The Student Loan Debt Crisis Is About to Get Worse

This person has a bachelor's in economics and is about to finish a master's in finance. We conflate "an education" with "being educated" far too much.

I graduated 6 years ago with zero debt and no help from parents, because I actually looked into costs / benefits before starting school, picked a cheap school, and worked the whole time. I really don't know how we think it's acceptable for people to be 18 and not capable of making these decisions. You can vote and join the military, but you can't recognize financial servitude like this. They're being failed long before they get to college.

Part of the problem is that high school doesn't teach students a lot of the things they really should know for the real world. For the most part, the first two years of college are spent covering topics my parents learned in high school. The average student doesn't get to the real meat of their degree until their third or fourth year, which I think is a real problem.

But somehow this is how it works. Except in extraordinary cases, this is the path young people need to take to get a decent job.

That is to be expected for young people right? So these young people rely on authority figures to give them advice, all of which beat the drum of "go to college, it's the only way".

Why do we expect these young people to be wiser then these authority figures in their lives?

FTA: "Delinquency is at crisis levels for borrowers, particularly for borrowers of color, borrowers who have gone to a for-profit and borrowers who didn’t ultimately obtain a degree,”

As counterintuitive as it sounds, it wouldn't make sense for these individuals to quit and do something else unless that something else is also obtaining a degree, preferably from an institution that is not for-profit.

You seem to imagine that a generation of kids should be happy going to trade school and working as plumbers.

I know for a fact that at the vast majority of Fortune 500 companies you aren't even getting past the HR screen without a degree. What are those people supposed to do?

An article which covers this in significant detail from about 8 days ago: "The Bermuda Triangle of Wealth"

https://news.ycombinator.com/item?id=18174287

You should always be asking yourself who you are a slave to.

Or take a big life risk and unknown, likely pass up the ability to take student loans (for the small aspects of benefits they do extend), and risk a long term disadvantage at accessing the same higher paying markets.

It's no surprise there is a lot of bad feelings about this choice, especially when other first world nations have this mostly sorted out.

On top of that, as a society, it would be far cheaper for us to fund this on a social basis (by public funding low/no cost tuitions for public universities - with closed loop cost controls) instead of an individual account basis (with loans and an open-loop tuition inflation mechanism).

At the end of the day it falls to parents to educate their children. The assumption that the world at large has (or will ever have) your family's interests in mind is horribly naïve and negligent. Schools can mostly be trusted to educate in an academic sense, but reality is not best learned through an iPad.

And I think that a sane and successful society should help its citizens to do smart decisions.

As soon as you are legally allowed to be bound to a contract, our own government swoops in and tries to steal your future life savings before you even have the knowledge to know what's happening.

It's predatory lending at it's finest. And the loans come directly from the government. AND they're the only loans you CAN'T default on.

I wonder if any government in history has ever been good to its people. But, man, does it really seem like governments now are really fucking the 90% over.

Anecdotally, I've noticed some of this as well. When I took a leave-of-absence from my degree, some college students flat-out ignored me when I mentioned it. I find it ironic that institutions who are supposed to broaden peoples' minds still gravitate towards their own tribes/cliques.

</end rant>

My 50,000 foot view of the problem is that it is far to easy to obtain a huge sum of money to go to school for a career with no job prospects. My solution would be to factor in degree and ability to repay, making loans much harder to get.

These are 17-18 year old kids we're talking about...so it IS possible that they felt like they had no choice.

Even students that "worked non stop" are likely graduating with debt unless they had external assistance (either parents or scholarships or both) and even having done everything "correct" there's a high probability the only option after graduating is a job you hate in a career unrelated to your major (this is as applicable to S(T)EM as it is to humanities in my experience. The previous generation got everything for nothing then pulled up the ladder on the rest of us, don't act surprised when people are a bit salty.

We give children close to zero financial autonomy, no idea of work, of making money and losing it, then ask them to make one of the largest financial decisions of their lives at the age of 18. The background to this is a massive amount of messaging that your education is worth it.

It's not surprising they feel this way.

For the record, I didn't go the traditional college route, and I never had a penny of student debt, so if anyone has a right to feel smugly superior, it'd be me. However, I only avoided student debt by the dumb luck of making poorly thought out decisions that happened to work out in the end.

"If get a journalism degree, I could be a side-line reporter for the NFL on TV " compare that to: "If I get an IT or CS degree, I could make over $15/hour in an IT department at a company."

My point is that there are a whole lot of careers that fall into the middle of these extremes. And just googling the average salary for those careers may not give you the full story. Maybe only the top 10% of architects make good money, so the average is OK. If that is the case, you cannot give broad advice to people. You don't want to tell the people who would be in the top 10% not to be architects and you don't want to tell the bottom 10% that they should go for it. How do you even know unless you are in the industry yourself and know the person well?

It's kind of amazing that this is still being perpetuated. When I graduated high school 20 years ago, this was the mantra. Even then, it was a bullshit line. I got a degree in graphic design after high school, and there was a large portion of that class who did not find work in that field. I was near the top of our class, and I struggled to get interviews.

While it is ultimately an 18 year old's job to make this decision, parents and administrators are apparently still shoving "college solves all problems" down the throats of high school students. Is it because they don't know what else to tell these kids?

The difference is that a hippie who got bored with a commune could get a job and in less than a year had disposable income to pay for goods and services.

Now take a 20-something today who gets bored playing fortnite and decides to get a job. It's the same as the hippie, except a) they have something like 50K of debt (and rising), b) from day 1 their place of business starts getting telemarketer calls for student load consolidation, c) debt collectors call their employer in an attempt to intimate and harass them, d) at worst their wages are garnished to pay the interest on their loan, e) they are depressed because of a-e. (Aside: when that employee leaves the organization the debt consolidation telemarketers very quickly cease calling, which is super creepy.)

That last point about depression is key. Imagine the existential crisis of a hippie who must challenge their idealism and come to terms with the much more limited (yet realistic) freedom that comes when working for a living. Now for the fortnite player add a sense of interminable dread from a sea of debt that cannot be unloaded even in bankruptcy. The small joy of choosing what to do with the money one has saved is gone when one cannot save any money.

I can't think of any persuasive argument that says the hippies wouldn't have been swimming in debt if college had been funded that way in the 60s.

Upshot-- I can't figure out the source of your mixed feelings. If students today are entitled, they are no more entitled than previous generations of students who didn't deal with this kind of debt crisis.

Anyway, a critique of a human institution almost always involves humans who are not acting responsibly. If every institutional critique devolves into a discussion of how irresponsible a critical mass of the actors are, what's the point of doing the institutional critique?

This seems like an interesting and wide-open market since they are taking on traditional debt instead of getting some kind of education-focused loan product.

I went to school for Computer Engineering and paid for the first three years of my education with financial aid and student loans.

Then I got an internship that paid well, lived frugally, stopped taking loans, and paid off my loans with my income. I graduated with no debt.

Of course, I was fortunate that I was able to get financial aid and that I was getting a degree in something that could land me an internship that paid well.

This is already the case in my eyes, where having a degree is a net negative unless in conversation I hear it's actually being used and is returning above median income.

Statistically, that just isn't possible for all holders, meaning any time I hear someone has a degree, it's a coin flip whether or not that means anything at all.

On a separate note, as far as the article is concern I think we're already beyond there. Anecdotally, all of the degree holders within my wife's circle don't have a plan to pay them off. Which means student loans are the new mortgage, and if and when they plan on obtaining a mortgage, they won't pay that off either.

I have people very close to me that have no plans to pay off their mortgages, which means the loaners are just consuming payments indefinitely.

The latest scare to me was learning that community colleges are catching up to universities in terms of the absurdity in cost. I was absolutely floored when I learned what it cost to just obtain a two-year degree.

The issue is, its very hard to get a four year degree for that cost.

-. To show you can complete a big, multi year project that’s full of doing stuff you don’t like

-. To get past HR screenings

-. If you ever want a chance to reach Executive level jobs, you need to have a degree, for the perception of nothing else.

This debate has been going on for a long time, despite this being presented as a recent thing, and it always comes down to those things. While the tech-minded here might want to see it from a strictly educational standpoint, these are human/societal reasons that are quite important.

Would you suggest your kids to think of that possibility? If not why? Language barriers? Far from Home?

Some higher paying jobs are asking for master's degrees. Also, my brother can directly attribute his income increase to obtaining an MBA.

Is it worth it? An extra US$10k per year for X years of work? Better job stability? These are the decisions that need to be made, and not every career needs a degree.

Is this view counter to the original intent of college to create a class of people who are well-educated in the humanities as well as the sciences? Yes, but today's cost of education is just too out of control and salaries for most jobs too low for that noble idea to be practical.

Which is true for very, very few of the people actually going to college. Which means your advice is essentially "no" for the vast majority of people who would ask.

A dead give-away that there is a problem is that every degree costs the same to acquire. That is insane and archaic.

When faced with an irrational consumer, unfortunately, the rational course of action for a university is to spend money on prestige building items like fancy architecture and football, rather than trying to provide the best education for the money.

While I agree with this, I think part of the stigma is that "blue collar" jobs tend to be the ones that get outsourced, automated, or made irrelevant due to technology and internationalization.

And there's really not much empathy when that happens. I remember some of the elitist attitudes taken toward the out-of-work coal mining communities that were a hot topic during the last election cycle. I'm not trying to make a statement about which side is right/wrong, but it makes sense that people in general prefer to avoid "blue collar" work, with that sort of a national attitude towards it.

With a college degree being the de facto minimum bar to fields with some semblance of lifelong job security, it makes sense that people will attempt to acquire one, no matter the cost.

I have multiple people in my family who work as plumbers and carpenters and it's not as simple as you make it out. When the getting is good, it's nice, but they have all struggled with longish periods of unemployment, injuries, etc.

Same here. If you can't afford full 4 year tuition, it literally makes 0.0% sense to go to a university for 4 years, when you can go to a CC for 2, work, save some money, blow through your courses then transfer to a university.

If I could do my collegiate career over again this would be my move.

This is a large part of the problem: it's typically quite difficult or impossible to take on that level of debt without some kind of asset to secure it. And if someone lends that kind of money to someone who cannot make payments, bankruptcy is an alternative.

Student loans can't be discharged through bankruptcy; universities and banks have no skin in the game; students, especially young people, are left holding the bag.

On the other hand, young people don't vote: http://nymag.com/intelligencer/2018/10/millennial-voters-201... so this basic dynamic may continue indefinitely.

Isn’t this always the case? The radical element is making tuirtion free and cutting rates in half. For the former, that involves states raising taxes or cutting other spending. For the latter, it involves the federal government further exposing itself to these debts.

Making private loans payable at a fixed rate or fraction of AGI would be better. It would force lenders to give a shit about students’ post-graduation odds.

US has generally good universities (expensive, but good) precisely because public schools have to compete with private ones on quality and private ones must compete with public ones on cost. Take that competition away (and this proposal will wipe out private universities) and the quality will quickly suffer.

I would much rather gov't required uniform transparency for all accredited public and private schools: acceptance rates; total sticker price, median actuals after scholarchips (so you can compare your "20k scholarship/65k tuition" package to averages); graduation rates; average debt at graduation; first and expected 10-year earnings; etc.

Inform, not restrict. My 2c.

Furthermore, the easier they make it to get into college financially, the harder it'll be academically. That shift in burden will lead to more stringent admissions requirements, which means people will have to pay more for SAT prep, tutoring, etc.

The condition must be that the cost to a student / family of a student attending for a basic bachelors degree is zero, and that re-taking classes/classes for any unfunded (IE out of state/country) student is up to the actual "production" cost for a funded student.

The balance sheets should be open to the public for audit and inspection.

If the Federal Government would limit loans to a set amount per course credit you can rest assure schools would scramble to have offerings that fit within the guidelines.

there seems to be little issue with forcing health care prices upon those who provide the services so the same should be done for education. simply weight the course and apply costs appropriate. this could be used to encourage certain skill sets over others.

The truth is, it was known the debt crisis was going to explode once the Federal Government got involved. Same happened to education as a whole let alone health care

Basically, they target vulnerable people who have an earnest desire to approve themselves or access to someone else’s money. They advertise outcomes — “wouldn’t you like to be a respitory therapist making $75k” vs. courses of study and admit people to programs they are unqualified for. Then they pump you dry.

As a middle class person, it’s difficult to appreciate the mysterious nature of things without trustworthy advisors. A close friend came from a blue collar background and didn’t get good counsel. Her parents were thrilled that she got into college, which had been seemingly impossible for them.

She ended up getting a package of loans and scholarships that ran short at the end of her studies. Fortunately, in the 90s these predatory student loans weren’t as common, and she ended up putting $50k on credit cards to pay for her last 3 semesters, and was able to go bankrupt after a few years.

I know a few people who attended a for-profit college. What “fooled” them was that they essentially had little lose: stay in a dead end job or take an expensive risk with a greater than 0 chance for ending up better than they were before.

We were usually given resources to help and were more or less usually supported by those above us. We did the best with what we were given. I kept in touch with some of the students for a while and most of them did ok (not great, mostly just ok) and were at least working in something close to what they wanted. Overall, back then, it was mostly positive. I've since worked at a couple of large public institutions and I can't say it was all that different. People on the front lines were mostly trying to help when they could. Totally different scale though, hard to even compare the two environments.

Some are 17-18 year old kids when they make the decision, with parents who don't even know better. Others are older but don't have the critical thinking skills that you and I have, or even a high school diploma. They're desperate to get out of awful minimum wage jobs and make something for themselves, but don't have many successful peers who can give them good advice. The schools have aggressive salespeople who lie through their teeth about outcomes.

It's crazy that we give people 5, 6 figures of loans when they aren't even mature enough to plan a few years in the future. If they don't get a career out of it, we're punishing them for decades for someone else taking advantage of them.

It's easy to blame people for this, but if I had no opportunities and no education, I could see myself taking a risk in the hopes that things will work out and I'd improve my life. The schools themselves are the ones who know better and are milking people for all they're worth. We should be stopping them from doing this, and the previous administration took good steps towards this.

Most schools, public and private, moved to the model of charging as much as the family can afford (i.e., putting a huge sticker price and refunding the "unaffordable" portion for each family via a much-touted scholarship).

Something I learned from the book Weapons of Math Destruction: there's an entire industry around skimming contact information from poor people to target for certain products. People will spend heavily on AdWords advertising for terms like "apply for food stamps," and have a web page that offers the service of expediting your food stamp application for free. Of course, this website is just a form that takes your info and forwards it to the regular online food stamp application. Maybe it's got better UX, but it's not expediting anything.

As part of handling the application, the website operator can save the name, address, and phone number of someone who is highly likely to be poor and desperate. They sell this information to certain companies, predominantly diploma mills and payday loan companies, who will then call these people directly to aggressively market their services.

I don't have the book at my fingertips, but if my memory is right, the contact details for one qualified lead sells for like $75.

https://www.pbs.org/wgbh/frontline/film/collegeinc/

Does it change the framing of this fact if we assume a degree's main value to students is in its signaling power rather than what they learned? In which case ballooning debt is still a really problematic thing because it shows we're dumping money in an arms race which everyone would be better off if we could tone down.

Not that I disagree, but as a counterpoint: Nearly everyone I know who is financially successful (and didn't inherit any significant wealth) has spent a part of their post-college existence in this position. This is in no way representative or scientific, but the point is that "temporarily cash strapped" is a reality and not a fantasy for a nontrivial number of people, and the perception of unlimited upward mobility extends past your twenties. It's not just folk wisdom for many, it's supported by some degree of experience.

I think we have to consider what's best for society. Having so many people living the first half of their working lives buried under tens of thousands of dollars in debt is going to hurt all of us, even those who were "responsible" with their loans. Too many important jobs in society require lots of education but don't pay well enough to actually cover living expenses and loans. Think counselors, educators, even nursing is moving in this direction.

We need to bite the bullet and help these people, otherwise, we will all suffer the consequences. These jobs will go unfilled, people will be homeless or living in poor conditions, and it will be future generations that bear the costs from this.

This is maddening nonsense.

I started college in 1999. Jokes about English majors asking if you want fries with that were mainstream when I was in grade school. There isn't a single person who has attended college in the last 40 years who didn't have enough information available to make better decisions (in market terms) about what to study. Kids will be kids and they'll make bad decisions. Fine. But there's nothing new here (except that, obviously, the consequences of those bad decisions get larger as costs rise).

Tuition is only a part of college expenses. How do students pay the rest?

I was curious about this so I looked it up: Full-time students pay roughly ~$5.3-5.6K per semester, or ~$11K a year [1]. Easy to see how one would accumulate ~$50K in debt from just tuition expenses alone.

1: https://utexas.app.box.com/v/ug-tuition-18-19-long

I'm interested in hearing more of your take on this statement.

From my personal experience, as a first generation immigrant (though of Western European background), it wasn't overwhelmingly confusing. Sure, there were lots of options - R1 state schools, Ivies and other top-notch private schools, secondary state schools, etc. But, once I figured out which category of schools best suited my talents (in my case, R1 state school, because I was smart but no clue what I wanted to study), the set of choices was narrowed substantially.

After that, it was really just a matter of looking at the costs, as in my limited experience at the time, all the big state schools were mostly interchangeable, or at least had enough to offer that I didn't fear not finding something to study and hobbies to pursue.

Staying in state, at the time, was something like $16k/year (UVA, mid-90s). Leaving the state was roughly double. Pretty much a no-brainer to go to UVA, VT, or W&M. I ended up at UVA mostly because of ego - at the time, it had the better all-around reputation. Hind-sight being what it is, I might have thrived better at W&M, but I hardly failed to thrive (just wasted my first year partying too hard and not taking academic seriously).

Default just means not being paid in full and on time.

There are, in fact, fully accredited and reduced cost online degree-granting instititutions.

https://en.wikipedia.org/wiki/Church_Educational_System_Hono...