Soaring Student Debt Prompts Calls for Relief
wsj.com
wsj.com
I made the choice to go to a slightly less prestigious school so I wouldn't have to go into debt for college. I also worked all through college to pay for my expenses.
Should I now be punished for that decision? Why should we make people's financial mistakes consequence-free?
I think the government should get out of the student loan industry entirely: stop subsidizing them and making interest rates a political issue. Let the market signal which degrees are valuable and which aren't. But also make them dischargeable in bankruptcy. At least then there would be a consequence for people deciding to take out expensive loans for education.
Same reason we let people walk away from homes (or not walk away, simply not be able to afford them), but we'll still give them a mortgage 3 years after their foreclosure; the economy needs the monetary velocity to survive.
I hope you realize it doesn't quite work like that.
Fiat currency is a shared delusion of value with invisible hands exerting forces to enforce certain behaviors (the Federal Reserve attempts to stoke inflation in order for the economy to reach full employment, arguably unsuccessfully, while technology and cheap Chinese labor is having enormous deflationary effects, with the result being real estate and equities turning yet again into asset bubbles); never be fooled that we're somehow "losing" value by forgiving debts at the national government level.
No, the Federal Reserve attempts to provide easy money to spur employment, balancing that goal against the competing goal of controlling inflation. The Fed does not try to stoke inflation to drive employment (especially since inflation doesn't drive employment, though employment can help drive inflation.)
http://www.bloomberg.com/news/articles/2016-08-14/the-tokyo-...
That's right. The Bank Of Japan is printing money to prop of the value of top companies trading on Japan's exchange. Think about the macroeconomic causes and consequences of that.
>The GPIF’s results are seen as a gauge of broad market performance, as the fund owns nearly 1% of global equity markets and more than 7% of the Japanese stock market. Domestic and foreign equities comprised 44% of the portfolio at the end of March, below its 50% target weighting for the asset class, the fund said in a statement. http://www.wsj.com/articles/japans-gpif-pension-fund-suffers...
There is this can they keep on kicking, hoping to out run the "current" malaise but you can't escape the Great Graying when your economies are dependent upon constant expansion.
Technically, money is created when a bank writes a loan, but the Fed does meta-meta(-meta?) money creation on a global scale.
Like I said in my comment, I recognize that there needs to be some option for people who can't possibly repay their student loans. Defaulting on your mortgage is not consequence-free: you lose your home and hurt your credit. We don't let people just forgive their mortgages and keep their homes without hurting their credit, but that's what a lot of people are advocating for student loans.
We should treat student loan debt like any other debt.
Just because it's unsecured doesn't mean we shouldn't be able to discharge it with bankruptcy.
Get the government out of the loan business and the market will correct itself. You won't be able to get a loan for a useless degree and if you end up being unable to pay off your loan you can go through normal bankruptcy proceedings and their consequences.
Then again, if less ppl could afford a degree in Queer Musicology (does exist - https://www.musicology.ucla.edu/mission-and-history-1) or let's say Environmental Studies etc maybe the supply and demand would even out so that'll be a good thing.
Given that federal loans have always had rates set by government policy (not market rates) and the fact that private participation in the program was ended in favor of exclusively direct loans in 2010, I'm not sure what the concern for "market rates" is -- there is no market involved.
If you got rid of the insanity that is federal loans it would just increase demand for state schools and community college.
God forbid.
Absent a government, lending is a lose-lose situation. The lender has little recourse to compel the lendee to pay, and the lendee has no protection from the lender.
http://www.economist.com/node/21559618 quoting a research paper:
"With all factors present, net tuition increases from $6,100 to $12,559. As column 4 demonstrates, the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition."
And then:
"so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay."
If existing lenders aren't willing to loan to minorities, then there would be a fantastic opening to make a profit in loaning money to poor minorities with high test scores to study STEM.
The US is very deeply invested in the idea that the way to overcome the disadvantages faced by members of certain minorities is education. But those same disadvantages make those students worse credit risks. A credit-based system looking to optimize return wouldn't give these students access to the same educational opportunities.
If the problem is that minority students have difficulty achieving at the level of white students, let's focus on that. I don't think it's very helpful that we saddle these students up with loans but then they don't even end up graduating. Instead of forcing lenders to lend to bad credit risks, let's come up with ways to support minority students so they aren't credit risks. I personally would be happy to invest in minority students studying CS, for example.
And yes, it will be somewhat painful in the short term. We'll have to confront the reality that lending to students with low SAT scores to study esoteric subjects is maybe not a good idea. Perhaps it would even encourage such students to not waste their time and money on bad degrees.
You can't.
> Isn't that the reason student loans are not dischargeable?
No.
First, student loans are, in fact, dischargeable, though there is a higher bar to discharging them. So expalanations of why they are not dischargeable are unnecessary (and necessarily incorrect.)
But, more to the point, unsecured loans in general are dischargeable without the heightened requirements that apply to student loans; not having something to repossess isn't a difference between student loans and other unsecured loans, so cannot explain the difference in treatment.
>You can't.
Yet. ;)
[1] <https://studentaid.ed.gov/sa/about/announcements/itt/faq>
Explanations of why they are more difficult to discharge is certainly necessary, though.
I'm also curious how student loans can be discharged except via death of the lendee. It probably happens, but I don't personally know anyone who has discharged subsidized student loans in bankruptcy. (I do know people who have discharged unsubsidized private student loans in bankruptcy.)
(Also, "borrower" is the more usual term, rather than "lendee".)
(Also, agree on "borrower". It's late and I'm exhausted and all I could come up with was "lendee".)
I work in the industry, some of the ways you can have your student loans discharged are:
False Certification (Ability to Benefit): For forgiving a borrower's loan based upon a false certification of the borrower's ability to receive benefits to attend college because he/she doesn't have a GED or high school diploma.
False Certification (Disqualifying Status): For forgiving a borrower's loan based on the borrower's disqualifying condition(s) for the degree.
False Certification (Unauthorized Signature/Unauthorized Payment): For forgiving a borrower's loan based upon endorsement or certification of the promissory note, disbursement, or application by an unauthorized person.
School Closure: For forgiving a borrower's loan based upon a school closure that prevents the borrower from completing his/her degree or program.
Unpaid Refund: For forgiving the borrower's loan because the borrower's school did not provide the correct refund to the borrower's lender.
Teacher Loan Forgiveness Forbearance: For borrowers who are eligible for the Teacher Loan Forgiveness program and whose entire outstanding balance will be forgiven at the end of their fifth year of teaching in a qualifying school.
Total and Permanent Disability: For borrowers who are unable to repay their Federal Family Loan Program student loans due to total and permanent disability (as defined by the U.S. Department of Education).
We should! There's no asset to secure the debt, so just mark the trade line as unpaid/collections and have it be a black mark for 7 years.
If Congress isn't going to fix this, Millenials can max out unsecured credit, pay off their student loans, and then go bankrupt on the unsecured debt; 7-10 years of bad credit is better than the federal government pursuing you for the rest of your life.*
* Not legal advice. Confirm with an attorney first if you attempt such a feat to ensure you stay within the law by doing so.
That seems incredibly harsh.
Then again, you Americans really don't believe in rehabilitation do you.
The 7 year black mark is no one wanting to loan you money because you've shown you won't pay it back, and it's 7 years because the government says it can't be longer. It's not anything truly harsh like prison sentence or anything.
Now, if you're credit score is simply low due to negative marks from late payments or charge offs, yes, it's likely you won't be lent to again until you take action to raise your credit score (by making payments on time).
"Some countries keep failed entrepreneurs in limbo for years. Britain will discharge a bankrupt from his debts after 12 months; in America it is usually quicker. In Germany people expect it to take six years to get a fresh start, according to the commission; in France they expect it to take nine (see chart 2)." http://www.economist.com/node/21559618
Until Bush changed the rules at the request of the financial industry, we did.
Will the economy be more healthy? I see little evidence for the assertion. It's possible the damage done by all that debt cancellation will be greater than any benefit.
Cancelling the debt might cause a negligible amount of inflation.
http://www.businessinsider.com/3-charts-explain-the-effect-o...
http://time.com/10577/student-loans-are-ruining-your-life-no...
Is there another reason that forgiving student loans improves the health of an economy?
Otherwise...
While there is an element of truth to that, see "the marginal value of a dollar". You "spend" your ten millionth dollar quite differently than you spend your ten thousandth.
Some of these guys for whom money is simply a means of keeping score won't change their consumption patterns much no matter what.
If you want to increase velocity, the way to do it is cause more cash to be in the hands of broke people.
Still, I'm hesitant to draw the conclusion that giving cash to someone with a high MPC results in a markedly higher amount of consumption/expenditure in the economy, as if alternatively that cash was invested by someone with a high MPS it would be eventually spent anyway. Of course there would be some frictional element to this (money needs to be transferred when invested, etc) but I posit that more is made of this than should be.
It'll end up in the deficit just like everything else. As it should. Unlike QE{I,II,III}, this will increase the base.
Saving and spending are both morally neutral; it's just that we think it's Good To Be A Rentier, so we (curiously) bias in a moral case for saving. The New Testament of finance :) allows for bankruptcy, to implement a mechanism for forgiveness.
Saving is pragmatically good. But we seem to make a moral fetish of it - in fact, if our neighbor spends, spends, spends, we benefit. But Liberal Atomism doth make hypocrites of us all...
Ignoring all this, monetary velocity is important and all other things being equal, I'd rather have it than not have it.
The best way to grow an economy is to give a dollar to its poorest participant, not its richest, because the poor class will immediately spend it on goods, creating demand, where the richer you are the less of your income goes to consumables that drive production.
Side note: "How the Economic Machine Works"[1] by Ray Dalio (manager of one of the world's largest hedge funds) is fantastic in describing these concepts in non-academic-economics terms.
[0]: https://www.federalreserve.gov/releases/h6/current/ [1]: http://www.economicprinciples.org/wp-content/uploads/ray_dal...
It gets wiped off the books and a dollar leaves the economy.
> The person you're giving it to will either spend it on consumption
Did you take a loan out from a person? No. You took a loan out from a bank. They don't spend deposits on consumption. They cover their expenses and profits with the interest you pay.
> or loan it to someone else until (ultimately) it is spent.
The amount of lending a bank makes is almost unrelated to the amount of deposits they hold. Reserve regulations impact this somewhat, but the reality is that banks make profitable loans whenever feasible. If they don't meet reserve regulations at the end of the day, they borrow at exceedingly low interest rates to cover the gap. A bank can make a billion in loans at 5%, borrow at 3% to meet regulations nightly, and still come out ahead. (Specific numbers made up. Overnight rates are actually closer to 0.25%. So a loan at 5% with no reserves is actually crazy profitable.)
> And if you deposit the dollar into the bank then the bank have to loan it to someone (they need to make money too!) who will then spend it on consumption.
The fed pays 0.5% on reserves that banks hold. As of a few minute ago, Chase's interest rate sheet showed <0.5% for all checking, all money market, and most savings accounts. So in reality, Chase can hold your deposit and pay you interest and still make money.
If your savings has a "good" interest rate of, say, 1%, a single loan of $100K at 4% could still cover the cost of $800K in deposits. Banks absolutely do not have to loan out every dollar deposited to make money.
http://www.federalreserve.gov/monetarypolicy/reqresbalances....
https://chaseonline.chase.com/resources/RateSheetForCons7021...
> It won't reduce the amount of money in circulation.
When a bank loans you money, they are creating money. When you pay it back, you are destroying money. The view that your deposit is "loaned" to someone else is very inaccurate and misleading in a modern banking economy.
http://www.bankofengland.co.uk/publications/Documents/quarte...
The Fed does require a certain reserve percentage that the bank cannot loan out. It's only fair that they pay some interest on that.
However, making 0.5% is losing money because of inflation. Furthermore, no bank is going to loan you money for 0.5% - they're going to charge you a lot more.
> Banks absolutely do not have to loan out every dollar deposited to make money.
No legal requirement, sure. But they have every reason to loan out as much as possible. It's why they advertise loans, credit cards, etc. Banks have plenty of expenses, too, which means if they don't make loans, they go bankrupt.
Inflation is also irrelevant. What matters is the spread between what they pay a depositor in interest and what the Fed will pay for holding the deposit in reserve. So long as that spread is positive, they make money just for holding your money. Can they do better by lending and increasing the spread? Sure. Do they have to in order to make money? Not really.
This is also really odd stuff to choose to nitpick out of the discussion of how money of created in the modern economy.
I'm not sure if you're under the impression that I'm claiming that holding reserves is the primary way banks make money. I'm not. The discussion about reserves is to answer the claim that a dollar deposited with Chase will automatically result in a 90 cent loan to someone else. It will not.
The case in point was for a 'wealthy person' (not my term, I don't like it but let's roll with it) who holds the debt of a student borrower. The hypothesis of an above poster was that money repaid on loan service (from the borrower student to the rentier) would not result in increased consumption in the economy and that if the money remained with the debtor that they would be more likely to stoke consumption in the economy. My point was that if someone gives you money you can either spend or invest it (let's forget physical currency for now - in our current monetary system there's not that much central bank money [physical/reserves] in the economy as a percentage of gross domestic product, save for the US with USD1.46 trillion, owing to persistent current account deficits and the Triffin dilemma and other factors - but I digress). But let's take your argument as an example. If I hold $100k of a student's debt, and that debt is 'extinguished' then it doesn't change the money stock in the economy. If a debt between 2 individuals is "wiped off the books" then a dollar doesn't "leave the economy".
>> The person you're giving it to will either spend it on consumption >Did you take a loan out from a person? No. You took a loan out from a bank. They don't spend deposits on consumption. They cover their expenses and profits with the interest you pay.
I'm not sure I really follow what's going on in this segment of your response. Banks take deposits. They fund assets (often loans) with those deposits. Those funds are then used at some point for consumption.
>> or loan it to someone else until (ultimately) it is spent. >The amount of lending a bank makes is almost unrelated to the amount of deposits they hold. Reserve regulations impact this somewhat, but the reality is that banks make profitable loans whenever feasible. If they don't meet reserve regulations at the end of the day, they borrow at exceedingly low interest rates to cover the gap. A bank can make a billion in loans at 5%, borrow at 3% to meet regulations nightly, and still come out ahead. (Specific numbers made up. Overnight rates are actually closer to 0.25%. So a loan at 5% with no reserves is actually crazy profitable.)
Well, as much as I'd like to be able to change double entry accounting (and the laws of physics) this is not the case. The amount of lending a bank does is inextricably related to the amount of deposits they hold. If you 'deposit funds' with a bank, then there is a corresponding liability on their balance sheet (an entry on the right side). Other liabilities of banks include debt (both short and long term) and equity capital. Guess what? If you deposit money with a bank (or loan it money by purchasing its debt, or invest by providing equity capital) then whatever funds you provided the bank must be recognised on the bank's balance sheet. This new money you gave them goes on the left side (their assets). Now if you're a bank you can hold physical currency in your vaults (doesn't earn much interest, and there's a potential silverfish problem) or you can loan it out. You could loan it to the Fed[0] for 0.5% or you'd probably want to loan it out to someone else at a potentially higher rate (think mortgages, equities if you want to roll the dice, structured credit if you're feeling like it's 2007, you get the point).
>> And if you deposit the dollar into the bank then the bank have to loan it to someone (they need to make money too!) who will then spend it on consumption. >The fed pays 0.5% on reserves that banks hold. As of a few minute ago, Chase's interest rate sheet showed <0.5% for all checking, all money market, and most savings accounts. So in reality, Chase can hold your deposit and pay you interest and still make money.
Sounds like a money machine. Does Chase obtain all of their debt capital from depositors? Or is it possible that they pay more than 0.5% on some of their funding?
> If your savings has a "good" interest rate of, say, 1%, a single loan of $100K at 4% could still cover the cost of $800K in deposits. Banks absolutely do not have to loan out every dollar deposited to make money. http://www.federalreserve.gov/monetarypolicy/reqresbalances..... https://chaseonline.chase.com/resources/RateSheetForCons7021....
$100,000 * 0.04 = $4,000 (loans -> income) $800,000 * 0.01 = $8,000 (deposits -> expenses) -$4,000 (total profit)
Losing $4,000 every year on a $100,000 loan book doesn't seem like the best move for a bank. Furthermore, I ask this one question - if they don't "loan out" every dollar deposited, then what do they do with the monies? Hoard them in a vault?
>> It won't reduce the amount of money in circulation. >When a bank loans you money, they are creating money. When you pay it back, you are destroying money. The view that your deposit is "loaned" to someone else is very inaccurate and misleading in a modern banking economy.
As illustrated above, a deposit with a bank is a liability entry in their balance sheet with a corresponding asset to match. The asset would either be physical currency if that is what you deposited (how old fashioned) or the debt of another banking institution (which I'm guessing would be netted out at the end of each day - or intraday if that is your central bank's kind of thing - and balanced, or exchanged for central bank money). By definition the money is "loaned" to someone. Now we could really get into the nitty gritty of credit creation and "high powered central bank money" vs "private bank money" but there's probably not the need to get that into detail.
Anyways - I'm probably wrong with all of this though. It would be awesome if you could show the balance sheet entries which would correspond to the transactions which you're describing as then we could really just resolve any confusion using quantitative measures rather than long winded discussions :)
This is not a real scenario. Virtually no one's education is funded by direct loans from wealthy individuals. Student loans are issued by banks.
When you pay a dollar on your student loans' principal, that dollar ceases to exist. The bank might turn around and make another loan that recreates that dollar, but they are not obliged to do so. Banks are under no obligation to loan out everything they can. If they were, there'd have been no talk about "tight lending" after the housing crash.
> If I hold $100k of a student's debt, and that debt is 'extinguished' then it doesn't change the money stock in the economy. If a debt between 2 individuals is "wiped off the books" then a dollar doesn't "leave the economy".
This model of banking assumes a fixed monetary supply, which is not the case. Banks literally create money when they issue loans. If they didn't, the monetary supply would be fixed except in rare instances where the Fed creates money ex nihilo. As you are doubtless aware, the money supply fluctuates constantly. Where you imagine those fluctuations in supply come from?
The article I linked from the Bank of England also covered this, in bold, at the beginning. "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."
> Well, as much as I'd like to be able to change double entry accounting (and the laws of physics) this is not the case. The amount of lending a bank does is inextricably related to the amount of deposits they hold.
Deposits in this context are money. Loans are not. The bank gives you a loan for $100k. This creates an asset and a liability. (Double entry accounting is still mercifully intact.) The $100k sitting in your account now is literally money. You can spend it, transfer it, withdraw it, roll around on the floor in it, whatever you like. It's money. The $100k loan the bank marks down as an asset is not money. It can't be spent, only paid back. It can't be withdrawn, only sold.
The liability increased the monetary supply. The asset does not reduce it except when it's paid back, which is why banks literally create money when they issue loans and why paying off a loan literally destroys money.
The fixed supply model of banking is intuitive but it's also insufficient describe how modern banking actually works. Everyone agrees that monetary supply is not fixed.
> Sounds like a money machine. Does Chase obtain all of their debt capital from depositors? Or is it possible that they pay more than 0.5% on some of their funding?
It is a money machine.
I don't know what percentage of Chase's capital comes in the form of deposits.
> Losing $4,000 every year on a $100,000 loan book doesn't seem like the best move for a bank. Furthermore, I ask this one question - if they don't "loan out" every dollar deposited, then what do they do with the monies? Hoard them in a vault?
You're forgetting that the Fed pays 0.5% on reserves, which covers that $4000 cost. Obviously breaking even still isn't a functioning business strategy. The point is that banks do not have to lend every dollar possible in order to be profitable, not even close.
And yes, unloaned deposits are either held in the vault or transferred to the Fed. In either case the bank earns 0.5% on them.
> Anyways - I'm probably wrong with all of this though. It would be awesome if you could show the balance sheet entries which would correspond to the transactions which you're describing as then we could really just resolve any confusion using quantitative measures rather than long winded discussions :)
I'll decline to mock up a balance sheet for you. I'm not denying double entry accounting.
Which comes from depositors supposedly "hoarding" money in banks. (In fact, banks loan out a >1 multiple of deposits, called fractional reserve banking. So "hoarding" money in banks results in more money being spent, not less!)
Even in a hypothetical scenario where banks always loan the maximum amount they can, a dollar in the bank would result in less money in the economy than simply handing the dollar to someone on the street. Fractional reserve lending means that the bank can issue a 90 cent loan after receiving a 1 dollar deposit. And we assume that the 90 cent loan will stay in the bank as a deposit so that they can issue another loan for 81 cents. And so on. In this model, a dollar in the bank actually results in ZERO net money entering the economy. It's all deposits in the bank that can't be withdrawn because it would cause a cascading loan call.
At any point in this lending chain, if someone decides to withdraw the money they were loaned, it stops the chain and some amount of money less than 1 dollar enters the economy. It might be 90 cents, 81 cents, or 15 cents, but it will always be less than the dollar that was initially deposited. So even in the model where banks always lend as much as possible, there's still less money entering the economy than was deposited.
And of course, banks are aware of the cascading loan call problem and therefore keep more reserves in aggregate than the minimum so that they don't end up in this situation. Which means that the impact of a dollar deposited scales back even further.
If I borrow money from the bank, they simply list it as a credit to my checking account. I can then write checks to buy things. The vendor deposits my checks in his checking account. The money never left the bank, but it still resulted in commerce - for all intents and purposes, it "entered the economy".
There is no scenario in which you depositing a dollar in the bank "results in more money being spent, not less" in comparison with you spending a dollar. It quite obviously cannot be the case, because a spent dollar is economic activity of its own plus whatever economic activity occurs as the result of depositing the dollar, because the spent dollar is most certainly on its way to the bank as well.
Where exactly do the banks obtain the capital which funds their balance sheet? From something other than individuals with investable (deposits/debt/equity) funds?
> This model of banking assumes a fixed monetary supply, which is not the case. Banks literally create money when they issue loans. If they didn't, the monetary supply would be fixed except in rare instances where the Fed creates money ex nihilo. As you are doubtless aware, the money supply fluctuates constantly. Where you imagine those fluctuations in supply come from? The article I linked from the Bank of England also covered this, in bold, at the beginning. "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."
Indeed, if a bank makes a loan on its own book then there's a credit in the deposits account and a debit in the loans account. This has created commercial bank money. It's part of the M1 monetary aggregate.
Now as for the creation of high powered central bank money, I'll point you to the Federal Reserve Balance Sheet[0] where you can see that the Fed has created "around" 2.5 trillion dollars "ex nihilo" since 2008. Literally, they have printed that much money (it's reserve balances, but I'm sure the member banks could cash them in for physical if they asked Janet nicely). Now you might be surprised that the Fed (and other central banks) create money every single day. They also destroy it too. They do this by buying and selling securities which expand or contract their balance sheet.
> Deposits in this context are money. Loans are not. The bank gives you a loan for $100k. This creates an asset and a liability. (Double entry accounting is still mercifully intact.) The $100k sitting in your account now is literally money. You can spend it, transfer it, withdraw it, roll around on the floor in it, whatever you like. It's money. The $100k loan the bank marks down as an asset is not money. It can't be spent, only paid back. It can't be withdrawn, only sold.
If the bank creates a $100k loan "out of thin air" how can you withdraw it or roll around the floor in it? Do they print it out on notes which have the bank's name and logo on them?
> The fixed supply model of banking is intuitive but it's also insufficient describe how modern banking actually works. Everyone agrees that monetary supply is not fixed.
I'm not sure anyone ever said the money supply is fixed? That would be really problematic. The money supply changes by the second, you can see weekly numbers displaying fluctuations in central bank money and commercial bank money (ie: M0/M1/M2 etc) at the St Louis Fed[1]. It would be pretty weird for there to be a fixed money supply (even on the gold standard, after loss and destruction of the metal there's a ~3% annual expansion in supply iirc).
> I don't know what percentage of Chase's capital comes in the form of deposits.
54% in 2015[2]. Where do you think they get the rest of their capital? And how much would they have to pay for it?
> You're forgetting that the Fed pays 0.5% on reserves, which covers that $4000 cost. Obviously breaking even still isn't a functioning business strategy. The point is that banks do not have to lend every dollar possible in order to be profitable, not even close.
So depositing money with the Fed isn't lending it? Does that mean it doesn't show up on the left side of a bank's balance sheet?
> I'll decline to mock up a balance sheet for you. I'm not denying double entry accounting.
You'd be amazed at how simple it makes a discussion when you have a balance sheet and income statement. There's no conjecture, it's just facts. And thanks for the in depth debate! It's been a while since I TA'd this stuff in college.
[0]: https://fred.stlouisfed.org/series/WRESBAL [1]: https://fred.stlouisfed.org/categories/25 [2]: http://www.marketwatch.com/investing/stock/jpm/financials/ba...
Indeed, if a bank makes a loan on its own book then there's a credit in the deposits account and a debit in the loans account. This has created commercial bank money. It's part of the M1 monetary aggregate.
If I hold $100k of a student's debt, and that debt is 'extinguished' then it doesn't change the money stock in the economy. If a debt between 2 individuals is "wiped off the books" then a dollar doesn't "leave the economy".
I'm not sure if we're talking past each other or what.
> If the bank creates a $100k loan "out of thin air" how can you withdraw it or roll around the floor in it? Do they print it out on notes which have the bank's name and logo on them?
I'm not sure why you're pretending to have trouble understanding this concept. This is you being disingenuous.
The rest of this seems to be us definitely talking past each other. I'm not super interested in how Chase's assets and liabilities break out. I engaged in the conversation specifically because you seemed to be asserting that loan repayment doesn't destroy money. I'm not sure what you're asserting anymore, and the rest is tangential anyway.
There's also the discussion around fractional reserve lending, but I don't think we actually disagree much about the mechanics except that you think banks are essentially obliged to loan every deposited dollar and I don't, but I don't know this this is an interesting point to continue.
Borrow from whom? I've heard this idea before that the loans issued by a bank are essentially independent of the deposits, and it makes sense to me from a logistical perspective - is some BofA loan officer going to load up BofA's financials to make sure they have the money to issue the loan? No, they'll just do it, and it's someone else's job at the end of the day to "make it work".
But who are the banks borrowing from? If it's from other banks, doesn't it mean that in the aggregate loans and deposits are tied together?
In general, yes, the aggregated loans and deposits are largely tied together. There some fuzziness even here, though, as the Fed can inject money or move loans onto their books in a number of ways.
Even if these wealth hoarding lending class members had just left their money in the bank, remember that these funds have a corresponding entry on the left side of the bank's balance sheet (not much cash/reserve balances in the banking system) and would also have to be loaned out to someone else in the economy by the bank.
So I still don't see how lending money leads to guaranteed lower amounts of consumption in the economy?
Of course you'd need a real economist to do a study to find out if that's actually true.
Frankly, we have thousands of other problems, highlighted by basic health care, that we should probably prioritize first.
This isn't a word and Norway isn't socialist.
Clearly the two "well known" publications (the most preeminent Marxist journals) listed in that wikipedia article and the fact that the wikipedia article's definition of neo socialism has absolutely nothing to do with Norways economic model point to the fact that the parent comment definitely didn't make up that word out of thin air.
Norway is not socialist, neosocialist, or whatever dumb made up "socialism" you people try to come up with.
Also something having a wiki page on any website and being used in a couple of journals does not make something a term/word. It only indicates that someone wants it to be a term/word.
Upthread is strong with hyperbole from an American perspective, and that "neo-" is just to distinguish having strong governmental social programs/services/safety nets (often caricatured as "socialism" from both the right and the left) from old-school destructive actual Socialism.
The situation in the US is a political choice, not a consequence of some economic law.
Many people I know who did engineering with me in India were stuck waiting for a 'dream job' and have gone no where with their lives. People like us knew we had no special skills in engineering to wait for a magical moment of a 'dream job' to arrive and took whatever came our way. Incrementally we worked towards improving ourselves and now have near dream jobs.
The more special you think you are, lesser the options you will have. Because you would got used to thinking of many jobs as work beneath you.
Maybe it's just having the sheepskin that matters most.
The Internet era effectively invalidates structured schooling education for the vast majority of people who do not require the rigored environment such institutions impart. For most people, reading books, watching lectures, and discussing with fellow students of the discipline (or even experts) in social media is more than sufficient to acquire a knowledge of desirable fields of study.
The only difference is, you don't get a piece of paper after doing it for four years many industries mandate you have to try to use that knowledge professionally. But if you are only in it for fulfillment, you can get that right now, without any state institution subsidizing your living and accommodations to acquire it.
Unfortunately, the world isn't making new land. It's a reality of life that we live in a world of scarcity.
Is there a country in the world where this isn't possible now?
"See, the sad thing about a guy like you is, in 50 years you're gonna start doin' some thinkin' on your own and you're going to come up with the fact that ... you dropped 150 grand on a fuckin' education you could have got for a dollar fifty in late charges at the public library!"
It's not the actual learning itself that's expensive; it's the credentials.
> other people's bad financial decisions?
This is different than someone taking a bad loan on their own. This is the case of your parents and grandparents, your government, the schools, the newspapers, etc. all effectively telling you that it's a good idea to invest in education. So good that in a country that loves its liberties and independence so much people will fight against public health care, the government will do the work to guarantee that you can get your education loan.
Surely they can't be all wrong... I cannot honestly blame people for believing the lie in this case.
I absolutely can. I grew up listening to all those same messages and hearing all the same things.
I also realized that it might be a good idea to do some college research and to apply for various scholarships.
High school seniors aren't babies. If they're good enough to get into a college, they should be smart enough to do the minimal research which it takes to find out which degrees are valuable and which aren't. There are tons of resources online to learn about this stuff.
I'm pretty sure that absolutely no one anywhere tells their kid, go to Columbia University, live full time in Manhattan, take an extra three years to finish your bachelors, study pottery making, live entirely off of student loans. Aim for at least $400,000 in debt when you finish.
No one ever says that. Ever.
(As a random data point, the average student debt in 2015 was $35,000. That doesn't seem like an insurmountable bill.)
There's a reason more people are living at home, struggling with their debts, and the middle class is declining and it's not because their bills are so easily surmounted.
Also 35k is still a huge amount that will follow you for decades for some people.
you've got a serious lack of perspective if that's what you think this is
If what you are implying is that the eventual result of non-forgiveness is access to education only for the wealthy, I would disagree - there are other options, none of which are perfect that I'm aware. That said, I'm trying to figure out what reasoned argument you might be making with this statement which might be an exercise in futility.
The simple truth is that the world isn't a fair place and doing the right thing is not the same thing as doing the fair thing. Fair is "everybody gets treated equally". That just isn't how things work in the real world. Right is "to the best of our ability, we try to help people get what they need." That's something we can really aspire to. Doing the right thing.
How is that fair?
Compared to Europe the education system in the US looks like a system that is trying to get as much money out of young adults as possible rather than getting as many people as possible an affordable education.
In fact, there are lots of free calculators which will show you the expected earnings and cost of different degrees.
You can single-handedly decide to go to a cheap community college for the first 2 years.
Apart from that she also went to Columbia University. Totally overpriced in my opinion, but it made her really happy. Because of her decision back then, now, as a couple we have a "second mortgage". Not all financial decisions in your life are under your own control.
the private college system is what you are describing.
the community college and public university system does exactly that, but nobody talks about it, because it's un-glamorous and un-dramatic.
Really I don't blame young people for this. There are too many degrees and too much money is being created to pay for them. The state loves this, it creates lots of money and it ties people into debt which seems to be the entire aim of western states now as they want to work people hard all the time. If you attain financial independence through non-debt you might decide not to work 40 hours a week. Then the establishment can't cream off your labour, and they hate that.
Instead, remove the standard of requiring certain levels of education. Perhaps require industry-specific credentials that can be earned through exam or internship for most jobs. College should be about personal exploration over career preparation—at least in the bachelors level.
Students can complete credentials as part of their final semester Senior curriculum or on their own time.
Not just that: this is, ultimately, a giveaway to the academic classes, who have lucked into the business of selling things to unwise consumers spending someone else's money.
When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the coffers of colleges, universities, professors, junior assistant vice-provosts of diversity affairs, athletic coaches and the whole panoply of 21st-century academia.
Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit.
I would throw an actual party for any dictator in the US who would do to the colleges what Henry VIII did to the monasteries.
I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.
And the schools should not be in the business of telling students what they can afford. For one thing, they probably can't know.
Without the government guarantees, banks would think hard about whether a loan was repayable, and schools wouldn't have nearly as many anthropology or art history programs cranking out unemployable specialists year after year.
The government guarantee removes economic consequences for certain actors -- for the school and the bank, but NOT for the student. The student with an art history degree is now stuck with a massive loan that is not even dischargeable in bankruptcy, whereas the bank and the school suffer no consequences for having trained someone in an unemployable specialty of little to no economic value.
On the contrary, they are incentivized to do that.
The academic dream is that everyone deserves the same education. This is obviously not a reality, but you should at least acknowledge the middle ground is disliked by the "academic class" and the "non-academic class" alike: it's expensive as hell and we still have idiots running the world.
If loans are forgiven, the money will be "moved" (so to speak) to the bank accounts of the indebted, not academia.
In the case of state schools, student loans also benefitted the tax payers. Student loans means such schools can charge a higher tuition, which means they need fewer subsidies from the the state.
Moreover, I wish it went to the professors etc. but with intermediaries like Great Lakes I also fear that even that is not the case.
The principal on those loans already went there, and forgiving the debt won't move any additional money there except insofar as people with unpaid student loan debt overlaps with people working in academia.
The point of a move this move is twofold. The first is to unburden people who were, in essence forced into massive debt at gunpoint as the result of fairly recent and arguably corrupt policy changes (note the lifetime health / income / well-being stats. for those without college degrees, and the role played by banking lobbies if you doubt any of this).
The second is to signal to the predatory class of administrators who have benefited the most that the party is over. It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates.
Sure, I could see being in favour of loan forgiveness if at the same time we completely eliminated federally-subsidised loans. But I don't see that happening: I see us forgiving outstanding loans, then granting even more loans, with absolutely no pressure for students to economise.
True fact: one doesn't need a single-occupancy bedroom or a multi-room suite in order to get a good education. One doesn't need a winning football team. One doesn't need a fancy cafe with subsidised prices; one doesn't need a climbing wall. All one needs for a good education is food, shelter and good professors.
But as long as someone else is (or appears to be) footing the bill, students will angle for the nicest possible way to spend their four, or six, or more, years.
Err, we do. It's called taxes, which fund the military.
More importantly, joining the peace corps is a choice. Nobody compels you to do it. Taxes are not: if student loans are forgiven, I'm being forced to pay for other people's financial decisions. I find that much more objectionable than my voluntary charitable contributions.
You may not like being forced into something, I may not like being forced into something, a criminal may not like being put in jail - but there are certain rules on the aggregate which are set up not for the individual, but to benefit society as a whole. There are situations in which the ethics of upholding a society overtake those of an individual (e.g. the prevention of returning to a, "state of nature," argument.)
Beyond that, in our situation, there are multiple extenuating circumstances of for-profit universities who had lobbied the Federal Government to gain special treatment which would grant them the capability to be funded via student loans. Those Universities then went on to employ extremely unethical practices, preying on those who did not have the proper background or capacity to choose. Mind you, this was all done with Federal money, sanctioned by your and my tax dollars, which we have no choice in paying, as you stated. What we do have a choice in, is saying that a certain percentage of student loans should be forgiven due to extenuating circumstances such as unethical for-profit educational institutions, educational institutions such as ITTTI which went out of business, etc. I think the underlying assumption that people are making here on this discussion is falling prey to the, "slippery slope," fallacy in that ALL student debt should be forgiven, when in reality perhaps only a certain percentage should be, due to the high incidence of unethical educational institution degree-awarding growth which occurred subsequent to the 2008 economic collapse.
What you will see on here is a lot of people making appeals to the economic benefits of making a decision which benefits a larger aggregate of the population. If you can't stomach that, then you should at least watch the latest Frontline Documentary on For-Profit Schools, and read the Wikipedia Articles on various for-profit schools which have recently gone out of business, like ITTTI.
Like I said in my original comment, the government shouldn't be in the business of student loans in the first place. If it weren't, a lot of these for-profit schools wouldn't exist (because private lenders would realize that they're bad credit risks).
You are undoubtedly not the only one who feels this way. It's very natural.
However, in the west sometimes I think we forget how lucky we are, and that the rest of the world often pays for our bad decisions and with much more than money.
I would rather pay their student loans and be grateful for what I have as a white western person, which puts me on a privilege level well above a large proportion of humanity.[1]
I am _not_ trying to preach, just giving you some food for thought.
[1] And this is why here in Canada, I am pleased to pay for other people's healthcare too.
I am very aware of my privilege. In fact, that's why I donate at least 10% of my income to charities operating in the developing world.
That's actually part of why loan forgiveness galls me so much. It's offering a subsidy to people who are actually some of the most privileged people in the world. College-educated Americans are hardly an underprivileged group.
There's also a choice aspect of this. Going into huge debt for college is a decision, as opposed to being born into an underdeveloped nation or falling victim to illness. [0]
Points taken above.
I'll just point out that the focus on fairness is a strong human trait, and IMHO it is a trait that we over-express. Often our notion of fairness is very biased as well.
We are most likely to recognize situations that are unfair against us, but easily gloss over all the unfair advantages we may have.
An anecdote: One time I was complaining to my grandmother that something wasn't fair, what did I do to deserve this... etc.[1]
And she said: "Don't say that. If we got just a fraction of what we had coming to us for our sins, we'd be in big trouble!"
If we insist that things should be fair, let's be very careful about what we wish for.
[1] She was the most upstanding, hardworking honest person I have ever met, and a whole community agrees with me. And even though her point was made from within a religious framework, I think it is very applicable. She died almost 20 years ago, and she would have been 100 years old today. She is greatly missed. I also realize it's a bit of an imposition to mention this in your thread. I just wanted to insert a reference to a remarkable individual on this anniversary. Her name is Thérèse Pilon.
I think I've been appropriately rewarded and punished for my decisions in life.
I'll probably never even _know_ the totality of my good fortune, like the portion of an iceberg that lies under water it's invisible to me.
I'm not trying to persuade exactly... I just feel that this may be true for many of us.
Anyway, thanks for listening.
You don't think all Americans pay for everyone's healthcare?
You're not being punished, in any sense of the word.
You would be paying regardless of your own decisions. You are not being punished, you are being forced to contribute. If that's the way your fellow citizens vote, that is how it will be (though I doubt it will happen soon).
Right. That's why I said I was being punished for choosing to avoid loans. It's what makes loan forgiveness such a moral hazard: we discourage people for making the financially prudent decision to avoid crippling debt.
If I had instead borrowed money to finance my education, I could have gotten it forgiven and avoided this punishment.
You can say it's "unfair," or "undeserved," or like you say below, that it "discourages people from making a financially prudent decision". But no one wants to "punish" you -- that would be absurd.
If you set up the situation so that students can get themselves into crippling debt due to the market, you should realistically recognize that this might result in people with different underlying assumptions deciding that those students/former-students should get bailed out. So maybe it's better to just figure out ways to preempt the problem, which leaving it to the market (often a fairly abusive place for the less-informed or less-wealthy) doesn't really do.
Making them dischargable in bankruptcy would be a very useful change here, but where I disagree is that the market would be good at usefully signalling "this is a valuable degree" or "this isn't a valuable degree."
In economic models, one of the biggest reasons for soaring tuition is increased ability to pay. So every move to increase how easy it is to take out student loans causes tuition to go up which causes pressure to make it easier to take out student loans.
Therefore the expected result of your policy is outrage, short term dislocation, and then greatly reduced tuition. Which will move money from academic administration to the rest of the economy.
The cuts in state aid were mostly due to the 2008 financial crisis. However over decades, tuition has been rising significantly faster than inflation, while state aid has mostly kept up with inflation.
Furthermore rising tuition is not just a phenomena of state schools. Private universities have seen tuition skyrocket over the decades by similar percentages as public schools, and they never received state aid.
* Student loans that cannot be discharged via bankruptcy.
* Student loans that are more accessible thanks to both government loans and lending policies that encourage banks and credit unions to furnish student loans.
https://badgerherald.com/news/2010/04/07/as-state-funding-fa...
and the cuts have continued, eg a further $250m in 2016
http://host.madison.com/wsj/news/local/education/university/...
Should each of us support the status quo, because we don't to give up our little piece? Are we in a Nash equilibrium?
You might be the one who made a bad financial decision. A loan might have made you richer in the long run. ;-)
Not at all! These people are called "conservatives".
I think a student from a middle class family (meaning loans and not grants) should be able to attend four years of an in-state college, get a full education, perhaps work a part-time job but also have time for the kind of valuable extracurricular activities that are a part of the college experience, and graduate, without going into an unreasonable amount of debt. But it sounds like the reality is that that amount of debt, for that scenario, has climbed quite a bit.
The price of tuition practically /skyrocketed/ after it become impossible to discharge student loan debts.
Worse we've had two recent 'recession' periods and had insufficient recovery since then. It is extremely difficult for those entering the workforce to find entry-level jobs, and the competition for those seeking part time jobs means anyone going to college is automatically 'overqualified' (source, my own personal experience; over a decade ago, and I DOUBT it's gotten any better since!)
This chart shows part of the story:
https://en.wikipedia.org/wiki/College_tuition_in_the_United_...
https://en.wikipedia.org/wiki/File:InflationTuitionMedicalGe...
"... All rates are computed relative to 1978. [51]
Cost of living increased roughly 3.25-fold during this time; medical costs inflated roughly 6-fold; but college tuition and fees inflation approached 10-fold. Another way to say this is that whereas medical costs inflated at twice the rate of cost-of-living, college tuition and fees inflated at four times the rate of cost-of-living inflation. Thus, even after controlling for the effects of general inflation, 2008 college tuition and fees posed three times the burden as in 1978."
Even though I worked hard to pay back everything with interest, I still wouldn't wish the experience on anybody. I don't understand how funding other people's education is somehow a "punishment" to me.
Yes, this is called living in a society.
I used to feel the same way as you. But we need to stop loading young adults with debt that can never be dismissed. Young adults are easy prey. Student's are for the most part clueless on what it means to be in debt without being able to pay for it. Mostly student's are desperate to afford their dream school or study for the one profession that will increase their pay check and are willing to sign a simple contract to get it.
Luckily some of us know early on that we must get trained in a marketable skill to pay back the loan. Greek studies or French literature will not cut it these days. Not all of us are that lucky to know it.
We need to look at the lenders and schools too. They don't care who they lend to because they have a guaranteed repayment. This leads to predatory lending for lenders.
Schools don't care what they teach. This leads to nice to know classes. They will always find student dreamers that will major in (name you silly major here.)
The supply and demand curve has gotten out of wack. Maybe only certain majors and schools can be eligible for loans as a start.
Also, how is it that a student can go to school from K-12 and not have a skill. High schools need to be responsible too. I took a year of Calculus in high school. It's nice to know it yet it has not lead to a pay check. I'm sure there are other more productive ways to spend a year of school.
Indebted students are a symptom of the bigger problem on how to train society's future workers. It's time to do something about it. Debt forgiveness and a reform to the educational system is a great place to start. BTW, free higher education is not the answer. Look at what happens to the K-12 graduates. Free higher education will only extend that system without much results.
Yes, student's are stupid and it sucks that some will get a free ride but they are only a part of a bigger problem. We need to look at the problem more broadly.
I give students more credit than you do. If you're capable of going to college, you should be capable of understanding compound interest.
> The supply and demand curve has gotten out of wack.
I agree completely. Get the government out of this business and we'd see realistic supply and demand.
It'd be much easier to get a loan for a CS degree and a degree in CS would cost a lot more than one in English literature. Instead, we have the ridiculous status quo where the latter costs almost exactly the same as the former despite vast differences in value.
Why is making loans to people that have, statistically, a very low chance of paying off somehow not also a "bad financial decision"? We pay for "bad financial decisions" regardless of who makes them - debt forgiveness for individuals or bank bailouts when they get in over their heads.
Banks only lend for education because it's not dischargeable - there's no penalty for the bank making a 'bad decision' because they'll get their money one way or another.
Yes, make all student debt able to be discharged in bankruptcy, and we'll see a different dynamic play out. However... there are more predatory lenders out there that specifically target the newly bankrupt so... it may not 'cure' all issues, just shift some of the burden around.
EDIT: had meant to add that we already pay for people's bad health decisions via insurance pools, and we already pay for people's bad life decisions via prisons.
It's important to recognize that you're talking about the federal government and not really banks. Whether it's a bad decision to issue student loans to people who are unlikely to pay them back is irrelevant to the parent question about fairness. The government doesn't have money of its own. It has your money, and my money.
There is no scenario in which the government gets penalized for poor lending practices. The citizens get penalized, and that's why people who were conservative with their educational loans and expenses tend to be less than impressed with the idea of writing of a trillion dollars in student loans. That trillion dollars is largely going to come from the pockets of people who aren't carrying student loans.
I agree that the government shouldn't be making bad loans to people who are unlikely to pay them back. In fact, that's exactly what I said in my comment: the government should get out of the loan business.
Unfortunately, loan forgiveness would mean me (a current taxpayer) having to pay for the past poor decisions of students.
> We pay for "bad financial decisions" regardless of who makes them - debt forgiveness for individuals or bank bailouts when they get in over their heads.
Banks pay significant penalties for bailouts, while people seem to want debt forgiveness with 0 repercussions. Not to mention this whole issue of banks is orthogonal because most loans are from the government.
If we let the bankruptcy system handle it, people could get out of their loans but there would still be consequences.
I was under the impression that only federal student loans were protected from bankruptcy. However, it looks like that changed in 2005 when Congress largely extended this protection to private student loans as well. I still don't quite fully agree with your statement since financial institutions often have a hard time collecting on debt regardless of their legal rights, but you are certainly correct that this encourages financial institutions to take on more risk. Private student loans are performing much better than federal student loans though (11%+ vs 4%+ delinquency rates) so the data implies that they are still practicing somewhat strong underwriting practices. Further, nearly 95% of all private student loans have a cosigner.
Regardless, the private student loan market is very small in comparison to the federally subsidized student loan market. I know it is easy to blame the 'banks,' but in reality this situation has developed largely from societal pressures (college=success), federal and state policies ('cheap' and 'accessible' loans), and unchecked spending at colleges.
Link of an interesting paper on the subject for those curious: http://law.emory.edu/ebdj/content/volume-32/issue-1/comments...
Bad financial decisions that they made at age 18 with heavy pressure from everyone around them?
I got bigger fish to fry.
I started college in 2006, and graduated in 2012. Why did it take me so long? Partially because I switched majors to one that would yield a stronger career (read: tech), and partially because I worked my backside off for years, including a full year away on an engineering internship. I worked 20+ hours each week during school doing remote engineering so I could graduate without debt. I regret working so much. Some of my grades suffered because I was oversubscribed, and the work time meant I didn't have much of a social life. I applied for every merit scholarship for which I was eligible, and 33% of my college expense ended up being paid for by one I was fortunate to be granted. The paid-for months were the best.
So I agree with the question: Why should other kids have it easy when I busted my ass? My answer is nuanced. Kids who coasted through school on piles of debt while enjoying the ample time it afforded should not get away scot-free. Nevertheless, it is in society's best interest to help them out. Like it or not, we live in a capitalist and consumer-driven society. Debt is holding people back, as the WSJ article described. We all benefit when people can get out from under their debt and contribute, and we also all benefit when everyone is educated (even if it costs each of us something).
Society has a right to expect something in return, however. My college scholarship was from the federal government, and it came with a service requirement. It was a fair deal. They paid part of my way, and I owed them part of my time. I worked in a job I picked that was relevant to their interests, and contributed to their cause, while starting my career. Both sides won.
My ideal solution would allow citizens to dispel student loans through public service. Unlike making student debt eligible for bankruptcy, public service wouldn't be punitive. The deal would be that you have give back to society if you want society to have your back. We should bring back the Civilian Conservation Corps, and the Works Projects Administration. We have crumbling infrastructure? No problem: put graduates to work fixing it. They can earn minimal wages while getting student loans reduced for each month worked. They'll dispel their loans, have a job (an issue for many), learn practical life skills, and we'll all benefit from public works that make the country stronger. We can have shining bridges, beautiful parks, and an educated citizenry with the agency to move forward and pursue their higher ambitions. Some countries have mandatory military service. Is asking for a few years of service so much for those who want to dispel their loans?
We actually already have public service loan forgiveness programs. I think they're great and would support expanding them to additional fields.
There needs to be negative pressure applied to the price of education.
It's a tricky problem. To both provide consequences and support the weak amoung us.
Moral hazard and consequences are exactly why smoking is one of the few things which are allowed to affect premiums under ACA.
We should absolutely stop subsidizing this craziness though.
Get a degree in something useful (ex. CS) instead of political science or musical theater.
http://i.imgur.com/yU9b1Ta.png
These things really, really shouldn't happen in the first place, but when they do, the systemic effects should be prioritized over individual gains.
Only downside would be more economic activity because well educated people can spend more of their money on things....oh wait, that isn't a downside.
The grand irony in all of this is that the people who did go on to become plumbers, electricians, mechanics, roofers, HVAC specialists, etc, are all the ones that are currently in huge demand. And over the next 20 - 30 years they're the ones that aren't going to be automated (well ... mechanics may become less relevant with electric cars rising in popularity). As much as I'd love to automate remodeling my kitchen I'm not holding my breath on seeing it happen any time soon.
I think another part of it is that even low level office jobs now require some sort of degree simply because everybody has one. It's no longer something unique to have on your CV hence why so many people seem to be going for Masters degrees too. I know so many people only getting out of education in their late 20's and many of them got a degree, struggled to find a job, so went back for the Masters to give them ad edge.
Another problem all this education causes is lack of experience. If you decide at 16 or 17 that you're going into a trade you can get an apprenticeship and build up experience. If you go to college 'because that's what people do' and struggle to find a job based on your degree when you come out it's hard to even get a job in retail or sales because you're 23 with no experience.
One solution might be to only offer loans for degrees that lead to a job (doctor, lawyer, architect etc.) and consider things like History or Music a luxury.
I majored in music. It's pretty easy to tell who will have a reasonable career after college. The people who are well prepared succeed. The people who aren't usually flounder and subsequently go on to flounder after school.
Should we be telling people who are likely to succeed in their field that they can't get loans to study something they will probably do well at because of all the asshats that apply to these programs with little preparation?
My main point is that a lot of people are doing degrees when they can get the information they need elsewhere, much cheaper, and they are not getting value for money. Unless we can convince people college isn't something they have to do being more specific about which degree paths get loans is the only way I can see to prevent those people taking out loans they will never be able to pay back.
Additionally, music is pretty unique in that very few people study music in college without having already studied it seriously for 10+ years prior. Typically, if you've been playing that long, you've applied to specific schools with specific teachers in mind. I don't think anyone that plans on being successful in the field will be able to get much from whatever clown is teaching at the local community college.
Further, teaching can be surprisingly lucrative. Teachers that consistently put out competition winners at the state+ level can charge upwards of 100 dollars an hour. Top tier teachers in the LA area charge 300+. The most expensive I've ever seen was 700 /hr. (This is true for piano, which is my frame of reference. I'm not sure what music teachers in other instruments make.)
Continuing some of the above points, basically every really good pianist in the US comes from one of two "lineages" of pianists. Either they can trace their teachers back to Schnabel, or back to Josef and Rosina Lhevinne. I would be very surprised to hear of any 2nd generation student of Schnabel's or 1st generation student of the Lhevinne's teaching at a community college, much less online. I guess what I'm trying to say is that it's really not possible for the students who would succeed to get the information they need in a cheaper form.
But back to the initial point, I'm not convinced that cutting off entire paths of degrees from receiving support in the form of loans won't represent some sort of massive loss to society. Consider all of the potentially lost art/literature/music? At any rate, I feel like either college should just be subsidized by the state, or let people just be personally responsible for what they choose to study (which is what we already do.) I'm heavily in favor of the former.
> Consider all of the potentially lost art/literature/music?
I don't think that would happen. Music degree != creativity. You could argue that the people not creating teach others who do create but I think the majority of people who go on to create great art are going to do that whether they get a degree or not.
> The community is not particularly open about sharing information
Maybe it's because we're talking about music in such abstract terms but this is certainly not my experience. I've been working towards a career in mixing for the last few years and there is an abundance of great teachers and communities online for a small monthly fee. Everybody is incredibly supportive, helpful, and even share work when certain people have more than they can handle. From another angle I've always found musicians more than helpful teaching each other new things (e.g. I see someone playing with a technique I don't know and ask them to show me how it's done).
> At any rate, I feel like either college should just be subsidized by the state
I agree with you here. I live in the UK and the most anyone pays for tuition is £9k per year. I actually looked into going to the US for college and the costs were incredible. However a lot of that is because students choose to go out of state and go to well known schools. Maybe that's where the change needs to happen. Big subsidies for studying in state.
The idea of a university is not a place where one goes to get a piece of paper that certifies one as competent to perform a job - that should merely be a side effect - university is a place where people should go to learn about things that interest them and inspire them in the company of other like-minded people whilst simultaneously growing as an individual. I acknowledge this is a rather idealistic view of our higher education institutes but I think it's one we should strive to make a reality.
As long as we continue to believe this, nothing will change.
Universities indoctrinate, lets not be naive. Most schools have little interest in widening the perspectives of students. They are on a mission to unify perspectives. Indeed I would say that universities are more responsible for our Idiocracy than television - graduates really believe they have become enlightened when in fact they have been programmed.
It's almost as if there is more to the world than Central and Mediterranean Europe.
And heaven forbid, students get exposed to radical ideas in their philosophy classes. We can't have any of that, here.
There are plenty of old ideas that are excluded by what most universities define to be classical education - yet the complaints are about lack of coverage for Kant and Plato, rather then, say Confuscius, or Cornel West. (For examples both less, and more relevant to modern thought.)
The complaint was directed at a Philosophy education, not at a Western Philosophy education. If said top-20 college promised the latter, and ignored the classics, that would be reason to complain. Otherwise, it's like complaining that your History class didn't solely focus on America.
The other assumption that I call into question is that Freud, Kant, etc are 'apolitical' figures - whereas a feminist writer is 'political.' This is, quite plainly, nonsense.
Plato's views on government, and condemnation of democracy are quite clearly laid out in the Republic.
Kant writings have plenty to say about freedom vis-a-vis government, state power, rights of property, revolutions, warfare.
None of these great minds existed in an apolitical, unbiased vacuum, where they could devote themselves to nothing but free thought.
When it comes to education, my impression is that people use the term 'apolitical' to describe political opinions that happen to align with their own. Hence, Hobbes and Locke are apolitical - whereas feminist philosophy so frequently is. Adam Smith? Apolitical. Karl Marx? Political.
If that is the claim, then I agree that it is wrong. The most common criticism of Marx that I have heard is not that he is political, but that he is wrong (and perhaps incoherent). Similarly, I think that any curriculum that wants to replace the highly influential writings of Plato with another philosopher should make a case for why we should do this... an argument beyond the "inclusion" of additional points of view. I can sit at my desk and come up with a dozen different points of view. I don't think that each of those should be included in a philosophy class, in place of Plato.
Students are already exposed to too many radical ideas (supported by current political interests), which REPLACED the basics/foundations - that was my point.
Also, modern philosophers have a lot to say. I still recommend de Beauvoir and Wittgenstein to anyone who cares to read.
>> university is a place where people should go to learn about things that interest them and inspire them in the company of other like-minded people whilst simultaneously growing as an individual
This is the problem. That all sounds great but it is not worth $100k and there are many other ways to have that experience that do not cost that much.
You can get an excellent education at a state school for less than $6k per year.
The person who gets a degree in music theory, philosophy, or art history may not get a job that ties in to their major, but these people all leave college with skills in critical thinking, writing, the ability to meet deadlines, skills in communicating complex ideas to others, public speaking, etc. Most importantly, they leave with proof that they know how to learn and improve themselves. There are jobs for people with these skills, and they will likely be far more rewarding than gutting chickens on the line all day or waiting tables at the Cheesecake Factory.
[1] https://admissions.utexas.edu/tuition/cost-of-attendance
Edit: Sorry I misread. These stats are by semester, not year.
State college and community college in particular can be a lot less, and it's possible to even split the difference and do 2 years community and then graduate from the university by transferring credits. Of course, you have to have your ducks in a row to pull that off.
You're paying for room and board regardless if you go to college or not. Or you can just live with your parents.
Sounds like a fun luxury good. Why should we subsidize such a luxury good and encourage 25-50% of the population to consume it?
Should we also subsidize luxury goods enjoyed by other subcultures, e.g. video games, muscle cars or strip clubs? If not, why not?
After all, if it turns out that the public external benefits of a physics degree exceed those of a women's studies degree, then the former should be subsidized but not the latter.
In any case, what do you believe the external benefits of education are?
I don't believe one can really quantize which degree has more public benefits. Some benefits are hidden, in the sense that their benefit isn't so readily recognizable. The benefits of an educated populace are manifest and, I believe, clearly worth the expense of public financial support.
And once you factor in the harms caused by signalling, it's far from clear it's even a net positive.
The benefits of an educated populace are manifest and, I believe, clearly worth the expense of public financial support.
The external benefits are far from clear.
If a person is educated and becomes a doctor, and then fixes my spine in return for money, the benefit is clear. But that benefit is fully captured by myself and the doctor, and he factored the cost of education into the price he charged me.
Can you name what the external benefit (i.e. benefits captured by third parties) is, for both medical education, physics education and women's studies?
I'm trying to know what external benefits you think exist and why you think they are uniform across all fields of study, which is a much stronger claim that you made. I cannot think of any such benefits.
E.g., one might hypothesize that people in college develop useful skills that benefit others in a manner they cannot capture as wages. But it's a little crazy to suggest that a women's studies major develops those skills to the same degree as a nurse.
Right. The point of contention is whether we should be paying $50-150k per person for this public good.
I mean, the benefits are clearly there, but the price has been skyrocketing and when the individual can't pay back their loans, we all suffer.
I share your concerns; on the other hand, is signing up for a 3-to-5 year course really the best way to help people discover their passion? As an exploratory path, it sound expensive both in resources and in time wasted for the student.
Around here, we have something called "summer university" wherein high-school students can spend a week or two getting an high level overview of the college course. It's extra-curricular, so few attend, but seems like a similar approach introduced into the regular HS calendar (say, the last two months), getting everyone to try a few courses of their choice, could provide even more exploration for much lower costs.
Comparing higher education to job training is especially damaging in a fast paced economy with new fields and jobs popping up all the time.
This is the key problem - education is often positional good, since not every job seeker can be better educated than the others.
>One solution might be to only offer loans for degrees that lead to a job (doctor, lawyer, architect etc.) and consider things like History or Music a luxury.
Better is to make asking about and providing your college background illegal, with some exceptions for doctors/lawyers/engineers/etc.
I saw this first-hand -- I want to a very good school that wasn't _quite_ top-tier. My classes were full of kids who were only there because their parents had decided they should go to college, and then the parents fell in love with the school.
When I say deskilling, I'm talking about creating products that reduce the amount of skill required to do a task. This increases the pool of labor competing for the job. It also often increases how much a single person can get done in a given amount of time.
Compare PEX and copper pipe fitting.
The next thing we'd like to get us something like the Voortman V808[1], that thing should cut or labour input requirements by 50% or more.
Instead of removing skilled jobs and increasing a job pool of less skilled ones, tech can increase efficiency of master craftsman to the point where there is no need for the less skilled/experienced apprentices, thereby compressing the job pool instead of expanding it.
Otherwise, you wind up going to school a couple more years. You are still likely going to start work 2-3 years sooner than someone going for a 4 year degree.
plumbers, electricians, and plenty of other blue collar vocations do pretty well imo.
That's about half of $35k for basic expenses while living in Manhattan, which leaves plenty of room for taxes/savings/going out/travel/etc. And there are a lot of great free events in NYC, too.
Business degree? You might be a retail store manager because that is what you found that you actually have experience in... because you worked retail through school.
It is bad all around.
...You might get a different picture of things if you hang out in some of the skill trades reddits:
https://www.reddit.com/r/SkilledTradesNetwork/wiki/community...
...fer instance: "Here's what 10$ an hour looks like! Had to put in my 2 weeks."
https://www.reddit.com/r/Welding/comments/52byky/heres_what_...
And pretty much every reply is "I make way more than that, what are you thinking??"
I'd imagine the guy either doesn't know how to show up consistently and on-time, or has such a severe lack of social skills that he can't properly interview for a job. If you can weld like that and can't find a job making more than $10/hr you are doing something SERIOUSLY wrong.
Way more than that being $30/hour = $60K per year.
Not arguing that we could consider it low, but providing more context.
Combine that in a household are you're getting close to $100K.
I think the point still stands, but it's good to have more accurate data.
I make much more than that and I only have an B.A. in English.
You can absolutely get a job as a web developer without a degree. I know many who have done so.
Not true. Look at any construction site and labor-saving innovations abound. Plumbing comes in new materials like PEX, which takes less labor to install. Large parts of houses are fabricated off-site and shipped in on trucks. No job is immune from automation and increased efficiency.
I agree that there are and will continue to be good skilled trade jobs and many people would be better served by pursuing these options, but there is tremendous value for the average American in a college degree. The problem is that a lot of Americans are unable to graduate college, and waste their time and money pursuing a degree instead of doing something more inline with their talents or their drive.
As it stands, automation will most likely continue to primarily affect blue collar workers before it hits knowledge workers. Long-haul truck driving will probably fall relatively soon and factories will continue to have more and more automation.
Not for everyone obviously and it's not big pay but I know what I pay contractors and it's nowhere near minimum wage.
Huge demand? Not in the US. Trades salary growth has been flat.
The result of this transition incentivizes the wrong output: instead of kids coming out of college able to freely think for themselves, now they come out begging for direction.
At least this is how I was raised. I don't think I have an opinion myself aside from enjoying the idea that I'll likely have the same job in a year I do now.
Note: Some schools still charage less than 10k/year. http://www.usnews.com/education/best-colleges/the-short-list...
Instead, schools have a huge incentive to raise tuition endlessly and family's are stuck playing a zero sum reputation game.
https://en.wikipedia.org/wiki/Survivorship_bias
Struggle can also cause bankruptcy, violence, and misery.
Not having an emergency fund is about the riskiest thing you can do.
> If you owe $2k every month to NelNet or another institution, it's much harder emotionally and financially to quit your job to travel the world or start your own company.
The emergency fund helps with that. When built up, it should cover 6-12 months of zero income. Amassing it first means losing a job doesn't mean deferring payments on the student loans and winding up with years more payments to make as a result.
> We had Federal Loans and the interest rate was still 6.5%
One of my wife's student loans is at 2.5%. At 6.5%, it's not below inflation and paying it off makes more sense.
But sometime emotions get in the way of financial strategy.
Sorry, I have to laugh. This is the most HN thing I've read today. It's a tremendous privilege to have the option of quitting your job to travel the world, rather than the fear of being arbitrarily laid off, and failing to put food on the table or lose your house. My redneck might be sticking out this morning, though.
I have moved around the country for work quite a bit, so I do feel fairly well-traveled. At least in the continental US.
At least colloquially, this term signifies one has been to other countries (or better, other continents) and visited other cultures, immersed in other languages, other governments, other ways of eating, etc. One who stays within a country would not (in my opinion) be "well-traveled", despite the country being enormous. My 2cents.
I define well-traveled as someone who has traveled a significant distance based on their circumstances in life. By your definition a large portion of the people living in the EU are well-traveled just living their normal lives. Which is a far easier thing to accomplish than someone in the US. I have driven from Orlando FL to Las Vegas NV, a distance of around 2300 miles or so, twice. How many countries does that cover for that range in the EU? I have visited many locations around both cities and in-between. I have lived in four states in different areas of the country, each with their varying cultures. I can tell you for a fact that the Southeast and Southwest US do have different cultures, even though they both sort of speak the same language. Walking through downtown Los Angeles after growing up in small town Alabama is visiting a different culture.
Just my 2 cents.
I agree, there is a kind of snobby adherence to the term by some people, as they see the point of becoming "well-traveled" to have been able to afford it.
I politely disagree that the term -- or idea it was meant to abstract -- is to convey how much distance one has traveled, but rather how varied the places have been that one has lived in. Just a short quick visit, e.g. a many-hundred-mile 2-week scourge through Europe, robs you of the experience of living in a non-tourist area where the environment is nothing like what you are accustomed to.
The idea (phrased as "well-traveled" or otherwise) from my perspective is to learn that many countries have very different ways of life; some have better/free access to health care, or not at all; some have almost no diverse ethnicities (e.g. China), or that in the middle-east, you can have countries with a strong diverse mix of many religions (Lebanon); how foreign country governments treat you (no VISA, vs. register yourself with police everywhere); etc.
For those with hard lives, many can be some of the nicest people. Visit China, other south-east Asian countries, rural India, Africa, as well as the well-developed nations in Europe. The most important trait one should take away from travel is: first-hand experience at the range of life that exists on this planet, something which cannot be read from a book.
We take for granted many of the artifacts and ways we work in our lives; seeing others gives us perspective that becomes a useful skill. I wholeheartedly agree that these skills can be developed without leaving the country, among our own rich, poor; and we are fortunate to have all four climates within our borders, too!
Edit: If you are supporting children, the above advice may not apply.
Thank you for recognizing that.
It's also worth noting that 2.5% is still higher than inflation in the last couple years.
Yes, people should decide how much debt they want to take on.
There are vast differences in the value of different degrees (cost and earnings). It's people's responsibility to educate themselves. The rest of us shouldn't have to subsidize someone's terrible decision to go into debt for a degree in basket-weaving.
If you're old enough to drive a car, join the army, or be charged as an adult, you're old enough to realize that paying tens of thousands of dollars for a degree in musical theater isn't a great idea.
It's not rocket science. There are tons of resources online to help you figure out which degrees and schools are good value.
And how many finance courses would they have taken during high school?
That's not going to happen because it's politically easier to continue to subsidize failure than to draw the line on this bullshit and reward sensible hard working people like you.
...but don't get salty because the debt won't vanish. I have no doubt that if an education loan is forgiven, it WILL affect that persons credit rating. Much like when a debt is forgiven/charged-off. Also, charge-offs are typically treated as a form of taxable income... so these people will pay one way or the other, and likely take a long-time credit rating hit.
There's simply no way that you will want to forgive the student debt... so pay them off if you can! The punishments of 'forgiveness' simply have to outweigh the benefits or the system will be gamed until broken.
That's not much consolation. I wouldn't be happy if the government decided to simply pay people for making poor financial decisions, even if we recovered x% of those payments through taxes.
I'd still be paying for it with my massively higher taxes.
Just get the government out of the student loan industry. Let the market signal which degrees are valuable and allow students to discharge through bankruptcy (but ruin their credit).
Government already does that in a myriad of ways, some more morally accepted than others. It's almost part of the base definition of what we expect the government to do, if you really think about it. Paying for the poor that made bad life decisions and lost their job, the sick that didn't save for medical expenditure, the parent that had one-too-many kids and can't pay for their food/schooling, etc.
I would argue they are all very similar, buffering and protecting those that are incapable of providing for themselves, either by inability or conscious inaction/abuse. It's just that some people think this should be done by private efforts, instead of by government which uses it's power to force people to obey and pay.
Why, though? Depending on how the idea of debt relief shakes out, this might be one of those "sometimes life is unfair" moments that you just have to accept and move on as part of living in a society. The alternative is a massive contraction in buying power, which could certainly directly impact your livelihood. Is the spite worth that?
The selfish thinking that people shouldn't get anything for "free" (ie, shifting education burden from taxes to the student) and everyone should be accountable for every dollar is how we got here.
If I just finished paying off my student loans, and debt forgiveness happened, I would be annoyed and a bit jealous. But also happy that those who had their debt forgiven now have more money to do stuff and contribute to the economy. I would truly be happy for them. Why wouldn't I?
(Note: I don't believe debt forgiveness will ever happen)
"I had to do <thing that sucks>, therefore everybody has to do <thing that sucks>" isn't a great argument, but "you had to do <think that sucks>, but I don't want to so I'm going to make you do <other thing that sucks> so I don't have to" is even worse. It's like forcing someone who just finally managed to rebuild their house after it burned down to share their house with another fire victim for free.
Actually, probably not. That's part of it, but if student loan debts are forgiven, the banks aren't going to eat all of that cost - the government is going to step in and help recoup some of that cost. So not only did I have to pay for my own college education, I'll be taxed to help pay for thousands of others, as well.
Of course it will. That's money which the government loses.
I pay tens of thousands in taxes every year.
“The only time you look in your neighbor's bowl is to make sure that they have enough. You don't look in your neighbor's bowl to see if you have as much as them.”
I'm almost done paying off my student loans, and because of that, I don't want anyone else to have to endure paying for student loans, even if I myself don't get the benefit.
Stop whistling past the grave yard. That is how government works. They have guns, and prefer that you don't, just in case you get all argumentative and pouty.
At least where I'm from, no you won't. Your debt to the state will grow and eventually they'll try to repossess it (through e.g. wage garnishing). They can't arrest you for not paying taxes.
What happens if you go up and steal someone's car?
The same thing that happens if you break any other law.
"What if you resist arrest?"
The same thing that happens if you break any other law.
"Eventually, someone will deploy state-sanctioned violence in this situation."
And you get no sympathy from me, because in this case, you clearly broke the law.
That's bullshit. In reality OP proposes to transfer money from me to people who made investments in human capital that didn't pan out.
Maybe that's their fault, because they invested foolishly. Maybe it's nobody's fault, because they invested in a positive-expectation bet and got bit by the variance (it does suck when you take out a loan to go to nursing school, and the feds decide to import a bunch of Filipino nurses instead). Maybe they were the victim of fraud, and someone sold them a bill of goods.
In any case, it has nothing to do with me.
Rather more direct when they're taking my money to do so. This isn't an abstract "ask not for whom the bell tolls, it tolls for thee" scenario, and the alternative is not personal autarky. OP is proposing a direct transfer, from me to a stranger, to which I am opposed, and therefore one which must be imposed by force. The alternative is not imposing such a transfer. Cut a check yourself if you think it's a good idea. Bullshit about the universal brotherhood of man and unity of the volk does not excuse arbitrary impositions.
Somehow we got twisted into this track of thought that everything must be individually accounted, and student became individually loaded with the debt of their education. And because students as a group are in a poor bargaining position for tuitions - the inflation of education costs skyrocketed. I think they are the only life cost that gives healthcare a run for it's money in it's ability to exceed (by multiples) both the growth in the economy, let alone the growth in personal incomes. This cannot continue.
Plans to give student aid to income below a certain threshold will only serve to further cause tuition inflation. It is a case where individual allocation of cost/debts is much less efficient and harmful to our economy than social allocation of the cost. I think we need to go back to funding public universities out of direct state and federal budgets so that public institutions can offer low or no tuitions. This way, gov't organizations with the budget leverage, with much better visibility and oversight can keep costs down at public universities. Low public university costs will also help cap the excesses of private tuitions via market competition.
Unwinding the current mess of student debt is also a huge issue, but should be undertaken too (but I'll leave that to some other time...)
Most undergraduates have no real need to obtain a gold-plated degree. Undergraduate education in nearly all fields is well-understood and can be delivered adequately at low cost. This is why foreign countries that aren't wealthy still produce excellent undergrads. Only in the US do we believe you really can't get educated unless you went to an expensive and/or elite school.
All of the sudden the banks will actually care about doing due diligence and the likelihood of being paid back, instead of throwing money at everyone knowing they have a federal taxpayer backstop.
You want a loan for $60k to major in electrical engineering at NC State? Approved. You want us to loan you $225k to major in Sociology at Sarah Lawrence University? Denied.
-- note - not to disparage anyone who went to Sarah Lawrence University. Chosen purely because it was listed as the most expensive private school
Not so bizarre when you consider that student loans are very difficult to get discharged via bankruptcy. The loan issuers don't need to worry so much about whether you'll be able to pay it back or not, because it's more a question of "when" than "if".
If you could discharge them in bankruptcy, no one would offer them because huge percentages of people would go ahead and do so.
And society can have a discussion again on how much it values educating its populace.
Fix bankruptcy laws, fix the student loan problem.
Sure. And if they change then their loan status/situation will change.
Just like my mortgage through my Credit Union. The terms of the mortgage when I refinanced was owner occupied for 12 months after the closing date. If I move out prior to the 12 months I'm technically in default and the holder of my note gets to choose what to do.
The problem is that people are graduating with huge debt and can't get jobs that pay well enough to pay off their debt.
A large number of the people who default on their debt never graduated.
I normally would down vote a comment that starts with DYRTA. I haven't this time, I wanted to use the opportunity to express how I think we can maintain HNs civility. Thank you.
"Federal figures show most people in default on student debt owe relatively little—under $10,000—because they dropped out of school"
17-18 year olds often aren't going to have much of a credit score, so you're basically winding up excluding folks from low-income areas/backgrounds from a college education.
Are you going to ban students from changing their major after a few weeks?
That wouldn't be true even with the limitations on discharge in bankruptcy, except that servicers have been actively steering people with trouble paying into deferments rather than the various income-based-and-discharged-in-N-years plans (where N is generally 20 or 25.)
FYI, Lloyd Blankfein was a History major, amongst other Billionaires: https://en.wikipedia.org/wiki/Lloyd_Blankfein
It's what you do with the degree.
I've been entertaining the idea of buying a house in my neighborhood. This town never had real estate inflation and bubble, because of rust belt economics. $150,000 should buy a nice place.
It seems mighty unfair to limit the money simply because a degree doesn't earn so much. I think such a system would lead to sub-par schools for the 'lesser' degrees and better ones for those with better earning potential.
Our generation has no solidarity. We should just strike or protest and demand lower tuition. Or just not pay back the loans en-masse.
How come with the internet and twitter etc, we can't organize whereas in the 60s and 70s they could get their act together?
>and students who have potentially low-earning majors such as History are still given similar amounts of money from banks as a CS major
The corporations would love to turn universities into training grounds for the skills they need. Yet another example of them pushing an externality back onto the rest of us again.
Education is not the same as training. Education is more than training and expands your mind.
Training just teaches you a set of job skills.
Some ideas to improve the "situation on the ground":
- reduce the demand for college education
- reduce the cost of attending college by providing better material support for students in the form of affordable room and board.
- reduce the cost of attending college by providing better public funding (by an order of magnitude) for public universities, state schools, and community colleges for students of proven ability (3rd/4th year students).
- fail students who are wasting their money more quickly and aggressively.
- make it easier to attend college part-time while working or while raising kids (the idea of intensive four-year study with "Summer Breaks" is absurd in the modern non-agrarian economy)
- publish clear metrics on loan-repayment/income prospects after achieving a 4-year degree of <type> from <institution> with <gpa/perf metrics/etc> and use these to gate loans (it is probably rational to take out loans to get a philosophy degree from Harvard, it is probably not rational to take out loans to get a philosophy degree from a random state school in Minnesota.
- regulate predatory loan-lending even more aggressively.
- offer insurance as part of loans to allow students to hedge against catastrophic life/economic problems.
If you are a dead average intellect with dead average work-ethic and ambitions, I see absolutely no reason to support your post-secondary education beyond a year or so. That's throwing damp logs on a dead fire.
If you're a dead average intellect with dead average work-ethic and ambitions and you take out tens of thousands of dollars in loans gambling on a future that doesn't exist, I see no reason to treat you any differently than someone who gambles and loses in the market.
Source: https://en.wikipedia.org/wiki/ITT_Technical_Institute
I want to increase the odds that someone who is willing and able can work their way to where they want to be, and decrease the odds that fortune dictates who wins and who loses.
(I vehemently support leveling the funding playing field for primary and secondary public schools in Minnesota and dramatically increasing funding for schools in poorer neighborhoods; also providing credits for child care, preschool, public transportation, and safer streets. What I object to is the idea that someone should go to Macalester College, get a degree in Psychology with a C+ average, then complain because they aren't handed a job with a wage high enough to cover $100k in student loans).
1. Doctor & Finance couple with combined income $400,000+/year 2. Pharmacist & Finance couple with combined income $200,000+/year 3. Science Research & Quant(finance) couple with combined income $300,000+/year
Interestingly - all have finance or medical field/science exposure..
The rest are renting forever paying of debt with no plans to buy soon (we are in hot real estate area).
I dont see who will support real estate prices going forward.
$124/mo, 840 sq. ft: http://www.zillow.com/homedetails/1204-Via-Seville-Cathedral...
$93/mo, 1190 sq. ft: http://www.zillow.com/homedetails/617-NW-8th-Ave-UNIT-11-Mil...
$70/mo, 832 sq. ft: http://www.zillow.com/homedetails/1745-35th-St-NW-Winter-Hav...
$72/mo: http://www.zillow.com/homedetails/8528-Highland-Ave-Kansas-C...
$92/mo, 2302 sq. ft.:http://www.zillow.com/homedetails/122-Cheyenne-Rd-Shohola-PA...
"Sold as is-where is-no disclosures available-Seller has had no knowledge of property-no representations made as to a warranty-habitability,marketability.express or implied."
I guarantee you that the seller _DOES_ have a knowledge of the property, and that's why it's only $19,500.
And in real estate, where flowery language is the name of the game, the above is coded language for: "Bulldoze it and build" (come on, "no guarantee of habitability"?)
Likewise, your place in PA - did you look at the photos? There are entire exterior walls covered with (torn) Tyvek and tarps. There are unfinished walls, roofs and floors.
Another, a cinder block hoarder dwelling that is missing multiple windows.
I get that you're trying to make a point, but you're also picking out not just low end locations, but houses that are in some cases quite possibly condemned, or should be.
Only two of those looked remotely habitable (and not a matter of pleasantness, I mean from a health and/or safety perspective).
http://www.zillow.com/homedetails/152-Sagamore-St-San-Franci...
http://www.zillow.com/homedetails/1055-Gilman-Ave-San-Franci...
http://www.zillow.com/homedetails/15320-Swan-Ct-Gulfport-MS-...
...(one of those homes is not like the others).
The one near Palm Springs may be a close second, but I can't image what the commute from there to to some job in the LA or SD area is.
http://thereformedbroker.com/wp-content/uploads/2015/03/Scre...
There's this amazing thing called "renting." Not owning your home doesn't mean you live with your parents.
The notion that you should be able to immediately buy a house at the beginning of your career is ridiculously entitled.
Finance - MS followed by work followed by MBA takes you to 30 years + 5 years again close to mid 30's
So no, im not talking 25 year olds.
China.
On the surface this seems hyperbolic but its true. The area I am at has seen wealthy Chinese investors buying up property in the new developments and then leaving it to their children to manage. It's almost impossible to buy a house here in the sub $300k range due to the rapid buy up and flipping they're doing. Most of them don't sell either - they rent, leaving people here in perpetual rent cycle without the ability to own property in a decent area.
Eerily similar narrative to any other welfare debate in the US.
This will do nothing more than favor the rich and further suppress the poor.
* I say supposed to be because the rule was swallowed by an exception during the regulatory process and now only plays a minor role.
The great majority of student debt holders owe less than $30,000.
I'd like to see more direct funding for schools and a shift of federal support to competitive grants, but those aren't huge numbers when you look at a degree bringing in hundreds of thousands of extra dollars over a career.
Grants aren't as egalitarian as giving anyone who wants it a loan, but they can be expected to distort the market less (because schools have to compete for people who don't get them).
The interest on the loan sizes I've mentioned is typically going to be less than $4000 a year, so if they pay $6000 a year the loan will go away quite quickly. That's a substantial amount of after tax income for a lot of jobs, but students should be looking at the debt in those sort of terms, that it is going to be one of their main payments for a while.
This just shows how incredibly stupid the right wing is in the US. They could be using this as a cudgel to punish their intellectual opponents in the universities (entirely justified, since their claims to be increasing the human capital of their students in an economically productive way were evidently false), and simultaneously break down a barrier used to exclude a large number of their constituents (non-college-educated whites) from white collar employment.
Instead it looks like they might be setting up to cut another check and further solidify the role of colleges as ideologically hostile gatekeepers to decent employment.
This will have a drastic affect on the interest rate of student loans, but perhaps a turn towards normal will be good for us. As of right now the government gaurantees it 100% -- which is to say YOU guarantee it!
If you work for a big company and you have an ivy league grad and a guy from a conference you met who seems promising do you:
a) hire the ivy guy and if he is crap mumble about youth today b) hire the random guy who screws up and everyone blames you ?
Both get hired at low wages as starters, you might save a bit on the random person but not that much. Plus if he is good he'll want a rise.
Large corporations are about sitting nice and still and not messing up.
I'm not sure it's the market, it's the consumers of the product in our world where managing perception in large companies which often have monopolies is more important that cranking stuff out. Not always, but often.
A college degree is this decades version of "nobody got fired for buying IBM"
EG: https://aims.uchicago.edu/node/83
I tend to think that many things that are now in college degree programs are actually things that should be in trade programs - we've turned everything into a degree, and in the process, stopped realizing what the value of a degree is and/or what the purpose of a theory driven/liberal arts education is.
(TL:DR if you don't end up reading the link - to think, to create the ability to teach yourself, to encounter new ideas and figure out which ones are hot air and which ones are not. To learn how to create good new ideas for yourself! To become a better human being and citizen in order to better participate in this world)
If we separated out the trade school aspect, well, it becomes very hard to value an education in the traditional degree/liberal arts sense - and it becomes easier to tell what's the value of that immediate trade school diploma by market forces. In that, then the government could apply a limit on loans to what is very knowable (market forces) and apply some other metric because of the public good gained by aiming towards education in general
I still think his points hold (as do many of the speeches points, most of which in some ways are similar).
However, attaching liberal education to everything may or may not be a good idea - and with the trade-ism of college, liberal education is sort of conceptually odd
It is because of increased Medicaid costs and also because boomers aren't financing the proportion of state higher education that their parents did that many of today's young have higher student debt than it the past.
Doctors don't haven't to incur debt in medical school if they spend four years in the military as doctors.
Your option for doctors to not incur medical debt is very hopeful. First, I doubt the military has enough positions for all the doctors to fill, and I doubt all doctors would be fit enough to qualify for military service. On top of that, that is 4-6 years longer before they can actually practice.
There should be a way that is much better than sending potential doctors and surgeons off to war. For instance, forgive loans to folks that work in general family practice for 7 or 8 years, less if they move and practice in an area that is in a high demand (poverty stricken area) - with the disclaimer that they must take all forms of government backed insurance.
In all seriousness, though, there is a real sense in which students who go to college are being scammed, in this sense I pity them. Their money isn't going to better professors, who are still paid a pittance for a lifetime of devotion to their field, even in the sciences. It's going to the administrators, whose motives are not actually education, but gaming the already broken system of academia.
In my eyes, this makes the case for socialized higher-ed even stronger. A system which incurs financial ills so great is , by definition, a market failure, one so vast that it begs the question why it is a market in the first place. It'd be much more prudent to pay for students educations if they show potential for success in the first place, rather than financing many of my college peers who now work in coffee shops as compensation for their $200k Anthropology degree. No system built on craftily selling economically useless degrees as an "investment in one's future" will actually provide any benefit to society.
So what's to be done? First, Provide students with scholarships, or the like, to schools which limit administrative expenditures or those whose administrative expenses pale in comparison to the money they spend on qualified professors. Second, disqualify schools which do not produce a threshold percentage of net-gain employees - if a school has a track record of pumping out angsty coffee shop Lit majors, it has no business in taking taxpayer dollars. Last, provide outlets for students who aren't destined for a career in the sciences. Maybe trade schools that offer classes in academics alongside chances to become electricians or plumbers, both careers face workforce due to people's obsession with reading hundred-year-old books instead of doing something meaningful with their time.
Rant complete
Should it be the individual receiving the education (either at present, or in the future in the form of loans), or other people? Should people who don't go to college be forced to pay for education of those who do?
Should we further tell students not to care what price colleges charge them? If we forgive debt, we're telling students to go to a school regardless of the costs, and telling schools to charge whatever they want.
We're then forcing non-college-educated plumbers to pay (through the tax system) for the engineers college education.
This seems like a terrible idea.
I also see a huge problem with lumping all education together. There are some colleges, degrees and people where college can be considered a wise investment. That is, the expected value of the degree is more than the cost. There are other times when it appears college is a consumption expense, like just buying a four year vacation or a luxury car.
When someone graduates college with the same productive capacity they had before college, but now with debt, that's sad to me. Working at $10 an hour in a coffee shop isn't that bad. Working at $10 an hour with $50k in debt is very bad. Many times people were just 18 year olds who were handed a blank check (loan) for college, and didn't know better. But there was no checks or balances on this ignorant 18 year old, as the lenders dont care that the student was not increasing their productive capacity.
What we need is a system with no lender guarantees, with potential for percent of income repayment (earning equity), and have it be unsecured like other forms of debt. This will make lenders function properly, and only give loans to those who it believes are improving their human potential at college- and for whom college isn't the equivalent as buying a $100k luxury car.
1. Allow people to pay off their loans with pre-tax dollars, just like 401k investments.
2. Cap interest rates. The high rates are a big problem for people with large balances. The interest rates are a little lower now than the used to be -- 6.8% was standard for Federal loans for many years, and private loans are even higher.
3. Limit the amount that can be borrowed in the first place. Colleges have been raising tuition because they know students will be able to get the money. Apparently there are already limits, but I know people with over $100k in debt for a bachelor's degree, so clearly the limits aren't low enough. Limit what students will borrow, and you limit what they can pay -- tuition increases will become a lot harder to justify.
4. Make it easier to discharge loans in bankruptcy. This will also reduce lending, which is actually a good thing.
s/college/youtube/g
Also, bring back the apprenticeships. Why not let someone learn for free or even get paid a small amount? It's so much better than them going into debt.
College is such a racket.
This is eerily reminiscent of the pre-revolution French or late Soviet Union trying to keep their spinning plates of state obligations, onerous taxes, and corrupt subsidies aloft.
Not to mention that college was a lot more affordable two decades ago...
My wife, on the other hand, is in another boat. She is studying vet med and has a pile of debt, and will likely be paying off her loans for most of her career.
Our taxes are the dues we pay to live in a civil society, but civic responsibility doesn't end there.
I managed to go to a small public university after the tuition hike but before the Great Fees Gouging. I'd probably have escaped with $5,000 less in debt if I had started with my state's (Georgia's Hope) merit based scholarship instead of having to build up 10 semester hours totally on Federal UnSubsidized Loans the first year.
At that point, used Ebay books could run you well past $1,000 a semester. Hope only gave you a $150 for books. Hope also did not cover fees. Those started at about $800 every semester when I enrolled. My 4th year, they had hit well past $2,500 per semester. Included in that was $150 to build a new student recreation center that I would never use since it wasn't even being built yet.
The amount of hustle I had to do just to escape that school with minimal debt was insane. My overloaded schedule (because semester hours past 12 didn't increase your tuition or fees) meant I needed a job that let me do study or homework while working. So typical service jobs off-campus were out of the question. My year basically was applying for summer retail jobs, lying my face off during the interview that I was going to stay on past the summer, and then of course quitting. I'm basically black-listed from several retailers for quitting for this reason. Christmas was always easier because those jobs are naturally seasonal.
During school, I'd tutor various core classes under the table. At my university, this was considered quasi-against-the-rules. Tutors were supposed to go through the Student Support Center. They'd pay you hourly minimum wage and set you up with other students for free. Tutors who were students caught not going this route were usually sanctioned by the university and threatened with all sorts of administrative punishments.
Naturally, this was unacceptable to tutors, so we all snuck around advertising by word of mouth and meeting off campus. I mean, when I can easily pull $100 a session as the only person willing to try to cram Plato into your brain, why would I go through the SSC? Calculus was a bit harder because there was more competition, so that usually ran about $60 to start. Once I had kids getting their B's and telling their friends, I was able to pull $100. I ran a group rate for a Fraternity that was a flat $350 a month.
I lived off campus, because rent on a 3 bedroom, 2 bath was $950/month plus utilities. Speaking of hustle, keeping those bedrooms stocked with roommates was it's own drama. Kicking roommates who fell behind was even worse. The lease was in my name, because most places I went to rent a room were on 6 month leases and headed home every summer. I wanted something more permanent since I was staying in town year round.
All said, I managed to escape with just over $30,000 in debt. That's tuition, fees, and about $10,000 a year to supplement all my other income. I hit a job immediately and started burning it down as fast as possible. I landed a better job with nice, $10,000 yearly bonuses and finished murdering it.
This was right as the next big wave of inflation hit higher education. Now? I went back and poked some of my social circle in that town. Getting out without $60,000 in debt is basically impossible. If you live outside of a 10 mile radius of the campus, you are required to live in the dorms your Freshman year. Literally every course uses some sort of book with an online component. To access that component, you have to buy the book new to get a code. The university regularly charges current students fees to raise money for buildings that won't be built for 5 years. They recently charged a parking fee, and then made all lots on campus hourly paid parking. The lot that parking fee is for? It's about a 4 minute walk off campus. Good luck if your class is on the other side of the campus.
Part time students are actually charged the exact same fees, but are not allowed access to several benefits of of the campus. This is disguised as "discounts" for full time students at on campus food vendors, a higher co-pay for health services (physical and mental), and being barred from the free tutors (that no one can use because we won't work for them) Student Resource Center.
The problem isn't just the loans, it's a deep cultural problem in the administration of these universities. University presidents down to the department chairs are held to metrics that lead to perverse incentives. They must milk students of every dollar possible so they feed the enrollment machine. This leads to admitting students that probably shouldn't be admitted. This leads them to dumb down courses to graduate students who have no business having a degree to feed the graduation rate.
TL;DR: The US higher education system is abusive and terrible. Avoid at all costs.
I'm teaching one class as a part-time instructor now back at my old university (basically for beer money on top of the day job), and it's blowing my mind how much more flashy the campus is. And naturally, how ridiculously expensive it is after only 10 years. The focus on "student life" facilities strikes me as an odd set of priorities considering how long hiring and pay raise freezes for faculty seem to last.
The mandatory online book thing is pretty insidious. We're required to use it by the department, and I can see how there is a kernel of a good idea there. It basically helps you run gigantic course sections while grading all homework for you, but while simultaneously killing the secondary textbook market (which is pretty evil). Worse, they are clearly implemented by the lowest bidder and break every web standard you could imagine.
Basically, with increased class sizes and mandatory online content, every core course is slowly turning into a weird online hybrid class. I think this is decreasing the difference between a traditional education and a MOOC bit by bit, which is eventually going to give a lot of universities a bit of an identity and marketing crisis.
Pearson, Wiley, Mcgraw-Hill et. al. are the entities that I would most like to see disappear when the college bubble pops. Free open-source community maintained textbooks seem like the obvious way forward to my software developer brain.
On the bright side, I do enjoy actual lecturing. It's a lot more fun when you can do it with few or no stakes, since I don't have to rely on it for a living. I'm literally on the exact opposite of the spectrum from a tenured professor, but I weirdly feel like I have to same level of freedom.
On the one hand, yes what's happening is wrong. On the other hand, you CHOSE to go into debt knowing that you would have to repay it after you graduated. Just like people who CHOSE to deal marijuana KNEW it is illegal.
Disagreeing with the law doesn't entitle you to break it. Similarly, disagreeing with your loan terms doesn't entitle you to not pay them.
I CHOSE to go to a cheap state school to avoid this fiasco. Now others who didn't choose prudently get "relief"?
At one point do we just say, hey, you made shitty choices, sorry. Where is that line? I'm not saying we shouldn't do something, just offering up a different point of view.
But the difference between a law and a promissory note is that the legislature didn't get your explicit approval before passing the law. The promissory note has your signature on it, under a promise that you made to pay a certain amount at a certain time in exchange for valuable consideration.
The note is a contract, and you can make any contract you like. But we do have rules for the types of contracts that the state will help to enforce. The parties to the contract have to be competent, and the contract can't force anyone to do anything illegal, and everybody has to understand what they are agreeing to. If it was, indeed, a "shitty choice" to take a loan that you couldn't reasonably pay back, there may be an argument there that the contract was lopsided and unconscionable from the start, and being forced to repay it on the original terms would be rewarding bad behavior on the part of the lender.
Defaulting on a loan because you now disagree with the terms is less ethical than dealing weed because you disagree with cannabis prohibition. You should really support clemency for nonviolent drug offenses before considering forgiveness of student loan debts. One is a matter of being forced to live under the (somewhat arbitrary and capricious) edicts of the powerful, and the other is about breaking promises after already realizing the benefits from making them.
The problem is assuming that borrowers are fiscally competent. We know this to be false, even among home buyers. 18 year olds, who have every adult that they trust telling them they must go to college and take these loans, don't stand a chance.
The loan industry not only knows this, but they optimize the system to capitalize on it. I don't think the student was represented when laws were passed to prevent discharges in bankruptcy.
A professional loan officer just has to fool some kid one time, and closing that 15 minute deal often destroys that kid's entire adult life.
We provide Donald Fucking Trump more protections from financial disasters than well-meaning students who have never had a loan or investment in their life.
Coincidentally, he is one of the many who are exploiting this system, with Trump University existing for little other purpose than siphoning this taxpayer-guaranteed free money.
Then when the cards inevitably collapse, half of the population eats up the propaganda about "personal responsibility".
Personal Responsibility would be not taking idiotic risks and getting the government to pay for it.
I can assure you that approximately zero students took out loans thinking they wouldn't be able to repay them. But we know the lenders knew better, because they won't give out these loans without a cosigner and/or a government guarantee.
In fact, indentures were a better deal, because the indenturee was guaranteed to have the job necessary to fulfill the contract. Student loan issuers don't have to accept work in lieu of cash.
If a mistake is made, remedy the mistake. The government made a mistake in providing a glut of cheap money and prohibiting the borrowers from discharging the debt in bankruptcy. They need to fix their mistake by undoing that.
What you're proposing is like abolishing slavery, except for everyone who is currently a slave. "Sorry guys, there will be no NEW slaves, but you were slaves when it was legal, so, tough"
Same as with loans. You choose to take out the loan, that's on you.
If I choose to run my car into a crowd I suffer the consequences, not Chrysler. (And yes, I realize this analogy isn't perfect)
And comparing this to slavery is plain stupid. That is an issue much greater than this regarding equality for everyone. You didn't have a choice to be born a slave.
And here I don't even necessarily agree with not helping these people - I just want the issue addressed of where we draw the line between poor decision making and poor choices.
1865 (with the ratification of the 13th Amendment), actually.
"Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."
I hate to get all "Zero Hedge", but this really does stink of some conspiracy to turn the middle class into lifelong renters instead of owners. The independence the middle class once had by achieving a debt-free existence and owning their own residence is being wiped out, and as a result, the middle class itself will effectively be destroyed.
Mortgages were sort of unusual - housing was simpler then and people just paid cash. Sears sold home kits - of 12,000 pieces they said could be finished in 90 days by the owner - and while they offered financing, they topped out @ 60K in 2016 dollars. I don't think the financing was a "mortgage" per say, closer to consumer credit. People pay $60k for cars on four and five year notes.
So if saving real goods and services doesn't work, what does? You can make things now, and sell them to people for dollars or some equivalent promise of future goods and services. Then you can later redeem these for the stuff you need later.
Oh, and did I mention the generational stuff? Small family sizes and aging Baby Boomers means that there's huge pressure to turn today's resources into promises to give people stuff later. Hence, debt.
I'd actually prefer if a conspiracy was responsible for this. Economic forces make a lot more people work a lot harder to push back against changes. Price controls are a great case in point for this.
Shiny new buildings, Hotel-like dorms, Professors making 400k, Administrators making 700k, a moped for every football player ...
Not sure I can imagine a football player on a moped, though.
Also our dorms are pretty shit.
Better yet, how many professors get hired as non-adjuncts?
Problem: Schools charge max loan value. Students can't pay them back.
Solution: Give away free money.
All the government has to do is nothing. Just stop doing things. Stop being involved. The problem will fix itself overnight if they did literally nothing.
Le sigh.
How is the education loan market any different than the automobile or home loan market with respect bargaining position and ability to make an informed decision?
Loan issuers are forced to issue loans without regard to the likelihood those loans will be paid back. Someone seeking a computer science degree from Stanford is treated the same as someone getting an English degree from a 4th tier state school. That's utterly insane.
But with education, students have likely never bought a car, or a house, and don't have much background or life experience at this point in their lives and you want them to make a one-time, long-term, investment decision in a non-fungible asset?
Most students only make the decision once and whatever you learn about the school or career not meeting expectations isn't ever applied again. Worse, you don't find out first hand what quality your education really was until after leaving the college. Worst, the decision isn't really couched in terms of a ROI type investment decision (maybe thats changing), but that's certainly not the only factor at play in student school decision.
That's not a good basis for balancing a market.
> Loan issuers are forced to issue loans without regard to the likelihood those loans will be paid back. Private loan issuers aren't forced to do anything. They can always leave the market and invest elsewhere if they cant figure out how the serve the market.
Second, students don't get much choice in loans with the government-backed loans. There really is no 'market' for the student to shop, nor does the student have bargaining power except for refusal to accept the loan. With automobile or home loans, one can do things like have a larger down payment, shop aroudn for interest rates, or improve their credit rating. Students have none of these options.
Third, informed decision? You get promised for years as a young person that college is the key to having a comfortable life. The university promises all sorts of possible careers with the degree, and quotes numbers that may or may not be true.
Seems twisted to tax the rest of the country who decided not to or weren't able to participate in college in the first place
You folks are getting screwed.