
U.S. student debt: $966B as of Q4, 2012 - Q6T46nT668w6i3m
http://newyorkfed.org/newsevents/mediaadvisory/2013/Lee022813.pdf
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pash
As of last December, there is another repayment option geared toward the
enterprising (or not) Hacker News sort, at least those not yet flush with
cash. The Pay As You Earn option [0] allows you to pay no more than 10% of
your _discretionary_ income, over a twenty-year window. The balance beyond
that will be forgiven.

In most circumstances, you'll end up paying less under this plan than under
other payment plans contingent on income. In fact, if you have no income while
you're starting your startup, you'll owe nothing. This is pretty much always a
better option than getting a forbearance or doing one of the other payment
options [1, 2], at least until you realize your millions.

The qualifying criteria are really the sticking point. Please post your
questions, concerns, tax advice, etc., below. None of this is straightforward,
and I'm sure I have as much to learn about this as the rest of you. ...

0\. [http://studentaid.ed.gov/repay-loans/understand/plans/pay-
as...](http://studentaid.ed.gov/repay-loans/understand/plans/pay-as-you-earn)

1\. Only recent borrowers qualify for this option. If you don't qualify, look
into consolidating your loans through the Dept. of Education, then applying
for the PAYE repayment plan on the consolidated loan.

2\. The NYT has a good summary:
[http://www.nytimes.com/2013/01/01/opinion/relief-for-
student...](http://www.nytimes.com/2013/01/01/opinion/relief-for-student-
borrowers-in-pay-as-you-earn.html)

~~~
esurc
The devil is in the details (the last bullet point on your first link):

> You may have to pay taxes on any loan amount that is forgiven after 20
> years.

Roughly: the more student loan payments are reduced now, the more the borrower
will pay in federal income taxes later.

The unpaid portion of the loans will be accumulating at least some interest
until forgiven. Forgiveness of that remaining balance would (under today's
law) trigger a significant tax event for the borrower.

~~~
jbooth
Like with every kind of income, getting the income and paying 30-40% tax on it
is vastly better than not getting the income.

But yeah, that's a big chunk of money to have to come up with all at once in a
given year.

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OldSchool
The reason for this problem is so transparent it's laughable: easy access to
borrowed money naturally creates inflation in the target market until heavy
borrowing becomes the norm. It happens again and again throughout history.

The only way to be truly on the risk-free side of this one though is to own a
school.

As a principle, I would downsize or mortgage my house before I'd send my
children into the world as debt slaves. For their part, there are plenty of
state-funded schools where tuition is 10K/yr or less.

The whole thing is backwards: these lenders and schools are businesses and
should be marketing and selling you their product, not forcing you to "apply."

If foreigners have the means to pay non-resident costs to attend our public
schools, then I see no problem at all selling them an education. Giving them
grants in lieu of citizens is just bad practice. Lending them money is bad
risk management.

~~~
orofino
This is subjective, but I think you're wrong.

Having debt isn't a bad ting, crippling debt is of course, but I graduated
with over 40k in debt and it forced me learn things like prioritization and
budgeting. It also gives you a sense of urgency about finishing school.

Most parents aren't saving enough for their own retirement as it is. They
should NOT be going further into debt for their kid's college. The kids can
get loans for school, the parents can't get loans for retirement.

Parents should save as much as they reasonably can to help kids through
college, but the child needs to shoulder some of the burden as well.

~~~
OldSchool
I see your point. Students having some 'skin in the game' is very valuable.

I find the rules surrounding the debt far more disturbing than the average
amount carried by graduates, which really only amounts to the cost of one
typical family car. When you read about people falling on hard times and their
debt being tripled by collection agencies with no way out because of
bankruptcy laws, its hard not to view it as one more lobbyist-created
situation that favors the banking industry.

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tomjen3
Part of the problem is that people have gotten the idea that they have to go
to college, but still think they can major in whatever they want.

90% of everything is crap, this applies to degrees as well. Go to uni to
become a doctor, layer, mathematician, programmer, etc. Fine.

Go there to study hotel management, English literature, Womens rights,
Communication?

Except a rip off.

~~~
NoahTheDuke
Haha "Women's Rights"

Glad to know the STEM jerk is going strong here also.

~~~
tomjen3
I meant womens studies.

I don't even care if they take it, I just don't want them to complain that
they then can't get a job using that degree.

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wjnc
That is the next debt crisis coming up. Only difference... normal people don't
get bailouts.

~~~
petercooper
As a non American, is US student debt repayment linked to income? Or is it a
more typical type of debt that could swallow up incomes in the event of
deflation?

Here in the UK, you have to earn over the equivalent of $26k per year to start
paying it back and then it's 9% of your income over that. I believe it is then
written off after 30 years. So the risk of a crisis in this version of the
system is low since the terms are so generous.

~~~
zanny
As a recent CS grad who had around $20k of debt (and 16k of that is now paid
off 9 months later) the terms are not generous. I had to take subsidized
stafford loans each year just to qualify for my state grant, since it was
supposed to be "needs based". My last loan is only 3.5% interest though, so
I'm taking my time on it.

The other poster covers it in greater detail, but after 6 months they expect
payments, and deferring them only lasts so long (and I don't know how long).

And you can't ever get rid of them.

The answer still isn't to bail everyone out. It just perpetuates the problem.
If higher education is to be a for profit business (at least in many cases)
you can't create artificial lending markets like student loans, it just causes
the absurd bubble that has popped up in the US. It should be flat "heres the
cost, go try to get a loan for it" like you would a car or house. When the
government starts handing out free money no questions asked with a repayment
plan, schools just pile that on top of their tuition fees as profit.

It doesn't hurt that we really should be looking to having online
certifications for either free (MIT courses, etc) or extremely low cost. While
the K-12 years also have a function as day care, hopefully adults don't
require that cost, and stuffing them into giant brick buildings often
thousands of miles away for months on end is really inefficient.

~~~
jelveh
I agree that bailouts are not the answer.

The answer is to let these loans default. That's how the lending system should
work. No bailouts, but simple defaults.

You as a lender are responsible for factoring in the probability of a default.
If you haven't - sucks to be you. Same goes for government loans, e.g. you
create an institutionalized Banking system (like the Federal Direct Student
loans).

And if you survive the coming mass default
([http://www.zerohedge.com/news/2013-02-28/delinquencies-
stude...](http://www.zerohedge.com/news/2013-02-28/delinquencies-student-
loans-surpass-those-credit-card-debt)) - without gov. bailouts - you'll have
learned a valuable lesson on lending: Don't give out ridiculous loans on
ridiculous terms to people who can't afford them. And rest assured that the
education system will find a way to adapt - probably by making education a lot
cheaper again.

~~~
B0Z
The problem with your solution is that the majority of student loans are
government insured Stafford loans and a "defaulted" loan is still paid back to
the lender for full principle by the American taxpayer. Support for this
solution would be miniscule.

In an aside, loans made to college kids to get a quality education is not a
ridiculous loan on ridiculous terms to people who can't afford them.

~~~
jelveh
I believe the American Taxpayer will have to pay for this either way, the
choice is between effectively destroying the lives of those that default or
giving them a fighting chance.

> "In an aside, loans made to college kids to get a quality education is not a
> ridiculous loan on ridiculous terms to people who can't afford them."

I'd like to disagree with you and I believe that a default rate of > 13% (and
rising sharply - [http://www.ed.gov/news/press-releases/first-official-
three-y...](http://www.ed.gov/news/press-releases/first-official-three-year-
student-loan-default-rates-published)) supports my statement.

~~~
zanny
It doesn't hurt that (at least for me) the ONLY reason I went to college was
for the degree saying CS. I had been programming for years, wrote some WoW
addons, and was bored out of my mind for 3 years straight taking lectures on
things I could have easily read in textbooks or even off wikipedia. But the
number of job opportunities when you have BS of CS on your resume are just
orders of magnitude larger.

 _That_ is colossally stupid. We need a better way to certify people for
things than wasting years and tens of thousands of their dollars on this
nonsense.

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jacquesm
This could start some reverse brain-drain. Get education at a top flight
university in the US, rack up student debt like there is no tomorrow. Then
leave the US, move to another continent and use your prestigious title to out-
compete the locals while you leave your debt unpaid. Highly unethical (well,
maybe not so highly, student debt is a pretty questionable concept to begin
with), but definitely not more so than those that study in poorer countries
which they leave behind the moment they have a title giving them access to
employment abroad.

~~~
InclinedPlane
Unlikely. If someone can easily find a high paying job overseas with their
education they can do the same in the US, debt problem solved.

One of the biggest problems is that student debt is so easy to acquire. It
makes it easier for people to complete college who aren't as serious about it
and who don't have a firm notion of how they will make money afterward. It
also makes it easier for colleges to raise tuition (as they've done). Classic
bubble behavior.

The real problem is that the low quality of K-12 education has forced a lot of
employers to require college degrees as a prerequisite, not because the job is
dependent on the specifics of the degree but because it's the easiest way to
ensure literacy and so forth.

~~~
vellum
If employers are just using a college degree as a signaling mechanism for
basic skills, they should just ask for high school GPA and SAT score. Those
are the primary criteria colleges use for admissions.

~~~
randomdata
I expect there are considerably more people who fit the necessary criteria to
attend college than who end up as graduates. When you are trying to filter
applicants, you usually want to reduce your set, not increase it. Even
filtering on college graduates is starting to be less effective due to
increasing rates of output from the colleges. In the technology field in
particular, we've started to become more interested in hobbies because fewer
people have relevant hobbies than degrees.

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josscrowcroft
This is absolutely brutal... given that many Americans I know have come out
after 4 years (NB: it's standard 3 here in UK) with a degree in
God–knows–what, with no idea what to do or where to go, and have ended up
effectively retraining as soon as they start their first (often
degree–unrelated) job.

This may not apply for e.g. doctors, lawyers, and such – but I'm convinced a
University–grade education can be had for far less (though a large investment
still required) outside of the for–profit institutions.

I'm just waiting for someone to come along and prove it... and for society to
accept it (which would close the pay gap).

~~~
maxerickson
Most degrees in the U.S. are earned at public universities and colleges. Those
are not for profit institutions.

From the pdf, a majority of borrowers owe less than $25,000. Less than 15% of
borrowers owe more than $50,000. I'm sure that the larger debts skew towards
younger people that have not made very many payments, but those numbers hardly
paint the picture of a crisis. There's "only" about 6 million people with
enormous debts.

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timme
"U.S. student debt market cap reaches $966B, stakeholders mostly satisfied"

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Tycho
If you throw private debt and public spending in together, does the US have
more debt due to education than other western countries? (eg. in Britain the
state largely subsidises higher education but then you pay taxes or your
government borrows to cover the cost)

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zwieback
The Atlantic ran "The Myth of the Student Loan Crisis" recently:

[http://www.theatlantic.com/magazine/archive/2013/03/myth-
stu...](http://www.theatlantic.com/magazine/archive/2013/03/myth-student-loan-
crisis/309231/)

~~~
maxerickson
Looks like an older release of this data.

(the numbers for chart 3 correspond with the Q3 2011 chart on this page:
[http://libertystreeteconomics.newyorkfed.org/2012/03/grading...](http://libertystreeteconomics.newyorkfed.org/2012/03/grading-
student-loans.html) )

It's unfortunate that the Atlantic post uses the term "Indebted Students" for
their chart, the data clearly covers all holders of student loan debt (many of
whom will be happy to identify themselves as former students).

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cryowaffle
More people invested in education, more people have debt to pay.

