Student Loan Bailout

http://www.economist.com/node/21534792

IN LATE 1965, President Lyndon Johnson stood in the modest gymnasium of what had once been the tiny teaching college he attended in Texas and announced a programme to promote education. It was an initiative that exemplified the “Great Society” agenda of his administration: social advancement financed by a little hard cash, lots of leverage and potentially vast implicit government commitments. Those commitments are now coming due.

“Economists tell us that improvement of education has been responsible for one-fourth to one-half of the growth in our nation’s economy over the past half-century,” Johnson said. “We must be sure that there will be no gap between the number of jobs available and the ability of our people to perform those jobs.”

To fill this gap Johnson pledged an amount that now seems trivial, $1.9m, sent from the federal government to states which could then leverage it ten-to-one to back student loans of up to $1,000 for 25,000 people. “This act”, he promised, “will help young people enter business, trade, and technical schools—institutions which play a vital role in providing the skills our citizens must have to compete and contribute in our society.”

Almost a half-century later these modest steps have metastasised into a huge, federally guaranteed student-loan industry. On October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout.

Johnson’s lending programme was altered almost straight away. The intention of providing students with an education through “business, trade and technical schools” was expanded to include the full, imaginative panoply of American education, regardless of economic utility. Interest rates and terms have all been adjusted numerous times.

The result is a shifting, difficult landscape only barely understood even by insiders. For students, the task is that much larger. They must choose between an array of products, including subsidised and unsubsidised “Stafford” loans (named after a Republican senator) via the William D. Ford loan programme (named for a Michigan congressman), loans directly from the government, “Plus” loans (for parents of dependent children) and “Perkins” loans (named after a congressman from Kentucky), plus an array of private options.

On top of all this, there are choices about how to consolidate, restructure and pay the debts. Many students are understandably overwhelmed. Deanne Loonin of the National Consumer Law Centre has one client with $300,000 in debt from a failed effort to become an airline pilot. That liability could have been reduced by a better understanding of products.

Two things, however, are clear. The size of student debt is vast (see chart), and lots of borrowers are struggling. More than 10m students took out loans for the latest academic year, according to a report issued on October 26th by the College Board, a consortium of academic institutions. Almost a third of students graduating from college, and 69% of the ones dropping out, hold debt tied to their education.

The total amount of debt is staggering. The New York Federal Reserve Bank puts it at $550 billion, but includes a footnote in the “technical notes” section suggesting this may be an underestimate. Sallie Mae, the school-loan equivalent of the housing industry’s Fannie Mae and Freddie Mac, reckons there are $757 billion-worth of outstanding loans. A bank heavily involved in the area says there is at least another $111 billion in purely private loans, and with new lending estimated in excess of $112 billion for this year alone, the total amount outstanding will surpass $1 trillion in the not-so-distant future.

Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way. That was just about sustainable in the good times, a lot harder when there are fewer jobs to be had.

Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.

This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.

Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.

There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.

The changes announced this week are designed to ease the pressure on struggling graduates. Borrowers who qualify will get payment relief, not debt relief. Their payments will be capped at 10% of income rather than 15%, but interest will continue to be applied to their underlying debt and may expand rather than contract over time. There will also be forgiveness after 20 years, rather than 25. The administration says these changes will have no cost to taxpayers. If there is one lesson of the past 46 years, it is to be dubious of that claim.


**********************

So I'm not quite sure how this won't cost the tax payers money. If debt is to be capped at 10% and forgiven in 20 years and it used to be 15% and 25 years, how is the government NOT losing money?

In any event I think its time for *real* reform on student loans.

1. Make funds available ONLY for tuition paid directly to a college. No more living off of student loans or spending the money on other things. True story, one of my friends paid for his PS3 with student loan funds.

2. Require standards for student loans. I'm not talking about credit worthiness, I'm talking about SAT scores. I'm sure there is going to be a high correlation between good students and repaying these debts compared to poor students.

3. Limiting student loans to 4 years for undergraduate degrees. 6 years total for master's degree. Make the student pay for it on their own if they want to switch majors, fail (or withdraw) from classes ect ect.

These changes would go a long way to making a better system. I'm not in favor of the government interfering at all but I think that ship has sailed. Best quote from the article:

"Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way."

If you subsidize something you get more of it. The best way to lower tuition is to have less government subsidies, ie lower supply of students.

I think they could recoup a lot of the bad debt if the government would sell some of the more hopelessly indebted into indentured servitude contracts... and I could use a sl...ervant to tidy up around here, that's for sure.

Quote:

---

Originally Posted by Lewkowski

"Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way."

If you subsidize something you get more of it. The best way to lower tuition is to have less government subsidies, ie lower supply of students.

---

100% agreed.

Subsidies also hurt the job market by diluting the value of a university degree (for getting a job) and making qualified people pretty much unable to stand out. . .

*and for any university; "rank" doesn't matter unless you get the job via a personal connection.. you think that auto-parser HR uses to screen thousands of (often auto-sent!!!) resumes cares what university you went to? It should, but nah..

Quote:

---

Originally Posted by agamemnus

100% agreed.

Subsidies also hurt the job market by diluting the value of a university degree (for getting a job) and making qualified people pretty much unable to stand out. . .

*and for any university; "rank" doesn't matter unless you get the job via a personal connection.. you think that auto-parser HR uses to screen thousands of (often auto-sent!!!) resumes cares what university you went to? It should, but nah..

---

This is wrong. Subsidies are a problem when they artificially inflate the demand for a specific project, yes. But demand for university educations should not be constrained by money (why would that be an macroeconomically efficient outcome? Then our smartest poor kids won't get those educationis), but rather by talent. Universities already screen quite rigorously for academic success, so I'm not sure that you'll get more people getting university degrees who shouldn't. All you're doing is allowing qualified poor people to join the college-educated workforce, which is an incredibly good idea.

As for the critiques of the loan programs: I agree that this currently proposed expansion is going to cost money, but I'm unconvinced of the other critiques of the loan program. The programs aren't ridiculously complex - there's a handful of well-defined products, and most students only qualify for a smaller subset of them, which is almost always determined by the financial aid unit of one's institution. As for being told about alternative loan repayment option, I'm bombarded by information that my loan servicers are legally required to give me, including detailed information about extended repayment plans/etc. I think the issue is largely manufactured - students who don't do the basic reading on information pushed at them have no one to blame other than themselves if it comes to bite them in the ass later.

I wonder if this development will continue:

http://www.nytimes.com/2011/09/21/ed...dmissions.html

Quote:

---

Originally Posted by wiggin

This is wrong. Subsidies are a problem when they artificially inflate the demand for a specific project, yes. But demand for university educations should not be constrained by money (why would that be an macroeconomically efficient outcome? Then our smartest poor kids won't get those educationis), but rather by talent. Universities already screen quite rigorously for academic success, so I'm not sure that you'll get more people getting university degrees who shouldn't. All you're doing is allowing qualified poor people to join the college-educated workforce, which is an incredibly good idea.

---

They're doing a lot more than that - for example, allowing morons to spend $300,000 to not become an airline pilot, financing diploma-mill organizations and just generally setting harmful and counter-productive expectations. (For example, "now that you've gotten your Feminist Studies degree and are on your way to a much higher paying career in... [?], repay us our $75,000, please!")

Not that there's anything wrong per se with a program to help poor, but otherwise promising youth a chance at a higher education and the better life that may bring, but somehow the government has managed to turn it into a ridiculous, harmful boondoggle, as always.

Quote:

---

Originally Posted by wiggin

As for the critiques of the loan programs: I agree that this currently proposed expansion is going to cost money, but I'm unconvinced of the other critiques of the loan program. The programs aren't ridiculously complex - there's a handful of well-defined products, and most students only qualify for a smaller subset of them, which is almost always determined by the financial aid unit of one's institution. As for being told about alternative loan repayment option, I'm bombarded by information that my loan servicers are legally required to give me, including detailed information about extended repayment plans/etc. I think the issue is largely manufactured - students who don't do the basic reading on information pushed at them have no one to blame other than themselves if it comes to bite them in the ass later.

---

Not that they should be absolved for their own ignorance and stupidity, but I usually don't bother to read the fine print for how much of it there is and how useless most of the information is, so there's that, and there's also something to be said for the idea that for-profit institutions probably shouldn't be allowed to exploit federal education loans (and the ignorance of the people on them) to turn a profit, particularly when the program has built-in options to perform "collections" functions as it is.

Government program turns into big-fucking-disaster..., shocking.

Quote:

---

Originally Posted by Lewkowski

1. Make funds available ONLY for tuition paid directly to a college. No more living off of student loans or spending the money on other things. True story, one of my friends paid for his PS3 with student loan funds.

2. Require standards for student loans. I'm not talking about credit worthiness, I'm talking about SAT scores. I'm sure there is going to be a high correlation between good students and repaying these debts compared to poor students.

3. Limiting student loans to 4 years for undergraduate degrees. 6 years total for master's degree. Make the student pay for it on their own if they want to switch majors, fail (or withdraw) from classes ect ect.

---

These ideas are straight up awful and very shortsighted.

1. Your example sounds like a lump payment problem over the idea of student loans helping students survive.

2. You being "sure" of something isn't worth jack shit. How about you throw up a citation that shows how a 17 year old posting passing SAT scores is reflective of that person picking an in demand career path (that remains in demand a decade later), and is capable of managing their financies as an adult.

3. How many people honestly finish college in 4 years? Even without combining this with your point 1, which would force students to place work over education.



Not that I agree making more money available for student loands is a good idea. It doesn't do anything towards helping reduce that hurdle for higher education, instead its incentivizing greed at the university level.

Another annoying thing about government student loans: They don't let you pay them off early either. So they can get that extra interest off of you. We were paying my husband's student loan off for 10 years, and annoyed the shit out of us that we couldn't just send them a lump payment of what was owed (It was a measly amount towards the end, something our tax returns could have finished off 3 or 4 years prior to that).

I don't know the answer to the college debt problem. I do know we need to stop forcing everyone to feel they need a degree to survive. We need nurses, plumbers, service technicians and the like; technical schools and apprenticeships are a much better investment these days. I know colleges are there to make money, but a little responsibility in letting students know ahead of time that their History degree is going to be worthless, so getting a financial loan may be not a good idea unless they plan to double major in something a little more useful if Mommy and Daddy aren't picking up the bill.

Quote:

---

Originally Posted by Lewkowski

So I'm not quite sure how this won't cost the tax payers money. If debt is to be capped at 10% and forgiven in 20 years and it used to be 15% and 25 years, how is the government NOT losing money?

---

You're assuming that all that extra debt in the gap between those two sets of terms will be repaid, I imagine. The people claiming it won't cost money are assuming the opposite, that none of it will be repaid figuring that if it wasn't paid off by then that it wouldn't be. Both assumptions are wrong.

Quote:

---

1. Make funds available ONLY for tuition paid directly to a college. No more living off of student loans or spending the money on other things. True story, one of my friends paid for his PS3 with student loan funds.

---

I actually wouldn't have a problem with this except I would expand it to all fees and not just tuition. Most state colleges, even the expensive ones in states with multiple tiers, do not charge much tuition, if any. But that doesn't necessarily make them cheap either, they're just putting a different label on the costs which they're expecting attending students to pay for.

Quote:

---

2. Require standards for student loans. I'm not talking about credit worthiness, I'm talking about SAT scores. I'm sure there is going to be a high correlation between good students and repaying these debts compared to poor students.

3. Limiting student loans to 4 years for undergraduate degrees. 6 years total for master's degree. Make the student pay for it on their own if they want to switch majors, fail (or withdraw) from classes ect ect.

---

2 is ridiculous. You want to wait to ensure whether they'll graduate, why not wait until they've actually come back for their second year of education. That's the gold standard for graduation rates, most people who go and don't graduate drop out their first year. The limits on 3 aren't bad but the fact is that they're already in place in a slightly different format for those schools offering the 4-year degree you're referring to as your metric. They take the form of caps on the amount of money the Department of Education will loan to a student each year and in total. All those other things and the etc you mention for 3 are just so much pointless gilding.

Quote:

---

Originally Posted by Catgrrl

Another annoying thing about government student loans: They don't let you pay them off early either. So they can get that extra interest off of you. We were paying my husband's student loan off for 10 years, and annoyed the shit out of us that we couldn't just send them a lump payment of what was owed (It was a measly amount towards the end, something our tax returns could have finished off 3 or 4 years prior to that).

---

Er... that's not true for subsidized Stafford loans, at least not in the last decade. My wifey and I have paid off all her her higher interest loans, and are just paying the minimum on the loans with interest rates so low that between the tax writeoff and inflation, the loan loses value from year to year.

I don't think time limits are going to be very helpful. There's nothing wrong with taking an extra year because you had to retake a class, or moved to a different school, or tweaked your major. Learning is about adaptation at times. I'd much rather someone make a good use out of a degree than rush through 4 years getting a silly degree, only to have no prospects for a job and thus not pay their loan back. A good majority of my friends took 5 years for various life interruptions, and they all have great paying jobs and have mostly paid back their loans (except the annoying federal ones that don't let you pay it off early!)

Also, some universities offer "Fast-track" degrees that have higher courseload per semester but may get you undergrad plus master's degree in 5 years. If your degree plan doesn't fit into the traditional 4/6 year then what will happen to those students?

Edit: I'm not sure which loan it is that Hubby had, this was back in 1999 when it was started (and before he moved to this state and qualified for in-state tuition). I'll have to ask what specific type it was. But it was annoying as crap that we paid off two cars before the loan, which wasn't much to begin with. The interest rate wasn't very high on it, but still I'm sure they wanted that little extra they got by stretching it out ten years.

Quote:

---

Originally Posted by Ominous Gamer

3. How many people honestly finish college in 4 years? Even without combining this with your point 1, which would force students to place work over education.

---

I'd just like to point out this is doable, from first hand experience finishing my undergraduate degree in 3.5 years, while working on average 20 hours a week while in school. I also never spent my college loan money on non-school related items, nor changed majors. This is however a great example that these experiences and behaviors do not necessarily correlate with future financial success or successful employment in one's chosen field, as although I enjoyed a one year internship and two year stint of employment in my field, I now work in retail. Hooray. I don't know whether I should feel enjoyment or sadness at the fact that my personal experience continues to break Lewk's view of the world in regards to income.

Quote:

---

Originally Posted by Illusions

I'd just like to point out this is doable, from first hand experience finishing my undergraduate degree in 3.5 years, while working on average 20 hours a week while in school. I also never spent my college loan money on non-school related items, nor changed majors. This is however a great example that these experiences and behaviors do not necessarily correlate with future financial success or successful employment in one's chosen field, as although I enjoyed a one year internship and two year stint of employment in my field, I now work in retail. Hooray. I don't know whether I should feel enjoyment or sadness at the fact that my personal experience continues to break Lewk's view of the world in regards to income.

---

I don't believe Lewk would argue that immediate success if guaranteed to anyone, even those who ostensibly have done all the right things.

Quote:

---

Originally Posted by Enoch the Red

I don't believe Lewk would argue that immediate success if guaranteed to anyone, even those who ostensibly have done all the right things.

---

He has on numerous occasions though stated that people who do not have current financial success, must not be financially successful because they are lazy and/or make poor financial decisions. He also frequently uses his own personal anecdotal evidence, and even did so in this thread when referencing his friend buying a PS3 using student loan money, to make suggestions or statements of how things should work (in the case of the PS3 buying friend, that student loan money goes directly to the college, and can't be used to live off). But you are right, he doesn't argue that immediate success is guaranteed to anyone, because whenever someone like myself points out situations like mine, he ignores them, and will in the future continue making sweeping generalized statements as if contradicting arguments have never been made/raised.

Quote:

---

Originally Posted by Illusions

He has on numerous occasions though stated that people who do not have current financial success, must not be financially successful because they are lazy and/or make poor financial decisions. He also frequently uses his own personal anecdotal evidence, and even did so in this thread when referencing his friend buying a PS3 using student loan money, to make suggestions or statements of how things should work (in the case of the PS3 buying friend, that student loan money goes directly to the college, and can't be used to live off). But you are right, he doesn't argue that immediate success is guaranteed to anyone, because whenever someone like myself points out situations like mine, he ignores them, and will in the future continue making sweeping generalized statements as if contradicting arguments have never been made/raised.

---

Hard work, dedication, and education are certainly contributing factors in predicting achievement, but they are neither necessary or sufficient indicators of success.

Quote:

---

Originally Posted by Enoch the Red

Hard work, dedication, and education are certainly contributing factors in predicting achievement, but they are neither necessary or sufficient indicators of success.

---

Which is the very reason why nearly everyone argues with Lewk.

Quote:

---

These changes would go a long way to making a better system. I'm not in favor of the government interfering at all but I think that ship has sailed. Best quote from the article:

---

Are you kidding me, you don't support government giving out student loans? You don't think an educated populace is a massive externality and deeply intertwined with progressing our society, and maintaining our prosperity?

Quote:

---

Originally Posted by Lebanese Dragon

Are you kidding me, you don't support government giving out student loans?

---

I don't. It apparently leads to morons spending $300,000 to not learn to pilot a commercial airliner.

Quote:

---

Originally Posted by Lebanese Dragon

You don't think an educated populace is a massive externality and deeply intertwined with progressing our society, and maintaining our prosperity?

---

Not that the question pertains the actual issue of government-granted subsidies, but no. We already have enough college-educated retail clerks. They're called "women's studies majors," and creating more is hardly a formula for progress and prosperity. Giving a college education to the guy who scrubs the toilets and empties the trash cans, likewise, is a misallocation of resources that actually harms our society rather than improving it.

Aren't there any data on how much the govt and society makes or loses on student loans?

Quote:

---

Originally Posted by Illusions

Which is the very reason why nearly everyone argues with Lewk.

---

I don't think that's what Lewk is arguing, and I certainly don't think it's the very reason why everyone argues with him.

Quote:

---

Originally Posted by Aimless

I wonder if this development will continue:

http://www.nytimes.com/2011/09/21/ed...dmissions.html

---

I think this is the most interesting part of this. As many may expect, I think our government has distorted the higher education market. This distortion has brought many good things —*more people have gotten access to many of the great colleges we have here.

At the same time, it's hard to deny that these subsidized loans (plus demographics) have fueled something of a tuition bubble that's squeezing the financial middle class from college tuition. If you

A) Make a good income and don't qualify for subsidized loans
B) Want your kid to go to college
C) Don't want them to work and focus on learning/exploring instead

It basically costs a quarter of a million dollars to send them to a private institution.

That said, I do think there's something to this idea that not as many people need a higher degree. I don't want to devalue education at all. But the more I work, the more I think the value of my college degree is saying I have one versus any skills I actually obtained from college.

There are ways to change this dynamic with private institutions. They're supposed to be non-profit, but they often are swimming in a sea of money; the largest endowments run over $10 billion (in the case of Harvard, quite a bit over $10 billion). My own alma mater has an endowment of about $6 billion, which works out to about $750k per undergraduate student. Currently, there are no rules about how much of an endowment's proceeds should be spent on actual operations vs. making the endowment larger; this means that instead of, say, subsidizing tuition (even a 3% after inflation return would have been enough to cut $20k off of tuition at my school), they just save it or use it for the occasional capital campaign. (Realistically, a lot of the money is earmarked for endowed chairs, which is the stupidest idea ever IMO; professors should be self-financing with grants at major research institutions.)

This paradigm can change, and already has changed for some schools. More and more of the rich, elite schools are offering very generous financial aid packages with the aim of minimizing or eliminating student loans, especially for poorer students. Princeton famously did this recently, and a number of other top tier schools have followed suit. So for people who honestly can't afford it, it doesn't cost very much at all to go to a top tier private institution.

On a similar note, going to a four-year public institution is not going to break the bank - a top notch public institution costs about $60k for four years of in-state tuition, which is eminently reasonable. The real problem happens with mid-tier private institutions: the schools that cost a lot but don't have the resources to give much financial aid. To be honest, though, I don't understand why someone would attend a middle-of-the-road private institution when they could go to a perfectly good public institution for a much lower cost. The real advantage in private eduction only comes for the very cream of the crop.

I've said it before, and I'll say it again - despite all of the worry about inflation in college costs and the middle class being unable to afford college, the fact of the matter is that the average graduating student has about $20k in debt. That's nothing given the wage advantages you get from having a college degree.

Quote:

---

Originally Posted by wiggin

I've said it before, and I'll say it again - despite all of the worry about inflation in college costs and the middle class being unable to afford college, the fact of the matter is that the average graduating student has about $20k in debt. That's nothing given the wage advantages you get from having a college degree.

---

I'd be curious to see the exact scale of that advantage once self-selection is taken into account.

*shrugs* There have been studies that have attempted to control for that, but as you can imagine it's fairly challenging. Certainly ignoring selection issues, you're talking about a huge jump in average income. More broadly, I'd argue that the highest incomes coming out of college are in disciplines where you really actually need that coursework (rather than just needing some letters after your name); you don't make mathematicians or engineers from high school educations.

Quote:

---

Originally Posted by wiggin

*shrugs* There have been studies that have attempted to control for that, but as you can imagine it's fairly challenging. Certainly ignoring selection issues, you're talking about a huge jump in average income. More broadly, I'd argue that the highest incomes coming out of college are in disciplines where you really actually need that coursework (rather than just needing some letters after your name); you don't make mathematicians or engineers from high school educations.

---

That might be true, but those fields (mostly various forms of engineering) make up a small proportion of college graduates; as far as I know most people get liberal arts degrees, which provide some general skills (writing, reading, arguing, etc.) but don't really lead to jobs that require substantive knowledge of the fields. Now I do believe that a college education improves a person's lifetime earnings, but I've never really seen a convincing study that told me the size of the effect. This very research question was actually mentioned in a class I had on regression discontinuity, and I'm curious if the method was applied to the effect of the American university system. Matching would probably provide a pretty good estimate as well.

Quote:

---

Originally Posted by wiggin

On a similar note, going to a four-year public institution is not going to break the bank - a top notch public institution costs about $60k for four years of in-state tuition, which is eminently reasonable. The real problem happens with mid-tier private institutions: the schools that cost a lot but don't have the resources to give much financial aid. To be honest, though, I don't understand why someone would attend a middle-of-the-road private institution when they could go to a perfectly good public institution for a much lower cost. The real advantage in private eduction only comes for the very cream of the crop.

---

That largely depends on the state. And what you mean by "top notch". Penn State main campus runs ~$20,000 per year for in-state tuition and fees. Books, housing, food, parking or bus fees extra. Extension campus tuition varies, but is still ~$15,000/year.

Quote:

---

I've said it before, and I'll say it again - despite all of the worry about inflation in college costs and the middle class being unable to afford college, the fact of the matter is that the average graduating student has about $20k in debt. That's nothing given the wage advantages you get from having a college degree.

---

That graduating debt figure has changed since you were un undergrad. :p Last figure I read was an average of $50,000, but it probably depends on the source and if they include student debt plus credit card debt. That said, it's still worrisome that college costs have inflated to such levels, in a fairly short amount of time.

Not everyone can qualify (on merit) for Princeton or Stanford--with zero tuition for families earning under $100,000. Gov't grants aren't as plentiful as they once were, and many federal loan programs simply aren't enough for many students. The financial aid process is complicated, especially for kids of divorced parents, when both parents' income is calculated, even when one parent has no intentions of paying "their fair share". Students often fill in the gaps with private loans, and end up with high interest debt for degrees in 18th century French Literature or something....and NO honest counseling on cost:benefit. Even the old rule of thumb that total debt shouldn't exceed one year's salary in your field isn't a reliable metric anymore. Because so many can't find a job in their field.

Also, as great as having a college degree can be, today's debt incurred by eager students doesn't necessarily translate to the conventional wisdom of wage advantages. That's almost becoming an urban/academic myth. College grad's income and employment advantage data is usually over a lifetime, when compared to HS grads or those who "only" get a vocational or trade degree. Unemployment for degreed people is lower, but that doesn't mean they're employed in their field.

Ask any Education major who can't get a job teaching, but is working two part-time jobs in retail, and still has $50,000 in student loan debt. Many new grads are forced to live at home with a parent, be a dependent on their health insurance policy (because their employers don't offer any benefits and their option is either buy health insurance or pay student loans) and hope like hell something turns around. And soon.


<<Personally, I find it sad that so many HS kids are making it a strategy to get full Athletic Scholarships that range from soccer to football, and that determines their school of choice, but that's a different can of worms :( >>

Quote:

---

Originally Posted by Loki

That might be true, but those fields (mostly various forms of engineering) make up a small proportion of college graduates; as far as I know most people get liberal arts degrees, which provide some general skills (writing, reading, arguing, etc.) but don't really lead to jobs that require substantive knowledge of the fields. Now I do believe that a college education improves a person's lifetime earnings, but I've never really seen a convincing study that told me the size of the effect. This very research question was actually mentioned in a class I had on regression discontinuity, and I'm curious if the method was applied to the effect of the American university system. Matching would probably provide a pretty good estimate as well.

---

...and liberal arts degrees lead to a much smaller wage premium than STEM degrees (which make up ~15% of awarded undergrad degrees). Which implies that general skills give you an edge up over high school alone, but it might merely be masking a selection phenomenon, but actual marketable skills matter from a wage perspective. I'm pretty sure we've had this discussion in the past as well.

Quote:

---

Originally Posted by GGT

That largely depends on the state. And what you mean by "top notch". Penn State main campus runs ~$20,000 per year for in-state tuition and fees. Books, housing, food, parking or bus fees extra. Extension campus tuition varies, but is still ~$15,000/year.

---

Michigan costs about $15k/year. That's a pretty damned good school. Illinois is about $16-17k. Maryland is under $9k. The Cal system is about $15k. Texas is under $12k. Virginia is about $12k. UNC is about $8k. Washington is under $11k. Wisconsin is about $8k. Penn State, btw, is about $16k. OSU is about $10k.

Most of those schools are in the top 50; they'll beat any education outside of the top 20 or so universities in the US (and the top 50 or so universities in the world).

Quote:

---

That graduating debt figure has changed since you were un undergrad. Last figure I read was an average of $50,000, but it probably depends on the source and if they include student debt plus credit card debt. That said, it's still worrisome that college costs have inflated to such levels, in a fairly short amount of time.

---

Your numbers are wrong. We've been through this before. Even in this awful climate for financial aid/etc., it's currently about $25k average for students who graduated in 2010 (I don't recall seeing the 2011 numbers; they might not yet exist). Those numbers are also a bit skewed - I believe it only takes the average of students who actually have debt, which are only about two thirds of the total who graduate. The Project on Student Debt runs the numbers every year.

Quote:

---

Not everyone can qualify (on merit) for Princeton or Stanford--with zero tuition for families earning under $100,000. Gov't grants aren't as plentiful as they once were, and many federal loan programs simply aren't enough for many students. The financial aid process is complicated, especially for kids of divorced parents, when both parents' income is calculated, even when one parent has no intentions of paying "their fair share". Students often fill in the gaps with private loans, and end up with high interest debt for degrees in 18th century French Literature or something....and NO honest counseling on cost:benefit. Even the old rule of thumb that total debt shouldn't exceed one year's salary in your field isn't a reliable metric anymore. Because so many can't find a job in their field.

---

Oh, please. If you can't get into a top tier private school on merit, then go to a state school and walk out with minimal debt, likely all of it federally subsidized. And if you spend $200,000 getting a degree in French lit, I have no sympathy.

Quote:

---

Also, as great as having a college degree can be, today's debt incurred by eager students doesn't necessarily translate to the conventional wisdom of wage advantages. That's almost becoming an urban/academic myth. College grad's income and employment advantage data is usually over a lifetime, when compared to HS grads or those who "only" get a vocational or trade degree. Unemployment for degreed people is lower, but that doesn't mean they're employed in their field.

Ask any Education major who can't get a job teaching, but is working two part-time jobs in retail, and still has $50,000 in student loan debt. Many new grads are forced to live at home with a parent, be a dependent on their health insurance policy (because their employers don't offer any benefits and their option is either buy health insurance or pay student loans) and hope like hell something turns around. And soon.

---

All short term concerns for anyone with a useful degree.

Quote:

---

Originally Posted by LittleFuzzy

You're assuming that all that extra debt in the gap between those two sets of terms will be repaid, I imagine. The people claiming it won't cost money are assuming the opposite, that none of it will be repaid figuring that if it wasn't paid off by then that it wouldn't be. Both assumptions are wrong.


I actually wouldn't have a problem with this except I would expand it to all fees and not just tuition. Most state colleges, even the expensive ones in states with multiple tiers, do not charge much tuition, if any. But that doesn't necessarily make them cheap either, they're just putting a different label on the costs which they're expecting attending students to pay for.



2 is ridiculous. You want to wait to ensure whether they'll graduate, why not wait until they've actually come back for their second year of education. That's the gold standard for graduation rates, most people who go and don't graduate drop out their first year. The limits on 3 aren't bad but the fact is that they're already in place in a slightly different format for those schools offering the 4-year degree you're referring to as your metric. They take the form of caps on the amount of money the Department of Education will loan to a student each year and in total. All those other things and the etc you mention for 3 are just so much pointless gilding.

---

Since they can't get out of student loans via bankruptcy its likely they will pay eventually. Again if this means students give less money for repayment how is this cost neutral?

And I'll agree that tuition can include the fees and such.

So do you think *every* adult should be given a student loan regardless of academic ability, responsibility or merit?

Quote:

---

Originally Posted by Ominous Gamer

These ideas are straight up awful and very shortsighted.

1. Your example sounds like a lump payment problem over the idea of student loans helping students survive.

2. You being "sure" of something isn't worth jack shit. How about you throw up a citation that shows how a 17 year old posting passing SAT scores is reflective of that person picking an in demand career path (that remains in demand a decade later), and is capable of managing their financies as an adult.

3. How many people honestly finish college in 4 years? Even without combining this with your point 1, which would force students to place work over education.



Not that I agree making more money available for student loands is a good idea. It doesn't do anything towards helping reduce that hurdle for higher education, instead its incentivizing greed at the university level.

---

1 - So I have a problem with students living high on the tax payer funded hog and using those student loan funds for non-educational purposes. Besides what is the problem with working AND going to college? Millions do it. In fact I bet those millions who do that are more successful than the ones that don't on average.

2 - You would argue that there is no correlation between SAT scores and success?

3 - Yes most don't finish in 4 years. Because there is little incentive to do so. Letting the money spigot run dry will motivate students to actually work hard and NOT waste their time. Do you realize how many 18 year old's want to go to a 4 year university for the "college experience" (read socialization and partying) as opposed to going to a community college for two years and than transferring? If kids are sucking on the taxpayer teat then darn it they should have to get their ass in gear and not waste time. Four years and go. If you can't finish in 4 years well hell that doesn't mean you can't go to college that just means you *pay your own way.*

Quote:

---

Originally Posted by Lewkowski

So do you think *every* adult should be given a student loan regardless of academic ability, responsibility or merit?

---

Do I think financial aid should be available for pretty much anyone attending college? Yes. Because it doesn't actually cost the government that much since, these being loans, so much of the money does get paid back. The marginal return on trying to filter out people who might not be good for it aren't worth the increase in marginal exclusions of people who would have succeeded despite falling afoul of the filters. And then there's the increase in costs to research, create, administer, update, etc the filtering formulas, appeals, and all other sundry necessary new parts in the process.