Hey! Glad to see this on HN. I'm a volunteer developer for this group, and we are looking for more hands. If you're interested in helping us out, feel free to reach out to me on GitHub (karissa) or Twitter (captainkmac).
Borrowing money is risky, and includes risks beyond a straight up cost/benefit analysis. It also makes the borrow more vulnerable (not just to the lender, but to others as well). It should never be entered into lightly.
I sympathize with these folks who have gotten themselves into this situation, but they did make the choice of their own free will. If they didn't do a proper analysis ahead of time, it doesn't seem fair to shift the cost of their decision onto others who did, or who are responsibly shouldering the burden that they took on.
There is a definite moral hazard in the current system (it encourages indebtedness and inflates the cost of education), but that doesn't make it right to create another moral hazard in trying to correct it.
For those trying to escape poverty, disadvantaged teenagers must choose between debt and the permanent surrender of their hopes and dreams. Hardly a situation where the borrower can be expected to make a dispassionate calculation, nor is it a situation where there's a clearly correct course to be found.
Education used to be 'free' here in The Netherlands (certain amount of money each month for students). They recently turned this into a full fledged loan. Although the interest is very low it dramatically changes how students approach studies and immediately start to think in terms of ROI ... I fear for the future of Dutch education. I'm glad I just wrapped up my undergrad and am currently borrowing as well for my Master's but thankfully (I'm one of the few) who have 'great' career prospects.
The American system is really really screwed up if you are trying to escape poverty.
I think in the USA college is too expensive, but I'm not convinced it should be free. I like the idea of students actually having some skin in the game. Also I don't want tax dollars to pay for someone to study poetry for 4 years for free. You'll get into a situation like Norway, where it takes a master's to get a foot in the door, and no one gets a job until they are 30.
Compared to USA Norway has a very high living standard and an extremely good social care system, USA is ages behind that, really very much behind. Also participation in politics and society is much better organized and more effective than what we see in the pseudo-democratic system that USA represents today.
So free eduction may play a role in producing positive results for the whole society. Also maybe the poets are more important to this than a person from a country where no free education is available can understand.
> Also I don't want tax dollars to pay for someone to study poetry for 4 years for free.
In a certain sense you already are, by indirectly bearing the costs of widespread loan defaults. At least the government is in a position to effectively address the overabundance of worthless degrees being issued.
What on earth makes you think the choice was not coerced? A student before the age of 18 is presented with an option. Here's one path - be in massive debt. Here's the other path - your hopes and dreams are shit. That's freedom? Hardly.
It's funny how all the moral hazard trolls come out of the woodwork as soon as something benefits poor people. Bank bailouts? No hazard. Corporate tax cuts? No hazard. Corporate subsidy? No hazard. Private prisons? No hazard. Help indentured slaves? HAZARD!
I respectfully disagree. No one is forced to take out a loan and go to college or university. You said it yourself, they do have options.
There might however be a lot more traction on one of the paths as compared to the other.
You're presenting this proposition as that the only way someone can make it, is by pursuing a higher education (with severe debt). I, again respectfully disagree. It is not that binary.
First of all, the path of not going into higher education is not as ridiculous as you make it sound.
Secondly, there are many variations of how to finance your higher education. You do not have to take out a loan. Especially not for the full duration of your studies.
No. Ignorance is to blame. Can the 18 year old be expected to make good financial decision? Probably not, especially if they only have a government school education which most likely does not teach basic economics. However, does that 18 year old not have parents?
And what do we end up with when these 18 year olds become 23 year olds with a load of debt and still no basic idea of economics or understanding what it means to go into debt? We end end up with an even bigger problem.
Agreed. I feel for these students as well, as there are a lot of social pressures to go to college.
But that empathy is short lived. We all have a free will. All these students could do the math prior to the commitment (I did!) and see the mountain of debt they'd be in. To say that it was someone else's fault is just yet another cop-out of a generation where it is socially acceptable to walk away from commitments and refuse to accept responsibility.
You act as if the consequences were clear. Whatever analysis even the most sober and risk-averse 18-year-old student did in 2005 about her student loans could not have predicted the massive economic flustercluck we've been through in the past 10 years. Flawed inflation and wage growth assumptions alone have already likely doubled the long-term cost of those loans, even if you assume the student found the job they were essentially promised when they committed to the deal. The fact is that these kids were misled by a delusional society and egged on by greedy loan providers and desperately underfunded state universities.
You call it a moral hazard to forgive the debt, but the students who took the loans are the least-bad actors in this scenario.
Lending money is risky, and includes risks beyond a straight up cost/benefit analysis. It also makes the lender more vulnerable (not just to the borrower, but to others as well). It should never be entered into lightly.
What I mean is this: a lender who cannot choose who to lend to wisely will be pushed out of a free market. If the people they are lending to cannot pay them back in large numbers, they have no one to blame but themselves.
I have to be honest, if some kind of student-loan amnesty ever goes into effect, I'll be a little pissed that I prioritized paying mine off with my earnings for the first half-dozen years out of school. Just imagine what I could have done with those tens of thousands of dollars instead...
It's not just about who's better or worse off. It's about the basic principles of meeting one's obligations and of applying the law equally. Would you be equally flippant about a law allowing any other group to shed their obligations without consequences? Bankers, perhaps? Or members of any ethnic group other than your own? It wouldn't affect you directly, as you'd be neither the debtor nor the creditor. Those people would be better off without you being worse off . . . except that we're all worse off when the foundations of civil society are weakened.
The situation with corrupt lenders and pseudo-educational institutions leaving others with nothing but massive debt cries out for relief. However, that relief should extend to a ll those who have been victimized - not just those who have yet to pay. Laughing or sneering at those who paid already, because it was both legally required and financially prudent that they do so, is pretty abhorrent.
"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread." - Anatole France
To hell with your laws when they serve to oppress.
Such a binary either/or kind of thinking. Reductionist, too. Did it ever occur to you that there are better and worse ways to deal with bad laws, or bad application of laws? Anarchy is a markedly inferior alternative which every time in history has only enabled a new set of oligarchs to rise.
> Someone else would be better off without making you worse off
That money doesn't come from nowhere; someone is paying for it.
Student loans are already provided at below-market interest rates[0], which means they're being subsidized by taxpayers, either explicitly or implicitly.
[0] Not all student loans, but the majority if not all of undergraduate federal student loans
I like the way that these articles and the comments ignore the elephant in the room: The cost of living while attending college.
Here is a data point for my local State University. I happen to work there, so I can verify that these numbers are pretty much correct. You can pay cheaper rent, but you'll pay back the difference in car mileage and/or roommate drama.
Tuition is (roughly) 40 percent of the cost. What really drives up the student debt is the cost of living. If we really wanted to do something about student loan debt, I think we'd do better to apply the same political pressure to the cost of living as we do to the rate of tuition.
Indiana University [1]
Tuition: $10,388
Room and board: $9,794
Books and supplies: $1,230
Transportation: $1,030
Personal Expenses: $2,096
The "books and supplies" section would be interesting to break down. How much of it is due to needlessly churning out new editions to cut off the used book market? In the age of the iPad, shouldn't someone be producing first rate, open source textbooks in core subjects?
It's a pittance of the total, but that $1,200 (x4) could still add up to a lot with interest.
Let me answer that with a statement and an anecdote.
The statement: The proportion of costs I outlined, from my point of view, have always been true. I finished my first degree in 1997.
The anecdote: All the professors in my computer science program (I'm not going to name-drop, but I had some great teachers that insisted that I learn scheme, then Java, then C, then assembly) either had no required text or gave syllabi that referenced several versions of their listed texts. The context was that we were free to get the best deal possible on the texts.
There's two problems when students choose an institution:
1. Poor and too often manipulated information about a school's job placements.
2. Students are short sighted about debts and schools don't care because the money is government guaranteed.
Solvable problems! Have an independent party collect and report on job placement. Then tie a school's loan eligibility more closely to the ability of recent graduates to pay.
Those numbers are horrific. My entire UK degree debt will be about $60k at 3% and I won't have to make any repayments until I earn about $30k pa.
For my degree it should be a net profit for me. For less well paid occupations one is insulated against low wages. I am happy that I contribute to the advancements in non vocational learning.
My fellow students and I are said to contribute $40m pa to the local economy which is much needed in this deindustrialised part of the country - all accommodation is provided by third parties.
But $45k per year is an outrage. It surely can't be based upon the cost of provision.
You're right, it isn't. It's largely a for-profit industry, even the 'non profit' colleges. Most teachers, especially adjuncts, make very little in comparison to what the students are paying -- look at NYU, 50k/year per student in a class of 20 where the teacher is paid 5k/class. The math doesn't add up.
Would a self organised University be possible in the US system?
A group of teachers using cheap space and online communications to provide lectures/support/assessment with students then taking exams accredited by another institution? Possibly with sponsorship/organisational support from a voluntary sector organisation?
That is basically how most Universities outside Oxford/Cambridge/Edinburgh/Aberdeen started in UK in the Victorian period. The University of London was set up to validate degrees provided by various constituent colleges in the regions. There was a strong non-conformist (Baptist/Methodist) input on the funding and organisational side.
Faculty would love to disintermediate the ever growing administration. Accreditation is an issue, and overcoming the importance of brand. Competing with the for profit niche might work though.
UK Background: Last government (the coalition) decided to move part of the financial burden of a University education from the state (in the form of a 'teaching grant' paid directly to the University) to the student (in the form of a low rate loan as described by SixSigma). This was entirely within the ideological position of one of the coalition partners, but was a bit of a u-turn for the other partner with rather drastic results in terms of support.
The Student Loan Company in the UK has to borrow money at commercial interest rates in the financial markets. The difference in costs between the interest rates paid by the company and the interest paid back by the students will be met by the government. It isn't clear to me if there will actually be any net saving to the taxpayer at all - I recollect seeing (but can't find a reference at present) an analysis that suggested that the policy will actually cost more money compared with the previous direct grant system for the next 20 years or so. I suspect the payback period will depend on the number of graduates who get stuck in low paying jobs.
It's based on supply and demand. Since anyone and their dog can get a student loan, and the federal government guarantees those loans, demand for college education is basically inelastic. You can keep raising prices without losing students: they're just going to borrow more money. It's basically the same mechanism as that of subprime loans, where anyone got to buy a house they couldn't afford, except that it's federally mandated.
That $45k / year is for private non-profit colleges, which are the most expensive kind (even worse than for-profit), and not the norm. For an in-state public University, the number is more like a quarter of that.
There are a lot of old, prestigious private non-profit colleges (Princeton, Harvard, MIT) who can charge a lot because of their reputation. For-profit colleges are mostly very new and tend to have bad reputations.
This is a much more controversial statement than most HNers give it credit.. It's by no means settled 'science' that government loan subsidies are the largest (or even a large) determinant of tuition costs. Colleges used to be much more subsidized by taxes which have been pared back for decades, the loans are the result of this change -- not the cause. Total tuition costs increase much faster than inflation but look at total costs per student for the college and it's a very different story.
Work and save money before you enter a University. If you work and save for 2 years after high school you gain many advantages:
1) You will save some money to pay for school.
2) Because you are a bit older a new world of grants are available to you since you are returning to education.
3) Because your income will probably be fairly low you will qualify for more grants due to this fact.
4) Gives you time to figure out what you want to go to school for and possibly make you take it more seriously when you start.
Another option is to join the military and qualify for a lot of additional grants that way. 4 years of service opens a lot of doors. There are many non-combat roles available.
There are many ways for the poor to advance themselves and not cripple themselves financially for the next 40 years.
One way to deal with the student loans crisis is for a nationwide student loan bailout. You don't have to erase the loans, just refinance them at a much lower interest rate. Currently the rate is 7%, which is just insane. For a virtually no-risk loan, which cannot even be discharged in default, that is a terribly high rate.
Refinancing will be a transfer of wealth from the rich to the poor. Good for the economy, shores up consumption, and all that. Has the added side-benefit of freeing indentured slaves.
If the current interest rate is high compared to default risk, why hasn't some private company come in to undercut the government and make a killing? I don't think it's because the banks aren't greedy enough. My guess would be that it's because of the extremely high default rate on student loans, and the extremely favorable repayment terms that government loans offer: payments capped at 10% of discretionary income, and forgiveness after 20 years (10 if working in non-profit or government)[1].
It's my impression that there isn't much private student-loan industry left, having been driven out by federal loans. What's left probably targets a different demographic from the usual one, like borrowers who have already maxed out their federal loans, which might be a riskier group.
In Sweden - the current interest rate is 1%. This is financed by the state and is low because of a multitude of factors. One being that it is practically impossible to default on the loan. It will stick around.
(The tuition is free for higher education in Sweden, but you can choose to take out a loan for your living expenses during your study period).
I would be okay with this but other things need reform. They need to cut down on bloated middle management layer in colleges. They need to cut out the shitty diploma mills that don't give graduates much success in getting jobs after graduating.
I think part of "the system" involves learning and lending institutions informally forecasting what the lifetime return on a student's education will be, and then attempting to maximize the return on the student loan(s) as an investment on those future earnings.
The learning and lending institutions clearly fucked up big-time in their forecasting, along with everyone else who was irrationally exuberant in their optimism about the future economy.
Now they are stuck between students on one hand (who have been sold a bill of goods and are seriously pissed about the pittance left over after their loan payments, if they're able to pay back at all), and the investors on the other hand (which includes not only evil bankers' money but also people who have been sacrificing in good faith for decades to contribute to their retirement accounts).
So the stage is set for a nice messy society-destroying generational war that should distract everyone from the forecasting mistakes.
Free Education is the primary attribute of a free and cultivated society. If you are living in a primitive country with no free (+higher) education, all available resources should be focused on reaching this goal as the most important evolutionary step.
Many underdeveloped societies and failed states can be identified by looking at the education situation. In the worst cases education is held hostage by a leading group of brutal oligarchs that are raping education into a "business-model" - these societies will need a lot of help from other nations to overcome the dark neandertaler age they are stuck in and it is important to teach them about the basic abilities of Homo Sapiens Sapiens - solidarity, compassion and love.
Education is never free; it always consumes some resources. The question is who should pay the cost: the student or everyone else?
In cases where basically everyone needs the education to succeed in society and the positive externalities are large (e.g., teaching young children to read), I think that the case for "everyone else" paying is pretty strong. In cases where the education is mostly consumption (i.e., the benefits all go to the student), the case for subsidizing is weak (e.g., a trust-fund kid getting multiple PhDs in impractical fields to have something to do).
So the main issue becomes: where does a Bachelor's degree lie on this spectrum?
1. Fields of study are very heterogeneous. Some majors have a much larger return on investment than others, so subsidizing all "higher education" equally probably doesn't make sense.
2. Even in Western Europe, college attendance rates are only around 1/3. Is it right to have that 1/3 subsidized by the 2/3 who don't go to college, and who on average have lower income?
3. (More speculative) To some extent, the payoff to a college education is not because of what you learn, but in signaling that you're a smart, conscientious, perseverant person. In that case, a degree becomes less valuable the more people that have them, and the case for subsidizing what has become an arms race becomes a lot weaker.
4. If we spend a lot of money and effort propping up the current, very expensive, forms of higher education, we might discourage better ways of educating from emerging. One example is something like Coursera, where the marginal cost of adding one more student is basically zero, and everyone can learn from the very best educators in the field. Another would be separate institutions for education and for testing / accreditation. This would help with grade inflation, bring back the focus in the educational institutions to teaching rather than credentialing, and provide more accountability (% of graduates passing a common exam is a lot easier to compare than future income of graduates, and is less confounded by things like socio-economic status of students).
If it's a federal loan, the government will garnish your wages [1] and eventually your social security payments [2], and will withold any tax refunds. And since student loans usually can't be discharged in bankruptcy, you'll have bad credit for literally the rest of your life.
Also, you pay income tax on forgiven loans, not defaulted ones.
Here's the list of issues (signup/login related) that I'm working on now: https://github.com/debtcollective/debtcollective-web/issues/...
Here's a taste of the future: "Harnessing user data (and combining it with data gathered automatically from creditor websites and public data sets)" - https://www.newschallenge.org/challenge/data/entries/debt-co...