> lenders that are taking on too much risk
The lenders are taking no risks since these loans cannot be discharged through bankruptcy. There are also very large late fees and penalties that can triple (or more) the amount owed.
The lenders are taking no risks since these loans cannot be discharged through bankruptcy. There are also very large late fees and penalties that can triple (or more) the amount owed.
I went to school from 87-91. I could already see the problem starting. I was hoping this bubble would burst before my own children went to school. Two of three have gone to public schools so far, and we've paid through the nose for it. We are pushing our third towards some sort of trade school.
Personally, if you’re going to be miserable anyway (as most Americans are these days), it’s probably better to be miserable with money than without money, lol
And idk. My best friend from high school moved out here with me and he's a waiter making 40k a year and seems totally happy. Works like 30 hours a week, no mental stress, able to work out and work on himself. I think money is highly overrated.
But I think my main point is both of us have a way of becoming sustainable so you might as well do what makes you happy instead of working a job you hate for 8 years. Being a waiter making 40k isn't enough long term, but working your way into a higher end establishment or management is. A girl I dated started out as barista, became a store manager, and is now the regional manager and makes ~125k a year and more importantly she is a perfect fit for the job and enjoyed it the entire time.
All I'm trying to say is there are a lot of paths to a sustainable life even when following your natural inclinations.
But anyway OP responded his son's not super interested in college anyway so his plan sounds good to me anyway.
> every day I wake up dreading going to work
This sounds terrible. But at least you have a job. Many people wake up with dread every day for whether they or their baby will starve to death.
Also, it’s never too late to change.
Academia should be a place for people who run away from money, because it's the last thing upon the list of interests for them. Academia should be a place for joy in learning concepts, and in some circumstances, which strive to be useless. Mathematics is one of the most exemplary fields for this, which is summed up quite nicely with the following quote:
"The mathematician does not study pure mathematics because it is useful. He studies it because he delights in it, and he delights in it because it is beautiful."
Never go to a university expecting to improve your wealth status, because it very likely won't happen. Turn elsewhere to find wealth.
Many have drowned in student debt following their passions, but this wouldn't be so in many countries that have university education fully covered or significantly subsidized by taxes.
Once something is paid for with tax money, then the people paying the taxes want a say in how it's spent -- which is not just reasonable, it's a requirement of a liberal democracy.
It's fine to speak from one's experience, but to say that someone else should make the decision one thinks is wise based on a single comment is either ignorant, arrogant or both.
Edit: I replied to you @allenrb, but I'm not directing these thoughts toward you. I'm just pointing out a general behavior I see (but wish I didn't) on the internet and HN.
Interests are all well and good, but costs are real. Following passion is for rich people (or people who get unlimited student loans).
I think this is a truism that people want to be false.
But in any developed country, most poor people are pretty rich when compared to the world, and it offers them lots of freedom to choose what field they want to work in, where they want to work (both city and company), etc. There isn't the expectations that sons take their fathers' jobs and that daughters take their mothers' (often being a homemaker).
It still sucks to be relatively poor in a developed country, but most are rich enough that they can follow their passions in ways their grandparents never could and half the world can't today.
If you don't do a modicum of Research before you take on tens or hundreds of thousands in debt to invest in something, that's on you and you alone.
If people were not bailed out and subsidized we would not have these issues of this magnitude.
Regardless of whether the parent can support that tuition cost or the kid has to take on loans themselves, it should be up to the individual whether they take on that risk irrespective of the parent's financial situation, which is I think where this heavily-downvoted reply was going.
As somebody who's education was way less supported than the rest of my family, who came out with a better job than all of those others in spite of that, there's a decent chance your kid will resent being "held back" by such a choice for a very long time if you give them trade school as their only option in life.
Lots of people find ways to be successful in the arts by eventually finding something cross-disciplinary, and with the direction most non-white-collar jobs in the US are heading I wouldn't bet my kid's life on trade school. What made sense as a sentiment on Mike Rowe's "Dirty Jobs" 10+ years ago doesn't quite hold up as well today, and those projects were funded by the Koch brothers and the whole "trade school is just as good" thing should be taken with a mountain of salt. I'd love to see more data proving trade school proves better today, especially for young adults with educational backgrounds and access to learning and job opportunities whose parents are in the economic class to be browsing HN
At $60k per annum... that's crippling debt.
The mortgage CDO's where tranched in 2008 also.
I thought the government guarantees these loans, but maybe I mis-read that, mis-understood, or something changed. I think the borrower is still on the hook and accrues fees if they don't pay but I also thought the federal government literally paid to keep the bank whole.
Have to wonder how this interacts with the US healthcare system. As people get older they are more likely to have health problems that prevent them from working and cost a bunch of money.
The secret is to lend money and then make people spend it on something worthless. You know, the easiest way is to lend someone money so they can gamble the money away. You might now argue that this is terrible for the lender, but only if the lender doesn't own the casino. Then the gambler ends up in massive debt for no benefit. It doesn't matter if the borrower repays the loan or not because the lender didn't lose a single penny and every payment results in profit.
This is just a hypothesis because I am not aware of any banks or financial institutions operating an educational institution, except maybe lambda school which was heavily incentivized to get people to sign up for income sharing agreements but then only deliver some low quality MOOCs with the only source of support being TAs who themselves are former lambda school graduates.
You take a bunch of loans and bundle them together and securitize the bundle to sell to the public. Mortgage CDOs crashed the global economy in 2007-8.
https://www.investopedia.com/terms/c/cdo.asp
Or if you prefer the Big Short explanation:
But, CDOs go a step further. You may have more or less risk tolerance. So we chop it up. You can buy something that gets paid back if 70% of the loans are good, or only if over 70% or over 80%, or even over 90%. The less likely you are to get paid back, the more you make.
So the person who absolutely wants to get paid back gets a small interest rate. The person who only gets paid back if literally every loan pays off gets a much higher rate.
In 2008, what happened is all those people buying the "very safe" 75-85% failure rate sections also were getting wiped out.
Education doesn’t have this kind of contagion. If you stop paying your student loans it has very little impact on the value on my education.
It's never been more true that education is overpriced and underdelivers.
The contagion may not be "house goes bust and my house value goes down"... but there is a contagion: My degree is now no better than the degrees for the mills pumping out idiots while lowering standards and full of soft degrees filling the markets with "educated" people that aren't qualified to fill a coffee cup at starbucks.
If you don't see a market flooded with lower value results as devaluing the worth of higher education then you're not looking closely enough.
The official term is SLABS: Student Loan Asset Backed Securities. Here's a recent paper on the subject.
But lenders aren’t going to suddenly go from approving 100 loans a month to just 10 a month. The incentive structures are designed to weasel and lie to pump out flattering bottomlines every quarter.
You can trot out the statistics but you can’t change human behavior without changing the incentives.
There’s been massive capital movement across the globe. Money moving out of China and Russia in particular. And the gulf countries with a surplus of cash thanks to multiple years of expensive oil.
But it’s really just speculation. I haven’t noticed an influx of ore Chinese buyers into my market.
Yes prices are crazy but if demand is still not being met, then prices are meant to be crazy.
> Two of three have gone to public schools so far, and we've paid through the nose for it. We are pushing our third towards some sort of trade school.
Jesus Christ. You're gonna give child one and two full opportunity to realize whatever potential they have, but steer child three?
US community colleges (usually 2-year) tend to have low tuition and may offer flexible scheduling so you can pay as you go and/or work through school. Housing can still be expensive though.
US public universities may have lower fees for in-state students. UC Berkeley costs some $41K+ per year (including on-campus housing, food, etc.) for CA residents - not particularly affordable to begin with - but charges an extortionate $33K "nonresident tuition fee" on top of that for non-resident students (including any students under 24 whose parents live out of state.)
Public Universities are ones funded by the state, to varying degrees.
Private Unis have their own funding, usually through a mix of tuition and large endowments.
- https://studentaid.gov/manage-loans/forgiveness-cancellation...
- https://www.consumerfinance.gov/about-us/blog/busting-myths-...
Somebody I know had a medical emergency while in their repayment period. They were unable to work and went on to disability insurance, and eventually had their loans forgiven. I think they had to be on disability for a certain period of time (measured in years, iirc) before they were discharged.
Eventually, they recovered sufficiently to be able to return to the work force debt-free. I'm not sure if the hurdle for loan forgiveness ought to be "you have to basically die", but it's at least that high for now.
There's also the well-known "public servant" path. I'm sure there's some ironic joke to be made comparing the two.
Doesn't it seem like a society shouldn't encourage people to financially self-immolate in order to start their adult life?
I mean, giving the self-immolators some tweaky hacks to prevent being lit on fire is not really the best solution.
It's a tricky problem. We want people to have equal opportunity to pursue college, even if their parents can't afford it. But at the same time, we don't want to subsidize cost creep.
Clearly the current solution doesn't work. Alas, we're deeply invested in it (literally), and each passing year the entanglement grows.
I think you can make a strong case for govt-funded tuition at public universities. But I don't know how to get to there from here without making a handful of people very unhappy.
In other words, basically borderline poverty for years before people realized it was never going to happen, and got lucky enough to get out of disability -- cuz a lot of people don't.
The bigger problem is that people _think_ it won't work and they don't bother trying. How many folks could have met the hardship burden but didn't apply?
We need to stop repeating the falsehood and instead be truthful: Student loans CAN be discharged via bankruptcy, if the applicant meets a hardship threshold.
I'm assuming it pays out at 100x lottery numbers. But, again, that is still basically zero. Is why I don't regularly buy 100 lottery tickets.
Every other debt having your bankruptcy approved is proof enough that you were under undue hardship and couldn't crawl your way back out. But student loans are special and need further proof, which means they are definitely not that easy to get out from.
Why do we take anti-individual stances, but pro-business stances? Is that a byproduct of capitalism, or am I misreading the world?
Actual business loans require assets/collateral, even those from the SBA. At least this has been my personal experience with my businesses. You can't get a loan with no credit or assets (like a student can).
And PPP really should not have been forgivable - if you run a business, then it’s your responsibility to have enough money in the coffers to survive any economic downturns. Individuals get punished way more harshly than businesses when things go south.
As far as interest rates, I had six figures of student loans and they were at 2.88%. Rates today are higher, but that's because they very loosely follow the federal funds rate. This is no different for business loans. But loosely speaking, interest rates on federal student loans are pretty low compared to other types of loans.
In fact, the reason the stock market reacts so badly to interest rate increases is precisely because it increases the cost of borrowing for business.
Yeah there were stimulus checks, and I saw a lot of people say something like “wow look at all these handouts people are getting, they don’t deserve it all!” but then they turn around and say the PPP was the greatest thing ever and businesses deserved them.
I think we are too critical of individual choices nowadays, but not critical enough of the terrible choices that businesses make. That’s probably the gist of my discontent.
If that business goes under, how many individuals are out of a job?
The PPP loans were intended to keep _individuals_ employed.
You're presuming a fact that's not in evidence. I know it's the flavor of the month whataboutism to point to PPP as an excuse to forgive student debt, but PPP was wildly unpopular amongst people who didn't directly benefit from it as well. I have full faith the SBA makes terrible loans as well.
Also, anti-student loan isn't exactly an anti-individual stance. It can also be interpreted as anti-University subsidy. And when you look at the absurd wages professors and administrators can command at these places, I wouldn't blame someone for thinking these loans are distorting the market so badly that it harms consumers/taxpayers while enriching professors and administrators.
> You're presuming a fact that's not in evidence. I’m not so sure about that. How many executives get paid remarkably well, even though they fail miserably? Sometimes even with tax payer money.
I claim that the blame here really rests on big government for creating this fucked up system, not the businesses that work within it. By the way, I blame the government for the PPP fiasco too.
None of this is particularly pro-business, but a lot of people are apologists for big government and need to be disabused of that notion.
There's inherent risk to everything, everywhere. Making the loans undischargable in bankruptcy doesn't negate the risk of non-repayment; it just hides it. Until, eventually, all the band-aids fall off, reality bares its ugly head, and we all wish we hadn't-a done that. Yet, in thirty years we'll forget about it and do it all over again, in some new, crazy, way.
Student loans not being dischargeable through bankruptcy creates a moral hazard, much like bailing out banks. Banks will lend an infinite amount of money for student loans, because there is no risk to them. Creating free money always devalues it; if you have to work for your money, an education is priced $X because that's the maximum people will pay. If everyone gets unearned money to pay for education, it becomes worth $X + $Y. This is just the SaaS model for people. (Consider AWS; "oh you want to make money selling a SaaS service? we'll take 10% of your revenue for servers." Student loans are the same thing, "oh, you want to go into a high-earning field? we'll take 30% of your income for the next 10 years.")
Compare this to things where banks could lose money, like mortgages. If you bid $1,000,000 on a property that's worth $200,000, the bank will simply require a down payment of $840,000. They have no interest in your starry-eyed games. If you walk away, they can close out your loan by selling the property at the appraised value, and they're happy. Banks have the right amount of paranoia about lending for this kind of purchase; their goal is to never lose money. Student loans should be no different; current grades and expected job prospects should play heavily into the decision as to whether or not to lend money. This will reduce the cost of education because selling a $600,000 art history degree to straight-C students won't be viable in the market anymore. (Universities will fight hard against this, because the degrees are cheap and everyone pretends they have some value. If people realize degrees don't have much value, the cash cow dries up. But we have to kind of look at the effect on society as a whole and realize that work experience is actually what we value. After the first 4 years of your career, nobody cares about your GPA or where you went to school anymore. And incidentally, 4 years is exactly how long college takes!)
> I went to a state school and tuition was $750/semester.
I paid about $800 per quarter in 1996. Even at tax subsidized state schools, tuition has gotten much more expensive since then.