Profits from student loans are ‘obscene’ | Hacker News Reader

Profits from student loans are ‘obscene’

washingtonpost.com

33 pointsboh19 comments

Just some context: Student loans outstanding will exceed $1 trillion this year http://usatoday30.usatoday.com/money/perfi/college/story/201...

The amount universities are charging students is what's 'obscene' to me. Making 5% profit on "obscene"ly risky loans isn't the cause of the US's student debt problem. This just sounds like populism and pandering.

Universities charge students what they do because the students get loans to pay for them and the true cost is hidden.

>Making 5% profit on "obscene"ly risky loans isn't the cause of the US's student debt problem. This just sounds like populism and pandering.

Student loans are federally guaranteed (i.e. if the student cannot repay the loan, the federal government will), so they aren't risky at all; the bank is getting its money either way. If you're going to shill for the banking industry, you're going to need to try harder than that.

some student loans are federally-guaranteed, not all (though, perhaps, most)

Um...what?

I had said that it isn't obscene for the federal government to make 50 billion dollars a year off a much larger amount of very risky loans that it bears almost all the risk for, and you accuse me of "shilling for the banking industry".

I think it is you who needs to try harder.

EDIT: changed all to almost all, since not all loans are federally guarenteed as warrenm points out

I don't know that you can pin this solely on universities. Simple supply and demand states that they'll keep raising rates until the market stops following them.

Each group has a hand in this mess, including the students themselves. Pointing to only one group suggests that we can find a solution there. I really don't think that's the case with this problem.

Although I think you're right about everyone sharing blame I think as not for profits this type of behavior is egregious from universities.

There's nothing risky at all about federally guaranteed loans that cannot be discharged with a bankruptcy. It's pretty much printing money.

They might not be dischargeable in bankruptcy, but a recent article I came across mentioned that a huge percentage of outstanding loans are technically in default. Those are loans that are way behind in payments.

Until 2010, and still on the guaranteed debt outstanding since 2010, if someone defaulted the government would pay it off. This would not discharge the debt, it would just become a debt owed to the government.

http://www.nolo.com/legal-encyclopedia/what-is-federally-gua...

I am thinking her name should be Senator Soundbite. The majority of students have twenty five thousand or less in student loans.

There are better alternatives than adjusting the rate to making sure students who want an education can afford it. Increasing Pell grants is one, having colleges which don't have price ceiling match them or not receive aid is another. Public Service programs which give way to loan forgiveness; you pay a percent of income for a number of years and the loan is forgiven provided you choose an approved career path. I would love to see another alternative listed in a recent businessweek article, limiting loan amounts based on what is studied. That would fix the problem with some colleges which sell degrees in low paying fields but charge exorbitant fees.

Still key is the rampant rise in tuition and related costs which is a reflection of easy money, as in the loans are just so easy to get

It's not 9% profit. It's 9% per year.

That can be double or even triple the cost depending on the timeline of payback

As a dude from Europe, I'm used to hearing Americans complain about their student debt.

Then I recently read that some American government programs give out student loans at rates of up to 9%. Even though I'm not in any way affected, this makes my blood boil.

If you are from the US, want a decent education, don't qualify for a scholarship and probably won't get into MIT anyway, please consider going abroad for your studies. In many countries over here you pay your living expenses, a relatively small fee (<200€ per semester) and that is it.

Granted, you'll have to spend some time learning a weird language and you will most likely get some sort of culture shock, but in the end, you can get a decent education here without ruining yourself.

Here are some links:

http://studieren.de/checklist-germany.0.html http://www.studyinpoland.pl/en/index.php/education-in-poland...

This is economics 101... Monopolies are bad, especially when they're protected by the government. It's absolutely sickening that you can't get rid of this debt even in bankruptcy, and these loans are given our to practically everyone. It's encouraged, in fact. This influx of guaranteed money inflates prices as well of course, to absurd levels.

Are we really doing this? Not that student loans aren't a good topic for discussion, but basing it off of obvious political posturing with little basis in reality is a bad place to start.

It cannot be said often enough: state and federal support for universities has dropped considerably, and that is the root cause for the rise in tuition. Nothing else.

Again: the burden has been shifted from the taxpayer to the student.

Baloney, my friend. Government student loans are the PRIMARY reason the costs of college have skyrocketed. End them - observe as the army of administrators dwindle, the pointless BS classes disappear, the tuition bills decrease.

Somehow the title moves the focus away from problem. The real issue is not about obscene profits. Apple might be making obscene profits from iPhone.

The real problem is how Universities and Government have managed to create a monopoly and milk the future generation of their country.

Is it really this hard for Americans to understand that this whole thing is not sustainable?

I am not an American but I have lived here for the last 3 years. There are few things that I find really strange.

What is wrong with the fee structure of universities here? The tuition is ridiculously high for the standard of undergraduate education. High tuition creates two very fundamental problems in the society.

First, barrier to entry is very high. Not everyone can afford college. This creates a class of undereducated people. Normally, a set of population being undereducated is not a problem (actually it is a good thing from the macroeconomic perspective). But that is not true for America. Life in America is ridiculously complex. There are multitude of choices for everything and everyone is expected to make informed decisions.

But the underclass does not know how to make such choices. The underclass never got a chance to get educated and well-informed of their choices. How the fuck does the American society think they will live their lives? Will they make good health choices? Good career decisions? How will the underclass sustain themselves?

Second, to solve the "barrier to education" problem, we created a loan program which gives money to every one. Econ 101: As a necessity for growth, a loan has to make a profit. The government giving out easy loans is not a solution at all. This just pushes the problem to a point in future. Meanwhile, the loans create underclass 2, a generation coming out of school with debt. I've seen friends paying their loans off until 10 years after graduation. What a burden. This burdened underclass 2 does not have the freedom to switch jobs easily, take risks, make expensive (hut healthy) choices. For a consumer-driven economy like we have in America, this is toxic.

How hard is it to understand that we are just pushing the onus on to someone else in the future. Honestly, I'm quite scared to have kids here. They are going to suffer a lot. Why?

- Because even with a decent salary, I won't be able to buy a house, send kids to good schools and activities, save for their college education and make healthy lifestyle choices, all at the same time. Forget starting my own business or vacations or pursuing my hobbies

- So, my kids will end up taking a toxic loan which they'll take years to pay off

- That means when (if) they marry and have kids, they are in a worse position than I am right now to do anything. Their off-springs will have it even worse.

There is no guarantee that this will not burst like the housing bubble. The people affected by these would be young citizens. These same young citizens (and their off-springs) have to lead the country to the future.

If we value freedom and individualism so much here, the barrier to getting information and sound advice should be much much lower...aka education and healthcare should be fucking cheap. Education should not be a profiteering pipe-dream for anyone. It is a matter of people's lives.

A few folks will call me socialist for saying this but hey, if making education and healthcare cheap does not make sense to you, I don't give a fuck about what you call me. Btw, I am no Obama fan either.

At the current rate, all we are creating is underclasses that is not good for a consumer-economy reeling in debt. (sidenote: A consumer-based economy submerged in debt is never good news. Consumer-based economies need citizens with sound financial status to keep them the economic engine running)

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