U.S. Student Debt in ‘Serious Delinquency’ Tops $166B
bloombergquint.com
bloombergquint.com
It doesn't seem like a good idea at all to indebt a significant part of the young population (which I presume creates a lot of avoidable stress) while the rich gain in wealth and power year after year. But I guess longer-term thinking has been thrown overboard in economic decision/policy making anyway, because that would make the numbers not grow fast enough.
Recently I'm under the impression that American society has been tearing itself apart more than is healthy, damaging social cohesion to a great deal. Good luck building an advanced society on distrust and inequality though...
But, from a non-European perspective, Europe doesn’t seem to be doing well? It seems the EU is slowly disintegrating, and the monetary union isn’t working. Also the political landscape seems to be in turmoil as well.
Actually, this particular part of the thread you're responding to is about wealth inequality, economic policy, short-term political thinking, whether the EU is doing well comparatively, and policies that create a large amount of potentially avoidable anxiety - among a few other topics.
Education is only a related topic for this specific comment chain.
I'm not saying the European countries have it wrong, but their systems seem far from free college for everybody (how it is often reported in the states) and much closer to free college for the worthy. Please correct me if I'm wrong.
When you have finished your Hauptschule or Realschule (lowest and mid path) you usually start a job but part-time you also go to a job-school (Berufsschule) where you learn more specific things that are useful for your job. This dual-education works great and is being exported to other countries where german manufacturers get active but don't find the skilled workers they are used to.
While the Americans seem to not be operating as a democracy for a while and are instead a Corporocracy. It became fairly obvious after the GFC. The three “super powers” in the world are not democracies.
I make it US, EU and China - 4 if we count Russia for the 8000 nukes but not by most other measures.
Moving on, we Europeans are making a decent profit from selling weapons to the Middle East and African countries. We might as well take on those refugees driven out by the violence our weapons cause.
Europe's history, even the years since WWII, is full of migrations: Post-war displacement affected more than 10 million people, refugees from East to West Germany, Brits fleeing the rain for sunny France and Spain (they are a few hundred thousands), Hungary 1956 dispersed 200,000 hungarians of which 70,000 crossed this little bridge https://en.wikipedia.org/wiki/Br%C3%BCcke_von_Andau and the last decade saw a massive flow of young people from southern Europe to the north which causes long-lasting problems for the southern countries. The list goes and and will go on. Some EU countries have 10% or more of EU-nationals in their population which in my eyes will become a hot topic in terms of higher level elections as right now you are only allowed to participate in local elections if you are not a native.
The EU is making progress every year: I grew up near a border which was gone by the time I was a teen and nowadays using my mobile phone in any of the EU28 will cost me extra. It's those small things that the people do love about the EU and would miss if they'd just think harder about it. It's also boost regions otherwise neglected by their respective country's government. No one in Westminster gives a fuck about the North or Wales, the EU does, with lots of money being invested.
I hope we see a decade of consolidation and more unification e.g. in the tax, finances and transparency. Junker's own blunders as Luxembourg's prime minister are unforgivable.
The purpose of the EU is to prevent war. The EU hasn't had a war in 75 years. That is the longest that Europe hasn't been at war in its recorded history.
The EU is if anything a force against peace, as it takes a totalitarian "you obey us on everything or we work with you on nothing" approach which may appear to create temporary peace, but only by suppressing dissent. The USSR was also by this approach very "peaceful".
Also, I understand that Russia is considered less and less "European" with each passing year but the Ukraine and Russia (or at least all of its centers of power) are located within the European continent by definition. There's also the issue of the IRA's war against Northern Ireland and the UK as a whole, while that conflict doesn't meet the commonly agreed definition of "traditional warfare", it was the very template every modern insurgency bases itself upon. In a sense that was a war by any modern definition since traditional warfare seems to have become a relic of the past.
The EU was a necessary prerequisite of the peace process in northern Ireland, as is being brought into sharp focus now With Brexit.
Wealthy people tend to be owners of businesses (directly or indirectly) that buy this labor, and they have a better negotiating position.
Young people with all the time in the world, an education, and no debt are also in a good position to establish new businesses. Having fewer of those reduces competition.
In essence, what we're talking about here is a massive wealth transfer from people seeking post-secondary education to those offering that education (sometimes public, sometimes private)... except (critically) the effects are future loaded.
We've indebted an entire generation, but it's an invisible anchor dragging on their economic aspirations.
If you ask me, we should do three things to fix this: (1) haircut absolute public loan amounts to a manageable amount in exchange for public service (more funding & new opportunities), (2) haircut private loans to a manageable amount (too bad, they shouldn't be able to offload risk to the public and keep their profits), funded by new taxes on underperforming (read: abnormally large numbers of deliquent loans) private loan vendors AND institutions generating said loans (both of whom benefited from originating poor quality loans), (3) continue efforts to tie government-guaranteed loan eligibility to positive outcomes (your graduates don't find jobs in their fields, your program(s) are no longer eligible for loan guarantees).
The lenders are rich. That's how lending works - you have money (are rich) so you lend it now for more later (get richer).
My thinking was more along the lines of: shouldn't the haves fund/enable the future success of the have nots instead of having them turn into (hopefully temporary) "have even less's"? In my mind it doesn't seem very sustainable to fuel education with debt even with government as creditor, especially in case should economic downturn occur...
I'm a university student myself and thanks to publicly funded universities I pay ~300 EUR per semester here (including an IMO quite generous public transit ticket). Obviously someone else is paying all the rest (plus the cost explosion is probably not nearly as bad here). The thought of having to personally indebt myself however, not knowing how things'll play out in this increasingly crazy world, seems quite scary. Looking at the situation of US students makes me all the more grateful to not be in their shoes.
I admit my original comment wasn't very well thought out, just something I wanted to vent (reading certain subreddits may have had something to do with this). There's obviously more forces at play concerning US higher education (and the welfare state in general), many of which I'm sure I can't see.
Beyond that don't trust what you read online about the US. It is all grossly exaggerated. Remember the US is a large country with a wide variety of people with different priorities.
European here as well, but best I'm aware what you're saying is not how it works.
The US government is the student loan lender at the end of the day when you work through the insurance chain. And in contrast with mortgages, car loans, credit cards, etc. where you can declare bankruptcy to make the debt go away and start anew, you can't default on the US government.
The real story here is that an increasingly large number of US citizens are having or stand to have their wages garnished by the US government. Debt bondage comes to mind...
For the European model to work in the states, many schools need to be shut down, so as to reduce the freedom of picking whatever major at some school.
Exactly, it just becomes a deferred tax. There are also laws that cap how much a person's wages can get taken specifically with student loans. It maxes out at around 10%.
Again, I do not agree with it. But to pretend the sky is falling is false. That's also why, as you've noticed, laws have been adjusted in the wake of the abuses of the for profit university industry. As well as accreditation crack down on the organizations that accredited these for profit universities.
I'm not saying it's right or just. I'm only saying it's intentional and not some giant debt bomb surprise that the government is not expecting.
It's just kind of how the US tries to do things. By having loans they are trying to apply market forces. The idea is that students will do a better job as a whole deciding what schools and programs continue. And again again, I'm not saying I agree. Just relaying that there is an actual design behind it.
Citation needed. My personal experience paying taxes in both EU/NL and US/TX is that I pay slightly more in the US, in pretty much the same situation (family of four, two incomes)
I am not an American, nor that knowledgeable about their tax system, but my impression is that their system has a lot of layers (like state/county/local), which might make it unfair just to compare national level taxes.
I always feel like tax should be measured in "if my employer pays 100 extra, how much more can I give another company for a good/service".
I don't know about US but for Germany the answer is between 25 and 40 depending on how low your income is and what your family situation is.
http://www.oecd.org/newsroom/oecd-tax-rates-on-labour-income...
Long-term thinking may mean less burden in society by making the incentives based on debt
I also think people forget that the US is a superpower in part because of the brain power it has, that brain power in part comes from the folks coming out of university. When you look at Uni's top 100 rank, 58% is American & 22% is European. Although this might be a simple correlation vs. causation scenario, I think it is worth accounting for in conjunction with a variety of variables.
I still agree that the tuition $ in the US is exorbitant and that governments need to teach people the values, risks, etc of going to university just like I think everyone should have at least 1 personal finance class in high school, it would help a lot of people.
P.S. I am not American
1. Selecting a very expensive, non-prestigious private school.
2. Selecting a major that has no ROI for the cost of tuition.
To give concrete examples:
Option 1.
4 years at U of Texas at Austin.
Tuition = $40k.
2 Years at Tarrant County College.
2 years at U of Texas at Austin.
Tuition = $24k.
4 years at Southern Methodist University.
Tuition = $250k.
And, while I would support further taxes to support state schools, I have no desire to support students who are personally selecting to attend a school that will cost 10x just because they want to. And I have no desire to forgive their loans, either.
I think as others said, many students aren’t doing the ROI calculations.
For me, the government loans are 3.75% which is totally reasonable IMO. One could easily outpace this with an ETF fund.
The private loans are more expensive at 6% and up but the lower end is still totally reasonable.
The real issue is that people taking these loans lack the financial skills to pay them back. A friend who is out of school for 10 years has a near six figure loan debt that he refuses to pay down despite earning six figures. Learning to budget and live frugally is a required skill to escape the debt that many don’t have.
I also know very few that have visited financial aid to get a second look at their scholarships / grants. I went every semester and walked out with something. A friend walked out with $14k extra in financial aid from one meeting. Those in the worst positions financially also get vastly more aid. I had some savings going in but still paid a fraction of the tuition sticker price.
In all, the experience worked out well in my favor with a paid research position and other breaks along the way, but given any other situation I would recommend going the state school route which is often a tenth of the cost.
My school wouldn't give anyone extra aid even if you went in in person and asked (the only case I know about is a student's mother passing away halfway through undergrad) and you'd get a little less every semester because tuition kept going up.
Top schools tend to be more generous despite the higher sticker price. My sister graduated from one with around 1/4 of the debt that I did. 2 years was with the same FAFSA for both of us.
If we can't do anything to solve that portion of the problem, we should at least restrict the mandatory fees that are tacked on for non instructional purposes. No student should have to pay for decades to prop up with school's sports ambitions. For every Alabama that makes a profit off of sports, there are dozens of Georgia States that impose ridiculous mandatory fees on students to balance the budget of the athletics department.
Athletics are easy to pick on because they're the most visible but most schools have a whole list of these non instructional fees that students must pay, in most cases, go into debt to pay or be denied access to education.
After removing the mandatory fees, also limit how much of the tuition can be used for non instructional purposes. Every institution has overhead that must exist to keep things operational but there must be a limit to how much or we're once again either denying access to education or condemning students to an overwhelming debt burden.
Instruction of course isn't the only mission of most universities. Research is important. Extension is important. There are many worthwhile activities universities engage in that should continue but not at the expense of access to instruction.
edit: spacing
We need to vastly cut costs and sports and non-instructional costs wont move the needle.
A few schools earn direct profits of about $10 million per year from their athletic budgets. Texas A&M's increased revenue is related to stadium renovations.
Good professors are an extremely expensive thing to have, and students of merit deserve time with such masters that maximizes knowledge transfer. That almost always means not having regimented, graded curriculum taught by lecture from one singular book, but that is how almost all university courses operate.
Any time a professor repeats themself or is forced to do something mechanical or routine is a failure of the system to take advantage of their ability.
I also dispute your claim that 100-level courses should just be assigned to grad students. of course any grad student should have a firm grasp of the intro material, but intro courses aren't _just_ about learning tools and building blocks for understanding advanced material. they are a department's first opportunity to get students excited about their discipline and get them to start thinking about how all the little pieces fit into a larger perspective. simply throwing grad students at these important courses is a great disservice, imo. to be fair, the current practice of shoving 200+ students into a huge lecture hall is not much better, no matter how good the instructor.
Are they? I left academia partially because compensation was so much better in industry. I remember doing the calculation that a tenured professor's salary was covered by 3-5 undergrads' tuition. At public universities, these salaries are public.
Schools will trip over themselves to offer degree programs to meet Federal Assistance requirements. Each degree, each course credit leading to that degree, should all be subject to review on a periodic basis to insure that the needs of the country as a whole are being supported. Colleges which fall outside the loan guarantees will obviously find methods to insure students can attend, by steering endowment funds and sponsorships.
This sounds horrifying. You want every change of a course to go via some central bureaucracy for approval? This bureaucracy will be staffed by ideologically neutral disinterested angels, regardless of which party is in power?
I think there's a much more free-market solution here. Cap student loan payments at 15% of taxable income, written off after 20 years. Then they can never be a crushing burden, and lenders will become very picky about who (and for what course, and where) they make loans to.
And 17-year-olds will be presented with highly relevant individualised information about the likely outcomes of different options. And it'll also create some jobs for the coming glut of machine-learning people, to make these predictions...
There's already more than enough "ideologically neutral disinterested" distortion of social value created by so-called free markets everywhere else in the economy. If free markets were going to solve university education they'd have done it by now - just as they've been promising to for decades now.
Training lots of people in currently high-wage jobs would be precisely the point -- those high wages are the signal that the economy could use more of them.
If there are professions which can't be funded this way (which means that right now, those employed in them never pay off their debt) which we would like to subsidise, then let's do that directly, give out music scholarships etc.
The "so-called free market" in education is responding to incentives we are providing it, which are really terrible.
The market in university education is not free, though. There are significant distortions induced by the various loan and scholarship policies enforced at both the federal and state level.
Has "the free market" been promising to solve university education? Is such a thing even an entity capable of making a promise? As far as I can tell, it's totally uninterested in doing so. Most reputable educational institutions are not for profit. The for profit ones seem almost entirely taken with the problem of bilking students and taxpayers by providing shoddy goods at outrageous prices and exploiting the student loan regime and ignorant customers. The university education system and the free market are, as far as I can tell, basically uninvolved with one another.
FWIW, I don't think the free market would solve university education either, for entirely foreseeable reasons. In a completely free market, universities and lenders would bet on the affluent, and the poor would be left out in the cold to an even greater extent than they currently are. But on the other hand, it's hard to blame the free market for the current state of affairs.
Central planning of education? Do you really want such control ceded to a handful of unelected bureaucrats?
The Medicare/Medicaid system's costs have risen by leaps and bounds every year since their inception. That is not a model one would want to emulate for lowering education costs.
Students that got in would go through a dense cursur and be viewed as higher intellect for the work market. With years (at least in France) there was a desire to make everybody get a higher education degree, but often by relaxing barriers of entry. You get more students but less good ones, the market is saturated by mild masters degree, not enough jobs, they trickle down (sic) and cause degree inflation (post office summer positions required 2-3 years diplomas, not rare to see a 5y college student working there).
At the same time what used to be a simple way to absorb people's need for a job is a bit comatose, simpler hands on jobs (which value was seen as less at the era of Master's degree or nothing) were nice to let people find a salary without much hassle.
I remember a tv host saying he went to Paris without anything and got a job by almost knocking at the first door he saw..
It's this thought, that makes me wonder if government backed higher education is worth the money. I'm inclined to support government backed higher education, but I do think this is an important question to ask when determining specific policy. I'd think we'd only want to pay for STEM degrees where students were able to maintain a certain GPA.
With that said, yes, the system is predatory. It's disgusting the amount of interest I paid for ten years to these loan sharks.
You put them through public school to... train them to work in factories. Because that is the original and persistent intent of what a high school education leaves you capable of.
You then siphon them into university then because... they need the means to live, and the only way to get it is with specialized skills.
Like with many things the original functions of what these programs were meant to achieve (creating a capable working class for regimented jobs of the era) have been totally lent to obsolescence but the systems remain as if nothing changed.
Not even STEM justifies the cost of university. We could be collectively saving absurd amounts of time and money if 14 year olds were electing to pursue a STEM career and simply shadowed professionals for 4-8 years and learned through first hand experience while reading books and doing online regimented lecture learning about the subjects on their own or in collaborative groups of their peers. You wouldn't need extravagant institutions costing absurd amounts of upkeep to maintain just to fail to produce capable scientists and mathematicians because they graduate with often only a rote understanding of ten+ year outdated domain knowledge and no experience practically applying any of it.
I believe that's called a PhD :)
But I totally agree that much of the system we've invented is a mistake, basically from having the causality backwards. People who went to university did well, made more than those who worked in factories. So we decided that (after closing the factories) we should send the entire population there, so they can all do well! But it doesn't work like that...
Society/government can only do so much to push people towards success. I agree that a lot of people go to college without being prepared or able and that adds to the cost. It is the cost of failure that society has accepted up until today, we will see if it changes.
This morning my university sent me an email about a `Summer Funds & FAFSA Workshop` to `receive guided 2019-2020 FAFSA filing help.` In their words: `an open lab session to help you complete the FAFSA .`
Schools seem of the opinion that the money is already theirs; If they could file it without the students they would.
Just because it's systemic doesn't it's not predatory. With admins focused on the money and teachers focused on research, how are universities any more than glorified testing centers?
Doing something like making community college and trade school level degrees free and leaving everything else to private loans sorta makes sense. (Arguably 80% of university graduates really didn’t need their degree for their job.)
Banks will lend less, to people they think will pay it back. Which means schools will have to charge less, particularly for non-profitable majors.
What is does mean, however, is that no sane entity will then continue giving out loans for someone to go $75k in debt to go to cooking school.
How I’ve no idea. Right now it’s kinda risk free to give loans out so that would change. Maybe then less cash is made available and universities have extra capacity.
I think this would be a vastly better scenario simply because all interests would be aligned. Universities would have an incentive to keep prices reasonable because lenders would want to keep the total amount lent per individual relatively low. Universities would also have an incentive to ensure students would be likely to be able to comfortably provide for themselves after graduation because, once again, lenders would have an incentive to ensure that the people they're lending to will be able to comfortably pay back their loan once they graduate. And so forth and so on. In the end, we'd likely reach a scenario where it'd be relatively easy to obtain loans for majors likely to improve your ability to comfortably provide for yourself, and relatively difficult to obtain loans for majors likely to leave you with difficulties providing for yourself.
A world where anyone could pursue education, on public dollar, on any topic they'd like, is an interesting idea. I look forward to seeing the outcomes now that such systems are truly starting to be put to the test. Many nations are facing substantial pressures on their social systems such as aging populations, increasing costs of medical care, reduced fertility rates, immigration of lower earning individuals, etc. At the same time, the face of the job market is constantly changing such that an ever larger share of all desirable careers require some degree of educational specialization to even get your foot in the door. These are relatively new problems and I'm not entirely convinced that utopic ideas of decades past will remain viable in the decades to come - though I certainly hope to be proven wrong!
But if it became commonly done after graduating, then I imagine it would not predict much about whether you will pay the mortgage on your house (which is anyway secured by the house) and so lenders would soon not care.
The upside is that lenders would still have to consider whether the borrower is actually likely to be able to pay back their loan
There's undoubtedly tons of waste in universities' functioning, but I don't blame policymakers for treading lightly when it comes to constraining their operations in any significant way for fear of killing the goose that lays the golden eggs, as opposed to simply the baseline ideological skew towards less direct regulation of businesses.
Innovate in trade schools and start convincing high school students to take that path instead of University.
that's a tax on the non-attendees, why should they pay for your education when it significantly raises your earning potential?
That's ... actually how it's done, yes. Besides dam construction the https://en.wikipedia.org/wiki/Maschsee is a nice example of literal hole digging.
Did he mean complicated process for the school to buy them, or was he making them and selling them to the school himself?
Also, theft when you are an adult is not excused by claiming you were dumb kids in my opinion.
I agree, but you can hardly force low-performing students to quit and pursue apprenticeship instead?
The real difference is government funding for universities. No country in the world has made higher education affordable to the masses without high levels of government funding -- the US used to do this and stopped, with predictable results.
I appreciate both sides of this and I'm not sure where I currently am on the issue.
Libraries do purge from their shelves, and probably should as time progresses. It is interesting to me the figuring on what to purge, for obvious reasons. Likewise for what new material "should" be taken in to [re]fill the shelves.
Similarly, I once purchased a ~50-year-old book about "future" rocket science from a used book store. The clerk actually asked for clarification, "You understand this book is 50 years old, right?" ... yes I do, please take my money. This makes me wonder where libraries dispose of their discarded stock if not some gigantic shredder or similar.
The gist of this is; some shithead, many years ago decided to increase his bottom lines by fucking with future generations and our ability to output... when they started this whole fucking problem, and you know what? Let it burn to the ground.
You know who's not gonna lose a bunch of money? The people in student debt, we already fucking have.
Meh...I figure maybe society will just collapse at some point and it won't matter anyway. Either that or a bunch of people are going to start going crazy because of this and things will get interesting.
At least we’ll all go down together.
If you trash every millennials credit score, the scores would become worthless.
I wonder if some sort of cloud sourced banking could be worked out to make it feasible. Trying to float a startup bank with student loans, for instance - but that’s clearly outlawed. Maybe some crowdfunding of a bank start up through small monthly contributions. Instead of needing a good credit score to be able to purchase things, buying into a monthly alternative to the credit market.
Flying by the seat of my pants here -
Maybe sell gamified returns for appropriate length investments. So the customer signs up at cost X. Every month they contribute X dollars. The company stores those funds in cash equivalents. At any time, the customer can pause or cash out their payments to that point. After a year, the company stores those funds in instruments that pay out in a year, maybe, or the company just keeps them in cash equivalents. After a year, the customer can qualify for a loan of 12*X+Y through the company. Y being 0 or some present value of the customers promised future payments.
Sorry. But you took a debt, you pay it back. Integrity isn’t outdated.
I agree that the idea and industry behind “13th grade” is dumb. Obviously not every kid should be encouraged to take on debt to go to college. But “stop paying your debts” is a bad message imo.
Not really.
- Do you own a debt to your parents with a interest rate of 25% because they gave birth to you ?
- Do you own rent to planet earth for living in it ?
Debt can be unreasonable, just like wealth can be unreasonable. Its why governments intervene to destroy large amount of concentrated wealth and Egyptian pharaohs used to periodically clear everybody's debt.
The culture of " Paying your debt " is created by the small number of creditors who historically have controlled information flow, because they understand that society in aggregate has strong bargaining power.
You made the decision. Own up to it. If you can't do the math at 18 years old you shouldn't be going to university anyways.
They charge an interest rate to cover their risk. Right now, with the fact that debt holders cannot default, they are getting an unfair deal. Defaulting on the debt and refusing to pay effectively triggers the risk that they were charging interest on.
Like strikers refusing to work until better working conditions are provided, so too are debtors withholding payment doing something noble.
Whether that's true depends on your moral framework, doesn't it?
> They charge an interest rate to cover their risk.
That's not exactly correct. I mean, a portion of the interest rate is due to risk, but another portion of it is because lenders need a return on their investment, or they won't lend. Moreover, student loan debt is not totally risk free (as we can see by the fact that $150B of it is in serious default).
> Like strikers refusing to work until better working conditions are provided, so too are debtors withholding payment doing something noble.
There is a difference. A person's agreement to work must be continuously in effect. They can withdraw it at any time, with no consequences other than that the ongoing benefits of their employment should also terminate immediately. That is, most non-union workers are working without a prospective agreement in place that obligates them to provide future labor. And when union members strike, it's normally when they are without a contract. Not in the midst of an existing contract with management.
The same is not true of an agreement to pay back a debt. It is prospective: "in the future, I will pay back such and such amount, on such and so terms." You can argue a lot of different things about these notes -- whether they're fair, whether the people agreeing to them are capable of understanding them, etc. Should the age of majority be raised? Should people be required to take a test to ensure they understand contracts before they are allowed to enter into them? And you can also argue about policy that might ameliorate the situation. But there is little contractual similarity between refusing to repay a loan and striking.
People should absolutely refuse to pay unsustainable debts they can’t afford (but I have news for you: there are already people not paying... because they can’t).
I’m glad you’re secure enough to dispense such wisdom like this, but I fail to see how it’s going to help anyone pay their rent or buy a house, because at the end of the day, people simply cannot afford these loans. And if you’re going to suggest that people just shouldn’t borrow, them prepare to have a steadily diminishing college-educated population as only the increasingly wealthy can afford to actually get an education.
Now, the legislative regime could change. But it would have to change quite a bit to get significant increases in funding for college. Or maybe it's better if poor people just don't go to college? That's questionable at best.
I think this problem is a lot harder than people on this thread are making it out to be. Making student loan debt bankruptcy proof is within the Overton window in this country. I guess not making it bankruptcy-proof with no other changes is also within that window. Free or reduced price college tuition for the vast swathes of people who need it to attend is just outside, so it's definitely a foreseeable outcome, but if we don't get there in the next two decades that wouldn't surprise me either.
"Taxes would increase"
100% bonafide baseless claims.
Have some vision friend. There are alternatives even though you can't think of them.
With the proper reshuffling all most Americans would see are new opportunities to better themselves, their families, and the economy
Or alternatively, end of the current university system. One thing that always confused me when looking at US and UK unis (both had prices rise a lot) and my home uni is how much extra stuff is added. I went there for technical education, and that's pretty much all my first University provided, and it was really cheap. It didn't have sports teams/events, on-campus clubs/entertainment, student union bars, fancy areas. It used soviet-era-style big slab buildings, and provided reasonable education. Yes, going to a UK uni was nicer. It also cost me ~200x more, to support all the extra things.
People who just want the degree should be able to get just that without the lifelong debt.
[1]: https://campusnext.wustl.edu/items/landscape-architectural-p...
Citation needed. At least where I'm from, the stereotype of the corner grocery store that declares bankruptcy every 7 years is still shared as a negative
The problem has nothing to do with liberal art majors, or irresponsible borrowing.
The problem is entirely driven by an excessive cost structure of both public and private institutions.
People like the founder of Lambda School understand the problem and will be the solution.
[ISA FAQ](https://lambdaschool.com/faq/)
I agree colleges killer feature for a young person is networking, friendship, and dating. You just have to find alternative places to get it.
It's equivalent to a 40 hour work week.
The solution is in plain sight and has been successful in other first-world countries for decades: government funding of higher education.
People who suggest a market-based solution need to explain why none of the first-world countries that have achieved affordable, high quality higher education have used a market solution. The only way it can be achieved is through high levels of government funding.
Very inefficient and expensive in every country including the US.
If everyone switched to business and engineering, there would still not be enough jobs to support the educational cost structure.
* $1.27T of outstanding debt.
* Subprime share of that fell to 22% but because so many loans are being created, total number of subprime borrowers (SBPs) is now at all-time highs.
* 8% of SBPs are seriously delinquent. Cycle low was 6% in 2012. Peaked at 10% in 2010.
* Increasing share of prime loans is offsetting the deteriorating SBP picture.
* “Although rising overall delinquency rates remain below 2010 peak levels, there were over 7 million Americans with auto loans that were 90 or more days delinquent at the end of 2018. That is more than a million more troubled borrowers than there had been at the end of 2010 when the overall delinquency rates were at their worst since auto loans are now more prevalent. The substantial and growing number of distressed borrowers suggests that not all Americans have benefitted from the strong labor market and warrants continued monitoring and analysis of this sector.”
https://libertystreeteconomics.newyorkfed.org/2019/02/just-r...
I learned absolutely nothing during my 4 years of undergrad that is practically useful to my current vocation, and I can say the same is true for 90% of my peers.
For some areas of study, college IS worth the cost. For example, hard sciences. But, for the vast majority, it's not (think: business and administration, art, history, economics, etc.)
I would guess that in 90% of cases, graduates would be more valuable to companies and potential employers if they spend those 4 years and $300K (tuition + lost wages) learning/practicing their specific trade/industry.
So, when are we as a society going to realize that 90% of us are wasting 20% of our most productive years on useless learning? This really seems like a travesty to me.
What happened is that for a long time, only a certain class of people got to go to a university, and that class of people were the same ones that got the best jobs. In fact, many companies used a university degree as a filtering mechanism to select that class of person.
Other classes saw this, and assumed that if they also got this degree, it would open up that other class. It worked for a bit, but soon there were simply too many people getting the degrees for it to work anymore as a way to select a limited group. It is no longer the gateway into a higher class lifestyle.
At the same time, though, I think it is a bit dismissive to call the education useless. I learned a ton studying philosophy at a university, even if it doesn't directly apply that often to my work. It helped me understand the world, its history, and how we think. I am very glad I did it.
However, it was not training me for a job. Not everything we do is for job training.
Instead, I think if you surveyed people, the most prevalent reason for enrolling in college is the belief that it's a wise investment in their financial future. My belief is that this is just not true for 90% of potential graduates. And, wasting 4 years and $300K is a huge mistake when taken in the context of this college debt crisis.
I don't know what the short-term solution is, but I think the long-term solution is for companies to stop requiring college degrees and move towards evaluating the skills that actually correlate with job output. As a business owner, I've certainly done this, and I hope we can move in this direction quickly as a society.
The two big things that typically don't get brought up in these discussions is that government funding for college is way down and medical costs. All these state schools, which are pretty much the backbone of higher education in america are chronically underfunded. The last 40 years in america we have been borrowing against our future and higher education funding is just one aspect.
The second aspect is that higher education is fairly labor intensive, a large part of the labor cost is health care. When a pharmaceutical company acquires the rights to a rare drug and jacks up the cost 1000% that cost ultimately is passed on to students.
Forbes: "In 2005, Congress passed, and President George W. Bush signed, the Bankruptcy Abuse Prevention and Consumer Protection Act, which exempted federal and private students loans from discharge."
https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_an...
IIRC correctly, the number and size of student loans grew greatly after this Act. College students who received advice which encouraged them to take on huge debt loads - on speculation - were essentially thrown into the water to see if they could learn to swim.
That said, it's probably still a good thing long-term to end government subsidized loans. But that doesn't mean the private market is healthy. I'm not an expert on this area, and I don't know why there aren't "smart" lenders that do a better job arbitraging this. It could be possible that it's inherently difficult to predict whether someone will default or not.
As other people have pointed out, the real problem is the incentive structure for colleges and the increase in administrative staff (and thus tuition) who are enriching themselves at the expense of everyone else.
So commercial lenders receive a disproportionate number of applications from students who will have a difficult time finding a well paid job.
Or that they know the risk, but also know people have to borrow so see a chance to profit more from it.
Like it did in 2007? One in a million voices might have even thought to bring up how spoiled the housing loan market was, but the markets kept singing the tune of growth until hundred year old banks were out of business from loan defaults. That was the government pushing bad loan policy on private banks who lopped them up like candy from a free money fountain until everyone involved got a taste of reality.
Private industry easily gets caught in its own deliriums in pursuit of endless profit.
Private edu costs are out of control, but if we can figure out how to cut costs then I don’t think the institution of college/higher ed should go away.
You have the rest of your life to work...as a working adult I don’t particularly wish I had skipped college and taken a 6-month online class instead so I could start working earlier.
"You make some of your strongest friendships, connections, potentially future partner in school. You learn a lot about yourself."
This article addresses the issue directly:
"Student debt a harsh math lesson for US graduates as wages lag" - https://www.nola.com/education/index.ssf/2018/03/student_deb...
For instance:
> Compared to their peers at other colleges, students attending for-profit institutions -- mostly those classified as inclusive, part-time or two-year -- are falling behind in their debt repayments. Twenty-two percent at for-profit schools were behind on their academic loan payments compared with six percent of students at public institutions, according to a survey by the Federal Reserve.
The Federal government provides an enormous amount of free/"free" credit, the schools get cash and the students take on the risk. Coupled with the role of academic institutions as gatekeepers of a shot at a better future, and we get the system we have. Hyperbolically, t only outcomes schools are incentivized to care about are applications (lower acceptance rates raise prestige) and attendance (money is transferred to the school only while the student is attending).
[0] https://www.newyorkfed.org/medialibrary/media/research/staff...
(Once you become immune to eye-rolling life gets easier.)
There's a lot of companies with unfilled skilled blue collar jobs. And despite self-driving trucks, semi drivers can make some serious money.
And HVAC projected job growth is 14% over the next 10 years. Thank you Global Warming!
Besides in the circles I grew in this attitude would have brought some balance to things considering I was surrounded by people pushing deeply academic subjects beyond all else.
You can easily pay off your student loans very quickly, you get to see the world, and if you do it right, you have little to no expenses while you're sailing and can bank that money for when you quit.
For most people though, I don't recommend making it a long-term career though. It can be dangerous, and I always felt like my life was on pause while many of my friends were getting married, having kids, etc. (And I worked with a lot of older men who did not have good family/wife situations.)
One can certainly get a desk job with a Marine Engineering degree, but one leaves so much on the table if they do.
Now there are some real sweet positions and trade jobs out there, don't get me wrong, but there are a whole lot more shit positions beneath that and a whole lot of other factors other than just the hourly pay.
If millions of people are losing, some set of people must be winning (by an amount roughly inversely proportional to their size). I understand economics is complex, feedback loops, etc., but with so much money flowing it must accumulate somewhere. And I’m sure people have studied it on a deeper than anecdotal level
The financial markets no doubt have some pretty big winners though the way all of that works is a bit convoluted and difficult to pin down individual winners. If there is no tsunami of default, the government itself (and hopefully taxpayers by extension) likely will come out a winner.
The money flowing through campuses flow out in many ways beyond student spending. New construction, salaries for professors and administrators, textbook companies, journal middlemen, and many others are all thriving off of the diversion of so much money into these institutions. In general it's good for the economy around the schools but a million little drags on the economy wherever the students live after graduation as their potential spending dollars are diverted to loan payments instead of the local economy.
My high school was thankfully somewhat resistant to this trend in that there was a very large vocational program that was somewhat popular amongst my graduating class.
I don't mean to offend people when I say this, but there are certain majors that very, VERY few people (if any) should actually pick as a matter of practicality (likelihood of getting a livable-wage job related to the major vs. getting saddled with debt for a degree that you won't use during your lifetime).
In an ideal world you world put them in a short boot camp to make sure they up to snuff for the job but atlas you have the gatekeeping going on with universities. I personally can't wait for the education bubble to pop.
medical and student loans cannot be bankrupted houses are mostly gov't supported and when they crash the gov't bails them out.
If you don't want high prices, tell the gov't to stop inflating the prices.
Can’t pay student loans, your BI gets automatically directed to paying it off with no interest until the balance is clear.
Need to pay for school in the first place? Direct the monthly BI to the university to cover tuition/housing/meal plan (or a significant portion of it).
Commit a violent crime that will put you in jail, let your BI go to the prison to cover your stay.
Have a baby? The baby gets a basic income that can pay for daycare, baby supplies.
First among those, actually securing student loans against the BI.
I’ve never seen BI as being anything that would be desirable to live on though. Closer to survival level income in the area of $700 / month. You’d partially pay for it by reducing all other types of government service payouts (welfare, social security, disability, unemployment) by that amount. You’d likely see homeless shelters, rehab clinics, etc open that were designed to operate on a per person budget equaling the BI.
At the same time, you can potentially eliminate minimum wage discussions since it would immediately supplement those workers.
I think it’s doable at a low level as long as you partially address the costs with dents in the budgets of many of the other existing services.
We’ve wasted trillions on unproductive military initiatives in the Middle East, this would be relatively minor in comparison. The economic productivity realized by these debtors able to be full economic participants instead of having student loan drag for a lifetime outweighs the moral hazard.
Fresh slate and we start over as a country on the right foot for education delivery.
- people who were realistic about their finances and did not take on debt to "drag for a lifetime" in the first place. Why should the "rich" and/or reckless kids who lived in overpriced dorms with unnecessary amenities get bailed out when "I was smart and didn't screw myself from the start"?
- people who were able to afford a university education out the gate and were not burdened by any or much debt in the first place (and their parents!). Why should the "poor" and/or reckless kids who reached for something they couldn't & shouldn't have been able to afford get bailed out when "I worked hard to provide for myself / my family from the start"?
I did not come from money and came from a pretty awful environment so I know this is a possible outcome for most people.
Are there some people who took out great quantities of loans with no concern for their future? Absolutely. Should such people be hounded by this lack of foresight at the age of 19 into their old age? I'd argue no. Even if you can't find sympathy for the indebted, I'd also argue that very few societies in history have managed to stay cohesive with a large, indebted underclass, let alone prosperous and achieving their potential.
> there's a good number of folks with student loan debt they can't easily manage who made all the right decisions but got a bad break somewhere.
I don't think it's ever the right decision to take out a massive amount of debt. Even to study something you love. You can't fight against the real world economics of that decision. I saw the option to get what I considered to be a lifetime's worth of debt and looked for alternatives. Lots of people who come from lower class backgrounds do the same.
I think it's going to be very hard to get those people on board with paying off other people's student debt.
Apologies, you didn't state that and I assumed.
> It's very possible to just enter the labor market and make money if you work hard and smart. I'm a developer but I know plenty of people I grew up with who went on to be: military people, plumbers, cops...
Then again, it's also not. Some fields absolutely require credentials and long-term education and we, as a society, need those jobs to be filled: social work, doctoring, teaching, plant management, accounting, licensed engineering etc. Some of these jobs have high potential -- medicine, if you choose the right sub-field -- and others not so much. In fact, the reason why we have a shortage of GPs in the US is a result of medical students looking at their debt burden and deciding they need to move into cosmetics or other high-paid fields. This strikes me as bass ackwards.
> I don't think it's ever the right decision to take out a massive amount of debt. Even to study something you love. You can't fight against the real world economics of that decision.
Well, the consequence of this stance is that only the rich will ever be credentialed, or the rich and the fortunate. Societies in which this is the rule haven't tended to fare well over the long-term.
> I saw the option to get what I considered to be a lifetime's worth of debt and looked for alternatives. Lots of people who come from lower class backgrounds do the same.
Well, good on you; that's quite an accomplishment. It used to be the case that people from lower class backgrounds, in the US, could go get an education without taking on debt loads, gambling that they'd be able to pay it off once their salaries kicked in. We, as a nation, used to subsidize schools and apprentice programs. My argument, essentially, is that 40 years ago we chose to make schools subject to market forces and this has been one of the main movers of rising inequality in the population and we have proof that it doesn't have to be this way from prior experience. We should consider this a failed policy experiment and reverse course in the most direct manner possible.
An individual can only swim so hard against the tide. Even if some do happen to make it to shore that doesn't mean there's no tide.
> I think it's going to be very hard to get those people on board with paying off other people's student debt.
Which people, sorry?
I just don't think we should excuse people's existing debt. We should look to fix things in the future. Some of that is the realization that there's value to be created outside of credentialed fields. Some of that is also probably the removal of credentials as a requirement for many fields as well.
Ah, okay, there's the difference. I tend to think that solutions to issues that don't address defects in the present moment are partial at best. Maybe, also, I don't imagine that most people with student debt were profligate, and, even of those that were, I don't think they ought to be held to account in perpetuity for that, especially if we end up settling on the notion that the root cause was a failure to properly value education as a society.
We know advertising works well and makes people do and buy shit they don't need or want, and in this case it was primarily targeted at kids during and immediately after highschool who are especially vulnerable.
Aren't these loans almost all government backed? Meaning if the loan defaults the government pays the creditor?
Yes. And therein lies the problem insofar as I'm aware, because you then owe the money to the US government and you cannot declare bankruptcy on the US government. You can escape paying a ludicrous mortgage or car loan or what have you by declaring bankruptcy. You cannot do the same with the US government, which will garner your wages for all you're worth for the rest of your life if you don't pay back your student loan.
I understand that educational loans are essentially unsecured loans. So fine, let them be treated like personal loans and let lenders evaluate their risk accordingly. It'll quickly put an end to letting an 18-year old go into $100k in debt for a liberal arts degree.
Otherwise, community colleges prepare students to transfer into year 3 of a 4-year college, at a fraction of the cost. This is a viable option for students who can't afford the full 4-year experience.