
The Student Loan Debt Crisis Is About to Get Worse - petethomas
https://www.bloomberg.com/news/articles/2018-10-17/the-student-loan-debt-crisis-is-about-to-get-worse?srnd=premium
======
duxup
I have strong mixed feelings about the student loan situation.

First I don't think you should have to incur a huge amount of debt to go to
school, it's terrible.

At the same time I worked with a lot of students at a past job where we did
internships and gave them experience and I was kind of shocked by their
attitude about them, mostly by how much a victim they were of it all... while
incurring more and more debt.

There was very much what I interpreted as a sort of "I was told I'd make a ton
of money if I did X, and so I had to take out all these loans, and this
sucks.". The level of victimization they felt was immense, like they had no
choice but to sign on the dotted line.... and yet here were many of them
seemingly choosing to keep at it incurring debt, not really curious about any
other options / didn't want to do anything else. Many straight up didn't even
have a job / many never had one ... this was kinda surprising to me as I never
stopped working during school (to be clear I'm not saying anyone has to do it
my way).

There was another attitude that they felt life was like "If I push button X"
(that would be go to school) "Then I get Y" (job, money, etc) and if it didn't
work that easily then it was just terrible.

Something needs to be done about the situation over all but it strikes me that
many students perspective is way off as far as how the world works career wise
(it's not push button get thing for most of us) and while they seem to feel
they are victims... they also dive head long into the situation / debt and
many don't acknowledge their own participation .... I worry that if
participants aren't "participating" (with finances and even career) not much
will change.

~~~
TallGuyShort
I recently discussed this with a person who was continuing to get student
loans after already being under a mountain of debt and recognizing that their
job prospects were not as lucrative as they hoped. I asked them why they were
doubling down when it was obvious they were in a bad situation and making it
worse. They said they had invested too much to choose another path.

This person has a bachelor's in economics and is about to finish a master's in
finance. We conflate "an education" with "being educated" far too much.

I graduated 6 years ago with zero debt and no help from parents, because I
actually looked into costs / benefits before starting school, picked a cheap
school, and worked the whole time. I really don't know how we think it's
acceptable for people to be 18 and not capable of making these decisions. You
can vote and join the military, but you can't recognize financial servitude
like this. They're being failed long before they get to college.

~~~
mikestew
_They said they had invested too much to choose another path.

This person has a bachelor's in economics_

Man, of all people that ought to know about the "sunk cost" fallacy...

~~~
anongraddebt
This particular individual may have fallen prey to it. However, I think
students in similar situations face something a bit more nuanced than the sunk
cost fallacy.

If you accept that middle-income, professional jobs are decreasing relative to
lower-income and higher-income positions, then many students with a non-
trivial amount of debt are in a trap. For example, say you graduate with a
B.A., $120K in debt, and the only job you can get out of school pays ~40K, but
low upward mobility long-term (pay-wise).

Your options are (for this hypothetical):

(1) Take the ~40K job with low upward mobility long-term.

(2) Purchase a $120K graduate degree that offers a 65% chance at a six-figure
job out of school (and high upward mobility long-term) and a 30% chance of a
~$60K job (and medium upward mobility long-term) and a 5% chance of ending up
in outcome (1).

Which is more rational?

Now, we could get into questions of how well this maps to reality, or what the
expected value of each outcome is, or how to even compute expected value in a
situation with myriad messy variables and reductionist assumptions, etc.
Regardless, I think we can say that if income and upward mobility resemble a
barbell distribution more than a normal distribution, then we have defeasible
justification for believing the following:

(Proposition) A non-trivial number of students face decision traps which lead
to a choice less akin to the sunk cost fallacy than a non-confident choice
when living between 'a rock and a hard place'.

At times, people will say something about having invested so much already that
their decision is pretty much pre-determined even though they're attempting to
convey having made a non-confident choice after being stuck between 'a rock
and a hard place'.

~~~
slivym
Your number 2 scenario is dead wrong. The reason the person is in that
scenario in the first place is because they mis-judged the payoff from having
the first degree. The likelihood they misjudge the second degree is just as
high.

In fact let's look at it: what's the probability that given your inability to
gain one of the lucrative jobs at this level of education you can gain one
with a higher level of eduction? Well we can speculate, a higher level of
education can be sought for two reasons: you're acadmically gifted and
genuinely want to get more education, or you're not academically gifted and
you want the magic fairy wand to wave to get into Brothers and Brothers LLP.
Well let's face it, you're in group number 2, and it's the people in group 1
who are the actual successful candidates. So given that your pay off looks way
off. You won't get the top jobs - you're not good enough, you won't get the
medium jobs - you're overqualified, and you won't get the cheap jobs - you
can't afford to work for that amount.

~~~
anongraddebt
(1) Your group number 2 describes a sizeable portion of law school graduates
who actually do end up in six-figure corporate jobs, as well as a decent
(though smaller) portion of medical school students. Unless, only those
persons who obtain the six-figure jobs out of graduate school are academically
gifted. This would mean, however, that sizeable portions of the graduating
classes of many such schools (even just the elite ones) harbor non-
academically-gifted students. That's not an indefensible position. However, it
would be rather odd and not terribly convincing on its face, as presumably
only the academically gifted could have arrived there in the first place.

(2) Even assuming your argument goes through successfully, it is irrelevant to
whether the person committed the sunk cost fallacy, which is the issue under
discussion. Now, you could argue that subjective assessments of expected value
always track the true underlying expected value (i.e. the actual expected
value for any individual's objective abilities). In that case, all non-
academically-gifted students who chose further education would likely be
committing the sunk cost fallacy. That's not the case though, and you know
that. Or you should, because it is prima facie absurd.

(3) It is relatively uncontroversial that there is a substantive disconnect
between the supply of graduates and the number of jobs paying a salary
justifiably commensurate with the debt-levels we are seeing. This has a couple
of knock-on effects. For example, an across the board devaluing of degrees,
which unjustifiably increases hiring requirements for lucrative professional
jobs, further exacerbating prestige whoring, etc. This turns high school
seniors deciding to attend elite private schools into even greater gamblers as
the cost of an initial degree rises. Maybe they are or maybe they aren't
rational to take that gamble (Are gambles by definition irrational? If so,
pick a different term.). However, after having taken that gamble and come up
short, they don't automatically become irrational in taking it again. Or, at
least, the irrationality wouldn't necessarily have anything to do with the
sunk cost fallacy.

------
bradenb
I was discussing student loans and value of a college education with friends
the other day. We were discussing whether or not I would recommend college to
someone today. My conclusion is that TODAY I would still as long as that
person has the means to do so without any loans.

But, then we started discussing whether I would push my children to go. My
answer is that I hope I don't need to. Even though I have some amount of
college savings for my kids, I don't think it will be enough to let them
choose their school freely and I would much rather that money go towards
starting them out in their career or family or whatever they choose.

My hope is that when it is time for them to start their adult life that there
will either be enough cheap or free alternative forms of education or that the
stigma of not having a degree will have lessened. Realistically, I don't think
the situation will have changed in that time.

My own experience is complicated because I took out loans--which I greatly
regret--but also likely have my career to thank for it. I had a full-tuition
scholarship to the school of my choice, but opted to go to another school my
parents wanted me at; when I eventually transferred back to my original choice
I had lost the scholarship. If I had to do it again today I would definitely
start with a 2 year local college education and then work hard through the
remaining years to finish debt-free.

~~~
orev
The main reasons to get a degree are:

-. To show you can complete a big, multi year project that’s full of doing stuff you don’t like

-. To get past HR screenings

-. If you ever want a chance to reach Executive level jobs, you need to have a degree, for the perception of nothing else.

This debate has been going on for a long time, despite this being presented as
a recent thing, and it always comes down to those things. While the tech-
minded here might want to see it from a strictly educational standpoint, these
are human/societal reasons that are quite important.

~~~
mental1896
I don't have a degree and I'm 10+ years deep into my career. What has started
to stand out for me in recent years is that there are holes in my experience
that my college-educated peers don't have to deal with. Granted I never had to
deal with student loans so I guess there's a tradeoff. But the problem with
these education "holes" is that they hit you right out of left field when you
least expect it.

~~~
echelon
What do you feel are the gaps in your education? Do you think taking an online
course would help with them?

I suggest learning a little about data structures and algorithms, each are
typically one semester courses in undergrad. You might supplement it with
operating systems and distributed computing, though data structures should be
a primary focus.

~~~
mental1896
I've tried and failed going back school enough times to know it doesn't work
for me. Certification courses & clinics have proven worthwhile in the past
though.

------
zomg
Broadly, student loan debt is an economic supply/demand issue. The government
keeps supplying loans and (of course!!) schools continue to raise "tuition" as
the supply of monies is nearly endless.

A good first step would be to reduce the supply of loan dollars, which would
lower the number of students who can pay for college (however, no politician
would sign up for that) and theoretically lower prices.

There's also a stigma in the US about "blue collar" jobs, which is absolutely
pathetic. Plenty of people in America support their families (quite well)
working in blue collar industries.

As an example, plumbers in my area (New England) can essentially demand their
own rate and take on work as they desire. Don't want to pay their quote hourly
rate? Well then, you can fuck right off and good luck finding another plumber
in the next 2 weeks.

We need to do away with the mentality that you HAVE to go to college, because
you don't and the majority of those who do are attending are doing so because
they are naive and don't know any better.

~~~
JPKab
Personally, I want us to find a way to hold universities accountable for
handing out bullshit degrees that aren't remotely worth what they charge.

A dead give-away that there is a problem is that every degree costs the same
to acquire. That is insane and archaic.

~~~
godelski
Why not the banks who are giving out the risky loans? They know a degree in
underwater basket weaving isn't going to pay off a $100k loan. In most other
circumstances a bank does a risk analysis. And it isn't like they don't know
what degree the borrower is pursuing.

While the banks are giving money the universities are incentivized (because
they are profit seeking) to increase prices and provide overpriced degrees.

~~~
Eire_Banshee
Student loans are guaranteed by the federal government, right? Thats why banks
dont care. Its just the private student loans banks worry about.

~~~
blancheneige
correct: [https://studentaid.ed.gov/sa/](https://studentaid.ed.gov/sa/)

this is the subprime bubble all over again, with the govt providing a risk
free opportunity for private entities to maintain the insane price runaway
until it all comes crashing down.

~~~
zone411
Incorrect. The private loans are no longer guaranteed by the government:
[https://en.wikipedia.org/wiki/Student_Aid_and_Fiscal_Respons...](https://en.wikipedia.org/wiki/Student_Aid_and_Fiscal_Responsibility_Act)

------
Teknoman117
I wish I understood the community college path when I went to school - as in
get all your GEs and intro courses out of the way then finish at a 4 year
university. It’d be a lie to say I hadn’t heard of it, but the high school I
went to told all students that taking such a path would damage their career.
Most of the trouble I had with college was me being a stupid 18/19 year old,
and I wish I’d done in a place that wasn’t so expensive.

Thankfully I got a fantastic job that lets me pay it off rather quickly, but
it feels weird to be living more or less paycheck to paycheck working at a
tech giant (‘emergency fund’ is mainly not spending any bonus money). I
realize I’m damn lucky, and I worked (and still do work) damn hard, but I just
can’t help but feel something is a bit wrong with the whole situation.

My parents both went to college, but they were able to leave school, my dad
being the only one to get a job of the two of them (at low pay for the time)
in the economic recession of the early 90’s, and they managed to pay off their
student loans and buy a house within two years of graduating. Yet here I am,
nearly 3 years after graduating living paycheck to paycheck with my cat in my
little studio apartment.

Part of it is my choice, I didn’t have to elect to pay off my loans in 5
years, could’ve taken a longer note, but I hate being in debt. I hate the
concept. Owing more money than I could reasonably produce at any given moment
bothers the hell out of me.

~~~
bdcravens
The secret no one tells anyone: the name on the piece of paper at the end is
all that matters, and even then, 98% of employers really don't give a damn
about the school you went to, especially after you get that first post-
graduation job.

~~~
ngngngng
This seems incredibly hard to shake. Whenever the discussion of affording
college comes up I bring up the affordable schools I know of, which I count as
anything with less than $10k of tuition and fees a year. The response is
usually that you will never get a good job if you attend one of those schools.
It's as if somewhere it gets into peoples minds that if you don't spend $40k
on tuition a year then your education was worthless.

~~~
bdcravens
Perhaps if you think success is only working at a FAANG or a unicorn in SF,
this may be true, but there's way too many people making great incomes to
disprove that.

~~~
ngngngng
True. I'm a dropout that's making great income, but not at a FAANG or a
unicorn. Honestly i'm tempted to get a job at one of those just to be sure I
could do it.

------
chasing
It is interesting to consider what we could be spending our money on instead
of tax cuts for the wealthy and war:

"Make public colleges and universities tuition-free for working families, cut
student loan interest rates in half, and allow every American with student
debt to refinance at the lowest interest rate possible. Estimated cost: $60
billion."

[https://www.budget.senate.gov/ranking-
member/newsroom/press/...](https://www.budget.senate.gov/ranking-
member/newsroom/press/report-if-not-for-republican-policies-the-federal-
government-would-be-running-a-surplus)

~~~
gowld
There are 20million college students/yr. $3K/yr/capita seems an underestimate
of the cost of their education, since high school costs >$5K/yr/capita.

~~~
lkbm
Drop ~5% of those as non-citizens[0].

Drop ?% of those as not falling under "working class".

Adjust $??? billion for existing in-state subsidies, since only marginal cost
is relevant.

Of course, add $??? billion when quantity demand explodes when price drops.

[0] [https://www.bostonglobe.com/metro/2018/02/01/number-
foreign-...](https://www.bostonglobe.com/metro/2018/02/01/number-foreign-
students-studying-drops/JHb6P59y3Ut0px2VM54JBN/story.html)

------
korethr
As mentioned down-thread, this is a supply/demand issue. The government loans
effectively create an infinite supply of money, so of course tuition goes up
to capture all that money.

I have a radical proposition: End student loans.

Get rid of the program outright; don't issue any more loans. Take the money
being spent on issuing student loans and instead earmark it to issuing to the
states to fund their colleges with the condition that tuition costs lower
proportionally. End bankruptcy protection for private student loans, and
authorize banks to factor the degree/major into their underwriting.

I'm fully aware that this will take an act of Congress, both figuratively and
literally, not to mention likely be politically unpopular. But student loans
didn't arrive out of thin air, one or more of acts of Congress created the
mess we're in today. It will take them acting again to begin the process of
cleaning up.

In the spirit of debate, let's hear why this cannot possibly work or what the
problems with it are.

~~~
mjevans
You're on the correct track but haven't quite hit the mark.

The condition must be that the cost to a student / family of a student
attending for a basic bachelors degree is zero, and that re-taking
classes/classes for any unfunded (IE out of state/country) student is up to
the actual "production" cost for a funded student.

The balance sheets should be open to the public for audit and inspection.

------
gowld
The main story is the overpriced underquality (and often criminal) for-profit
"college" industry. This has been well-reported for over 10 years. Why are
students STILL getting fooled by this?

The increase in price and loans at real colleges is a relatively minor (but
important) problem, and one that could get proper attention if the massive
dreck of the for-profit college industry was cleared away.

Do you know anyone who attended a for-profit college in the past 10 years?
What fooled them into attending?

~~~
ptero
You are singling out for-profit colleges, which to me does not make sense. I
am not sure I agree -- out of state sticker prices at good public universities
are not much different from private ones. And in-state costs are not far
behind (and it is not just tuition, add books and living expenses).

Most schools, public and private, moved to the model of charging as much as
the family can afford (i.e., putting a huge sticker price and refunding the
"unaffordable" portion for each family via a much-touted scholarship).

~~~
lmkg
You seem to be conflating "private" and "for-profit." Most private schools
that are considered respectable are non-profits (at least on paper). When
someone says "for-profit college," they mean diploma mills.

~~~
ptero
Agreed and thank you for the correction. Diploma mill industry is indeed the
predator. But I think the way to stop it is to force disclosure of total
costs, average salaries, etc. Once people see what they actually get from
those (a piece of paper) they may be more inclined to shop elsewhere.

------
paulpauper
Sigh..another one of these "X is about to get worse/is a crisis" type articles

The media has been predicting this since 2012 and yet it refuses to pop. So
maybe it's not a bubble, or if it is, the media really sucks at trying to time
these things and should stop trying.

[https://www.google.com/search?q=student+loan+crisis+bubble&s...](https://www.google.com/search?q=student+loan+crisis+bubble&source=lnt&tbs=cdr%3A1%2Ccd_min%3A%2Ccd_max%3A1%2F1%2F2012&tbm=)

A lot of the debt is secured by the fed govt. Only 8% student loan debt is
private.

Second, despite all the doom and gloom over student loan debt and grads not
finding good jobs and , a college degree still has a good ROI in terms of
higher wages, lower unemployment, and higher lifetimes wealth, versus having
no degree. In spite of all the anti-college rhetoric in recent years promoted
by the likes of James Altucher and others, this gap has only widened since
2009 in the aftermath of the recession and shows no signs of narrowing.

[https://qph.fs.quoracdn.net/main-
qimg-c093e2248a8c4bc6902d9b...](https://qph.fs.quoracdn.net/main-
qimg-c093e2248a8c4bc6902d9b80f1e8feeb)

[https://img.huffingtonpost.com/asset/5772d5ea1800001a00fa2e5...](https://img.huffingtonpost.com/asset/5772d5ea1800001a00fa2e58.png?ops=scalefit_820_noupscale)

[http://greyenlightenment.com/advice-that-you-should-
ignore/](http://greyenlightenment.com/advice-that-you-should-ignore/)

Real wages for non-graduates have plunged since 2008

~~~
savanaly
>Second, despite all the doom and gloom over student loan debt and grads not
finding good jobs and , a college degree still has a good ROI in terms of
higher wages, lower unemployment, and higher lifetimes wealth, versus having
no degree.

Does it change the framing of this fact if we assume a degree's main value to
students is in its signaling power rather than what they learned? In which
case ballooning debt is still a really problematic thing because it shows
we're dumping money in an arms race which everyone would be better off if we
could tone down.

~~~
toasterlovin
If you're familiar with evolution of signaling traits in animals, this isn't
actually very surprising. If you have a competitive mate market (where members
of one or both sexes compete for the other sex), all excess resources will get
funneled into signaling status. The most well known examples are probably
peacocks and male birds of paradise, who spend a tremendous amount of energy
building extravagant plumage to attract females.

An alien biologist would probably predict that the end state of a competitive,
highly differentiated job market is prospects investing excess resources into
signaling quality until the marginal return approaches $0.

------
ProfessorLayton
Let’s talk some numbers, because while 1.5T sounds scary, something else is
going on. I’ve posted this finding before, but it seems relevant to this
article:

The median defaulter does so with a loan of Just under 10k [1]. It is worth
discussing why the median defaulter is unable to pay roughly $100 per month
(assuming a 10y payment plan), and how to address that issue. When viewed from
this perspective, the problem does not seem insurmountable.

[1] [https://www.americanprogress.org/issues/education-
postsecond...](https://www.americanprogress.org/issues/education-
postsecondary/reports/2017/12/14/444011/student-loan-defaulters/)

------
bilbo0s
I have a theory that this is one of the symptoms of the psychological fallacy
that many Americans hold with respect to financial health. You've probably all
heard the joke about poor and middle class Americans:

"You never meet an American who's not wealthy. They're all just temporarily
cash strapped."

It's a joke, but there is some truth to it in that many poor or middle class
Americans do think in this manner. So the average American is very well aware
of the consequences of debt, and the costs associated with education. But they
think the lack of well paying work is a very temporary situation. If you talk
to an unemployed or under-employed person, they'll say that they just haven't
found work _YET_. (The key word being "yet". Deep down, at an almost
unconscious level, the average American believes they will find that job. Or
they wouldn't use the word "yet".)

This is not just an issue with college debt by the way. This same
psychological quirk is what generates the abnormally high levels of
consumption across nearly every sector of the American economy. It's the
reason American's buy homes that are a bit more of a financial stretch than
prudence would advise. We buy cars that are more pricey than we can really
afford. Clothes, trips, consumer goods etc etc etc. On a sub conscious, or
maybe even on a conscious- level, we believe our financial health will always
get better over time. And, at least in the past, most of the times we've been
right. So we can be forgiven for believing the same thing now.

I'm honestly unsure how we would go about addressing that issue when it rears
its head in college financing? Because it is deeply ingrained in us at this
point. In my own case, I went to the University of Wisconsin for free. So
while I know it's not a popular idea, I really do think we might be well
served to look at how we might enable free bachelor's level education for
people _without_ requiring them to be freak athletes or super intelligent or
whatever.

~~~
cirgue
> "You never meet an American who's not wealthy. They're all just temporarily
> cash strapped."

Not that I disagree, but as a counterpoint: Nearly everyone I know who is
financially successful (and didn't inherit any significant wealth) has spent a
part of their post-college existence in this position. This is in no way
representative or scientific, but the point is that "temporarily cash
strapped" is a reality and not a fantasy for a nontrivial number of people,
and the perception of unlimited upward mobility extends past your twenties.
It's not just folk wisdom for many, it's supported by some degree of
experience.

~~~
bilbo0s
Yep.

That's why I wrote:

> _we believe our financial health will always get better over time. And, at
> least in the past, most of the times we 've been right. So we can be
> forgiven for believing the same thing now..._

------
esotericn
It's unclear to me that student loans present meaningful systemic risk.

Mortgage defaults rather obviously have a knock on effect in prices for homes,
which huge numbers of people rely on (across the globe) for security,
retirement, etc.

By contrast, half of the country defaulting on student loans doesn't affect
anyone other than the issuers of said loans. Are people indirectly investing
in these issuers?

~~~
auiya
The problem is it's the federal government, thus you the taxpayer are
responsible for defaults, which is a much larger swath of the population than
just homeowners. The student loan crisis is going to be worse than the sub-
prime mortgage issue because it won't be easy for our economy to recover from
the downturn. The fall out will be both cultural and systemic. The course-
corrective measures would be lenders locking out lower-income families from
colleges, leading to a faster collapse of our middle class. Colleges will drop
tuition rates slightly but tuition is largely sticky, unlike housing prices.
This may even lead to some colleges going out of business. Loans will likely
be under-written appropriately, but then degrees will be prioritized based on
earnings potential, so only a narrow field of study (medical, lawyers, tech,
etc) will be eligible for lending. Schools may price degrees differently, and
only invest in those degree programs with the largest earnings potential, to
the detriment of many other crucial programs. Ultimately college will become
an institution to perpetuate a narrow focus of study, and only to those
already in positions of wealth, which will further hasten the collapse of our
middle class. We may not even be smart enough to realize what hit us until it
does.

------
apo
A vicious cycle: easy student loan money inflates the cost of tuition, making
college less affordable and increasing the demand for easy loan money.

Breaking the cycle is as simple as it is counterintuitive. Abolish federal
student loan guarantees and interest payment programs.

~~~
downrightmike
That or mandate tuition costs. Want federal money, you have to cap tuition and
fees. The other thing to keep in mind is that universities have endowments
that they could pull from, but the administrative bloat likes to keep raising
costs and pushes tuition further.

------
sovietmudkipz
This is pretty selfish but every time I see news about student loans I start
to worry about having to pay for other people's student loans.

I spent three years cutting everything out of my life that wasn't necessary so
that I could pay off my $50,000 in loans because I didn't want to have the
debt. It was a Spartan existence indeed.

Now that I've made that sacrifice and come out the other side, it makes me mad
to think that I may have to pay for others to pay off their debts as well. Why
can't they pay it off themselves? No one forced them to take on the loans. Why
is my paycheck being considered for looting?

I would feel taken advantage of too. If I knew I could get someone else to pay
off my student loans, I would have used my resources much differently. I would
have lived more in the moment instead of hunkering down and paying it off.

Like I said; selfish thoughts. But I can't help but feel a sense of injustice
when considering a situation where I have to pay for other debtors student
loans.

~~~
Retric
The people bailed out would be people making the loans not taking the loans.

~~~
bunderbunder
It would be both of them, really.

Right now, under US law, you can't declare bankruptcy from student loans. A
bailout would imply changing that rule so that we can let people with student
debt off of their obligations.

You'd also, natch, be bailing out the people who hold this debt.

I'm really not sure what the path forward is, here. Theoretically, the most
important line of defense against a bad loan being made is that the lender
doesn't want to lose money, and therefore won't make a bad loan in the first
place. This isn't always awesome on its face, because it means that people
don't get to buy things they don't have the money for right now. But it's
really kind of nice. It also protects people from taking on debts they can't
afford, because that translates into default risk. And it protects people from
taking on debt to buy things that are overpriced, because that translates into
collateral risk.

But at some point we decided that being able to get certain kinds of loans
(mortgages and student loans) is very nearly a natural right, because they
give access to things that we associate with prosperity (land ownership and a
postsecondary education). So then the government sets up programs to greatly
reduce the barriers to access to these kinds of loans, by essentially setting
up a whole bunch of special rules and programs that make it easy for lenders
to ignore default risk. And if you don't care about default risk, you'll make
much bigger loans than you would otherwise, which fuels prices getting out of
control.

We saw how that went down with housing. Now we're going to see how that goes
down with student loans. I'm not sure there are any good answers there.
Personally, I _like_ the idea of leaving lenders to sink or swim. They've had
a nice long ride on a gravy train fueled by government largesse, and, if they
failed to contingency plan for the possibility that someone might turn off the
gravy spout, I don't feel particularly bad about that. But the lenders are
financial institutions, and, as we've seen, the financial industry is such a
horrible tangle that it's hard to anticipate the ultimate repercussions of
letting them fail.

But it's also hard to anticipate the repercussions of a bailout - money
doesn't grown on trees, so the funds used to make the bailout need to come
from _somewhere_. When it comes to government intervention on this sort of
thing, though, I'm kind of inclined to take my mother's advice: "It'll never
heal if you don't stop picking at it."

~~~
Retric
Currently the US taxpayer is on the hook for bad loans. My point is, letting
people discharge loans does not require a bailout.

So sure we could discharge loans while also bailing out the people who made
these loans, but again they are different questions. As you say their are long
term issues with the availability and cost of student loans.

I don't have any great answers, but framing things as only two options is
greatly simplifying what we can do.

~~~
toasterlovin
> My point is, letting people discharge loans does not require a bailout.

In reality, changing the bankruptcy rules around student loans will have to be
paired with a bailout of the people holding the loans. Lobbyists will make
sure of that.

------
cletus
I still find the US attitude to college somewhat perplexing (I'm Australian).

Australia had free university education until around ~1990 or so when it
introduced HECS (Higher Education Contribution Scheme), which I believe later
changed to HELP. The idea of this is that any tuition you receive will incur a
cost that will be deducted from your salary (above a certain level) until its
repaid. It has interest. Previously you could get a discount by repaying early
but I'm told that went away.

The key aspects of this system are:

\- You can't student loans for any expenses. This only covers tuition. I think
this is a reform that's needed for the US system.

\- It isn't a loan. If you don't earn an income you don't pay anything.
There's no getting crippled by loan repayments like seems to happen with US
student debt.

\- It's largely impossible for 18 year olds to get into a situation where they
owe hundreds of thousands of dollars (I saw a CNN report on millenials once
that, as one example, had a young woman who worked as a waitress now who
accrued >$100k in debt studying Theatre Arts at NYU).

From working for large US tech companies (in the US) I see a prevailing
attitude that some people who work for these companies feel like they're
underpaid if they can't save up and pay for private college education for each
of their children, which 10-20 years in the future, may well be >$500k _each_
(which is just crazy).

There are actually lots of good options for getting a college education
relatively inexpensively:

\- ROTC

\- Resident state college education. This may mean delaying your start a year
to establish residency but can pay off big time. UT Austin has an excellent CS
program an in-state tuition is quite affordable last time I looked.

\- Stopping when enough is enough. I see a lot of people getting pretty
pointless Masters degrees, for example, which is fine if you can afford it.

\- Starting at cheaper (even community) colleges and transferring later.
You'll miss out on some of the social aspects of the early years of college
but your degree will still say Stanford or whatever.

I wonder if it's not sending the wrong message to your children that they can
go to Yale without paying a cent out of pocket. Like what happens when they
can't provide that for their own children?

College in the US more than Australia seems to be used as an artificial
barrier to entry to a lot of jobs too.

~~~
wgerard
> \- Resident state college education. This may mean delaying your start a
> year to establish residency but can pay off big time. UT Austin has an
> excellent CS program an in-state tuition is quite affordable last time I
> looked.

I was curious about this so I looked it up: Full-time students pay roughly
~$5.3-5.6K per semester, or ~$11K a year [1]. Easy to see how one would
accumulate ~$50K in debt from just tuition expenses alone.

1: [https://utexas.app.box.com/v/ug-
tuition-18-19-long](https://utexas.app.box.com/v/ug-tuition-18-19-long)

------
lordnacho
The pressure to attend university is immense in certain places.

I never thought of doing anything else, and none of my high school classmates
did either. It just wasn't something to contemplate. And that's despite having
many contemporaries who didn't attend university.

Luckily, though I went in blind, relying just on what older people had told me
about the working world, I ended up studying something interesting that got me
a good career. Also quite luckily it cost me barely anything, since I'm
European.

For me the worst thing about the student debt story is that I might have been
born somewhere with just as much pressure, where studying was expensive, and
studied something with no prospect of ever paying back the loan.

And in what sense have people truly decided for themselves? Only in a legal
sense. An 18 year old knows nothing about even what it is they are ignorant
of. How many 18 year olds are going to know how bankruptcy works? How many 18
year olds are going to tell their parents in a convincing way that they are
better off doing a course in plumbing?

The worst thing, though, is the whole education FOMO causes people to not be
educated. You just do what you need to pass the exams. If you find out that
you just need a certain equation, you just memorize that equation, plug in the
numbers during the exam, and forget about how generations of scientists
arrived at the equation. If you find out something isn't going to be examined,
you will stay ignorant of it. And somehow (let's face it, it's obvious) people
know that real life is not going to require you to know things in the way that
exams do.

------
mcguire
There's an issue that nobody seems to discuss here: where you go is at least
as important as that you go for higher education.

The numbers for for-profit colleges are rather dismal: higher costs, higher
student loan rates, lower graduation rates, lower salaries[1]. And in my
personal experience, I've never met anyone with a degree from a for-profit
college that was particularly exceptional.

An anecdote: I know someone who recently graduated from a for-profit college
on a GI bill. Someone miscalculated how much money he had in benefits there,
and when they realized he was out of money, Bam! He graduated. They did have a
requirement for an internship deal, apparently supposed to lead to permanent
employment, but they placed him with a local company repairing industrial
electronics for $10/hr; for someone in his mid-30s with 8 years in the Navy
and several years of experience as an insurance claims adjuster.

I am personally a big fan of higher education. It's the one opportunity in
anyone's life to learn and experience things you cannot get anywhere else, to
meet people who can expand your horizons beyond your specific, small bubble.
I'm also not a big fan of "everyone should get a STEM degree, 'cause that's
where the money is"; I've met too many people in my career who didn't have the
aptitude or interest and it's never led to a particularly pretty result. So, a
purely financial viewpoint does not impress me much.

But even from a financial viewpoint, for-profit institutions are spectacularly
bad.

[1] [https://capseecenter.org/research/by-the-numbers/for-
profit-...](https://capseecenter.org/research/by-the-numbers/for-profit-
college-infographic/)

------
crwalker
If something can't go on, it won't. This crisis will resolve itself when:

* Many colleges go bankrupt

* We are honest with our kids about the learning and signaling consequences of their choices

* Employers loosen their degree filters out of rational self interest

Universities are not _for_ job training. There are much more effective ways to
get job training like apprenticeship.

~~~
coredog64
I'll make the same comment I make in all these threads: Requiring a college
education is the last bastion of socially acceptable racism. If we can break
that, then we have a shot at knocking that third item off the list.

~~~
geggam
Is there a term for using racism in a post online like hitler is to godwin ?

Not everything can solve or be attributed to race. We are all the human race
and the sooner everyone starts thinking like that the better

------
sntax
I really feel like the underlying problem is we expect people to be adverse to
purchases that will be a net loss. Unfortunately, "shopping" for higher
education is extremely confusing and to make matters worse your lender is
guaranteed to be paid. So we have created an environment where people who are
the most vulnerable are being taken advantage of. We need to find a way to
better protect people from making terrible six-figure investments, whether
that is through legislation or education something has to change. Even if
there was a website that scraped data from LinkedIn to show where people from
higher education institutions get hired and what positions they get would
massively help consumers not make bad investments. I would have never paid the
money for my degree knowing what I know now.

~~~
alistairSH
_" shopping" for higher education is extremely confusing_

I'm interested in hearing more of your take on this statement.

From my personal experience, as a first generation immigrant (though of
Western European background), it wasn't overwhelmingly confusing. Sure, there
were lots of options - R1 state schools, Ivies and other top-notch private
schools, secondary state schools, etc. But, once I figured out which category
of schools best suited my talents (in my case, R1 state school, because I was
smart but no clue what I wanted to study), the set of choices was narrowed
substantially.

After that, it was really just a matter of looking at the costs, as in my
limited experience at the time, all the big state schools were mostly
interchangeable, or at least had enough to offer that I didn't fear not
finding something to study and hobbies to pursue.

Staying in state, at the time, was something like $16k/year (UVA, mid-90s).
Leaving the state was roughly double. Pretty much a no-brainer to go to UVA,
VT, or W&M. I ended up at UVA mostly because of ego - at the time, it had the
better all-around reputation. Hind-sight being what it is, I might have
thrived better at W&M, but I hardly failed to thrive (just wasted my first
year partying too hard and not taking academic seriously).

~~~
sntax
It is not the fact of choosing between UVA, Virginia Tech, and William and
Mary. Anyone of those schools is highly likely to give you a return on
investment even if you get a non-stem degree. Why is this? They all have
strong brand recognition. They are very selective; even the least selective of
those three (VT) has an average GPA acceptance of 3.92. [1] It gets confusing
for people who are not the best and the brightest. if you have a 3.0 GPA and
1000 SAT (median scores for high school) you might think it is a good idea to
go to a school like Radford University. [2] Both cost about the same but one
will vastly decrease your chances of making a return on investment. Now it
might not be a bad idea to attend Radford if you plan on staying in southwest
VA and you got a marketable skill. However, there is a large number of people
who go to Radford get a history degree and move back to Richmond Virginia. Now
your six-figure investment is worth about the same as the paper it is printed
on. My parents always told me "It doesn't really matter where you go to school
or what degree you get, you just have to make sure you get a degree!". This
might have been the case at one point, but it is nowhere near the case
anymore.

[1][https://www.collegedata.com/cs/data/college/college_pg01_tmp...](https://www.collegedata.com/cs/data/college/college_pg01_tmpl.jhtml?schoolId=1568)
[2][https://www.collegedata.com/cs/data/college/college_pg01_tmp...](https://www.collegedata.com/cs/data/college/college_pg01_tmpl.jhtml?schoolId=1625)

------
JoeAltmaier
College became a checkbox item long ago because rich, successful people went
to college. Turns out, many of them were rich and successful for other reasons
(class, inheritance, old boy's network).

So, now folks are asking "Why isn't college worth the money?" I would respond,
it was never "worth the money", as it isn't technical school.

Conflate that with, medicine and engineering are still attainable only through
college and its a very confused situation.

------
40acres
I wonder how pragmatic and realistic today's parents (and yes, I think it's
mainly on the parents) and kids are with respect to college.

My family was lower middle class, I used FAFSA and PELL to pay my way through
college. I paid maybe a couple hundred dollars per semester for eligibility. I
also rarely bought textbooks and instead would torrent them, all of these
steps were taken because I knew my parents could not afford college and had
already stretched their wallets to pay for my private high school.

At the end of the day parents need to look at college in a similar way to how
we purchase other things. Everyone would like a Tesla but an Accord will do
for most. Are you really going to hamstring your kids, and possibly yourself
(ParentPlus loans) to send your kids to an out of state, private school w/o
scholarships? Universities and the government share equal blame but at some
point we need to come to certain realizations about college.

------
nothingtodo
All these comments, and not one word about automated HR screenings that drop
your resume unless you have an "advanced degree" or from a "top school". It's
all fine and good to tell people they don't need something, but let's be
honest about what you're doing: preventing those people from being as
competitive as you when they apply to the same jobs.

As long as jobs require degrees, people will keep chasing them because at the
end of the day it's not about knowledge or ability (as the automated
algorithms seems to prove), but about the stamp of degree.

And notice how the post talks about degrees after college? Because that's the
reality of the job market right now, you need more than a college degree or
else you are shit out of luck.

------
anonymous5133
I think this is being caused by many factors:

1\. Schools have failed to utilize technologies which allow quality to be
maintained and costs lowered.

2\. students fail to utilize existing programs which help to reduce the need
to take traditional existing classroom-based college classes, such as, AP
exams or CLEP exams. High schools need to do a better job of telling students
about these programs, especially CLEP exams.

3\. Employers have become obsessed with the traditional degrees being the
signal of high-quality employee skills as a basis to make hiring decisions or
to even give an interview.

~~~
zippidydooda
The average High School Student who can get into a State University usually
doesn't have what it takes to take and get credit for an AP exam
unfortunately.

------
qubax
We think that 18 year olds are too irresponsible to drink alcohol, but they
are wise and responsible enough to take out $50K in student loans. If that
isn't pure evil, I don't know what is.

Adam Smith said debt is slavery for a reason. Can't imagine a just society
saddling so much young people with so much debt at such an early age.

But then again, public utilities are now peddling gambling ads and the US has
never been a just nation like we pretended to be.

------
adreamingsoul
I was only able to afford a few college classed, and instead taught myself
various skillsets and backgrounds. It helps that I have a mind for learning
things on my own. I consider myself fairly successful, and have a respectable
career. However, I do love learning and hope to surround myself with brilliant
minds in the near future. I’m not interested in a degree on a single focus,
but I do see value in working towards a ph.d or a doctorate.

------
mark_l_watson
And then the failing empire, now controlled by special interests, started to
eat its young.

I would bet a lot of money that if our population was surveyed, over 70% would
strongly support dismantling “big business education” and go back to the
system we had 30 years ago.

I am in my 60s, and when I think about the entrapment of our youth in student
loans with false information and promises, it makes me furious.

------
alexpotato
Every time this comes up, I think about this statistic:

You used to be able to work for minimum wage for a summer and afford college
but that is no longer true
([https://www.buzzfeednews.com/article/gregschoofs/how-much-
co...](https://www.buzzfeednews.com/article/gregschoofs/how-much-college-did-
your-summer-job-pay-for))

------
colonelpopcorn
I managed to work my way through a 4 year program at WGU without any debt.
It's been great to be debt free, but the cynic in me wishes I'd have gone to a
more prestigious university and taken on debt because I just know that any
future political candidates are going to get hammered at the polls if student
debt relief or forgiveness isn't one of their main policies.

------
Simulacra
Why don't we stop giving student loans to people who can't pay them back?
Let's apply some actuarial analysis to all of the degrees a school offers.
Based on the expected and realistic salary and job projections, use that to
decide whether or not to give someone a loan. Student debt is a huge problem,
but requiring student fiscal responsibility is even worse.

~~~
EpicEng
Because most of these loans are guaranteed by the fed and no politician is
going to run on a "take away student loans" platform.

------
yhavr
But still, it seems that the choice to "suffer to repay student loans, but
work in the US" is better than "obtain a free/cheap education abroad and miss
your relatives if you can't find a job in the US after it"

edit: "suffer to repay student loans and probably doom your children for even
worse circumstances"

------
csense
> the next generation of graduates could default on their loans

I always thought student loans COULDN'T go into default.

If they just don't pay, the taxpayers will make the loss good. And the
government's able to come after your income and assets for the rest of your
life, regardless of bankruptcy.

Do I not understand how student loans work?

~~~
dlp211
They can go into default, they can't be discharged in bankruptcy.

Default just means not being paid in full and on time.

~~~
dragonwriter
> They can go into default, they can't be discharged in bankruptcy.

Yes, they can, there is just a higher bar than other unsecured debt to do so.

------
hourislate
There needs to be disruption in the whole Education System.

It's a shame in this day and age you still have to pay a fortune for
accreditation through traditional channels and can't really pursue it through
an Online Education at a greatly reduced cost.

I suppose AI will make it all irrelevant in the next 20 years or so anyway.

~~~
dragonwriter
> It's a shame in this day and age you still have to pay a fortune for
> accreditation through traditional channels and can't really pursue it
> through an Online Education at a greatly reduced cost.

There are, in fact, fully accredited and reduced cost online degree-granting
instititutions.

------
fredgrott
What seems to be missed...

1\. We still do not know how to teach B and C students...lectures always are
geared and favor A students.

2\. Most ED loans are to B and C students

3\. Fed sponsor loans ALWAYS act to defund state ed programs by over stressing
the state public university systems

------
SubiculumCode
I've been very lucky to get on a federal program to repay my loans for staying
in research. Or perhaps I can leave research and earn more money. Ahh well, I
still appreciate the 20k they payed off this year.

------
ngngngng
The discussion in most of these comments gets even weirder when you throw BYU
into the mix. Top 100 private school with less than $6000 in tuition and fees.
Why isn't everyone clamoring to go there?

~~~
fetus8
Maybe because of it's tightly coupled religious association??

~~~
ngngngng
Sure, so then we throw virtually every other school in Utah into the mix. Utah
Valley University, University of Utah, Utah State University. Each of these
has comparable tuition and fees to BYU without the religious association. Each
of these should be very affordable with a part time job and a small pell
grant.

It's not just Utah though. If you qualify for in state tuition (just go live
somewhere for a year), Florida State is similar in cost. I assume there are
many other schools scattered around the country that are similar.

So my question remains, why the hell are people attending schools where
tuition and fees are in excess of $40,000 a year? If Dads got that much money
then sure, why not. But knowing you'll have to pay it all back? It doesn't
make sense when there are many options for affordable schools.

------
wpdev_63
wait you don't need to get that college degree <insert liberal arts degree> to
work in barista? Shocker!

Responsible employers should be looking to high out of high school and train
them instead of requiring a undergrad degree. This education for the sake of
education is a cancer.

------
momentmaker
How will all these colleges survive without getting all these ill-educated
students to come to their campuses?

------
francisofascii
Imagine if the Equal Opportunity act was modified to forbid employers from
discriminating based on college education credentials. Then imagine how
employers and students would act differently. Employers would have to find
other ways to determine if employees could do the jobs. Maybe elaborate tests
or prior job experience. Most students would probably would stop going to
college.

------
slenk
I don't know why we keep reading Bloomberg after the Super Micro ordeal. I
feel like they burned any credibility they had.

------
Kephael
College is very inexpensive but you must major in a degree that teaches you
strong technical skills or at a school that signals that you are highly
intelligent and socially adept. Racking up debt with out of state tuition at
some unprestigious state school is a horrific idea. Loans should be priced
according to the true risk presented by the loan recipient. Majoring in CS at
Stanford should be very low risk, majoring in Sociology at Iowa State should
be high risk. Free tuition just provides a job subsidy to professors in
unscientific fields of dubious value. Liberal artists are royally screwed
unless they graduate from Princeton or a similarly notable school.

Most schools should probably just close.

