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Comment by rayiner | Hacker News Reader

All this talk about student loan forgiveness is an unnecessary solution to a problem that’s not really that bad: https://www.nytimes.com/2018/04/02/upshot/an-international-f...

Average BA holders in the US graduate with $28,000 in debt, versus $21,000 in Sweden. The Swedish system is basically like our income-based-repayment, which we have had since the 1980s. Except, as you’d expect with Sweden, there is less paperwork and fewer gotchas. Simply tweaking the PAY-E system Obama created, to add automatic enrollment and automatic annual income verification based on tax returns, would get us a system that has proven workable in Europe. All without trillion dollar loan forgiveness or radical changes. (And with, in my opinion, a fairer system of redistribution, where those who needed loans and got high paying jobs subsidizing those who needed loans but didn’t get high paying jobs.)

(And simply tweaking ACA would get us pretty close to the Dutch model of health insurance. But that doesn’t get headlines.)

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When making comparisons with Sweden or other countries the cost of healthcare, housing, food, and transportation should be taken into account. Healthcare and transportation costs are much higher in the U.S. I think too we also have a higher per capita income and I don't know how things balance out. One thing for sure though. I'd rather be poor in Sweden than in the U.S.

There is also the fact that many students who start a four year degree end up never graduating. At the college I teach at it is clear that we are marketing to students who should not be going to college and shouldn't realistically expect to get a degree. But we need the money due to lack of state support and as a result standards for passing have gone down. What we have now is a system that has the incentives in the wrong place and this will have bad societal consequences years from now.

Like almost everyone else who comments on this topic I have ideas on how to make things better and like almost everyone else those ideas are largely naive.

Why is the cost of living relevant when you’re talking about debt levels? The point is simply that our debt levels aren’t that unmanageable, and we could achieve something very close to the Swedish student loan system by simply automatically enrolling people in repayment plans we already have.

Moreover, American cost of living is the same in Sweden as in the US (the GDP per capita in nominal dollars is identical to the figure in purchasing-power-adjusted dollars). You may need a car, but housing is cheaper in most of the country.

As to healthcare, making comparisons is difficult. 2/3 of college graduates have employer subsidized healthcare. For those people, you need to look at the median employee premium portion, which is $2,200/year. (There are also out-of-pocket costs, mostly for drugs, but the US figure of about $1,000 is not much different than the Swedish figure of $800 on that front).

The employee premium paid by the typical college graduate is much less than the extra taxes that same person would pay in Sweden. The median college graduate earns $51,000 in the US to start. The median employee premium of $2,200 is 4.4% of that. The tax differential is almost certainly higher than that. (In Sweden, all of that is taxed at 30% county tax, no federal. In the US, the first $12,000 is tax free, and the rest is taxed at 10-12% federal, plus maybe 4-5% state and local, plus 7.65% FICA).

You wrote: The point is simply that our debt levels aren’t that unmanageable,...

The cost of living is important as this and income level determines the affordability of debt. Just comparing income level and debt level between the two countries is not a deep enough analysis in order to determine if your proposed fix would work.

You are also ignoring the fact that a large number of people who go to college never graduate. These people are completely absent from your analysis of the problem. You are focusing only on the set of college graduates of both countries. I suspect that the rate of college completion for those who enroll at least one semester is much higher in Sweden than in the U.S.

According to your post 1/3 of U.S. college graduates don't have employer subsidized healthcare. This is a huge percentage and you are ignoring them in your analysis of relative debt burden.

Taxes are higher as a percent in Sweden than in the U.S. but in the U.S. at a moment's notice you can get screwed financially really bad in ways that you can't in Sweden. An ambulance ride in the U.S. costs much more than in Sweden and yearly out of pocket expenses for healthcare is much higher. The necessity of a car causes most people in the U.S. to have auto loans and unplanned maintenance costs can send people over the financial precipice.

I suggest that merely looking at the numbers you have does not give a clear picture of the relative situation in both countries.

Why would transportation costs be higher in the US? Gasoline is two times cheaper in the US than in Sweden. Food is roughly the same price, depending of what you eat.

Public transportation is very bad in the U.S. Even in major cities. For the vast majority of people a car is a necessity in the U.S. Most Americans end up in debt to buy a car. Then there is insurance and the opportunity cost of the government having to spend a great deal of money on road maintenance that could otherwise be spent on things like education.

European cities have much higher population density, and the lower personal income (often via higher taxes and, ironically, worker protection laws) changes the tradeoff between driving and taking pub trans, so more people take the bus. The tradeoff is that a lot of people live in small boxes.

And european governments have plenty of bs job creation engines like roadwork, too.

Would be nice to have some data. One related observation, that seems less surprising the longer I live here, is that europe has no spacex, google, tesla, nasa, coherent mars rovers, the list goes on... if you give people stuff, they're mostly just afraid someone's going to take it away. But yeah, to echo someone else's comment, I'd rather be poor, or even average, in Europe. I guess being super wealthy here wouldn't be that bad either, since nobody's nipping at your heels.

> europe has no spacex, google, tesla, nasa, coherent mars rovers, the list goes on...

The European Space Agency, Airbus, a huge number of car manufacturer, ... It's not surprising that the #1 economy in the world has more big company than the #3 one (when they decide to group). A lot can be said also about the American culture and politics when it comes to entrepreneurship. But presenting Europe like its devoid of any important industry is also outright false :) .

> And european governments have plenty of bs job creation engines like roadwork, too.

Do you really think that there isn't economic value in roadworks?

US BS job creation is in healthcare, particularly insurance processing and billing, not roads.

Printing paper checks in the 21st century....

>that seems less surprising the longer I live here, is that europe has no spacex, google, tesla, nasa, coherent mars rovers

These lists are meaningless. I can do the same thing and get smug about Intel, TSMC and Samsung buying EUV equipment from Europe.

Cars are required in most cities in the US to hold a job due to lack of public transportation.

Cars are required in most rural areas in the US because there is no other way around.

On that second point, a perspective note for non-US people who don't realize: Sweden has about the same geographic area as just California. Only covers about 5% of the whole contiguous US.

And there's 40 million people in California compared to 10 million in Sweden. So comparatively California is a densely populated mecca.

Transportation costs for most individuals are related to density at a city level, not a nation level, so I don’t see the relevance of comparing density of a nation.

Size comparison, for reference: https://thetruesize.com/#?borders=1~!MTM4NDAyOTc.MTA5MjczODQ...

>At the college I teach at it is clear that we are marketing to students who should not be going to college and shouldn't realistically expect to get a degree.

It seems like almost all 4yr colleges do this to some extent nowadays. Freshman lecture halls with 500+ students and one adjunct faculty ratio are a money maker. Capstone classes with 40 students and one tenured professor are a money loser. You'd have to hire really bad bean counters to miss the obvious way to exploit that situation for monetary gain.

But taxes are much lower in the US. Is healthcare even cheaper in Sweden, if you figure in taxes?

From data collected over 2014-2018, the US spent $10,586 USD/capita on healthcare and Sweden spent $5,447 USD/capita on healthcare.

Source: https://data.oecd.org/healthres/health-spending.htm

That may be so, but doesn't necessarily imply that health care is more expensive in the US. It's possible that in the US they simply spend more money on useless things, or do more screenings with better technology, for example.

Many things can go wrong with interpreting such statistics, see also my comment here: https://news.ycombinator.com/item?id=21760725

Afaik, some of the best (and also most expensive) medical procedures are only available in the US.

> It's possible that in the US they simply spend more money on useless things, or do more screenings with better technology

These are both components to saying that the health care system is more expensive in the US.

> a rich country could spend more money on health care and still have worse average health than poorer countries

Yes. I think that multiple people on this thread would argue that this is the case with the US.

> many health outcomes may also depend on wealth - for example over-consumption leading to obesity, which might affect health more than spending on health care can compensate.

This implies that differences in social services and urban design have an impact on healthcare spending. This is relevant to /u/sykick's statements "the cost of healthcare, housing, food, and transportation should be taken into account." and "I'd rather be poor in Sweden than in the U.S."

"> It's possible that in the US they simply spend more money on useless things, or do more screenings with better technology

These are both components to saying that the health care system is more expensive in the US."

Sorry, but that doesn't make sense. If the service is better, the higher price is justified. Presumably you can always choose to not use the better technology to save money.

"This implies that differences in social services and urban design have an impact on healthcare spending."

How does it imply that? More social services would stop people from overeating? Do you have a citation for that?

In Sweden, you pay taxes for healthcare and everyone receives healthcare.

In the USA, you pay taxes for healthcare, but only the old and the poor receive that tax funded healthcare. So the average taxpayer has to buy their own health insurance in addition.

The linked chart also shows a clear correlation with Purchasing Power Parity, which also should be accounted for.

> only the old and the poor

Also government employees, and those under the care of the VA.

> Purchasing Power Parity, which also should be accounted for.

Yes, I agree.

To illustrate with a simplified example:

Imagine nation A has median wage of $20k and nation B has median wage of $40k. Also imagine that their income distribution is the same. Then, if healthcare costs in nation B are twice as high, healthcare is equally as affordable.

" So the average taxpayer has to buy their own health insurance in addition."

How the money is collected is pretty irrelevant (indirectly via taxes or directly by the insurance company or physician). What matters is the overall cost.

It is relevant due to the complexity and uncertainty imposed. When I lived in the US, I didn't have a way of learning how much an interaction with a medical system would cost me. Now that I live in the UK, I do.

Don't forget profit, and the incentive for insurance companies to care less about what they pay and probably prefer higher prices.

Why would insurance companies prefer higher prices?

Their profit is capped at a percentage of payouts. Pay more keep more profits (after raising rates).

Scuttlebutt is actual healthcare expenditures in places like Sweden are about half that in the US.

I find such figures difficult to interpret, though (like here: https://www.healthsystemtracker.org/chart-collection/health-...)

It could be that richer countries simply have more money to spend on health care, so why wouldn't they spend it.

On the other hand many health outcomes may also depend on wealth - for example over-consumption leading to obesity, which might affect health more than spending on health care can compensate.

In that example, a rich country could spend more money on health care and still have worse average health than poorer countries.

Not saying that is exactly what is going on, just that it makes sense to be careful with judging.

Could you define 'much'? I have seen figures once, and it wasn't all that much.

I have to google for that later. Might also be difficult to compare because of different forms of taxes (income, wealth, VAT, energy...).

Difficult to find reliable numbers. This one claims about 43% taxes in Sweden vs about 26% in the US https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe...

Another question perhaps is who pays taxes - another source I found said 2/3rds of voters in Sweden get their money from the state, either because they are government employees or recipients of welfare.

So an average tax rate might also be misleading, if many don't pay taxes at all.

Why was it necessary to change student loans to being non-dischargeable in bankruptcy? That is a recent change and it shifts the burden from banks having to evaluate the loans they are making which would likely mean fewer loans and thus less money earned from interest. It seems like student loans should be treated like any other unsecured loan. And really student loans shouldn’t even be necessary for public universities but that’s another point.

Because it is an unsecured loan. It would be too easy for a newly minted graduate to declare bankruptcy, discharge the loan, and move on with their life. The only entity stupid enough to loan money to students in that world would be the government.

The missing wisdom here is that maybe the government should take on a high-risk, societally high-reward investment like education.

I think you're using the word "risk" idiosyncratically. Student loans are unsecured, and most people are done with them by the time they're 23. If they're dischargeable in bankruptcy, for a lot of people, it's irrational not to default on them; the bankruptcy is gone long before your credit history matters.

That sounds nice but it requires there to be a definition of "societally high-reward education". That is difficult. Even if you find some methodology to identify the quality programs that have an appropriate "societal reward" you have to deal with the problem that the costs for those programs will inevitably rise in lock step to the amount of tax dollars used to subsidize them. (See https://www.newyorkfed.org/medialibrary/media/research/staff...)

I would suggest the federal government get out of educational loans entirely. Let the private loan market evaluate and take the risks, probably with an income based repayment contract that favored degrees/programs that are likely to lead to reasonable incomes.

Steve Jobs had an English degree. Would most STEM obsessed industrialised file that under 'favoured'?

Who knows? Like I said that is a difficult decision and I'd rather those decisions be made by individuals. They can decide if taking out a loan to get an English degree is worthwhile. And if they can't find someone to loan them the money, they may have find a different approach.

The more you "favor" particular degrees, the faster you you saturate the market with new graduates. The eventual outcome being those jobs are no longer in high demand, nor pay a decent salary

Yep. That is called "the market". And I think the government shouldn't get in the way and "favor" anything. Let people decide their own careers and interests and let them balance the pros and cons.

It does, to an extent. Stafford and Perkins loans are direct from the government.

This article says 90% of student loans are from the gov't, so it appears it currently does exactly what you're suggesting. https://www.nationalreview.com/2017/02/student-loans-governm...

The loan programs don't adjust the interest rates for the risk/reward involved. As a taxpayer I don't want to fund someone for 4 years in college and then have them default or be be unqualified for a job that would make them self sufficient.

I'd rather have non of my tax dollars allocated that way, but if I don't have a choice then there should be some attempt to invest in people and skills that produce self-sufficient citizens.

12 years is enough, if we wanted it to mean something instead of day care.

So what? If making a loan would be stupid, that loan shouldn't be made.

We could return to a world where only the upper and upper middle class could go to elite colleges.

Despite the fact that be more likely to help than hurt my family, I think it’s undesirable societal policy.

> We could return to a world where only the upper and upper middle class could go to elite colleges.

Or we could just socialize college and abolish the distinction between "elite" and "not elite".

Right, but that doesn't stop the government. Student loans are not approved based on any risk/reward mechanism that I'm aware of (currently).

There has got to be a happy medium between 7 years and life.

I'm guessing long-term unsecured debt in five to six figure amounts is ordinarily really hard for an 18- to 22-year-old to get, no matter what they're spending it on, and if they somehow manage it the interest rate would be very high. Making it non-dischargeable was likely intended to fix those problems. (not saying it's a good idea, but I'd imagine that was the plan)

Nobody else is saying it so I will: Non-dischargeable loans have resulted in spiraling student loan debt.

Lenders have no reason not to give out these loans as they will be repaid even if it is sub-prime.

Schools have no reason not to jack up rates because students are given largely unlimited access to loans.

Both parties have been repeating this and raising their incomes for decades ever since student loans have become non-dischargeable.

Instead of ranking loans based on repayability, lenders have divorced themselves from financial reality because government intervention.

>> Nobody else is saying it

People have been saying this for many, many years! And using as an example of the Law of Unintended Consequences.

>Why was it necessary to change student loans to being non-dischargeable in bankruptcy?

To keep interest rates on student loans low and to make sure the loans are available to 18 year olds with no credit history.

There was a real problem with medical students racking up huge sums, declaring bankruptcy when they were making low money during residency, but then making 6 figure salaries a few years later.

>It seems like student loans should be treated like any other unsecured loan.

Nobody loans 18-22 tens of thousands (and 22-26 years olds hundreds of thousands of dollars) in unsecured loans.

And look at the interest rates for other unsecured loans. My credit card rate is 19%. Earnest gave me LIBOR + 3% on 200,000 dollars of student loans.

But federal student loan interest rates aren't low. Undergrads' loan options are determined by their parents' income, regardless of whether their parents are providing financial assistance. Graduate students can't take out subsidized loans at all anymore, even if they are on food stamps.

My loan rates are 6.55%. After 10 years of continuous school, that really, really adds up. I even had scholarships but they wouldn't cover my dorm, the mandatory meal plan, or summer classes so that I could finish undergrad faster. I looked to refinance with 3-4 different companies, like SoFi, but the lowest they offered was around 7% despite my very good credit score.

6.55% is low for an unsecured loan to someone without assets. Unsecured loans to people with good credit that can be discharged in bankruptcy have rates that are 3x that.

>> without assets

and without an income

So, to lump medical degrees discharged in bankruptcy as a risk to undergrad loan financing is a bit disingenuous.

Not addressed to you, personally.

Lots of options here.

> Why was it necessary to change student loans to being non-dischargeable in bankruptcy? That is a recent change

It was in 1976, not very recent.

> It was in 1976, not very recent.

The person to whom you are replying is referring to the poorly-named Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. That law expanded the exemption from discharge in bankruptcy of student loans to be any student loan, including privately-issued student loans, not just ones issued by the government through a federal or state program.

This is why you see companies like SoFi running around offering screamingly low rates on student loans. Because they are private, those companies need not offer any of the protections a government loan offers (income-based repayment, forbearance options in the event of loss of income or disability, and so on) but retain the power to garnish tax refunds and the loans cannot be discharged in bankruptcy.

The switch to non-dischargeable loans came along with cutting banks out of the federal student loan system. Non-dischargeable loans are issued and owned by the Department of Education, and only them.

This predated that change. Sallie Mae use to directly fund student loans, now Navient only manages them for the Dept. of Ed.

Edit: forgot to say non-dischargable goes back way before that switch. I have personal experience around 2001, but I'm pretty sure it goes back to the 80's.

> And really student loans shouldn’t even be necessary for public universities but that’s another point.

Set aside the education component entirely. It costs money to be housed, fed, entertained, and consume other things. That’s getting paid for somehow and that somehow is often borrowing for undergrads.

>Why was it necessary to change student loans to being non-dischargeable in bankruptcy?

I believe it was something along the lines of people borrowing for law degrees then discharging the debt right after graduation with the knowledge gained from their new degree. I'm sure it was done in other degrees as well.

So, nothing to do with undergraduate degrees?

>I'm sure it was done in other degrees as well.

And also you dont get non graduates subsidising graduates

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