
The Ripple Effects of Rising Student Debt - pcl
http://www.nytimes.com/2014/05/25/business/the-ripple-effects-of-rising-student-debt.html
======
withdavidli
>student loan debt, which cannot be discharged via bankruptcy

Apparently this isn't true anymore:
[http://www.businessweek.com/articles/2014-05-06/you-can-
get-...](http://www.businessweek.com/articles/2014-05-06/you-can-get-student-
loans-forgiven-in-bankruptcy-but-its-far-from-easy)

Personal Opinion:

People lack knowledge of how heavy a burden dept really is. Many of my
classmates decided to go to college around 17-18yo, myself included. Many of
these classmates never worked a full-time job, top students probably not a
part-time job either, because their parents want them to concentrate on
school.

Example: There was an article about an NYU student suing the school because it
was too easy for her to sign $50,000 loans each year.

Students take loan "tests" now before being able to sign for loans, but they
don't really show what this really means. The tests show examples of what a 10
year loan may look like for payment, but really it should show the percentage
of your pay it will cost per month. A $100k-$200k loan can easily take away
50%+/month of net income from a person making $40k-$60k per year (hopefully
your income will rise substantially over time, but most likely your cost of
living too, e.g. apartment/car/family).

Debt is crippling, and if you search online for examples you'll see huge lists
of comments of life stories.

EDIT: Adding this link to display spending power over time for Plumbers vs.
Doctors vs. Teachers: [http://www.bloomberg.com/news/2011-03-09/study-hard-to-
find-...](http://www.bloomberg.com/news/2011-03-09/study-hard-to-find-if-
harvard-pays-off-commentary-by-laurence-kotlikoff.html)

Summary of article: Given everyone lives to 100 years of age, the doctor only
has $423 more per year than a plumber. I know this doesn't account for if
everyone became a plumber right now.

~~~
mercer
It's both fascinating and horrifying to me how high the loans in the USA are,
and the fact that they're 'proper' loans.

Here in The Netherlands, I know quite a few people who didn't get any student
loans because they wanted to avoid _any_ debt at all cost. And the Dutch
student loans are not even 'proper' loans. If you don't have a job, for
example, you pay a monthly minimum of around 50 euro (I think).

Of course, the fact that this is possible here in itself is a nice thing, and
times are changing here too. But if I had lived in the US, I might've never
gone to college just to avoid such staggering debts.

~~~
SilasX
In the US, if you avoid debt at all costs, you get a rude awakening when you
apply even for secured loans because you have "no credit". What's worse, the
"what's my score" sites will tell you you have a high score, even as every
lender thinks you're a hobo!

Yes, I know (now) that there are ways to get out of the catch 22 (get a tiny
limit or secured CC) but it was an unpleasant surprise at the time given that
it's drilled into you that "you should stay away from debt and credit cards"
(which really means CCs _on which you don 't pay in full each month_, and
which you _must_ carry).

Is the Netherlands anything like that on credit?

~~~
mercer
Ah yes, the credit score. I remember a friend explaining that to me when I
visited her in the US. It shocked me!

This does not really exist here, and I'm pretty sure that's the case for most
of Europe. I'd say at the very least most middle-class-and-above children are
strongly imprinted with the concept that debt is bad.

Furthermore, I suspect that at least here in The Netherlands there are pretty
strong regulations on credit-style business ventures and advertising (or
buying with monthly payments).

Basically, our approach is that if you can't pay for something, you shouldn't
buy it. Among my friends, whatever their personal situation, most don't even
have a credit card (and I'm almost thirty!). And when they do, it's usually
specifically for buying stuff that you can't pay for with a debit card.

In my case, for example, I was pretty quick with a credit card because I was
'internet-savvy', but I specifically got a student version that has a -1000
euro limit and that automatically resets to 0 every month.

~~~
SilasX
I find it hard to believe that Dutch lenders don't quantify credit risk into
something that's effectively a "credit score".

Did you mean that there's some _particular_ aspect of credit scoring as it
works in America that doesn't happen in the Netherlands?

~~~
mercer
They do look at your financial situation if you want to make a loan, if that's
what you mean.

I was responding primarily to "In the US, if you avoid debt at all costs, you
get a rude awakening." As far as I can tell, that's not the case in Holland.
It's better to not have any kind of debt if you get a loan. Which seems like a
sensible approach to me.

(but I am not well versed in all this, so if you really want to know I suggest
you ask a Dutchman who has had experience with loans other than big student
loans!)

~~~
SilasX
>I was responding primarily to "In the US, if you avoid debt at all costs, you
get a rude awakening." As far as I can tell, that's not the case in Holland

Alright, but I don't get why you characterized that state as "Ah, the credit
score ... that does not really exist here". (Though I was mainly perplexed at
the implication that they're no counterpart to it -- i.e. a _quantification_
of the credit risk, even if under a different name.)

And for secured loans, they do look at your situation in the US. It's just
that commercial banks use the score as a filter before they bother with that
process. If you have no credit (but are otherwise responsible, etc) then
credit unions will still look at your situation even despite lacking a credit
history.

(It's nevertheless frustrating that official what's-my-score sites will say
you have a high score, even as every lender tells you, "Um, no you don't.")

------
_broody
Traditional education is reaching a breaking point, IMO. Tuition costs keep
rising at a runaway pace, while the prospects delivered by a diploma are
dwindling just as quickly, which is having a catastrophic effect not only on
the lives of graduates but on the economy at large.

Why is the education system so broken, at every level, when people are more
fixated than ever on the importance of getting a degree? And how do we fix it?

------
gjjones
This article strikes home on each point. I often consider the idea of teaching
or starting a business, just to talk myself out of it cause of the risk
against my student loans. I wish it was better conveyed when I was younger
that my decision to go to a private school for a bachelor's would severely
limit my options in life.

Then again I'm still glad I went, even if 6 figure student loans was part of
the result.

------
malvosenior
If you focus on becoming a good developer and start consulting IN HIGH SCHOOL,
you will make bank. Forgo university altogether. I'm surprised more people
don't see this path as at least a viable alternative if not THE way to go.

~~~
peter_l_downs
I took a job as software engineer at a SF-based startup right out of
highschool. 2 years in, I make some serious money and now that my "gap years"
are over it's been interesting to look at what would happen if I continued
working instead of returning to school. I have decided to return to school for
the following reasons:

* School will be more "fun" in a lot of ways than work.

* I will meet many more people of the same age and interests at university than I would meet / have met in the "real world".

* As much as work experience is looked for on a résumé, a diploma from a legitimate institution looks better and will help me find work.

It's a tough decision – thinking about $60k/year tuition is like staring up at
a figurative Mount Everest of impending debt.

~~~
alistairSH
So don't go to a school that charges $60k/year? It never ceases to amaze me
that people think they need to attend expensive private schools, when there
are plenty of top-notch publicly funded schools available.

~~~
hga
Problem is, most of those are no longer "cheap"/inexpensive, and to get the
lower rates you're limited to ones in your state. Just looking at the not so
top notch University of Missouri in my home state, it'll cost a resident
around $20K/year plus transportation expenses, around $35K for a non-resident,
and in general STEM majors cost more due to laboratory fees.

Also note that public schools make no guarantee that there will be space
available in required classes for you to finish in 4 years, and often have
quotas for majors, e.g. per
[https://news.ycombinator.com/item?id=7795041](https://news.ycombinator.com/item?id=7795041)
the University of Washington has 80 CS slots per year, with over 1,500
applicants and a 3.9 GPA required to even be considered.

While I'm not saying they're necessarily worth it, private schools with rare
exceptions guarantee you'll be able to finish in 4 years in the major of your
choice.

~~~
mercer
Would going to a European university be an option? The experience of being in
another culture itself could be immensely valuable.

------
crazy1van
Perhaps this is abnormal, but I found it was totally possible to go to college
in the US debt-free if you 1) Do well in high school, 2) Are willing to go to
an in-state school, and 3) Don't mind working part time.

Dozens of my friends in my senior highschool class went on to do just that.
Good grades got them at least a partial in-state scholarship. Then some part
time work (often just in the summer) made up the difference. The tuition was
fairly low because they stayed in-state. This was in Florida and Georgia in
the early 2000's. Have things really changed that much? Or maybe those states
were just an anomaly.

Frankly, I think in many ways college is overrated. However, getting a degree
with minimal debt in a field with good job prospects still seems like a great
option. However, spending big money to study at a "top" school in a field with
average job prospects seems like a poor financial decision. It is a shame such
a major financial decision is made when people are so young.

~~~
mgibbs63
The HOPE Scholarship (the Georgia in-state scholarship program) still exists,
but since the early 2000's, it has become considerably harder to qualify for.
It used to be as easy as graduating from a public high school in Georgia with
a 3.0 GPA, and would cover all your tuition, up to 15 credit hours per
semester. Once you were in college, I don't believe there were even any GPA
requirements. Today, I think you need a 3.7 GPA to qualify. EDIT: Looks like
you still just need a 3.0, but there are additional 'academic rigor'
requirements on the high school courses you take.

It was a spectacular bargain (and still is, but to fewer students), and paid
for my degree at Georgia Tech, which is a pretty good school. The system is
funded by lottery revenue, though, which brings up some thorny issues. The
majority of people who buy lottery tickets are working class, but the majority
of HOPE recipients are upper-middle class - effectively a bizarre reverse-
welfare program.

In most other states, similar programs don't exist, and even students who are
willing to stay in-state and work while they go to school end up with some
student debt.

------
sitkack
I would think that student loan debt would cause people to more aggressively
negotiate salary increases, which will drive inflation. As professional labor
becomes more expensive, off shoring of high level services will increase (to
offset rising labor pressure).

~~~
nightski
Usually when negotiating salary increases you need some sort of justification.
Having a lot of debt isn't a very good one in my humble opinion. At least I
have never seen it used successfully.

~~~
withdavidli
You're right, more debt is not a good reason for higher salary. Higher salary
is a value proposition. If a candidate can prove they can add substanial value
to a company they can demand a higher salary.

This value proposition is very hard for new grads though. Most come out of
school with little to no work experience, internships included. So it's hard
for them to make this case. Not only can they usually not make the case,
depending on the role, a new employee is not at optimum productivity until
.5-1.5 years on the job. This is one of the main causes of employers always
looking for that 1+ years of experience. The first year is most costly to the
employer in training and risk the employee just taking a job somewhere else.

------
oldspiceman
Why don't US citizens enroll in European universities? It's way cheaper and of
similar standard. Plus there's tons of programs offered in English. Including
Engineering etc.

Some reasons you should: \- you're more attractive because you are foreign \-
you're less fearful of starting your own company because you're not in debt \-
alcohol is dirt cheap and you can legally drink \- you can learn another
language \- you can explore all of europe on weekends because flights in
europe are dirt cheap

The reason people don't: they're scared of doing something different.

~~~
ZanyProgrammer
The reason people don't: They wouldn't be allowed into most European countries
as students. I'm pretty sure the immigration rules wouldn't allow it. And I'm
pretty sure the cost of moving overseas is something that is out of the reach
for all but the most affluent people.

~~~
daemin
I don't think the cost of moving overseas is actually that high, especially
for a student. A plane ticket, a suitcase, and a laptop. I'm pretty sure
those, accommodation, and food would be cheaper than studying at home at an
expensive school.

------
timedoctor
The idea of getting a loan to buy something that you can get for free (top
universities put a lot of their course content online for free) is ridiculous.

It only makes some sense for degrees where the university education is a 100%
prerequisite to a high paying occupation (for example medicine).

In general US consumers go into debt far too easily. For example it's common
place to get a car loan, even though you can't afford a car. In my opinion
this is dangerous to your financial health, much better to buy a lower cost
car for example and avoid a loan. It only makes sense when the car is
necessary for your job and in this case if you can't afford to pay cash for
the car you should buy the lowest cost (relatively reliable) car possible.

~~~
ekimekim
Your mistake here is assuming you're paying for education. You are not. You
are paying for a certificate, saying that you passed certain tests and
achieved certain marks. Education has nothing to do with it.

And unfortunately, many jobs (not just doctors, but simple basic jobs) now
require a degree. Sometimes they don't even care what degree.

