This is because of distortions in the student loan market. Risk is not being properly assessed and loans are being made when they should not be. Philosophy majors at non-top schools should not be given loans since it is unlikely they will be able to pay them back and the philosophy majors are hurting themselves in the process.
A fix to this distortion is unlikely since the end result would be the closure of hundreds of schools and thousands of faculty and staff being laid off as there would be significantly fewer students.
There's a lot of assumptions here about the value of degrees. It's not just liberal arts people who have trouble getting work, and no degree is a guaranteed ticket into work.
Education shouldn't be treated as a problem to which the solution is free markets. If anything the US could learn from other countries and “distort” its loan “market” more.
His example is talking in aggregate, not specific students. Sure, you might have an art history major find a job quicker than an engineering student, but who will end up getting more jobs, 100,000 art history majors or 100,000 engineering students?
The loan market in the US IS improperly distorted right now - it treats all loans as having the same repayment risk...which is absurd. What we need is a loan system that offers interest rates based on majors. Computer science major? 4% interest. Comparative women’s studies major? 25% down and 12% interest.
“That will just make it MORE difficult for liberal arts majors to repay their loans!” — Yes, exactly. It’s a market signal to re-evaluate their decision, or skip college entirely.
The fix is to provide state funded education, like in Germany! Otherwise, subjects that do not create profits (e.g. philosophy, social studies, history, ...) in the later term will falter.
I think this implies that degrees in history or philosophy and such are always worth very little and a degree in eg mathematics is always worth a decent amount.
For one thing there are plenty of people with such “low value” degrees who would be quite capable of repaying student loans.
There is also the American system where many valuable degrees (eg Law, MBA) require an undergraduate degree as prerequisite, and these are typically in humanities subjects so it seems that to get the opportunity to have these degrees (where loans will likely be repaid), one must first do a low value degree (where a typical loan might be less likely to be repaid).
Also as I understand it, in the German system the state basically sets the fees whereas in America the universities set the fees and the government has to somehow back loans for them. I think part of the problem is a follow-the-leader one: Harvard can set high fees (although poorer students wouldn’t have to pay them) and teach history or philosophy (where such a degree would likely be reasonably valuable, or rather those people who are accepted would be able to make a good living afterwards), and then many other universities will also want to set high fees (without being able to cut them much for poorer students), and want to teach philosophy or history (even though their students will likely not gain financially from the degree or achieve financially despite it).
Perhaps the universities could be made to take on more of the risk of student loans not being repaid (eg student loans would have to be given out by organisations wholly owned by universities). But I’m not sure I really like the idea of universities having to only do things that will make money for their students. Then again, perhaps this is just the leftover of the idea of universities being somewhere that the wealthy sent their children to enrich their character rather than places where choose people go to to improve their earning prospects.
I think this implies that degrees in history or philosophy and such are always worth very little and a degree in eg mathematics is always worth a decent amount.
In terms of the money the students earn in their later life, this is definitely correct. Society simply does not fund jobs not "contributing" to the economy in a sustainable way - for example, caregivers for both young and old people, teachers or social workers are paid shit, while a total dumbass can earn tons of money as a "consultant"...
I think the key word is “always.” It is probably true that an average humanities graduate earns less than an average mathematics graduate (I chose this instead of engineering where there might be professional qualifications involved). However it is less clear that an average law or mba graduate would earn less than an average mmath graduate. And for those degrees an undergraduate in humanities is required so surely that degree must be considered worthwhile.
There are also good government jobs which are full of people with humanities degrees, and plenty of people with mathematics degrees which they gain little from.
I suppose the point I want to make is that if American universities all stopped offering courses in the humanities then there would likely be complaints from government departments or industry about not being able to find sufficiently educated candidates. I suspect that if half of universities stopped offering those courses the effect would be much smaller.
Then gets a job as a pizza deliveryman and says "I lost faith in my country"
---
I find it very hard to relate to such people. They get a college degree, but never learned critical thinking skills. Maybe the issue is colleges producing low quality students.
I have friends with similar degrees and they found soulless sales jobs.
It seems like a responsibility/thinking problem. These arent your best students, these are bottom barrel.
Who is to blame? Maybe our high school teachers for telling everyone to follow their dreams instead of learning.
High school counselors for mass-funneling students into university. Corporations for demanding college educations for unskilled labor. Creditors for lending to young-adults predominantly 18-20 years old. Universities for inflating social experience to the detriment of academic quality and increased tuition. Parents for the cultural peer pressure.
Ultimately, I tend to agree with you but I have a hard time criticizing the naive 18-20 year old rather than the multitudes of enablers who allowed this situation to arise. Is it really fair to blame the victim of an elaborate and complex system designed to extract the perfect amount of present and future value from them while leaving them with just enough (or in the extreme case, not enough) to survive?
"I've designed the perfect device. It can extract just enough usable meat from a cow while still keeping it alive." -Paraphrase of a quote that I can't attribute at this time.
EDIT Actual quote thanks to leetcrew and andygcook:
"I invented a device called Burger On The Go, it allows you to obtain 6 regular size hamburger, or 12 sliders, from a horse without killing it."
Pretty sure you’re referencing this quote from Dwight on the Office:
“I invented a device, called Burger on the Go. It allows you to obtain six regular sized hamburgers, or twelve sliders, from a horse without killing the animal. George Foreman is still considering it, Sharper Image is still considering it, SkyMall is still considering it, Hammacher Schlemmer is still considering it. Sears said no.”
No matter how predatory or even fraudulent the lender, in U.S. culture the individual takes the blame in the name of "personal responsibility". After all, if we were to acknowledge that vendors influence consumer choice, uncomfortable ethical questions would arise.
Nobody disputes that people are influenced. But it still comes down the the fundamental right of self determination, which is a pretty core principle in Western Democratic society. It's my right to try to influence you to do something (within reason) and it's your right to do whatever you please.
> High school counselors for mass-funneling students into university.
I agree with this statement. These people plant ideas in the heads of young people which grow and grow due to the influence they have impressionable kids.
Some kid can play a flute so is encouraged to take on unbearable debt to pursue their dream.
> They get a college degree, but never learned critical thinking skills.
Are you seriously suggesting that a degree in philosophy does not teach critical thinking skills?
> These arent your best students, these are bottom barrel.
While I would agree that a degree in comparative literature or history probably isn't as likely to land you a job as a degree in, say, computer science, it doesn't seem fair to assume that those who have fled the country to escape their student debts are automatically dumb losers. Nor do I expect that attitude to inspire a sense of "responsibility" in those who are considering to emigrate.
It seems to me that the so-called "bottom barrel" students would drop out rather than successfully complete a bachelor and then a masters degree.
I think it is too easy to blame students. I dunno how it is in the US but the advice I got in Norway before studying was terrible. When you are 18-19 you don’t know that much about the world. Grownups have to do a lot better job guiding young people.
I studied robotics and AI in Norway assuming if such a study was offered it was because industry needed such skills.
This was 20 years ago before the current AI craze. But there was practically no jobs in this field in Norway. Fortunately I had enough programming to a regular programming job. First by working as a corporate drone at Accenture.
So I was lucky career wise, but that was not due to smart calculated choices. I was wrong about almost everything I did. I chose a study I thought involved building robots when in fact it was mainly about programming them. And almost nobody needed those skills in Norway apart from a company doing recycling and parts of arms industry.
99% of jobs at the time seemed to be some Java server side development, and I had not even learned Java at Uni.
I think the problem is educational institutions want to keep their jobs and students and are thus not entirely honest about how useful the studies they offer really are.
They present a rose tinted reality. Education must to a larger degree respond to the needs of the Labour market and industry.
Allowing people to default on student loans just makes education more expensive for everyone else. There's plenty of people who looked at their job prospects for the degree before going to college and determined some degrees are bad investments. Why should the rest of us have to shoulder the cost of someone else's poor investment choices?
> Allowing people to default on student loans just makes education more expensive for everyone else.
I don't think we really know that. Making these loans non dischargeable has large systemic effects I think that causes all sorts of other costs to increase. It would certainly make getting loans more difficult, but perhaps total cost of education would go down and make more scholarships available?
It does have consequences, but declaring bankruptcy right after college is probably a good idea (on an individual level) right after college if one has sizeable debts and bankruptcy discharges the debts. College grads tend to have little assets under their names to seize and are several years away from needing to use their credit score to get a mortgage.
Loan issuers would simply require a cosigner with sizeable assets to seize. Tada! Now no one from a poor upbringing can be the first person in their family to attend college. You have created a permanent underclass.
You don't have to do anything. But some things might in your best interests. It's on you to figure that out, or someone else will figure it out for you.
The key word in the title of this article is "Americans". All over the world there are students making stupid decisions to study subjects that will prove useless to them in the future; only in America does it routinely lead to tens, even hundreds, of thousands of dollars of debt.
The students may be clueless, but the lenders know exactly what they're doing.
> They get a college degree, but never learned critical thinking skills
Hard to imagine anyone getting a philosophy degree and not being able to think critically. Especially from a decent accredited school.
> Maybe the issue is colleges producing low quality students.
You mean low quality graduates or alumni.
> These arent your best students, these are bottom barrel.
You know what they call a medical student who graduates with a C average? Doctor. Just because they aren't the top of the class doesn't mean they should be delivering pizzas for a living.
> Who is to blame? Maybe our high school teachers for telling everyone to follow their dreams instead of learning.
Are you seriously saying philosophy or comparative literature or communication and history students aren't learning?
I have degrees in computer science, philosophy and math and I learned lot as a philosophy student. Of course the computer science degree is what got me my jobs, but that doesn't mean I didn't learn anything in philosophy.
This is actually really excellent reporting. The people and stories in this article are very real, and I bet there are thousands more people just like this and potentially millions who want to be like this.
I did the expat thing for 2 years. Sleeping on mountains, on couches, in airports, in cars, everything. It's a lot of fun and really cheap. You feel a lot of freedom.
But, it is still hard to get things going "legitmately" in any country, and by that I mean finding a job and getting a visa and, if desired, having an apartment or a family/spouse.
I came back to the USA and luckily found what seems to be a more permanent job than sales. I'm making $2,000 a month and splitting expenses with my gf.
Ultimately that math works better than being a nomad on $500 a month. But I'm wondering if someday I will give it another shot :)
While immoral I am hardly one to speak, right after the Brexit vote when the Pound Sterling was unusually low against the US dollar (Oct 2016), I cashed everything in to pay off my loans at a stark discount (15% off). Is it wrong to benefit from your home country's misfortune? Is it wrong to leave your home country to avoid repayment?
I will say that while I consider the morals of things, the wealthy and ultra-wealthy seem to have no such compunction. They will happily move money off-short to avoid tax, re-work income to pay lower capital gains tax rates, or have an official residence in a lower tax location.
Somehow I think they will clamp down on this a lot more than they do the ultra-wealthy.
Why is this immoral in the least? At worst, it's lucky. At best, very shrewd. The UK held a referendum which impacted the value of the currency against another that ended up being beneficial to you. Literally nothing you did impacts any of this. In fact, by doing what you did, you helped support the pound (i.e. selling dollars to buy pounds). It's not even close to what's being described here.
>I'm personally financially benefiting from other's misfortune.
and why's that bad? honest question. you're not the cause of the misfortune. I see it as no different than a roulette game where you bet on red, someone else bets on black, and you end up winning.
Seriously. At least in software, there are plenty of jobs where experience matters more than credentialing. We don't have to respect the degree flaunters.
Red herring. I am not a CS major and I think people taking out huge loans to major in communications are just as much a problem as bloated school staffs, federalized loan programs, etc.
It's not zero sum. People who bash CS majors for no reason are douchebags, as are people who irresponsibly borrow.
Communications majors work in HR, advertising, PR, etc. Most liberal arts majors are the same way- there are jobs, just no recruiters throwing themselves at you. CS is unusual in that there's a huge demand for recent grads, most other jobs have the experience/no experience paradox.
My wife has $400,000 of medical student loan debt. We are on PSLF but are nervous about the program and question if her student loans will really be forgiven. If they are not forgiven at the end of our 10 years of qualifying payments we plan to leave the country. If you can find a job outside the U.S. and don’t mind learning a new system I think leaving the U.S. is a great option. Will people do this over medical debt in the future? As the world becomes more integrated this option becomes easier. Especially since speaking only English is not as limiting as it used to be.
It sounds like she took the loan because the government promised a particular repayment scheme. I don't get how you can be mad at the individual in this case, when the government is the one that renneged on its promise.
The U.S. takes medical talent from other countries including poor ones. Those countries make an investment in these docotors and they leave for the U.S. for economic reasons. We shouldn’t complain if it starts to go the other way should we?
It's interesting to me that the people highlighted in the article are creative enough to do things to avoid repaying their student loans but aren't creative enough to turn their education into a higher paying job. It strikes me as misdirected energy.
The heart of the article is the debt of student loans are getting so great that more people are taking drastic measures to avoid repayment. The article I wish I had read was how some people aren't entrepreneurial enough to turn their college education into cash. More people should learn how to negotiate their employment lives better. I renegotiated my salary immediately after graduating because (A) I knew the market values college grads higher and (B) I wanted to try to raise my pay just to see what happened. Why don't others see their degree as a bargaining chip to be played when negotiating? Why aren't some people willing to employ riskier plays?
"I couldn't believe I couldn't find a job in America." -- Albright, from article
Creativity and entrepreneurial spirit is especially needed for people who get degrees that don't have obvious market potential. For example, some people say a history degree isn't worth much However; entrepreneurial individuals with history degrees have gone on to make a great living making educational content for online media. The job didn't exist so the individual created it. Sure, it's a risky proposition for the individual but they're already playing risky from a market potential standpoint. I feel like Albright from the article could have used this framing to his benefit; but instead, he fled his debts.
> More people should learn how to negotiate their employment lives better. I renegotiated my salary immediately after graduating because (A) I knew the market values college grads higher and (B) I wanted to try to raise my pay just to see what happened. Why don't others see their degree as a bargaining chip to be played when negotiating? Why aren't some people willing to employ riskier plays?
You have no bargaining power if you have no differentiating skills or knowledge.
I wonder if these news stories intentionally pick weak examples of people to highlight. 20k and 30k debt, for communications and history degree, so now you have to flee the country? Okay.
The people who bought homes in 2000’s that they couldn’t afford were acting irrationally, too. It’s easy to dismiss this and think “wow these people are dumb, serves them right...” (my first reaction), but then I think: wait, these are just a few examples they found who are willing to share their story. How many people are out there defaulting on their loans that we don’t know about?
Why do you say they were acting irrationally? They were broke and they saw they could still live in a 1/2M house--sounds pretty rational to me, especially if you can just drop the debt via bankruptcy.
With colleges, there is a nasty effect that student loans are inflating tuition prices and punishing the financially responsible people who save money for tuition. It's almost more rational to make sure to have no savings and benefit from the free government money.
In Malaysia, those who default on their student loan are barred from traveling overseas. Since it's taxpayer's money, people are not happy when you are free to travel overseas without settling your responsibility. At least that's the impression from asking around (I'm not local).
"Can't find a job" won't fly here, as you can literally get burger-flipping jobs easily—you can't walk to a mall without seeing dozens of "Admin/sales/waiter staff needed". Also, most uni graduates have a family (rent-free stay).
What makes US different? Student loans not from taxpayers money? Low-paying jobs impossible to get? Parents don't let their kids stay until they can afford their own place?
In Indonesia, the govt doesn't even have money to give loans to students.
It's the cost. Tertiary education in America is unrealistically expensive, so you're locked into higher payments for longer (typically life). Even if a lower paying job is enough to pay up, your entire life purpose becomes paying off a student loan. Without the college and loan you would have had a shitty job but $300 more, nothing else would be different.
In South Africa the banks finance students, so the government doesnt hand out loans there either. You can pay off a typical degree in less than a decade. That system is completely unlike what Americans experience.
Regulatory capture by the financial industry. The US government has facilitated a system whereby as many students as possible are funneled into taking predatory loans.
> He then went back to school to pursue a master's degree in comparative literature at the University of Colorado Boulder.
You graduate with a degree that has little market value and can't pay your load, so your solution is to accumulate more debt for another degree with little market value?
There are many sources of this problem, but I suspect the three that get the least attention are:
- parental pressure to attend college
- guidance counselors and school administrators pushing for college
- the wholesale destruction of vocational schools
As a result, the US K-12 education system produces a never-ending deluge of students who believe their only life option after high school is to get a four year degree. Or joining the military, but that's a different discussion.
Like the people in this story, many HS grads study subjects with little economic viability.
Why?
That's the story I'd like to see. What motivated the choice to waste four or more years and tens or hundreds of thousands of dollars on a credential that will never pay for itself?
Two of the three have become teachers in other countries, and one wanted to be a professor here. So they have at least some desire to teach, some ability to teach, but would rather move to a new country than teach K-12 here. And somehow we have a teacher shortage.
From my experience, quite a few people getting the degrees being criticised in this thread want to become a professor in that field. Teaching is what they want to do, but they just saw how terrible being a high school teacher would be.
This is ridiculous. I left school with $30k in debt and paid it down with my $35k job. What we don’t hear enough about are the people who foolishly go to a bank for their loans, and then take out massive amounts, avoiding all work and scholarships, then get some degree that has little to know market value. Student debt is not the problem. Banks, universities and the students are the problem.
Most student loan debt is owned by the government so it wouldn't collapse quite like how mortgages sank the housing market. If the pipeline for easy loans dries up a lot of colleges and their dependent industries (publishing, construction, education focused IT providers) will probably take a big haircut or close.
True, but there has been a large drive toward refinancing student loan debt, which moves that risk into the private sector. I would be curious to see what percentage of government financed loans have been converted to private debt.
Oh yeah I've seen a lot of ads for SoFi and Laurel--also weirdly extravagant SoFi 'member' events. It seems like SoFi alone is probably fairly large. They've been reporting billions of dollars in consumer and student loans converted in a Q1 2018.
Also they've been issuing asset backed securities linked to their loans.
I couldn't afford to go to college when I left HS. So I took my life savings and certified as a CNE back in the day. I found a job and was able to attend school part time. My employer ended up funding a lot of it. It took a while but it worked out. I had no school debt and actually made a really good living.
The federal government shouldn't be in the loan business. Those are my tax dollars being redirected for uses for which taxes should not be applied. I'm not an ATM.
Other than that time I payed off one of my student loans with a lump sum check I've been perpetually in default and they never came after me (other than an occasional letter) or garnished my wages...actually, now that I think about it, I can't remember getting a letter in quite a while, years perhaps?
Admittedly, I did try to skip the country a couple times but it never stuck.
Now I just work as an "independent contractor" so have no wages to garnish, no retirement plan and will have to work until the day I keel over dead from who knows what (or get replaced by the robots).
Or scrutinized. I don't think it's ethical for the government to give $100k to a music therapy student, as they'll never be able to pay it back with their future wage.
I honestly think the mess the US is getting into here is just another example of failure of capitalism just like the health care system.
Now everybody struggles to get education and health care right but few places in the west does it seem to go as wrong as in the US.
People also choose dumb stuff in more socialized educational systems but because the government regulates the school system they don’t make tons of useless study places.
In fact we have seen this effect in Sweden as private enterprise started taking over more schooling. The number of popular but useless studies shot up. It is a classic case of market failure. It is one of those areas we’re bureacrats actually do a better job than the market.
This article should be titled “How some dishonest people made bad decisions and instead of fixing them ran away.” They blame others for their choices, and take no responsibility. Nobody made them get those degrees, take out those loans, or any of it. I get that the cost of education is a problem, but using loans and then skipping town to avoid repayment isn’t only dumb, it’s dishonest.
And yet, in the corporate world there's no condemnation of businesses that avoid paying back their debts by declaring bankruptcy.
Legally, that's not an option for student loans, but morally is there really any difference? Is there an ethical reason why student borrowers are less deserving of the bankruptcy option than other borrowers?
> How some dishonest people made bad decisions and instead of fixing them ran away.
How do you propose they fix the problem? By shutting up and paying it all back, even if they have to work 7 days a week and sleep in a cardboard box for the next few decades? Doesn't the bank share some responsibility here for giving a loan to someone that they knew would likely not or hardly be able to repay?
From what I understand, it's not exactly easy for an indivual to "fix". From my limited knowledge about the US economy, it's not easy to get a well paying job quickly, the examples there showed that they tried to get jobs, but the jobs they could get were worse than leaving the US.
Maybe they made a bad decision in the first place, but do they really deserve a lifetime of debt because they did what they were told they needed to do (go to university) but weren't aware about the pitfalls of certain paths? While they weren't directly forced to take get a degree, isn't it kind of expected by schools and parents nowadays? So there's still pressure to to it...
(also, not everyone is suited or has the prerequisites for the big and well paying jobs, so it's kind of unfair to expect people who are smart but not in the way that certain jobs require to struggle through stuff not suited for them, which might also cause problems, etc...)
>Nobody made them get those degrees, take out those loans, or any of it
technically true in the sense that they weren't forced at gunpoint to take the loans, but you're ignoring the effect of high school teachers/counselors, parents, and peers have in pushing them into getting a degree.
Preventing educational debt from discharge in bankruptcy is one of congress's greatest crimes. The fact that they exempted their own children from the law is just the icing on the cake.
It's not true. The original source of the claim appears to be a misrepresentation on Fox News years ago of Congress' student loan repayment plan for staffers.
A fix to this distortion is unlikely since the end result would be the closure of hundreds of schools and thousands of faculty and staff being laid off as there would be significantly fewer students.