rid of the tax penalties for disability discharges, but meanwhile borrowers may find themselves paying taxes on the forgiven loans.

They might be able to legislate that away as well though, i.e. funds that schools can prove they've received as payment of tuition and other approved things (book?) to be tax exempt.

The discrepancy (i.e. funds used to travel to Europe for fun) instead of paying for courses, will become income.

Sure, but it will literally take an act of Congress to cause an exemption.

The only time I can think of it happening previously was during the housing meltdown. Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. It was waived for a year or two. (There was no attempting for "how" the money was spent. So loading up on toys and not paying the mortgage was a strategy that got rewarded (assuming you enjoy the stress of default.))

Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle.

Heh! If only! It depends on whether your equity is positive. If by chance you owe more on your house than it's worth (i.e. the outstanding principal is not satisfied by the foreclosure sale), there are only about ~11 states in which one can simply walk away. The rest allow a lender to sue you for the difference:

http://www.nolo.com/legal-encyclopedia/whats-the-difference-...

That's currently happening to me here in Atlanta. I bought a $160K condo at the top of the bubble in May 2007, right before the first wave of subprime-related Fed rate cuts. Because it was a relatively high-interest loan (good for May 2007, when Fed rates were at their peak, but laughable three months later), I still owed $140K on it when I chose to default in 2014-15, and when it was foreclosed in summer 2015, it was sold for $85K. I'm currently being sued by the lender(s) for the $55K.

Fair enough, and there's an additional level of complication here in CA: The original loan is non-recourse, but a refinance is recourse. So a lot of folks did not fully understand that the offer to refinance an underwater home at a low interest rate was probably worse than just walking away.

I think it used to be rare for filing of deficiency suits, so my sympathies on your situation.

Considering my very negative asset picture, my attorney was very surprised that I was sued, let alone for the full deficiency. He wasn't expecting that.

I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags), and put me in the "probably can pay us" bucket. Oh, if only they knew how wrong that assumption is. This is one unintended consequence of having to present a successful image to the world for marketing purposes; it makes your creditors think you got Gs.

> I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags)

That's a good guess imo. One side effect of the housing bubble is that banks decimated their loan-recovery units on the way up (because how would a loan ever go bad when prices are rocketing? You just force a sale. So lay off most of the recovery personnel.)

As a consequence, when the market went south the recovery efforts were second rate, which probably explains why the bank is wasting its time going after you. But you knew that. :)

In any case, good luck to you.

Yeah, I just don't understand the justice of this scheme. Not to sound like I've got a grudge to bear or a sob story -- it is what it is, and I generally own my mistakes in life -- but, academically: I was barely 21 years old when I got the condo, barely six months at qualifying income history, < 24 months of credit history, hardly any money down. I was definitely a beneficiary of Bubblicious underwriting conditions.

With the proviso that nobody foresaw the housing crisis in its eventual form, how is it reasonable to impute 100% of the risk for the real estate market going south on me? Who had the macroeconomic models and computers to evaluate the property risk? The bank. Who ended up with the actual condo in hand, in the end? The bank. Who had the actuarial data to evaluate me as a borrower? The bank. Who got 6.5% APR on one loan and 8.25% APR on the other for 6-7 years? The bank.

So, why is it that the bank gets the upside of all of that, and I just get a $55K lawsuit? I would not dispute the notion that I should bear some risk for the value of the collateral, but, all of it? How does that make any sense?

> With the proviso that nobody foresaw the housing crisis in its eventual form

Believe it or not, there were a bunch of us that did and took action. See The Big Short for some other examples.

Of course, nobody with a conflict of interest managed to see it (Ben Bernanke, Fed Chair, Mark Zandi, Economist at S&P which was rating the trash AAA).

That you can miss predicting the biggest economic event in three generations and still have a job as an economist is a testament to how broken that field is.

> How does that make any sense?

Absolutely zero. And the fact that nobody is doing time for what happened is itself a crime.

/rant, deep breaths.

Yeah, well, sounds like you and I go on the same rant. I'm not even ranting because I'm an aggrieved deficiency defendant; it's just the principle of the thing that offends me, if you can believe that, utterly unrelated to my personal financial liability. Nobody in my position should be getting boned from all sides simultaneously when the banking sector, enabled by the easy-money Fed, caused the whole phenomenon.

Of course, an aggravating factor in this case is that Atlanta was understood to have a massive glut of condo development even before the subprime price collapse. That's why condos in Atlanta still haven't recovered to anywhere near pre-crisis levels, unlike freestanding houses. As of last summer, my unit was worth 48% less than I paid for it. The point being, I was paying $1400/mo in mortgage (mostly interest) (+$300-$400/mo in HOA dues!). A qualified buyer can finance my place for $85K at like $350/mo now! :-) And I'm the one getting sued.

IRS part of the US Treasury, an executive dept. But yeah, I guess it doesn't mean that POTUS can just make up random new laws under guise of executive orders. It seems Congress and Judicial have powers to override / counter-legislate

They don't just think it is. It _is_ (and should be!)

Glad to see our government reaching out to folks eligible for help that may not realize it. If anything, this doesn't go far enough. Student loan debt should be able to be discharged in bankruptcies!

Maybe, maybe not. If you restrict it too far, loans won't be made to people who need it. What bank wants to lend $100k to a student who is going to graduate, declare bankruptcy, then get a $150k/year job with no liabilities? Obviously it's a contrived example, but the real trick of all this is lending money to someone with no assets. Somehow you have to pay for those who can't pay on their own: either interest rates go up, number of loans goes down--neither of which is particularly good outcomes.

bankruptcy isn't exactly a get out of jail free card

I'm not an expert in this area, but I suspect if you're interested in qualifying for a mortgage in the future, bankruptcy is something you should think twice about

I'm not opposed to student debt having somewhat different standing from other types of debt in bankruptcy proceedings

but I think playing with the mechanics of what moving around the standing of student debt in bankruptcy proceedings would do, is probably a fruitful avenue to explore as a society

----------------

I'm not sure making it harder to take out 150-200K in student debt might not be a step in the right direction, even if that's politically hard

A bankruptcy can only remain on a consumer's credit report for 10 years. And even within that period, if the consumer pays other debts on time then after a few years a bankruptcy will have only a minor impact on credit score. So for someone who graduates from college at age 22 with $150K in student debt it would be economically rational to immediately file bankruptcy and discharge the debt. At worst he would have to wait until age 32 to qualify for a mortgage, and probably not even that long. The government shouldn't encourage this. We need to find ways to prevent students from needing to borrow so much in first place.

> Somehow you have to pay for those who can't pay on their own: either interest rates go up, number of loans goes down--neither of which is particularly good outcomes.

This presumes that college prices exist in a vacuum and that if less money is available colleges won't lower prices. I mean, in the short run the market isn't very flexible, but in the long run it is.

Pretending that college education won't respond to market forces is just as foolish as pretending that anything else won't.

You're using an "at equilibrium" argument.

The things you described might take 10-20+ years. Between lenders tightening up and college prices coming down, you have a generation of poor people that can't go to college.

> The things you described might take 10-20+ years. Between lenders tightening up and college prices coming down, you have a generation of poor people that can't go to college.

And so...?

Not being flippant. But if an entire generation of poor kids doesn't go to college, doesn't that mean employers have to figure out other ways to measure probability of success?

What if that generation takes online self-directed courses? What if that generation turns out to be way more self-starting and independent? What if that turns out to be the greatest thing to happen since the early 1900's when "make factory workers" became our educational mantra?

Honestly, I could see this being a great thing.

> Not being flippant. But if an entire generation of poor kids doesn't go to college, doesn't that mean employers have to figure out other ways to measure probability of success?

To an extent yes, but in many situations the easier solution will be to not consider the poor kids and just hire the kids who could afford to go to university. I.e. how it was in years gone by, and not a desirable outcome - but maybe it would be different now in the tech age we live in.

Less loans means less people go to college and the price drops. If you think college is overrated and expensive, that might be a good thing.

I think both of the outcomes you suggest, rates up and number of loans down is likely. This would pretty much have a direct impact on the cost of tuition as well it seems, which you seem to have left out of the list.

Bank can delay payments for few years to avoid that scenario: no payments -> no bankruptcy.

I have a theory that a properly functioning "mercantile capitalist" system requires debt jubilees at regular intervals. Hammurabi was on to something with debt jubilees and writing the law in the common tongue instead of the priests tongue.

Translation: money got redistributed from net tax payers to net tax non-payers.

That's a funny way of saying "people who are disabled are no longer going to be shaken down to pay student loans they have no way of paying."

I have my doubts about how many of these "disabled" are really "disabled". Certainly some are. Certainly some are not.

Ah yes, remember: the poor people have your money: http://www.ibtimes.com/panama-papers-corporations-shifted-ha...

Better we wash away a bit of fiat we shouldn't have then screw people who have already been screwed enough by being disabled.

No it didn't. Student loans are a wildly lucrative business. The DoE originates something like $110B in student loans EVERY YEAR and charges between 3-7% interest on it.

The DoE could eat the cost of this without even noticing.

110B * .05 = 5.5 Billion theoretical net profit on a year's loans.

This forgiveness costs 7.7 billion so I think they probably would notice.

They originate that many per year. So that's $5.5B per year for 20+ years. At any given time, they should have income for 20+ years worth of originations, right? Obviously, this situation is more complicated since they couldn't pay.

They lent out much less in previous years, climbing from ~$15B in 2000 to a peak of around ~115B by 2011, and declining steadily since. This makes sense because private lenders controlled a healthy portion of the market before 2011.

Not net profit, ?gross profit?

The US government doesn't have those billions lying around with no ideas about how to make money with it. It has to borrow it. Interest rates for US bonds aren't high at the moment, but they aren't zero, either.

And as others mentioned, these are the bad loans: those that people do not have and likely never will have the money to pay back or pay interest on.

Because of that, this is more a decision to do the government's accounting differently than a decision to spend money.

"All translators are traitors." -- Italian proverb.

Well, "Traduttore, traditore" is a Tuscan proverb -- which has been translated! Oh, the irony.

It works on so many levels.

Well duh. Isn't the other way around literally impossible?

Who is eating this loss? Government? Individual tax payers? Someone or some entity must be losing this $7.7 billion.

Well, since the federal government appears to be making a sizable profit off of their student loan business, I'd say that this $7.7B will just come off their "balance sheet".

http://www.politifact.com/wisconsin/statements/2015/oct/01/e...

A federal law was passed in 2010 that required all student to originate from the DoE, giving them a monopoly on the juicy, high interest, high balance, zero risk loans given out to millions of Americans each year. Because of this, the DoE rakes in billions a year in profits from student loan interest.

So this $7.7 could hit their bottom line and barely move it. http://www.bloomberg.com/news/articles/2015-12-11/a-144-000-...

It's possible that this was the first step in a plan to gradually unwind the student loan crisis. I'm sure that changing the repayment rules while commercial lenders owned most of the student loan debt would cause a massive backlash.

Sallie Mae or US Treasury - I am sure the banks would be made whole again. I am of mixed views here, because a Student Loan is technically is a permanent burden unlike other loans.

Federal student loans are guaranteed by federal government. So the federal government is losing the $7.7 billion.

Which means us, the taxpayers.

But do we, the voters, think it's worth it? I think it is, personally. Of course it would be nice to move toward cheaper education, but I'm OK with this forgiveness of debt.

There should never have been any debt in the first place. Most of Western Europe provides education for free. Those societies understand that a lifetime of taxes more than adequately repays any debt. Little of the rorting from "education providers" we see her in Australia as well.

If fascist corporatism didn't ruin capitalism things may have been different. But as it stands governments have a much better track record to deliver good education outcomes than corporates. And that's saying much.

There are laws in some countries barring governments from declaring welfare schemes in an election year. I hope this is not Election year pandering.

Last I checked, Obama is not running for re-election, and it'd be hard to spin this as a democratic party decision.

Also, he's enforcing a current law (loan forgiveness for total disability), not making a new one.

This may be a new thing in US or perhaps the motivations are benign. Where I come from every election cycle starts with a parade of sops and welfare schemes targeting "weaker sections". Its hard not to be cynical about such things, irrespective of the party affiliation or leadership.

I think it's more he's trying to get some stuff done before he leaves

Obama's not up for re-election.

Misleading title per usual. The program to discharge loans of disabled people has always been there. Just made the process easier so more people are aware of the program.

Makes more sense to me to allow bankruptcy to apply to student loan debt than to add even more rules and and exceptions to the laws.

There should be a cap on goverment guaranteed loan, perhaps $20k.

There are already lifetime and per-year limits on DoE loans.

Everyone is created equal, and for those who aren't, the government will make it so.

I don't have a problem with forgiveness for people who are actually disabled. The problem is that in modern America, disability has become a catch-all for anyone who can't find a job they want. With the right lawyer, minor inconveniences will get you classified as disabled.

NPR did a great feature explaining the rise of disability as a catch-all welfare tool: http://apps.npr.org/unfit-for-work/

It's nice to see the paperwork hassle removed for something like this, but the cynic in me can't help but think of the bank executives all across the country popping corks on champagne over the multibillion dollar lump sum settlement on loans that would have otherwise only trickled repayments in as people manually filed paperwork. Essentially this means they're earning millions on the billions that they can now reinvest immediately.

These are federal loans.

My understanding is that there is a significant chunk of federal student loan debt still owned by banks, and the older debt (pre 2010) would be more likely to be in default due to permanent injury/disability.

I found https://www.tuition.io/blog/2011/11/so-who-the-heck-owns-my-...

>Guarantor. Up until 2010, many federal loans were issued via the FFEL program, where private commercial lenders (i.e., banks) issued federally-guaranteed loans. An act of Congress in 2010 eliminated the FFEL program, so now all federal loans are issued directly by the U.S. Department of Education’s Direct lending program.

So no banks were at risk anyway, everything was guaranteed by the feds.

Federal student loans are zero risk to banks under all circumstances since they cannot be discharged in bankruptcy and the government guarantees the loan.

I am glad this measure exists for the disabled Americans being shaken down to pay down loans they cannot pay or have dissolved in bankruptcy.

However, as a professional with student loans, I will be furious until the day I pay off my final loan at the 6.55% I am paying. I could get a car for cheaper. And it is doubly ridiculous that federal loans can be farmed out to private companies, which, spoiler alert, exist to make profits, not an educated workforce!

As much as I would love to stop paying $300 every month (and every tax refund till 2020), I am not that distressed about paying back an expensive and lucrative education. However, the use of private companies charging usurious rates is simply wrong.

> However, as a professional with student loans, I will be furious until the day I pay off my final loan at the 6.55% I am paying. I could get a car for cheaper.

And you should be able to get a car (or house!) for cheaper because those are items that can be sold to cover the outstanding loan balance. Secured credit is always cheaper.

It'd be one thing if student loans were true unsecured debt but they're not. The government backs most student loans (even private ones) and they are not dismissible through bankruptcy. So, in some ways they're more "secure" than a car/house/etc.

https://enlightenme.com/secured-and-unsecured-debt/ (there is a mountain of other resources on student loan debt and how it differs)

So should I try and sell my experience in a Shakespeare class on the cheap? My professor was pretty terrible.

It is crazy. At minimum, student loans ought to be capped at prime + 1%. I don't agree with giving away a completely free higher education, but something like this makes much more sense. Make sure the student has some skin in the game, yet doesn't have an oppressive burden to bear for the next 20-30 years.

That would make the lender lose money.

> I am glad this measure exists for the disabled Americans being shaken down

Silly hyperbole. They're simply being asked to pay for a product they consumed.

> the use of private companies charging usurious rates is simply wrong.

Sounds like your complaint is less with "usury" than with private enterprise.

Lending comes with inherent risk: if you lend out money, there's a chance that you'll never get it back. That's part of why interest is paid on debt.

Of course. But in this case, this debt is non-dischargeable, so the lender (the government!) is asserting its right under the law--a law that the student should have been aware of before rushing off to expensive, no-name liberal arts university.

This doesn't apply only to expensive universities. Or no-name universities. Or liberal arts universities. Or universities that people "rushed" to (that's a new one on me - how long does one have to delay their higher education before you deem it "not rushing"?). More to the point: "the law" clearly says that you don't have to pay your loans if you're disabled.

> This doesn't apply only to expensive universities.

In order for a university to saddle students with crushing debt, it must almost certainly be both a.) expensive b.) unhelpful for career prospects. This points to private liberal-arts colleges and for-profit diploma mills (though the latter are a lesser part of the problem; they are cheaper and enroll nearly 40% fewer students [1]).

> More to the point: "the law" clearly says that you don't have to pay your loans if you're disabled.

I'm not suggesting the law is being violated. What's offensive is that borrowers are being encouraged to default, _regardless of delinquency status_; the majority are current on their loans! The administration is actively seeking to maximize loss to the taxpayer.

[1] http://nces.ed.gov/programs/coe/indicator_cha.asp

To continue the theme, this doesn't only apply to "crushing" debt. As you mentioned, most borrowers are current on their payments. There's nothing to suggest that this forgiveness applies to more liberal art schools or more expensive schools (except ones that were cheap enough to not needed a loan in the first place).

Your second point is a good one, but since these people were deemed "fully disabled" by a doctor, it seems likely to me that these people would find it difficult to service the loans at some point.

Otherwise manageable debt can become crushing with the onset of a disability. And one's career prospects can take something of a dive.

Correct, my discomfort with government functions being farmed out to private corporations which add cost and no value clearly indicates that I am a red-faced Commie.

WTF. What ever happened to if your able, then you can work. Wow.

I know it was tucked way down in the second sentence, but hey:

> The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven.

I'd like to know how they are identified. Is it just because they've checked a box along the way?

I'm relatively certain these people will not be required to submit a doctor's written diagnosis of whatever causes their total and permanent disability.

It will probably be more like the gov sends a form to a list of people (aggregated somehow), and if they fill it out and return it, then they get to legally avoid their loan obligations.

The article says that these people were identified by asking the Social Security department who in a list of people with outstanding college loans had already been diagnosed by a doctor with a permanent disability. They're basically taking out a huge pain in the ass of these peoples' lives in having to fight for this.

That is also explained in the article. They matched loan data with Social Security disability data.

From other discussions elsewhere, in order to qualify for this designation, it seems as if you have to have a significant disability that permanently disables you. Eg. It's not enough just to lose an arm and a leg, you have to be disabled in such a way that (current) prosthetics cannot restore your ability to work.

Of course, those are the standards/rules/regulations, but knowing the vast corruption within the US .gov, what actually happens is probably a different story.

This is specifically for people who are completely disabled, can't work, and are _already_ eligible to have their loans dismissed. All it does is reduce the amount of paperwork required.

This applies to people who can and do continue to work. You just need an SSI status that isn't likely to be resolved within X period of time. I believe depression and anxiety disorders are the most common cause of lifetime disability. Here's a comment from a Reddit thread yesterday, which mirrors my experience:

https://www.reddit.com/r/news/comments/4eij5y/obama_to_forgi...

I have friends from high school who are on SSI for depression and continue to work for extra income. They're mostly lazy and none of them live what we'd think of as awesome lives. But I wouldn't in a million years think of them as anything close to permanently disabled. If someone put foot to ass they'd be capable of supporting themselves and probably better off and happier in the long run for it (which is a whole different discussion entirely).

My experience is that a great many people with the type of depression and anxiety disorders that get them placed on SSI are really not capable of holding a full time job. Many of them are prone to emotional outbursts, can't follow simple directions, engage in self-sabotage, can't keep appointments, have bizarre delusions about the way the world works, and are chronically addicted to drugs and/or alcohol. They might be able to do occasional part time stuff on a freelance basis, but they are not long term employable. In the past such people would end up in skid row or locked away in a mental health facility.

To put it another way, I consider myself extremely lazy. Yet as much as I hate working, there's no way in hell I'd trade having a job for the hopeless subsistence existence of an SSI recipient. We're talking less than $20k/yr even in a high cost of living state. One is not allowed to save more than $2,000. If someone's judgment is so impaired that they see this as a fruitful voluntary life plan, then the workforce is better off without them, in my opinion.

This aligns with my experience and observations as well. The other thing is, with the evisceration of "welfare" (AFDC) and its replacement with TANF in the Clinton years,

http://www.theatlantic.com/business/archive/2016/04/the-end-...

... SSI disability benefits have basically become the new "welfare", for those "lucky" enough to qualify. As you rightly noted, barring a real physical injury, the most probable pathway for the largest number of people involves psychiatric and emotional issues.

I'm not one of these right-wing "just get a jerb!1" populists, nor am I alleging widespread fraud. I don't doubt for a second that most disability benefit recipients really do have psychiatric encumbrances to work. Your account just happens to be a situation to which I've been repeatedly exposed:

> They're mostly lazy and none of them live what we'd think of as awesome lives. But I wouldn't in a million years think of them as anything close to permanently disabled. If someone put foot to ass they'd be capable of supporting themselves and probably better off and happier in the long run...

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