
The Long Road to the Student Debt Crisis - prostoalex
https://www.wsj.com/articles/the-long-road-to-the-student-debt-crisis-11559923730?mod=rsswn
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tptacek
The statistics in this article aren't especially useful, and could easily have
been made more so by breaking debt down by attainment. Students that leave
postsecondary without a 4-year bachelor's degree on average apparently owe
less than $10k; with a bachelor's, less than $25k; with a graduate degree,
$45k.

Roughly 1/3 of all borrowers drop out, implying (I think?) that the majority
of debt is held by people who complete degrees, a substantial minority of whom
obtain graduate degrees.

If the student debt crisis is about rescuing people for whom college was of no
benefit (for instance, because they attended a for-profit school and didn't
obtain a bachelor's degree --- the overwhelming majority of low and middle SES
quartile students at for-profit colleges do not), the intervention needed to
solve that problem is radically different and less expensive than "forgiving
all student debt".

~~~
rayiner
The last point is key. There are so many options that provide relief for those
who need it most that don’t bail out New York Times journalists who paid
$150,000 for a Columbia English degree or big firm lawyers who paid $250,000
for a Columbia law degree. And given how much of the debt is subject to
income-based repayment, there is also a set of options for bringing relief to
those who don’t qualify to cap their loan payments at 10% of disposable
income.

~~~
seniorivn
There is also a free and fair option, just let people go bancrupt on their
student loans. We've already seen politicians bailing out loans to help their
reach friends, but saying it's all for the people.

Don't let history repeat itself

~~~
tptacek
The problem with allowing people to BK their student loans is that it creates
a perverse incentive. If you BK over a car, it gets repossessed. But nobody
can take your education back. A BK at 22-23 years of age is not a strong
deterrent; you'll still be able to buy a house in your early 30s, which is
when a lot of people plan to do that anyways.

You _can_ make loans dischargeable, but doing so will drastically change who
loans are made available to in the first place.

~~~
dsfyu404ed
For a long time people were allowed to discharge student loans in bankruptcy.
Most people didn't because costs were reasonable and it hit your credit score.

If you suddenly made that allowed again there's be a bunch of initial
bankruptcies because of pent up demand and the market racing toward
equilibrium but it would almost certainly revert to somewhere near the level
it was originally.

~~~
tptacek
Two responses to this (we're recapping a previous thread at this point):

1\. Tuitions were _much_ lower when loans first started to be non-
dischargeable.

2\. The provision to exempt them from bankruptcy was based on concerns that
people were already ruthlessly defaulting on them.

As this article notes: the current disposition of college financing is part of
a package of policy changes geared at drastically expanding access to college,
and that package is generally viewed as being successful on its own terms.

~~~
carlmr
Allowing for bankruptcy discharge would lead to less predatory lending (since
all of a sudden the banks would have an interest in checking credit-
worthiness), and that in turn would lead to universities losing many students
if they don't lower tuition costs to reasonable levels again.

Not allowing defaulting on student loans was a huge driver in why tuitions are
so high without any added value from the universities.

~~~
rayiner
The only real lender of significance in the market is the federal government,
which makes loans without regard to credit worthiness. That policy is not
subject to change for policy and political reasons. What credit check is an 18
year old going to pass for a large unsecured loan? Especially 18 year olds
from disenfranchised groups?

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burke_holland
Interesting that there is no mention here of the drastically inflated number
of administrators in colleges as compared to say 30 years ago.

“literally nobody knows who these people are or what they are doing”

[https://www.forbes.com/sites/carolinesimon/2017/09/05/bureau...](https://www.forbes.com/sites/carolinesimon/2017/09/05/bureaucrats-
and-buildings-the-case-for-why-college-is-so-expensive/)

~~~
bryanlarsen
Teacher salaries are the biggest factor in price increases.
[https://marginalrevolution.com/marginalrevolution/2019/05/bl...](https://marginalrevolution.com/marginalrevolution/2019/05/bloat-
does-not-explain-the-rising-cost-of-education.html)

~~~
SolaceQuantum
This doesn’t work for all Systems. From the UC system for examples,
administrative salaries increased 13x while tenure faculty salaries increased
1.6x, but faculty growth is less then the growth of student body, from
1964-2015.

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ineedasername
The story makes some very good points, but completely misses two other reasons
that tuition costs have risen so much faster than inflation:

1) State aid has dried up considerably. Public colleges used to get a a huge
amount of their budget from the state. However, cutting funding to higher
education has always been more politically palatable when tightening the belt
than other areas. When I was in college, the funding was roughly 50%. Now it's
about %25, and in inflation adjusted dollars is significantly lower than 20
years ago.

2) For at most of the past 20 years, there's been an arms race amount colleges
competing for students. In that pursuit, enormously expensive new facilities
from dorms to rec centers have ballooned capital expenses, covered primarily
by bind issues that have interest to be paid and therefore necessitate higher
tuition. To make ends meet.

These two items, along with easy financing, represent the three legged stool
on which massive tuition and increased and student debt sits.

~~~
jfengel
Any idea where this arms race comes from? Were the colleges holding classes
with empty seats because they couldn't get enough students?

One would like to think that this would allow new schools to materialize that
opt out of that race to the top, though of course the overhead is very high.
I've been watching Signum University, an online-only school, work its way to
accreditation over the past several years, and they're nowhere close. (A big
bolus of cash would probably help; they're trying to do it with only small-
donor donations.)

I feel like college has become not-worth-it in the three decades since my
degree, though unfortunately that's not true: even with the ballooning costs
it's still a net positive. It just seems as if they're raising prices to
absorb as much of that net positive as they can, and in doing so the people on
the left side of the return curve go from positive to negative. Since the
schools get theirs up front, that's pure positive for them.

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jartelt
I understand that one is privileged to some extent to have been able to pay
off student debt. But, I can't help but think it could be problematic to
cancel all student debt and in effect penalize all those who worked hard to
save and pay off their debt.

Only a couple years ago it was advantageous to pay off your student debt
quickly to avoid interest. Now it seems beneficial to pay the monthly minimum
only and hope that the debt gets forgiven by the government at some point...

Does any one know if any of the Democratic candidates have talked about this
issue?

~~~
headcanon
Not based on direct evidence, but based on the candidates' rhetoric and
Democrats' typical platform goals, I'm thinking they will prioritize
forgiveness for low earners, similar to how they limit write-offs for student
loan interest payments to incomes below a threshold (I think it was 80k last
year? I don't remember).

So if you're already in a place to pay it off without struggling, I'm betting
your life won't change that much. I'll just be happy to see my loans gone. If
I end up paying it off in 5 years and find out it all would have been forgiven
regardless, C'est la vie.

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Aaronstotle
I think a lot of the student debt crisis is self-inflicted. No one is forcing
you to attend a 4 year straight from high-school, go to a community college
and then transfer to a state school/4 year. (I spent 3 years at a CC, but I
graduated from a UC and paid off my student loans within a year)

Yes, college is expensive, but there is an existing alternative that everyone
seems to forget about and it boggles my mind.

~~~
jseliger
No one is forced to take out any kind of debt; the issue is that typical debt
is secured by an asset or dischargeable in bankruptcy. If you make severe
mistakes with credit cards, you'll declare bankruptcy and the credit card
companies will suffer. This imposes some market discipline on lenders. Banks
are (ideally) not eager to make mortgages to people who are likely to become
insolvent. Yes, I know about the Great Recession and this was part of the
problem.

Severe student loans can be incurred starting at age 18 and aren't
dischargeable. That's why they're uniquely pernicious. It's typically not
possible to fuck up your financial life for decades via most debts, but it is
with student loans. We don't know ourselves and the future is unpredictable,
and that's why bankruptcy exists. Taking it out of the equation empowers
predatory lenders and institutions.

~~~
DoofusOfDeath
> No one is forced to take out any kind of debt

In practice, I'm not certain this is true. In Massachusetts, a parent can be
forced to pay for his over-18 child's college education:

[https://www.familyneedslaw.com/blog/2019/03/massachusetts-
pa...](https://www.familyneedslaw.com/blog/2019/03/massachusetts-parents-can-
be-ordered-to-pay-college-expenses.shtml)

I'm unclear as to whether or not the court can force a parent to go into debt
to accomplish that.

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omegant
Honest question, why are Universities becoming so expensive? Is because these
credits are available? Was estudying a degree cheaper before the credits?

~~~
katmannthree
Short answer: Because they can.

Longer answer, according to the universities: Because modern students demand
more than just classes, they also want social services (on-site counseling,
bias incident response teams, etc).

Longer answer, according to a cynic: Because universities are more or less
guaranteed the money from the federal government, they've grown to spend the
money on inflated administration. As costs go up the government allows
students to borrow more and more to cover the costs, and universities find
ways to jack up their prices to match the money on the table. While the
government loaning poor students money to better themselves with an education
is a great thing in theory, I think it's what directly lead to the current
situation. I don't want to turn this into a long post against capitalism, but
I think that the unfettered capitalistic worldview we have here in the US is
the root problem.

~~~
bluedino
A project will grow to fill the timeline, and departments will grow to fill
the budget

~~~
hinkley
The bureaucracy is expanding to meet the needs of the expanding bureaucracy.
-Oscar Wilde (And Civ IV)

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mnm1
> After years of projecting big profits from student lending, the federal
> government now acknowledges that taxpayers stand to lose $31.5 billion on
> the program over the next decade, and the losses are growing rapidly.

Most civilized countries offer free or close to free education for their young
population instead of trying to profit off of this segment of the population
that barely knows what it wants out of life. If they can do it, I'm sure we
could. How about bailing out the people for one and ending this for profit
loan system once and for all? How about investing in the future generations of
Americans for once instead of trying to profit from them? Or we could continue
on the path we're on and see just how much worse things get for the masses
here. I wonder just how much they will put up with.

~~~
tlear
Free education only works when you have a selection system where you are
tested and then put where you fit(shoveling dirt, laying bricks, trade school,
college, university).

In US any graduate from HS can go do 4 year degree in “something”. Try that in
Germany or Netherlands.

~~~
de_watcher
Well, if he's not capable to receive that education then why he's trying to
borrow money for something he can't handle?

~~~
tlear
There are pile of problems with this.

1\. Testing 12-14 year olds to decide their lot in life is.. well unreliable.
Not to mention brutal.

2\. In US race card will be played once it is apparent that proportion of
people with different ski color that get free education does not line up with
demogrphic proportions(political suicide)

3\. People WILL game it by hiring tutors to study to test, bribing teachers,
teachers will cheat and give out solutions etc. In Netherlands they have what
amounts to counter-intelligence apparatus to counter this. Good luck
implementing that in all of the States.

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hashberry
Student loans can also be used to pay rent and meals, and living in an urban
center is increasingly expensive. My alma mater is tearing down old dorms and
building pricey new ones instead of making student life as affordable as
possible.

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TYPE_FASTER
Why have the costs for healthcare and higher education been rising so rapidly?
This article seems to blame government money and people wanting higher ed, but
it doesn’t back up any of its claims.

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systematical
So the government increased the cost of college by getting involved?

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Havoc
Unlike houses students can't walk away though? And they're more resilient in a
way - being young & on a upward trajectory.

The whole thing seems a touch more diabolically evil in a way.

