
U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt - umedzacharia
http://financeography.com/us-citizens-hold-about-13-trillion-student-loan-debt/
======
skwosh
There seems to be a strong sentiment in this thread that the only value
provided by education is the contribution to career (e.g. that loans should
only be provided for financially viable courses, that studying arts is as
useful to one's career as studying finger painting, etc).

This just seems _so_ wrong.

Optimising for vocational training means you're effectively tuning out the
abstract arts and sciences and... oh, the humanities. These fields don't
usually/directly translate into a financial success, but they broaden our
perspective and deepen our experience. And in doing so provide the tools and
language to more effectively analyse and engage with human culture.

And to a certain extent, "true" art is antithetical to capitalism, in a
similar way that "true" journalism is antithetical to surveillance
(honesty/transparency vs main-stream popularity), and I'd argue equally as
important. For that reason these fields _absolutely_ should be subsidised,
otherwise art becomes about marketing, journalism becomes about propaganda,
and science becomes about start-ups...

~~~
Lazare
Okay, but how does that translate into policy?

Fact 1: Education in the US is very expensive, in large part because the ready
availability of loans removes most downwards pressure on prices.

Fact 2: If you are loaned money to obtain a degree which is not economically
valued then you will not be able to pay it back.

Fact 3: If you loan people money without expecting people to pay it back, then
it's not a loan, it's a grant.

Fact 4: If you offer grants to high school graduates to take non-economically
values classes, a lot of them will do so. This pushes up the cost of the
education, and pushes down the wages graduates will make, excerbating the
problem.

> For that reason these fields absolutely should be subsidised

Perhaps. But in which case by how much, by whom, and in what fashion? Because
offhand offering free arts degrees sounds like one of the worst possible ways
you could subsidise art as a field, and one of the best ways you can cause a
lot of harm to young people while enriching the existing education
institutions and not really advancing art at all.

Mind you...

> otherwise art becomes about marketing, journalism becomes about propaganda,
> and science becomes about start-ups...

Artists, journalists, and scientists have always had to earn a living. To the
best of my knowledge, there was no "golden age". We've never subsidized
artists (or scientists, or journalists) in the way you say we should; the
future you're afraid of "becoming" is our present and past.

~~~
JulianMorrison
Basic income. Free tuition. An outright grant, no repayments. Literally zero
barriers except ability for anyone, for any level of academic achievement in
anything. Result: a culture with a lot more understanding of the real world,
and the preservation of human and humane values, rather than a laser focus on
the hand-to-mouth of Jobs Right Now.

~~~
JustSomeNobody
If we have basic income, why do we need to be educated at all? Just stay home
and live minimally.

~~~
Fargren
Because self-actualization is a human need and for a lot of people education
is a means for that. Because some of us enjoy creating things that are of
value to others. Because life is more than survival, basically.

~~~
exclusiv
You may be right on some, but if it was a good idea you would have said most.

~~~
Fargren
Are we talking about UBI, or about education? Because if it's UBI, what I
mentioned was just one of the mechanisms by which it could work. But I
honestly don't know if it would. I suspect it would, but we can't know without
more research and tests. Human behaviour is too complex to model a priori.

------
jazzyk
This is another example of the law of unintended consequences.

While the idea of helping people become more educated is obviously beneficial
to both individuals and the society as a whole, government loans - which are
supposed to "help" \- are a huge factor fueling ever-raising costs. The loans,
in effect, subsidize the higher-education complex, rather than students.

Many of us have been brainwashed to think that higher education _has_ to cost
a lot of money. But it need not: all that great education requires are wise,
passionate teachers and a bit of infrastructure: a whiteboard, a few books,
and a laptop computer (with a couple of outliers).

We don't need football/hockey teams with coaches paid $3-4M/year. We don't
need armies of "Deans of Diversity & Inclusion" (and other phony
administrative positions), who make $400K/year, we don't need manicured lawns
and Olympics-quality sports facilities (these salaries are from the Univ of
California - a state school!)

If a good private university cost < $20K/year and a state university < $10K,
we would not have endless discussions wrt who should pay, who should study
what, etc.

~~~
lordCarbonFiber
I see this sentiment a lot, and I feel like you fundamentally misunderstand
what is actually happening at universities. Discounting athletics, which in
some places are revenue neutral and can be counted as marketing/local cultural
artifact depending on who you talk to, the "wise passionate teachers" you
praise so aren't there to teach idiot undergrads. Instead, they're hired to do
research with the teaching as essentially a subset of that in most cases. Pure
research, especially in a political climate that's increasingly anti-
intellectual and anti science, is expensive and that cost gets offloaded to
incoming students since the hard requirement for a college degree for many
professional jobs creates inelastic demand.

The "phony administrative positions", lawns, and student facilties you dismiss
as pork are the school's way of competing for the piles of grant money
replacement known as undergrads.

Then further more, prices are already in the ball park of your supposed ideal.
An instate student can go to a school like Georgia Tech (ranked 5 or so in
engineering nationally depending on the year) for 12k before scholarships,
essentially free if they don't piss away their grades. Private top tier
schools cost more, but tend to offer more scholarships and grants so that's
harder to compare between institutions. It's not that schools are expensive,
it's that students are choosing to not go to the inexpensive schools, usually
to get out of their state, or to be in an institution that specializes in
their major, or go someplace with better student institutions.

US research is what makes our schools the top in the world, and the actual
education gained from an undergrad degree isn't the drive for most people.
It's the networking, the exposure, and the certification, none of which can be
duplicated in a dinky classroom with a whiteboard and an underpaid teacher.
Just look at American High Schools if you want to see how that turns out.

~~~
digler999
> the school's way of competing for the piles of grant money replacement known
> as undergrads.

I say it's a consequence of their windfall profits from 3-5% yearly tuition
increases. Most institutions have "use-it-or-lose-it" budgets. Their
accountants can only be so clever in finding ways to spend it, lest it pile up
and get released on a state budget report. Then everyone would scream "Why
does UXY have a $50mil surplus when they just increased tuition!".

If they wanted to actually compete, they would _lower_ prices. Thats what
attracts buyers.

~~~
ska

      If they wanted to actually compete, they would lower prices. Thats what attracts buyers.
    

That is a dangerously oversimplified view of how markets work. Buyers are
attracted by a broad range of factors, only one of which is price.

~~~
wonder_er
> That is a dangerously oversimplified view of how markets work.

Because university is so expensive, we're told that more things matter than
just price.

Buyers are obviously attracted to more than low prices, but some buyers are
highly price-sensitive. So, we should let them find something that works for
them.

~~~
ska
There already is a huge range in the cost of university, so what you are
describing should already be in effect. Do you have evidence to the contrary?

(FWIW I also think that it is too expensive for various reasons, but also that
it is too naive to consider only price here)

------
toomanybeersies
Every time I read articles about student loans in the USA, the options are
always presented as either the current state, or free tuition.

Why are interest free student loans never floated as an option? Here in New
Zealand, our student loans are provided by the government and are interest
free as long as we reside in New Zealand.

It means that people who don't do tertiary education, or who do a trade, don't
subsidise those who go to university. It also means that there's a
disincentive to go to university if you don't need to, which I think is a good
thing, however everyone is able to go to university if they want to/need to,
without worrying about how it's being paid for.

Our student loans are also paid off proportional to our income, I think at a
rate of around 8% (and no repayments required if you earn less than $19k per
year). This means that you only pay what you can, it's essentially another
tax, rather than in the USA where you get people struggling to make payments
on their student loan.

Obviously, we also have the advantage of cheaper tuition, although it is
rising. It costs around NZ$7,000 (~US$5,000) per year to go to university,
it's not cheap, but it's not cripplingly expensive.

~~~
rahimnathwani
"Why are interest free student loans never floated as an option?"

Imagine what would happen if the US government made student loans interest
free. Who would gain, and who would lose?

(1) Students could afford to take out larger loans (as the repayments would be
more affordable with 0% interest vs. 4.66% interest)

(2) As a result of (1) colleges could charge higher tuition fees, without
reducing the number of students would could afford to pay

(3) The government would pay interest to the banks (interest that's paid by
students under the current system).

Based on what we've seen in the past, increasing access to credit for students
mostly benefits colleges. Students end up paying the same monthly payments.
Just like how lower interest rates make house prices go up.

This is indeed a sad situation. I'm generally in favour of free-market
solutions, but most 18-year-olds don't have sufficient information or ability
to act as a rational market participant. So the situation in the UK, where
undergraduate education is mostly funded by the government, and prices are
centrally capped, seems much better for students.

~~~
laughfactory
You're right on the money. In fact, I'd argue that almost no one is smart
enough (or wise enough) to only borrow what they really need. I went to
college when I was 30. I thought I was smart. I knew that new graduates
typically make, maybe, $40K. Yet, I signed up for the full boat...taking every
last cent they'd loan me. Consequently, my wife and I are now $250K in debt--
and have just bachelor's degrees (plus incomplete master's degrees). Sigh. So
much for being so smart.

Basically, I've come to the conclusion that college is not for all. We would
be wise to get behind technical schools, and community colleges, and save the
university for those pursuing subjects like medicine, science, math, law, etc.
At a minimum we should change the paradigm of college--from being an
"experience" (parties, socializing, sports), to academics. Getting rid of
school sponsored sports would vastly change the perception of college. Plus,
we should make it harder to graduate. Require a 3.0, and have controls in
place to ensure grades don't inflate to enable everyone to achieve the new
minimum. Basically, college should be 100% for learning. Sure, you'll still
have friends, go to the occasional party, but on the whole you're only there
to learn and do things you couldn't learn or do elsewhere. Right now it's
almost day care for 20-somethings. This would also necessitate dropping easy
programs and majors. Not that there isn't a place for the arts, but is a four
year degree in English or Art History really a good idea?

But yeah, I've noticed the same thing: the more we incentivize people to go to
college by way of grants and loans, the more expensive it gets. When was
college cheapest? When there was virtually no aid/loans available to anyone,
and a much smaller percentage of people went to college.

~~~
chronic6l
> Basically, I've come to the conclusion that college is not for all.

Of course college is not for all. It is not something everyone just "does"
because of "jobs". High schoolers and college students feel entitled. The vast
majority should not be in college nor do they need a college education. If you
are an 18-20 year old and cannot see this, then you sure as hell should not be
in college.

Intellectual exploration? Community college is good enough. Parents taking
$40K/year loans for tuition/rent for your private or flagship state
university? Majoring in humanities? Ha. Go ask those graduates if college was
worth it.

~~~
aninhumer
Well sure, it's easy to say that in hindsight, but that's not what these
students were told growing up.

A generation was told that if they got into university and did well, they'd
get much better jobs and be set for life. And it's easy to understand why,
because this was true for their parents' generation. Educated employees were
in much shorter supply, and thus in a much better position to capture the
increased wealth of a booming economy.

Is it any wonder people feel entitled when they were told constantly that they
would be rewarded for what they were doing?

------
charlieflowers
This is so obviously a scam that I don't see how it can hold up. Tuition has
gone to sky high levels, and who is getting that money?

Not the professors, let's get real. They have probably gotten sweet raises,
but nowhere near the growth rate of tuition.

The armies of "administrators" are getting huge salaries, but the main point
of the whole bubble is that it is a great way to proactively enslave a whole
new generation before they even have a chance.

It's so obviously a "sold my soul to the company store" situation that I can't
believe everyone doesn't see through it right away.

~~~
nicksergeant
They see through it. They just know they have no other option. Educators raise
rates because they can, students pay the rates because they have to. It's the
same problem we have in healthcare.

Until employers start scrutinizing education in terms other than "No degree?
No thanks.", then we will continue to have this problem, in my opinion.

~~~
aggie
Many students pay way more than they have to. I graduated from a top-10 public
school (in-state) after transferring from community college and my total bill
was about $35k. That's not nothing, but also not a ball-and-chain six-figure
mark that some people accrue.

There are better options than a lot of people have taken. To me the solution
has to involve better financial and career counseling for high school
graduates.

~~~
visarga
Natural selection at work. Some make the wrong choice to take too much debt.

~~~
giardini
Precisely! Visarga is bold enough to speak the obvious truth!

Problem is many, if not most, incoming students are unable to understand the
financial ramifications of student loans. This does not bode well for their
futures, especially in technical fields.

David Letterman once joked that "The lotto is a tax you pay for not paying
attention in math class." One might say the same about college student loans.

~~~
matwood
As an aside, your lotto comment made me think of expected value (EV) and
poker. At some point the pot of a lotto can become large enough where the EV
demands you buy a ticket. Taxes I think make this number almost impossible to
reach though.

------
Keverw
I think the solution is ending loans for college. I don't think an 18-year-old
with no assets, or even a stable job or no job at all should be given that
much money for college. No bank would give them a loan for a house. At least
you can foreclose on a house and take it back. You can't take back someone's
education.

Plus every time the department of education gives out more money, colleges
raise prices.

Imagine how much a television would cost if the government said everyone must
have a television. They're older people who tell me back in their day they
could work at a restaurant and pay for college debt free. Get the government
out of the student loan business and let the free market decide.

If no money is being printed for students to go to colleges, fewer people will
go to college and therefore the schools will be forced to compete for
student's business. Therefore college will be much more affordable for the
people who wish to go.

I totally agree with our President-Elect about getting rid of the DoE, along
with Common core. Let things be up to the states.

~~~
youdounderstand
That just means your parents wealth will dictate your future even more.

~~~
Keverw
What does parent wealth have to do with it? I watched this documentary years
ago.
[https://www.youtube.com/watch?v=kC_RYgkkmcM](https://www.youtube.com/watch?v=kC_RYgkkmcM)
I totally agree with this film.

Apparently back in the old days you could work a part time job, and pay for
college at night debt free. If the gov keeps handing out loans, then what
incentive do schools have to keep their prices low and compete with each
other?

Oh and then the presidents of some colleges are paid more than the president
of the United States. I guess appointing 4,000 people, managing the military,
a bunch of departments across the country, etc is easier than managing a bunch
of kids by their logic. Oh and don't forget we gotta build a nice stadium so I
can put my name on it too!

~~~
75j
> _Apparently back in the old days you could work a part time job_

Even if that was true, it's not the old days anymore. The college I went to is
now at 50,000$+ a year with compulsory room and board. Try paying that off
with a part-time job and still competing well with your rich peers.

No matter what, it's an enormous advantage to not have to work while in
college. I know I wouldn't have done as well if I was working simultaneously,
since I was still stressed out as is.

~~~
umanwizard
Tuition at the college I went to was about $8000 a year. I graduated in 2013.
What did the extra several of tens of thousands buy you?

~~~
75j
It was one of the the few smaller colleges with a linguistics department, so
there's that. I had small class sizes and good, well-known professors, but the
main reason is because I was 18 and I was just expected to go to a college
like that. I personally didn't want to go to college at all, but it wasn't an
option, and my parents fortunately had the money to cover everything. I got a
national merit scholarship which knocked about 20,000$ off the price tag (and
I contributed ~3000$ a year), but still, way too pricey. Many of my friends
took out huge loans to go there. If I had the choice I would've lived abroad
for a few years and then went to a state college.

------
conanbatt
Speaking from a purely market-driven position, the Student Loan Debt market
has one issue that prevents colleges from not raising tuition prices: its the
incapacity to default on loans.

Its obvious a huge part of the loans are used for careers that will never make
its money back, and the loans only collateral are the person itself(not his
parents assets). So if someone had an arts degree that cost him 150k, and
never made that money, he should be able to default on that loan. As he does
that, colleges have a strong incentive to keep tuition matched with the income
produced by that degree.

My understanding is that college loans have a special protection by the
government that makes them undefaultable. Dont subsidy college loans! Dont
take more money from all(including under represented poor people) to put it in
the pockets of colleges. Just make the loans defaultable, and you will see
such a massive movement of defaults that colleges will never put unpayable
debt ever again.

~~~
andorov
What if the schools were required to underwrite the loans on behalf of each
student? Incentives would be more in line.

~~~
conanbatt
Im not a policy expert, but I advocate for making things simpler. The capacity
to default already exists and will always exist. Devise a new specific
mechanism to offset another specific mechanism is like a patch to solve a
patch on a bug.

------
krisroadruck
I'm curious why we treat student loan debt as being special. We don't make a
huge deal out of people taking on other debt and then being unable to pay for
it. I think probably if anything, what we should have are better controls for
what types of degrees you are allowed to take a loan out for. If your degree
of choice is unlikely to yield the kind of return that will pay for it, then
you should be required to save up for it, rather than getting a loan, just
like there are qualifications for other loans, like auto or mortgages which
look at both the value of the asset vs its sale price, and your ability to
pay. If some kid takes out $100K in debt to pay for a degree in finger
painting how is that anyone but the borrowers (and possibly the bank who
approved it) fault?

TL;DR - When handing out student loans, we should consider aptitude (how
likely is the person to graduate) & the career potential of the degree as
qualifiers.

~~~
wernercd
> Why we treat student loan debt debt as being different

Where is the collateral? You buy a house, don't pay... you lose the house.

You buy an education, don't pay... you... lose the education?

No bank is going to give money for degrees without a realistic change of
getting paid back. They have no fear of getting paid back because you CANT
remove the debt via bankruptcy.

I think there needs to be a different approach because it IS different... but
the "you can never remove this debt" is too much.

My personal opinion:

Give some sort of limit - 10/20/30 years? - and some sort of max% of income -
10%?. If the loan isn't paid off by the end of the limit at a max % of income,
then the loan can then be discharged by bankruptcy.

That would remove loans for "crap" courses (finger painting) except for those
that pay for it out of pocket. Banks would still give loans for courses that
lead to real jobs. Kids could still take shit degrees if they can pay for them
(although, those would dry up).

~~~
hackinthebochs
>No bank is going to give money for degrees without a realistic change of
getting paid back.

Then they shouldn't. A big part of the problem is that the negative
externalities of loans are all but eliminated from the issuer and completely
placed on the borrower, only that these borrowers almost always unaware or
don't fully appreciate the risk. If we allowed student loans to be shed
through bankruptcy then companies would stop giving out $100k loans for art
degrees and history degrees. This is the sort of risk/reward calculation that
most incoming students aren't equipped to make, but actuaries are great at.
Why don't we let them?

~~~
candiodari
> If we allowed student loans to be shed through bankruptcy then companies
> would stop giving out $100k loans for art degrees and history degrees.

> Why don't we let them?

You've answered your own question, no ? Or at least pointed out one big center
of opposition. Additionally, universities themselves will vehemently oppose
this of course.

------
rayiner
We don't need student debt reform (and I say that as someone who has a lot of
student debt). Student loan debt is a middle/upper middle class problem. 2/3
of millennials don't have a college degree, disproportionately in the lower
and lower middle class. The majority have no student debt. Public money spent
on college or debt reform would be a regressive benefit to those who are
already better off than the median person. It would be better to spend that
money figuring out how to improve the plight of working class people for whom
college isn't in the cards.

~~~
formula1
I would argue that the problem isn't "if the poor are screwed, bad. If the
rich are screwed, ok."

I think the problem is eqch individual is pushed to go to college to find a
good job which raises demand of college, which raises price. But those good
jobs are barely out there for the graduates. And the college institutions
didnt guide people down paths of success, instead gave enough freedom to find
their own path to failure.

Now, you have a lot of intelligent hardworking (college is not easy) people
who are in debt with a very abysmal perspective on their future. Their debt
makes them worse off than working poor because any low income job would simply
put them in the black. And the gov has their habds tied because america is a
great believer in the free market yet a huge group of hardworking young people
are effectively worthless and the coming generations are likely to fall in the
same trap.

~~~
tptacek
It's really hard to work through the framing you've created here, where it's
supposed that going to college is a requirement to find a good job, the rich
are "screwed" by college debt, and the poor are... what? Screwed from multiple
directions simultaneously?

Further: if college is a necessity for a good job, and that's why students are
going to college, and they're leaving college with a mountain of debt and no
means to pay it off, then _college is not achieving the promise of securing
better jobs_ , and the answer isn't to plow even more money into the system
but instead to _stop sending kids to expensive colleges_ that have no positive
impact on their financial futures.

It would be nice if college in the US was free. If one could wave a magic wand
and reach that outcome, one certainly would.

But since we don't have magic wands, we have to prioritize, and we're
generally not keen to prioritize the financial well-being of the wealthy
before that of the less well-off. In matters other than finance, sure, we
don't discriminate that way; we don't, for instance, send the rich off to wars
first (we do rather the opposite).

~~~
formula1
Disclaimer : I am a self educated programmer with $0 in debt.

You say this with 20/20 hindsight and a unique perspective on supply and
demand. You say this with what sounds anger and resentment towards successful
people. I hope you view success and upperclass as a goal, or areat least a
believer in independence and hardwork

The mass majority of americans are sheep that are expecting the gov and
society to guide them towards a better future. These individuals worked hard
for 4, sometimes more, years. What these people are lacking is an
understabding of tge employment economy abd supply/demand. Since they dont
have mbas its quite understandable to be this naive.

So now we have thousands of intelligent hardworking people who were led to the
cloffside to jump. Arguably that is an example of survival of the fittest.
Theres only room for cockroaches doing the dirty jobs and allstars doing the
big ones. But considering our future depends on the survival and success on
understanding the universe, it is in our best interest to ensure these
hardworking individuals can be rewarded somehow and that future sheep
understand how the world works so that their cliff is one of choice not of
ignorance or force.

So your telling me

\- tough luck, let them die

Im telling you

\- these sheep were simply going down the path they were told

\- they were ambitious, smart and hardworking enough to survive 4 years and
graduate

\- the economy only selects the best and the rest are left to compete in the
same income bracket as the lazy, stupid, young, immigrant, unskilled etc.

Is it on the best interest of the united states as a nation to punish
ambition? How do we guide people from here?

~~~
tptacek
I'm a self-educated (1 semester at UIC and nothing else) programmer with $0 in
debt. I just sold a company a few years back. I do not have "anger and
resentment towards successful people".

I do not think we should spend large amounts of money to help refinance the
debts of some of the best-off people in our society. I think that's a bad use
of funds.

I also do not believe that college selects for "ambition". The overwhelming
majority of middle class high school students go on to college. They're not
all ambitious. They're just lucky.

Everything else I have to say about this comment, I already said in the
preceding comment.

~~~
formula1
Its clear you wish to end this discussion so I will give you the final word
after this.

Luck only goes so far. You need grades or sports to get in cheaply. The
inflation of college prices isnt related to only the "1%" going to college.
Nearly everyone goes [0], 68% in 2014. And if you dont, you either couldnt get
in or smarter than the system could handle. To graduate you need to study,
pass exams, write essays. College is not a free lunch only for the upper
class. Its a bet the the american government guarentees because they believe a
well educated workforce is a better workforce.

[0]
[http://nces.ed.gov/programs/coe/indicator_cpa.asp](http://nces.ed.gov/programs/coe/indicator_cpa.asp)

~~~
rayiner
Only 35% of millenials have student loan debt:
[http://www.gallup.com/businessjournal/188984/americans-
big-d...](http://www.gallup.com/businessjournal/188984/americans-big-debt-
burden-growing-not-evenly-distributed.aspx). As you concede, if you are part
of the one-third that doesn't go, it's probably because you couldn't get in.
But to the extent the government should be spending public funds to help
people, _those_ are the people who it should help first. Moreover, on a dollar
basis, it's the people who have the most education that will likely have the
most debt. _E.g._ interest free student loans will help those who do a couple
of semesters of community college a little bit, but will really help out the
doctors, lawyers, etc. who take on six-figure debt.

This is part of a larger phenomenon of the American welfare system helping
people who are already relatively better off. Own a million dollar house? You
can deduct tens of thousands of dollars a year in mortgage interest! Have
$200,000 in debt after going to a private college and getting a masters
degree? The government will forgive it! Did you make a six figure income
during your working years? Great, the government will not only give you the
disproportionate share of social security benefits, it will pay out more than
you put in!

------
newman314
I can't begin to express the disgust I have over ever-increasing tuition. From
what I can tell, a lot of it goes towards pointless fancy buildings, costs for
other activities other than learning and the ever present college textbook
scam.

There was an interesting episode on Planet Money why college textbooks cost a
ton but not high or middle school.

~~~
marcelluspye
Administrators suck up a huge amount of money these days as well. That's the
real scam, considering they only seem to make my life harder.

My institution has the added administerial tax of those offices inhabiting all
the nicest buildings on the quad. Really drives home the totem pole of who's
most important on campus.

------
godelski
The thing that worries me most is the delinquency rate. It is at 11%[1]. For
comparison the housing market delinquency rate went from 1.6% in 2006 and went
to 11.26% in 2010 (height, 2008 went from 3% to 8%[2]). That's where I see the
real bubble indicator. I really wonder how much more it can expand. And I
don't hear serious talk about what to do WHEN it bursts. Because it is really
a matter of when and not if.

[1] [https://studentloanhero.com/student-loan-debt-
statistics/](https://studentloanhero.com/student-loan-debt-statistics/) [2]
[https://fred.stlouisfed.org/series/DRSFRMACBS](https://fred.stlouisfed.org/series/DRSFRMACBS)

~~~
rahimnathwani
This isn't a bubble. There is no stock of assets that are suddenly going to
fall in market value. You can see education as an investment, but it's not a
tradeable asset. If I buy an apartment, there's a market that (i) tells me the
value of the apartment at any time, (ii) let's me (or the bank) liquidate the
apartment and turn it into cash.

University degrees aren't like that. Someone holding a degree doesn't suffer
additionally when people stop realising that this type of degree isn't worth
the sticker price. He's not selling his degree to new students. Whatever his
experience is in the job market is not affected by the price new students pay
for their degrees.

~~~
refurb
_There is no stock of assets that are suddenly going to fall in market value._

Sure there is, the loans themselves.

Right now a bunch of lenders have $1.3T worth of loans. If those loans don't
get paid off, they are $1.3T poorer.

~~~
rahimnathwani
What would cause those assets to suddenly fall in value?

~~~
refurb
A huge uptick in default rates. The only reason why student loan paper has
value is because there is an expectation that it will be paid off.

~~~
rahimnathwani
Ok, then what would cause a huge uptick in default rates?

~~~
jcbrand
People's inability to service/pay their loans, due to not having enough
income, due to the job market collapsing, due to a recession (which is already
overdue).

~~~
rahimnathwani
What you've described here is the value of an asset (student loan paper)
declining due to a change in the underlying cash flows generated by that
asset.

This is how asset prices are supposed to work. It's not the busting of a
bubble.

~~~
stale2002
OK, how about this.

Imagine that employers stop caring about degrees, and evaluate potential hires
based on other qualities.

This is already happening in tech.

If employers no longer cared about degrees, then workers who don't have them
would now suddenly be on equal footing.

The non degree holders would get much higher paying jobs, and conversely the
degree holders would get worse jobs. This causes the "value of education"
bubble to pop.

~~~
rahimnathwani
Then we're back to my earlier point. There is no 'value of education' bubble
analogous to a housing bubble. An individual's degree isn't tradable in the
same way as a house is, so the value of that individual's degree isn't being
bid up by people competing to buy it. So what would it mean for the bubble to
burst?

If you're talking about a mechanism by which the price of newly-issued degrees
were to fall (i.e. college tuition sticker prices fall by 50% within a year or
two) then, even if it were to happen, that's just a fall in the price of a
consumer good. If the price of laptop computers falls because people realise
they can do their work with tablets and chromebooks, we don't think of that as
a laptop bubble. Not a perfect analogy but I hope you get my general point: if
you're calling something a bubble, then you've got to be able to point to the
stock of existing assets whose price is out of whack with fundamental value
(e.g. based on future cash flows) due to irrational investors bidding up the
price.

I'm not claiming tuition fees are in line with fundamental value to the
recipient. If they're not, then it's just people buying stuff they shouldn't.
If they are in line, but it's for signalling reasons rather than the education
received, then there's economic inefficiency due to market failure, but it'
seems still not a bubble.

------
hackathonguy
The system here in Israel is roughly as follows:

The gov sponsors universities almost to 100%. The means going to university is
almost free for me as a student - about $2500 per year. I can acquire a law
degree and become a lawyer for less than $8000. The government is involved in
the way the public universities are run so as to keep the subsidies
manageable. Total government funding for university education in Israel is
about $1.5B [1]. Since universities have high admission standards, many
colleges have sprouted to service those who can't or don't want to go to one
of the public universities. However, since university prices are so low, even
private colleges are forced to operate with tuition fees of roughly $5000 per
year, which means they are also very manageable for students. Even so, the
quality of education in Israel is amongst of the highest in the world,
especially when considering its tiny population. Hebrew University, Israel's
best institution, has been ranked 26th in the world [2].

This system has attracted a lot of snark here in Israel, but from what I
gather it's actually pretty effective. Israel is the 2nd most educated country
in the world, with 46% of its population possessing a university degree [3].
:-)

Sorry for the Hebrew sources!

[1] Hebrew:
[https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7....](https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.A1.D7.9C.D7.95.D7.9C.D7.99.D7.9D_.D7.9E.D7.99.D7.95.D7.97.D7.93.D7.99.D7.9D)

[2] Hebrew:
[http://www.calcalist.co.il/world/articles/0,7340,L-3693018,0...](http://www.calcalist.co.il/world/articles/0,7340,L-3693018,00.html)

[3] Hebrew: [http://mako.co.il/special-mako-
news/Article-6489f432bb2f9310...](http://mako.co.il/special-mako-
news/Article-6489f432bb2f931006.htm)

~~~
logfromblammo
Every Jew I have ever known in the US, to the last individual, has always
placed a high value on education. It would seem to be a cultural value--or at
least it is among Ashkenazis. So it does not surprise me that Israel has a
decent, functional higher education system.

US culture, as a whole, does _not_ value education for its own sake. We value
education only as a business. And much of that business is to suck money from
the pockets of those who do value education as intrinsically beneficial, and
blow it along to those who provide the illusion of education at the lowest
operating cost. If a greater proportion of the population valued _real_
learning, the focus would be on making _high school graduates_ more relevant
and useful in the modern workforce, rather than using bachelor's degrees as an
arbitrary qualification for jobs that clearly do not require them.

If >25% of kids think they need to go to university to get a "good" job--or
even to just not be considered a low-status, ignorant loser--it is not the
university system that has failed, but the 12-13 years of public education
that usually precedes it.

------
teekert
If you'd choose a more social system where the students costs are paid
directly from taxes, taxes are higher, yes but you omit banks. The only thing
banks do is collect interest because the people have decided, or have been
told, that they can't collectively invest in the education of the next
generation. And so their kids pay interest, to banks who do nothing but print
the money and write down "you have dept" in return.

------
meddlepal
Anyone have any idea what the 20 to 50 year implications are for this? I
imagine this will crush the economy eventually if millennials cannot pay it
off.

~~~
dublinben
Regardless of how much debt there is, this isn't a bubble. These loans are
nearly impossible to discharge. Recent graduates will be on the hook for this
debt whether they want to be or not.

The largest negative effect of all this debt will be the drag it puts on
consumption. Young people are already delaying major purchases like cars and
houses due to all their student debt.

~~~
Retric
People can often just leave the country. US law makes it hard to discharge,
non US law is another story.

~~~
brobinson
>the act of renouncing U.S. citizenship does not allow persons to avoid
possible prosecution for crimes which they may have committed in the United
States, or escape the repayment of financial obligations, including child
support payments, previously incurred in the United States or incurred as
United States citizens abroad.

[https://travel.state.gov/content/travel/en/legal-
considerati...](https://travel.state.gov/content/travel/en/legal-
considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html)

I guess if you successfully renounced you could just try to avoid having any
contact with the US ever again...

~~~
umanwizard
You can't be arrested for not paying debts. You could probably still visit the
US as long as you didn't intend to work there.

~~~
throwaway729
In principle. In practice, renouncing US citizenship is the sort of thing that
gets you put on a "make their life hell if they want to come here" list.

~~~
umanwizard
Why would you need to renounce citizenship?

------
paulddraper
The Wall Street bailout was only...what, a trillion?

If we bailed out real estate speculators, I wouldn't be surprised if something
happened with college grads.

Unfortunately. I hate assuming responsibly for monetary decisions other than
mine, but judging the trend, that's where we're headed.

~~~
75j
So, I am not at all an expert in finance, but there are claims (from Jill
Stein for example) that the real cost of the bailout was much, much higher.

Here's a Mother Jones article that takes this position:

[http://www.motherjones.com/politics/2009/12/behind-real-
size...](http://www.motherjones.com/politics/2009/12/behind-real-size-bailout)

Can someone with more knowledge break down whether or not this is accurate?

~~~
TuringNYC
@maxerickson has a valid response, but there is a larger story here. Consider
hidden bailouts and also consider the _unfairness_ of such hidden bailout. I
would argue that the bailout was indeed much larger. For example, the Fed
started buying distressed mortgage bonds via Quantitative Easing, QE2, and
POMO. Should the Fed purchase an asset that is trading at 27 cents on the
dollar for 60 cents? That seems unfair...it was a hidden bailout.

Imagine you buy a house for $500,000, the value goes down to $150,000. The
government, instead of paying $155,000 pays you $450,000. That sounds like an
"open market transaction" but it is a gift, a bailout just by another name.
Unfortunately they didn't do that with homes, they did it with mortgage bonds
and CDOs, which meant that most of the gifts went to a small sector of society
in lower Manhattan and around Greenwich Connecticut.

------
OliverJones
The article is made suspect, in my view, by promoting this Credit Sesame
thing. There's a service called
[http://annualcreditreport.com/](http://annualcreditreport.com/) that provides
access to credit reports from the three major agencies without trying to sell
anything, or using any black-hat user experience design to trick people into
signing up for services.

------
pirocks
I wonder how much money could be saved if the US got rid of its general
education based system.

~~~
umanwizard
General education requirements in American universities serves the purpose of
getting people up to the level of academic high school students in Europe or
Asia.

We could get rid of it, but we'd have to fix high schools first. This would
likely require admitting that a focus on academic subjects isn't appropriate
for everyone. In many European countries, a majority of students go to trade-
oriented secondary schools and the minority that goes to academic schools
leading to university have to study quite rigorous material in secondary
school. That's why their university programs can focus specifically on
individual specialties.

For example, the French academic high school diploma (called Baccalauréat
Général) is normally considered equivalent to at least a year in a US
university.

~~~
pirocks
Agreed. I think that changing the high schools would be the best way to go
about this, instead of finding ways of paying massive amounts to colleges.

~~~
brianwawok
Why not just make colleges cheaper?

I would argue that kids in America have a much better life than say kids in
Japan or South Korea, with all night cram schools.

And in the end, the innovation in the world is coming out of America not Japan
and South Korea, so at least to some extent it must be working.

~~~
ryuker16
A lot of innovation occurs in Asia.

Also, South Korea has a similar college funding issue as the USA with rising
tuition. However it's blunted in Asia because parents are expected to pay for
it so the loans are more bearable. Pay and status tends to be seniority based
so the burden doesn't fall on the recent grad living at home.

------
OliverJones
The consumer finance "reform" act of 2005 made it very difficult to discharge
student debt in bankruptcy. It's time to undo that reform.

It had a disastrous unintended consequence, by completely shifting the risk of
an uncollectable loan away from the lender and onto the borrower. How so?

When a lender carries risk, they underwrite those loans. That means they study
them before making them. They pay attention to all kinds of things, including
the borrower's ability to pay and the value of the thing being bought with the
borrowed money. Underwriters are (usually) knowledgeable about the field they
work in. They understand the value of both vocational and liberal education.
Some of them even understand the value of giving under-served people a chance.

So, when a school gets calls from underwriters saying "we're having a hard
time justifying loans of US$100K to your students taking bachelor's degrees"
the school takes notice. They restrain growth in tuition and fees. Maybe they
even offer discounts, also known as "scholarships." Those calls, coming from
skilled underwriters, are far more effective than student demonstrations
against tuition increases.

The 2005 reform made it possible for the lenders to be much lazier. Their
underwriting is much more sloppy. The reform freed up a lot of tuition money
that the educational institutions were happy to soak up. And their students
are stuck with the bill for a lifetime.

I'm aware of the libertarian view which emphasizes individual responsibility,
and I have a lot of sympathy for it. I have a young friend who looked at the
cost of her first-choice college (Syracuse, it was) a few years back, and
wrote them a letter saying "sorry, you're too expensive. I regret that I must
decline your offer of admission." That too puts downward pressure on
educational costs. But she's rare: she has great presence of mind and forward-
thinking parents. Plus, she listened to me. -:)

Most high-school seniors get caught up in the mostly fake competitive
admissions system. They aren't in a position to behave like hard-nosed
underwriters.

So, let's put some of the loan risk back on the lenders, and bring back the
underwriters.

This situation is analogous to the mortgage crisis, which shifted the risk of
bad loans away from the mortgage originators. In that case the risk got
shifted onto anonymous buyers of securitized mortgages, and onto AIG. In the
case of educational loans the risk gets shifted onto the poor schlemiel who
wants to be a schoolteacher.

------
throw2016
A healthy and future ready society needs an educated and literate population.
From that it becomes a social goal and a social good with multi generational
run off effects that can't be measured in pure short term economics.

That one of the richest countries in the world should shy away from this
responsibility is a bit galling, more so because it seems to be purely so that
bankers can make some money.

You can't have a country purely of corporations and workers and the US has
been moving in this dubious and dystopic direction for decades now. You need
to build a society or everyone loses, eventually.

------
overcast
Welcome to cheap guaranteed federally backed money. Private institutions will
continue to jack up education prices, because they know kids will be able to
get loans from the government to pay for them. It's too late for me, and
millions of others paying back enormous loans, but I dream of the day school
becomes affordable. There was a time, you could work you way through college
washing dishes. Schools existed WAAAAAY before federal assistance.

------
hartator
> Officially, the nation owes $1.26 trillion in student loan debt.

The nation doesn't owe anything, I would rather said past students who still
have loans owe this money.

~~~
colordrops
It's a synecdoche.

~~~
hartator
I don't think it is, to allow blur between the society and the individuals is
not something without consequences.

------
GFischer
Free (1) tuition is an interesting option, but it's not the end all answer.

We have basic tuition in Uruguay, and, while people don't leave university
with crippling debt, we still have the problem of people spending 4 or 5 years
of their lives and leaving with a worthless degree (as in, they cannot get a
job in what they studied). And they do end up in debt because they have to pay
for food and housing while they study.

I feel very sad whenever I see a working class family breaking their backs to
send their child to become an architect or a psychologist, because I know they
won't be able to get a decent job (there's one architect per 400 citizens, and
one in twelve in the workforce is a psychologist, they usually end up earning
less than a store clerk if they don't set up a succesful practice).

Another problem is the strain on infrastructure, in the Engineering faculty
they only have capacity to train about 300 to 400 students but over 2000 enter
each year. The solution is to have extremely hard and cruel first year courses
so at least half drop out in the first year and another half in the second
year (I dropped out in second year and enrolled in a private university).

Another country with free university is Venezuela, and a problem I've noticed
is that the quality of education is very uneven, there are graduates with
titles that aren't worth the paper they're printed on. This doesn't happen in
Uruguay that much because they force them to drop out (not a great solution
either).

(1) here in Uruguay it's not entirely free, it's deferred - graduates from the
public university have to pay about half a normal salary each year from 5
years after they graduate until they retire, so it often ends up more
expensive than a private university.

------
jonah
“He who works with his hands is a laborer.

He who works with his hands and his head is a craftsman.

He who works with his hands and his head and his heart is an artist.”

— American trial lawyer, Louis Nizer [1]

[1]
[https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a...](https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-
a-craftsman-or-an-artist/)

------
kriro
Has there been extensive research or trials of corporate sponsorship (or are
there any startups exploring this idea)? There are probably some
principal/agent issues but by and large why can't Google sponsor some CS
students and they sign a 4 year deal with them in return (somewhat similar to
sports?). In some fields, big corporations already compete for talent, why not
start the competition a level earlier (internships could be integrated as
well).

I can think of a lot of problems and reasons why this won't work...which makes
it interesting :) Apart from "won't work for not highly competitive degrees"
and "figuring out who to sponsor is as hard or harder than just hiring" and
"how do you grantee the people actually stay with the company and are
motivated" there's probably a lot more. I think the principle of reciprocality
can make it work in principle though.

~~~
ryuker16
General Assembly is a boot camp that does this.

ROTC does this for the military.

>Google sponsor some CS students and they sign a 4 year deal with them in
return (somewhat similar to sports?

They would probably try to get fired so they can get hired elsewhere for more
money leaving Google holding the bag or be lazy as fucks. Non compete
agreements are difficult to enforce....you cant create a wage slave and expect
it to be enforced by the courts.

~~~
kriro
Weather or not the pro sports model is a good thing to aspire to...I'll leave
that up to debate but that's a reference point where this model works. It
could be adopted with slight modifications.

The apprenticeship model also works decently well...at least I'm not
consciously aware of many carpenters, bakers etc. job hopping once their
education is complete.

But like I said the more optimistic view is that employees might actually like
your company and that the principle of reciprocality works in this setting.
There's going to be a subset of people who are going to be pretty happy that
you cared about them and financed their education (and there should certainly
be strong mentoring on the side not just "here's your money, call us when you
graduate"). If someone just hops away...well that's expensive but might be
less expensive than having such a person at your company. Fail early etc.

And I mean noone is forcing you to sign such a deal. If you want to argue evil
employers and "wage slaves" (a term I personally think is fairly ridiculous,
especially if applied in the context of IT jobs, but Chomsky gonna Chomsky)
and say that starting your life with huge college debt isn't exactly going to
set the workforce free either. You're pretty exploitable if you need to get
rid of crippling debt.

------
JohnGB
So total student loan debt is something like 10% of the cost of the Iraq /
Afghanistan war. Tell me again how it's not affordable to make college free,
when it's affordable to spend so much money on an unnecessary military
intervention?

~~~
cmdrfred
I wasent privileged enough to go to college. Why isn't paying off my mortgage
affordable instead?

------
ainiriand
There is something really flawed in a system that puts progress under bank's
interests. The advancement of the whole society is beneficial for us all, so I
dont see why it should not be subsidiced.

------
devoply
I am sure more education can fix this problem as well. Just a few more degrees
and we'll be able to afford interest on that debt, that the government will be
paying because the students are broke.

------
koga-ninja
Tuition is very expensive in the U.S.. People take loans because they are
banking on the future. They think that Even with debt they will come out
ahead.

I'm new on this site, but I assume that most people on this site are computer
programmers or are tech savvy enough to get a job that pays a decent wage.

I'm Canadian, but you should also look at the bright side Of US education.
There is no Canadian Caltech. If you step out and start a business in America,
it is Considered entrepreneurial and a good thing.

------
andrewclunn
Queue the political debate over whether this is a failure to provide secondary
education to our citizens, or an artificial inflation in its cost by
attempting to do so.

~~~
taurath
Other countries don't have this problem. There is no debate to be had - the US
can't control costs

~~~
GarrisonPrime
Agreed. That's the same core problem with the US health care system as well.

Yet in both cases, education and health care, control of costs is pretty much
not discussed at all. The only narrative we seem to hear is along the lines of
"find more money to pay for it".

~~~
taurath
Everything is a business in the US - which means middlemen everywhere between
services and the people consuming them. The fact that costs are hidden in both
places to the end user is a huge problem, and the government solution is
literally to throw more money into the system instead of controlling costs
through evil regulation. You just can't have it both ways - either you
subsidize and regulate cost or you remove the middlemen and make the entity
compete on the basis of cost. The problem with both health care and education
is that the goods aren't elastic - they're required in most cases. This, they
don't even compete on cost basis but instead quality, which drives prices ever
higher.

------
bogomipz
This is a quick read in case anyone is unfamiliar with student debt
"onwership":

[http://www.investopedia.com/articles/personal-
finance/081216...](http://www.investopedia.com/articles/personal-
finance/081216/who-actually-owns-student-loan-debt.asp)

------
partycoder
Education makes extensive use of debt factoring for risky loans.

Factoring is selling client debt at a discount for instant cash. The financial
institutions that buy the debt are usually responsible for collecting unless
they decide to pass it around again.

So in a sense, universities are sort covered against losses from that kind of
debt, not students.

------
Taylor_OD
I was lucky to get out without any debt due to athletic and other
scholarships. However the last two-three girls I've dated had 15K-25K in
student loans. They all said, "At least I dont have __K like my friend... "

I cant believe do much is being lended to college students.

------
dvfjsdhgfv
"While an educated populous is a good thing, the number of those not making
payments on their student loan debt as soared." \- what language is that?
Sounds like written by an undereducated populous...

------
mark_l_watson
Is this news? The global elites harvest young people for profit just as they
do older people with subprime mortgages, etc. Sorry for sounding cynical, but
that is just the way I think the world works.

~~~
Jtsummers
While not news, figures like this:

    
    
      In the past 12 years, we have added a trillion dollars to
      that amount and gained about 4% in the overall college
      graduation rate.
    

are important to publish sometimes. I don't think many people realize the
scope of modern student debt, which has obvious (?) negative implications for
the national economy.

~~~
mark_l_watson
I agree, more people need to be aware of the magnitude of the problem.

------
knightofmars
This is an advertisement for "Credit Sesame".

------
tedunangst
Does nobody care that the person holding a debt is the one that gets paid?

------
carsongross
Debt expansion is no way to run a money supply.

------
scott_c
The government-enforced student loan system is the problem. Universities know
they can charge whatever they want for tuition, they will get their money up-
front, and the students will be on the hook for it for life (and it can't be
declared in a Bankruptcy).

We need to revamp the system so universities can't charge us these ridiculous
rates.

------
Vera527
Congrats to all the students and recent grads out there.

------
formula1
Im glad I got someone with the shock value. Its clear you have a very unique
perspective that I appreciate you sharing.

Female in lower income bracket - I believe this. I think this is a rather
heartbreaking reality so I am a ok not going into this. What I do know is that
Ive met a few peoples whos moms work 16 hour days as much as possible.

\- chronically ill - the college educated are competing with the chronically
ill for jobs

\- mentally ill - the college educated are competing with the mentally ill for
jobs.

\- unable to afford - so they are working but cannot find housing. I believe
it.

I dont think 'bail out' is the solution. Its 'salvage and prevention'.
Ensuring that future generations dont fall into the trap and if they do it is
an educated risk. And salvaging multiple generations lives who were chasing
after the american dream.

Im all for helping those that cant help themselves. But Im also interested in
getting those 60% there to 100%. If the "prividged" are having are hard time
post graduation. The under privlidged have it even worse. We are talking about
the future of basically educated children not just "foolish rich kids"

~~~
dang
We detached this subthread from
[https://news.ycombinator.com/item?id=13009587](https://news.ycombinator.com/item?id=13009587)
and marked it off-topic.

Perhaps your intent was sincere, but the effect you had on the thread is
indistinguishable from trolling. Please don't do this on HN.

~~~
formula1
My apologies

------
known
In real world this debt cascades to rest of the world bloom.bg/1O04ymn

