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Student Debt Lawsuits Are a Lucrative Business (nytimes.com)
71 points by thisisit 5 days ago | hide | past | web | 113 comments | favorite





Good Lord. There are two issues with college tuition:

The first problem is people are not shopping around for a college education. There are thousands of incredible colleges around the USA that will give you the same or better education as a pricey school on the coasts.

I did my easiest credits at Bulter County Community, then Wichita State University, before finishing up at Kansas State University. I only took on about $8k of debt for a degree in Information Systems (computer science with an emphasis in business classes) from their engineering school (which is one of 24 schools that has a nuclear reactor on campus). K-State itself was a hoot to go to, it's a great little school in a swanky town isolated by 2 hours of prairie grass.

The second problem is people are paying way too much for a nearly useless degrees that some colleges offer. You can get a degree in "music therapy" or "insurance administration", both of which a motivated individual could also get on-the-job training for.

Somewhere there should be a list of "Degrees you should not get if you're going to pay more than $x for" to help bright-eyed high school kids make good decisions.


Shopping around for college education only makes sense if your career path doesn't take the name of the institution into account. Careers are so path dependent that landing in a worse first job can make a huge difference in lifetime earnings.

See, a good engineer I know, who studied in University of Missouri Rolla. Their CS degree is not all that different from a big name, as far as curriculum is concerned, but many HR departments won't recognize the place, especially if it's a company from the coasts. If you don't find a way to break through that social class, the best you can hope for is a Midwest Enterprise company, which will not pay as well, and will not teach as well. Then your resume will be thrown away at many hip companies, because working at such companies is seen as a negative, not as a positive: To climb out of a good education with a bad name to a place that pays top dollar can be a huge struggle. If instead you go to the Right University, you can then move on to the Right Company, and you can keep working at said places, or get venture capital to start your own thing, because you were already in the inside track. That's what you are paying for at the coastal university, not a dramatically superior education.

You are right though, in that there are many degrees that are terrible investments in all but the topmost universities. You'd be surprised by the kind of companies that will interview you anyway if you have an irrelevant degree from Harvard.


Heh, I went to that school and I had the same problem: literally everyone would ignore me because I went to a Midwest state school.

I went and did my own thing so my story is fine. But I wonder about how much good talent is ignored just on the basis of where one went to college.


I went to KU. Living in KS and making just as much as those in the coastal rat race, without the crazy housing prices. If you know your shit, you'll do fine.

For those saying “I got into Google and went $there:” understand that you are an exception and probably worked really hard to get on their radar in the first place. The difference between Princeton and Kean is that Google goes to Princeton. That’s a huge step up.

"your career path doesn't take the name of the institution into account"

So basically, only applicable with Law Degrees


Not just law. (Management) Consulting. Finance. Even tech, to a lesser degree.

The problem is a little bit more than people are paying too much for a worthless degree. It's that they are being given a loan that is backed by the US Government to get that worthless degree.

If the government removes the backing and allows the free market to give loans and set interest rates, suddenly you'll see that the lowest rates will be for STEM degrees, and those who want to study music theory, art therapy, English literature, are going to get loans for school.

However, that defeats the entire narrative of "everybody should go to school and everybody should learn whatever they want."


If you remove the government backing you'll see more of a divide on the socioeconomics of who gets to go to college and who is too risky to lend to.

Probably some, but really how much? A doctor is a doctor and makes a lot of money. A social worker, no matter the skin color, does not.

Right... but what about a potential doctor vs. a potential social worker? A poor student that tries to become a doctor is far riskier than a rich student trying to be a doctor. I believe that's the issue here...

Anyone can go to college, given they meet the academic admission requirements, and are willing to work (extending it past 4 years).

Completely agree

(except maybe on music theory, bit more technical of a degree that most people realize)


Doesn't matter how technical it is, it's still pretty worthless.

I'm a CS Major, but saying a degree is "worthless" is pretty narrow-minded, no? I'd argue (at least anecdotally) that most people getting into these "worthless" degrees know they won't make a ton of money - but for them, money isn't something they particularly care about.

There's more ways to define success than in terms of money.


Several of the best mathematicians I've met had degrees in music theory; there's a surprising practicality to it in modern CS as the concepts translate well to machine learning.

This may very well be true, but I'd rather make an argument against this idea by pointing out that the relative worth of a field of study is not related to whether or not majoring in it will get Facebook to pay you $200k out of college to help them build out their marketing panopticon. It's disturbing how many people on HN don't seem to get that (not necessarily you, but other commenters in this thread are exemplifying this). It's good to have people who study art and music and philosophy and design because those fields enrich the human experience, and because the world would be a worse place without them.

At HN, “worthless” == “Can’t score a $100k salaried job out of college with it”

I would rather employ someone who has a music degree and learned web dev in their free time than the majority of shitty comp sci programs or an mba

As far as postmodern literature departments, sure they are worthless, and maybe counter productive


If the govt did that, many many people won’t go to college, which is a terrible problem given the way we are set up.

My kids have two choices, and they both start with a K; KU (me) & KSU (wife). It has also better be engineering, hard sciences, accounting/actuary, or medical.

You’re looking at this too narrowly. If you want to work for McKinsey or an investment bank out of college, you go to an Ivy. That job alone can set you up for life if you play your cards correctly.

Some lucrative career tracks are very hard to get into without that name brand on your diploma.


> The second problem is people are paying way too much for a nearly useless degrees that some colleges offer

I agree with this but for many people I think they hit a wall whereby a degree is a minimum requirement for entry to a position even if everyone "knows" that it's not required.

In the UK this was made worse with a massive push for 50% of children to go to university [1] as a political target. Whilst that might've been a noble idea in principle, it further undermined apprenticeships and trade skills and led to the general public thinking if you don't go to university then there's something wrong with you. [2]

I did my first degree at Imperial "full time" and my second with the Open University 10 years later whilst earning - if I could do it all again I'd have gone straight into work and studied "part time" (I hate that phrase, it's really more like having 2 full time jobs IMO). The second time round I was also "paying as you go" for my courses which made me extremely mindful as to just what exactly it was costing me (FWIW it cost me about 20% of what my first one did and I was earning the entire time).

> Somewhere there should be a list of "Degrees you should not get if you're going to pay more than $x for" to help bright-eyed high school kids make good decisions.

Unfortunately I think even if such a list existed the people that need to actually read and think about it wouldn't be aware or interested in it. Of the 18 - 21 year olds I've talked to recently, aside from the aspiring medics and hopeful academics, a bunch of them view university as a time to work out what they want to do. That was ok 30 years ago but I think they're in for an extremely expensive lesson.

Then again hope for many millennials about the long term future is at an all time low so why even think about it. [3]

[1] http://news.bbc.co.uk/1/hi/education/1789500.stm

[2] https://www.theguardian.com/politics/2011/nov/02/parents-app...

[3] https://www.weforum.org/agenda/2017/01/wages-have-fallen-43-...


Happy to see another Wildcat around here!

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were given the option. Since a degree is not tangible, there is nothing to secure it with, they can't foreclose on your education like they can a piece of property. Without anything to secure it, there would be 0 market for college loans except for the privileged who can pay out of pocket for their education. IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%. Then it forces the school to look at costs, as well as expected outcomes of the program. At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?

"If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job"

Yeah, but that's exactly why no one would ever lend that amount in the first place. That, I believe, was the OP's point. College should not cost what it does. And part of that reason is federal guarantees upon the debt. So colleges can raise the price and since the debt is guaranteed creditors are happy to lend. Essentially, there is no check and balance on the price of education that exists for pretty much everything else that might be financed (i.e. a car).

"IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%."

Totally disagree. That seems to violate every notion of contract law that exists. The colleges are not taking part in the loan process. They are not agreeing to take any monetary risk on the individual. They are simply offering a service at a (bloated) price. The debtor agrees to take on debt to pay for the service and the creditor agrees to take the risk. The college should not be brought into that totally separate contractual agreement. That's like holding an employer responsible for debts that an employee defaults upon because the employer had cutbacks and laid off the employee.


Education costs have risen faster than health care costs, you have to try to find some way to contain it or every generation becomes more indebted. As long as the feds are going to throw free money at this, we need to find some way of controlling costs. IMO asking the university staff to tighten their belts and be fiscally prudent is going to get you about as far as trying to build 1000 new mid rise apt buildings in SF. So, what ideas do you have? I don't want to limit federal funds or limit access to education, but we can't have skyrocketing tuition like we have seen for the past 20 years.

I agree that universities are not going to tighten the purse strings unless they have no choice. The cause, as you mention, is the feds throwing money at the education system. Therefore, the only logical solution is to remove that. You say you don't want to limit access to education, but the world isn't perfect. If you want everyone to have access (meaning having access to funding via loans) then you must accept the consequences of that. I, personally, don't have an issue with limiting access. Education that involves universities with buildings, faculty, land to maintain, etc. are not infinite resources. The natural check on the usage of resources is cost. Presumably, you don't sit around letting your sink run all day because you would wind up with a massive water bill. If people want to go to college and get an education, there is a cost involved. There are always going to be those who are unable to pay due to extreme financial situations. But that's why there are scholarship programs, grants, etc. that exist.

The education system used to work fairly well in this country several decades ago. You used to be able to go to college and pay for it in a very reasonable amount of time even through minimum wage jobs. Loans weren't even necessary. And when the end user pays the bills, the connection to cost is there so people pay attention to what it really costs because they bare the brunt of it right away and it's not hidden (so to speak) from them through loans that are paid off over 10-20 years.

It was only when the government decided that something was "wrong" and needed to be improved that the system started going to shit and getting ever more expensive and the product (education) getting worse and worse - the quality of the education people are paying for nowadays is abysmal half the time.

I discussed this recently in another thread with some specific numbers attached to my explanation: https://news.ycombinator.com/item?id=15647956


> The education system used to work fairly well in this country several decades ago.

That is...a pretty remarkable claim. I think there are a fair number of people - lots of women, lots of people who grew up smart and poor, lots of non-white folks - who would contest that pretty stridently.


What you're referring to were societal/cultural issues and artificial limitations to education.

I'm referring purely to the quality of higher education for the price that was paid. Accounting for inflation, in real terms the price that was paid for college was a small fraction of what is being paid today. And anyone (who was not subject to artificial limitations on access) could pay for it in a very reasonable amount of time and not go into debt by working, as I showed in that link, ~250 hours a year at minimum wage to pay tuition - tuition assumed to be for one semester, not two - so double that to ~500 hours a year at minimum wage to pay for the whole cost of that year's tuition. That's extremely affordable and no one had to go into debt to do it. In fact my father did exactly this in the early 80's. He worked part time and went to school and had no debt upon graduating.


The answer is to build other accredited institutions that compete on costs. They can poach all those adjuncts from the established universities by offering them tenure-track positions, build no-frills dormitories, skip the fancy landscaping and neo-classical architecture, forego any formally sanctioned athletic programs, rely on the bare minimum of administrators, and focus on undergraduate instruction.

And that could be a decent second life for abandoned retail shopping malls, too.

It might also be nice for such an institution to adopt a libre-license or gratis-license policy for all course materials, such that textbooks and lecture notes are essentially sold for the printing and distribution costs, and electronic versions downloadable at no additional charge.

And since some of those new colleges will fail, establish a succession plan to begin with, so that the student records can be easily maintained and transferred.

Even if you cut established university costs to the bone, you still eventually run up against the problem that there isn't enough undergraduate instruction capacity in them to serve the growing demand for bachelor's degrees. You're going to need to build out anyway, and private universities aren't necessarily going to do enough of that if it drops the market price for tuition.


Or alternatively, you could make sure there's an affordable public option for university level education for qualifying students, to avoid the need for a loan in the first place. It was feasible before, and I'm sure there isn't any non-political reason why it'd be impossible now.

The percentage of the population that enrolls in college has increased dramatically, so a given level of individual support has become more expensive in total.

(I don't mean the above to really try to address whether it is feasible, just to point out that the situation has changed)


However, university cost inflation is even greater than health care costs. One of the only logical reasons is that as more “free” or “cheap” government money enters the system, the more inflation. Ready availability of student loans has made universities much more insulated from market pressures than “normal” industries.

If you were to eliminate student loans, costs would drop like a rock. You wouldn’t have universities hiring endless Vice Provosts of Some Bullshit Initiative or spending 10s of millions building “Student Life Centers” or luxury-level athletic facilities for sports that aren’t revenue self-sustaining. Universities are like the military — they pay the privates (adjunct professors) almost nothing while spending huge money on things like the Crusader Artilley System (insert random boondoggle university initiative here.)

Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, it’s clear universities are running quite a racket. And we haven’t even touched on the insanity that is textbook pricing.


>Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor,

Woah. Maybe a few freshmen should band together and hire some PhDs to assemble a fire-and-forget university. If you can pay for one professor per student, a class of 20 students who want to major in the same thing could easily fund 4-6 classes/year and have a factor of five left over to rent a nice room in the community center. Obviously this isn't about education anymore.


In addition to this very good point, Baumol's cost disease makes education ever more expensive as long as it is a labor intensive practice.

The bank should be entirely at fault here. If they looked at a student's request for a loan that said I'm taking a basket-weaving class at Cornell and I need $120k to attend then it's the bank's prerogative to look into the student's past performance, the rate of return for basket weavers, and the bias to which Cornell would prompt higher or lower returns in this area.

Just like any area of lending, it's on the bank to assess the risk of lending.

(And as an aside and I say down below: This is why I feel banks shouldn't be in this position.)


You and I are the bank, these loans are federal, no private bank is giving these loans out, you and I are and we are footing the bill when the natural default occurs

Private banks are giving the loans out. When they do, they keep the interest, but shovel the default risk onto the treasury without paying them to do it.

The Dep't of Education also gives out direct federal loans and grants, and sometimes those private banks service those loans, but federal financing is now not quite enough to pay for a whole degree, so private loans are filling the gap, at greater expense to the students.


I agree that our student loans are junk and need a revamp, but if banks only loaned for the rate of return of a job, we'd have engineers and no one else. There is something to said for having artists and philosophers are "useless" as their degrees are perceived to be.

> if banks only loaned for the rate of return of a job, we'd have engineers and no one else.

But is it really worse than the current situation - where people borrow to study something enlightening but economically questionable, and then struggle for decades as they can't pay the debts nor declare bankruptcy?

I agree that studying arts is worthwhile, both for the individual and society as a whole. But there has to be someone to tell the 18-year-olds that they can't borrow $100k for it, or they are making things worse for themselves.

Perhaps if banks adjusted loan amounts to potential future income, then arts faculties will be forced to lower tuition fees. And some students will correctly see that they just can't afford it - better to discover that before starting instead of after graduation.


No need to go to expensive university to be an artist or philosopher, especially if one acknowledges that probably noone would hire you for that. And considering the major/minor setup in US education, you could always major in something that is in demand, and minor in philosophy. Unless one believes that one needs to be pained to make art or thoughtful critique, I think we might get more of it if people were less burdened by student debt.

The idea here is that there is a feedback system causing the price of tuition to go up. Banks can lend at little risk and schools can charge a lot because students can get loans.

The hypothesis is that if students can't get the loans then the schools can't charge as much and have to become leaner. Combine this with a social change in perception of "you need to go to college to be successful" and I think the idea has merits. Simplified and not the full answer, but it definitely has merits.


But when an artist goes 100k in debt, we don't get an artist. We get a desperate barista.

Completely agree. I don't think banks should be operating like they do now. It's almost charitable in how it works. Banks, who are driven by profit, give out these loans at a massive risk.

I stand by my point because banks shouldn't be in this position. People aren't companies and they shouldn't be looked at in terms of returns. I (and this is my completely personal opinion) think either education should be free or only the government should provide education assistance.


I couldn't agree more, but should credit hours cost the same for engineering vs the arts? Could programs be 2 years instead of 4? I don't understand why we try to put education in this one size fits all bucket. The goal should be to provide more access to education at a lower cost. That is the deliverable we should be striving for IMO

That’s a great way to cut people from disadvantaged backgrounds out of college degrees, and therefore social mobility.

Which disadvantaged?

The smart person who is born poor or a minority will do just fine as their grades will carry them. Thus a bank should give them a loan - based on their high school report card.

The "stupid" person regardless of background is unlikely to do well and should not get a loan.


> The smart person who is born poor or a minority will do just fine as their grades will carry them.

Spoken exactly like someone who was not poor and not a minority.

Being poor creates a network effect of issues that can keep VERY smart kids down for a long time. Being poor and having all of your relatives be poor too means you have no mentor network and very few ways out. Being poor with poor parents that are working three jobs just to afford food and shelter or aren’t working because they’ve given up (or were given up on) means that your most direct line of support is pretty much absent and that you are on your own. Very few kids make it out of this situation.

It is a very hard problem to fix.

If you WERE poor and a minority and are saying this, then you should DEFINITELY know that you were an aberration.


I agree. However college will not fix the problems those people face.

I don’t think that banks should solely be in charge of who gets a chance in this country. Furthermore the myth of the good grades regardless of home life is just not realistic in my experience- many people need to grow into adulthood later because of instability, malnutrition, or the ability of the school they went to to prepare them for standardized testing.

I agree with all the objections you place. However those are different problems. Putting somebody in college from that situation will not help them. We need to give them a way better, admitting they will never be well educated, but they can bring their children to that level with the right support.

Note, this comment applies to the other poster as well.


I agree fully, and as I commented above, I don't personally believe this is a place for banks to be for that reason. It's shoehorning a profit-focused entity almost as a charity in my eyes. It incentivizes banks to go after borrowers as if they were a failed business when in reality they're just trying to improve themselves (which is good for all of us).

>At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?

This seems to be some undying myth that is really effective because it allows individuals to gloss over personal value judgements about individual's educational choices under the guise of economics. It massively oversummarizes college education AND market economics. It is a bad idiom used to undermine any area of thought (e.g., when I heard it applied to mechanical engineering "because mechE's don't code") that it requires more than two neurons to see the value to society from.

The role of education is to provide value to society, not simply provide labor to company's who create one form of value (i.e., capital).


As mentioned in a similar thread yesterday the role of universities has shifted to providers of vocation rather than education.

That's why so many people make that point. I totally agree with you, everybody should study what they find interesting and the role of universities should be to provide education rather than vocation.

But if someone knows they are gonna rack up $100k+ in debts, they should seriously weigh their interest in a subject against the expected (monetary) outcome of getting that degree.


If we didn't prevent it then prospective students would be directed to make better decisions with their future than to get tens of thousands in debt and a useless degree because it's so easy.

"At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?"

I think this burden should be on the lender first then the student. Banks don't just hand out money to an 18 year old for a business venture but they do for school because the government guarantees they can get it back.


> At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?

Surely it isn't

If no major banks will give student loans, than it will be smaller, low tier loan sharks at higher rates.

As some states in US, and other countries do have some programs where the state is either the guarantor or a partial payer, that will make things worse for the taxpayers.

Invention of student loans has unleashed the genie from the bottle.

No way back, just as it was with state backed mortgages that did just 2 things: made buying houses for cash patently impossible for an average Joe, made an average Joe having to pay for foreclosures and mortgage interest of another average Joe with his tax money.


> put the school on the hook

While I agree with that (a lot), you can repossess a degree. The school can choose to disavow knowledge of a student. Employer tries to verify your degree, nope, don't know you. You cannot repossess an education, but you can repossess a degree. How important that is, I'm not sure. Your other solution (clawing back money from the schools for useless/overpriced degrees) is far more elegant IMO.


Apart from being libelous to deny that a student had received an education, they should still be able to demonstrate knowledge, provide a graduation photo etc.

Ok, so, don't libel.

"We refuse to confirm or deny"

Or

"We see that person in our records, but, we aren't allowed to disclose if they did/did not complete a degree (and what that degree might be) because their account is blocked."

There are lots of ways that it can be tweaked to be legal. I still think it's not as good of an idea as clawing money back from the schools. They created the mess, they can fix it.


Putting the school on the hook for a percentage seems like it will cause schools to raise prices even more.

I do think students should be able to discharge student loans in bankruptcy. However to balance it out, you lose all rights to use any schooling. Try to register for any class again and your loans are reinstated with back interest. HR departments will be required to check the blacklist to ensure that your schooling is not relevant to any position you apply or might be promoted to. (you cannot raise to something like master plumber because a master plumber is expected to have some skills that you might learn in college even though most learn on the job)

Of course the HR blacklist needs to be protected by HIPPA like laws against misuse. A company should expect to sometimes hire someone and then find out they cannot promote them very far.


HR Blacklist? Terrible idea.

Just because you made a mistake 20 years ago doesn't mean you should never be allowed again. We're not talking about murder; and this is directly messing with someone's livelihood.


Then pay your tuition loans.

>If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets).

If you'd be stupid not to do it, how many people have actually done it? If it was actually done at a certain rate, why wasn't that rate priced in?

>IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%.

This is a pretty good proposal.


You can't discharge student debt in bankruptcy so no one has done it

> You can't discharge student debt in bankruptcy

Yes, you can, it's just more difficult than other unsecured debt. This is a distressing popular myth which leads people to fail to explore their options.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...


Once upon a time it was legal, so if it was smart, people would have done it back then.

I agree with this. As part of the underwriting for the loan the school has to have skin in the game and is responsible for at least some of the default and no extra recourse to go after the debtor beyond what the original lender already did. It would definitely change the admissions criteria for the better and also incentivize institutions to to spend more wisely.

> You'd be 29 by the time the bankruptcy fell off your credit report

7 years for chapter 13, 10 years for chapter 7


Being unable to easily get credit or rent an apartment in your 20s doesn't exactly sound like a walk in the park.

It's hardly remarkable. Student loans are originated without regard to credit risk, at the same interest rate for all borrowers. Moreover, pretty much every student is eligible to declare bankruptcy soon (and often, long) after they graduate. Requiring loans to be freely originated on one hand, and permitting people to discharge them in bankruptcy on the other, would be completely unworkable.

As to why we require loans to be originated without regard to credit risk: if we took credit risk into account, disadvantaged groups would get student loans at drastically decreased rates. That, in turn, would undermine our bipartisan narrative that the way to overcome all the bad things America did to certain people is not to fix the resulting problems, but for everyone to get a college education.


Is this same logic supposed to apply to professional school debt, which likewise can’t be discharged despite the extremely low credit risk?

Yes. If your credit risk is so low that non-dischargeability is a bad deal, presumably you can just get a private, fully dischargeable loan.

The basic structure of this argument is really straightforward: if student loans were dischargeable in bankruptcy, it would be irrational for a lot of student borrowers not to go into chapter 7 after school, when their earnings are so low that they qualify and their time horizon for major financial decisions is so far into the future that their current credit rating doesn't matter.


>Student loans are originated without regard to credit risk, at the same interest rate for all borrowers.

That's not entirely true.

For undergraduate students, no more than $57,500 can be loaned from the government at a fixed 4.45% APR. This is what you're talking about.

If you need more than $57k (which you would even at most state schools) you need to get a private loan. Private loans have variable APR based on your and your cosigners credit history. Sallie Mae offers loans with an APR between 5.74 and 11.85.


A fixed rate that changes, right? None of my loans ever had the same percentage as the year before. Small point though.

Federal are fixed, private are often variable.

Also, not sure about the 4.45%. My federal are more than that.


Hah right, a fixed loan rate which is fixed for the life of the loan. I mean that the fixed rate at which they lend changes every year :)

>As to why we require loans to be originated without regard to credit risk: if we took credit risk into account, disadvantaged groups would get student loans at drastically decreased rates.

Those are unlikely to be drastically decreased. What will drastically decrease is the amount of people, of any color, who can afford an art history degree. That is a good thing, especially for those who will be the first in their family who are going to college, and are therefore more likely to be swindled into one of those degrees in the first place.


The other side of it is everyone qualifies for a loan. So there's an enormous amount of risk associated with it and the interest rates do not reflect that risk.

It's difficult to loan 18-year olds money as they tend to lack income and credit worthiness and it's also unreasonable to expect an 18-year old to really understand the future debt they are setting themselves up for.


Hence why the federal government backs nearly every student loan either directly or indirectly. None of the private banks risk their own money in this market, as the feds have happily hand them cash and encourage said banks to loan it out!

This has resulted in costs spiraling out of control, as universities can charge whatever they want with minimal repercussions, and students often end up with the STD known as student loans haunting them for the rest of their lives.


As someone who exited a chapter 7 bankruptcy (all dischargeable debts wiped out) in 2010 with $140K USD in student loans, I can say with certainty that student loan debt sucks.

Oh wow. That must be some story about how you racked those up. I wish you luck.

Imagine a person who is the paragon on personal finance, wise & disciplined in all aspects of borrowing & spending; I was the opposite in my college days & grad school days :)

It's better now. Yay!


Because there is no collateral.

>In Miami, a law firm working for Transworld brought a lawsuit last year against Antonio Fuentes, seeking payment on a $13,356 student loan. With interest and fees, Mr. Fuentes now owed $25,322.31, according to the complaint.

>“Many judges take the attitude: ‘I paid my student loans. You ought to pay yours. Don’t give me this nonsense about technicalities.’”

That judges are even allowed to do this is awful. Why should this person have to go through the arduous and expensive appeals process just to get justice administered correctly?


Because there isn't enough skin in the game. Judges don't get punished for bad decisions and Transworld was allowed to mislead the courts for too long.

I don't think judges should necessarily be punished for bad decisions. The judiciary is a mechanism for allowing society to get along peacefully with one another (ie you can take your grievance to a judge instead of to the mob). I don't really want judges having to worry about punishment when doing their job.

On the other hand. Incompetent and corrupt judges have no place in the judiciary because it's basically an attack on the citizenry's ability to live peacefully. Now you need money, power, or violence to live security and that doesn't go well. Incompetent results in dismissal forever (sorry I don't have a good test for this). Corruption results in loss of past, present, and future benefits and significant jail time.

Third parties abusing the judiciary to abuse the citizenry is just as bad as a corrupt judge. Their end should be in a jail cell.


"The judiciary is a mechanism for allowing society to get along peacefully with one another"

The Judiciary is much more than that. But even if that were the case, judges who make bad decisions impair the peace that they're charged with keeping. It would increase peace to get rid of bad judges and prevent them from issuing bad judgements.

I think our primary issue is "what constitutes a bad decision". You separate out bad decisions from incompetent and corrupt decisions. I think that any 'bad decision' is one that reveals a Judge to be incompetent or corrupt. In this case, I think the judge made a bad decision because their decision didn't reflect the evidence available to them. They should be put on probation at the least.


You forgot lazy. What do you do with the judges that simply can't be arsed to read the filings or briefs, and arbitrarily rule against those that seem to be making the most work for them? They want a light calendar, so they can spend more time doing literally anything else. So what do you do with those who will only do their job half-assed?

Vote them out in the next election?

I think I'd be willing to move to wherever place it is you may be thinking about where that actually works.

I always vote "do not retain" in every election that allows the public to vote for judges, on the off chance that someone else that knows something I don't may need the help in removing a bad judge, and none of those judges ever failed to remain on the bench.

But most places that I have lived don't even vote on judicial retention. The only reliable way to get rid of a judge is to get them appointed to a more prestigious circuit, which would be a pyrrhic victory.


> I don't think judges should necessarily be punished for bad decisions.

There are poor subjective decisions and then there are bad decisions.

"The technicality of the law" is a core component of the job of a judge. _Wilfully disregarding_ that is incompetence.

Example: in my state I work as a paramedic or EMT. In many states, including mine, there are Good Samaritan laws that protect bystanders, should they do harm in attempting to do well. There's a standard of reasonability.

For me? Not so much/at all. If this is my job, I am held, by my employer, by the state, by the Medical Director (whose medical license I practise under), and my patients to a core competency that means I am expected to know, and act as a professional care provider, and that I can be sued, sanctioned, or otherwise for failure to meet those standards.

And it should be the case.


I'm rarely one to advocate for legislating solutions to problems but forcing schools be responsible for more of the communication with student/customer/debtor when it comes to loaning money, collecting payments and handling defaults would really cut down on the number of student loans that aren't paid back on schedule.

If the school is responsible for the overhead cost of that communication they will have a strong incentive to make their students capable of paying back their loans or accessing the various deferment/income based repayment options in order to avoid the cost of collections.

A work study student who hates their minimum wage job will be a lot more helpful to a debtor who received a payment due and is calling the 1-800 number on it because they are confused than some random person in a call center that's an Nth level subcontractor for some bank that owns the debt.

A work study student who hates their minimum wage job will be a infinity more helpful to a debtor who is in default and is calling the 1-800 number on it because they are confused than some random person in a call center who makes a commission based on how they handle the account in question.

If the school was responsible for the cost of communicating with the debtor a lot fewer loans would make it into default in the first place.


Given the benefits schools receive from being able to raise prices year after year with such limited downside, your idea makes a lot of sense.

It might be some way to impose some kind of responsibility onto the schools.


I suspect these guys are not the only debt collectors operating this way, but the whole thing is shameful. Talk about an industry crying out for more stringent regulation.

Is it more shameful than the colleges and universities that push students to taking out these loans (calling them "financial aid") knowing full well what waits them on the other side?

No way to discharge these loans besides leaving the country and going native elsewhere, or paying them off entirely. Essentially, if your gamble doesn't pay off, you get a life long debilitating STD known as student loans.

More stringent regulation from the very people that are encouraging it? How does that work exactly?

Crying out for a metaphorical noose is more like it.

I think this is another situation where you can look at the models in the UK, Europe, other similar countries to find solutions.

If I grew up in the US and could have managed it, you can study in Germany as a foreigner for free. Other countries like Aus have a system where your loan is interest free and indexed with inflation, and you start paying it off after you make about $35k per year as a percent of income.


Here in America we gain interest while we are in school and have to start paying it off 6mo after we graduate. For context, that is the average time it takes a student to get a job (right when they are also paying moving costs and such). Payment used to initiate after 9mo after graduation.

Not all loans accumulate interest while attending school. Look at unsubsidized vs subsidized federal loans.

Not all students qualify for such subsidations.

I just had an idea this morning for how to fund universities that I think could solve many of the issues associated with student loans. The idea is that instead of students paying tuition, they would sign contracts to pay a fraction of their income for several years after graduation, e.g. 1% of income for 15 years (perhaps with a cap). Enforcement could be difficult, but this would much better align incentives with the desired result, i.e. to educate! It would also incentivise universities to help alumni get and hold high paying jobs.

Starting such a university would require a lot of startup capital, but it would become self sustaining in less than a decade.


Imagine a world without ever inflating funny money, where people only buy what they need instead of junk.

The funny thing is that inflation would actually be among the easiest ways to get out of such debt.

You're right, but why cure the symptoms? Take care of the disease instead.

Slavery is illegal.

Letting people enslave themselves however is not.

An indentured servant or indentured laborer is an employee (indenturee) within a system of unfree labor who is bound by a signed or forced contract (indenture) to work for a particular employer for a fixed time. The contract often lets the employer sell the labor of an indenturee to a third party. Indenturees usually enter into an indenture for a specific payment or other benefit, or to meet a legal obligation, such as debt bondage. On completion of the contract, indentured servants were given their freedom, and occasionally plots of land. In many countries, systems of indentured labor have now been outlawed.

When you are enslaved by the monetary system... well... You made that choice


That's a terrible argument. Even in the 1600s where indentured servitude was commonplace, the system was essentially slavery, with comparable death rates. Hell America had a rebellion because of white slavery - Bacon's rebellion.

We got rid of slavery because of the social impact and also because of the moral implications. There's no reason to bring it back in another form.


Its not an argument. Its an observation of the existing monetary system.

When you borrow on your future earnings you are essentially putting yourself in indentured servitude to the banks.... and this is your choice.

No one forces you to do this.


Indentured servitude is also illegal.



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