U.S. To Forgive at Least $108B in Student Debt in Coming Years
wsj.com
wsj.com
From the article, for the 8 million people currently in default the average outstanding balance is < $10,000. For the people enrolled in the income-based repayment plan the average outstanding balance is > $67,000. So it seems if the marginal cost of borrowing more is 0, people are going to borrow more.
I think the real story is that it's difficult to have government subsidies for students without putting some form of price controls on the schools. What we see in practice is that the subsidies cost the government (which is fine -- that's what a subsidy is) but the value is being captured by the school, not the student.
1) The universities obtained massive loans to build fancy new buildings and that cost is simply being passed on to students.
2) The ease to obtain educational loans prevents universities from having any sort of revenue constraints.
Constraints breed innovation. If there are no constraints, the universities have no incentive to reduce costs.
But it's also true that the costs of employing professional workers has increased, primarily in the guise of health care premiums. There are more parties involved in this chain than just a university and students. A health insurance company (or any service company) may be able to increase premiums knowing the university has access to easy money from students.
And a public university (or any public institution) rarely has the option of laying people off and hiring ones with the right skills in order to maximize value. Universities are subject to so much political scrutiny that more popular options like hiring freezes or pay raise freezes are preferred, leading to this bizarre attrition that makes it difficult to get value out of your most expensive resource: faculty and staff.
https://priceonomics.com/static/images/college-one/Yearly_Tu...
Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.
They are not, but they offer a very different set of problems. In that situation buildings are not the issue, but inflated tuition before loans. I appreciated the government coming down on for profit institutions and would definitely like to see more scrutiny of private colleges in regards to loans.
>Also, if these institutions are interested in "maximizing value" then they should be perusing modified MOOCs (online course + office hours and on-site testing). They are not.
That's just not true. Plenty of institutions are exploring these or using them, either to reach students that are not local or to teach local students. My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students).
The other issue that comes up with MOOCs -- at least where I am -- is that students who might go to a local community college or small university are going to larger institutions in state because they can take courses online. That leads to a great deal of political hostility towards the large institutions.
In California, they kinda bricked the online courses (at the time). You would get no credit for the course if it was within your major. The material was also somewhat simplified. Also, the fact that you took an online course was looked down upon.
> My dad works at a state university system and they are aggressively pursuing MOOCs, but there has been a great deal of push back from students and placement partners (businesses who the colleges partner with for placement of trade students).
That sounds like great news. Your right, it seems to boil down to politics.
Professors, by and large, are freaking out about a new proposed law to mandate accepting online course credit. “There is no possibility that University of California faculty will shirk its responsibility to our students by ceding authority over courses to any outside agency,” wrote the faculty senate in a strongly worded letter.
https://techcrunch.com/2013/04/03/a-few-crazy-college-fees-t...
I think the problem here in Minnesota is not the professors, but the students, who don't want to take an online course, especially since it does not seem to lead to a reduction in tuition. Several faculty had already integrated MOOCs into their curriculum (staff cuts may have forced their hand), but your customer have to want it. Placement partners also felt they were not necessarily preparing students to the agreed upon level.
1) The courses should be VIGOROUS and SELF-PACED (no quarter, semester).
2) Billed on a monthly subscription.
Students are short-sighted:
1) They can load up on more classes concurrently.
2) Spend more time on hard courses and breeze through on easy ones.
3) Have access to more courses and not be constrained by univ. budget or professor availability.
Basically, the students get more for their money in the near term. At some point, the tuition will flatten out and potentially increase access to those who could not previously afford to attend.
For state schools in my state, capital funds for school buildings come from a different pool of money. And for any "student initiative" buildings, such as a rec center, current students vote to increase their student fees to help pay for them. Which is stupid. The are sacking their wants onto future students and increasing the costs for them with "non-education" related things. Most of these student fees are outlaid for more than 4 years. If you want a gym to workout in while a student, get a membership to an existing local fitness center. Don't force all the students to subsidize your wants.
When the government subsidizes student loans (which I think they should in order to promote an educated/skilled society) there must be cost controls on the school (no NE private school art majors costing 100k+) and underwriting on the part of both the school and the student (the student doesn't successfully complete a degree, the government gets money back), in combination with monitoring.
I never said that they couldn't. I said that when the government pays for student loans they should enforce price controls and underwriting of the loans.
If the government really wants to get involved in this (which I really wish they didn't) they should build and operate more schools. Make them either at-cost, heavily subsidized, or (my preference) entirely free for anyone to attend. Forget income requirements, residency requirements, or anything else. Just make it entirely free to anyone that wants to show up and learn.
This would force the private sector to actually compete against something meaningful and that would lead to lower prices. The current system of the government handing out loans to anybody for anything is what leads to $100K 4-year tuitions.
We've already got a decent baseline of community colleges throughout the USA. If they closed off the student loan spigot and poured that same money into there we'd all be much better off. If someone wants to go to $EXPENSIVE_SCHOOL then fine, let them figure it out on their own or get the school to use their $N-billionaire dollar endowment to subsidize it.
By financing loans, aren't they already trying to do this? Building and operating more schools just adds more cost.
IMO, when you have a functioning government, this is what makes a single payer system (like is often seen in healthcare) so great. If schools can't come to a reasonable price/agreement with the single payer, they don't get paid. And it also leverages a central tenant of Capitalism... there's always someone out there willing to work for less.
I know people see this as a bad word, but if we leveraged the best of both Socialism and Capitalism in situations like these we would be better off.
No providing loans increases the demand side of things (more people capable of paying) without controlling costs or increasing supply.
Building and operating more schools increases supply which would have a downward pressure on costs as private institutions would then be competing for students against (more) government run schools.
> IMO, when you have a functioning government, this is what makes a single payer system (like is often seen in healthcare) so great. The single if schools can't come to a reasonable price/agreement with the single payer, they don't get paid. And it leverages a central tenant of Capitalism... there's always someone out there willing to work for less.
Ha! This is first time I've heard someone try to explain single-payer healthcare as an example of capitalism.
Well single payer isn't Capitalism, it's Socialism. I wasn't trying to represent it as Capitalism. In (this form) Capitalism, if one buyer and one seller can't agree (where the supply and demand meet), then that's ok because there are (most likely, given a supply/demand graph) other buyers and other sellers.
In (this form) Socialism, if the sellers cannot agree with the single payer (or the payer that represents an overwhelming number of the potential buyers) then they don't get paid for services (or are relegated to the much smaller market segment).
>> I know people see this as a bad word, but if we leveraged the best of both Socialism and Capitalism in situations like these we would be better off.
Not to imply that you were being disingenuous/malicious, but leaving out this part of my post misrepresents what I was trying to say.
You could say they are doing this but in a super inefficient way. With plentiful student loans you end up a lot of actors that capture the money that should be going to eduction (the goal). This includes schools (and their growing administrative departments, lenders, expensive sub-standard housing).
You know when college was the most affordable in the US? It's when the states contributed the biggest part. http://fivethirtyeight.com/features/fancy-dorms-arent-the-ma...
I'm personally in favor providing an option at decent post HS education to almost everybody for a modest cost (so people do take it seriously). This shouldn't be just college or generic 4 year university but also vocational training (HVAC, nursing, electrical). If you want to go to a private institution or non public-private partnership, that will always be an option.
I also think there's a lot of room for redesigning the 4 year university. I did enjoy some (but not all) of my required electives courses like History of Theater, Early American Literature, History of Africa (you could pick an area), but I don't think it's ethical to shove down a year of classes that may or may not be helpful to people in their life and saddle them with additional debt for that so smugly we can claim they will be more rounded.
You can also look at this from a selfish long term angle where we equip people with the tools for the future so they are more self reliant (less reliance on government programs) also offset with higher tax recipes in the long term.
Not sure how you'd manage class sizes while still maintaining quality (assuming increased enrollment). I guess would this end up turning into a "grade 13-16" thing where you have the same problems you have funding schools and paying teachers a good salary.
Yeah, but you'd lose a football team, an expensive stadium for which the bond payments are still due, and a lot of nice offices for staff.
Government loans should only apply to state schools, the schools should be funded better, and there should be more oversight and price controls, sure (public schools waste millions of dollars just like private ones on sports, administrator salaries, fancy buildings and landscaping that aren't necessary, etc).
This is exactly the reason Clinton/Sanders proposed a plan to include free tuition for /public/ universities for people meeting an income threshold. No free rides to Sarah Lawrence.
And I'm saying we should have more (assuming we want the government to have any hand in this).
> Government loans should only apply to state schools, the schools should be funded better, and there should be more oversight and price controls, sure (public schools waste millions of dollars just like private ones on sports, administrator salaries, fancy buildings and landscaping that aren't necessary, etc).
Screw loans. Just let people go to school for free.
> This is exactly the reason Clinton/Sanders proposed a plan to include free tuition for /public/ universities for people meeting an income threshold.
Screw income thresholds too. I don't care if your a prince or a pauper, it should be free regardless.
Income thresholds are a pain in the ass to implement and verify. Plus they have the insanely stupid consequence of causing people not to save money as it's only going to be used against you.
For every millionaire's son that's going to get a free ride under by "everybody's included" plan, you'll get plenty more people that were on the cusp of whatever income threshold you've chosen. I can live with that (hell I think it's more fair than discriminating based on the success of your parents).
> No free rides to Sarah Lawrence.
That'll still exist but it'll have to be the student's uncle instead of Uncle Sam.
http://studentaid.psu.edu/types-of-aid/loans/federal-direct/...
Gives you about 31k as an undergrad, and 138k as a grad student.
So combined you could be 160k in debt, which adds up especially if you don't do payments for a few years.
Then there is a whole other product of "private loans" where a bank gives you a loan, but the government agrees to back against loss to some degree (unsure of exact rules). Seems like this limit varies by lender, but is in the 70-120k range
https://www.edvisors.com/college-loans/terms/loan-limits/
So all said, you can end up with a LOT of debt.
Yup. That's also why so many for-profit schools popped up.
http://slatestarcodex.com/2015/06/06/against-tulip-subsidies...
The top thing the government can do for it's people is to keep them alive. (Free from invasion, murder, etc).
The second thing the government can do for it's people is to keep them healthy. Access to health care, etc. etc. More of an offshoot of above, but for things deeper than alive.
The third thing the government can do for it's people is to educate them. Not so that they can get "better jobs", but so they can be educated. The people around you vote just as much as you do. They decide the future of the country just as much as you do. Would you rather someone who never ever set foot in school helped elect your local government, or someone who has a PhD from a good college?
Kind of a hierarchy of needs.. education doesn't matter if you aren't safe.. but once you are safe, it seems very important. Not at ALL a 0 sum game. You don't educate to give people better jobs, but to enable them to think critically. Which is why 4 year colleges do a lot more for the world than coding boot camps or trade schools.
Couldn't those be improved instead? It would benefit everyone, not just the upper-middle classes that can afford college.
"The BLS reports that elementary teachers in the U.S. receive an average annual salary of $55,270. Many teachers, including those in New York City, receive their pay at set intervals throughout the course of the year. In other areas, teachers only receive pay when school is in session. The BLS does not gather data relating to hourly wages due to the manner in which most elementary teachers are paid. However, someone working a typical 40-hour work week would have to receive an hourly rate of $26.57 to earn as much as the average elementary teacher over the course of a year."
That article is quoting BLS statistics[0]. Where are your numbers?
[0]http://www.bls.gov/ooh/education-training-and-library/kinder...
That's an odd measure. Why use the average median instead of the median median or the average average?
Remember also to take into account the median (or average, whatever) wage among people with four year degrees + special training + willingness to continue training to maintain their certificates.
https://en.wikipedia.org/wiki/Household_income_in_the_United...
>Remember also to take into account the median (or average, whatever) wage among people with four year degrees + special training + willingness to continue training to maintain their certificates.
And then cut that number(50,556)[0] by 1/4th, and you are at a number much lower than what most teachers make currently and that's before you factor in pensions and benefits.
[0]http://time.com/money/3829776/heres-what-the-average-grad-ma...
Universities are useful in attaining a particular type of education that is not suited to every highschool graduate. It's fairly clear once you've spent time on an American university campus that not everyone there "needs" to be there on the governments dime for the betterment of society.
But it's like those synthetic diamonds: It doesn't matter how much shinier, purer and cheaper they are, they will never replace "real" diamonds because the whole purpose of diamonds as a status symbol is that they are expensive.
But is this really an unintended consequence? Who has more lobbying power in Washington, students or Princeton and Yale?
"By committing to an admissions policy that does not consider a student’s ability to pay, and by meeting the full financial need of all admitted students (with no loans required), we ensure that Yale is accessible to the most talented students from around the world, regardless of their family’s income" http://admissions.yale.edu/financial-aid-prospective-student...
And thus it's in the academic class's self-interest to encourage both more lending and more debt forgiveness — and remarkably enough that's exactly what the academic class is arguing for.
I don't think that they're acting in bad faith, just that there's little incentive for them to examine their assumptions. After all, from the perspective of a tenured professor or a university executive, higher education is an unmitigated good, his life's work.
Well, uh, yeah, what did people expect? This was a pretty deliberate policy shift. Public higher education used to be funded by per-student block grants at the state level, whose conditions said that tuition and fees had to be kept below some maximum level and could not rise faster than some maximum rate. Now it's mostly funded via subsidized loans.
When you subsidize education-usury instead of education, you get more usury and less education, because that's what you paid for.
Everyone going to Stanford will get a tech job in SV, which is nice for about 0.1% of the population, but its a national problem and rando graduate of some state U has at best 50/50 odds of getting a job in their field or working retail/restaurant/bartend work. Better off as a 22 yr old electrician than as a 22 yr old unemployed kid in moms basement.
Most of the building trades have also fared badly (with electrician somewhat of an exception), as wages have collapsed over the past few decades in trades like carpentry and roofing.
The problem is that these programs are notoriously underfunded (the financial assistance barely helps. It's like 10k a year if you're very lucky), have their resources misallocated, and do just enough to say that they're doing "something". Their funding is also often lumped in with other welfare "handouts". So when people vote against funding "handouts", they vote against helping people who need it most.
[1] https://en.wikipedia.org/wiki/Trade_Adjustment_Assistance
Where I live, we have Second Career Ontario[1]. When I was in college, several of my classmates were formerly highly paid tradespeople who ended up unemployed and unable to find work after the decline in Ontario's manufacturing sector. The Second Career program funding was enough for them to go back to school for a couple of years. To to best of my knowledge, all of my classmates ended up making the transition to a new career successfully.
I've seen programs in other jurisdicitions that provide some funding for retraining, but not enough funding to teach people enough skills in enough depth for them to realistically be able to move to a new career.
:-)
Seriously though: I have been begging plumbers to come and work on a reasonably high-priced project at my house. I reached out to 10+, no one is interested - they are booked for weeks in advance.
What would it pay for them?
$6k got me a 4 hour response of a 5 man crew with an excavator to replace a rusted section of a wastewater pipe, which involved digging 14ft down and demolishing part of my driveway (and pouring new concrete in after it was finished)
> No more than 2 days of work for 1 person.
You'll have us believe a plumber charges $375/hour for this project, based on the $6k quote?
This is not typical, so either your project is extremely difficult or you're not telling us something else.
Trades are great, but we, as a society, are not really prepared to deal with them. It's easy for someone working a comfortable desk job to say "those kids should go into the trades" without realizing the following things:
1. Trade jobs often involve non trivial amounts of physical risk.
2. Trade jobs rarely allow you to work until normal retirement age (65 or even 70). I never met a diesel mechanic over the age of 50, and precious few in their 40s.
3. Despite all that, they don't pay as much as your desk job.
If you're going to sit a kid down and give them the option between a physically demanding, difficult trade job or a climate controlled, higher paying desk job, what do you think they are going to choose, realistic or not?
There is no longer a reason to think that you must go get a 4 year degree in order to have a career and financially independent. Education has evolved drastically over the last 20 years because tuition has gone through the roof.
Prestige and pride have a lot to do with it. Two degrees from the same school are worth the same if one person was there for four years and one went to community college for two first, but ask the 17 year old HS student who just has to sign a promissory note which one they want to do, and they're going to pick the first option 9 times out of 10.
Also, who are you to tell someone that they can't go to a school if they can find someone to lend them the money to do it?
If you're in the US and you don't think that rate is unreasonable, I'm curious as to why. We're talking about loans that cannot even be discharged in bankruptcy, in a 0% interest rate environment.
But I'm paying roughly the same for loans taken out in the last five years. It's irritating.
That part is also a zero-sum game, because all parents work harder to afford the best neighborhoods and that makes the price of living in those neighborhoods go up, leaving everyone right where they started only they now work two jobs instead of one.
Decoupling property tax from school funding can help with that. In Universities, a system that is free but only accepts the people with the best grades, IQ, or some arbitrary qualification can help, but brings its own problems.
My best investments are the raises I get when paying off my student loans ahead of schedule.
Just an anecdote of someone who not only wasn't educated about the options, but actively encouraged to ignore them.
I think, realistically, the only benefit I maybe missed out on at a more expensive school is that I could have (completely anecdotally) met a larger, richer network. And now, I would be using said contacts in that network to get me better job(s). For example, I've seen perfectly regular people come out of Cornell and they just mint money.
On the other hand, investing in a network doesn't stop at college, so it can be overcome in various ways.
I guess what I find most disappointing in retrospect was that I wasn't encouraged to research further out from the local area. My original comment may have been a bit hyperbolized in that clearly I knew about state schools, but my idea of what constituted a "state college" was influenced by the three within an hour drive of where I grew up. In my state's college system these three also happen to rank toward the bottom of most lists in terms of job placement and campus quality of life. I toured two of them and wasn't exactly impressed. So belief became that "state college" meant "cheap college", as in the degree would be worthless. Again, this is the naivete of a rural-raised 17 year old.
In the summer before my final year at my expensive university, I did a "Research Experience for Undergraduates" internship thing at one of my state's larger research universities and was blown away by how different (and better) it was compared to the state schools I was familiar with. I was 21 at this point and had a better understanding that even though it was about a 7 hour drive from home, it really wasn't that far away, and if I had known about it when I was graduating high school it would've been doable.
For curiosity's sake, I just looked up what the tuition plus room and board for this state school, and in 2016 it's still less than half of what I paid for my school in 2005.
But that's all in the past. I think I got a decent, though not stellar, education from professors who genuinely seem to care (even now, as I stay in contact with a few), in addition to the networking opportunities. In the end I don't regret it, but I do try to advocate to my younger relatives that they should shop around and take the decision seriously, and of course ask me for guidance should they need it.
Also, I'm still paying off the loans from when I went back to school a five years ago. The jump in tuition after 10 years away from school was a major shock when I went back.
http://fivethirtyeight.com/features/fancy-dorms-arent-the-ma...
Here is one link: http://www.cbpp.org/research/state-budget-and-tax/funding-do...
The cost increased due to government intervention. They wanted more people to go to college so they told lenders they'd guarantee loans for education. They do that by having the ability to take it out of your paycheck for the rest of your life if you don't pay. Anyway, with the flood of money instantly available, schools were able to jack tuition by double digits every year for as long as the want. The place I went has been on a building spree for the last 20 years - it's a whole different place now. Part of that was needed since the number of students has about doubled, so it's not entirely wasteful. But the bottom line is that the "free" money is what caused the rates to rise. I feel bad for that entire generation - they got fucked from all angles financially.
The irony is no one will ever be able to afford a gym membership as nice as the gym they had in college because they're too loaded with debt from said college.
But.....that being said, I have heard that they lost over half of their government subsidies (it's a private school), and the state has been perpetually 6 months behind on those subsidy payments, so that's at least part of the reason for the tuition increase also.
1. On-line loan repayment calculators showing you're monthly payment for years.
2. Youtube videos under the search "I majored in debt".
3. The FAQ on the loan servicer's website; or "Where's all this interest coming from?!"
http://www.studentloan.org/about-us/frequently-asked-questio...
I was an international student in the U.S. and went to a community college and did very well then went to a 4 year college after. I had little choice since $1 USD = $2.5 of my country's currency so community college was a cheaper option especially after having my parent also send my other siblings to college out of pocket. At community college I watched kids(Americans), not all though just waste their opportunity, slacking off in the cafeteria when they should have been at class and eventually getting dropped. It was basically free for them. We international students just wished amongst ourselves that we were given the same opportunity of free schooling at that level. Going to community didn't seem to hurt me in anyway.
When the in-state flagship university costs $25k/year to attend, it's not very reasonable.
And if the government participates in loan forgiveness, then the fact that the government is also a lender isn't really relevant, because the taxpayers will be covering that bill anyway.
Really, it's for the best that the federal government gets any interest from student loans, rather than private banks having a vested interest in the growth of tuition rates.
All in all, people appreciate the idea of having a middleman in the equation that greatly increases the costs of the product, just so that then can pretend they are not financing other people education when they could simply accept public education, pay much less and get rid of the speculative middleman.
Same goes for healthcare actually. It's a strange part of American mentally: better pay more for an inferior product and pretend that you aren't actually financing those that can't afford the product, than pay less and have a part of what you pay directly helping those that can't afford it by themselves.
One reform that has been suggested is to make sure that universities have skin in the game, that they actually lose money when a loan defaults. I'm not sure we should go there but there should be a system better than debt servitude for students coupled with moral hazard for society.
There doesn't seem much political will to de-bubble economic sectors, real estate certainly hasn't been fixed and thats a larger problem, ditto medical-industrial complex.
The average cost for tuition and fees in Indiana is nearly 8,000 per year. This does not include books and supplies (at around $1200) nor what they view as living expenses ($11,500). This is an average yearly cost of $20,700: $9,000 of this will be needed in a lump sum payment to the school when going. And I'm guessing the yearly living expenses aren't exactly all-inclusive.
Minimum wage is only $7.25. If you work 38 hours a week for a year you only earn a bit over $14,000 before tax. You might not get tax breaks because you are still a dependent on your parent's taxes. Heck, you can't even afford to pay your living expenses if you are working part-time. As a young high school graduate, most jobs that are willing to work around your college schedule pay this rate.
I'm not saying it is impossible, but highly improbable that you can go to college without financial aid. Tuition skyrocketing - yet again - will make little to no difference.
For those that college makes sense for, however, this is a pretty common scenario.
Kids: please don't go into debt for education! Go to a community college or a state school. Go part time. Go to a trade school. Start a business (no degree required!) But just try to avoid debt. It's hard to describe exactly how suffocating debt can feel. All those things you want to do when you grow up - debt is going to make most of them harder of impossible.
Parents: if you want to save up and pay for your kids education, I guess that's fine. But if you can't/won't, then it's your responsibility to inform you children about debt.
I experienced this when buying my first house. My wife and I were unable to get a conventional loan because our debt to income ratio was too high. I had $90k in student loans from grad school which prevented us from getting a conventional loan. We were able to get an FHA loan and can re-finance once we get to 20% equity but it is frustrating to have to put up with FHA regulations before buying the house.
My favorite effect of this social difference between [most of?] EU versus [most of?] US is that in non-england Europe, paying for private schooling means you're dumb and can't earn good grades without paying for them. In the US few non-private universities are considered truly legit.
Always a fun pub or thanksgiving dinner conversation.
For comparison, my european public uni was 50eur/year for enrollment fees.
LMU Munich, #1 uni in germany, is 110eur/year in mandatory fees.
You have no idea what you're talking about.
Ditto in Israel. Small "academic colleges" are second-tier public institutions. Privately-owned colleges are for people who really can't do well on matriculation exams. The best universities are the six big state-owned ones.
> Critics, including academics across the political spectrum, say the income-based repayment program isn’t targeting the neediest borrowers and instead bestows big benefits on those who attend pricey colleges and graduate schools and earn high incomes.
Take a new surgical resident who just graduated from med school with a slightly above average amount of debt - $300k [0]. They consolidate their loans and put themselves on an income based repayment plan, and start their residency at a nonprofit hospital. After 120 payments (at most one per month) made while working for a 501(c), their remaining loan is forgiven, tax-free. [1]
At the outset, the income based plan really is the only option. They'll be earning a modest salary as a resident - 40-60k per year. During this period their debt will accumulate unpaid interest as their payments are capped at 10% of their income (above 1.5x the poverty line, so something like max_payment = 0.10*(income-20k); $200-300 a month, at most). After ~7 years of surgical residency, depending on specialty, the doctors begin earning $300k-$500k/year. At this point their total loan amount at 7% simple interest (unpaid interest isn't compounded under these programs) has grown somewhere on the order of 40-50%. Now they are making the maximum payment on their debt assuming a 20-25 year repayment term. Unfortunately, they'll only be making those payments for 3 years before the entire balance of the loan is forgiven - tax free.
The end result is that for doctors whose residency and subsequent career begins by working at nonprofit hospitals, the government will end up forgiving the full amount of their medical school tuition, usually plus a little bit of interest. Med schools, law schools, and other professional schools know this, and actively promote these programs as a way for students to justify going into unbelievable levels of debt. [2]
In general, those with less than about $40k in debt will see no change to their monthly payment by moving to an income based repayment program, so they have little incentive to go through the hassle of signing up.
[0] http://grad-schools.usnews.rankingsandreviews.com/best-gradu...
[1] https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
So we get more doctors that work in hospitals that aren't motivated by profit and you make it sound like a bad thing.
Also: don't kid yourself. Non-profit hospital chains are enormous businesses. [0]
[0] http://www.beckershospitalreview.com/lists/25-top-grossing-n...
I made no claim that non-profit hospitals aren't enormous businesses so I'm not sure what your link is proving. Though to me that link does actually make the point that we should have more non-profit hospitals, imo.
2 more points:
1) You are grossly over exaggerated the compensation of doctors after residency in non-profit hospitals. Of course they do make more than the median income but it is no where near 10x.
2) I think you should consider what the benefit of a) having non-profit hospitals and b) loan forgiveness programs for doctors at non-profit hospitals is.
"Hospital employment: Hospital employment can be a good option for orthopedic and spine surgeons who want steady hours, guaranteed income and relief from the administrative duties associated with running a private practice. Hospital employment also guarantees an immediate patient base, which can be difficult to build from the ground up in a private practice.
"One of the interesting thing hospitals have been doing for employed physicians is paying a wage to a new graduate that are substantially higher than what they would make in private practice for the first year or two," says Dr. Ott. "So they capture many of the new graduates. While they may be spending more on the professional services side, they recoup hospital charges when these surgeons bring patients to the facility for surgery or diagnostic testing."
For general orthopedic surgeons, the starting salary is $500,000 with a sign-on bonus at $35,000, according to the "2011 Orthopedic Recruiting Trends & Starting Salary Overview from Orthopedic Recruiting Group. Hip and joint on average receive $597,000 salary and $50,000 sign-on buns, while spine surgeons receive $452,000 salary and $40,000 sign-on bonus."
http://www.beckershospitalreview.com/hospital-physician-rela...
I mean the article all but says this ("critics.. say the income-based repayment program... instead bestows big benefits on those who... earn high incomes").
I guess history does repeat itself.
I think it's less about the amount any one person is paid and more about the huge number of administrators moving paper from one desk to another.
I went to a private liberal arts college with a few thousand students. We had a Dean and four assistant Deans, all of whom made multiple six figures a year. Our president when I was there made $450k/yr and had next to no living expenses.
B.
Private v. public has nothing to do with academic bloat.
But Big 10 football (and basketball) runs at a profit for the schools, it's the big salaries at smaller sports programs that don't make financial sense.
When academia is run as a business and subsidies are drastically cut, you need to devote resources into acquiring new customers, which means competing with other universities who are doing the same thing. Hence the rapid increases in campus amenities and business administration positions that never existed 30 years ago.
> campus beautification projects like replacing the flowers every month
Out of all things to complain about, flowers on campus are on the low end of the totem pole. Let them plant flowers, I say! I enjoy them.
You forgot paying for sports facilities...
Edit: Downvotes for wondering why universities are paying millions for sports facilities. Nice.
- Vemo Education (vemo.com)
- LEIF (joinleif.com)
- Purdue, Washington U (...)
I would bet it's a small minority of students who actually did seriously consult their parents and whose parents did wisely caution against it (even refusing to sign a parent PLUS loan, a factor not talked about much) but who found a private lender themselves anyway and after graduating can't pay it back. You could protect this minority from itself by raising the age of adulthood, but if we actually agree it's a minority, this won't solve the problem.
My point is it's not good enough to blame stupid non-adult teens when you could blame their adult parents just as easily, and trying to solve the problem at either of those levels (less stupid teens through 'education', or less stupid adults with longer reaching power, or forbidding teens in general from making bad choices) won't work.
Loan forgiveness should not be restricted to teens. I know many adults that could be similarly mislead.
And absolutely it is a minority, which is why student loan forgiveness is workable. Trust me, the banks will still make money, just not as much.
Some loan forgiveness is workable and I think inevitable but it does nothing to stop the problem, it just relieves some people at the expense of others (generalizing to the whole economy) who can take the hit. In that it's kind of a herring. When you find yourself in a hole, you should stop digging as the first thing you do. Loan forgiveness lifts some people out of the hole but incentivizes digging faster.
The party in the best position to know who will and won't be able to repay a particular loan is the lender, who has all the historical data and statistics about previous loans.
You seem very close minded. Everyone can't and shouldn't do a CS degree to "get a job".
Not everyone is as well informed as you were at 18.
This problem doesn't really exist in other first world countries.
Being that student loans in the US are _no longer forgivable_ via bankruptcy or any other means, these student loans are essentially a permanent debt the student will never be free of otherwise, and bear more than a passing resemblance to a class of indentured servitude. Such things are not what any reasonable person had in mind for America.
If you want to fix the problem, stop subsidizing the loans and allow these colleges to die, shrink or reduce costs.
The loan provider is in a much better position to know who will and will not be able to pay back a particular loan.
> If you want to fix the problem, stop subsidizing the loans and allow these colleges to die, shrink or reduce costs.
Perhaps this is better, but seems unrealistic.
They have no reason to care since the government backs the loans.
They are just being subsidized at the expense of folks who are (over a lifetime) much poorer than they are.
Basically, if loans don't need to be paid back, what's the point of a loan at all?
It is also the responsibility of the party giving a loan to ensure that the borrower will have the ability to reasonably repay the loan in the future.
During the housing crisis, banks enabled home buyers by providing low interest rates, insanely low income requirements, and small down payments. As a free person with their own free will, it should be your responsibility to decide if an investment is worthwhile, not a no-name bank which most definitely does not have your best interests at heart.
> It is also the responsibility of the party giving a loan to ensure that the borrower will have the ability to reasonably repay the loan in the future.
While it's obviously their goal to ensure that the borrower will be able to repay the loan (why else would they have people jump through so many hoops to get one?), it's by no means their responsibility. The only responsible party here (i.e., the party you can count on) is yourself. Your bank isn't going to find you a job, or put together your resume for you, just so you can repay your loan.
If you label all borrowers who can't pay back their loans as "victims", wouldn't that make the practice of lending itself immoral? In your opinion, why not just outlaw lending completely and be done with it? That way no one can be taken advantage of.
No. It is only immoral to knowingly lend to someone who can't and won't be able to repay the loan.
Perhaps we also shouldn't rescue someone who falls into an open man-hole, because it isn't fair to those of us who know to watch where we're walking?
Fools should be responsible for the consequences of foolish behavior.
The financial sector disagrees.
Agreed, but to that point, I'd imagine that the primary consumers of student loans are people in their late-teens who are on-the-whole less financially responsible than homeowners. And for a lot of those people, they're under a lot of social pressure to go to college despite the fact that it's a gamble that might not pay off.
The exception is for fields that are zero-sum games, such that an abundance of lawyers, for example, makes it cheaper to defend yourself from a lawsuit but also more likely to be sued.
No thanks, if I'm paying for your education I expect a better discount than "my office is a little bit closer"
Op is right, this is unadulterated bullshit.
Firstly, if the services are in demand why is paying off the loan an issue?
Secondly, they already have the degree paying off loans does not increase the number of graduates.
That is a very good point.
> Secondly, they already have the degree paying off loans does not increase the number of graduates.
It depends on how the debt is forgiven. If government just pays the colleges then it will suck, but suppose they were like "You sold a defective product to millions of people and we are not paying for it. Deal with it". Then colleges will learn to stop offering useless majors and the number of graduates in bullshit will reduce while the number of graduates in useful stuff will increase.
Probably not, but considering that the forgiveness program the government is talking about mainly targets people with debt who can't pay it back - like people who are seriously disabled and can't get a job - you would likely be subsidizing people less privileged than you, which is a good thing.
> If and when they start making money can I expect a discount on their services?
No, but they're not making money now and they won't be in the future and that is why the government is considering discharging their loan debt.
So if I become disabled, will you be paying my mortgage?
I take your position to be that 1. you're in favor of providing financial support to people on disability, but 2. concerned that college-educated people on disability potentially stand to qualify for more benefits than non-college-educated people on disability.
If this program's stated intent was to fully subsidize education for people who would definitely not be able to procure work in their academic area of focus (like subsidizing music degrees for deaf people or whatever), I would concede that the program would be economically counter-productive. Otherwise I think the government should extend more financial assistance to people who are at greater risk of ruin.
Even ignoring the often sizeable income tax bill, people whose debts are forgiven likely paid more back to the government than you did, on both a percentage and absolute scale.
Edit: And to the income tax point, if you've got tens of thousands in debt and have an already high income (not totally outside the realm of possibility since you're likely ~42 years old) that could easily be a 5-figure bill.
The correct way to compare is to do time discounting at market interest rates (i.e. what interest rates would be if the feds did not act as backers for student loans).
But you can hardly expect all people who just got out of high-school to have good financial sense.
I've got a similar unpopular opinion about the housing bust. Prices were sky-high, so I chose save (and couldn't afford to buy a home). Then, a bunch people who got in over their heads and couldn't make their mortgage payments were, in some situations, bailed out.
Yes, I get that some people were deceived by zealous mortgage brokers or had personal crises that caused them repayment issues. But I'm sure that's about as common as the people who took what they could get as far as a mortgage, lied on their applications, or were flipping houses.
Irresponsible fiscal behaviour is incentivized, and more prudent measures are punished.
Also, your figure is for the average C-Section; not as common as traditional.
And, there is no "insurance" option (as there is for birthing) for student debt; which really would reduce it to about 10% of the cost...
Art therapy is a respected form of psychotherapy. It's available to people on the English NHS (which focuses on evidence based treatment), and "art therapist" is a protected title in the UK.
Does "art therapy" mean something else in the US?
Here's a list for health care: https://www.hpc-uk.org/aboutregistration/protectedtitles/
I don't know enough about art therapy to say that it is or isn't scientific, though.
It's often an MA degree, so there's no pretense of it being a scientific endeavor.
I realize that my wording was ambiguous so I'm sorry for that.
"The government is practically forcing our hand; what can we do. Those philistines, there is just no reasoning with them. Ever since Reagan all they do is cut, cut, cut -- why does no one appreciate the value of an education anymore?"
[+] I have been occasionally called paranoid regarding this claim, so I will clarify that this is directly observable. Get a price quote which contains any portion of grant aid. Then inform the university that you've received a $2k scholarship. The university will increase the price retroactively, by "applying" the scholarship 50% to your loan and 50% to your grant aid.
This was straight-up policy at my alma mater. Luckily, my regular-old mater embarrassed the heck out of me by arguing the point with them for each of my external scholarships, causing a net decrease in the cost of attendance of about $10k versus the university's post-subsidy-recapture amended quote.
Students aren't forced to pay tuition. It's a voluntary exchange if they feel they're getting their money's worth.
They shouldn't have been allowed into college in the first place, but the college was just too happy to take their money and give them nothing.
I'm all for personal responsibility, but isn't it too much to ask for teenagers to be able to resist propaganda from all sides that insists they must go to college and follow their dreams?
Students are not the problem, they are just doing what they are told. We just need colleges and banks and governments to stop telling them to be financial idiots.