Hacker News Reader

Comment by maverick2007 | Hacker News Reader

maverick2007

Student loans always did feel kind of predatory to me. We're asking 17 or 18 year olds whose brains haven't fully developed the ability to prioritize long term consequences to take on 10s or 100s of thousands of dollars in debt when in many cases, they don't even know their path through college (major etc).

Now don't get me wrong, I don't have some sort of magic plan to fix this (maybe allow them to declare bankruptcy would be a start?) but the whole industry just felt a little predatory to me.

View on HN

Not only that but they're being pushed into college by a generation for whom college tuition was something like 400% less (I believe that's after inflation is calculated in but would have to look it up).

The fact is, while college administrators and presidents are doing just wonderfully, the actual discernible education has not become much greater for the student to warrant this increase.

So you're pushed in by a generation for whom the benefits were great, and the costs affordable to a college education where the costs are exorbitant and the benefits less so.

Then I guess I have a "fully developed adult brain" (whatever that is) and certainly couldn't fully understand all the effects of taking out a $120k loan to take a risk on a degree in a subject I don't know (by definition, otherwise why am I going to school for it?) - let alone long term risks and opportunity cost assessments.

I think it puts anyone looking to go to college and 'move up the ladder' in a very difficult position.

Honest question. Why doesn't the lender require the borrower to explain how they plan to repay?

Or why do they continue to lend large amounts for degrees where there's a low probability of getting a good salary after graduation.

Or does the govt assume the risk of student loan defaults?

Why doesn't the lender require the borrower to explain how they plan to repay?

No lender ever asks that. Lenders ask themselves, "how will I be repayed? And in the case of default?" In most cases, the answers are "by the borrower" and "take the house or car, the sale of which will offset some of the loss".

In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash". There is zero incentive to determine how the borrower will repay.

> In the case of student loans, the answer to the second question is "the U. S. government will pay it, in cash".

No, it's not. While private student loans are still offered (sometimes, by predatory scammy for-profit schools themselves), none of them for quite a few years have been government guaranteed.

The former government guaranteed loan program has for some time had exactly one lender by law, the federal government itself.

> No lender ever asks that.

I just bought a house and you're utterly wrong.

Student loan debt can't be discharged by bankruptcy. Lending in this situation is decently low risk. You're basically rent seeking with humans instead of land. Once you've got one, you can siphon off their excess productivity for decades. You'll get your money back in the long run.

> Student loan debt can't be discharged by bankruptcy.

Yes it can, though it is more difficult to do so than it is for other unsecured debt.

> bankruptcy would be a start?

Yes. This is the start and the end. Bankruptcy will stop lenders from making predatory loans. It puts risk on both sides.

Tuition costs will naturally (and quickly) drop. Because there will be fewer people able to pay a crazy loan fueled price without a crazy loan given to them.

Precisely. Same applies to mortgage market as well.

Maybe. The other option is that higher education will just be for the global rich. It’s a myth that markets need everyone, in fact it’s a core tenet of modern economics that markets can hum along just fine while excluding a large class of people, with no incentive to bring them into the fold.

Solution: lower tuition.

Which was the status quo before federal student loans.

I know the standard talking point is that easily available student loans is the only cause of tuition increasing so much over the years. But this ignores the massive drop of state funding that used to go to most colleges, and (IMO even more important) demand vs supply. It used to be that college was one of several valid options after high school, but now everyone is supposed to go to college and there is a lot of societal pressure to go, without regard to what a person wants to do with their life. This allows colleges to keep increasing tuition almost without limit, because you _have_ to get a degree so cost doesn't stop people from going.

I'm just curious, before federal loans, were private lenders willing to fund anybody, or only degrees they found lucrative?

Or was the tuition so low it didn't matter? (E.g., somebody who gets a psychology degree and winds up making $40k/year doing data entry still can afford to pay the relatively small amount)?

I don't remember the exact numbers, but tuition in the 90s was very low in comparison.

Here's a link that shows 2-3x increase in adjusted dollars:

https://www.cnbc.com/2017/11/29/how-much-college-tuition-has...

From what I recall, parents had to save for their kids college, and if you didn't have a college savings fund then you worked your butt off in high school in order to qualify for scholarships. And you worked a side job to pay your way through college. And a lot of people didn't go to college, because a lot of people could get really good (decent paying) jobs without it.

Before federal student loans it was possible to attend University on a part time wage. It was hell, like it always is when trying to improve your socio economic status. But possible, unlike today.

Solution: Reduce the amount of debt available. Cheap and easy school loans are what pushed up tuitions. They're not going to decline until the easy money disappears.

Reply on news.ycombinator.com