Hacker News Reader

>the average college graduate has $30,000 in debt, which doesn't actually seem that bad.

Until you come to find out one of the college grads couldn’t get any employment and the one that did (with $100,000k+ in loans) got 3 part time jobs including Starbucks barista and mail delivery. That’s the reality for millions of America grads, not 6 figure SV jobs with stock options and health insurance.

The numbers and realities are devistating, 1 million grads are defaulting on their loans every year.

And your take on the income based repayment programs sounds like marketing and PR. These income based programs have been in play for over 10 years so the first groups of students (in government/non profit work) were in theory eligible to discharge their loans, yet something like 90% of the first batch were denied the discharge because the banks played games along the way (put students into deferment for a month while the banks reviewed student financials on annual renewals breaking the consecutive payment rule and restarting their 10 year clock every time). For the rest of the loan holders (the first batch who isn’t eligible for discharge until after 25 years) will be in a similar boat/rude awakening when their time comes - of the programs aren’t gutted first which has basically been threatened since the program began. Sure these programs exist but so does discharge of student loans in bankruptcy (but there is a reason why almost everyone thinks student loans aren’t dischargable in bankruptcy).

> Until you come to find out one of the college grads couldn’t get any employment and the one that did (with $100,000k+ in loans)

So they should get their college loans paid off by taxpayers that had nothing to do with their really really bad decision?

If the decision was based on government-backed advice like schools teaching "Everyone should have a degree!", and the government subsidising cheap loans for all then yes, obviously. It's a problem taxpayers created so it's a problem taxpayers should fix.

It's still a really really bad decision to go to a $100,000 school over a $20,000 school

It's a really bad decision to lend a kid $30k+ to obtain skills no one wants to pay for.

No, the person was lent $30k for the OPPORTUNITY to study anything they wanted, to become anything they wanted. The person CHOSE to obtain skills no one wants to pay for.

My point is that the lender also made a bad decision.

What lenders require you to list the classes you plan to take?

I didn’t claim any lender did, just that it’s a bad idea to lend tens and hundreds of thousands of dollars to young people with no collateral and only a loose requirement to use it on “education”.

No lender is actually stupid enough to do this, other than the US taxpayer.

Many US taxpayers aren't this stupid. The problem is that they need to contend with the votes of people who may or may not file taxes but still vote.

The reason these loans can be made without collateral for the rates they are is the loans are not discharged easily. They’re still a benefit to both parties, because both gain from them on average.

No one is stupid here. Stupidity would imply a net loss on one or both sides, which simply isn’t true.

This is not a matter of people getting the wrong skills, or being bad at those skills, or anything to do with choices. If 200,000 kids go to university to get a particular degree and 4 years later enter a market recruiting 180,000 graduates with that degree then there's a problem, yet no individual made the wrong decision. The problem is about predicting the future job market, attrition rates at universities, and the over-supply of graduates as a whole. It's not simply people doing the wrong degrees.

Putting all the blame on individuals for making bad choices shows a distinct problem of your understanding of the issue.

I would gladly pay an 80k premium to go to a more prestigious school if I had to choose. I'd bet that the increased lifetime earnings due to a better resume and better education would easily surpass 80k.

Well if you are going to frame it as taxpayers paying off the loans (I don’t necessarily agree with you framing it that way), then the taxpayers are also the ones that extended these guaranteed loans in the first place.

So by your logic, yes taxpayers are responsible to the extent they are guaranteeing loans in the first place which is what allows the schools to charge artificial prices which the data shows can’t be repaid in millions of cases because the jobs and wages aren’t there. The article maybe just a few anecdotes but when the data amounts to 1M defaults a year, at what point are you going to stop complaing about the taxpayers having to make up for the bad decisions of 18 year old kids trying to better their future and question taxpayer funded loans allowing the runaway school costs in the first place?

> taxpayers are responsible

Taxpayers have no choice: pay taxes or face fines / jail.

Arguably taxpayers also get to choose who they vote for. You can argue about the effectiveness of the democratic process in the US but it feels a tad disingenuous to suggest we have no responsibilities in this system we are all apart of.

A political ballot doesn't carry enough bits of information for you to express how you would like to see student loans administered, and every other thing you'd like to influence.

In the first place, a government like that of the US is a massive bureaucracy, only a tiny fraction of which is actually elected. No matter who is elected, pretty much the same people will be administering student loans.

Of all tax units filing income taxes, 76.4 million tax units pay no federal income taxes. That's 44.4% of all tax units.

That's approximately 44.4% of potential votes by people who likely choose politicians that are spending the money of those who do pay taxes. And of those that pay income taxes, a few pay the disproportionate share of those taxes.

So basically, many people who are tax filers but not tax payers are getting to choose who they vote for, but others are left shouldering all the tax responsibility for the bad policies of those politicians. These tax filers might be paying other taxes like state and local sales tax, but those taxes are pretty much all state and local and irrelevant when we are talking about federal loan programs.

https://www.taxpolicycenter.org/model-estimates/tax-units-ze...

* "A tax unit is an individual, or a married couple, that files a tax return or would file a tax return if their income were high enough, along with all dependents of that individual or married couple."

If the taxpayers actually cared about 1M defaulted student loans a year they could elect leaders who will take action.

Maybe you vote for a politician who will terminate federally guaranteed student loans. Maybe support one that will provide UBI, which will be adjusted based on student loan obligations. Maybe elect one that will reform the existing IBR/repayment options so 1M students are going into default every year.

But as we all know what your saying is a strawman when you have people like warran buffet paying less in taxes than his secretary. Obviously that’s not by accident and rich taxpayers have successfully organized/lobbied/passed multiple laws over the last 40 years providing tax breaks for the themselves and corporations.

> Maybe you vote for a politician who will terminate federally guaranteed student loans.

Problem is, that joker wants to criminalize abortion and lock up anyone who smells of weed. Now what do I do?

Make the schools pay for it.

Yes.

I'd just like to point out that when I was a student the university upgraded from a cafeteria to a foodhall (rated one of the best in the country), tore down old student dorms and replaced them with suites. And went into massive debt to pay for new buildings and renovate old ones. The students had no say in the matter and I'm sure if given the option would have preferred the old, paid for buildings.

This was a state school of 30,000. The school and the state decided what tuition was going to be, not the students.

My college did the same. Tore down the old library and built a new one that put all the books behind robo shelves. Built a new gym, several new dorms, a "student center", basically anything other than contributions to education. It's like they had a surplus of cash and had to find a way to spend it.

They have to spend a certain % of endowment funds every year (4% maybe) in order to maintain tax-free status.

Uh, why not simply give it to the students?

Yes, because letting them funnel their debt-servicing money back into useful parts of the economy (houses, cars, businesses, whatever!) would be a much better thing for the country as a whole than what they're doing now.

This debt is a huge bottleneck on the economy; it's slowing things up for a huge part of the population, and for what? We're not better off as a people. We're not building a better country or future this way.

The arguments I've seen in favor are all "they made a bad decision, they should live with it" or "I paid mine off, why should they get a free ride" or any number of variations on that sort of thing. I haven't seen a single argument that the student debt status quo is good or healthy for the country, or is getting us where we want to be as a people.

Personally, I don't give a shit what stupid degree people got or how much student debt there or how hurt those who paid theirs off will feel; hurt feelings or resentment are no good basis for policy. This is a bad scene for the country and forgiving the student debt would improve things in so, so, so many ways; the trade-offs are absolutely 100% worth it.

> improve things

Improve things for whom? Who is going to shoulder the disproportionate burden of forgiving all those loans?

Uncle Sam.

Uncle Sam is the US taxpayer, or more precisely, the minority of Americans paying most of the taxes.

Using your argument, why not pay off everyone’s car notes too?

There is no reason anyone should ever default on an IBR loan. That’s the whole point of the income-based repayment. The reason people still do it is because they don’t follow the proper procedures for requesting IBR or requesting forbearance. That’s a damning indictment of our educational system, that a million students a year who have at least been accepted into college can’t figure out a simple administrative procedure. But it’s not the fault of the program itself, nor does it call for radical change.

Likewise, almost everyone who got rejected for the IBR forgiveness did so because they screwed up the administrative procedure: https://www.forbes.com/sites/zackfriedman/2019/05/01/99-of-b.... 73% didn’t meet the program requirements, and another 25% screwed up the application, not providing sufficient information. That’s not a sign of anything wrong with the program, it’s a sign of the total failure of our educational system.

I’m quite put out that these issues are being used to justify tuition-free college. In my view, the existing system is actually pretty good. If your college education ends up in you earning a lot, you pay back more to the federal government. If it doesn’t, then the federal government takes a hair cut on your loans. The people who earn more subsidize those who earn less. The total cost to the government ends up being pretty low (IBR will cost the government about $18 billion per year over the next decade, a tiny fraction of the cost free college would cost.) If what’s preventing that system from working well is that people attending college can’t figure out the administrative requirements, then I’m sorry I don’t think that’s an acceptable excuse.

>There is no reason anyone should ever default on an IBR loan. That’s the whole point of the income-based repayment.

Again that’s right in theory and what the banks report, however, individual law suits uncovered intentional efforts by the banks internally to force deferments and resetting the clock on IBR loan payers. Literally bank communications turned over in discovery on a number of lawsuits show instruction not to process annual financials, place the students in forebearance for a month, then process the documents so the clock reset.

Case in point the banks at no point inform loan holders when the IBR discharge clocks reset (sure student knew they were in forbearance for a month every year, but in these cases the students timely submitted the documents and students have no control over the bank processing times), it’s only when the students went for the discharge and were the students informed there clocks reset annually. Further bank communications showed this was also intentionally done so over the years the banks counted on the student losing their records and proof they timely submitted their annual financials.

And I’d argue that 98% (it’s actually 99.5%) of loan holders being denied discharge in IBR programs is proof the program is broken, but again the individual lawsuits against the banks/loan services broke this wide open. Then again we don’t need to look at the individual lawsuits either multiple state attorney generals have brought charges against the largest loan servicer for these acts and worse (continuing to collect on loans that were actually discharged), still it doesn’t seem that will help these students (like billion dollar fines against the banks didn’t help homeowners post 2008).

> Again that’s right in theory and what the banks report, however, individual law suits uncovered intentional efforts by the banks internally to force deferments and resetting the clock on IBR loan payers. Literally bank communication turned over in discovery on a number of lawsuits show instruction not to process annual reporting requirements, place the students in forebearance for a month, then process the documents.

There are no "banks" here. These are loan servicers acting at the federal government's direction.

If there is a problem with the loan servicers, then the federal government should retain different ones. That has nothing to do with whether the program works or should be different. (And if the federal government has failed to properly supervise the companies it hires to service its loans, why is the solution even more federal involvement?)

Here is a decent write about about 4 such student lawsuits...funny you mention the federal government, because as you will see in this article the Dept. Of Ed. Was involved in these efforts to reset the discharge clocks, because the program was going to cost them more than expected. Specifically right before the first batch of discharged loans the Dept of Ed changed their rules on the fly (in violation of the Act) to make students ineligible for discharge.

https://www.studentloanplanner.com/pslf-lawsuit/

Edit: I think In all 4 of these cases the Dept. Of Ed. Already approved these discharges, sent approval letters, then changed their rules and revoked the discharges. Again the rule changes were in violation of law and done because the costs of the program were so large.

If the government is can't be trusted to manage this I don't see how it can be argued that we need more government intervention to resolve the problem.

I don’t think I argued that government intervention was needed to resolve the problem.

However, going back to 7th grade civics our government is split into 3 branches to distribute power and provide checks and balances. In this very instance the judicial system (government) is the forum where these facts and bad acts of the government were uncovered and a judge (government employee) reinstated the discharge in 3 of the 4 cases cited.

> Judge Timothy J Kelly of the DC Circuit Court found that the original determination letters had language in them that seemed final, in contrast to the Department of Ed’s claim that it was provisional.

> 1 million grads are defaulting on their loans every year

Source?

That is astonishing!

About 20 million people are expected to attend a college this fall [0]. With the expected graduation time of six years for undergrad [1], that means that each year's 'class' is only 3.33 million people. So, that means that about 1/3 people with an undergrad degree will default on their loans (yes, fast and dirty stats here). Couple that with the fact that only about 70% of people take out loans [2], and you have a default rate per class of ~43%.

Yeah, ~2/5ths of people that take out loans will default on them?! Is that anywhere near the defualt rates of other types of loans (auto, home, etc)? This seems crazy.

[0] https://nces.ed.gov/fastfacts/display.asp?id=372

[1] https://nces.ed.gov/fastfacts/display.asp?id=569 (this is pretty complex data, well worth the dive)

[2] https://www.cnbc.com/2018/02/15/heres-how-much-the-average-s...

EDIT: Yep, it seems to be true [3]. Home and auto loans are a bit harder to google, but they seem to be at about 4% and 6% respectively. Honestly, the default rates on student loans are really high compared to other loans of a similar timeline and monetary value.

[3] https://www.cnbc.com/2018/08/13/twenty-two-percent-of-studen...

Typically a debtor is going pay their home/car loans first (that’s not a huge surprise).

I agree it’s an astonishing number, and once you begin looking past the data and at the individual stories/anecdotes it’s heartbreaking. After all look at this article people are literally leaving the country.

I have 4 brothers all of us have a bachelors and advanced degree (1 MD, 2JDs and 2 Masters). I had a brother move to Korea to teach English, because he couldnt get a job. He had an undergraduate degree in information science and an MBA, graduated in 08’. People in this thread want to blame student choices and say it’s an issue of majors/skills...that’s not the problem.

Problems with the college system aside, why get an MBA without any work experience? Every successful MBA I know became a domain expert before pursuing theirs.

> $30,000 in debt, which doesn't actually seem that bad

I think over time what seems reasonable has been stretched. Given that you don't have any collateral with this debt, $30k seems extremely deep under water to me, coming from a generation where I was able to pay off all my student debt with a relatively low-paying job within a couple of years.

> The usual rule is that student debt shouldn't exceed your expected first year income

Was this rule made by the same people who made the rule about how much to spend on an engagement ring?

If you go to Stanford and then get a job at Google where your signing bonus is $30k cash after tax, then yeah maybe it all adds up.

I also remember the "rule" that a house should cost 2 years salary. And when I graduated college in the early 80s, starting salaries were $25-$30K, and you could get a house for $60K on Long Island.

IIRC, the "rule" was 4 years. And that's about what homes in the USA cost today (median home cost is apx 4.5x median household income).

It's been growing over time. It was 2x, then 4x, now 4.5x. This is an increasing problem.

It's been between 3.5x to 4.5x pretty much the entire history such data has been tracked in the USA, a bit over 100 years now.

Seriously. I graduated a top Canadian engineering school about ten years ago, and I think my debt at graduation was around $10k, and that was with per-term tuition that was around $6k, I think, so most of that debt was from the final year— prior to that I'd been covered by a mix of money earned on internships and a family RESP.

> Given that you don't have any collateral with this debt

You may not have collateral, but you technically should have an asset, which in this case would be an education and degree in hand. What matters is if your education and degree were in a subject that has market value.

$30k for a computer science, engineering, law, finance or medical degree wouldn't really be underwater, because you have a degree with market value.

> average college graduate has $30,000 in debt,

The average listed in the article is a mean, but then you compare it to a median starting salary.

If an appreciable fraction of college graduates have 0 debt, it could imply that students that do have debt have a higher debt that $30,000. Of course, this distribution could have lots of different shapes, so there's no conclusive statement I could make here, but it seems quite dangerous to compare the mean of one thing to the median of another and then say that there's no issue.

I'm also not disputing your other points. I'd definitely be interested in finding our more information about why the article elided those repayments (or if they haven't been happening for some other reason).

I find it curious that articles on the student debt crisis never mention that information.

Be honest! You know exactly why they didn't mention these things.

News today seems to be: 1) figure out what you want your article to be about and make sure it's an attention grabbing headline, preferably outlining a negative situation, 2) do research on the issue, 3) filter out any information that runs counter to your headline, 4) write article with the remaining information even if it's not an accurate representation.

There are journalists/publications that just stop at 1) I think. Doing any kind of research is rarely on the table, and that's very apparent when you confront these people directly. They don't even know their subject.

Is the average American buying a new car or new to them car every 4 years? Last I checked, new car loan terms are 3-5 years.

they have 6 or 7 years now

average is 65 months for new cars

https://www.autotrader.com/car-shopping/buying-a-car-what-te...

Doesn't look like that includes leases

I got rid of my first post college car 2 years ago. I had that car 15 years, so I definitely beat the odds. I've never understood the desire for a car to be more than a source of transportation. Some people seem insistent on extending their sexuality with a car. Others feel that having a different cars makes them a better person, but these are just externalities. I feel like the bigger reason students leave the US and shirk responsibility is because they can.

They took a degree that doesn't pay as much as they'd expect, or maybe they are just poor planners that don't care about the future. These are exactly the types that you would expect to take on high risk behaviors for smaller rewards. There's nothing wrong with that, except for claiming that it was the only option they had. Certainly they (and many others) have plenty of options. Some have the habit of making poor decisions until they paint themselves into a corner.

Car loans are stretched to the 84 month and 96 months now (and they'll helpfully roll your last car loan into it too)

I know this info - but just reading it makes me wonder why people go along with the scam.

I get it - I once had a car loan too; it wasn't even a new car (but I bought it from an actual dealer, so it wasn't some weird sketchy loan). Paid it off, had the car for a while, then it died and I moved on. That was the last car I financed, too.

Since then, my wife and I only pay cash for used cars, and spend the extra money normally used for payments, for maintenance and upgrades on the vehicles (upgrades are on my side, mostly - I own a Jeep Wrangler - don't own one unless you like to throw money into a hole - but it's more fun than a boat, so there's that).

We own our cars for as many years as we can, until it becomes more expensive to repair than to buy something else. But, there again, I think my wife will keep hers for as long as parts can be found for it (2013 Outback - solid vehicle), and I'll keep my Jeep until I can no longer get into it from age (then I'll probably just delete the lift and put regular tires on it).

My VehiCROSS on the other hand...I'll cry the day I sell it, unless it's at a car show auction should it ever become a collectible. Heck - I'll still cry - I love that truck.

No way is it possibly a new car every four years. There are over 200 million licensed drivers in the US and less than 20 million new cars sold per year.

There are 300million adults buying 17million cars per year. That's an average of 17 years per car, not 4.

Rules of thumb don't tend to work well at the extremes, since discretionary income matters more than total income, as far as debt is concerned.

> Currently, your payments are 10% of your income above 150% of the federal poverty level. So if Chad is making about $25,000 per year (corresponding to about $1,700 per month take home), his payments would be just $640 per year, or $50 per month under the current PAY-E scheme.

A $30,000 loan at 5.05% APR with $50/month payments will take infinite years to pay back. Need to be paying $127 a month to keep up with the interest, otherwise you are getting deeper and deeper in debt.

The debt, including accrued interest, is forgiven after 25 years.

It might be. If the program still exists, and you didn't do any paperwork wrong in 25 years. And then you might owe taxes on the forgiven portion.

The government could get rid of IBR, but it would be very difficult to do so retroactively. At that point, ordinary contract law principles come into play. The government’s freedom to end federal programs doesn’t free it from having to meet pre-existing contractual requirements. Even Trump’s plan and the new GOP bill only gets rid of loan forgiveness for new loans, and only 10-year public interest forgiveness program, not the 25-year forgiveness for everyone else.

The federal government also promised college students in 2007 that student loans would be forgiven after 10 years of work in public service professions.

Of the first 29,000 applications filed with the Department of Education to take advantage of this promise, 96 were approved. That's an approval rate of 0.33 percent.