I sense being propagandized about student debt. While I support a social cap on interest rates for student lians, i do not support and resist the subtext of and constant allusions to outright loan forgiveness. I dont enjoy being hustled via a sustain campaign aimed at conferring free rides.
Following the housing bubble, you'd think we would have noticed that when government-backed loans for everyone who wants one flood the market, prices rise so as to absorb the available cash.
Federal Student Aid is such a reflection of our current political crisis in America. Whether reading this article or reading the comments, one is struck by the sheer lack of any long range plan to address how we in America can best provide a college education to those who want one and can qualify for entrance into a college of their choice.
Since we are still operating almost every area of public policy in our country with 20th century logic and procedure, it should not surprise us that we have set this process up with "business" like procedures, but have expected the government to run it. Neither the business like procedures nor the government stasis will address this issue and until we begin to apply some common sense non political planning that not only involves the loan issue, but also our colleges and universities, it is unlikely this problem will be addressed.
Since we are still operating almost every area of public policy in our country with 20th century logic and procedure, it should not surprise us that we have set this process up with "business" like procedures, but have expected the government to run it. Neither the business like procedures nor the government stasis will address this issue and until we begin to apply some common sense non political planning that not only involves the loan issue, but also our colleges and universities, it is unlikely this problem will be addressed.
The second portion (article?) (Sorry, I have a BA but not in English...) in you sentence sums up much about the problems in our education system. "Are qualified to pursue higher education" long ago ceased to be a filter; Anyone can pursue higher education, since it became the place to evade conscription during the Vietnam era.
High Schools have almost completely shed their "Vo-Tech" programs, and the Community Colleges NEVER established the replacements (for Electricians, Masons, Plumbers, Carpenters, etc). Many English Majors probably don't even recognize that a "Mason" is a bricklayer. But hey, the contractors can hire undocumented immigrants so much cheaper than that expensive Union Labor.
This whole shift in how we train and value our labor force, well, there have been PhD dissertations (or should be) trying to explain the problem.
But I have three small ebay sales to prepare for carrier pickup ($3.95 each, my first this week!). Any parolee from a temp agency can work in the mail room, I have no marketable skills.
Enough profits I can splurge on a couple of Items down there on the value menu this weekend.
High Schools have almost completely shed their "Vo-Tech" programs, and the Community Colleges NEVER established the replacements (for Electricians, Masons, Plumbers, Carpenters, etc). Many English Majors probably don't even recognize that a "Mason" is a bricklayer. But hey, the contractors can hire undocumented immigrants so much cheaper than that expensive Union Labor.
This whole shift in how we train and value our labor force, well, there have been PhD dissertations (or should be) trying to explain the problem.
But I have three small ebay sales to prepare for carrier pickup ($3.95 each, my first this week!). Any parolee from a temp agency can work in the mail room, I have no marketable skills.
Enough profits I can splurge on a couple of Items down there on the value menu this weekend.
1
What other wealthy "democratic" state consigns its ambitious, well-intentioned, idealistic yet unknowing youth to a lifetime of debt peonage?
6
What other wealthy "democratic" state allows all citizens to attend college, regardless of whether they have the aptitude and readiness?
4
This has become a vicious circle, loan + loan = endless loans. Your Government has wasted trillions of dollars on useless wars. Can't it wake up now and heavily subsidise college education and make it within the reach of common man so that a college graduate can breathe. Anyway after employment, the sensible employee has no choice except to take one or two essential loans maximum due to lack of sufficient savings for buying a car and later an independent house or flat so that these loans can be paid alongwith the other credit card payments.
3
Don't worry. Our legislators (both Democrat and Republican) will bail out this industry via public funds. It is simply too much of a vote getter to let it fail. Democracy at its best.
This is EXACTLY what happens when Krugman-style Big Government gets into businesses it has no reason being in. First it starts doling out "loans" left and right, thus fueling surging secondary education costs and letting colleges and universities increase tuition outlandishly. This of course requires even MORE loans, the of course, those who got the loans and blew the money come whining asking for handouts in the name of "fairness". Government needs to get out of the Loan business PERIOD. And that includes ALL Loans of any type.
3
Some posters here need to take time and come into reality when it comes to claiming that students are taking loan reimbursements to live high on the hog or not even attend classes. They are completely out in left field. that does not mean that some fool has not found a way to game the system, but non-attendance does not take long to uncover and reimbursement does not occur until mid-term and attendance is mandatory to receive the refund amount.
Now lets look at some numbers, at least in my state of Louisiana.
In-state tuition is about $8,700 a year.
Maximum Federal Financial aid, w/ max Pell grant for freshman year is $15,775 which leaves about $7K to "refund".
Sounds like a good deal right? but not so fast.
The typical Independent student (includes those whose parent are ineligible for parent plus loans) is 18-25.
this student does not live at home and pays rent on average of $600 a month plus utilities in a shared apartment.
In Louisiana their average income is $8.25 an hour and they typically work 30 hours earning about $1000.00 a month pre-tax. Most work 2 jobs to make ends meet. That $7K annual "refund" comes to $584 a month making their "income" $1584 a month.
Can you live on that? eat, study at least 20 hours a week, have a car, go out, or buy clothes?
BTW the average Associates degree in LA takes 6 years to obtain because students have to stop and start their program or only take 1 or 2 classes a semester.
Complaints about the refund are bogus whining.
Now lets look at some numbers, at least in my state of Louisiana.
In-state tuition is about $8,700 a year.
Maximum Federal Financial aid, w/ max Pell grant for freshman year is $15,775 which leaves about $7K to "refund".
Sounds like a good deal right? but not so fast.
The typical Independent student (includes those whose parent are ineligible for parent plus loans) is 18-25.
this student does not live at home and pays rent on average of $600 a month plus utilities in a shared apartment.
In Louisiana their average income is $8.25 an hour and they typically work 30 hours earning about $1000.00 a month pre-tax. Most work 2 jobs to make ends meet. That $7K annual "refund" comes to $584 a month making their "income" $1584 a month.
Can you live on that? eat, study at least 20 hours a week, have a car, go out, or buy clothes?
BTW the average Associates degree in LA takes 6 years to obtain because students have to stop and start their program or only take 1 or 2 classes a semester.
Complaints about the refund are bogus whining.
6
My student loans have become like a bad joke. I started off with $60,000+ in federal loans (thank GOD I didn't get sucked into private loans) after doing a BA and a master's as an independent student (single mom), but have always been in Income Contingent repayment. Since employers won't pay jack, even with a graduate degree, the most my payment has ever been was around $100 a month, but it was $0 for 5+ years while interest piled on. After about 10 years, my loans are currently around $90,000, and I have no intention of ever paying them off. After 25 years in IC payment, the debt will be forgiven. I have to wonder what the point of any of this is. What was the point of me getting a graduate degree if we allow a society that does not reward hard work and advanced degrees? What is the point of allowing tens of thousands in debt if you don't even have to pay it back (not that I could)? What is the point? I feel sorry for all the kids getting private loans these days. I work at a college right now, and know a few who are terrified to graduate.
2
If you have worked at non-profits or governments, for 10 years since I think 2007? then you might qualify for Public service loan forgiveness. pay it off in 10, not 20 or 25 years. Google Public Service Loan Forgiveness.
1
Only certain types of fed loans qualify for the Public Service loan forgiveness program, and if the appropriate steps haven't been taken to consolidate existing loans into the "right" type for this program they won't qualify. If you consolidate now, however, your payment/forgiveness plan starts at 0, so any and every loan payment you've made up to this point on your debt won't be credited toward the 10-year forgiveness plan. Given that the standard repayment option for most fed loans is also on a 10-year cycle, it doesn't really do anything to help people pay off their student debt faster, especially when the standard repayment options are too high for a lot of people's monthly income. And, since the details about this forgiveness program haven't been widely reported, not only do many people not know about it, but the work they have already done in the public service sector (which notably pays less than private) continues to be taken for granted at the expense of these loan costs.
1
Here is the problem: You should never have gotten a Loan of any type from the Government to pursue a degree. This is the housing bubble all over again, created and abetted as usual by Big Government! Also, student loans (to the extent they exist at all in the private sector) should be dischargeable via bankruptcy. This would make those providing the loans gauge and price the risk appropriately, and would let those who truly can't pay walk away.
No one among our elected representatives (hold your snorts and snickers) that I know of, other than Elizabeth Warren, has bothered to ask why federal loans demand interest far beyond what the market demands. PLUS loans (avoid these please) at 7.9%? Stafford Loans at 6.8%? My car loan is 1.4%. What exactly are these loans financing? Profits. They finance profits.
5
Dear Pete:
Two word answer: Risk Premium
1) You can repossess a car, but last I checked, its tough to repo someone's brain (without making an awful mess).
2) Default rates on Educational loans are higher than on consumer loans.
3) Student loan terms start out at 10 years and can be extended almost indefinitely, whereas auto loans are typically for a 3-5 year term.
So as a student lender, if I have: less chance of getting my money back; no collateral to claim in a default; and it will take me at least twice as long, if not longer to get repaid under even the best circumstances; then I would have to be crazy to lend at the same terms as an auto lender.
On top of which, Auto companies provide cheap financing to get people in the showroom and buying cars. They can afford to loan at less profitable rates because they are making it up in volume of cars and higher utilization rates for their factories/supply chains. It's baked into the cost of the car.
In light of these facts, your "conspiracy theory" about student loan profits may indicate that your educational dollars may have been misspent. Apologies to you, your alma mater, and your student loan provider...
Two word answer: Risk Premium
1) You can repossess a car, but last I checked, its tough to repo someone's brain (without making an awful mess).
2) Default rates on Educational loans are higher than on consumer loans.
3) Student loan terms start out at 10 years and can be extended almost indefinitely, whereas auto loans are typically for a 3-5 year term.
So as a student lender, if I have: less chance of getting my money back; no collateral to claim in a default; and it will take me at least twice as long, if not longer to get repaid under even the best circumstances; then I would have to be crazy to lend at the same terms as an auto lender.
On top of which, Auto companies provide cheap financing to get people in the showroom and buying cars. They can afford to loan at less profitable rates because they are making it up in volume of cars and higher utilization rates for their factories/supply chains. It's baked into the cost of the car.
In light of these facts, your "conspiracy theory" about student loan profits may indicate that your educational dollars may have been misspent. Apologies to you, your alma mater, and your student loan provider...
3
In contrast to what Sen. Warren has been saying, the Treasury actually charges agencies such as DoEd, HUD, USDA, DOE, and DOT at the 10yr T-bond rate for direct loan capital, not at the overnight Treasury rate that is influenced by the Federal Reserve.
Only problem with that logic is that there is no risk to student lenders as student loans are not discharageable in bankruptcy. They WILL get their money back, no matter what. They carry zero risk...so yes, it's quite profitable. Sallie Mae (now Navient) made at least $7.3 billion in profit between 2005-2013. They not only get paid for servicing contracts by the government, but nearly all of their own assets are backed by the federal government.
2
Comments paint a very familiar scenario. I took out about $40K to do BA and graduare work at 2 local schools (CU and NYU). Post school I worked independently as a teaching artist working with children and youth in drop-in centers for homeless youth, at-risk youth, Police Athletic League, after school programs at NYC public schools. This work is done for love and devotion to serving the less-fortunate. Its also usually part-time work, without benefits. I tried to get deferments on my atudent loan payments but while paperwork stalled somewhere my loan defaulted. Now that debt has swollen from $40K to $129K, with over $60K of that being "legal fees." Now as a single mom, working as an Asst teacher in a Kindergarten (again no benefits, pt work, earning about 14K per year with which I must support my child, credit wrecked) I'm in a bad situation although my original job impulse after college was oriented toward helping society not making money. These are values I want to instill in my child and the children at the Kindergarten where I teach, but if one is left with a mountain of debt and feeding oneself and one's 7 yr old daughter on $60 a week worth of food stamps, how can these socially-oriented values be preserved?
4
Why is the discussion solely focused on federal loans? The maximum amount won't pay for in state tuition at our local state university, let alone room and board. Forget about those don't qualify for subsidized loans but whose parents can't contribute regardless of what the government thinks they should be able to contribute.
1
My wife was late on one month's FEDERAL student loan payment last year ($748/mo).
The default letter we received was not so shocking inherently, the shocker came when they letter's opening line was "as you know Congress has authorized under whatever law to charge fees and service charges due to your default..etc. and so on"
The additional fees? $19,520.
Added to an over $100,000 debt-load, with interest compounding.
Why? Because Congress authorized it.
The credit card industry isn't even this dastardly.
The default letter we received was not so shocking inherently, the shocker came when they letter's opening line was "as you know Congress has authorized under whatever law to charge fees and service charges due to your default..etc. and so on"
The additional fees? $19,520.
Added to an over $100,000 debt-load, with interest compounding.
Why? Because Congress authorized it.
The credit card industry isn't even this dastardly.
5
Did she not qualify for forbearance? That would've taken care of one month. Is she didn't qualify for forbearance (via sudden loss of income, life circumstance, etc.), then why was the payment late?
$30k-100k in loans for school,
$200k-800k in loans to buy a house,
$24k per year to pay for preschool / daycare per child
Save $150-400k for each child's future tuition
$18k+ per year to save for retirement
$thousands per year for extra-curriculars so my children can develop skills and actually get into college
Where is this money supposed to come from on 2% average wage increases per year? The avg American makes $50k per year, maybe a bit more in major cities (with corresponding increases in house prices/rent).
The American debt way of life is not sustainable for 99% of people. You can pay for tuition, or save for retirement, or pay your rent/mortgage, but not all three.
Colleges seem to think most American's are millionaires and have no other expenses. Majority of children are born to single mothers too, earning an avg of $35k per year. I fear for the future. Haves and have-nots are so far from each other.
$200k-800k in loans to buy a house,
$24k per year to pay for preschool / daycare per child
Save $150-400k for each child's future tuition
$18k+ per year to save for retirement
$thousands per year for extra-curriculars so my children can develop skills and actually get into college
Where is this money supposed to come from on 2% average wage increases per year? The avg American makes $50k per year, maybe a bit more in major cities (with corresponding increases in house prices/rent).
The American debt way of life is not sustainable for 99% of people. You can pay for tuition, or save for retirement, or pay your rent/mortgage, but not all three.
Colleges seem to think most American's are millionaires and have no other expenses. Majority of children are born to single mothers too, earning an avg of $35k per year. I fear for the future. Haves and have-nots are so far from each other.
16
having 2 kids going through the student loan process for several years followed by trying to get them into the new debt relief program, the entire system from one's very first FAFSA application is positively byzantine. yes, get it out of the dept of education's hands if for no other reason than funding for that department routinely gets cut in the federal budget, leaving fewer & fewer people to do the work.
1
Several years ago, the mortgage crisis caught policy makers flat-footed, and they are determined not to be surprised by a possible future collapse rooted in household debt.
--------------------------------------------
Funny.
Everyone knew about the mortgage crisis, even my dopey cousin Vinnie.
Capitalists didn't want to stop the merry-go-round because they were making money. To add insult to injury, the government made the "risk takers" whole, when the real estate "house-of-cards" collapsed.
--------------------------------------------
Funny.
Everyone knew about the mortgage crisis, even my dopey cousin Vinnie.
Capitalists didn't want to stop the merry-go-round because they were making money. To add insult to injury, the government made the "risk takers" whole, when the real estate "house-of-cards" collapsed.
3
I know many millennials who are using the money from 529 programs to purchase a condo or starter home instead--with their parents' blessings. And I seem to be the only one terrified by the prospect of a generation of kids who achieve nothing more than a high school education because college is simply too far out of their reach. There is nothing wrong with learning a trade or joining an apprenticeship; that is clearly a wise way to make a stable living. There is something clearly wrong, however, with having a mortgage at 18 with a job at Walgreen's ($8.25/hr.) to sustain it. It's no secret that minimum wage jobs are quickly disappearing with technological advancements. I thank heavens that I graduated at a time when tuition was affordable, in a career that I enjoy and sustains my lifestyle, and with debt that was consolidated at 1% interest.
Declining family wealth has turned out to be embarrassing for Washington's policy makers. Our complex tax blend has created wealth redistribution trends favoring the wealthiest 10%, harming the middle class (next 40% of the population, wealth share down 17% since 1995) and devastating the working class (poorer half of the population, down 75% to just a 1% share).
In the U.S. there is about $83 trillion in family wealth and each percentage point represents about $830 billion in family wealth. The working class (62 million families) have just a one percent share in large part due to almost one trillion dollar in student loans that, unlike a mortgage or auto loan, produce debt and no tangible assets. Millions of young people with too low IQ's have been lured into easy college loans but most have failed to graduate or have graduated in the bottom of the class. Decent paying jobs have not been available due to the expansion of low wage jobs. The combination of high unemployment and tax credits have resulted in jobs that make paying off student loans rather difficult.
Data about the employment experience, defaults, family wealth, etc. is not available because it would further embarrass policy makers. Data from 10 or 20 years ago (before the Great Recession) about the value of different levels of college education is no longer valid. Current data would likely show that encouraging borderline students to attend college only reduces family wealth and the value of higher education.
In the U.S. there is about $83 trillion in family wealth and each percentage point represents about $830 billion in family wealth. The working class (62 million families) have just a one percent share in large part due to almost one trillion dollar in student loans that, unlike a mortgage or auto loan, produce debt and no tangible assets. Millions of young people with too low IQ's have been lured into easy college loans but most have failed to graduate or have graduated in the bottom of the class. Decent paying jobs have not been available due to the expansion of low wage jobs. The combination of high unemployment and tax credits have resulted in jobs that make paying off student loans rather difficult.
Data about the employment experience, defaults, family wealth, etc. is not available because it would further embarrass policy makers. Data from 10 or 20 years ago (before the Great Recession) about the value of different levels of college education is no longer valid. Current data would likely show that encouraging borderline students to attend college only reduces family wealth and the value of higher education.
4
"How does delinquency differ by amount of debt, income and education? Which colleges leave students underwater, with low earnings and large debts they can’t pay?"
I've looked at the published figures on delinquency, and it looked to me like it answers one of these questions. Students who attended for-profit educational institutions had much higher default rates than those attending traditional two- and four-year nonprofit colleges and universities. Part of that difference no doubt reflects the different constituencies these institutions serve, but one would have to be obtuse not to think that for-profit institutions have an obvious incentive to encourage people with marginal educational abilities to sign up for classes and finance them through Federally-guaranteed loans.
However all of these issues remain secondary to the question of why the Federal government continues to earn a profit off the backs of student borrowers to the tune of some $40 billion in fiscal 2013. This has been a persistent concern of Senator Warren, but rarely commands much attention from the media. She proposed having students borrow at the same rate as banks do from the Fed. Whatever became of that proposal, and why aren't we hearing more about the onerous interest rates students continue to pay?
Once we get the interest-rate problem resolved, we should turn our attention to those for-profit educational institutions and start disqualifying ones with substantially above-average default rates.
I've looked at the published figures on delinquency, and it looked to me like it answers one of these questions. Students who attended for-profit educational institutions had much higher default rates than those attending traditional two- and four-year nonprofit colleges and universities. Part of that difference no doubt reflects the different constituencies these institutions serve, but one would have to be obtuse not to think that for-profit institutions have an obvious incentive to encourage people with marginal educational abilities to sign up for classes and finance them through Federally-guaranteed loans.
However all of these issues remain secondary to the question of why the Federal government continues to earn a profit off the backs of student borrowers to the tune of some $40 billion in fiscal 2013. This has been a persistent concern of Senator Warren, but rarely commands much attention from the media. She proposed having students borrow at the same rate as banks do from the Fed. Whatever became of that proposal, and why aren't we hearing more about the onerous interest rates students continue to pay?
Once we get the interest-rate problem resolved, we should turn our attention to those for-profit educational institutions and start disqualifying ones with substantially above-average default rates.
2
Low interest rates would only allow colleges to increase their tuition prices more, since they will tell the students that they can afford larger monthly payments.
How can student loans be profitable when 50% of them are not being repaid and about 25% are paid on an income based repayment plan?
1
I think more data is needed to determine how profitable these student loans are for the government. Your scenario assumes that all or most people are repaying their loans and the government is pocketing the difference. However, if a lot of loans are not being repaid, due to default or forgiveness programs, the profit may be much less, even negative.
I am glad you are bringing attention to this issue, which not only is timely but effects many students. While it may not have a place in the core argument of your article, a big piece of students defaulting on their loans is the extremely high interest rates that basically make them predatory. Take a look at what student loan interest rates are and compare those to interest rates of the house market or even your savings account and it becomes obvious why students aren't able to pay down their loans or even touch the principal part of their loan.
3
Today's student loan debt is the creation of the bankers, the schools and the government. Simply put they are all in bed together to make a buck under the guise of providing a hand up for students in need. In reality, they simply prey upon the weak and disadvantaged. Wolf in sheeps clothing, let the buyer be aware!
6
Students are not victims. Federal student loans, which comprise the vast majority of the debt pool we are talking about here do not involve banks at all. They are all backed by the U.S. taxpayer. Secondly, 1/2 to 2/3 of all dollars borrowed are for "indirect costs", i.e. pocket money, not tuition and fees. Finally, the income based repayment (IBR) and pay as you earn (PAYE) programs limit payments to a percentage of income, making the amount borrowed and the interest rate irrelevant. This set of policies protects the student but unfortunately encourages abuse and poor enrollment decisions. Simply put, too many students are allowed to borrow too much.
3
"1/2 to 2/3 of all dollars borrowed are for "indirect costs", i.e. pocket money"
You mean living expenses (i.e., food and housing) and textbooks? People have to eat, sleep somewhere indoors, and have the necessary books for classes. Those aren't exactly luxury items.
Federal loans for living expenses are based on the college's *reasonable* estimates of how much it costs to survive at a very modest standard of living. They don't just hand out money for people to spend as "pocket money".
You mean living expenses (i.e., food and housing) and textbooks? People have to eat, sleep somewhere indoors, and have the necessary books for classes. Those aren't exactly luxury items.
Federal loans for living expenses are based on the college's *reasonable* estimates of how much it costs to survive at a very modest standard of living. They don't just hand out money for people to spend as "pocket money".
1
Our whole way of life has deteriorated since Nixon ended the gold standard in 71'. Nations around the world saw that the U.S. was spending far more money on the Vietnam War than it had gold and began redeeming dollars for the gold it was backed by. Nixon closed the gold window for fear we would run out.
Since then debt, both public and private have grown exponentially. Had the gold standard remained in place the U.S. government would not have been allowed to become $18 trillion in debt. Government salaries have kept pace with inflation as they borrow more and more while private sector wages lag behind. They have barely budged in the last 30 years when you account for inflation. The Federal Reserve's loose money policies have done nothing but aggravate the situation.
The Federal Reserve takes note now because they are seeing a bleak future for the United States. As baby boomers retire and take their money from the stock market who will replace those investors? Will it be the next generation mired in student loans, underemployed with no health insurance and retirement? No- they won't be able to afford it as they live from paycheck to paycheck.
The Fed and Govt. have been robbing future generations for over 40 years and we still sit idly by and watch. They expand the scope and nature of govt. even though we are beyond broke. They fight wars their policies provoke and create departments that supply the police with military weapons to use on us. CAMPAIGN FINANCE REFORM A MUST
Since then debt, both public and private have grown exponentially. Had the gold standard remained in place the U.S. government would not have been allowed to become $18 trillion in debt. Government salaries have kept pace with inflation as they borrow more and more while private sector wages lag behind. They have barely budged in the last 30 years when you account for inflation. The Federal Reserve's loose money policies have done nothing but aggravate the situation.
The Federal Reserve takes note now because they are seeing a bleak future for the United States. As baby boomers retire and take their money from the stock market who will replace those investors? Will it be the next generation mired in student loans, underemployed with no health insurance and retirement? No- they won't be able to afford it as they live from paycheck to paycheck.
The Fed and Govt. have been robbing future generations for over 40 years and we still sit idly by and watch. They expand the scope and nature of govt. even though we are beyond broke. They fight wars their policies provoke and create departments that supply the police with military weapons to use on us. CAMPAIGN FINANCE REFORM A MUST
2
I see no information regarding the funding of state university systems with state tax revenues. I believe the state of Pennsylvania now funds approximately a whopping 7% of the cost of running Penn State (of course they have tens of millions of dollars invested in the football program, and Governor Scott in Wisconsin proudly announces he has driven the cost of state support of the University of Wisconsin down to 20%.
The only thing driving state legislators supporting their state higher education is their interest in winning basketball and football games; not providing education for their residents.
The only thing driving state legislators supporting their state higher education is their interest in winning basketball and football games; not providing education for their residents.
9
Yes, and Mr. Walker has initiated what many at the University of Wisconsin believe will be the devastation of one the nation's greatest public universities. So, your solution to growing student debt is de-investment in public education? Somehow that doesn't seem like it well help students. Conservatives in this nation always think cutting funding for education is such a great idea, yet all those nations who continue to outperform us on every measure of education seem to think investing in education is a good thing. Maybe we should look into that crazy idea.
3
Even respected academic powerhouse schools like UW Madison have seen administrative bloat. The governor is trying to wake the school up, to stop adding layer upon layer of paper-pushers who earn (with benefits and retirement) close to or over six-figures.
Not talking profs here, but assistant provosts, multiple chancellors, vice presidents, administrative officers, etc.
It's a maze, at UW and everywhere.
These people burrow in and enjoy regular hours, state benefits and COLAed retirements - early. It's a scandal.
Not talking profs here, but assistant provosts, multiple chancellors, vice presidents, administrative officers, etc.
It's a maze, at UW and everywhere.
These people burrow in and enjoy regular hours, state benefits and COLAed retirements - early. It's a scandal.
1
Didn't Obama wipe out billions in debt via an 2102 EO? This is an earnest Q. No one has mentioned this. Am I mistaken?
Student debt is a terrible burden for many borrowers, and it indirectly affects the economy by reducing the ability of the college grads to buy homes, cars, etc. However as an unsecured debt it doesn't have the destructive potential carried by the mortgages a few years back - there, the drop in home prices had been destined a spiral of defaults, foreclosures, further price drop, collapse of the construction industry, and so on. While the government in theory could help the borrowers, it could do nothing about the prices and construction industry dual collapses. Here, while the taxpayers are formally on the hook, in case default rates grow greatly there always a possibility (though fraught with poiltical risk and probably impossible as long as the Congress remains Republican) of e.g. swapping the consolidated student loans for the Treasuries which will make the repayment quite affordable for many borrowers, or in the most extreme, simply canceling the federal loan debts. Private debts are always viewed as hgh risk (despite being non-dischargeable), so defaults there should have been expected from the time these loans were originated.
Suze Orman summed up pretty well whether or not you should borrow money to go to school. 1) Can you pay the tuition and support yourself? 2) Will you have a job afterwards? 3) Will your job after school allow you to pay off your loans? If you don't answer yes to all three questions, it is not worth it. I may not have remembered her comments exactly, but this is what I understood about what she said when asked about this topic.
Borrowing money to go to university worked for me, but I did feel pretty uncomfortable looking at my consolidated student loans after graduation and I did not sit on the couch complaining about them.
Borrowing money to go to university worked for me, but I did feel pretty uncomfortable looking at my consolidated student loans after graduation and I did not sit on the couch complaining about them.
3
We're doing a great deal of damage to our democracy if gaining an education is being circumscribed by whether or not we'll have a job afterwards or can repay a loan, especially considering the vicissitudes of the economy.
8
It's asking a lot to expect 17- or 18-year-olds to be clairvoyant, and to predict what individual job markets will be like 5, 10, 20, or 30+ years down the road. Even professional economists with PhDs don't seem to be able to do it with any accuracy.
The fields that young people are currently urged to go into because they're "safe bets" (e.g., engineering, nursing, etc.) are problematic in various parts of the country. I've certainly heard of new engineers or nurses unable to find jobs, due to factors like hospital hiring freezes, employer preferences for cheaper H1B labor, corporate outsourcing, etc. No job is really "safe" these days.
When I started law school in 2002, the job market for lawyers was relatively good. I certainly wasn't expecting to make huge sums of money, but I thought at least I'd have a steady amount of work and maybe a mid-five-figure income. I don't think I could have reasonably predicted (at age 21) the severe contraction in the legal job market 10+ years on, the development of software that would enable the outsourcing of discovery overseas, etc.
The fields that young people are currently urged to go into because they're "safe bets" (e.g., engineering, nursing, etc.) are problematic in various parts of the country. I've certainly heard of new engineers or nurses unable to find jobs, due to factors like hospital hiring freezes, employer preferences for cheaper H1B labor, corporate outsourcing, etc. No job is really "safe" these days.
When I started law school in 2002, the job market for lawyers was relatively good. I certainly wasn't expecting to make huge sums of money, but I thought at least I'd have a steady amount of work and maybe a mid-five-figure income. I don't think I could have reasonably predicted (at age 21) the severe contraction in the legal job market 10+ years on, the development of software that would enable the outsourcing of discovery overseas, etc.
5
My wife and I have $2000 a month in scheduled student loan payments. How are we, and similarly situated debtors, supposed to save for retirement, purchase homes, and engage in the economy without rising wages and higher job growth?
The entire issue is a drag on the country.
The entire issue is a drag on the country.
17
Did you attend low-cost community college for 2 years, with a transfer to your state's public institution to get a degree that would increase your chance for full-time employment ? That's the way high school graduates should be thinking, so that they are in a position to save for retirement, purchase homes, and engage in the economy.
2
Except if we keep electing Republicans who want to slash funding for education which will either mean public school tuition close to private school tuition, or university systems too underfunded to provide a quality education. In which case, your plan won't work. But I agree it's the way to go for now.
1
Have you tried for the income based repayment plan? That caps your payments at 10% or 15% I believe... Google Income based repayment.
Student debt has been a building concern for many years but the mention of it has fallen on deaf ears especially this administration. Remember the rhetoric of higher education being a right to be available to all students regardless of economic circumstance. Well it isn't a right, reference the Constitution, it is a privilege. There is also the school of thought that not everyone needs a 4 year degree. We need craftsmen. mechanics, carpenters. welders, etc. This only requires 2 years of a good trade school which would cut costs and in most cases a job upon graduation.
America is racing towards becoming a social democracy and public debt is the result. If that is what the electorate wants so be it but just remember there are consequences.
America is racing towards becoming a social democracy and public debt is the result. If that is what the electorate wants so be it but just remember there are consequences.
3
How about going to school part time and working part time? Pare away some of that debt as you get your education, Pay as You Go. The writing has been on the wall for quite a while.
@merc- "How about going to school part time and working part time?"
I know plenty of people trying to do that. Yet higher education is so expensive these days (even at community colleges!) that every single one of them has had to take out loans to actually finish.
I know plenty of people trying to do that. Yet higher education is so expensive these days (even at community colleges!) that every single one of them has had to take out loans to actually finish.
There is also growing concern with student loan fraud and scams. Please see "Datum Desired: The Sad State of Student Bits and Bytes"
www.adjunctularnoodling.com
This may be helpful in your consideration of the broader issue.
~Don
www.adjunctularnoodling.com
This may be helpful in your consideration of the broader issue.
~Don
College professors are paid entirely too much. Many more courses should be available on-line for a nominal fee at this point in time. And this president wants "free college" for everyone? I do not want to pay for the other guy and his kid.
Not all college professors are paid too much. I know one associate professor pretty well, well enough to know what he gets paid and what he thinks about it. He teaches an average of three courses a quarter and after teaching he writes, goes to meetings, plans courses, talks and mentors students, travels abroad for research during the summer and grades students work. The university he teaches at has frozen his salary for the past five years or more, which does not make him very happy because he has three kids. He doesn't think he's paid too much and neither do I. He leads a whirlwind of a life working on average 1o to 12 hours every day whether he is in the classroom, in his office at school, or in his home office.
8
This is a laughably misinformed and gutless comment. Why is it misinformed? College professors' salaries haven't budged in 20 years, and they are actually pretty modest given the 10+ years of higher education necessary to teach at the university level. Go ahead and look this up. What has ballooned are resort-style campus buildings, amenities, and, yes, legions of administrators and assistants who have brought stupid corporate management techniques to the university.
Now, why is this comment gutless? When you say you don't want to pay for another person's kid, you reveal that you don't have the courage or the foresight to help others. But some of us realize that, even if we don't like you, we want to make sure that you have been given every opportunity to succeed. It's called society.
Now, why is this comment gutless? When you say you don't want to pay for another person's kid, you reveal that you don't have the courage or the foresight to help others. But some of us realize that, even if we don't like you, we want to make sure that you have been given every opportunity to succeed. It's called society.
13
That is a false assumption, Janis. The astronomical costs of college education in the U.S. are driven by the conversion of our universities into corporations, whereby highly paid upper-level administrators (CEOs) spend vast sums of tuition money on building booms, sports, and gleaming facilities. The truth is that most tenured professors make solidly middle class salaries, and their ranks have been declining for years. Now most classes are taught be adjunct instructors with no benefits, no job security, and the "luxury" of having to piece together classes at various campuses to eek out a living. In the past the U.S. actually funded its universities, and the result was that tuition was low for everyone. My guess is that you directly benefited from this system, and it's a sad day that you, and people like you, no longer want to help pay for "the other guy and his kid."
5
What I find the most ridiculous is colleges have to have three gyms and pavers to 'improve' their school! That is why they are so expensive. Then colleges expect students to pay ridiculous prices for an education that does not even include text books or housing… or living expenses! More ridiculous is the ridicule thrown on people who get bachelors and masters in the humanities. People didn't have to pay ridiculous amounts two generations ago to satisfy the corporate minded heads of colleges' pockets. College is not about getting a job, it is about learning all sorts of things, analyzing everything that makes us HUMAN! Just focusing on learning about science and math will not benefit society. Art is what moves us. How many works of art have ignited change? Oliver Twist is a much more compelling example of poverty in the Victorian Era than a chart of statistics showing earning rates in that era. So my plan, reign in college spending on things that include unnecessary bureaucracy, stupid buildings that will never be useful, and perhaps lowering the price of instate colleges to almost nothing for all people in all states, and private colleges will have to 'compete' by lowering their prices.
7
A good article. It's up to the president and the Congress. Good luck with that. Although, please note, this is taxpayer debt, not only because we are on the hook for defaults but because there is so much federal funding for the bloated universities and the questionable privately owned "colleges" and trade schools.
In an article in today's Times, this comment occurs: "A survey this year by Inside Higher Ed, conducted by the Gallup Organization, found that just 39 percent of college presidents felt confident that their institution’s financial model would be sustainable for the next decade."
What? Fifty thousand a year in tuition and sixty percent of our colleges are sliding underwater?
In an article in today's Times, this comment occurs: "A survey this year by Inside Higher Ed, conducted by the Gallup Organization, found that just 39 percent of college presidents felt confident that their institution’s financial model would be sustainable for the next decade."
What? Fifty thousand a year in tuition and sixty percent of our colleges are sliding underwater?
2
The vast majority of universities do not charge that much to each student. That is the private school cost, but there are at least 200 state universities of substantial size and more smaller ones. These charge far, far below the cost. Also, colleges include community colleges, which number in the thousands, because they are intended to be locally accessible.
If they all charged $50k and this were all paid in cash, you're right, there would not be the same issue.
If they all charged $50k and this were all paid in cash, you're right, there would not be the same issue.
5
I am quite surprised the author of the column did not directly mention anything about the significant number of private corporately owned colleges that thrive on students receiving government student loans. ""60 minutes" did a show on this topic a year or two ago whereby it showed, comparatively speaking, because of falsified graduation statistics and job placement, students from these private colleges were actually more in default than their mainstream college brethren. In the greater scheme of things, these dollar amounts are considerable.
As a result of an investigation resulting in falsified statistics of graduation and job procurement, "Everest College" in the Province of Ontario just recently had their license permanently suspended resulting in them have to close up shop. If a student who graduates from one of these private colleges(or any college for that matter) can't find a job, how are they going to pay back the loan?
No wonder the problems?
As a result of an investigation resulting in falsified statistics of graduation and job procurement, "Everest College" in the Province of Ontario just recently had their license permanently suspended resulting in them have to close up shop. If a student who graduates from one of these private colleges(or any college for that matter) can't find a job, how are they going to pay back the loan?
No wonder the problems?
5
It is absurd to blame the student debt problem on "for profit" colleges that are mostly vocational, teach practical skills and mostly serve working professionals looking to upgrade their skill sets.
The "not for profit" university system costs just as much or more - not just tuition, but in terms of public subsidies. And generates just as much if not more student debt.
For decades, a university degree was marketed as a ticket to a better life, better job and better salary. But in this day and age, it's not the ticket that it once was.
You walk out of college into a 30K a year job with a six figure obligation at 22....it can hold you back for the rest of your life. And what does a liberal arts degree get you in the work force?
The "not for profit" university system costs just as much or more - not just tuition, but in terms of public subsidies. And generates just as much if not more student debt.
For decades, a university degree was marketed as a ticket to a better life, better job and better salary. But in this day and age, it's not the ticket that it once was.
You walk out of college into a 30K a year job with a six figure obligation at 22....it can hold you back for the rest of your life. And what does a liberal arts degree get you in the work force?
1
Before the real estate bubble burst I was working a contract in California. My partner and I were driving from San Fransisco to our next site In Fallon, NV. when out in the middle of nowhere a bright shiny new subdivision appeared about 80 miles out from the city. the starting price was 400K and the first phase was sold out. Three other builders where starting there projects in addition to the original , We ate lunch in newly opened chain restaurant across from the sales office which appeared to be extremely busy. My partner commented "This cant last...this far out at theses prices, when the bubble bursts there will be hell to pay" Needless to say It did and there was indeed hell to pay.
All you need do is watch broadcast or cable TV for any period...wall to wall advertisements pitching "for profit" colleges with new players appearing each day. Each one offers loan packages. I find them analogous to those subdivisions I saw back in the day. One disturbing aspect is that many of the loans made are being used by "students" as easy money in the form of "refunds' for the unused portion of the loan. If we knew what percentage of the loans actually were applied to education and education related activities we would be terrified.
To borrow a phrase "This cant last... at theses prices, when the bubble bursts there will be hell to pay"
All you need do is watch broadcast or cable TV for any period...wall to wall advertisements pitching "for profit" colleges with new players appearing each day. Each one offers loan packages. I find them analogous to those subdivisions I saw back in the day. One disturbing aspect is that many of the loans made are being used by "students" as easy money in the form of "refunds' for the unused portion of the loan. If we knew what percentage of the loans actually were applied to education and education related activities we would be terrified.
To borrow a phrase "This cant last... at theses prices, when the bubble bursts there will be hell to pay"
10
There are plenty of jobs open in Silicon Valley that permit full or partial telecommuting, some in teams that are international. Meaning the workers can live anywhere.
That outlying suburb may well house techies who wanted affordable homes and, perhaps, lower crime. Who have very good jobs that they do from home. From that locale, they could easily commute in once or twice a week or more if a given project required F2F.
My friend's husband lost a hardware job (Apple contractor) in Florida. They moved to Boulder, less costly than the Valley, where he works from home. He flies to Cali twice a month. It all worked out for that family.
Hell to pay? Maybe not.
That outlying suburb may well house techies who wanted affordable homes and, perhaps, lower crime. Who have very good jobs that they do from home. From that locale, they could easily commute in once or twice a week or more if a given project required F2F.
My friend's husband lost a hardware job (Apple contractor) in Florida. They moved to Boulder, less costly than the Valley, where he works from home. He flies to Cali twice a month. It all worked out for that family.
Hell to pay? Maybe not.
Also, why keep pretending we don't know how this happens?
"fox guarding the henhouse": remember Mitt Romney's 2012 campaign when he was swanning around the country publicly praising expensive, sleazy for-profit colleges like Full Sail University (by name!) while taking campaign contributions from their founders, his good buddies? Also taking $$ from the college debt collection scourge ECMC? Romney was up to his keister in publicly promoting and taking $$ from the most predatory people in the college debt industry. Who did you think financed Romney running for president? Who believes any real reform of our system is possible when the Republican nominee has this kind of horrendous record on higher education? I mean, are we stupid or what?
Our elected officials are completely compromised by their proximity to the financial industry. Romney knew exactly how sketchy Full Sail is when he was drumming up business for it's owner, who gave him $$. There was scant coverage of Romney's ties to predatory schools/debt collectors while he was running, an ethically gross situation that made him unqualified to be president.
The Republican party has been bought by the college debt industry. They're why student loans are nondischargeable. Like all the GOPs current agenda, this is a situation that dooms or victimizes a large part of our population who are just trying to survive and live decent lives - but as always, what do the Republicans care about them?
"fox guarding the henhouse": remember Mitt Romney's 2012 campaign when he was swanning around the country publicly praising expensive, sleazy for-profit colleges like Full Sail University (by name!) while taking campaign contributions from their founders, his good buddies? Also taking $$ from the college debt collection scourge ECMC? Romney was up to his keister in publicly promoting and taking $$ from the most predatory people in the college debt industry. Who did you think financed Romney running for president? Who believes any real reform of our system is possible when the Republican nominee has this kind of horrendous record on higher education? I mean, are we stupid or what?
Our elected officials are completely compromised by their proximity to the financial industry. Romney knew exactly how sketchy Full Sail is when he was drumming up business for it's owner, who gave him $$. There was scant coverage of Romney's ties to predatory schools/debt collectors while he was running, an ethically gross situation that made him unqualified to be president.
The Republican party has been bought by the college debt industry. They're why student loans are nondischargeable. Like all the GOPs current agenda, this is a situation that dooms or victimizes a large part of our population who are just trying to survive and live decent lives - but as always, what do the Republicans care about them?
8
I don't understand how today's lenders can ever get repaid.
Thirty-seven years ago, graduates were able to work off their loans by 5% per year - taking a teaching position with the HeadStart program, or being in a position responsible for vulnerable kids (or something like that). Between that and making their scheduled payments, they weren't trapped in debt hell for the rest of their lives.
Heck, a good friend of mine even paid hers off early after going back for a Masters degree three years after college in order to get a guaranteed salary bump (from her school district employer), which was more than a little helpful.
How student borrowers get out from under it all now, I have no idea. Hopefully, some number of them don't get in too deep.
Thirty-seven years ago, graduates were able to work off their loans by 5% per year - taking a teaching position with the HeadStart program, or being in a position responsible for vulnerable kids (or something like that). Between that and making their scheduled payments, they weren't trapped in debt hell for the rest of their lives.
Heck, a good friend of mine even paid hers off early after going back for a Masters degree three years after college in order to get a guaranteed salary bump (from her school district employer), which was more than a little helpful.
How student borrowers get out from under it all now, I have no idea. Hopefully, some number of them don't get in too deep.
3
I co-signed my son's debt, knowing full well that he would never be able to pay it back himself. Name schools AND living expenses, so he could finish a BA and a MA in 4 1/2 years. He graduated in 2007, and still doesn't have a reasonably well paying job. After almost 8 years of paying, I still owe about $35,000. Thank goodness for my inheritance. My son is getting his early. I hope I don't outlive my money, but it's entirely possible.
8
I too co-signed for my daughter to get a lower rate and recently got a note from the lender, Discover, saying that her pay-off record would be reported on my credit record in addition to her credit record. She has a good job and has paid off more than the minimum, but is now talking about grad school. Discover's new reporting policies will make me think twice about co-signing again.
2
The O admin is said to be working on a plan to socialize these loans. What's another trillion.
1
Maybe some sort of loan forgiveness might be the best way out of this mess. After all these debtors can't buy much in the way of cars much less homes. Many are struggling to just get by day to day. If they can't participate, what's going to keep the economy afloat? Socializing the debt might be the right choice.
5
Seriously assessing a college education is harder than appraising a house, yet no assessment is a catastrophe waiting to happen. If a house falls down, it can be rebuilt much more easily than a poor education can be made up for. (Remember the story about "...teach a man to fish...")
Not seriously assessing a college education leads to what the great sociologist, David Riesman, observed, in 1980 (3 years before the first US News "ranking").
“...advantage can..be taken of [students] by unscrupulous instructors and institutions...the student estate often does not grasp its own interests, and those who speak in its name are not always its friends..”
To see just how prescient Prof. Riesman was, see the case studies and stories on my blog inside-higher-ed . I write it to inform, not how bad the student loan situation is, but about how corrupted our present system of higher education is. I was a professor. It's bad beyond any outsider's imagination.
Not seriously assessing a college education leads to what the great sociologist, David Riesman, observed, in 1980 (3 years before the first US News "ranking").
“...advantage can..be taken of [students] by unscrupulous instructors and institutions...the student estate often does not grasp its own interests, and those who speak in its name are not always its friends..”
To see just how prescient Prof. Riesman was, see the case studies and stories on my blog inside-higher-ed . I write it to inform, not how bad the student loan situation is, but about how corrupted our present system of higher education is. I was a professor. It's bad beyond any outsider's imagination.
4
Pretty simple problem to fix. Stop usury interest charges.
2
Why is so little mentioned about using debt wisely. Not all debt is bad (nor is it good) and not all education is equal. The world is clamoring for students that have focused on STEM subjects and have developed an expertise in those areas. Conversely, the demand for graduates in the social / cultural subjects has decreased.
Incurring some debt to acquire expertise in a field where there is worldwide demand may be a good idea while it's probably not a good idea to incur large amounts of debt in those subject areas not in demand or have limited income opportunities. This is basic economics.
Incurring some debt to acquire expertise in a field where there is worldwide demand may be a good idea while it's probably not a good idea to incur large amounts of debt in those subject areas not in demand or have limited income opportunities. This is basic economics.
2
Federal student loan rates make zero sense. They're either personal loans, in which case the rate is far too low, or they're federal debt, in which case the rate is far too high. However, calling the charges usurious is pure hyperbole.
I think my grad loans were 7.9%, with no collateral or payment plan. I was going to a high-end business school and had no issues paying them off, but the structure still makes no sense.
I think my grad loans were 7.9%, with no collateral or payment plan. I was going to a high-end business school and had no issues paying them off, but the structure still makes no sense.
1
Like manufacturing, STEM jobs are susceptible to off-shoring. High-tech companies export their STEM jobs to low-cost India and China.
2
Easy explanation: the Dept of Education, like any massive organization, is hampered by inertia. It also probably has few statisticians and people with finance backgrounds. Since there has not yet been a crisis, and student loans are a money maker for the US gov't (thanks to 6+% interest rates on gov't student loans), Congress could care less. The status quo will continue until if and when there is a student loan "bomb". At that point, Congress will act horrified and point fingers at the Dept of Education, which will say it a) it didn't have the means to avert the disaster and/or b) issued plenty of warnings that fell on deaf ears.
In other words, it will be a repeat of the mortgage market crisis, S&L collapse, etc except most likely an even bigger "bomb" due to how huge student loan debt has become.
In other words, it will be a repeat of the mortgage market crisis, S&L collapse, etc except most likely an even bigger "bomb" due to how huge student loan debt has become.
1
The Department of Education has plenty of people with STEM backgrounds.
The reason they do not share the data is not that they don't know what it means.
The reason is that they do know what it means.
The reason they do not share the data is not that they don't know what it means.
The reason is that they do know what it means.
2
As several think tanks have pointed out, the performance of education loans s quite similar to a decade ago. The difference now is that Wall Street is upset that there is a fairly-large, low-risk marketplace that is now under the control of the government rather than under the control of the financial services sector and its 'masters of the universe.'
4
Department of Education has officially denied multiple times that there is a Student Loan problem. They have not issued any warnings about the growing student debt problem. Also, if the Department of Education would now limit student loan funding, thus causing pressure on the tuition prices, how would the campuses finance their stadiums and bloated administrative staff? Dept. of Education and University Administrators are in cahoots with each other.
The professor's comments are spot on - save for one feature. The data on student loans got more opaque when the Federal Government took the entire business over. Not surprisingly so did loan volume and so did defaults.
1
It actually got less opaque. Or do you have any web links to transparent data on the guaranteed loan program? They didn't even provide delinquency and repayment plan info on those FFELP loans. Defaults didn't go up much but the increase was due to all the for-profit schools coming in from the guaranteed loan program. In addition, the loose credit approach of private lenders (non government guaranteed) reversed after 2008, sending a lot of those high risk customers into the federal program.
2
Higher education now is nothing more than an extraction racket with Universities (businesses) and Wall Street beneficiaries. Preying on the weak which include the youth in this country is the latest business plan in the US. Privatization of public education is on tap as well. (I can visualize the predators licking their chops over the $600B spent on public education annually.)
The children of every society are the FUTURE of the society. How well they are treated, educated and shepherded determines future outcomes.
Our leadership has been bought off by the highest bidders. The highest bidders have no future vision other than greed and power for themselves. They buy off and support mediocrity who will do their bidding.
It is a sad day in America these days.
The children of every society are the FUTURE of the society. How well they are treated, educated and shepherded determines future outcomes.
Our leadership has been bought off by the highest bidders. The highest bidders have no future vision other than greed and power for themselves. They buy off and support mediocrity who will do their bidding.
It is a sad day in America these days.
4
We are loaning money to naïve - and by definition - uneducated "consumers" so that they can "buy" an education. Yet the "sellers" in blocking attempts for either the "purchaser", or the lender learn about the product.
Clearly, assessing a college education is harder than appraising a house, yet blocking all true assessment of education is a catastrophe for all of us - except for the colleges. If a house falls down, it can be rebuilt much more easily than a poor education can be made up for. (Remember the story about "...teach a man to fish...") Yet, we regulate housing much more effectively than we do education.
Not seriously assessing a college education leads to what the great sociologist, David Riesman, observed, in 1980 (3 years before the first US News "ranking").
“...advantage can..be taken of [students] by unscrupulous instructors and institutions...the student estate often does not grasp its own interests, and those who speak in its name are not always its friends..”
He goes on to note that many (if not most) colleges cater to student "wants" instead of needs, which can be quite different - and the colleges, professor, and administrators that do this know exactly what they are doing.
I know this from first hand experience. I am a retired professor, and I cannot overstate just how prescient Dr. Riesman was. Buy beware.
Clearly, assessing a college education is harder than appraising a house, yet blocking all true assessment of education is a catastrophe for all of us - except for the colleges. If a house falls down, it can be rebuilt much more easily than a poor education can be made up for. (Remember the story about "...teach a man to fish...") Yet, we regulate housing much more effectively than we do education.
Not seriously assessing a college education leads to what the great sociologist, David Riesman, observed, in 1980 (3 years before the first US News "ranking").
“...advantage can..be taken of [students] by unscrupulous instructors and institutions...the student estate often does not grasp its own interests, and those who speak in its name are not always its friends..”
He goes on to note that many (if not most) colleges cater to student "wants" instead of needs, which can be quite different - and the colleges, professor, and administrators that do this know exactly what they are doing.
I know this from first hand experience. I am a retired professor, and I cannot overstate just how prescient Dr. Riesman was. Buy beware.
5
In-debting Americans for nearly most of their productive years from the age of 18 to possibly 50 just so that they can have a college degree is near criminal. Here is a simple solution to the current debt loads and for financing future student's education:
Students apply for a education loan from the Social Security Administration for college, trade school, doctorates, etc. Once the students start to work and earn a wage, their Social Security tax is increased by a 1/4 % until the loan is paid off. This may take some students 20 years, others less depending on their reported income.
Social Security gets paid back 100% of the loan as long as a person is earning a wage. Since the Federal government has been borrowing from Social Security for decades without paying interest, I would suggest that there be an interest rate set at the inflation rate.
Social Security Administration would be more than capable of handling these program. Take the banks, Wall Street out of the education business. Students decide how and when to spend for their education but it is no free ride, just a reasonable pay back scheme.
Students apply for a education loan from the Social Security Administration for college, trade school, doctorates, etc. Once the students start to work and earn a wage, their Social Security tax is increased by a 1/4 % until the loan is paid off. This may take some students 20 years, others less depending on their reported income.
Social Security gets paid back 100% of the loan as long as a person is earning a wage. Since the Federal government has been borrowing from Social Security for decades without paying interest, I would suggest that there be an interest rate set at the inflation rate.
Social Security Administration would be more than capable of handling these program. Take the banks, Wall Street out of the education business. Students decide how and when to spend for their education but it is no free ride, just a reasonable pay back scheme.
4
Or how about we just make education affordable so that we don't need to take out a loan in the first place?
6
There is fundamental corruption here. The colleges and universities are the ultimate beneficiaries of the massive loan program. They take the money from the program and use it build a huge bureaucracy, build unnecessary facilities and pay themselves more than necessary. At the end of the chain is Wall Street, who is earning investment management fees on the enormous surpluses owned by the universities.
8
Can you please tell me where I can get a high-paying job, other than as college president, in higher education? I would like to apply. Thanks.
1
Can you coach football or men's basketball?
(Sorry, I think those jobs are still 100% male...)
(Sorry, I think those jobs are still 100% male...)
Leave aside the break-down, I'd just like to see some more figures. I've googled (ok just a bit) and I don't really see them easily.
What amount of new debt is being put on each year for American higher education? Student loan debt seems to be increasing by almost 100 B Usd a year. This, as I understand it, is a net figure. Some debt is being retired, and even more debt is being put on. Each year how much new student debt is there?
There are also parents (and others) taking on debt to pay for their children's educations. This obviously is a harder figure to estimate, but if a parent borrows x in a year and is paying more than x for their childrens' higher education that year, suppose that all of x is counted. What is this figure?
Then what is the total figure (students + parents)? Call this F. What is the percentage in terms of GDP? (0.7%?? 1%??) in terms of total federal spending? (3%??) In terms of total federal revenue (4%??) In terms of the total of federal and state budgets? (2%??)
Also how much do colleges and universities spend a year? What is the percentage of the debt being taken on compared to this amount?
Thank you.
What amount of new debt is being put on each year for American higher education? Student loan debt seems to be increasing by almost 100 B Usd a year. This, as I understand it, is a net figure. Some debt is being retired, and even more debt is being put on. Each year how much new student debt is there?
There are also parents (and others) taking on debt to pay for their children's educations. This obviously is a harder figure to estimate, but if a parent borrows x in a year and is paying more than x for their childrens' higher education that year, suppose that all of x is counted. What is this figure?
Then what is the total figure (students + parents)? Call this F. What is the percentage in terms of GDP? (0.7%?? 1%??) in terms of total federal spending? (3%??) In terms of total federal revenue (4%??) In terms of the total of federal and state budgets? (2%??)
Also how much do colleges and universities spend a year? What is the percentage of the debt being taken on compared to this amount?
Thank you.
The system of students loans is a problem because it provides both loans and direct grants (Pell) that are not calibrated on ability to repay. Interest rates are set by program. So, a student going to MIT engineering is charged the same interest as a high defaulting programs. The result is that the system actually artificially underwrites bad schools at the expense of good schools and through the loans, students infer equal quality. If student loans pricing were set by the specific default rates of the school and major, then a students would be charged virtually no interest for good programs (e.g. engineering, healthcare, computer science, etc) and 15%+ for poor degree and school choices. In the end, schools would be forced to improve outcomes to attract students and rather than a system where politicians set the interest rates, the market would dictate both the nature of the education market and the cost of attending.
10
Actually, I doubt that loansharking would discourage most liberal arts majors. Kids have no sense of how interest of 15% will mount up. Just deny the loans if they are a bad risk. If students really want those majors, let them do them in six or eight years and graduate with little or no debt, instead of four years and thirty years of debt. Of course, higher education could just be made free, instead of made absurd by the "free" market.
No where in this article did I find any information about student debt from private loans. Are these counted in the numbers cited? What, if any, potential solutions will apply to private debt? There seems to be little relief for those with private debt, like my son. He was unable to qualify for adequate federal aid while a college student because his single mother made too much money. So most of his last two years were financed privately. His enlistment in the Coast Guard, which would have qualified him for debt relief after 10 years, only works with federal loans. Even though he's refinanced, he's still paying higher interest than those with federal loans. I'm a strong supporter of debt relief for this generation of college graduates -- but I fervently hope that those caught up in the private loan market will be included.
6
What you also don't see is how much parents are putting off their own retirement savings to fund their children's education.
6
The ultimate taxpayer bailout of a vast amount of this debt will likely have more redeeming benefits than that of the 2008 bank bailout. At least the funds will have a better chance of flowing into the general economy. It is just a matter of time.
4
End federal backing of student loans, & change bankruptcy laws so that you can eliminate student loan debt and university/college tuition rates will contract to a true market reflection, and then rise with inflation. There will be a period of years, perhaps a decade, where higher education suffers b/c universities/colleges have to reign in their expenditures, but the system will then sustain its self with little mean deviation. The feds can increase the grant program, but federal backing of student loans shifts the burden of pay and performance from the institution and individual to everyone.
9
The Department of Education has their hands tied by greedy and worthless private for-profit schools who lobby not to have this info made public. If the American public knew just how bad things were their entire model would be in jeopardy. Imagine a business model where your customers are guaranteed to afford your product so long as they've never defaulted on a previous student loan and all the risk is on the taxpayer if there ever is a default. That's essentially what these online for-profit schools have and they spend triple in recruitment efforts than they do in the quality of education they provide.
11
probably one of the most uninformed posts I have read in a long time. For profit schools actually are regulated by default rate and effective job placement. Traditional schools are not. State schools underwrite about between 15-35% of their tuition through state taxes, in others a direct transfer between tax payers and students. IF traditional schools were regulated the same way a for-profits entire sectors of traditional market would disappear e.g. every Historically Black College and University. The real resistance to change are the traditional colleges. They are happy to have the for-profits regulated but want none of the regulations in their own homes
3
My brother is a veteran police officer with a disabled wife (who hasn't worked in 20 years) and an 18 year old daughter he is struggling to put through her first year at a state university. His daughter has a part time job and worked all through high school. She bought a car to commute because she can't afford to live in the dorm. She's a smart girl who graduated from high school with a 4.2 GPA, but given the family's circumstances, I have doubts she will be able to finish college.
If a veteran cop who is struggling to take care of a sick wife has this kind of trouble putting a daughter through a state university, isn't this system a complete and total mess? His daughter is smart, industrious and a great student. My brother has spent his entire adult life protecting the community surrounding this local state school he basically can't afford to send his kid to. What's wrong with this picture?
I don't have illusions that cops are perfect but in his decades on the force, a close friend was shot and killed by a gang member and another also killed in the line of duty. Plenty of fellow officers have suffered disabling injuries on the job. My brother has specialized in an area of policing where he must constantly deal with extremely violent people and his safety is a constant concern.
If we can't find a way for someone like him to provide his academically gifted daughter with a decent education without assuming a mountain of debt, what's wrong with this country?
If a veteran cop who is struggling to take care of a sick wife has this kind of trouble putting a daughter through a state university, isn't this system a complete and total mess? His daughter is smart, industrious and a great student. My brother has spent his entire adult life protecting the community surrounding this local state school he basically can't afford to send his kid to. What's wrong with this picture?
I don't have illusions that cops are perfect but in his decades on the force, a close friend was shot and killed by a gang member and another also killed in the line of duty. Plenty of fellow officers have suffered disabling injuries on the job. My brother has specialized in an area of policing where he must constantly deal with extremely violent people and his safety is a constant concern.
If we can't find a way for someone like him to provide his academically gifted daughter with a decent education without assuming a mountain of debt, what's wrong with this country?
31
Here's the problem:The country's template has switched from that of a common wealth (I split the word on purpose) to that of a suction pump. This suction pump bores down into the population as far as it can and sucks up what ever it can grab for its handlers. The handlers in turn forward the product to their employers. We know who they are--the ones with the $8,000 shower curtains ($8,000 would go quite far in educating your niece at a state college. Think what 3 or 4 shower curtains could do.)
2
This article is just about the nuts and bolts of a possible financial crash. The fallout from this outrageous situation with student loan overextension at a time when jobs that pay well are rare is going to be catastrophic. This kind of debt means that you leave college with a lead weight on your back. You are hobbled. It cripples your thinking. You may never find a partner to marry. You may never be able to buy a house or finance a car or think about having a family until you are too old. (I was a canary in the coal mine and had about $28,000 in student debt in the late 80s and early 90s. It affected my every decision. I couldn't do what I wanted. I paid my student loans while I had no health insurance and lived with my mom. College debt pretty much ruined my 20s and a bit of my 30s. By the time I was clear of the debt the damage had been done. I feel really bad that so many young people are going to suffer the same stress and indignity.
29
Let me get this straight. Banksters shift money around in order to enrich themselves, contribute nothing to the country, ruin the global economy, receive massive bailout loans from US taxpayers, and never have to repay these interest-free loans.
Conversely, young American men and women take out loans simply to study and acquire skills and knowledge for the sake of self-development and to become productive contributors to America's economy and future, and they are crippled by loans with exorbitant interest rates, which they cannot repay because there are so few jobs and wages have been stagnant for decades. Legislation does offer one way to discharge a student loan - by dying.
That, my fellow Americans, is a race to the bottom.
Conversely, young American men and women take out loans simply to study and acquire skills and knowledge for the sake of self-development and to become productive contributors to America's economy and future, and they are crippled by loans with exorbitant interest rates, which they cannot repay because there are so few jobs and wages have been stagnant for decades. Legislation does offer one way to discharge a student loan - by dying.
That, my fellow Americans, is a race to the bottom.
38
This is such a naive article. The reason that there is no close oversight of the student loan program is that Congress has been paid to keep it that way. The for profit colleges, the Bible schools, and the private loan industry have bought the shop. The last thing they want is for someone to take a look under the hood of Old Bessie. We all know what's under there: a flood of taxpayer money pouring into private hands, along with life support to so-called colleges that haven't a prayer of placing their graduates into middle class jobs.
35
Exactly. There isn't a lobby group that fights for students access to higher education, that fights for legislation to stop these for profit schools ripping off students with promise of jobs but in reality just more debt. Congress is bought and paid for by big money and there is certainly big money in higher education.
Presidents and deans of universities are getting salaries up and over $1.0 million. Administrative staffs are growing along with huge grandiose capital projects, yet the average professor and adjunct teacher at higher education is hardly earning a middle class income.
Who speaks for students and their families in Washington? Certainly not our current 2 political parties.
Presidents and deans of universities are getting salaries up and over $1.0 million. Administrative staffs are growing along with huge grandiose capital projects, yet the average professor and adjunct teacher at higher education is hardly earning a middle class income.
Who speaks for students and their families in Washington? Certainly not our current 2 political parties.
5
It's no mystery what the "drivers of student debt" are: tuition and fees that are astronomical and rise exponentially and stagnant wages (for parents and students) that are stuck in the 1970s.
9
There are three things I was told by my grandfather before I left the farm.
(1) Never a borrower nor a lender be. Make your own money.
(2) In any fight both sides lose. Don't be a fighter
(3) Always have enough money set aside so you can walk away.
Over a period of 18 years I heard those words of wisdom a few hundred times.
When I was offered a student loan #1 came to mind and I turned it down, earning the tuition money BEFORE I went to college.
When I graduated from college the military and CIA recruiters were offering handsome bonuses, free graduate school scholarships, and choices of assignments worldwide, if I would fight for my country. I remembered #2. I turned them down and went to work in high finance on Wall Street.
On Wall Street I remembered #3 and I set aside enough money to walk away from Wall Street. Three years later when the stock market crashed I left Wall Street and lived for the next 11 years in Hawaii.
So far these three pieces of wisdom are working for me, otherwise I wouldn't bother sharing them.
(1) Never a borrower nor a lender be. Make your own money.
(2) In any fight both sides lose. Don't be a fighter
(3) Always have enough money set aside so you can walk away.
Over a period of 18 years I heard those words of wisdom a few hundred times.
When I was offered a student loan #1 came to mind and I turned it down, earning the tuition money BEFORE I went to college.
When I graduated from college the military and CIA recruiters were offering handsome bonuses, free graduate school scholarships, and choices of assignments worldwide, if I would fight for my country. I remembered #2. I turned them down and went to work in high finance on Wall Street.
On Wall Street I remembered #3 and I set aside enough money to walk away from Wall Street. Three years later when the stock market crashed I left Wall Street and lived for the next 11 years in Hawaii.
So far these three pieces of wisdom are working for me, otherwise I wouldn't bother sharing them.
9
"Work Hard" might be a good 4th on your list. I read many articles about how to improve education and I can't recall a single one proposing hard work by students which is ironic because hard work is about 80% of the formula for success in school (and life). Late into the night read the chapters and do the problems over and over. My guess is only about 25% of college students do this and therein lies a big source of our problems. I suspect many college grads can only get work at Starbucks for a good reason.
4
I wonder how long you think people should work at high-school graduate wages to save up the now-astronomical costs of a college education? I've read anecdotes about how people used to be able to pay for a year of college tuition and books by working during the summer. How often is that the case now?
3
"When I was offered a student loan #1 came to mind and I turned it down, earning the tuition money BEFORE I went to college."
How many decades ago was this...?
FYI, the average cost of attending a *public, in-state* four-year university is now $18,943 (including tuition, fees, room, and board). The average cost of attending a junior college (including housing and living expenses) is $11,052.
http://trends.collegeboard.org/college-pricing/figures-tables/average-pu...
That means that the average bachelors degree at a state college will run you $75,772. The "cheaper" route (i.e., going to a junior college for two years, then transferring) will still run you $59,990 on average, according to my calculations. Just how many years do you suppose it'll take a kid flipping burgers to save that up?
Times have changed. Telling young people that everything will be all right as long as you "work hard" is utterly ridiculous. Many of the ones I know ARE working quite hard (often at multiple jobs), and still have no realistic hopes of finishing college unless they take out considerable loans.
How many decades ago was this...?
FYI, the average cost of attending a *public, in-state* four-year university is now $18,943 (including tuition, fees, room, and board). The average cost of attending a junior college (including housing and living expenses) is $11,052.
http://trends.collegeboard.org/college-pricing/figures-tables/average-pu...
That means that the average bachelors degree at a state college will run you $75,772. The "cheaper" route (i.e., going to a junior college for two years, then transferring) will still run you $59,990 on average, according to my calculations. Just how many years do you suppose it'll take a kid flipping burgers to save that up?
Times have changed. Telling young people that everything will be all right as long as you "work hard" is utterly ridiculous. Many of the ones I know ARE working quite hard (often at multiple jobs), and still have no realistic hopes of finishing college unless they take out considerable loans.
It's a sign of the dysfunction of our values - on one hand education is still considered elitist (who wants a president, a legislature, or media with brains?), while people realize these days a college education has become the bare minimum, and still it may not be worth what it cost, as prices escalate to levels unseen in any other country (and not just for the top schools), or the corresponding jobs don't exist.
Never mind college, we can't even ensure quality public elementary and high schools and what money there is is either siphoned off in the form of vouchers for private/charter schools, or in the form of tax cuts because education is still not considered a basic right. (Case in point, California's once great college system)
My generation now considers itself fortunate that it 'only' costs $10k/year for a top school - all costs included - so that neither parents nor children had to mortgage their future; still, one reason I didn't go on to grad or medical school is the cost, but at least I could start a career without it.
Never mind college, we can't even ensure quality public elementary and high schools and what money there is is either siphoned off in the form of vouchers for private/charter schools, or in the form of tax cuts because education is still not considered a basic right. (Case in point, California's once great college system)
My generation now considers itself fortunate that it 'only' costs $10k/year for a top school - all costs included - so that neither parents nor children had to mortgage their future; still, one reason I didn't go on to grad or medical school is the cost, but at least I could start a career without it.
9
When 2/3 of all Federal student loans proceeds ends up in student's pocket under the guise of "indirect expenses", not tuition and fees, I wouldn't call student loans an investment in our future. Consider that a Veteran fully covered by the GI Bill (tuition and fees fully paid) pockets ALL financial aid and a student fully covered by a Pell grant at a community college pockets ALL loans and you begin to see where the dollars are going. Having worked in student finance for 13 years, I do my best to discourage this, but policy makes it difficult, especially when there is a payment plan that makes the amount borrowed irrelevant (Income Based Repayment or Pay as You Earn). It makes no sense to me that Graduate level debt exceeding $100,000 can be included in such a payment plan and that there is no aggregate limit on Graduate Plus loans.
3
Students should be able to refinance their student debts the same way home owners refinance their mortgages.
30
they can and do.. My friend just refinanced all of his debt after finishing residency and starting a job as a full time doctor. He lost some of the pay as you earn protections but was able to capitalize on the very low rates right now.
I have had a mountain of student debt that I repaid. I don't object to education debt. The problem, actually, isn't a lack of oversight. Between the DOE and the FRB and the OCC and the CFPB, there'd is plenty of oversight. The problem is that the overseers fail at their jobs.
1. The schools get this government backed debt and what do they do with it? They build - Everything you can think of. Fifty million dollar campus centers. Dorms that are just for students who have singles. No roommates? What is the point of college?
2. The for profit schools should not have access to federally backed debt. Simply, these schools don't place kids the way the traditional colleges do. And they lie. They say the kid will get a job making a hundred grand or that the kid will get trained in various ways that are impossible to achieve in the time and work involved.
3. The agencies cannot interfere with repayment. If the kid borrowed money to pay for school, the kid has to repay the debt plus the interest, just as the kid agreed. obviously if the kid was lied to by the school and the lie was material, their may be adjustments. But I busted myself for 20 years to finally repay my undergraduate and graduate school loans. I took jobs I didn't want because they paid bills I had. I also asked my employer to travel more often - to far flung places - to make sure I could live at my employer's expense, all to repay my loans. Im hardly exemplary but the program works because kids repay.
1. The schools get this government backed debt and what do they do with it? They build - Everything you can think of. Fifty million dollar campus centers. Dorms that are just for students who have singles. No roommates? What is the point of college?
2. The for profit schools should not have access to federally backed debt. Simply, these schools don't place kids the way the traditional colleges do. And they lie. They say the kid will get a job making a hundred grand or that the kid will get trained in various ways that are impossible to achieve in the time and work involved.
3. The agencies cannot interfere with repayment. If the kid borrowed money to pay for school, the kid has to repay the debt plus the interest, just as the kid agreed. obviously if the kid was lied to by the school and the lie was material, their may be adjustments. But I busted myself for 20 years to finally repay my undergraduate and graduate school loans. I took jobs I didn't want because they paid bills I had. I also asked my employer to travel more often - to far flung places - to make sure I could live at my employer's expense, all to repay my loans. Im hardly exemplary but the program works because kids repay.
5
The 1/27 NYT article "A Data-Science Lender Takes on Student Debt" motivated me to look into how I could get out from being a chump paying 8% on my student loans. One of these loan skimmers gladly refinanced it only to within hours sell it, I suppose, to private individuals with a rating that its quality is much higher than the pool of student loans at risk for default. (They screened my credit rating, graduate university name, criminal history, and employer quality--also, they only take graduate degree loans.) My preference would have been for NelNet to honor my final call/request to alert them that I was about to refinance and for them to provide a more market-reasonable rate since with them my loan with them would continue to help to fund other student loans. Their answer was no. So now I've contributed to help increase the default risk of our government's student loan all to save ~6% APR. I don't feel good about it, but at least I'm not played the fool.
7
This isn't that difficult to figure out folks. College administrators and presidents are to blame.
Colleges, like any other market participant, will charge as much as they feel the market can bear. When the market has access to unlimited mountains of cash provided for by federally backed student loans requiring no collateral, colleges will always seek to capture the subsidy. Always.
College administrators like to believe they hold themselves to the higher ethical standard the ivory tower requires, but they are raiding the national treasury (in the form of forgiven student loan debt under IBR). And they are strapping millions of smart kids with lifelong debt.
They deserve the blame. Let's blame them.
Capping the amount of student loans one could take from the fed gov at a much lower level would solve this problem, but timid college administrators would hide behind cries that doing so is "denying access to education."
Colleges, like any other market participant, will charge as much as they feel the market can bear. When the market has access to unlimited mountains of cash provided for by federally backed student loans requiring no collateral, colleges will always seek to capture the subsidy. Always.
College administrators like to believe they hold themselves to the higher ethical standard the ivory tower requires, but they are raiding the national treasury (in the form of forgiven student loan debt under IBR). And they are strapping millions of smart kids with lifelong debt.
They deserve the blame. Let's blame them.
Capping the amount of student loans one could take from the fed gov at a much lower level would solve this problem, but timid college administrators would hide behind cries that doing so is "denying access to education."
19
Student loans in the United States have exceeded $1.3 trillion-- a subprime debt bubble with few consumer protections (despite Obama's recent attempts to help, blocked by Congress.)
The USA has condemned its own youth (and often their parents) to a form of crushing, inescapable debt-slavery. When combined with the debt pressures caused by the costs of US healthcare, divorce, day-care and legal fees (esp for small businesses), it's also crushing the larger US economy. And it's all been caused by short-sighted US policy that enslaves our own citizens to crony capitalists and bankers.
I've seen this crisis first-hand as an engineering professor-- yes, it hits STEM grads too. My students desperately need good jobs and wages to help pay off those student loans (state funding keeps getting cut), yet US policy foolishly encourages mass outsourcing to India, while crippling wages through the cheap labor H-1B visa.
More and more, students in my field are opting to emigrate. Germany (as well as the Nordics) offers free education to Americans who can speak German, while France, Brazil, Belgium, Italy, Spain, even Argentina and China offer low-cost educational options too. (Sadly Canada, the UK and Australia are more and more following the US debt-based model.) Many of my own graduates, once debt-free, are also emigrating to spare their own children this nightmare and avoid the USA's many other debt-pitfalls. The US can't survive as an economy based on indebting its citizens.
The USA has condemned its own youth (and often their parents) to a form of crushing, inescapable debt-slavery. When combined with the debt pressures caused by the costs of US healthcare, divorce, day-care and legal fees (esp for small businesses), it's also crushing the larger US economy. And it's all been caused by short-sighted US policy that enslaves our own citizens to crony capitalists and bankers.
I've seen this crisis first-hand as an engineering professor-- yes, it hits STEM grads too. My students desperately need good jobs and wages to help pay off those student loans (state funding keeps getting cut), yet US policy foolishly encourages mass outsourcing to India, while crippling wages through the cheap labor H-1B visa.
More and more, students in my field are opting to emigrate. Germany (as well as the Nordics) offers free education to Americans who can speak German, while France, Brazil, Belgium, Italy, Spain, even Argentina and China offer low-cost educational options too. (Sadly Canada, the UK and Australia are more and more following the US debt-based model.) Many of my own graduates, once debt-free, are also emigrating to spare their own children this nightmare and avoid the USA's many other debt-pitfalls. The US can't survive as an economy based on indebting its citizens.
84
Hear, hear. Tech worker here: competing with H1B workers, in crushing debt. After a car accident, unemployment, and two-year l recovery was no way I could afford the loan payments, so they simply take it from my pay. This means I can't pay the other debt I agreed to pay - credit card, car. I can't move to a cheaper place because my credit is now shot.
Colleges need to be up front about what wages to expect upon graduation. Loans need to be offered and repaid at a rate taking into account other living expenses and debt. And college needs to be way more affordable. Tech employers must stop giving work visas except for genuinely exceptional foreign nationals.
Colleges need to be up front about what wages to expect upon graduation. Loans need to be offered and repaid at a rate taking into account other living expenses and debt. And college needs to be way more affordable. Tech employers must stop giving work visas except for genuinely exceptional foreign nationals.
4
"Sadly Canada, the UK and Australia are more and more following the US debt-based model."
Even so, universities in those countries can be a very good deal for US citizens. I know a number of people who've gone that route.
The tuition for international students at many of those universities is in the US $14-15K range per year (plus housing, etc.)-- comparable to many US state schools, and less than half of what some private American universities are charging.
Also, many international undergraduate programs are only three years (rather than four in the US), which saves a chunk of change.
Even so, universities in those countries can be a very good deal for US citizens. I know a number of people who've gone that route.
The tuition for international students at many of those universities is in the US $14-15K range per year (plus housing, etc.)-- comparable to many US state schools, and less than half of what some private American universities are charging.
Also, many international undergraduate programs are only three years (rather than four in the US), which saves a chunk of change.
so you prefer taxpayers be burdened instead? Students can, to a large degree, minimize debt by serving in the armed forces. Instead they choose to borrow.
I think the people responsible for putting a gun to students heads to FORCE them to take out these loans be imprisoned.
2
tjp wrote, "I think the people responsible for putting a gun to students heads to FORCE them to take out these loans be imprisoned"
That would be you, I suspect. The jobs most people get with only a high school diploma pay so little they'll be unlikely to save for college; indeed, they might qualify for food stamps. When they can't save enough to pay cash for a college education, you'll slam them for not bothering to educate themselves enough to get a decent job. Yet if they do take out a loan to pay for college, they're still a handy target for your cynical wrath.
That would be you, I suspect. The jobs most people get with only a high school diploma pay so little they'll be unlikely to save for college; indeed, they might qualify for food stamps. When they can't save enough to pay cash for a college education, you'll slam them for not bothering to educate themselves enough to get a decent job. Yet if they do take out a loan to pay for college, they're still a handy target for your cynical wrath.
6
In my grandparents' day, it was possible for a high school graduate to get a fairly decent job (e.g., in manufacturing) that would support a family. Those days are pretty much over.
Nowadays, the vast majority of entry-level jobs require a BA or some kind of formal higher education. Even in manufacturing and traditionally blue collar occupations, employers are no longer willing to train people-- they expect them to show up on day 1 with all of the skills they need. In the white collar world, even a basic secretarial position requires a bachelor's degree now.
So.... what exactly are people supposed to do, if they want to get a job? Most colleges are so expensive now that they have to take out loans. Even many community colleges and state universities are unaffordable.
Nowadays, the vast majority of entry-level jobs require a BA or some kind of formal higher education. Even in manufacturing and traditionally blue collar occupations, employers are no longer willing to train people-- they expect them to show up on day 1 with all of the skills they need. In the white collar world, even a basic secretarial position requires a bachelor's degree now.
So.... what exactly are people supposed to do, if they want to get a job? Most colleges are so expensive now that they have to take out loans. Even many community colleges and state universities are unaffordable.
1
Really, what this article points out and makes clear is that federal student loans are a form of taxation on education. It's a latent tax on those households that opt to send their children to college and hopefully into a middle class income bracket. With fixed, lifetime interest rates, and no way to negotiate lower rates, (as in the case of credit cards) student loans do not function like any other form of credit. This and the condition that student loans cannot be discharged through bankruptcy really does make them resemble a tax as much as a loan. If the Department of Education refuses to publish and share detailed data on default rates, then as the article implies, the only sound remedy is transfer the loan program to another agency that would be commissioned on the principles of transparency and public accountability. This is an issue of critical importance to the emerging electorate as well as to institutions of higher education who are interested in supporting education reform. Without mandating a reform of federal education funding, national educational reform will be trapped in a cycle of shrinking budgets and rising costs, which will inevitably lead to higher failure rates. Creating more transparency in federal education funding will lead to more accountability in education funding, a necessary first step of reform.
11
Few ever make it to the "middle class" by taking out loans that they can never possibly repay.
5
why do people on this board keep talking about how student loans cannot be refinanced? I have many friends who have refinanced with private lenders after finishing school and getting a job. The only people I have heard of unable to refinance are those with staggering loan balances and poor job prospects because of choices they made.
1
"The only people I have heard of unable to refinance are those with staggering loan balances and poor job prospects because of choices they made."
----------------
The people who need refinancing the most. Too funny.
----------------
The people who need refinancing the most. Too funny.
2
America has created a nightmare by not investing in herself.
Ayn Rand's view that capitalism will prosper by pulling itself up by its creative bootstraps is not only simple-minded, it is actually stupid.
If you study Western Civilization, you find that nearly all artistic AND scientific breakthroughs required mastery and sponsorship. In a country with 320 million people and a shrinking bourgeoisie, it's pretty clear that there will be no funds or time for mastery, and fewer and fewer sponsors.
Let's wait until the Medici's fund great art and science, Ayn Rand. Then, we can have an America we can be proud of! (long after I am long dead).
Ayn Rand's view that capitalism will prosper by pulling itself up by its creative bootstraps is not only simple-minded, it is actually stupid.
If you study Western Civilization, you find that nearly all artistic AND scientific breakthroughs required mastery and sponsorship. In a country with 320 million people and a shrinking bourgeoisie, it's pretty clear that there will be no funds or time for mastery, and fewer and fewer sponsors.
Let's wait until the Medici's fund great art and science, Ayn Rand. Then, we can have an America we can be proud of! (long after I am long dead).
16
If students still studied western civilization in college we probably wouldn't be in the mess we're in. Those 'impratical' courses about history, humanity, the arts and culture were swept under the rug long ago to make way for more 'useful' subjects.
2
Abolish the Department of Education.
Abolish the Student Loan Program.
The federal government has NO business in these.
Abolish the Student Loan Program.
The federal government has NO business in these.
5
There is no reason why students cannot attend a junior college and work part-time jobs during summers and the school year and then finish at a state college. I worked three jobs during college and my both my financial & professional life worked out just fine.
4
Janis, the world of US college education has changed radically since you went to school, so please, spare us the "everyone can be as lucky as me" examples from your own higher education experience. The credits at many junior colleges don't transfer well to major universities (their quality varies quite radically unfortunately), so students wind up having to redo the courses anyway at a public university. This has happened to many of my own students-- engineering programs are quite demanding about their students' coursework, and they will frequently reject junior college credits. Many students don't live near junior colleges, so they'd have to take on substantial living expenses that would wipe out any savings they'd gain. Also the cost of junior colleges has also been going way up, with some quite expensive for students not in the immediate neighborhood.
As for working 3 jobs in college-- a student cannot do this in a demanding field like engineering or other STEM fields. One of the things that my colleagues and I tell our students is that their engineering training is their full-time job, and they must dedicate themselves fully to their study to master the field, including for their summer projects and undergrad thesis work. There's very little time for one part-time job let alone several, and besides, this approach can be self defeating. It can prolong college and cost even more, and the salaries of such part-time jobs are far below the rise in tuition costs.
As for working 3 jobs in college-- a student cannot do this in a demanding field like engineering or other STEM fields. One of the things that my colleagues and I tell our students is that their engineering training is their full-time job, and they must dedicate themselves fully to their study to master the field, including for their summer projects and undergrad thesis work. There's very little time for one part-time job let alone several, and besides, this approach can be self defeating. It can prolong college and cost even more, and the salaries of such part-time jobs are far below the rise in tuition costs.
58
Please don't be too precious about STEM classes. English majors also need the time to read all those pages. I was a Russian major and had 10 hours a week of just my major classes, plus, English, theology, math, etc. No one should have to work their way through college. It's a cruel joke.
5
To add to Radek's comment, I'd be curious as what Janis's college years were.
My frustration with comments like that is that it tends to come from smug baby-boomer types who typically went to school in the 60s and 70s (and even the earlier 80s before Reaganomics started taking a fuller hold on the economy), where working and paying for school with little to no debt occurred precisely because of the MUCH HIGHER PUBLIC SUBSIDIZING of higher ed that has increasingly gone by the board in the past three decades. And so, given the country's propensity for the submerged statism model of funding most public goods, these people can now smugly declare that they paid for school all by themselves--when of course, unlikely today with the current massive private indebtedness--they really had significant public / societal assistance in paying for it.
My frustration with comments like that is that it tends to come from smug baby-boomer types who typically went to school in the 60s and 70s (and even the earlier 80s before Reaganomics started taking a fuller hold on the economy), where working and paying for school with little to no debt occurred precisely because of the MUCH HIGHER PUBLIC SUBSIDIZING of higher ed that has increasingly gone by the board in the past three decades. And so, given the country's propensity for the submerged statism model of funding most public goods, these people can now smugly declare that they paid for school all by themselves--when of course, unlikely today with the current massive private indebtedness--they really had significant public / societal assistance in paying for it.
10
'...We’re Frighteningly in the Dark About Student Debt...'
What is even more frightening is that students are in the dark about taking on such huge debt, as they have not even basic financial literacy.
If a student lives with their parents and attends a community college for two years, then transfer to a state university, they can obtain a Bachelor's degree for less than $30,000, even in New York (SUNY full time tuition is $7000 a year and the community colleges are even cheaper). That is less than the cost of most new cars and if the student majors in a field that has good job potential (Hint: No Liberal Arts, no Fine Arts, nothing with 'Studies' in the name), those loans can be paid off quickly.
That said, public university should be even cheaper, so that tuition can be lowered, but anyone getting themselves into $100,000 of debt at a private university that is not Harvard or Yale is a fool.
And we all know what happens to fools and their money...
What is even more frightening is that students are in the dark about taking on such huge debt, as they have not even basic financial literacy.
If a student lives with their parents and attends a community college for two years, then transfer to a state university, they can obtain a Bachelor's degree for less than $30,000, even in New York (SUNY full time tuition is $7000 a year and the community colleges are even cheaper). That is less than the cost of most new cars and if the student majors in a field that has good job potential (Hint: No Liberal Arts, no Fine Arts, nothing with 'Studies' in the name), those loans can be paid off quickly.
That said, public university should be even cheaper, so that tuition can be lowered, but anyone getting themselves into $100,000 of debt at a private university that is not Harvard or Yale is a fool.
And we all know what happens to fools and their money...
5
NM, you like many others are int he dark about the brave-new-world of college costs and student loans in the US. The junior college-to-4-year-university approach is very risky and often does not work-- the credits frequently don't transfer, and students have to redo the courses anyway, in the process taking on even more debt. This is esp. true for fields like engineering that are very demanding-- many of my own students have had to redo courses that they took at junior colleges due to complications with credit transfers, and junior college costs have also risen, many of them quite expensive for students outside the immediate neighborhood (And this is before we take living expenses into account if they're not nearby).
Also you underestimate how expensive public universities have become in the US, with cuts to state funding they're unbelievable nowadays, and because of the capitalization of all the interest and fees on the initial loan, it's very easy for the principal to inflate to 6 figures. You make it seem as if students choose up-front to go into $100,000 in debt, but the reality is that they're largely trapped by a broken, predatory system that's almost unique in the world. (Canada, the UK and Australia have also foolishly followed the US example of high-priced student loans, though not to the same extent.) Do you really believe a 17-year old HS grad understands all the ins and outs of a complicated loan? And even then, tuition often skyrockets while they're in schol.
Also you underestimate how expensive public universities have become in the US, with cuts to state funding they're unbelievable nowadays, and because of the capitalization of all the interest and fees on the initial loan, it's very easy for the principal to inflate to 6 figures. You make it seem as if students choose up-front to go into $100,000 in debt, but the reality is that they're largely trapped by a broken, predatory system that's almost unique in the world. (Canada, the UK and Australia have also foolishly followed the US example of high-priced student loans, though not to the same extent.) Do you really believe a 17-year old HS grad understands all the ins and outs of a complicated loan? And even then, tuition often skyrockets while they're in schol.
36
Dear NM, Both my uncles did exactly what you suggest--they attended an inexpensive local college then transferred to Stanford for senior year and emerged with priceless Stanford diplomas!
Of course, that was in the 1920s. Quite a few things have changed since then. The model you advocate simply no longer works.
Of course, that was in the 1920s. Quite a few things have changed since then. The model you advocate simply no longer works.
7
Hint: Liberal arts includes the sciences. You need a little more liberal education to understand there is a difference between liberal arts and the humanities. Not to mention that the humanities are essential preparation for understanding how and why there is more to life than being a cog in the corporate machine.
3
Student debt is a problem for more than the students who incurred the debt or for the government who holds the loans. Student debt has had significant impact on new home and new car sales. Having this huge debt aligned with our minimum wage economy insures these debts will be around for a long time. I think the time has come to look into some form of debt forgiveness (on a larger scale than currently used). Maybe there is a point where the debt forgiveness helps others parts of the economy enough to in effect pay for it through other tax income.
11
Perhaps they should major in studies that might actually pay them a minimum wage.
Wouldn't that be smarter than dedicating one's college career to studying the emotional component of being a sex-starved, female, hyphenated whatever?
Wouldn't that be smarter than dedicating one's college career to studying the emotional component of being a sex-starved, female, hyphenated whatever?
My reaction to your last sentence: Part 1 - TRUE: "Another agency might be better equipped to handle it," Part 2 - LOL - "allowing the department to focus on its central goal: improving education." The federal Department of Education is a failure. When was the last time any policy or practice came out of this department that "improved education?" When has any there been even a slight "improvement" in education as a result of this cabinet post? There is no need to attempt to obtain valid data on student loans. Intuition about the Education Department tells me that it doesn't exist or that it would be so onerous to collect that it would take years and years and years and millions and millions of dollars to do so. What is needed is an analysis of how to absorb the losses when the Department of Education decides to write off all student loan debt to date. There is absolutely no reason for the Federal government to be in the loan business.
5
For those interested in student loan default rates by school, the Dept of Education has a handy guide to every public, private and for profit school in the country. Data is available for 2009, 2010 and 2011 cohorts. Browse it for your state and you will quickly see where the real problems are and how the DOE actions to shut off loans to high default schools will impact this issue.
https://www.nslds.ed.gov/nslds_SA/defaultmanagement/search_cohort_3yr201...
https://www.nslds.ed.gov/nslds_SA/defaultmanagement/search_cohort_3yr201...
4
This is a valuable resource, but only tells part of the story. Loans not being fully repaid (partially paid), on hardship forbearance or other deferments are not included in this report. Also, defaults are only tracked 3 years after a student leaves school. If a student does forbearance for a few years, then default later, they do not count for the purposes of this report.
1
No mention here of the total amount of paren plus loans also backed by the federal government. It makes no sense that the federal government or anybody else should makes money on higher education loans. Repayment should cover initial loan amounts plus administration costs and nothing more. The default rates would be much lower in this case. Schools that use the federal government backing to profit and see high default rates should lose federal backing of all loan programs.
3
I have taught at a major state university, a small historic black university (HBCU), and a four-year state college. At the black university and the state college, over 90% of enrolled students received maximum financial aid through Pell Grants and Stafford Loans. The two smaller schools essentially survived by having no admission standards and keeping uninterested students enrolled as long as possible. In most instances, this enrollment lasted three semesters until the student exhausted remedial classes or otherwise flunked out. At the HBCU, students could cash in their stipend for textbooks, which many used to buy cell phones. At least a third of my students considered textbooks a waste of money and refused to buy them. University administrators winked at this practice and did nothing to interrupt the flow of federal money and loans countersigned by parents. Many students viewed financial aid as a gift or an entitlement and had no concept or intention of payback. The graduation rate for African-American males was 7% at the time I taught there. Finally the miserable graduation rate and loan defaults led to the "retirement" of the university president and a general housecleaning of administrators. The Obama effort to hold institutions accountable for graduation rates and loan defaults is a positive step. Higher admission standards is another, even if it leads to lower enrollment.
29
All federal loan programs should be scrapped.
2
But graduation and admission standards goes against the narrative that requires that all students be afforded the right to go to college whether or not they are qualified and whether or not they are even interested.
This is nothing but income redistribution at its finest and actually increases the the disparities in income and wealth between the top and the bottom with the taxpayer picking up the tab.
And the liberal...er...progressive...er...whatever it is that they he is calling himself these days to avoid being tagged with the responsibility for all of the policy failures...tries hard to bury anything that might point to his guilt.
This is nothing but income redistribution at its finest and actually increases the the disparities in income and wealth between the top and the bottom with the taxpayer picking up the tab.
And the liberal...er...progressive...er...whatever it is that they he is calling himself these days to avoid being tagged with the responsibility for all of the policy failures...tries hard to bury anything that might point to his guilt.
2
There's no Obama effort to hold anyone accountable. It's nonsense. Saddling black students with loans is nothing new, and diverting the money to phones and car payments is routine.
But this happens at lots of schools. I taught at giant state school and spring break to places like Mexico and Caribbean were routine.
Students used their student loans for these trips. Black, white, Asian and Latin students - I saw this over all backgrounds.
But this happens at lots of schools. I taught at giant state school and spring break to places like Mexico and Caribbean were routine.
Students used their student loans for these trips. Black, white, Asian and Latin students - I saw this over all backgrounds.
Agree that an audit and review are sorely needed at Education and should be demanded. The bigger problem is the extensive financial illiteracy of the parents and prospective students when they look at attending college.
2
The majority of colleges in this country should be shut down. For-Profit colleges must be reined in immediately! Why isn’t it done? One surprisingly simple answer is: if you close the college, you close the town; not unlike obsolete military bases, underutilized post offices and other useless government facilities. Politicians lack the intelligence, integrity, fortitude and foresight to enlighten their constituencies and pursue visionary, long term alternatives to sustain their social and economic well-being. Students and their beleaguered parents are being tragically misled so that we can meet the short term goal of keeping students off the street and providing college-related jobs in many communities which have no viable sources of income. The vilest tragedy is not the waste of the taxpayer’s dollar. It is the inevitable shattering of the hopes and dreams of students and their families while saddling them with a lifetime of insurmountable debt that they can never repay because they have not been taught the skills to get a job which will allow them to do so. Prospective employers are keenly aware of the insufficiencies of for-profit graduates and summarily dismiss their applications. Further, a degree from a For-Profit college will almost never qualify the student for acceptance into a graduate program at a reputable institution; which is why these Vampires are conjuring up their own bogus “graduate” schools to keep the wound open and the blood flowing.
20
These are all excellent points, and superbly written.
oz.
oz.
Let me get this straight, one of the largest lending institutions in the country is run by the Department of Education and is essentially unregulated. Unsaid is private sector banking is subsidized to the tune of several percent for every dollar of student debt. If one set out to create a public perversion at taxpayer expense I doubt seriously congress as currently constituted could do this fine of a job.
9
Imagine if the colleges loaned students the money instead of the government? Colleges would have an incentive to operate more efficiently and graduate individuals with marketable job skills that would allow them to repay the loans. Presently, colleges have passed the problem of graduating students with low skills at high expense on to the taxpayers.
14
This is the next bubble. Matt Taibbi warned about this a year and a half ago. http://www.rollingstone.com/politics/news/ripping-off-young-america-the-...
It's nice to see The Times paying attention, if only in an op-ed, and one that points the finger at government rather than colleges for tuition increases at triple the inflation rate in order to fund their Hyatt-like dorms and star professor salaries, or a society that so little values education.
It's nice to see The Times paying attention, if only in an op-ed, and one that points the finger at government rather than colleges for tuition increases at triple the inflation rate in order to fund their Hyatt-like dorms and star professor salaries, or a society that so little values education.
19
@Micheal Cantwell - Thank you for your reference to this amazing article. It's spot on and all I can say after reading it is, "Wow!"
3
It's not entirely whether the colleges can be blamed for making unemployable graduates; it's at what level of the socioeconomic stratum they fall. Harvard, Princeton, etc., grads are always employable because of the name and connections. State schools are middle-of-the-road. If you're a poor kid going to Local Independent Not-for-Profit for business (or, worse, liberal arts) to get a leg up in the world, your chances are worse.
2
In the Education Department, a student going to cosmetology school is viewed pretty much the same as a student going to Stanford's chemical engineering program. The simple solution is to allocate loan portfolios to schools based on each institution's historical graduate salary, employment rate and aggregate student default rate. It doesn't take a genius to realize that when the single mom is makes $13 per hour doing haircuts, it's awfully difficult for her to pay back $100,000 in student loan debt.
2
No single mom making $13 per hour should have taken on $100,000 in student loan debt and any person who did so spent the money on a lot other than tuition.
3
A cosmetology certificate does not cost $100,000. It costs more like $5,000 to $10,000 in tuition costs.
When I attended university in the early 70s, one quarter of my tuition for two classes was about $70, plus books. Today at this same university, after it has spent an exorbitant amount on a new sports stadium, new student facilities and ever higher pay for a college president, the amount students today pay is many multiples of what I paid at that time. I left college with not a dime of debt.
I imagine that many of today's college bound students would be happy to forego a deluxe sports stadium, even though it's great to root for the good old college football team. And many would likely forego having more expansive and luxurious student union buildings. Some college and university presidents now make salaries in the million dollar range.
If I were a student today, I would be happy to forego a few amenities and extraordinary salaries for a university president to get what I had gone to the university for, to obtain a degree at an accredited school at reasonable cost.
I imagine that many of today's college bound students would be happy to forego a deluxe sports stadium, even though it's great to root for the good old college football team. And many would likely forego having more expansive and luxurious student union buildings. Some college and university presidents now make salaries in the million dollar range.
If I were a student today, I would be happy to forego a few amenities and extraordinary salaries for a university president to get what I had gone to the university for, to obtain a degree at an accredited school at reasonable cost.
42
I observe that for students at a high-quality campus of the University of California system circa 1980, the student fee (i.e., tuition) was $750 for a full academic year. That works out to $2167 in current dollars. At that time support from the state government, and to a lesser extent the federal government, accounted for something like three-quarters of the university's operating costs. It was truly a public university. Loans weren't a part of life for most students, not a big part for any student.
Nowadays the student fee is not $2167 per academic year, but around $13,000. (Still a bargain compared to any private university in the same class). After a generation of tax cuts and budget cuts, state support has declined to about 10% of the total, and student fees must now be the lion's share of school funding. And the students...these days they've become experts on student loans.
Then to learn that Department of Education not only can't count its own loan portfolio but won't allow anyone else it to do the job for them--agggh.
Nowadays the student fee is not $2167 per academic year, but around $13,000. (Still a bargain compared to any private university in the same class). After a generation of tax cuts and budget cuts, state support has declined to about 10% of the total, and student fees must now be the lion's share of school funding. And the students...these days they've become experts on student loans.
Then to learn that Department of Education not only can't count its own loan portfolio but won't allow anyone else it to do the job for them--agggh.
3
In 1980 California was contributing 11,000 per student to California State University, in 2014 dollars. Add the 2,167 the student was paying and you get $13,167 tuition cost.
In 2014, California's contribution had dropped to $8,000 (on a much higher student count) and the student's contribution has risen to $13,000, for a total of $21,000. Since both sets of numbers are in 2014 dollars, how do you explain the massive increase in excess of inflation? In all other industries, increased volume results in lower unit costs.
Although the state schools complain about the reduction in state support, they are in fact receiving hugely more dollars and are squandering them.
In 2014, California's contribution had dropped to $8,000 (on a much higher student count) and the student's contribution has risen to $13,000, for a total of $21,000. Since both sets of numbers are in 2014 dollars, how do you explain the massive increase in excess of inflation? In all other industries, increased volume results in lower unit costs.
Although the state schools complain about the reduction in state support, they are in fact receiving hugely more dollars and are squandering them.
A little background would help. Much of the $1 trillion loan portfolio was originated by private banks and guaranteed by the Federal Government, prior to 2010 when this system ended. Since 2010, all loans are direct loans and various relief measures have been provided to make payment easier. Colleges with sustained high default rates cannot offer student loans. And in default, collection through garnishing paychecks and tax refunds becomes possible. Student loans are lifelong obligations except when forgiven for service like the Peace Corp or teaching in a low income school.
Current default rates in 13% range primarily reflect private guaranteed loans made before 2010 since most of the direct loans have not yet reached start of repayment.
Such a huge change from private to direct loans along with privacy issues complicates reporting. But the risk of some kind of sudden default crisis seems misplaced.
The real risk was not reforming a broken private loan system exploited by for-profit diploma mills. For profit schools represented 13% of all students, 31% of all student loans and nearly 50% of all defaults.
Current default rates in 13% range primarily reflect private guaranteed loans made before 2010 since most of the direct loans have not yet reached start of repayment.
Such a huge change from private to direct loans along with privacy issues complicates reporting. But the risk of some kind of sudden default crisis seems misplaced.
The real risk was not reforming a broken private loan system exploited by for-profit diploma mills. For profit schools represented 13% of all students, 31% of all student loans and nearly 50% of all defaults.
17
Another troubling aspect of student loans is that saddling our graduates with debt early in their careers impinges on their ability to save for retirement. Given the time value of money, the best time to save for retirement is in a person's 20s and 30s. But paying down student loans diminishes one's capacity to save at the same time.
If Germany can make its public universities tuition-free (even for international students), surely we can afford to do the same.
But then again, Germany spends only 1.3% of its GDP on defense, whereas we spend upward of 3.9% of our GDP on defense. I guess it's a question of priorities.
If we cut back on defense spending, we could invest the savings in education.
If Germany can make its public universities tuition-free (even for international students), surely we can afford to do the same.
But then again, Germany spends only 1.3% of its GDP on defense, whereas we spend upward of 3.9% of our GDP on defense. I guess it's a question of priorities.
If we cut back on defense spending, we could invest the savings in education.
70
It'll never happen here. Sad.
1
Germany also restricts college attendance to a relatively limited few. In the US everyone seems to have a "right" to attend a college. THis means that limited state funds cannot provide "free" education.
1
Imagine what a strong, healthy nation we would be today if we had invested those trillions of dollars that we burnt up in Iraq and Afghanistan in education. Imagine the advancements in science, technology and the arts we could have achieved if we hadn't fed the ever greedy, ever immoral corporate welfare state by bailing out corrupt banks and Wall Street. Imagine what a great nation we would be if the corporate bought and paid for, dishonest austerity hawks in Congress were replaced by politicians that cared for the rest of the country instead of the 0.01%. No, what we will see is far-right attacks on students for being in debt while they self-righteously genuflect at their alter of gangster capitalism.
106
Keep the poor and the middle class drowning in debt from cradle to grave. Economic slavery for the entire nation, this is the Republican dream. The conservatives will have you believe the being unable to get a decent job is the borrowers fault and debt-ridden students should be blamed and shamed. Expect the far-right self-righteous to blame students while they praise the expansion of the corporate nanny state that profits from the debtors. How shameful we have become as a cruel, arrogant, ignorant nation.
91
Pretty sure this is the outcome of a dream envisioned by the Left. Federal student lending was supposed to serve as a cure to the barriers to higher education that members of the middle-and-working class faced.
The federal government's provision of easy credit to student borrowers-- without any type of accountability for schools if students defaulted-- created a system in which universities could freely increase price and find students who would incur debt to pay.
William Bennett actually saw this coming (in a NY Times editorial, no less): http://www.nytimes.com/2013/11/03/education/edlife/catching-up-on-the-be...
I'm not saying that Democrats are to blame for this, but to reduce this to an issue of the Republican party is completely dishonest and, well, dumb.
The federal government's provision of easy credit to student borrowers-- without any type of accountability for schools if students defaulted-- created a system in which universities could freely increase price and find students who would incur debt to pay.
William Bennett actually saw this coming (in a NY Times editorial, no less): http://www.nytimes.com/2013/11/03/education/edlife/catching-up-on-the-be...
I'm not saying that Democrats are to blame for this, but to reduce this to an issue of the Republican party is completely dishonest and, well, dumb.
3
I agree with jinx on this. The availability of loans were well intentioned, but without proper checks and oversight, this is the result.
"Why can’t we answer these basic questions about student debt?" This is rhetorical, right?
It's because the Dept. of Ed (the executive branch) does not want anyone to know. Circumstantial evidence is overwhelming, that the education finance system is broken. It is really just a redistribution program, and used to make poor investments (i.e. in future careers of unprepared college students). The collateral damage, by the way, is college tuition inflation - studies from both sides of the aisle have shown increased student loan limits directly contribute to increasing tuition.
No sane member of Congress would vote for this kind of wholly inefficient, nearly ineffective program, so you just push it through the executive branch. Especially a department famous inside the Beltway for being as incompetent as the Dept. of Education.
No one doubts the good intentions. Increase access to college. Allow the country to invest in its human resources. Help "even" the playing field. But this is done in an insanely ineffective way. Basically, the government takes taxpayer money and makes whole any losses incurred by lending to people who clearly cannot repay.
The government runs a lending program designed to lose money - maybe break even on paper, but the money lent must first be borrowed by selling Treasury bonds. That's an embarrassing fact. You don't want to expose yourself by letting people analyze exactly how you're losing taxpayer money in a deliberate, systematic way.
It's because the Dept. of Ed (the executive branch) does not want anyone to know. Circumstantial evidence is overwhelming, that the education finance system is broken. It is really just a redistribution program, and used to make poor investments (i.e. in future careers of unprepared college students). The collateral damage, by the way, is college tuition inflation - studies from both sides of the aisle have shown increased student loan limits directly contribute to increasing tuition.
No sane member of Congress would vote for this kind of wholly inefficient, nearly ineffective program, so you just push it through the executive branch. Especially a department famous inside the Beltway for being as incompetent as the Dept. of Education.
No one doubts the good intentions. Increase access to college. Allow the country to invest in its human resources. Help "even" the playing field. But this is done in an insanely ineffective way. Basically, the government takes taxpayer money and makes whole any losses incurred by lending to people who clearly cannot repay.
The government runs a lending program designed to lose money - maybe break even on paper, but the money lent must first be borrowed by selling Treasury bonds. That's an embarrassing fact. You don't want to expose yourself by letting people analyze exactly how you're losing taxpayer money in a deliberate, systematic way.
10
We are deluged with ads for no- name colleges often with "patriotic" names offering some sort of education for potential low-wage jobs that can't possibly require a college degree in the traditional sense. What possible type of "college education" is required to qualify the student for what is a thinly diguised low wage security job ("jobs in CSI and law enforcement"). Another massive fraud on both the student and taxpayers to fatten the "private colleges" so favored by the republicans.
Went I graduated from Notre Dame, a real university, in 73 with a BA in History and no student debt, due to lw tuition, partial scholarship and working in 2 campus cafeterias. Unlike the student palaces today, our dorm was built in 1927 and had the lustre of a military barrack. But I received a 1st rate education and a sense if civic and moral obligation that stayed with me through life. Btw, ND never had "fraternities" which we considered inane and contempible at other schools.
Went I graduated from Notre Dame, a real university, in 73 with a BA in History and no student debt, due to lw tuition, partial scholarship and working in 2 campus cafeterias. Unlike the student palaces today, our dorm was built in 1927 and had the lustre of a military barrack. But I received a 1st rate education and a sense if civic and moral obligation that stayed with me through life. Btw, ND never had "fraternities" which we considered inane and contempible at other schools.
25
The Department of Education made a profit on student loans last year and I believe the year before. Your diatribe is erroneous although I agree with your intent - the Department of Education should not be in the loan business. Period.
1
I suppose the loans that are being fully repaid are "profitable", but taking into account the 50 percent of loans not being repaid and the other 25% being paid on an income based (less than fully repaid) schedule, I don't see how the portfolio is not at a loss.
3
Many of the companies who service student debt are frighteningly in the dark about it, as well. But in a different from federal agencies. Let me explain.
As we all know, student debt is regularly repackaged, consolidated, and traded amongst financial services companies. Because of this rapid buying and selling of debt--and, it must be noted, the shifting federal regulations for which they have to account--these companies regularly distort numbers, fail to account for previously paid portions of the debt, and erroneously rescind offers that might lower interest rates for the borrower. You can look this up: they are regularly subjected to lawsuits for near-fraudulent practices.
Here is the kicker: they are almost never held accountable for their shady, sloppy practices. Their bureaucratic obfuscations and mismanagement almost always falls like lead on the shoulders of the borrowers. "We messed up your payment schedule? Doesn't matter--pay us." "You have a long and accurate paper trail proving that we were overcharging on a loan. It doesn't matter to our lawyers--pay us." "You want the government to intercede in our slovenly business practices? Too bad these are private loans without federal oversight--pay us ."
The lenders, not the borrowers, are the real deadbeats. For these extortionate practices alone, we should nationalize them .
As we all know, student debt is regularly repackaged, consolidated, and traded amongst financial services companies. Because of this rapid buying and selling of debt--and, it must be noted, the shifting federal regulations for which they have to account--these companies regularly distort numbers, fail to account for previously paid portions of the debt, and erroneously rescind offers that might lower interest rates for the borrower. You can look this up: they are regularly subjected to lawsuits for near-fraudulent practices.
Here is the kicker: they are almost never held accountable for their shady, sloppy practices. Their bureaucratic obfuscations and mismanagement almost always falls like lead on the shoulders of the borrowers. "We messed up your payment schedule? Doesn't matter--pay us." "You have a long and accurate paper trail proving that we were overcharging on a loan. It doesn't matter to our lawyers--pay us." "You want the government to intercede in our slovenly business practices? Too bad these are private loans without federal oversight--pay us ."
The lenders, not the borrowers, are the real deadbeats. For these extortionate practices alone, we should nationalize them .
56
No - we should not nationalize them. The Department of Education should write them off - bad debt. And never do it again.
3
I can confirm this through first hand experience. I recently attempted to help my girlfriend partially pay down the principal on her college loans. The loan servicer (ACS) misapplied the pre-payment. Basically, they treated it as a series of future payments rather as a credit against the principal. After many frustrating calls we basically gave up. They want to keep people in their loans and will flagrantly break the law to do so, because they know the average person just trying to get by and pay their loan back doesn't have the resources to go after them head on. It's a complete disgrace.
4
Those of us who were raised by Depression-era parents grew up with a fear of debt. House and car loans were about it for us. Going into debt for a sure thing like medical school was also ok. But in general, the feeding ground for loan sharks was the underclass, where desperation and lack of education made scams easy to pull off. Then, while my generation started easing off into well-financed retirement, the entire education establishment became a banking scam. Young people with no fear of debt walked into a trap. Colleges, real and fake, became the bait for loan sharks. How did this happen so quickly?
In the old days, loan officers suffered a penalty for making bad loans. Collateral was required. State schools were supported by state legislatures. Education was valued. Jobs were available for college graduates. Take all that away, and what you have left is another financial house of cards.
In the old days, loan officers suffered a penalty for making bad loans. Collateral was required. State schools were supported by state legislatures. Education was valued. Jobs were available for college graduates. Take all that away, and what you have left is another financial house of cards.
93
People of my grandparents' generation also benefited from government largesse, in the form of the GI Bill. The free higher education, affordable mortgages, etc., provided to returning GIs helped propel many people (including my own relatives) into the middle class.
I'm certainly not suggesting that they didn't deserve those benefits-- they did indeed perform a valuable service to the country. However, I've heard a number of older people who personally benefited from the GI Bill complain about "free money" and "government aid" going to young people today. A bit ironic, really.
I'm certainly not suggesting that they didn't deserve those benefits-- they did indeed perform a valuable service to the country. However, I've heard a number of older people who personally benefited from the GI Bill complain about "free money" and "government aid" going to young people today. A bit ironic, really.
It would be useful to see data sorted by institution. Hopefully the state schools will look more attractive than the private institutions costing twice as much.
6
Student loans wouldn't be a problem if the biggest economy on earth didn't force people into debt just to get a little education.
74
It's worse than you think.
14
As a parent to two college-bound high schoolers, I would love data on loan defaults at the colleges they are targeting. That would give me some indication of how employable those colleges' graduates are, and whether they can service the debt. The idea of taking out tens of thousands for loans is already daunting enough; we are too poor to pay out of pocket the full quarter million dollars some schools will cost, but too rich for aid (aka the declining middle class). But leaving such financing questions to pure guess work is criminal. Colleges are like the medical establishment, a closed system without much transparency, and it's time for us consumers to push back, hard!
33
The colleges have that data and should share it. Feel free to ask. But also keep in mind that a large state University may have weaker numbers than, say, an Ivy League school, simply because of the volume of students that come through their doors. Still, if a school's default rate is above the national average, that is definitely something to watch out for. I just started a blog you might find useful: ourplanforcollege.com In the next few weeks I hope to figure out how to post some of the tools I created to use with my own kids. It is indeed time for the family to get back at the center of the college journey.
5
JS - If your high schoolers are strong students, contact liberal arts colleges that are good but not in the top couple of dozen. That second tier of very good schools will offer substantial "scholarships" (price breaks) to strong students who could get into the top tier of such schools. 50% tuition reduction is a typical average. (The top group of schools won't offer academic scholarships because all of their students would qualify and those schools do not need to offer such scholarships to attract strong students.)
2
Many of those "top-tier" schools have substantial endowments that they use for financial aid. Schools also have moved away from academically-based scholarships to "need-based" assistance. Essentially the argument is that if we accepted you we think you're strong enough to attend our institution, and, if you don't have the resources to attend, we'll try to help.
Harvard abolished tuition payments for students whose familes earn less than $60K or so back when Larry Summers was president. My daughter was able to graduate from a "Seven Sisters" institution last year because it offered us a very generous aid package.
Harvard abolished tuition payments for students whose familes earn less than $60K or so back when Larry Summers was president. My daughter was able to graduate from a "Seven Sisters" institution last year because it offered us a very generous aid package.
1
If we are in the dark about student loan debt, it is because too many observers refuse to acnkowledge the obvious. For far too many borrowers, student loans are back-door welfare. Student loans may be used to pay living expenses. A borrower has to cede a portion of the loan to tuition at some school he has no intention of attending, but otherwise it's free money. This attitude is aided by a publications such as The Times that foster the view that such loans must eventually be forgiven on the grounds that borrowers are mostly the victims of predatory lenders.
10
I assure you, it's not free.
6
@SHerman: Even if we took all that as true, look at the result of what you allege:
- the "student" ends up with a loan on the books that is currently by law, undischargable for life, and that they will have a lot of trouble paying
- the "school" ends up with money in the bank, free and clear
Given this two results, can you really believe the only reason this system is broken is because of "the back-door welfare" to the "student"? Who is the one who has the money to give to Congressmen to write the laws the way they have been written to facilitate this practice, the "student" or the often for profit "school"?
- the "student" ends up with a loan on the books that is currently by law, undischargable for life, and that they will have a lot of trouble paying
- the "school" ends up with money in the bank, free and clear
Given this two results, can you really believe the only reason this system is broken is because of "the back-door welfare" to the "student"? Who is the one who has the money to give to Congressmen to write the laws the way they have been written to facilitate this practice, the "student" or the often for profit "school"?
37
It is not backdoor welfare. Each student who would like to receive "aid", that is, the difference between what his or her family can "afford" and the inflated tuition, room, and board rates needed for the college or university to provide "scholarships" to the least fortunate students, as well as above-market wages and benefits not only for academics, but for nonacademic employees like truck drivers and cafeteria workers, must complete the Free Application for Federal Student Aid, or FAFSA, a government form. Yes, the government, not the school, decides what the student and his/her parents (because, for some reason, parents are expected to pay the costs for an adult to attend school, even if that means decades more of debt for them) must pay. If the student and/or parent do not have the amount that they are deemed to afford, they must borrow the money. No problem, the government has a program for that, with a role that any bank would envy. It not only determines exactly how much each family must borrow, but it sets the rates, as well. The rate on our parent loans, which we are only now finishing repaying, our youngest child having graduated in 2009, is 8.5%, and the interest is not deductible, by the way, because our income is too high for that. Oh, and we pay quite a lot in federal and state income taxes each year, but that doesn't count toward our loan balance, apparently. The only party receiving backdoor welfare is the school.
9