This student loan debt crisis thingy is starting to scare me

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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 12:54 pm

Factorial wrote:When loan forgiveness occurs, do the Feds still pay the banks? If so then the tax payers are subsidizing the colleges, banks, and employers much like the Feds are subsidizing employers by giving food stamps to employees making crap wages at WalMart, etc.



I think the FED's buy the notes, so they actually hold the debt. Atleast that's what they did with mortgages. The idea was for the banks to originate the loans and the fed to buy the debt so the banks would have more cash to lend. (ie, banks would abuse this system)
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Re: This student loan debt crisis thingy is starting to scar

Postby CrazyJoeDavola on Thu Nov 21, 2013 12:57 pm

Factorial wrote:When loan forgiveness occurs, do the Feds still pay the banks? If so then the tax payers are subsidizing the colleges, banks, and employers much like the Feds are subsidizing employers by giving food stamps to employees making crap wages at WalMart, etc.


You are right. Only federal loans (stafford, perkins, etc.) are eligible for forgiveness. I think it works this way... the fed gathers all of the loans from private services when you consolidate, the fed now holds the loans and takes on the risk, after 10 / 20 /25 years, depending on the program, the loans are forgiven. Basically the fed pays for the loans up front, then doesn't recoup their full costs once they are forgiven.

At this point, the interest they are making (between 4.5% and 8.6%) on all of their other loans actually generates an overall profit for the federal government, but we are still years away from all these forgiveness programs and the corresponding payment periods really kicking in.

So yeah, you can look at it as tax payers subsidizing universities. You can also look at it as the states cutting funding to public schools, which in turn raise tuition, which is passed onto loans. So the fed is subsiding public state schools.
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Re: This student loan debt crisis thingy is starting to scar

Postby the riddler on Thu Nov 21, 2013 1:08 pm

The poster made a good point above about parents today not really being aware of how much more expensive college is than it was when they went to school. They know the importance of getting a degree but don't realize that their children are paying 3x as much as they did for the same thing. Schools are paying bigger salaries to employees, hence the higher tuition costs. Also, there are always new buildings that are built and the price is passed on to students. The government is giving out loans and making a profit when the students default on them. The dream of having everyone go to college is nice, but taking advantage of people and saddling them in debt for essentially forever is a joke. People need to wake up to the reality and not get sucked into the big business that college has become. Unless you're going to a prestigious institution or a place that pretty much guarantees you'll get a good paying job after you graduate then you should be a little wary of how much you're paying.
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Re: This student loan debt crisis thingy is starting to scar

Postby pressure=9Pa on Thu Nov 21, 2013 2:02 pm

This has been a topic of conversation at my home recently, although our oldest is only 5. My wife comes from a family whose attitude has always been that you should always get a degree by any means needed. In fairness, their persepective is that my wife's father is a talented and skilled laborer who has always done ok, but probably could have advanced further with a more formal education. Her mother got her BS in education late in life, and taught public school until last year.

My problem is that I see that we are only a few years away from the average degree not paying for itself in strictly economic terms, and maybe we're already there. The problem is the depending on what my daughter decides to do, it may require a college degree even if the economics aren't there.

In my view the fundemental issue is that as a society, we send far too many kids to college. Now, try to get elected into any public office having ever muttered that last statement outloud. In my business, we can never find, train, or retain enough skilled laborers (machinists, welders, electricians, etc.) to be confortable with our work force. I see that being a good area to encourage a 16 year old to move toward, assuming (s)he has the appropriate attitude and skill set. However, our culture assumes that people moving into those fields are the ones that "couldn't" go to college, and are looked down upon.
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 2:09 pm

pressure=9Pa wrote:
In my view the fundemental issue is that as a society, we send far too many kids to college.


This will continue to be the case as long as students continue to pursue degrees in anthropology, archeology, photography, ect. If there is a demand schools will continue to provide those degrees. The sooner demand wanes the better. Its negligent thinking on the part of high school seniors to not at the minimum to do a google search of the top 10 trending growth careers and see if any of those interest them. What you like to do and what you can get paid to do should be one in the same.
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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 2:17 pm

Oh come on. If someone wants to go through the process and get that degree, they should have that right. That's why I think some basic lending principles need to be introduced into the equation. If a kid wants to take out $60K to get a 4 year degree in anthropology, they'd better have some outstanding potential (or deep pocketed parents to bail them out if need be).
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Re: This student loan debt crisis thingy is starting to scar

Postby CrazyJoeDavola on Thu Nov 21, 2013 2:21 pm

I still blame the parents more than the 18 year old kid. The kid has never had to think about debt, monthly expenses, career prospects, potential salary, value of a degree in x, y, or z. This is up to the adult influences in their life to help guide them.

We are definitely at the point where the "get a degree at any cost" and "pursue what you enjoy" concepts are not just impractical, they are flat out dangerous and have a substantial impact on your economic security for decades. I'm hoping that us 20 somethings will be much smarter consumers when it's our turn to help our kids pick a higher education and career path, largely because we learned our lesson the hard way.
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 2:26 pm

Troy Loney wrote:Oh come on. If someone wants to go through the process and get that degree, they should have that right. That's why I think some basic lending principles need to be introduced into the equation. If a kid wants to take out $60K to get a 4 year degree in anthropology, they'd better have some outstanding potential (or deep pocketed parents to bail them out if need be).


I agree completely. If they want to get the degree there should be nothing to stop them. But to expect a job with a good paying wage is ridiculous.
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 2:30 pm

CrazyJoeDavola wrote:I still blame the parents more than the 18 year old kid. The kid has never had to think about debt, monthly expenses, career prospects, potential salary, value of a degree in x, y, or z. This is up to the adult influences in their life to help guide them.

We are definitely at the point where the "get a degree at any cost" and "pursue what you enjoy" concepts are not just impractical, they are flat out dangerous and have a substantial impact on your economic security for decades. I'm hoping that us 20 somethings will be much smarter consumers when it's our turn to help our kids pick a higher education and career path, largely because we learned our lesson the hard way.


To be honest, I dont have anyone close to me who will "have to learn the hard way". I really find it hard to believe I am in the minority. IMO the cost of higher education is of greater concern than dumb people picking dumb majors.
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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 2:37 pm

thehockeyguru wrote:
CrazyJoeDavola wrote:I still blame the parents more than the 18 year old kid. The kid has never had to think about debt, monthly expenses, career prospects, potential salary, value of a degree in x, y, or z. This is up to the adult influences in their life to help guide them.

We are definitely at the point where the "get a degree at any cost" and "pursue what you enjoy" concepts are not just impractical, they are flat out dangerous and have a substantial impact on your economic security for decades. I'm hoping that us 20 somethings will be much smarter consumers when it's our turn to help our kids pick a higher education and career path, largely because we learned our lesson the hard way.


To be honest, I dont have anyone close to me who will "have to learn the hard way". I really find it hard to believe I am in the minority. IMO the cost of higher education is of greater concern to me than dumb people picking dumb majors.



Yeah, that's exactly what I think too. This is a huge product of crony capitalism. Colleges become unlimited money making machines, they can charge exorbinant amounts to house kids for 8 months a year and hold some classes and sport matches and what not. There is no consumer check, kids will pay whatever the college chooses, the college collects the money from the lending companies, the kid has a great four years, and then spends the next 20 years paying it back.

We have no idea what we're paying for. What does it cost for the dorms? The food? To have a gym? I'd love to know what the margin is on the classes. divide the cost of paying the educators with the amount of revenue those credits generate, then look at the fixed costs of the buildings and tools they use. Considering that non tenured doctorates teach a lot of courses I would really like to see the marginal cost of educating.
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Re: This student loan debt crisis thingy is starting to scar

Postby Letang Is The Truth on Thu Nov 21, 2013 2:39 pm

i feel like troy loney has 1 post per day that mentions crony capitalism
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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 2:40 pm

if we're talking education and healthcare...yes. It's so blatant to me.
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Re: This student loan debt crisis thingy is starting to scar

Postby CrazyJoeDavola on Thu Nov 21, 2013 2:41 pm

Hockeyguru, I have really had the opposite experience. Approximately half of my co-workers and friends under the age of 30 came out of school with student debt in the $30k to $60k range (sample size of about 20 people off the top of my head, so I realize that's not very precise). Every one of them is delaying major life milestones like car purchases, home purchases, marriage etc. Maybe I am in the minority, but it is definitely a growing one.
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Re: This student loan debt crisis thingy is starting to scar

Postby CrazyJoeDavola on Thu Nov 21, 2013 2:51 pm

Troy Loney you completely right. The colleges have no reason to lower their price or to make cuts if people just keep blindly paying because of stupidity, easy loan money, or whatever other lack of consumer checks that you want to think of.

As it goes right now, they have incentives to build new dorms in which every freshman has a personal bathroom and bedroom, they have incentives to make a dining hall with 100 options and charge $10 per meal (which equates to roughly $800 per month on food for one college student!), they have incentive to create the "Assistant to the Vice President of Organizational Collaboration and Synergy Development of Diversity Communications" position... All because people just keep showing up and paying whatever they ask. This is partly because they are trapped and college is actually important for most jobs, but also partly because we are dumb and place too much of a value higher ed and blindly write blank checks.
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Re: This student loan debt crisis thingy is starting to scar

Postby pittsoccer33 on Thu Nov 21, 2013 2:57 pm

Theres plenty of solutions to change things going forward - but what about the people who are already screwed?

Short of another Porkulus bailout, what can you do?
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 2:58 pm

CrazyJoeDavola wrote:Hockeyguru, I have really had the opposite experience. Approximately half of my co-workers and friends under the age of 30 came out of school with student debt in the $30k to $60k range (sample size of about 20 people off the top of my head, so I realize that's not very precise). Every one of them is delaying major life milestones like car purchases, home purchases, marriage etc. Maybe I am in the minority, but it is definitely a growing one.


I completed my MBA last year @ CMU, and have roughly 90k of debt. I am far better off now (paying down both my undergrad and grad loans) than I was when I was deferring my undergrad loans. Selecting an advanced degree that allowed me to advance in my field was a game changer. I cant speak to what decisions your co-workers and friends made, but at face value they sound like poor ones.
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Re: This student loan debt crisis thingy is starting to scar

Postby Rylan on Thu Nov 21, 2013 3:06 pm

pittsoccer33 wrote:Theres plenty of solutions to change things going forward - but what about the people who are already screwed?

Short of another Porkulus bailout, what can you do?


Hope they all hit the lottery and each get 60k after tax.
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 3:12 pm

Rylan wrote:
pittsoccer33 wrote:Theres plenty of solutions to change things going forward - but what about the people who are already screwed?

Short of another Porkulus bailout, what can you do?


Hope they all hit the lottery and each get 60k after tax.


Allow people to declare bankruptcy and have their debt wiped clean. Why are student loans different?
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Re: This student loan debt crisis thingy is starting to scar

Postby Rylan on Thu Nov 21, 2013 3:13 pm

thehockeyguru wrote:
Rylan wrote:
pittsoccer33 wrote:Theres plenty of solutions to change things going forward - but what about the people who are already screwed?

Short of another Porkulus bailout, what can you do?


Hope they all hit the lottery and each get 60k after tax.


Allow people to declare bankruptcy and have their debt wiped clean. Why are student loans different?


Cause, its debt for an intangible object.
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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 3:15 pm

you can discharge credit card debt with no physical collateral.
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Re: This student loan debt crisis thingy is starting to scar

Postby CrazyJoeDavola on Thu Nov 21, 2013 3:16 pm

thehockeyguru wrote:
CrazyJoeDavola wrote:Hockeyguru, I have really had the opposite experience. Approximately half of my co-workers and friends under the age of 30 came out of school with student debt in the $30k to $60k range (sample size of about 20 people off the top of my head, so I realize that's not very precise). Every one of them is delaying major life milestones like car purchases, home purchases, marriage etc. Maybe I am in the minority, but it is definitely a growing one.


I completed my MBA last year @ CMU, and have roughly 90k of debt. I am far better off now (paying down both my undergrad and grad loans) than I was when I was deferring my undergrad loans. Selecting an advanced degree that allowed me to advance in my field was a game changer. I cant speak to what decisions your co-workers and friends made, but at face value they sound like poor ones.


My co-workers and I actually have very similar stories to yours. We all have advanced degrees and have increased our earnings power.... I think the two of us are just looking at the scenario differently. Yes we have both increased our earnings power, and yes we will be able to pay the debt off. But your $90k with 6% or 8% interest is also a game changer. Over 10 years, that's $124K in payments at the standard 6.8%, $165K over 20 years. There's a huge opportunity cost to that. Invest it in a retirement account instead, and it's worth well over a million when you're in your mid 60's. Yes, you'll be able to pay it, and yes you'll make more because of the degree than you otherwise would have, but it's going to have an impact on our short term decision making and lifelong earnings. In addition, both you, me, and the co-workers I refer to have been successful. If you don't find the right job out of school or spend some time underemployed, you just get set back further.

I know, I know, it sounds like I'm saying "well wouldn't it be nice if we could have good jobs but not have to take financial sacrifices to get there". But my point is that higher education is turning into a very high risk / high reward gamble, and exorbitant cost of the gamble is going to substantially impact even people like you you that "win" the gamble, let alone those that don't. I'm just not sure if that is sustainable or wise as a society. Just you can afford it, doesn't mean that it's not an overpriced and risky venture.
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Re: This student loan debt crisis thingy is starting to scar

Postby Rylan on Thu Nov 21, 2013 3:17 pm

That was the argument I always heard. There was nothing tangible to allow it. I don't know the answer, but what I do know is it sucks lol.
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Re: This student loan debt crisis thingy is starting to scar

Postby Troy Loney on Thu Nov 21, 2013 3:19 pm

I know people hate this idea, but education financing requires more government oversight / regulation. They are already there, they guaranty the loans and finance all the debt. The current situation just allows colleges to pillage the government and then let the government handle the collection of all the education expenses.
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Re: This student loan debt crisis thingy is starting to scar

Postby thehockeyguru on Thu Nov 21, 2013 3:21 pm

CrazyJoeDavola wrote:
thehockeyguru wrote:
CrazyJoeDavola wrote:Hockeyguru, I have really had the opposite experience. Approximately half of my co-workers and friends under the age of 30 came out of school with student debt in the $30k to $60k range (sample size of about 20 people off the top of my head, so I realize that's not very precise). Every one of them is delaying major life milestones like car purchases, home purchases, marriage etc. Maybe I am in the minority, but it is definitely a growing one.


I completed my MBA last year @ CMU, and have roughly 90k of debt. I am far better off now (paying down both my undergrad and grad loans) than I was when I was deferring my undergrad loans. Selecting an advanced degree that allowed me to advance in my field was a game changer. I cant speak to what decisions your co-workers and friends made, but at face value they sound like poor ones.


My co-workers and I actually have very similar stories to yours. We all have advanced degrees and have increased our earnings power.... I think the two of us are just looking at the scenario differently. Yes we have both increased our earnings power, and yes we will be able to pay the debt off. But your $90k with 6% or 8% interest is also a game changer. Over 10 years, that's $124K in payments at the standard 6.8%, $165K over 20 years. There's a huge opportunity cost to that. Invest it in a retirement account instead, and it's worth well over a million when you're in your mid 60's. Yes, you'll be able to pay it, and yes you'll make more because of the degree than you otherwise would have, but it's going to have an impact on our short term decision making and lifelong earnings. In addition, both you, me, and the co-workers I refer to have been successful. If you don't find the right job out of school or spend some time underemployed, you just get set back further.

I know, I know, it sounds like I'm saying "well wouldn't it be nice if we could have good jobs but not have to take financial sacrifices to get there". But my point is that higher education is turning into a very high risk / high reward gamble, and exorbitant cost of the gamble is going to substantially impact even people like you you that "win" the gamble, let alone those that don't. I'm just not sure if that is sustainable or wise as a society. Just you can afford it, doesn't mean that it's not an overpriced and risky venture.


Exactly. Which gets back to my question as well as Troy's. How do you cap what colleges can charge? I believe the answer is you can't. As a consumer you have the right to choose which instiution you go to. Whether its spending 100k+ on Harvard or going to CCAC. I dont think the government should put caps on institutions, or in any way attempt to protect us from ourselves. I'm confident I can make the best decision for me. I could have gone to Pitt and paid half the price, but I didnt because I deemed the investment was worth the cost.
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Re: This student loan debt crisis thingy is starting to scar

Postby columbia on Thu Nov 21, 2013 3:24 pm

Are you guys saying that because the fed. government is backing the loans, they should have the right to tell you what you can't major in?
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