US student loans grotesquely high

[laughing dog]

The federal budget for this year is around 6 trillion dollars. The estimated cost of the bailout is 32 billion dollars which is about 0.5% of the budget. Just thought I'd inject a little perspective into the discussion.

Where is that number coming from?

Biden's student debt forgiveness plan may cost taxpayers an average of $2,000, some policy experts say

Student loan forgiveness will cost taxpayers and does nothing to solve the tough unaffordability issues that plague higher education, some policy experts say.

www.cnbc.com

The average burden per U.S. taxpayer will be $2,503.22, according to new estimates from the National Taxpayers Union that are based on the plan released this week.

That’s up from the group’s previous analysis, which estimated Biden’s plan could cost the average taxpayer $2,085.59 based on the $10,000 in forgiveness per federal student loan borrower that had been anticipated.

The plan unveiled this week would be even more costly, largely due to an additional $10,000 in debt cancellation for up to 27 million Pell Grant borrowers. It also puts a 5% cap on repayment of undergraduate loans in relation to monthly incomes.

Meanwhile, the Penn Wharton Budget Model now estimates debt cancellation alone will cost up to $519 billion. Loan forbearance will cost another $16 billion, the research found, while the new income-driven repayment could cost $70 billion.

It's like were in the late-stage empire where people are raiding the treasury.

I was mistaken - the 32 billion is the cost of existing loan forgiveness. The estimated total for the Biden's plan is less than $400 billion (the Brookings Institution estimates it around $370 billion (Putting Student Loan Forgiveness in Perspective) which makes it about 6% of the current budget.

 

[Gun Nut]

If you give an eighteen year old a sheaf of papers and say "if you don't sign these, you get no money to pay for college", do you genuinely think many of them would bother to read the small print, or would fully comprehend its implications even if they did read it?

18 year olds are adults, fully legally able to sign contracts and enter into agreements.

As a 50+ year old, I think back to when I, and everyone I know, were in their 20's, and understand that I, and they, were practically toddlers in terms of emotional, financial, and moral maturity. All of us, at the time we were in our 20's, believed there was next to nothing left to learn and our maturity was maximally developed.

Stupid, immature, and ridiculously ignorant CHILDREN... ALL of them.

This is not an insult to 20-something-baby-year-olds.... This is just how it is.

What is the opposite of the "naturalistic fallacy"? I mean, the idea that because it is written in law it defines what is true (18 year olds are equivalent in terms of personal responsibility to every other adult in America)?

 

[Derec]

Of course I can. Your assumption that they are not flies in the face of reality.

I am saying that you would have to show they were bamboozled. You cannot just assume it because they were young adults.

Do you always read and carefully consider every word of an EULA before clicking 'I agree'?

Clicking on EULA is quite a bit different than borrowing 10s of thousands, or even more than $100k.

The law presumes that contracts are entered into only by people who have carefully considered them and their consequences. But that's because the law is an ass.

What is the alternative? Get people an easy way to get out of contracts they freely signed?

And of course the law is often written by the beneficiaries of these scams.

What scams?

Yeah, because what people learn in college is not in any way beneficial to the nation.

They can learn in a state university as well. Nobody necessarily needs to go to say Davidson or Mercer.

You the taxpayer have been getting the benefits, while making the people providing those benefits into a cash cow for wealthy arseholes.

College graduates are on average making far more than non-graduates. Almost all "wealthy assholes" have college degrees. Many if not most (depending how you define "wealthy assholes") have advanced degrees.

And of course a country benefits from having a well-educated populace. That is an argument for state and federal governments increasing the funding for public universities, including making community college free to students (something Biden wanted to do). I agree with that.
I disagree with blanket student loan cancellation that fauxgressives like AOC are demanding.

It's way past time that you stopped exploiting people, and started paying for the benefits of living in a country not entirely populated by morons.

Who exactly do you think is exploited here?

 

[steve_bank]

Education has become a fast food industry.

 

[Derec]

Granted, a car loan is different from a student loan, but...

They are. For one, there is no collateral. You can repossess a BMW. You cannot repossess a college degree.
That's why student loans are guaranteed and subsidized by the federal government.

Another difference is with the car loan, you start paying right away. With student loans, you only start paying when of student loan people take out is "subsidized" meaning interest does not accrue while in school. If you take out more than the subsidized limit, the interest accrues.

But your point about rising college cost applies. They have been rising faster than inflation for a while.
Inspired by you, I looked up my alma mater, a flagship state school. Instate tuition and mandatory fees are ~$12k/a, meaning that an undergrad education is ~$48k before books, housing, meal plans and such.
More expensive than in my day, but not by that much. The point is, you can still get a bachelor's at a very good university without six figure loans. Note also that if your family qualifies, there are also Pell grants that do not have to be paid off which can pay for part of the cost. There are also scholarships. In Georgia, lottery funded HOPE scholarships still pays most tuition as long as you maintain a ≥3.0 GPA. Used to be all tuition, mandatory fees plus a small book stipend (good for maybe 1 or 2 classes worth of books) but I guess lottery fiends are not spending commensurate with tuition increases over the years.

But many kids want to go to fancy private schools and eschew public ones. I do not see why taxpayers should pay for that.

 

[Oleg]

Education has become a fast food industry.

Or a sham caused by do-gooder government. To the suprise of no one, the more loan money a student can borrow increases the amount the university will charge for tuition. Duh.

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf

 

[steve_bank]

If you are going into serious debt you should think about what you are getting for your money. Are you being given skills worth the money?

If I were hiring for a company I owned I would give preference to people who worked their way through school. I'd hire a community college grad who worked his or her way through than somebody who racked up a lot of debt for a name brand school.

Motivation.

College is a big corporate business with high profits. Foreign students are sought after, they pay full tuition at state schools.

The idea was planted that the only way to have a life was with a college degree. Obama promoted it. Demand wennt up and schools responder by cranking out diplomas. Grade inflation was an issue back in the 80s. PHDs in cultural and women's studies. As PHDs went up some questioned the actual rigor.

It is periodcally stated in the nedia how much more yiu will make over your life if you have a college dehree comapred to a high school grad. The ex[ectaion is then if I have a degree I WILL get a good high paying job. A coolege degree has become a ticket that gets punched.

I saw a commercial directed at business. A young person said we went to college for you, you should reimburse us for the cost.

That is backwards, you pay for education to invest in your future.

It may take 5 or 6 years, some people do work their way through.


I took a night class in the 90s from a Vietnamese professor in CS. PHDs in math and CS. He would chuckle and say how American students have it too easy. He started undergrad in VN during the war. He found a way.

An Indian engineer I worked with who went to the Indian equivalent to MIT said his grad school over here was mush less rigorous than his undergrad.

I

 

[Tigers!]

I still wonder if the major issue is being ignored. Why is higher education so expensive? If it wasn't, then kids wouldn't need to borrow six figures just to get a degree, and they wouldn't clamor for loan relief.

we have a similar argument in Australia.
So has anyone ever investigated why uni costs are so high?

 

[steve_bank]

I'd say part of it is that colleges and universities are not set up to minimize cost. Like the govt create a new program then figure out how ro pay for it. Creating programs like gender studies and other soft social areas costs money.

Too many programs increase cost. Increasing education diversity costs money.

Basic economics. Schools will increase tuition as long as there are people willing to pay it, and as long as the govt guarentees loans for exorbitant tuition.

COE - Postsecondary Institution Revenues

Between 2009–10 and 2019–20, revenues from tuition and fees per full-time-equivalent (FTE) student increased by 29 percent at public institutions (from $6,320 to $8,160 in constant 2020–21 dollars) and 7 percent at private nonprofit institutions (from $21,630 to $23,210).

In 2019–20, total revenues at degree-granting postsecondary institutions in the United States1 were $695 billion (in constant 2020–21 dollars).2 Total revenues were $438 billion at public institutions, $242 billion at private nonprofit institutions, and $14 billion at private for-profit institutions. These data include any changes in revenues that occurred during to the coronavirus pandemic in the spring of 2020. Overall, total revenues for postsecondary institutions in the United States in 2019–20 were less than one-half of 1 percent lower than in 2018–19 ($698 billion).

 

[laughing dog]

I'd say part of it is that colleges and universities are not set up to minimize cost. Like the govt create a new program then figure out how ro pay for it. Creating programs like gender studies and other soft social areas costs money.

Too many programs increase cost. Increasing education diversity costs money.

Basic economics. Schools will increase tuition as long as there are people willing to pay it, and as long as the govt guarentees loans for exorbitant tuition.

COE - Postsecondary Institution Revenues

Between 2009–10 and 2019–20, revenues from tuition and fees per full-time-equivalent (FTE) student increased by 29 percent at public institutions (from $6,320 to $8,160 in constant 2020–21 dollars) and 7 percent at private nonprofit institutions (from $21,630 to $23,210).

In 2019–20, total revenues at degree-granting postsecondary institutions in the United States1 were $695 billion (in constant 2020–21 dollars).2 Total revenues were $438 billion at public institutions, $242 billion at private nonprofit institutions, and $14 billion at private for-profit institutions. These data include any changes in revenues that occurred during to the coronavirus pandemic in the spring of 2020. Overall, total revenues for postsecondary institutions in the United States in 2019–20 were less than one-half of 1 percent lower than in 2018–19 ($698 billion).

The gov't does not guarantee loans for all tuition. Moreover, the big reason that tuition increased at public universities is that public support fell: tuition dollars replaced state and local aid.

When I started at my state university, over 60% or the operating costs came from the state of Minnesota. Now, it is less than 30%.

 

[Loren Pechtel]

One big problem with student loans is that some (not all) are extremely predatory. People report making their student loan payment for over a decade and never seeing their balance decrease. This is an enormous problem with how some of the loans were written. Some report their loans being sold and suddenly learning that they owe MORE than they borrowed, with no explanation or relief.

I believe it was Bush II who opened up student loans to commercial lenders who then charged credit card style rates.

This is a root of a lot of our problems in this country. Things which should be low cost to ensure most consumers would benefit are turned into profit centers for business interests to soak the people for profit instead. Take insulin. The inventors sold the patent for a dollar because they wanted it available to anyone. Drug companies (hand in hand with private insurance) took the "let's help people" ball, turned it into a "let's help our CEO get a bonus" ball and ran with it. Now insulin (in the US) is prohibitively expensive. Just like predatory student loans. Hell, predatory loans in general. There are old school mob loan sharks who wouldn't dream of charging what some car dealers do. I worked for one of those online dealerships for a minute. They were charging up to 28% interest on some long term loans. For the Bible thumping folks, that's called "usury."

I forget which passage says that's a sin, but I'm pretty sure it's in there.

Reality check time: The cheap insulin is still out there, it's still cheap. What has happened is drug makers have come up with better versions that aren't cheap.

 

[Loren Pechtel]

One big problem with student loans is that some (not all) are extremely predatory. People report making their student loan payment for over a decade and never seeing their balance decrease. This is an enormous problem with how some of the loans were written. Some report their loans being sold and suddenly learning that they owe MORE than they borrowed, with no explanation or relief.

I just ran into an explanation on this--some lenders have minimum required payments that are less than the interest that accrues. I don't see that as predatory so long as it's clearly disclosed.

In fact, I have suggested a system that would cause this to happen--cap student loan required payments at some percentage of income above the poverty line.

Sure but paying less than interest means the loan is never paid off—it’s a life long burden.

Yes, but with what I'm suggesting it's never an unbearable burden.

Again, the most vulnerable students are those whose family never went to college, who are likely to come from working class or poor families whose families have little or no ability to help them and who may have little or no experience with student loans.

A coworker at my last job told me her parents encouraged her to take out the maximum loans possible and to ‘enjoy herself.’

Yikes! But that's not the fault of the lenders.

 

[Loren Pechtel]

It WAS better back in the days when states funded most of the cost of attending a state university.

If states stepped up and committed or re-committed to covering at least 65% of the cost of university as they did in the early 70’s that would help tremendously.

As student loans became more available, universities began to raise costs—and states backed away from supporting universities as conservatism rose.

Yes, this is what I want. I'd even say 65% is below the ideal. In most cases I do not like free but I do think the government should cover most of the cost of the state university. I'd also provide that for trade schools with a good reputation. (As in graduates actually working in the field.)

 

[laughing dog]

One big problem with student loans is that some (not all) are extremely predatory. People report making their student loan payment for over a decade and never seeing their balance decrease. This is an enormous problem with how some of the loans were written. Some report their loans being sold and suddenly learning that they owe MORE than they borrowed, with no explanation or relief.

I just ran into an explanation on this--some lenders have minimum required payments that are less than the interest that accrues. I don't see that as predatory so long as it's clearly disclosed.

In fact, I have suggested a system that would cause this to happen--cap student loan required payments at some percentage of income above the poverty line.

Sure but paying less than interest means the loan is never paid off—it’s a life long burden.

Yes, but with what I'm suggesting it's never an unbearable burden.

Again, the most vulnerable students are those whose family never went to college, who are likely to come from working class or poor families whose families have little or no ability to help them and who may have little or no experience with student loans.

A coworker at my last job told me her parents encouraged her to take out the maximum loans possible and to ‘enjoy herself.’

Yikes! But that's not the fault of the lenders.

You think lenders should just lend to anyone?

 

[Loren Pechtel]

I really do not get the contempt that a lot of posters have for anyone who graduates with a degree in anything other than engineering. Engineers should be grateful more people don't pursue engineering because if everyone did, an engineering degree would not be worth very much.

The issue is not engineering only, but rather the demand for the degree. Too many people get easy degrees that they find are of little use in the labor market. Many degrees have little use other than in teaching the subject in question.

 

[Loren Pechtel]

If student loans were dischargeable they would cease to exist because most people would complete their education and then declare bankruptcy. People who take student loans almost certainly exit college with negative net worth.

Make them dischargeable x years later, maybe 10 or 15.

The problem is with public / federal loans. There’s little incentive for the government to limit loans to responsible borrowers (the government is incredibly incompetent with taxpayer money). Abuse would be rife. Better to just end federal loans and leave it to the private lenders. Then make the those loans dischargable in bankruptcy. The private lenders would need to actually assess the risk of the borrower. Universities would be forced to charge a market rate for tuition. Many useless university administrators and DEI commissars might have to be let go. Winning all around.

That would make them cease to exist.

There is little they can do to assess the risk of the borrower--students have little if any record to go on. And the vast majority of graduates come out of school with no income and no assets--clear candidates for bankruptcy.

If you want to make the lenders care: Look at what I proposed earlier--payments capped as a percentage of income above the poverty line. You fund a worthless degree, it's very unlikely you'll get repaid.

 

[bilby]

If student loans were dischargeable they would cease to exist because most people would complete their education and then declare bankruptcy. People who take student loans almost certainly exit college with negative net worth.

Make them dischargeable x years later, maybe 10 or 15.

The problem is with public / federal loans. There’s little incentive for the government to limit loans to responsible borrowers (the government is incredibly incompetent with taxpayer money). Abuse would be rife. Better to just end federal loans and leave it to the private lenders. Then make the those loans dischargable in bankruptcy. The private lenders would need to actually assess the risk of the borrower. Universities would be forced to charge a market rate for tuition. Many useless university administrators and DEI commissars might have to be let go. Winning all around.

That would make them cease to exist.

There is little they can do to assess the risk of the borrower--students have little if any record to go on. And the vast majority of graduates come out of school with no income and no assets--clear candidates for bankruptcy.

If you want to make the lenders care: Look at what I proposed earlier--payments capped as a percentage of income above the poverty line. You fund a worthless degree, it's very unlikely you'll get repaid.

Or scrap the entire stupid model, and fund education in ways that doesn't leave its recipients in debt at all.

That instantly resolves all the difficulties you are identifying here.

Just pay for education out of general revenue (hey, look, primary and secondary education are usually funded that way, and many nations also fund tertiary education that way, so perhaps it's not impossible!), and the increase in educated citizens will provide an economic boost that more than compensates for the expense.

Free market capitalism is an excellent way to ensure the optimum distribution of scarce resources. But it's not the ONLY way, and for non-consumables - such as investment in education or infrastructure - it's not even close to being the BEST way.

It works for cars, TVs, and mobile phones. That doesn't make it a good option for education, power grids or highways.

It's not the fucking 1980s anymore, and this daft Reagan/Thatcher economics whereby everything needs to be funded through free market capitalism, or not at all, is breaking our society. Infrastructure is breaking down and not getting the necessary maintenance or replacement; Education is going the same way. Fucking stop already. It doesn't work.

"User pays" isn't a universally sensible model, particularly where the beneficiaries aren't limited to the users.

I use my car; Nobody else benefits from my use of my car; So I should pay the costs of having a car. User pays.

I use my education; My employer benefits from my use of my education; My friends, family and neighbours benefit from my use of my education; If I invent something widely useful, or come up with a widely useful idea, then total strangers benefit from my use of my education. So all these people should pay the costs of educating me. Beneficiaries pay.

Income Tax payers are a pretty good proxy for the beneficiaries of societal goods such as education and infrastructure. Their income is largely dependent upon the existence of those societal goods, and it's reasonable to ask them to pay in proportion to the income thus enabled.

Why would I take out a huge and crippling loan to benefit a bunch of strangers? I would have to be incredibly young, naïve and gullible, and/or to have spent eighteen years being indoctrinated to believing that it was the only way for me to "succeed", before I would fall for such an obvious scam.

And if I did fall for such a scam, society would have a moral obligation to bail me out (and to punish the scammers).

I don't want to "make the lenders care". I want to see them penalised for their hugely immoral behaviour, and forced to pay compensation to their victims; but I will settle for the elimination of their business model scam, so nobody else will be victimised by it.

 

[Toni]

I really do not get the contempt that a lot of posters have for anyone who graduates with a degree in anything other than engineering. Engineers should be grateful more people don't pursue engineering because if everyone did, an engineering degree would not be worth very much.

The issue is not engineering only, but rather the demand for the degree. Too many people get easy degrees that they find are of little use in the labor market. Many degrees have little use other than in teaching the subject in question.

It’s always interesting what some people consider to be ‘easy’ degrees and how many people have opinions about how easy it is to find jobs ‘in those fields’ except to reach, as though that were an easy job. As far as I am aware, there are no labor economists posting on this board.

You are correct that there are no job postings that say ‘English Major wanted, starting salary $100K/year.’ But there is a great need for people who are able to compose a coherent paragraph or mage a cogent point, as I am reminded every time I read anything posted on the internet.

 

[Toni]

One big problem with student loans is that some (not all) are extremely predatory. People report making their student loan payment for over a decade and never seeing their balance decrease. This is an enormous problem with how some of the loans were written. Some report their loans being sold and suddenly learning that they owe MORE than they borrowed, with no explanation or relief.

I just ran into an explanation on this--some lenders have minimum required payments that are less than the interest that accrues. I don't see that as predatory so long as it's clearly disclosed.

In fact, I have suggested a system that would cause this to happen--cap student loan required payments at some percentage of income above the poverty line.

Sure but paying less than interest means the loan is never paid off—it’s a life long burden.

Yes, but with what I'm suggesting it's never an unbearable burden.

Again, the most vulnerable students are those whose family never went to college, who are likely to come from working class or poor families whose families have little or no ability to help them and who may have little or no experience with student loans.

A coworker at my last job told me her parents encouraged her to take out the maximum loans possible and to ‘enjoy herself.’

Yikes! But that's not the fault of the lenders.

Lenders who set up predatory loans for teenagers, amounting to tens of thousands of dollars do indeed share a lot of blame.

 

[Toni]

One big problem with student loans is that some (not all) are extremely predatory. People report making their student loan payment for over a decade and never seeing their balance decrease. This is an enormous problem with how some of the loans were written. Some report their loans being sold and suddenly learning that they owe MORE than they borrowed, with no explanation or relief.

I just ran into an explanation on this--some lenders have minimum required payments that are less than the interest that accrues. I don't see that as predatory so long as it's clearly disclosed.

In fact, I have suggested a system that would cause this to happen--cap student loan required payments at some percentage of income above the poverty line.

Sure but paying less than interest means the loan is never paid off—it’s a life long burden.

Yes, but with what I'm suggesting it's never an unbearable burden.

Again, the most vulnerable students are those whose family never went to college, who are likely to come from working class or poor families whose families have little or no ability to help them and who may have little or no experience with student loans.

A coworker at my last job told me her parents encouraged her to take out the maximum loans possible and to ‘enjoy herself.’

Yikes! But that's not the fault of the lenders.

ANY loan that cannot be paid off is indeed an unbearable burden.