
Student-Loan Debt Is Crushing Millennials - koolhead17
https://www.bloomberg.com/opinion/articles/2018-11-02/student-loan-debt-hobbles-next-generation-of-u-s-workers
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skh
Often times when student loans come up people blame exclusively the borrower.
We should keep in mind that in a properly functioning lending market both the
borrower and lender take on risk. The lender should not left out of the
equation on who to blame. Both parties are at fault. But we don’t have a
properly function student loan industry. Lenders assume very little risk in
this market but they should not be absolved of blame or have less outrage
directed at them.

~~~
Judgmentality
I agree. I feel like most of the problem would be solved by allowing student
debt to be erased by declaring bankruptcy. It's absurd that isn't the case.

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YinglingLight
What's absurd about that? The bank has no salvageable assets to claim. They
can't claim 4 years of European Literature from your mind.

~~~
Jtsummers
You can wipe out medical loans, which also have no assets to claim, with
bankruptcy. Or do you think we need to make _Repo Men_ a reality?

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maverick2007
Student loans always did feel kind of predatory to me. We're asking 17 or 18
year olds whose brains haven't fully developed the ability to prioritize long
term consequences to take on 10s or 100s of thousands of dollars in debt when
in many cases, they don't even know their path through college (major etc).

Now don't get me wrong, I don't have some sort of magic plan to fix this
(maybe allow them to declare bankruptcy would be a start?) but the whole
industry just felt a little predatory to me.

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dontJudge
> bankruptcy would be a start?

Yes. This is the start and the end. Bankruptcy will stop lenders from making
predatory loans. It puts risk on both sides.

Tuition costs will naturally (and quickly) drop. Because there will be fewer
people able to pay a crazy loan fueled price without a crazy loan given to
them.

~~~
CPLX
Maybe. The other option is that higher education will just be for the global
rich. It’s a myth that markets need everyone, in fact it’s a core tenet of
modern economics that markets can hum along just fine while excluding a large
class of people, with no incentive to bring them into the fold.

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esotericn
The normalisation of lending is a huge issue in general.

There's a pervasive idea that being able to actually afford things is
abnormal. That everyone should just take a loan out for education. For a car.
For a house. For a cellphone.

Yes, there are benefits to being able to get things 'earlier' than otherwise
would be possible. And if everything goes right, the situation a borrower is
in at the end of a loan may be better than had they not taken it.

But the actual result of this seems to be that, for example, ~everyone in
Britain is tied into full-time employment to pay off various creditors.

It's commonly posted on here that the average American has savings amounting
to effectively a bag of crisps.

That's the obvious result if you use every available bit of income, even if
it's "investing" for a future that never comes.

~~~
clairity
it’s very reasonable to take out a loan for an income producing asset (like
education), as long as the expected return is greater than the cost of the
loan.

but those sensible loans have also normalized loans for non-income producing
assets, and that’s where it’s better to be able to pay up-front (unless you
get an interest rate below inflation or the fed rate).

~~~
esotericn
The variance is more important than the EV.

An individual human is N=1. It's a single trial. You only live once. ;)

An example would be taking out a mortgage. The highest EV is generally
mortgaging yourself to the hilt. But in various circumstances, you'll then
lose everything.

Oh, and during the period you've basically given yourself a guaranteed annual
cost you can't discharge without potentially taking huge losses on a house.
(In the student loan example, you stay for the period, or you get no fancy bit
of paper at all).

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clairity
yes, i've assumed a functioning market where the interest rate correctly
accounts for risk, but that does mean a small but non-zero chance of loss.

but simply being alive is risky; there are no guarantees in life.

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aglavine
As a foreigner I don't get it. Why are students allowed to get a debt that
they can't pay. Why they take it?

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empath75
You're told from the day you start school that if you don't go to college,
you're not going to 'make it'. There aren't enough scholarships to go around.
So people will pay literally anything. And since they can't discharge the debt
in bankruptcy, lenders will throw money at them.

~~~
squirrelicus
Lenders are also required by the feds to throw money at them. They don't have
a choice.

Cost of money went dramatically down, so tuition inflated something like 4x

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_ah
There an interesting argument to be made around non-guaranteed loans with
rates dependent on course of study. Want a degree in medicine? Enjoy your 3%
loan since you'll probably be able to pay it back. Social Sciences? Get ready
for 20% interest to compensate for a high default rate. Interest rates are an
important signalling mechanism and could help stear students into educational
fields with greater economic demand.

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exabrial
If creditors were allowed to discriminate based on risk factors [probably
grades, attendance, degree field] we'd never be in this situation.

But, since these are government backed loans, people are pretty much
guaranteed to be funded, no matter their risk factors, are and the taxpayers
are going to foot the bill when they default.

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epx
Student debt plus the skyrocket price of real estate worldwide is killing this
generation. Low interest means no retirement, also. How lucky I was to be able
to save money in the 90s. Worried about my kid, though.

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mfringel
I feel like banks _and_ students should get a choice. A couple of assertions:

A) Interest represents risk as well as the time-value of money

B) A non-dischargeable loan is risk free to the lender.

Given those, there should be two products:

1) Offering a loan dischargeable in bankruptcy, at whatever rate the market
will bear.

2) Offering a non-dischargeable loan, with interest capped at the current rate
for a 10-Year Treasury Note.

If there's no risk, a bank doesn't get to add it in, and the money is cheap
enough that the student can pay it back.

If there's risk, a bank gets to charge whatever they can, and a student has
recourse to bankruptcy.

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randyrand
It'll be a good learning experience for the next generation.

~~~
basch
we are on the next generation. there are people just escaping crushing debt
ready to put kids into college. this didnt just start.

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abathur
There are too many perverse incentives in the system; the incentives need to
be realigned.

The amount of money coming from students incentivizes a university to provide
worse education to more students.

Easy loan money discourages discernment all along the pipeline--at
universities, lenders, students, parents...

~~~
sjg007
The expansion of loans came because state governments cut funding to their
universities and colleges.

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yhavr
Why don't people move to countries with cheaper/free education then?

Two major possibilities come to my mind:

\- US employers don't accept non-US diplomas.

\- Studying in the US gives you networking opportunities. If you come back
after Europe, you don't have enough connections to compete with local
graduates.

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sjg007
I did.. went to college in the UK. Germany has free University too.. US
employers accept the non-US diplomas.

However, the networking issue may be a thing.. The real networking though is
in sororities and fraternities I think. Or those secret societies... Then
again you can always do an MBA.. ;)

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kisstheblade
The figure 8% of GDP sounded mind boggling. But apparently it's true.

Quoth the wiki: "Approximately 43 million have student loans, with an average
balance of $30,000. In 2017, average student loan debt reached $39, 400, an
increase of 6% compared to 2016. Americans owe more than $1.48 trillion (44
million borrowers) which is roughly $620 billion more than the overall credit
card debt in the country."

Just to compare to a communist I mean socialist country (Finland in this
example), where we had an article about the massive increase in student loans
(doubled in the last 10 years).

400 000 people with loans totalling 3 billion (about 7600eur per person). To
scale that with the population of the US so about 60x we get the number 180
billion vs. 1480 billion.

Man you have it tough there :) Good thing that you all will be multi
billionaires (or so everyone apparently thinks when voting) so no need for tax
reform or any other kind of communist/socialist crap :)

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purplezooey
People aged 18-29 vote at a rate of _twenty percent_. Ain't nothing going to
change for them, ever.

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MaupitiBlue
Why do we encourage a group to vote who remind us daily about their inability
to survey their options and make good decisions?

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jdormit
I am so tired of the "Millennials are lazy and make bad decisions" narrative.
You can't make blanket statements about an entire generation. Please stop.

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codyb
Yea that's a crazy sentiment considering who encourages these young people to
go to college (their parents, primarily) and without considering the
absolutely unbelieavable increases in college tuition costs with no
discernible benefit to the attendees (while Professors become adjunct and paid
less).

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thrower123
There are just so many poor bastards that spent lots of money on useless
degrees.

It is kind of a problem in the marriage market, because more women go to
college and end up with massive college debt, which makes them financially
unattractive.

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thrower123
I am curious why this is a hugely unpopular fact.

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jimktrains2
It's more the not-even-veiled misogyny than the statement about the relative
worth of degrees that caused my down vote.

Also, most/all of this generation are told that it doesn't matter what your
degree is in, just that you get a degree. That idea combined with some generic
distain for trades is what drives kids to college regardless of cost. Men are
also taking out loans.

We need to respect trades and respect that not everyone wants or needs to
spend 4 more years in school.

We also need to stop being misogynistic, but that should go without saying.

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LyndsySimon
Is it necessarily misogynistic, though?

At the population level, women’s degrees are worth less than men’s because
women more often exit the job market to raise children. If someone wants to do
that - and I 100% stand behind that being a valid and important decision, for
either sex - then college debt would be a very poor financial decision.

I’m not convinced it’s a systemic problem, but it would be interesting to see
default rates broken down by gender.

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jimktrains2
The comment was, yes. First, it isn't a problem that is specific to women in
any way, shape, or form. Second, it paints women as only existing to find a
mate, and this is hampering that. Why should women be singled out in this?
They should be able to explore their intellectual side as well.

