What a Student Loan 'Bubble' Bursting Might Look Like

* Limiting the amount of money you can be loaned for majors that don't have good job prospects. People should turn to grants for these types of educations

* Increasing your interest rate if you miss class

* Increasing your interest rate for poor grade performance

In this case there is no bank to run on - people will just continue to have their wages/benefits garnished to continue to repay these loans that they are forever tied to. I feel like there's not really a "burst" that can happen - just that hopefully there can be some sort of debt forgiveness program or something that will alleviate the burden of the debts.

> A lot of that has to do with what Goldfarb likes to call the narrative—one that convinced kids that the only route to middle-class respectability was to get a college degree and that suggested failing to do so meant having failed at the American dream of upward mobility. To keep using the economist's terms, I would also say that 18-year-old high school seniors definitely qualify as "novice investors." Their philosophy can be summarized by Colin Hanks in the 2002 movie Orange County. When asked why he's so obsessed with getting into Stanford University and college more generally, he snaps back, "Because that's what you do after high school!"

Too often I see articles about student debt make a comment about how students have been tricked or misled into pursuing a degree. Why does no one talk about the alternative?

Let's talk about the alternative: You don't get a degree and now you're resume gets automatically thrown out of most applications. Only a small fraction of those without degrees manage to get well-paying jobs; they're the outliers. Albeit unrelated to employment rate, look at the salary differences: https://www.bls.gov/careeroutlook/2018/data-on-display/educa...

Some might say it's worth making $X/yr and debt-free than making $Y/yr with $Z debt but this only holds true when Y > (P*Z + X) where P is the percentage of the total initial debt being paid off per year (e.g. P = 0.2 if you're paying $10k/yr to get rid of a $50k debt). And these values are hard to predict.

The government would guarantee less student loans. This would be means some for profit institutions might shut down.

I can see why there are rumblings of loan forgiveness, as it has metastasized into something truly horrible. https://en.wikipedia.org/wiki/Debt_bondage#Definition

> I hated the film adaptation of The Big Short. The acting was good and it did have a surprising amount of energy for a story that centers around men in suits doing math. But I felt condescended to. Maybe director Adam McKay tested an original cut—one minus Margot Robbie—and realized a good amount of the audience couldn't follow the plot without having a sexy lady in a bathtub break the fourth wall to explain subprime mortgages and the financial crisis.

Sounds awfully pompous, like it came from r/iamverysmart. Much of the impetus behind The Big Short certainly was to break down the 2008 financial crisis to those that aren't economics/finance wonks, or for whom a narrative holds more weight than a several-hundred page non-fiction book about it.

It's not that I want journalists to coddle their audience, I just think it's a bad look to completely dump on other creators to inflate one's ego while trying to make a point.

How about this, which still includes a bit of criticism of the director (but milder):

"While the film adaptation of The Big Short had good acting and a surprising amount of energy for a story that centers around men in suits doing math, it wasn't exactly my cup of tea. Perhaps it's because I felt Adam McKay didn't trust his audience quite enough to understand the ins-and-outs of complex subprime mortgages and the financial crisis, instead falling back on gimmicks like having Margot Robbie in a bathtub break the fourth wall to explain it all.

"In some ways, America's student-debt crisis is a lot simpler than all that."

I don't know, maybe that's not any better: and maybe by criticizing the author I've become the thing I set out to...criticize. Whatever.

Combined with the newfound belief that, you must, and in fact, are entitled to go to college, "demand" goes up too.

The result is students racking up needless debt when they probably shouldn't have gone to college to begin with. College is NOT the only option to build a successful career, but in America, with no degree, you're seemingly sub-par in the eyes of our backwards society.

So, who wins? All these "Not-for-profit Universities" whose profit margins (non-profit, doesn't mean that aren't profit-ABLE) are probably better than many Fortune 500 companies.

The solution is to dry up the source of loan money, reduce the pumped up demand for bogus degrees kids are getting and encourage young people to consider other career options. You don't need a piece of paper to be successful.

Putting people into massive amounts of debt in exchange for a shot at a prosperous future puts a lot of pressure on them to rake in the dough, which I fear is going to corrode the morality of those going into high-paying institutionalized positions. In effect you are looking at the upper-middle-classes of the economy starting out with a big incentive to stratify because everything they have worked for rides on being able to pay off those loans - a toxic praxis.

On the other hand, if you are a policymaker for a nation's central bank, then this might be your strategy for ensuring your workforce produces measurable value.

Imagine a collective movement of 9,000,000 all ceasing to pay their student loans at once. If I thought all my friends weren’t planning on repaying, I would be quick to join them. Is the government really going to dig thousands of dollars from the bank accounts of millions of people at once?

Once there are enough people in enough pain that it turns them into single-issue voters on this issue, someone will create taxpayer-funded relief.

If it's a Democratic-led solution, it'll probably be in the form of massively expanded support for universities that eliminates the cost entirely, or reduces it to what one might be able to reasonably earn/save at a minimum wage job.

If it's a Republican-led solution, it'll probably be in the form of creating a tax-deferred savings account for college, combined with subsidized work-study program.

Both parties will probably agree to bail out degree holders who can't pay after a certain number of years. They will probably also force cost cutting reforms on schools.

You don't need the full college experience, but as the article mentions, getting away from home is a part of it for most.

Currently, there is no downward pressure on either universities or banking institutions for tuition rates or amount of money lent in student aid, because the government guarantees repayment. As a result, tuition rises every year far faster than inflation, and banks are happy to join in the reaping of the profits. Capping repayment rates would correct both of those issues, as the ROI goes down significantly over a certain total amount lent, if indeed the sum total can be repaid within a lifetime.

This would additionally ensure that while student loans are available to all students, all parties involved (student, bank, university) have an interest in ensuring the student will be able to pay back the loans, as opposed to now, where two parties have an interest in loaning as much as possible, and one child has conflicting interests.

This would additionally force some accountability on universities for their programs. For-Profit institutions, which currently largely exist to gather tuition money while providing no real educational value would suddenly become unprofitable, and collapse. Simply put: if your graduating students make little money after graduation, their rate of repayment will be significantly smaller than an institution that provides actionable skills.

Similarly, this would incentivize universities to ensure that all of their students are pursuing reasonable / coherent career paths. Currently, universities have the dual incentives to ensure that their students that go on to significant success and high paying industries do so (alumni donations), but also to collect as much tuition/room/board etc as possible from their existing students. This change would negate impact of the this second option.

This would allow students who go to expensive schools to go into lower paying professions. This would allow students with the best and most expensive education to pursue all types of jobs (for example, teaching), not just the jobs best fit to pay down their debt.

This would cap how punitive the accrued debt can be to the graduating student, and resolve the original issue mentioned in the article: student debt is now so overwhelming, it is preventing a generation from entering financial adulthood.

And lastly, this is just a guess and could be wrong, but I would paradoxically expect that in addition to all of the above changes, capping repayment rates would also result in lower amounts of student debt willingly taken on by students. This is for the simple reason that it is easy to rationalize "I'll be able to pay back {Insert_Any_Abstract_Dollar_Figure_Here} once I graduate and get my dream job", but everyone intrinsically would understand: "If I take out this loan, I'll be paying 10% of my income for the next 30 years"