The Absurdity of Student Loan Debt
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Also, a specific thing for anyone working on a degree (particularly an undergrad), check out CLEP exams. Very affordable per credit hour and you don't need to spend a semester listening to a professor [1].
[1] https://www.elearners.com/education-resources/finances/savin...
I suspect it's the same thing as when buying a house. The numbers are too big and become just numbers, without a corresponding value. 10K more or less doesn't seem to matter all that much, while in other cases one might agonize over a $50 price difference.
The common reason student loans are NOT allowed to be dischargeable is because, in the minute after graduating and without collateral, the student can declare bankruptcy with no effect (the vast majority are not buying a house within the time it would take for their credit to repair).
This has the side effect of blunting market forces. It is the same amount of interest and same approval process to get 200K for medical school as it does for an art degree, despite market forces suggesting that the former are vastly more needed (ok, granted, there's the AMA, but that's another discussion). It doesn't matter to the bank -- after all you can just repay a little bit until you're 70 years old.
Allowing things to be dischargeable 10 years after graduation would reintroduce market forces. You want 200K for medical school (maybe we change the post-graduation length a bit to account for residency / fellowship)? Great! Almost guaranteed well-paying job out the other end.
But 150K for an expensive art school + MFA? You better be prepared to have your credit looked at under a microscope. Application rejected.
What would this mean? This would mean that schools would actually have either a) provide more value to the individual, b) charge less or c) accept much smaller classes. It would mean they would probably have to focus most of their energy on education + job placement rather than funding more school athletics and building a fancier dorm.
I'm pretty sure my local high schools cost of administration haven't gone up 237% like colleges the last 20 or so years.
https://www.usnews.com/education/best-colleges/paying-for-co...
No one should be paying "until they are 70 years old".
My own personal experience with bad debt was my own fault, so I have a habit of blaming the person who willfully enters into debt; I opened a credit card as a young man without understanding the system, racked up huge balances, was eaten alive by interest and was forced to go into collection and settle. That effectively crushed my credit for 8 years. I did however learn a ton and was able to rebuild my credit. My children won't have to learn the hard way, unless they choose (operative word) to ignore the lessons I had to endure.
So without blaming the author for their own actions and writing it off as a "you should've known better"; Is the greater problem these days of a predatory nature by lenders, ignorance (willful or not), or a complete lack of education about an education? Or perhaps D. All of the above.
I ended up with a decent bit of debt for stupid reasons (e.g. never filed for residency so essentially paid double for college), but was able to dig out pretty easily due to high income. Most people who make stupid decisions can’t dig themselves out easily.
I entered college when credit card companies were just starting to practice predatory sign-ups on campus and at college events. And many of the tactics they used back then have since been outlawed. That was also at a time when the wealth of information we now have in the internet did not exist. Given the myriad of channels to learn these days, it's baffling. Hell, how many different reviews do we read before making a decision on where to eat, or where to get our oil changed?
Honestly the dangers of high interest rate debt have been known for millennia, anyway. This feels like a lack of self awareness. “Other people’s mistakes are their fault. My mistakes are other people’s fault too.”
There are tons of alternatives to funding a very expensive university through debt. Work part time, pick a cheaper school, get a bunch of credits at community college, or do all 3. And that is all without a single scholarship - of which there are many you may qualify for.
It’s irresponsible to just throw your hands up and claim that there’s no other way around it...
Assuming everyone's already well off and just living above their means isn't very helpful when education itself is the thing that's costing above most people's means.
If you pick up $200k in student loan debt from an Ivy League school but leave with an engineering degree, you’ll probably be fine, even if that’s not really the cost effective option. If you leave school with $50k in loans and a degree that doesn’t get you a decent-earning job, crippling debt is now your life.
1) Education is too expensive (especially relative to the value it delivers).
2) But, that money isn't even going towards the underpaid adjuncts who teach the classes. wtf??
3) Tuition expenses mostly go towards administrative salaries, very very old established professors, and buildings and services. This needs to change.
4) But it can't change, because you can't just open a college and get it accreditted easily. This is a regulated industry, just like the health insurance industry. You have to do the song and dance for months in front of regulators, who have their own interests in keeping competitors out.
So, all in all, the student gets screwed, the company that hires them receives questionable value add, and the college administrators and banks make a killing.
It is a massive wealth transfer that delivers little value.
At many (most?) universities, established professors make only slightly more than new hires because the budget simply isn’t there to pay significantly more and so the salary range compresses. And honestly, instructor pay seems like a good place to be spending money.
On the other hand, administration costs are out of hand. Some universities have crossed the 50% threshold and now spend more on administration than everything else combined.
However, I seriously must qualify your statement. There are adjuncts making 20-30k per year, with no benefits. Then there are tenured professors who barely do any teaching anymore making upwards of 200k per year. Some also hold simultaneous administrative positions.
So you have to tread carefully. I think what you are trying to say is that paying a tenured associate professor 60-80k per year is a reasonable expense. I agree with this statement.
Depends on the field. You aren’t hiring PhDs in computer science with that salary. They’ll leave for industry immediately. You’re also not hiring qualified instructors in CS at $20k for the same reason.
Problems student debt tried to solve:
1) these systems do not let many people learn at all. Maybe 1-2% of the population gets higher education.
2) there is a large difference between institutions. And society's classes arrange around specific institutions one way or the other (price, geography, ...) (by which I mean the rich go to one school, the poor to another, with of course vastly different prospects). The institutions attended by the wealthy get the best professors, the best reputation, and their alumni get an advantage in the workplace.
(and let's just ignore that this is exactly the part that specific countries saved, and kept separately from whatever funding system they otherwise use for education: the part that worked best for the rich, like France's Ecole Nationale d'Administration, London School of Economics, and Germany's Bundesbank Hochschule. That's just peachy. Most of these schools you can only be referred into, you can't apply (or can't apply successfully), and they lead directly to the government's upper echelons)
3) There were much, much less study directions. Essentially anything you couldn't convince your parents to fund you learning for 2 or 4 years for could not sustainably be a university department. This resulted in much smaller arts, social studies, philosophy, archaeology, language, ... departments. Many people want to study those directions, but few feel like funding them.
4) Universities had perpetual funding problems, because everybody feels like regulating education. So the growth of administrators actually started before student loans were started. Whilst I don't agree with most idiots putting up this argument, there is a grain of truth to the idea that regulation forces universities into many unnecessary costs.
5) even the richest university directions, like economics departments in huge cities, weren't exactly swimming in cash. Therefore they focus on what brings in the bucks (more or less outsourced R&D for huge companies, creating spinoffs and some recruitment) ...
6) unwillingness of these departments to grow to the size people would like, and being pretty selective as a result (famously civil engineering and of course medicine)
Every proposal here essentially boils down to forcing education to be a reasonable investment, which will re-cause much of the above problems. If we're willing to do that, sure, but ... I don't think so.
You are free to drop $70k a year on a bachelors/masters in preschool education and make partial payments for the rest of your life!
The idea behind is that a better educated population is more productive and pays, on aggregate, higher taxes. Part of this tax surplus can be used to pay for the debt defaults.
The reality is that the loans in too many cases are too high and will be paid back only in minimal part.
In the USA, government and private student loans are easily available. I have never heard of anyone who couldn't study becuase they couldn't get loans, though I'm sure it happens. I have heard of many people who accumulate huge debts for degrees that offer a low increase in potential future earnings. Like an MFA frankly.
This is mostly becuase USA student debt is a special debt that follows you for life. It cannot be discharged in bankruptcy. You can enslave yourself with a bad loan. Your soul is the collateral.
That's the absurdity the author refers to.
Relatedly, I remain confused about why, in another common case for further education, parents are allowed to take these loans out on behalf of their children. College at this point serves a couple of purposes in society, but the financial driver is probably that it is a sign of successful parenting. If a parent can't afford to send their children to college, they should have to do so with a collateralized loan, not one they can saddle upon their child.
Of course not. A huge portion of the population has essentially no understanding of finances, which is why they need to do things like call to ask why their loan balance is going up. Worse, there is a feeling of helplessness when finances seem like a mystery, hence in this case actually needing someone else to tell them to call and ask.
This is why the cries of “free market!” when, e.g., discussing caps on usurious rates at payday loan companies are missing the point. People get trapped in debt with no way and no understanding of how to get out.
I panicked and applied for an income-based repayment plan, which, paired with my habitual underearning, lowered my payments to $96 a month.
After five years of payments, I now owe more than what I originally borrowed because my payments haven’t even scratched the principal.
Income based repayments forgives the loans and interest after 25 years.
Original principal is $44,000. $96 X 12 = $1,152 / year. 25 X 1152 = $28,800 total repaid.
So, 20 years to go...
Of course, a Subway 6" combo will be $60 too.
Perhaps we shouldn’t be beating these people over the head with debt for trying to better themselves.
which to me doesn't sound too bad (i.e. less than a year of salary). is that inaccurate and is she talking about a complete different figure here?
in the netherlands it's fairly common to finish school with a couple of thousand euro's in debt, so why is this such a big issue in the usa?
0 - https://en.wikipedia.org/wiki/Student_debt#United_States
It is not "absurd". It is a working solution to a socio-political problem [for the modern Lords]. See Serf for a historic reference.
A lot of the people I spoke to in school decided to fork over that much cash because they'd been brainwashed into believing that there was value in the pursuit of your dream and that that value was intangible. Some of that started when we were kids when our parents told us we could be anything we wanted to be. We grew up expecting we would do whatever we wanted simply because that's the way we imagined the world should work and that if we did it well enough we would be successful.
Of course in reality we'd most likely never be able to make the kind of money that would allow us to repay those loans and live comfortable lives and retire at the modest age of 65, but there would be value despite that. You can't possibly quantify that value sufficiently enough to compare it to anything else before you dive in. My school happened to be fairly upfront about the downsides of their six-figure (over two years) tuition and would regularly advise that if you could not support yourself you ought to drop out. But so many students consciously decided to ignore the hardship they were going through because they thought it was temporary.
Some of the younger students got funding from their parents and never thought twice about the finances. Many of the older students, myself included, had saved up for the experience and had done an honest, sane calculation of the costs and whether they could bare it. We knew we'd return to our careers afterward and we'd make good money and be perfectly satisfied in our literary obscurity. Some got modest financial aid. Some got free rides. A select few got lucky and received six-figure book deals shortly after graduation. But others, who had only just begun their careers, who weren't talented enough for scholarships, who had not received the kind of financial education I and many others had, who didn't have the career prospects, are bludgeoned every month by their spectacular debt.
I own a small apartment and make good money as a software developer. My wife also works and we are very comfortable, but I look at my debt every day and think about all the things we could have had that might have been more valuable. I began school thinking I would never marry and would never have a kid because I didn't really want those things for myself. But I unexpectedly met my now-wife and we chose to have a kid and I realize that my two-year indulgence could have been my kid's college tuition. Or a good chunk toward private school. Or a down payment toward a house in the burbs. And I would happily trade in my degree for that if I could.
Every time I get together with my writing friends, we always talk about selling our books and making good money for them. It seems possible because we see our lucky few classmates have done it. It's a strange illusion, but it's one of the few things that makes the burden a bit more bearable.
The absurdity in my mind continues to be that any of us saw that much value in the degree in the first place. It's easy to say in retrospect that it wasn't a good financial decision, but there's a lot of pressure at the outset to pursue an idealistic vision. It's something people say they wish they'd done and when you have the opportunity and the gumption to do it you feel like you're doing something right. It feels heroic. Not a lot of people are willing to talk you down from it.
I'm pretty certain an MFA as a degree doesn't need to exist, but it's a cash cow for art schools, so the economics make sense for them. But it should be more than a debate about student loans. Adjuncts are underpaid, students are overpaying, and the people who run the programs continue to present the illusion of value. I'm not sure that more financial education is a perfect solution either because the system is exploitative.
College degrees have different values - an engineering degree has a very different value than a history degree. Since the tuition at four year schools for both degrees is (largely) the same but the financial value after graduation is different, I would argue that one of those degrees is a luxury degree while the other is not.
If you're arguing "the middle class should be able to afford college tuition without debt", that's a slightly different argument, but I'm not sure it has any merit (given the above that students make _choices_ about what degree to seek and that some degrees are luxury degrees).
[1] https://en.m.wikipedia.org/wiki/The_Scorpion_and_the_Frog?wp...
Incidentally the same is true of mortgages post-2008. Again for better or worse, the US at the present time has a highly socialized credit sector when in comes to individual debt.
Looking from a historical perspective we are really running late on a dept-reseting event. Usually a civil war or bank run caused a reset on the economy once in a while but the latest period of government banks, global banks and banks too large to fail has so far been protected by government interference from the same fate. The result is that there is a lot more unsecured debt in the economy than a strict market based economy with no government interference would allow.
The text is 100% generic. You could post it below any article that is somehow about a problem that is at least somehow, somewhat, just maybe, slightly caused by the government.
Your comment adds precisely as much to the discussion as a blank "Hi! I'm a libertarian!" would.
Why do you think associating my talking point with a political party makes it incorrect or not useful?
Isn't cancelling debt a form of less government interference, where the government will no longer allow its resources to be used to go after another person's property?
The article should be titled “The Absurdity of Useless Degrees”. It’s a very different calculus for someone taking out loans for an engineering degree.
Learning for the sake of learning is great, but not if it costs more money than you have.
Lots of ways they can make your life just as miserable for not paying.
But, this is an interesting thought exercise. I read some of these stories, and think to myself that living overseas for the rest of my life doesn’t sound too bad comparatively. I could even imagine a country seeking skilled immigrants might even pitch a citizenship path for people looking to start over.