Why is Mark Meru allowed to pay back only 10% of his discretionary income? He has a $225,000 income and can pay back more than $1,590 a month for the education that got him to this salary level. Then he could make a dent in the principal.
And according to the article it is not that simple: the forgiven debt amount will be taxed as ordinary income. Which means he'll also need to plan for å substantial tax charge at the point when his debt is discharged.
This was discussed in depth in another post a few days ago. This guy also lives in a 5000 square-foot home, and based on a little digging by others, it appears he has more of a spending problem then a debt problem.
> Bottom line: with so many borrowers set to default on their student loans, those who can't make ends meet will be able to pay roughly 10% of their income for 25 years. The remainder, such as Mark Meru's $2 million balance, will be an obligation of the United States taxpayer.
Is this generally true now? I mean, "10% of income for 25 years"? That's not so bad, really. Only half of 20% income tax bracket.
That 10% is what middle-income people would typically use to save for things like a 401k, a house deposit or a car. If people can't afford those they'll be much poorer in retirement, stuck renting for much longer which will keep them poor, and for many it'll mean they choose not to have children because they're financially unstable. On an individual level these things are unfortunate; on a societal level they're catastrophic. An aging population can ruin an economy. Tax receipts don't cover basic services. It's happening in many places already (Japan, UK, etc).
It's not so bad for the individuals who are paying 10% of their income, it is bad for US taxpayers who are as I understand this article collectively liable for that burden in 25 years.
How does anyone think it's a good idea to take out $1M in loans for an education? Yes, tuition costs are ridicules and in general students have no control over them. In general, I feel like students are taken advantage of. HOWEVER, students certainly can choose not to attend a certain school. If you choose to rack up $1M in debt, I feel like that's solely on you and your (obviously) poor decision making skills.
His first year loans were only ~$43k, but then the interest rate spiked and tuition also got hiked. He might be able to make more of a dent in the balance, but it's high enough that the only way payments are affordable is using the 10% of income rule, which results in a number to small to even keep up with the interest.
At this point student loan debt is like a treatable but incurable disease - you take the meds / make the payments hoping you last long enough for a cure to be found / legislated.
This article focuses on a man who took out ~600k in loans to become an orthodontist. That interest has since compounded to 1mm. I would imagine he took the loans out because becoming an orthodontist was his highest-paying career option. Had he known that the variable-rate loans would be impossible for him to pay off he probably would not have taken them out. We should not be putting aspiring medical professionals in this position.
So the state will be increasing the budgets for university medical departments, then ? In contradiction to what has been done for decades now ?
So, what I mean to say is that we will be increasing taxes some amount (not much, but let's say 0.5%) to allow for this and other subjects to train more people ?
(medicine is actually one of the most expensive things to train, requiring lots of tools, infrastructure (literally entire hospital complexes), ...)
Costs are out of control and university interests are not aligned with student interests in this matter. It seems like federal educational lending should be capped at some lifetime maximum ($200-300k per student?). The higher ed industry will figure out the cost side of the equation in a hurry when students no longer have unlimited access to credit.
The state should get out of the business of guaranteeing student loans entirely and instead only give grants. The loan guarantee system is exactly what misaligns university and student interests in loans. Universities have no disincentive to give students loans they can't pay back.
I don't think a cap would change university behavior - it would only affect a few students, who would be tossed out by the university to make way for the next students.
But the rub is in congressional abuse of accounting practices.
A loan guarantee "costs":
1) in reality: the future default rate, times the average loan that gets defaulted on
2) in theory: the past default rate times the average loan amount
What's wrong with this:
a) default rate : the default rate under very different circumstances: the default rate for guaranteed-by-the-state loans vs the default rate for large-personal-consequences loans
b) amount of the loan: average loan amount vs average amount that gets defaulted on. Everyone who's ever had a late credit card bill knows the vast difference here.
So congress got to vastly overspend, giving the money to banks (>72% of the dollars spent will be at the banks in the end, according to one study), while pretending to give it to their constituency (students, overwhelmingly democrat), in a way that will drive a wedge between them and republicans for decades ...
So of course they did this ! I mean, sure, it will throw a decent number of those people into destitution constantly for decades, but it's not like that's going to make those guys change their vote. Oh, mor... ? M-what ? Oh, morality ? I donate extensively to my self-owned charities !
I mean, let's give credit where credit is due here. Democrat party : I bow to your absolute genius.
I worked at a university that frittered away $150 million on a software rollout that was eaten by consultants and ultimately failed in every regard. Also, the same university is on a building binge, replacing donated buildings barely 10 years old with shiny new ones. Given the cost of CIP projects, that’s why tuition is so expensive... the universities playing “Keeping Up With the Yales” by pouring money into construction. If it weren’t for building binging, tuition would be much saner and in the realm of affordable for the taxpayer to prevent stalling the economic futures of students to be chained in debt with a degree that doesn’t help them enough to escape white-collar poverty.
It's absurd that becoming a medical professional requires saddling yourself with an exorbitant amount of debt. My doctor friends advise people contemplating med school not to go for this reason. It's incredibly sad that the economic situation is incentivizing intelligent people to stay out of medicine.
Herd mentality: if everyone is getting a degree, i must too. If getting a degree is an investment, why don't put as much money in there as possible, if ROI is constant?
Both wrong. Most people who are getting college degrees nowadays simply can't make enough use of them to even break even. People have to stop! They are the only ones to blame; capitalism has no checks in place to prevent people from harming themselves, maybe that's bad, but ultimately, it is their decision to get a diploma they don't need and can't hope to put to good use, is to blame.
This article focuses on someone who went into debt for dental school. I prefer the idea of an educated dentist to dentists without diplomas.
All that said, I agree with your sentiment, college is for many people completely unnecessary.
As per the article, we as tax payers are on the hook for the debt that will be defaulted on, so the fact that this system has spiraled out of control will hurt all of us.
Can't challenge your preferences, but I would encourage a bit of reflection on why you think that education is an advantage here.
I had some routine dental work done recently; some of my teeth were drilled out. It is a complete mystery to me why we think that a college level education is required for the man holding the drill. My body is very important to me, but it seems a tough sell that years of higher education would give a better outcome than years of, say, straightforward practice. I want a competent dentist, but their education isn't worth as much to me as the steadiness of their hand and their willingness to be gentle with my poor mouth.
In theory, any job could be done better by a more educated worker, but we could break it up into generalists and specialists like we do with electricians and electrical engineers. Save the education for people who deal with unusual problems.
>Most people who are getting college degrees nowadays simply can't make enough use of them to even break even.
Which means, most of these positions are in fact 'tails' of the distribution, they don't really exist, they are a net loss vs positions that pay less but do not require diploma. Because more people are getting diplomas than there are jobs really requiring it. If employers CAN get away with requiring a diploma for a position which doesn't really need it - why not doing it? At least it guarantees getting an employee which will be more loyal as he has to repay college debt so needs stable income. And they can get away with it because people falsely believe that college is a path to success and burn enormous money and years of life there.
Maybe there's just too many people who want to become dentists; resulting in too much demand and too high prices for dentists diplomas, and too many dentists for prices on their work to justify these diploma costs?
Why not just allow everyone with a medical dimploma from a 1st world country to come, get GC at the airport, and get to job the next day? What are the downsides, except liberals around the world nagging again that U.S. were robbing them?
I come from a country with free education and the latter part is just plain wrong.
Autodidact people are nearly always terrible programmers because they haven’t learned how to think. The few of them that actually understand CS principles are typically unable to work in teams because they’ve never been taught the fundamentals of working together. If they do have the right sort of personality (extremely rare in CS) they wont have the business side of things, making them unable to work with the people they are making systems for.
Of course I lead teams in digitization where, self management, team work, business and customer interaction is part of what my programmers need to do.
I’ve hired a lot of people by now, back between 1995 and 2005 a lot of them didn’t have much of an education behind them, and we’ve frankly spent 5 years cleaning up their mess since.
Today we simply require a degree.
It’s a little different in the IT department, they prefer certificates over degrees, but a lot of university engineering programs know this and give their students the essentials.
We do have a mix of technical degrees. There is the candidate or bachelor(people typically never stop here) at the universities for the full education, but we also have various academy degrees that are “almost bachelor” programs, which focus less on the theoretical and science things and more on practical application. Both roads are perfectly fine, but you really need that piece of paper if you want a job that requires any sort of thinking.
> Autodidact people are nearly always terrible programmers because they haven’t learned how to think.
Going off of the StackOverflow 2018 survey, only ~48% of professional developers have a CS, computer engineering or software engineering degree. If you’re willing to write off over half of potential applicants because your interviewing process clearly didn’t work well enough to verify the applicant can code, then sure, help inflate the degree bloat, but just understand, that even in countries where education is “free”, it comes at a cost that has to be picked up somewhere.
It’s a cost benefit sort of thing, the most expensive mistake i can make is hiring the wrong person. By requiring a degree I minimize the risk and I also save a lot of money by not having to test for technical aptitude.
If you’ve completed a CS candidate degre at a Danish university, it tells me you would be able to write a quick search on our white board if I asked you to. Not because you’ve memorized it but because you’ve been taught problem solving. I’ll sometimes ask what candidates think if test-first or something like SOLID, but I don’t really care about their technical knowledge on it, what I’m evaluating is whether they give me an honest answer or if they’re telling me what they think I want to hear.
Sure I could test people, but that would require 2-4 employees who planned, executed and evaluated the tests, which is expensive, and the university’s or the academy you graduated from has already done that. So what’s the point of it?
A typical Danish job interview is 30 minutes of trying to learn your personality, because you’ve already given us your credentials. For important jobs, we’ll even test your personality and use that as a basis for the interview talks.
I haven’t made a bad hire for more than a decade so I’m really not worried about missing out. Because hiring isn’t really about finding the right match, it’s about finding a good match.
Where are you based? In many countries a CS degree is no guarantee of rigor, teamwork or even ability to program. Most universities just focus on the computer science theoreticals (after all, it's not a software engineering degree), while the programming is restricted to artificial toy problems.
If you come from a degree-obsessed country like Germany I would hypothesise that you are confusing correlation with causation - smart, competent individuals with the capacity to work in teams go to university because they understand the importance of the degree to increase their hirability, but a 4 year degree not change a cowboy coder into thr above.
I’m Danish and there is certainly a reason n the better programmers have educations, I mean, why wouldn’t they? Not only is education free, the state gives you $1000 a month to study and our culture expects you to have an education.
There would almost have to be something wrong with you not to get one.
That being said, I’m old, I’ve been around since before IT educations were really a thing outside of research and science, and people with degrees are just better at working in enterprise. I’ve had really excellent autodidactic people write marvelous stuff, that was horribly documented and full of hacks that made it really inefficient in the long run, and that just hasn’t happened with people that had degrees.
I still see and hear if the rockstar mentality today, from the manager networks I’m part if, and it’s almost always from employees who haven’t had any schooling.
My experience has been the opposite. The only people I've
ever had to fire because they couldn't actually do their job has been people with CS degrees, and overall the people I've hired without degrees have done better than average.
Part of the problem is that most CS degrees are not software engineering degrees. Some will have modules that are relevant, but mostly these are not compulsory. As a result a CS degree is often a poor predictor of whether or not someone knows the processes around it, and even a poor predictor of whether or not someone can program.
A lot of people with degrees get sorted out if the screen prossee along with people who have no degrees. Because you’re absolutely right, university CS doesn’t necessarily make great programmers.
If I’m hiring for a programming job I typically prefer people with academy or engineering degrees though. They are taught less theory and more application.
A degree isn’t all we look at though, we’ll also look at your public code repository, but we won’t take a look unless you have a degree because we need you to do both theory and application, and we need you to have learned best practices in both.
I’m not saying people without degrees are useless mind you, I just don’t want to spend time finding the ones who aren’t, when I don’t have to.
Part of an education is learning theory of science, analytical methods, best practices and scientific reasoning. At least that’s part of a higher education in Denmark.
I’m sure people without degrees can learn in this on their own, but they are much less likely to have done so. So why would I bother taking the risk?
It’s about probability. People with no degrees are a bigger risk than people with degrees. That doesn’t mean there aren’t people without degrees who aren’t better, but it does mean I won’t allocate the resources it takes to find them.
I’m not looking for the best candidate, I’m looking for a good candidate.
They didn't loan him $1,000,000 all at once. The person used as an example initially borrowed $601,506. That seems high since he was told to expect the program to cost $400,000 to $450,000, but the original WSJ article explained that unlike normal medical residences, dental residencies typically charge tuition, which is another 3 years of loans on top of the original 4 year program. After the residence, he took a year of forbearance to get established. Of course, for all 8 years, the interested kept accruing.
From the $601,506 starting point, the $1,000,000 comes from him paying less per month than interest rate thanks to a government program he is in. He pays $1,590 while the debt grows something like $3,900 a month, so he isn't even trying to pay off his loans currently. After 25 years, the program he is in has the federal government paying off the loan, which at that time is estimated to be about $2,000,000.
My ingenious solution: don't buy so much education, if the loans are too much.
You know you shouldn't buy a house, a car, or a business asset which you know you can not afford or leverage to pay for itself, why do you take on debts (and make other decisions around payments) that you know you can not repay? I have to hope that people aren't counting on bailouts, but given the political rhetoric that gets tossed around, it's hard to imagine that doesn't factor in to people's poor decisions.
I think this is too black and white of a perspective.
First off, plenty of people buy cars they can't afford out of necessity. Or, rather, they NEED a car for work and buy a cheap used car that inevitably needs repairs and sucks up money they need for food, rent, etc.
I think attending college is a similar type of decision. We're told over and over that college is the only path to decent life, and in many ways it is. There's very little hope of someone without a degree making more than minimum wage and even less hope of doing meaningful work. If they're already poor, getting a job right out of high school won't pay enough to help improve their quality of life.
So they go to college hoping things will be better.
> I think attending college is a similar type of decision. We're told over and over that college is the only path to decent life, and in many ways it is.
You're also told that Harvey's makes your hamburger a beautiful thing, that smoking Marlboros will make you a man's man, that Tesla will deliver the Model 3 at the promised rate, and that you can keep your doctor. If your contention is that people should not be judged for believing what they are told, then I guess you could make that case. I certainly don't agree.
> There's very little hope of someone without a degree making more than minimum wage and even less hope of doing meaningful work.
I think there is something wrong with this, I have had 10th+ percentile income since I was 17, and I never attended high school. I get the impression that a number of people who have gone to college may have spent money and time better on books and begging for an internship. The people who benefit from college don't need assistance paying it off.
I'm aware I lost something by not going to college, but I figure it can't be too bad, if I can't really tell what that something is.
> why ... take on debts ... that you know you can not repay?
Obviously... people think they can repay them. There are millions of advertisements and seminars promoting the ROI of education. No one goes into them "knowing" they can't repay. They think they can, and then they cant.
It's going to be a pretty penny still to pay the federal taxes on a $2m+ loan (like, $400k, and that's not a loan, that's IRS money at that point).