The $555,000 Student-Loan Burden

[der_kommissar]

This is a difficult predicament to say the least. While I agree in principle with the course of action that many have mentioned about accountability and responsibility, one has to remember that college was MUCH MUCH more affordable 15, 20, 30 years ago. It is quite an eye opening experience to chart the cost of tuition over that period of time.

Simply put, there is no way that a student who is free to make a decision to attend the best possible school could work part time and pay his way thru school nowadays. Maybe if he were to start slinging dope on the side, it's possible, but in a legitimate manner, no chance.

I also agree that the cost of college is largely a function of the availability of credit (sounds familiar doesn't it...er housing). I was hopeful that the collapse of the credit markets in 2008 would finally expose these universities for all of their wasteful spending and their use of university endowments to cover operating expenses. Certainly, it has been seen that the Ivy's are in a world of hurt after they found themselves levered up in a whole slew of credit derivatives that they cannot unwind. At this point a year ago, many had lost 30-40% off of their peak.

While the notion of some form of severe punishment to those who choose to default on student loans is tempting, I wouldn't encourage it until universities get their act together. Clearly that doesn't happen until these federal programs are stopped dead in their tracks, but at some point there will have to be a consolidation within many of these spendthrift colleges that spend hundreds of millions on libraries, athletic centers, student centers and then continue to jack tuition rates up year after year. These schools have become de-facto mini government bureaucracies with minimal oversight and/or fiscal restraint.

 

[Vinny1]

No one should take out loans for college. If you don't have the cash to pay for it upfront, then you don't go. With less people being able to pony up the cash, tuitions will come down.

 

[forsalenyc]

the student loan dilemma has been on going for several decades. Clearly, the exclusion of student loans from BK protection hasn't been working as more than half of $800B outstanding balance is not being paid back(defaults, forbearance, etc.). There were many people abusing BK protection before the Student loan exclusion law was enacted in the 80's(not 2005). But also there are many who suffer (due to current economic conditions) b/c there's no way of getting out of student loans(unless you get crippled in some way).

Let's look at an example, John is a wealthy man who just foreclosed 5 investment properties in 2005. He had already profited over $1M since the late 90's when the housing boom started. He had bought and sold over dozens of properties but it came to a sudden halt when the real estate collapsed. He foreclosed all of his remaining properties, sure his credit took a hit, but he is sitting on alot of cash, keeps his luxury house and his Benz, and most of all, no debt. Mary, on the other hand, was a hardworking student who chose an Ivy School to further escalate her status then and when she graduates. After school, she was sitting on $100k debt, but got a job as an analyst at a notable investment bank. Less than a year later, she gets laid off, and finds that her field of expertise has been significantly trimmed, and decides to find a new career. With a smaller salary, she realizes now that her student loan could burden her for life.

Many highschoolers are just excited about going to college and don't think much about the consequences and risks of student loans. Most students qualify for some type of student loans and that is one reason why the tuitions have sky rocketed since the exclusion enactment in the 80's. In a way, it's like the real estate debacle in a micro way. Sallie Mae and others, knowing they are backed by the govt, started abusing defaulted accounts by hiring collection agencies($$$$) year after year thus escalating the debt most extravagantly. Simply put, they are 'sharks.'

I think one of the ET posted earlier saying that only medical bills should be protected under BK(with minor conditions). I agree that it should be all or none. either include student loans just like all other loans, or exclude everything(foreclosing, credit debt, etc). (Personally, I think foreclosure protection should only be given to the first home only, and rest of the investment properties should be excluded from this protection).

To sum it up, debt is a debt no matter how you look at it, and it should be paid back or be protected. Imagine what would happened if govt decides to ban foreclosure protection for homeowners, and everything must be paid back.............i'd say mass emigration.

 

[forsalenyc]

Quote from Vinny1:

No one should take out loans for college. If you don't have the cash to pay for it upfront, then you don't go. With less people being able to pony up the cash, tuitions will come down.

I think Universities could threaten our govt for protection first.........like the banks.

 

[stevegee58]

Quote from forsalenyc:

I think Universities could threaten our govt for protection first.........like the banks.

I'm a libertarian at heart and I'm left scratching my head how the gubment even got involved in college loans in the first place. Our founding fathers would have an aneurysm if they could see the sort of crap going on now.

 

[forsalenyc]

Quote from stevegee58:

I'm a libertarian at heart and I'm left scratching my head how the gubment even got involved in college loans in the first place. Our founding fathers would have an aneurysm if they could see the sort of crap going on now.

Our govt needs to think and see farther ahead. i mean, look at what they are doing..........coming up with 'band-aids' such as FHA loans. they need to check on the default rates on these.

 

[l2tradr]

Quote from Vinny1:

No one should take out loans for college. If you don't have the cash to pay for it upfront, then you don't go. With less people being able to pony up the cash, tuitions will come down.

Between this idea and the one that parents shouldn't pay for the tuition, that means NO ONE will go to college before they turn 35-40. How the hell is a 19 year old going to save up 50-100K to go to college, by flipping burgers? Or perhaps working shitty jobs from 19 to 30 and save up? Because they sure won't get anything high-paying with no skills or education, neither of which they would have under your "plan"...

The solution lies in government subsidies, like in the rest of the world. Education IS important. Couple that with entrance exams to weed out unqualified candidates.

 

[dandxg]

Quote from l2tradr:

Between this idea and the one that parents shouldn't pay for the tuition, that means NO ONE will go to college before they turn 35-40. How the hell is a 19 year old going to save up 50-100K to go to college, by flipping burgers? Or perhaps working shitty jobs from 19 to 30 and save up? Because they sure won't get anything high-paying with no skills or education, neither of which they would have under your "plan"...

The solution lies in government subsidies, like in the rest of the world. Education IS important. Couple that with entrance exams to weed out unqualified candidates.

I agree and you just touched on an important point I have been mentioning for some time. In Europe, kids only go to college if they test well, the others don't go to Gymnasium, high school for smart kids, the get a basic education and learn a trade. What's wrong with that? The world needs car mechanics and hair stylists, etc. Why do many kids in the US have to go into debt to become an auto mechanic from some private school. Teach them a trade on the taxes we already pay.

 

[l2tradr]

Quote from dandxg:

I agree and you just touched on an important point I have been mentioning for some time. In Europe, kids only go to college if they test well, the others don't go to Gymnasium, high school for smart kids, the get a basic education and learn a trade. What's wrong with that? The world needs car mechanics and hair stylists, etc. Why do many kids in the US have to go into debt to become an auto mechanic from some private school. Teach them a trade on the taxes we already pay.

Exactly. The problem is, there is no political will to implement that. In a way, understandably so (for the wrong reasons). As the employer (the one that lobbies all the political parties), wouldn't you want your future employees in debt? I know I would, as they will work for less money, longer hours and less complaining. Their choices would be limited, as the bills need to be paid. When someone is educated AND debt-free (perhaps has savings after a few years), they have more freedom.

 

[trader_arb]

Quote from l2tradr:

Exactly. The problem is, there is no political will to implement that. In a way, understandably so (for the wrong reasons). As the employer (the one that lobbies all the political parties), wouldn't you want your future employees in debt? I know I would, as they will work for less money, longer hours and less complaining. Their choices would be limited, as the bills need to be paid. When someone is educated AND debt-free (perhaps has savings after a few years), they have more freedom.

No, its not a conspiracy, because it is creating a problem that could eventually be strong enough to overthrow the government....You think people will complain less when their standard of living drops due to low wages and high debt?

Its simple. Government offers too many loans to whoever wants them, demand increases, and tuition increases. Everyone feels they or their kids are entitled to a college education.