Putting Kids in Debt (2015)
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I did take some issue with this paragraph:
> One was the obvious one: Unemployment. It is becoming very common for graduates to throw their hats in the air only to have them fall back and knock them in the head conscious. They wake up and realize this piece of paper with old English typography and curvy signatures is no guarantee to land a job.
In my experience, there were 2 types of people that prepared for jobs after college:
1. Some folks worked every summer, building connections and experience they could use to get later jobs. They were also working part time in the last year or two of college in an area directly related to what they wanted to work on after school.
2. Other kids basically either treated college as primo party time, or they just looked at it solely from an academic mindset. Point being, this group generally didn't do any preparation toward full time employment during their time in college.
So what I often saw with the group 2 people was that, in their last semester of college, they'd suddenly feel the anxiety of getting a job and would send out a flood of resumes during on-grounds recruiting, then they would lament how they didn't get interviews without really thinking much about (a) they had built no relevant experience in the previous four years and (b) their grades were often middle-of-the-road or worse, making it that much more difficult to stand out.
Point being, when you say "They wake up and realize this piece of paper with old English typography and curvy signatures is no guarantee to land a job." I mean, no shit. People have to take some responsibility for building the skills they'll need to get a job.
I would say we should require all debt to be paid back 100% but cancel all interest (or make it minimal like 1%). If you irresponsibly took money to go on spring break every year, then you should pay it back.
All the other people that you would describe as not having "genuine academic talent" need to put food on the table too.
I list all of this here to establish that, from a relatively young age, I (1) knew the meaning of a dollar and (2) was never shy of working.
With all of this being said, I can state with absolute certainty that, as a first generation college student, I had NO IDEA in 2006 what the numbers in front of me represented.
"$30K/year with room and board? OK, that doesn't seem too bad. The starting salary range for my desired career is $70-99K."
Add to all of this the stress about what the forthcoming workload would be like and the fact that most of my peers were taking on similar loans and I feel that I can cut my younger self some slack for paying $120K for an education.
That education should be publicly funded? Agree.
More education on financial literacy before college/university/ageOf18? Agree.
That adult's should not be held responsible for financial decisions made at 18? Disagree.
It's not an argument. It's an anecdote.
Perhaps we were right.
"And the burnt Fool's bandaged finger goes wabbling back to the Fire;"
Case in point - Parent making $13/hr decided it was a good idea to take out $40K in loans... https://www.yahoo.com/news/stuck-until-die-parents-buried-11...
A lot of companies are hiring right now, and for fresh-out-of-college grads, the requirements are pretty basic and basically cover the schoolwork. And there are (paid) internship opportunities too, whose internal goals are to convert the person from intern to full-time, and the requirements for interns are even lower.
One of those two things is necessarily not true, not in this market (i.e. for the past 5 years).
And as a result, they receive hundreds or thousands of nigh-identical applicants. If you don't stand out somehow, you don't get hired.
Check r/cscareerquestions, you'll see many examples. The entry level job market is much tougher than the experienced market.
Yes, if you apply to Google you will be one of the countless resumes that applies and need something to stand out (see also the two types of college students in https://news.ycombinator.com/item?id=33318407 ).
However, there are lots of other companies that are hiring that get a much smaller set of resumes.
The entry level job market for applying to a well known company that pays much better than average is much tougher than most people realize. And yet less well known companies can post https://exactsciences.wd1.myworkdayjobs.com/en-US/Exact_Scie... or https://careers.garmin.com/careers-home/jobs/9307?lang=en-us (there are lots more there, just pulled the first one) and only get a handful of applicants.
> Bachelor’s degree in Computer Sciences, Engineering, Sciences; or High School Degree/General Education Diploma and 4 years of relevant experience in lieu of Bachelor’s degree.
> 1+ years of work experience or coursework in design capabilities using modern technologies.
We can argue if modern CS curriculum is really equivalent to work experience, especially with reduction in number of large projects, but at least the companies are pretty upfront about what they want and why.
> But for a young lad, fresh out of high school, dumb as a thumb, a signature is all it takes to have a loan. Of course a kid sees no problem with it. Even the smart kids are convinced.
This is messed up. And it probably only happens because you cannot discharge student debt through bankruptcy. You are in debt for life (or until you finish paying).
This type of situation also reminds me of people who pay thousands in rent every single month, but are not deemed credit-worthy enough to get a mortgage for the same or even lower amount (in monthly payments), thus getting stuck renting.
1. Schools should be mandated to report outcomes for degree programs. I know that isn't the point, but it should at least be known. We have so much data, I should be able to see the expected salary of a major 10 years out.
2. It is clearly predatory that loans are given to students when we can guess that they will never pay it back. This follows from the first point.
https://collegescorecard.ed.gov/school/fields/?123961-Univer...
> That's the trick they use on kids to get them to sign up for these loans. You don't have to pay it until you graduate. Sometimes until you get a job. Sometimes they don't even tell you until when.
MOST student loans do not accrue interest while in college. The problem comes when you exceed that limit and start to take out other loans. Perhaps to go to a better school. But to imply that most students pay interest during college is nonsense. Yes school is expensive. Even my no name local University was expensive. But I had 30k of loans at graduation, not 200k. Parents are just as responsible here. Loan companies can only exploit your kid if you let them. We have a generation of people terrible with money encouraging the same behavior in the youth. It's this intersection of idiots that is the problem. The schools encourage it to fund new facilities, the loan companies encourage it because its free money to them. The parents encourage it by teaching their bad money habits to their children.
> Don't get me wrong we do need computer science graduates. It's just that most are not in it for computer science jobs. They are in for web programming and Apps. It's nothing new see people studying one thing and ending up in a completely opposite career space.
The purpose of going to school is not to get a job it's to learn to think. Often times, having the ability to think confers a higher salary than not. In particular, STEM program rigor creates people who are HIGHLY adaptable to most fields. Hence why you see them everywhere.
In summary the problem is not the loans, it's that they are not dischargeable. Make them dischargable and the problem goes away.
I didn't read that line as any implication that interest accrues during college. I didn't read anything like that in the blog.
But I definitely agree with your later point that parents shoulder a lot of responsibility here, and their own parents or education institutions for not teaching them more about money management.
> The purpose of going to school is not to get a job it's to learn to think.
While I agree, the issue is that career advisors and entire school systems are explicitly told to advise their high school students that they must go to college, regardless of their interests, hobbies, goals, or lack of goals.
I'm not exaggerating. My friend who taught high school physics was scolded by school administration for not being a college evangelist. "The kids who live in [wealthier neighboring town] don't get told to go work in the trades, they get told to go to college, and our kids deserve the same". While noble, the fact is that college for most kids nowadays is seen as the only option to get a _career_ instead of _just a job_.
By putting kids in debt the mean “allowing them to take out loans that will put them, statistically, in a higher income bracket than people who don’t go to college”
College is important - it’s why there is a cost to it.
I can argue - and I do in fact - that the federal guarantee that student loans not be dischargeable in bankruptcy led directly to the increased cost of education. This doesn’t mean someone else should pay your student loan bill. I’d be quite happy, though, taking away that provision letting students who got a raw deal discharge in bankruptcy. Let’s let lenders and colleges be required to make good investments again.
The real solution to soaring college costs HAS to include some provision where the university incurs some of the risk of repayment. Imagine how much more selective they’d be if they held 20% of every student loan. Or, imagine the guidance counselor resources that would suddenly appear when they have to care about what you do after you graduate.
True...but the cost varies widely and people need to understand that going to an ivy league school for a degree that gets you into something like being a social worker is not ever going to be worth it...other than to have a news article written about you one day talking about the $300K in debt you are while having a $45K/year job.
Yes. However, there has been an arms race of sorts in the higher education world that is completely unnecessary. New dorms and high quality facilities aren't a bad thing at all (when built wisely and cost-effectively), but having tons of administrators is. Colleges do need to cut down on some unnecessary programs, but they also don't need to go spending tens of millions on football coaches or athlete-exclusive facilities either (which happened at my alma mater).
>* Let’s let lenders and colleges be required to make good investments again. *
Agreed. But let's not also forget that the lenders can make a huge profit on these loans....I've seen loans as high as 8%! If we're going to ask young adults to go into debt to get an education, we should make sure that bankers and other parasitic actors can't make huge profits on said loans. They should be capped at 1-2% interest at most.
I think it is entirely fair to say that the college loan system is predatory on people who lack the life experience necessary to properly evaluate the burden they’re taking on themselves. If a bank makes predatory loans to the financially illiterate, the bank could get in massive trouble. But for student loans no such provisions are made, and to make matters worse they are not even dischargeable in bankruptcy.
I will admit though, a lot of my peers at that age were making dumb decisions, but quite a few knew they were doing so at the time, and did it anyway. Their concerns were not for the future, and they readily admitted as much. Facing the consequences later in life is the result.
How do you account for my case? https://news.ycombinator.com/item?id=33318674
If you "didn't know" how to do math (I learned the math required in high school, perhaps you didn't), you could have spent an afternoon learning what you needed to make a decision affecting the rest of your life.
Here it is in 5 minutes:
30K per year, 4 year degree, 120K total.
Calculate payments of 120K loan with X% interest over term of Y years. Mortgage calculators all over the place will work as substitute if you can't do it yourself.
Decide if this is what you want to do.
I replied specifically to this: "Expecting individuals to think rationally at 18 is completely valid."
I quoted it within my reply to point out exactly what I was choosing to address; no larger issue, no hidden agenda requiring you to read between the lines.
I don't think it's valid to expect 18 year olds to think rationally about matters like this because it requires speculation.
18 year olds don't have 18 years of steady life experience to guide their predictions for the future. They don't have 18 years of clocking in and out at the same job. They have, instead, 18 turbulent years of childhood and adolescence, even in the best case.
With that out of the way…
If wall street can't time the market, then how can 18 year olds? Do you really expect them to sit down and accurately calculate projected inflation and the probability of various economic downturns?
What about the graduating class of 2022? Do you expect them to have accurately predicted a 40% drop in the value of the USD back in 2017-18?
What would be the value in their arithmetic if they hadn't?
I'm from a rural area. Luckily, i'm not in the US, so me and my peer don't have outstanding debt, but i was around when the "Revolving credit" (also called "credit revolver" in my country) came full force in my area. Well, actually, revolving credit were here for already ten years. The suicides came full force (hence "Revolver". Get it?).
All adults. Mostly women, but not only. I was 13 when the first one offed herself in my village. She was around forty, and i knew her kids. "It takes money to make money" and all this crap worked well until that time. They were rational: their parents contracted debt in the 50s and 60s to build their business/farm or build their houses. Why couldn't they do the same? But the inflation was 10 to 15% at the time. They had no financial education, and the only example they had was from a time where everybody indebted themselves and it worked well. We had shows talking about "lever effect" and praising how clever the company was to indebt itself.
Circa 2005, the procedure to bankrupt yourself in my country became way more accessible and nowadays the revolving credits are less predatory.
Still "Expecting individuals to think rationally at 18 is completely valid." have nothing to do with endebtment.
It's because whatever age we start treating people as adults, they will only actually become adults a few years later.
But I'm pretty sure a large share of the actual adults aren't able to evaluate non-dischargeable debit either.
The average 15-16 year old has the mental faculties to function as an adult least as well as a "below average but good enough" adult. We as a society fail to give them opportunities to hone those skills.
People cannot be functional adults without practice. If we keep nannying people until older and older ages they will not gain proficiency at adulting until even older ages.
I absolutely believe an 18 year old is an adult and they have their own free will and capacity to make decisions. They are not a puppet worked by the heavens.
That said - I think we agree more than we disagree. Let students declare bankruptcy and force universities to once again have skin in the game.
What a strange way to look at it. Elementary, middle and high school is important, no? Roads are important. And parks. And scientific research. So much of our civic infrastructure is important without having a direct charge.
A fair trade-off would seem to be higher income taxes and free college or trade school. Would provide more ladders up for the disadvantaged and a stable source of revenue to fund it.
Many college degrees have a negative ROI or are oversaturated in the workforce or are completely unnecessary to their given career track. Our primary school system is pretty bad and we're not equipping 18 year olds, who are still emotionally and mentally immature, to make those kinds of decisions and take out a 5-figure loan, sight unseen, on dreams and naivete alone. It benefits only the lenders at the students' expense.
There are so many tweaks we could make. Encouraging real-world experience before starting college would be helpful. Putting trade schools up as an alternative would help many who struggle in the detached ivory towers of universities. Funding secondary ed, as many other countries do, would make sense as a continuation of primary school (especially in America, whose primary school systems are so quantitatively and qualitatively poor compared to the rest of the developed world). Revamping Common Core to meet more modern needs, and including extensive career & life planning for students of different backgrounds so they can see their options in the future instead of just learning from their parents and pop culture. Whatever, the possibilities abound, and many other countries do things better or worse in some way -- there are plenty of lessons to learn from.
Looking at the finances in a black box is missing the forest for the trees. It's not just about who pays. The whole system is antiquated and failing our children; in America you're basically born elite or you're doomed. There is no social mobility anymore, and that's not something that allowing student loan bankruptcies alone will solve.
The cost of higher education does not have to be borne by the individual seeking it. It could be financed by society and offered to those who desire it free if charge. It could even encourage more people to enroll and promise those who do well in their studies a financial incentive in form of a stipend.
I know of some countries that do all that with the idea that people with higher educational achievements - deliver higher economic output over their lifetime that more than covers the costs borne by the society and give their country a competitive edge in a global economy.
But US doesn’t do that.
It does, however, attract people who received their education for free in other countries to immigrate and compete with those who took out massive loans in US to do the same.
In my own experience as the beneficiary of such a system of education - the barrier is having to pass admission exams that are meant to ensure that available spaces are offered to those academically inclined to succeed.
In my personal circle of acquaintances all who were interested in securing the spot were able to do so.
But in an event you fail, you have an option to work on your shortcomings and take the admission exams again.
Totally, 100% agree. All the incentives are currently there to have lenders load up students with as much debt as possible, because they know there is no way it will get discharged (or, otherwise, taxpayers will end up paying for it).
We need updates to bankruptcy laws that make lenders think twice about giving $100k in loans to someone going to cooking school.
afaik student loan rates are in single digits, is that considered pretty crazy?
Universities and Colleges (many who receive federal funding, state funding and endowments, etc.) have consistently raised their tuition costs. The loans were created because the costs are so high. Why are the costs so high?
It reminds me of the health insurance debacle.
But the focus on work, jobs, etc. and the general assumption that education is purely vocational and only to serve our capitalist overlords is a really dismal thing. We should also make education free as many countries have, so that getting an education isn't about taking out hundreds of thousands of loans as much as it's about having the resources to better one's life.
This tends to be pushed by those with college degrees though (high school teachers). As parents who push kids to do something more blue collar but still in major demand (welding, plumbing, electrical, etc) you are up against an entire schooling system that has been heavily pushing college for the last 30 years.
It might, however, have taught them to spell.
EDIT: “guaranty” is indeed a valid, if archaic, spelling of “guarantee”. I ſtand rectified and expiated.
(b) where is the spelling error? If you're thinking it's 'guaranty,' that's a non-standard but correct use of the word (and in context, possibly a pun juxtaposed with "old English typography and curvy signatures").