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Nearly 5M Americans in Default on Student Loans (wsj.com)
145 points by rayuela on Dec 14, 2017 | hide | past | web | favorite | 134 comments

I'm a high school math teacher. As part of their high school math education, I encourage all of my students to do one of their projects on analyzing loans.

I ask them to pick an item they might take a loan out for, such as a car, a boat (we live in a small fishing town in Alaska), a house, or a student loan. They pick a realistic loan amount, APR, and term length. Then they run the numbers on the loan.

I demonstrate making a loan analysis spreadsheet, starting with an empty spreadsheet. Students then get the choice of making their own spreadsheet, modifying one that I've made with them, or using a loan calculator. By the end of a session, most of my students have become comfortable using a spreadsheet to analyze a loan. This lets them understand how all the various factors interact, and they can play with any loan they become interested in.

Students start out with no idea how banks and lending institutions determine monthly payments. They end up understanding loans better than many adults. They move away from "all loans are bad and predatory" and "loans are free money" to "some loans are fair, some are predatory, and I need to ask myself if a specific loan sets me up for a better life.

I wish someone had done this for me. When I took out student loans many years ago, I had no idea what my monthly payments would end up being. I was just told it would be worth while, and I trusted the people advising me. Students these days can't afford to blindly trust that student loans are going to make their lives better.

I think it's hard to absolutely assess the value of a student loan —however predatory— without considering the prospects of having a higher education. Some degrees are worth a dodgy loan. Some really aren't.

You could also say that many students wouldn't be in higher education without the loan. That is especially true here in the UK. That might not be a bad thing except that we've gone through an arms race so that every junior post needs five bachelor degrees and a decade of experience. Experience alone used to be enough.

It'd be nice to get back there. Our focus on getting everybody into higher education —and underwriting indefinite liens on lifetime income— has also meant that universities care more about the number of students than the quality of teaching. That alone probably isn't news, what has been recently in the UK is the remuneration of higher management staff.

They can apparently justify the 10-20× bump over senior lecturers (plus benefits like housing, cars, lunches) to their boards by saying they're the only people who can attract all the money from the students. It's disgusting and vicious cycle.

It’s similar in the U.S. people going six figures in debt for degrees that qualify them for $30k jobs is a problem, but that is a dirt-simple ROI analysis.

Forcing nearly everyone into the college-bound track is a huge problem. Politically, vocational training is deemed classist or racist, and such utopianism creates a sad disservice to lots of young people who could be learning skilled trades and setting themselves up for comfortable living.

Just like everyone at the university level is not med-school material, not every high schooler is college material.

Six figures?! I'm sure some people manage to clock that up, but the 2015 average[1] was $30,100 at graduation.

Edit: Don't get me wrong, that's still a huge pile of money for a worthless degree, or something you should have learned "on the job"... But it's a long way off $100k+

[1] https://ticas.org/posd/map-state-data

It sounds like a partial solution to this is an infographic that must be provided by each college before allowing loans to be taken out showing:

* The degrees you're interested in

* The total cost of ownership of each of those degrees, based on the dollar cost + interest

* The years you'll have to work to pay off the degree based on the median salary of whatever career requires that degree

* Placement rate in the career you're obtaining you're degree for after obtaining your education (colleges usually fudge the numbers here by considering a student getting any job as "placement" after going through their pipeline)

Very similar to truth in lending requirements for credit cards and mortgages.



You can't expect the college to give you a realistic prospect when they are the ones who stand to (non-) profit from your matriculation.

At the very least, they will give you a best-case scenario instead of a worst-case or median-case.

That's why you use the law to do it, like we do with credit card and mortgage products.

Sadly, in the US, we don't teach ROI. That comes in your 2nd year of college. Its a trap!

Pretty easy to assess if you google for some basic employment information (at least for the US). [1]

Doing so results in seeing that a sociology degree from an expensive school means you'll basically never be able to pay off the loan.

Get an engineering degree from a state school, and the interest rate almost doesn't matter. (yes, of course the interest rate matters - I'm just being a bit cheeky in the comparison.)

[1] This is literally the first link under google when searching for "starting salaries by major": https://www.forbes.com/sites/susanadams/2015/07/02/the-colle...

The problem is not the lack of personal responsibility of students in their decision to take out loans. The problem is the systemic failure to provide high quality education to those qualified to pursue it. Those who are qualified to pursue higher education should not be prevented from doing so by questions of personal finances, inherited wealth, etc

Very cool that you are doing this.

I had an AP English teacher that took us 'off book' after we finished our tests to teach us real-life stuff (how taxes work, credit cards, etc.) for a few days. More students should be getting such a primer before college.

But, you can't predict whether your going to finish college or not. or whether your going to get a "college grad" level job. or whether your going to get pregnant and not finish.

Analysis is great for aggregate decision making. But for the lotto of life. sometimes you can make the best decisions and still get screwed.

That is really wonderful. Schools everywhere, regardless of country, should really have a mandatory basic financial literacy course. So many people fall into various debt cycles and I feel such a course would be very beneficial at preventing a lot of people getting trapped.

Care to share your instructions? I’m an adult and I just use the web calculators haha.

This did not happen by chance. The answer isn't hard to arrive at--simply ask why college is so expensive compared to the 1990s, and why states cannot afford to offset these costs anymore. America is selling out its future by convincing young people that they should go into debt to pay for "the college experience".

But why does "the college experience" need to include superfluous staff and wasteful resources? Follow the money.

> Follow the money

Paint, for those of us with no familiarity with the US system, a picture.

Insane administrative salaries, ridiculous sports budgets, new buildings and amenities that no student needs ( https://www.washingtonpost.com/sports/colleges/one-schools-f... )

Those things are easy scapegoats but they aren't the biggest cause of tuition increases. States simply aren't spending the money on colleges like they did in the past. [1] This is likely because of all the guaranteed loan money available so the states don't feel the same pressure to fund universities.

For the specific case you linked above, $25m for athletic upgrades is really not that expensive for a school the size of UCF with over 64,000 students and an annual budget of $1.5b. [2] If you abandoned building the facilities and distributed the money evenly among all students you could cut costs for a single year by 2% for in state students and 1% for out of state students. [3] That isn't nothing and you can certainly debate whether athletic facilities are a smart use of $25m, but it is a drop in the bucket compared with the actual rise in costs.

[1] - https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...

[2]- https://www.ucf.edu/about-ucf/facts/

[3]- https://admissions.ucf.edu/cost/

Link n1 presents some interesting information:

"The picture is a bit different at private schools, which do not receive state funding but have nonetheless seen substantial tuition increases. At private nonprofit colleges, the spending categories described above — student services and faculty and administrative salaries — together explain most of the tuition increase over the past two decades."

So perhaps this is a case of misattribution - you have people talking about the excesses of private schools in terms of administration and such, but the article is talking about public schools. Are people just talking past each other here? A good question to ask would be if we're looking at the same rate of student loans/defaults on loans. If students in private schools predominantly pay their loans, then this points to the reduction in state funding as the primary culprit, but it could be the other way around as well.

There's also this:

"Among for-profit institutions, it is much more difficult to pin down a reason for tuition increases, though recent research suggests that one big cause is the generosity of federal student aid: Some institutions may be raising tuition in order to capture as much government-backed money as possible."

Since federal money and state money comes from the pockets of the same people, is it not reasonable to suggest that this "generous federal aid" is siphoning off resources into for-profits, where most of the tuition increase is "administrative bloat", instead of going to state-funded public schools, at least to some extent?

One final thing - the article doesn't go into detail as to why state funding has decreased. Is it because the states have redirected education funding into other spheres, or perhaps that the states have to fund way more schools(per capita) than they used to? This is another missing piece of the puzzle.

For one state in the Northeast, crushing debt load of state pensions. For a couple of decades, state leadership promised generous pensions and kept kicking the can down the road.

Something has to give and (higher) education funding is an easy item to cut.

"The current speaker of the house, Joe Aresimowicz, works for the American Federation of State, County and Municipal Employees, an amazing conflict of interest even by blue-state standards."

"The erosion of Connecticut’s suburban tax base is a more dire prospect than the continued weakness of its cities."

> Those things are easy scapegoats but they aren't the biggest cause of tuition increases. States simply aren't spending the money on colleges like they did in the past. [1] This is likely because of all the guaranteed loan money available so the states don't feel the same pressure to fund universities.

I have seen the model stated that there are two Official Views on why college prices are up:

1, the Democratic View: prices are up because states have cut spending on colleges.

2, the Republican View: prices are up because given the easy availability of student loans, colleges can charge higher prices.

It's surprising to me that these are considered acceptable rival opinions, because, if you assume that one is right and the other is wrong, it's very easy to determine which is which.

#1 says that prices have risen due to a fall in supply. #2 says prices have risen due to a rise in demand. Both of those things do in fact increase prices, but a fall in supply causes a rise in prices and a fall in quantity traded, while a rise in demand causes a rise in prices and a rise in quantity traded. If you think that one of these things is responsible for high prices, you can determine which simply by asking "compared to the good times when prices were low, have college enrollments increased or decreased?"

That's an incredibly simplistic view and betrays own biases. For example, point 1 could better be described as "per capita state spending" and that completely annihilates your point.

In the same way, for point 2, you would have to calculate the percentage of funding change per student, not the macro view alone.

Nah, it's both-and. States feel less pressure to fund colleges because of easy availability of student loans.

Alternative reason they charge such high rates: because they can. The demand (and the system/society that encourages it) is there. All of those items you listed I believe are the effect of having more money, not the cause of collecting more.

Former university system administrator, let me summarize: US govt style waste but in the private sector, spoiled professors to their credit who are not going to shrink their income after under and grad debt, and obtuse admins overseeing technical and nontechnical projects with zero domain expertise or project management acumen.

Go work in a private uni in the US. You'll be amazed! I worked in a top 20, and on an int'l campus. My very disgusted view of private education is based on 8+ years there.

You've got it. And not only is university more expensive overall for these reasons, but a significantly smaller proportion of tuition/housing is coming from state funding.

When education is treated like a business instead of a public good, the costs get passed on to students from wealthy families or to students who take out massive loans.

and the constant drumbeat that you must attend a $60k/year private school or your life is ruined. instead of a state college or better yet a 2 year community college + 2 year state. very cheap

I attended a state-run community/technical college. The cost was something like $6k/year, and the only company that's cared was _one_ Google recruiter who ghosted me when she learned I didn't have a 4-year degree.

I imagine you grew up either in an at least upper-middle-class family, or in an area with unusually driven and competitive teenagers compared to the national average.

There was absolutely no pressure, in my experience from a random boring part of white suburbia, for anyone to do anything but go to one of the states’s relatively cheap public universities.

People who went to places like MIT, Harvard, or expensive liberal arts colleges were a rare exception by far.

Tuition, especially at private colleges, is totally out of control. But class sizes are up, not down. And the number of full professors is not growing. So where is the money going?

To an explosive growth of administrative staff. My alma mater has almost one employee per student. There are many dozens of administrative departments, each with multiple deans and assistant deans and staff, and sometimes subdivisions each with their own layer of bureaucracy. OPAL, for example, has a subdivision for each kind of minority on campus, each with its own assistant dean and staff. You can look at the list of departments: http://home.dartmouth.edu/administrative-offices . Keep in mind that this is a very small college, with about 4000 undergrads and 2000 grad students.

This monstrous growth is entirely a product of the last 30 to 40 years and is almost entirely responsible for the astronomic increases in tuition, currently $60,000. Even worse, the college claims that its actual cost per student is double that, with the shortfall made up from the endowment. There is NO legitimate reason that a college education should cost over $100,000 per year.

The government needs to stop writing a blank check to these colleges in the form of unlimited loans for their students. The government needs to set a much lower cap on the number of loans it will give to each student per year. The colleges will accuse the party in power of trying to deny students the right to an education, but they will eventually surrender and start cutting the bloat.

What's the reason for that. I know administrative staff like that that are getting paid, but what would the current one decide to hire more staff? Unless there was some benefit the staff would prefer to keep the money for themselves rather than hire more people.

It is a law of bureaucracy that it always grows absent some constraining force. A few reasons come to mind:

1. Have a problem or a new political goal? Make a committee, open a new office, etc. This is how bureaucracies see the world.

2. Unproductive employees? You can't fire them because of HR policies and unionization, and more importantly, because there's no constraining force creating a culture of efficiency. So just hire more employees.

3. No one who rises to lead an organization then campaigns to diminish it in size. Everyone thinks they are important and that their work is important. Having more people working under you makes you more important. Having fewer makes you less important.

These are problems in for-profit organizations, but the market provides a constraining force. An inefficient company won't be able to compete with a more efficient one and will eventually go out of business. Also, shareholders will demand that expenses are cut so profits, and dividends or share price, goes up.

Americans colleges expect you to fully insert yourself into college life, and for you to fully insert them into your life.

It's like having a parent, except you have to pay them.

They expect everyone to live on campus - so they have to play landlord, mayor, community organizer and mediator, mom and dad, chef and waiter, stadium and opera house, convenience store and urgent care clinic...

Now, which of these do you think are among a college's core competencies? Which of these services are provided in a cost-efficient manner?

They also have a monopoly on providing those services to students, so no incentive to keep costs down.

Although by inclination what I want to do is rant about the iniquity of this kind of robo-debt in education, instead what I am thinking right now, is this: how does this compare overall to the rate of default in debt for other purposes? how does it compare to car loan debt? mortgage debt? I ask, because debt is the same, except in as much as student debt is in principle seeking a path to be able to repay it. The asset based debt invites a repo man:

you can't suck knowledge back out of a graduates head (ancient egyptian practices to the contrary)

"The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating." -Thomas Jefferson

I know I mention this book a lot on here, but _Debt: The First 5,000 Years_ is the most amazing book I've ever read on the history of debt, money and slavery.

Debt relief has to come. Every great civilization throughout history has had to forgive debts. Current student debt is not even remotely payable. Millennials are the most in debt out of any generation, the lowest paid and most likely to take unpaid internships[1]. They put up with so much more that no previous generation would have even stood for.

"A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point we can’t even say. It's more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe." Graber, Debt: The First 5,000 Years

[1]: https://www.youtube.com/watch?v=-HFwok9SlQQ

> They put up with so much more that no previous generation would have even stood for.

This is a rather ungenerous view of the great burdens faced by previous generations. When I grew up there was a draft. When you got out of high school, you faced the real live possibility of being forcibly inducted into the military and sent to an active combat zone--where many US soldiers died, including high-school friends of mine who were killed before they turned 20.

They would happily have swapped going to war for four years of college and the long-term debt attached to it if they had had that option.

You might not like the terms today, but please don't ever say you have it worse than any generation before you.

I agree with this. A lot of what I see along these lines is simple ignorance - life is certainly no harder than it's ever been and probably easier for most young people in the US.

You recommended “Debt” on here a while back and so I read it and just finished it this week. Amazing read! So interesting how the language of debt is tied up in our conceptualization of morality. I see this everywhere now, mostly recently in this aptly named startup trying to build debt instruments on the blockchain: https://dharma.io. After reading their whitepaper I think the irony of the name is lost on the authors.

Anyway, thanks for the recommendation!

"A debt is just the perversion of a promise...."

That entire quote reads as completely incoherent to me. I feel like I would have to learn entirely new brands of logic and language to decipher it.

I haven't read the book he suggested, but the book's author created this podcast[1], which I'm told covers much of the same stuff. It's really fascinating and changes how you think about debt.

[1] http://www.bbc.co.uk/programmes/b05447pc

A bit off topic, but that quote from Jefferson never sat well with me. Easy to say when you had over 600 slaves. You know what else drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating? ...slavery.

> Debt relief has to come. Every great civilization throughout history has had to forgive debts.

Usually great news and desirable outcome for anyone carrying such debt, but not so great news for someone hoping to borrow for college at that exact time when the turbulent debt markets are trying to price in and overcompensate for high default rates. It’s like being a prospective home buyer in late 2008 - no one is returning your calls and if they do, you get the privilege to pay a premium for the other people’s mistakes.

What's funny about that Jefferson quote is Jefferson was a man who couldn't control his spending and was in debt his entire life. It's not surprising he felt that way.

>because debt is the same

No, not all debts are the same: Debts That Cannot Be Discharged in Bankruptcy https://www.thebankruptcysite.org/nondischargeable-debts

Indeed and there even states in the US that are refusing to renew professional licenses for people who default on that debt. See:


> refusing to renew professional licenses for people who default on that debt

The crapper of it is, it's not just professional licenses, such as nursing or cosmetic licensing, as if that wasn't bad enough. Some states, like Iowa, South Dakota, and Washington, have laws that permit the state to revoke or decline to issue any license issued by the state, including driving, hunting, fishing, and even camping permits.

Basically, those states say that not only will they wreck your ability to work in the field for which you achieved a degree or license (or maybe you didn't successfully complete whatever program and are now working to pay off that debt that resulted in no positive outcome at all), they'll ruin your ability to go places--outside of cities, public transit is a non-entity--or even just have a little recreation while you figure out how to get out of a hole that just keeps getting deeper.

good point. some debts follow you around for life. And after: my dad always said tax was a gamble, and he decided to ignore the final-demand letters which we found in his office after he died. In one sense, he "won" the bet. In another, viewing him as the tuple {himself, his estate} he didn't...

Tax isn't a self serving sociopathic "gamble" it's what allows you to go to school and drive on roads and use the internet. Don't dodge it as part of some insane game you were taught.

Just because something was funded by taxes doesn't mean it wouldn't exist without taxes. When the Soviet Union liberalised, people there were shocked at buying privately produced bread. The limits of one's imagination do not constitute the limits of reality.

And just because something can be privatized doesn't mean it should..

Don't be naive. If I don't pay my taxes this year the Internet and roads won't suddenly disappear. I'll still drive on the roads to work and use the Internet when I get there.

Not paying your taxes is absolutely a self-serving sociopathic gamble.

I should point out that he had an accountant, who almost certainly dealt with most of this, and that as for others in the UK, income tax is taken at source, PAYG. The letters were the adjustment, not the totality of his tax debt. He was an academic, and understood very well the socialized benefits of the tax which propped up the tertiary education system he worked in.

Driving on the road usually requires a car, thats usually an expensive piece of equipment, followed by expensive running costs - fuel (and it's non-gamblable tax), replacing parts, servicing and so on. Use of the internet requires a computer of sorts and a locked in contract to Comcast or another private ISPs (BT in the UK, NBN in AUS etc...). Perhaps I've missed something, am I eligible for a fully-maintained cost-free Tesla, a new computer and free internet?

> Perhaps I've missed something

The road that the taxes (probably) paid for?

Also, GP said "allows", not "subsidizes every aspect of the most luxurious way for".

Here in Australia if you have outstanding debt that is owed to creditors it is paid first before any-one on the persons will would see the money. So in essence most outstanding debt can be collected on a person death.

The idea is to make your debt exceed your assets. Can't collect a million from an estate that has zero.

The ideal finish is..

On death all your debts should be paid in full with the exception that the cheque for the funeral should bounce..

but it's your family member who pays that cheque, not you post humously.

Ah! No.. the payment is made from the deceased's estate..

The overwhelming majority of student loan debt is government backed and eligible for some kind of income based repayment plan. There are four different kinds, but the most common two use a formula of 10% of income after 150% of the poverty level for the relevant household size. It is entirely possible to have a required payment of $0, before even getting into forbearance or deferral.

Car loans and mortgage loans are not comparable. It's possible to simply be unable to pay those debts. So there's every good reason that the student loan default rate should be lower than those.

But schools realize how flexible the terms are and increase the price of tuition to max out the level of debt students can tolerate even with income based repayment

Dental students in high cost of living areas routinely graduate with half a million in debt

Assuming you don't deliberately hide income I guess. Some people have said that for those who get on the low interest, or non-accumulating interest loan schedules, its the best kind of debt you can have. The lein on income is a royal pain and for student debt, it often hits just at the point you want to use increased disposible income to do things like have kids, restart the cycle. I was lucky enough to go to university in the UK in the time of free study with grant so to me, this is all hypothetical not actual and to any current student facing a lifetime of debt, I apologize for the circumstances you have been put in, by people like me

> how does this compare overall to the rate of default in debt for other purposes? how does it compare to car loan debt? mortgage debt?

Great question.

That assumes the person wasn't working too many odd jobs and hours to scrape by, so that they did receive a decent education.

Before the internet, centralized places of knowledge were needed, and you'd need to attend that place to find said knowledge. Think about how access to music caused the price of albums to drop. Education had not seen a similar dip in cost even though the supply is 100 percent saturated.

There's a dying class of professors who got in while tenure was still a thing that paid probably 1/10 of the cost for education kids are paying now. They have the rosiest glasses possible because they're making around 100k for zero competition in their workspace.

The vast majority of the time now a TA teaches the course or certainly grades the paperwork. Well over half of college degrees obtained will never pay for themselves.

A philosophy, social science or psychology degree are not important enough to pay 50k to get. Free college would be a complete disaster, and a massive waste of money.

The education cartel places liberal , financial shackles on kids who are less than 1000 sunrises away from going to prom. The liberal arts is a complete disaster for young people's financial means. So, you get somebody 100k in debt for something they could learn on the internet and guess what? They'll ALWAYS vote to raise taxes on the rich.

I worked at a state university for five years, doing research. The waste of extravagant, totally unsustainable. I was going to grad school free since I was an employee, dropped out to teach myself software and in four years I make nearly as much as the Phds. in a physical therapy department. All it cost me was time.

I thought college was an outstanding and irreplaceable experience. I still have student debt (pushing 40) and if that debt were tripled today I'd still think it was the deal of a lifetime.

Other than some international trips, going to a university was probably the best money I've ever spent.

And this is why it's such a difficult issue.

College can be a transformative experience, and it is for many such as yourself.

But many more are mired in debt and don't experience any increase in their abilities to think critically. For them, it turns out to be one the worst experiences of their life.

Easy solution: have two forms of college and let students pick when one they want to go to.

Have one system where it is primarily online and low cost.

Then have the traditional system where it is physical classes and high costs.

Let students decide where to go.

Nope, liberal arts majors earn as much as professional and pre-professional majors.


Only if they get graduate degrees. Otherwise they start at the lowest end of college degree holders. And the "high" 'professional and pre-professional degree' salaries are dwarfed by every STEM degree out of the gate.

And like the OP said, there is now a glut of humanities degrees higher than the demand for positions.

Do you hate the liberal arts?

Their importance in college was really emphasized after World War II, as many of the leading Nazis were seen as non-intellectuals without moral restraints developed by the study of history, philosophy, theology, etc.

Liberal Arts should be cheap you’re right, but it also should be required.

A big problem with liberal arts currently is it is burgeoning with new fields of study that are truly political movements masquerading as scholarship -- where liberal arts should only be motivated by the search for truth.

So in a sense, the liberal arts aren't the liberal arts anymore.

Based on the information on the internet on topics I was taught at, I only have to say that access does not equal quality.

The relief of bankruptcy: only for entrepreneurs, not for students.

Another instance of utterly corrupt selective application of theoretically sound conservative principles. Just like "deregulation" and Net Neutrality.

There is a reason for that. If your business goes bankrupt it can be liquidated to settle debts. Once that is done you are left with nothing. The same cannot be done with an education. You can't "give back" knowledge to your school, or sell it to someone else.

Liquidation of course is often insufficient to pay back all creditors. The risks which have to be assessed before making student loans vs. business loans differ by degree, not kind.

The systems of laws in our society are constructed. A choice has been made to privilege entrepreneurs over students.

assuming any knowledge was actually gained.

Ex-wife was an english prof at a state university. They had students who came in with a 16 on their ACT, which really means they should still be in high school. They'd take remedial classes for a couple years, then most eventually filed academic bankruptcy.

Finance officer was telling me how for in-state students, the student is only paying around 20% of the actual tab, and that the state picks up the rest. Then there was the story from a few days ago where some poor lady ended up owing over $100k for a < $10k debt due to fees and penalty rates.

Even my own degree, in the "allegedly" hard subject computer engineering, first day of class would fill an auditorium. After midterms, class size would drop to just a handful of people.

So taxpayers on the hook for subsidies, former students paying obscene finance charges on a kind of debt that is almost unshakable, and little of that culminating in valuable skills and credentials...

Excluding the more selective institutions, higher ed is a racket, and the financing of it is an even bigger one.

This is ruining America's future. That's 5M people who can't even qualify for a car loan now. The penalties for default are punishing. Even bankruptcy isn't a realistic option.

This is ruinous for these people. They'll be in their mid-30s or early 40s before they can pay off. Starting that late to build a nest egg, they'll never recover. There's going to be an entire generation that has no secure retirement plans. It will also be a baby bust. By the time they are stable enough to think about starting families, they'll be biologically incapable to produce. Nobody will be around to fight off invaders. We're seriously toast in 50 years at this rate.

Welcome to having America's latest STD! Its bigger than Hepatitis (at 3 million), and costs about the same to cure ($80k to $90k a person).

Relationships are delayed, careers are set back and our economy is slowly bled. Much like healthcare!

Don't even get started on health care. I worked in health insurance for three years and lived outside the US for about the same time. I saw a lot of waste in our health insurance industry and a foreign market that was superior in almost every way, even for very serious conditions. I wrote a post about it a while back:


The age curve in the United States is actually doing pretty good thanks to the massive amounts of immigrants we attract. Japan and Germany wish they had our population growth rates.

yeah, but some guy is building a wall ... getting rid of green cards too

but it's so easy to not opt in for a student loan you can't pay off.

Let's add another layer of abstraction and diversion, the trusty tax payer! /s

This of course, totally ignoring that government backed (everybody gets one no matter what) loans got us here in the first place...

There is a simple and equitable solution, which is to transfer the debt to the universities where they studied.

I genuinely don't know why I haven't considered this perspective before seeing as how many colleges treat students as just bodies to stuff their money bags with. Oh, come to our college, take out $60000 in loans for a degree that will never pay that off, but we get to pocket it anyways because we have no decency? Sure thing! And don't forget to donate as an alumnus! I'm not exactly in this situation, but have seen it enough with people who had no business being at certain schools for certain degrees that I can't help but think universities should be held responsible for all this to some extent.

It's strange how an old-timey concept like a "money back guarantee" gets looked at as though it were full-blown communism these days...

In the US people can’t clear student loans in bankruptcy. It’s a shame, I think, given the constant upward tick in tuition and lack of resulting careers. They can even go after the students parents.

Academia is a great example of what happens when you try to create a "market-free" zone: things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating. See: student loans/tuitions, pay-to-read journals (another front page HN topic).

The student loan problem is a result of the generalized "prestige economy" that's driving the problems with journals (and whose failures include that cascade of replication crises). To see this, realize that the only reason so many people are going to university at all is because a good name on your resume is now a requirement for getting any reasonably well-paying job. See the parallels between that and how academics need good names on their CVs in order to compete? It's a prisoner's dillema where the cooperation-case would be that every person who doesn't need their degree for their career would drop out at the same time that every academic switched to open-access journals.

> things get abused in unexpected ways while clever rent-seekers embed themselves in incredibly lucrative positions that you never knew you were creating

Don't forget the swelling of superfluous administration roles and salaries, including bureaucratic roles whose entire job entails manufacturing problems to justify the existence of their position. See: campus diversity officers https://www.theatlantic.com/education/archive/2016/09/americ...

When I was in school the common trend they had was requiring some foreign language course for ALL students. It was sold with all the traditional rhetoric of making students more well rounded but at the same time you aren't getting more well rounded if you are adding an extra 1 grand to your student loan. It never got implemented though because they didn't have enough budget to implement it.

Mind you, this requirement was in addition to all the existing courses you had to take (40 for a BA degree).

Exactly. If you wonder why education and health care costs explode: when the party deciding is not the party paying, that's what happens.

I hadn't heard of pay-to-read journals being an attempt to create a "market-free zone".

The journals occupy a position where the quality of the service they provide has nothing to do with why a person chooses to do business with them. It's a market in that you can choose who to submit papers to, but the incentives are so misaligned that it doesn't work like a market.

This all doesn't explain why so many people pile up massive debt for a degree that doesn't pay well, if at all, in the current (and foreseeable future) job market - and they'd have to be very clueless to not know it in advance.

They are kids

When they go to college? They're grown up enough to be able to understand such things. This was certainly the case in my generation (mind you, in a different country) - if you asked college students why they're there, some would be actually interested in the subject, most would be there because they thought it would lead to a well-paid or at least stable job, and a few would be kids of rich parents parked away to get their requisite diploma on whatever.

Consequently, for most, choosing where and what they are going to study would either be a research project in and of itself, or else they'd just pick one of the few specialties known to pay well. And we didn't even pay for college!

You can make the student loans dischargeable in the event of a bankruptcy, but at that point their risk profile is no different than unsecured personal loans. Which for a person with low or non-existing credit history (i.e. any 18-year-old) would likely result in:

* requirement for high down payment - perhaps 50 to 75% of the tuition being covered by student or his parents (through home equity loans or retirement account loans)

* frequent and aggressive repayment schedule, starting perhaps 30 days after originating the loan

* high interest rate, perhaps front-loaded into repayment schedule due to higher than normal default rates

* aggressive monitoring of the events related to debt performance, where missed class, late homework, substandard grade or a behavioral citation could result in interest rate boost

* incentives and price control mechanisms enforced by the lender - your computer science class will have a low interest rate, but that music appreciation class or gender studies gotta be out-of-pocket

I think overall that would lower the enrollment rate and force the unbundling of academic offerings. Not necessarily a bad thing, but I can see some people being against it.

> In the US people can’t clear student loans in bankruptcy. It’s a shame...

Maybe you could explain this to me, because I really don't understand. Why do you think that it's a shame that people can't just discharge substantial, otherwise unsecured government loans?

To me, the real shame is high school employees pushing college on marginal students. One of the few things worse than spending too much money on a not-particularly lucrative degree is spending the money, but not graduating.

I believe the graduation rate at Bellevue College, the biggest and best community college* in WA state is around 25%. I'm sure they're not unusual in that regard.

* It's technically not a community college, but for all intents and purposes, it is.

Our rich entrepreneur friends get to take advantage of corporate bankruptcy, giving them second chances when their ideas don't work out. This is just an example of blatant hypocrisy and favoritism advantaging the rich.

If at first you don't succeed... damn well better be an entrepreneur so you get second chances. If you work for a living, no second chances for you!

If it’s a market then the usual market forces need a way to work. Ie. If a college can’t reliably create employed workers the colleges need to feel that loss.

Bellevue College might be the biggest, but its far from the best. They tend to hire current UW professors to teach one class a quarter, stuff the rest of the dept with teachers that were able to get canned at the Seattle Colleges and UW satellites, and hope for the best.

Many of my friends who went there have horror stories about their teachers which I'd be hard pressed to encounter at Seattle Central College or North Seattle College.

Nearly every community college in the Puget Sound decided about a decade ago to shed the community branding and add a handful of 4 year degrees. Problem is the material you learn in upper level CS classes at UW and its satellites is quite different than what North Seattle College and Seattle Central College require (eg: a whole class on SQL Server, C# as the Intro CS class at Seattle Central rathr than the state mandated Python, etc).

US is pretty dismal at graduation rates overall - Department of Education is not even tracking the percent of graduates completing a 4-year degree in 4 years anymore, instead preferring a generous 6-year completion metric for a 4-year degree, which stands at 59% https://nces.ed.gov/fastfacts/display.asp?id=40

41% of all US undergraduate students have nothing material to show 6 years down the road except for the mounts of student debt. The quoted figure of 22% of those debts being in some kind of default starts looking optimistic.

USA checking in. I declared chapter 7 bankruptcy in 2010. Chapter 7 bankruptcy eliminates 100% of your dischargable debt. When the bankruptcy process had completed, I still owed ~200,000 USD, which was 140,000 USD in student loans and 60,000 USD in back taxes that were less than 3 years old, neither of which were dischargable.

In order to owe $60,000 in back taxes, you had to have income. Where did that income go? Were the original loan amounts even higher? Loans of $140,000 sound awfully high for an undergraduate degree. Did you attend a professional school (law school/dental/medical)?

The recession happened, and I attempted to find a job while living on money I had set aside for taxes. That was a flawed plan. About 70% of the loans were from grad school.

At this point, couldn't you just arbitrage it, and take out loans / mortgages / cash advances / credit cards just to pay off student loans and back taxes, after after which you'd actually declare bankruptcy.

If a lender is going to approve a sufficiently large loan to someone with $200k in student loans and tax debt, and without a high income, they would not be in business for long.

I was already tapped out. There was no more money to be borrowed.

That's called fraud and you will go to prison for it.

How is that fraud?

If you borrow money, and it can be demonstrated you never intended to make a good faith effort to pay it back, you're going to have a bad time.

Most people starting college are 17-20 year old young adults with income and assets far below what would be needed to take out $30K-$100K+ in loans.

Not enough lenders would want to take that risk, unless they have the taxpayer to back them up in case the borrower defaults.

If the borrower's allowed to wipe their debt in bankruptcy, then a lot of students will simply declare bankruptcy as soon as they leave school. The students who play by the rules are burdened with debt, and you're subsidizing people who game the system to their advantage.

The fairest thing to do, then, is either subsidize everybody, and have taxpayer-funded higher education (but that's expensive).

Or subsidize nobody, and let people pay their own way (but that leaves behind students whose families can't afford it).

Or fund the most promising students, and make everybody else pay (but that leaves behind students who don't have good academic record).

Personally I don't like the idea that our society starts its newest members out with a huge debt burden.

I’d rather society “waste” resources on young peoples educations than many other things. For reasons similar to why I’d like to see NASA with DOD funding.

It is confusing for me how bankruptcies work.

What happens if a corporate declares bankruptcy? Do they only pay less while keeping everything they invested/bought using the loan money, for example - buildings, equipment, stores etc? How does this compare to student loans?

Assuming the bankruptcy isn't called off:

The bankruptcy is handled by a liquidator or trustee in bankruptcy. That person / entity will attempt to liquidate the assets and will then pay a portion or all of the debts in order of preference. If there is a remainder (unlikely, but it could be) it will be returned to the shareholders. Depending on the country some creditors will receive automatic preference (such as the taxman). In some cases, for instance if it is believed the company is viable but has been managed badly it is possible that such a trustee will even attempt to keep the company running while they search for a buyer.

If debts are re-negotiated or forgiven it is possible for a company to emerge relatively unscathed from bankruptcy proceedings, this all depends on what deals can be made with the creditors.

It compares poorly to student loans because those are individual debts and unfortunately individual debts are far harder to discharge than corporate debts.

It doesn't really matter for corporations, as a company can be burnt and any debts left will never be paid, and a new company can be created with no debts.

This is what structuring related entities is all about.

The one that owes all the money (particularly the one paying and owing to employees) had nothing of real value in it.

I recently rejected a job offer at a major university, as a software developer for their IT department.

The position did not pay, what their brochure was promising their computer science majors could expect to be paid, while at the same time, asking these computer science majors to accumulate 5 salary-years' worth of debt, for the honor and distinction of earning this degree. But they don't even pay their own staff that much.

Like so many things here, I think this is another case of monopoly. Accredited institutions can do whatever they want because there isn't enough competition and students are being taken advantage of (no one is giving them the right financial knowledge about interest rates and years of labor required to pay off the loan).

Let's open up the playing field and allow more cheaper colleges like community colleges. And educate students about choosing those cheaper schools. Employers need to do their part too and stop being so elitist. Not every job requires a Stanford grad.

And let's design the programs so millennials can still work and earn money durring the day and do some kind of part time bachelors program in the evening (that doens't take too much extra time). That way instead of going into debt, they can spend the time breaking even or even building up some savings.

Student loans are the stupidest form of loans. Do people need a college education? Absolutely. What's the best way to provide it? I have no idea.

Here's why student loans are dumb.

1. They are practically guaranteed to anyone who signs regardless of their future ability to pay it back.

2. The majority of people getting them are children and have are terrible at perceiving future outcomes. Ask any 18-year-old starting college if they will make more money than average after graduating, most will say yes.

3.College drop out rates are high. This site says 56% https://www.collegeatlas.org/college-dropout.html . Taking out a loan to help you make more money and then not making more money puts you at higher risk not to pay back.

4. Relatively speaking all majors are valued at the same cost within an institution. If I get a bachelors degree in computer science I pay the same tuition and costs as someone who gets a bachelors degree in ancient history, even though our potential earnings are vastly different.

The entire student loan and college education market is a mess. I suspect this is a sign that college should be a public good or has been messed with by folks that think it should be.

Are there any studies that look at the costs of tuition compared to the rise in freely available equivalent information?

I wonder if this is common in other markets where the companies recognize that a lot of their business is commoditized so they keep raising prices to help offset potential losses.

I don't think student loans can collapse like mortgages because there isn't property involved. However, if there is a collapse in higher education in general - a sort of wave where people realize it is not worth it financially and enrollments drop dramatically, that would cause ripple effects in the economy.

The problem isn't what you learn, it's whether you can show the piece of paper proving you learned it.

I learned most of my undergrad education on my own at home from the books suggested. My education cost me time + the price of the books. However to get the exams, grades and piece of paper in the end, it costs a lot of money.

If we could decouple certification/exams from private institutions, autodidactic people could get their Bachelor's degree almost for free. For Master and PhD degrees I guess the point is more to do research.

A big problem is that the gov't is double-dipping on the benefits of higher education. They both benefit from higher taxes on earnings as well as interest of education loans.

Someone is making good money there. What if People invested on learning coding instead of spending a fortune just to feed the uni market?


Time to get into crypto and pay them off. I know I’m going to get a ton of downvotes for saying that...

probably still the fastest way to double your money...

Let’s simply tax the new BTC zillionaires, and pay down the student loan debts.

We could just forgive the debts. We don't need a compensating tax when inflation is this low.

This would be a slap in the face of some people who went to school and worked odd jobs to pay for tuition.

Not doing it would be devastating for the economy in the long run.

It's a hard choice but macro is more important than micro in these decisions.

Its a mistake in the long run to socialize risk. These former students are defaulting because the courses they took have no value in the marketplace.

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