Student loan bankruptcy

[QuantumPion]

Or we could reform how medical education, training, and licensing works instead of forcing those people into ever larger piles of debt for no reason whatsoever. Just an idea.

Reform how? Lower the amount of required education and training? Make professors teach for free? It's easy to just throw out there "I wish medical education was cheaper".

 

[QuantumPion]

Of course it's a ridiculous concept. Allowing 18 year olds to go several hundred thousands of dollars into non-dischargeable debt is a pretty obviously silly idea. If we need more people to become doctors there are many ways to do that other than by this mechanism, so of course it wouldn't prevent people from doing that.

I say student loans should be non-dischargeable, that way they are still obtainable and people going into high-paying professions can still be successful. You say something vague about "education should be cheaper". That's all well and good but it's not a solution, it's a wish.

I personally think that high amount, undischargeable, unsecured loans to 18 year olds is generally a bad policy idea. Your mileage may vary.

Well it depends on the situation. I do not think 18 year olds should be granted enormous loans to get arts and humanities degrees at private colleges. But if they are going to medical school, I don't see why not.

 

[Spungo]

Well it depends on the situation. I do not think 18 year olds should be granted enormous loans to get arts and humanities degrees at private colleges. But if they are going to medical school, I don't see why not.

We could always go back to the old system - private loans for education. A bank will lend you tons of money to become an engineer or a doctor because they know you'll pay that money back. They'll be slightly less interested in giving you money to get your degree in Feminist Studies.

This would end the Education Arms Race. Why do you need a 4 year degree to flip burgers?? It's because most applicants will have a 4 year degree. That's how an arms race works. That's how capitalism works. Raising the bar causes the bar to be raised. If companies can get away with demanding 4 year degrees to scrub toilets, they will. As soon as there's a lack of highly educated applicants wanting to scrub toilets, companies will lower the standards. Maybe you only need an associate's degree to clean the toilets at McDonalds. I think it would be glorious to return to the days when you didn't need any education to clean toilets or mop floors.

The education arms race is really a war on poor people. You didn't have the luxury of taking a 4 year vacation while you learned about Gender Studies? Sorry, Tyrone, but you can't clean our floors for minimum wage. We're looking for someone with more education.

 

[Belegost]

Then again, if you're in a certain variety of fields, equipment like scanning electron microscopes, linear accelerators, etc., - that equipment doesn't come cheap. I think it can be argued the other way as well - those history majors - they pay for heating in a room and for some history buff to stand in front of them and lecture them for a few hours. There's no equipment. Their tuitions are subsidizing the tuitions of the engineers, physicists, etc.

I am not aware of a university that funds linear accelerators, SEMs, or other high value research equipment from the general tuition fund.

The way my grad school (and others I have discussed with peers) worked was that each lab group was responsible for providing their own grant/donation money, from which the cost of any equipment needed for research was taken out, including the costs for leasing the lab space from the university, and purchasing office furniture such as desks and chairs from the university supply. For major pieces such as an SEM, if the university wanted to use it for courses, they would pay the lab that had it for the time used (and at a rate that preferred the university.)

Further, for each student or postdoc employed by the group, the group was required to pay an overhead fee to the university (ostensibly to cover the costs of utilities and campus resources used by the employed, but on top of tuition costs) and this was significant, as a grad student I received ~25k/year salary + 30k in tuition and fees paid, and additionally the grant needed to pay 20k in overhead to the university.

 

[K1052]

Reform how? Lower the amount of required education and training? Make professors teach for free? It's easy to just throw out there "I wish medical education was cheaper".

Yes, my plan is to have Dr. Nick do all surgeries.

I'd rather make medical education free and open to a wider pool of people who would otherwise not consider it due to cost. A significant amount of otherwise capable people won't consider it because they don't want the debt burden. Simply make a deal that says their education and training will be paid for in exchange for a certain number of years on contract as a primary physician. The country has an emerging crisis in the number of available doctors to care for a growing and aging population. Shortages of adequate, timely medical will cost the country a lot more than educating more doctors/nurses.

 

[QuantumPion]

Yes, my plan is to have Dr. Nick do all surgeries.

I'd rather make medical education free and open to a wider pool of people who would otherwise not consider it due to cost. A significant amount of otherwise capable people won't consider it because they don't want the debt burden. Simply make a deal that says their education and training will be paid for in exchange for a certain number of years on contract as a primary physician.

I'm pretty sure that already exists, but most people don't want to do it because it is a worse deal to work for peanuts for 10 years rather than make a lot of money but have a lot of but manageable debt. I mean you are just trading one form of debt with another.

The country has an emerging crisis in the number of available doctors to care for a growing and aging population. Shortages of adequate, timely medical will cost the country a lot more than educating more doctors/nurses.

Yes that is true but it is a tragedy of the commons situation that is not easily fixed.

 

[QuantumPion]

We could always go back to the old system - private loans for education. A bank will lend you tons of money to become an engineer or a doctor because they know you'll pay that money back. They'll be slightly less interested in giving you money to get your degree in Feminist Studies.

Sounds good to me. Unfortunately again the problem is those in a position to make such a change have a vested interested in keeping the status quo.

 

[realibrad]

Of course it's a ridiculous concept. Allowing 18 year olds to go several hundred thousands of dollars into non-dischargeable debt is a pretty obviously silly idea. If we need more people to become doctors there are many ways to do that other than by this mechanism, so of course it wouldn't prevent people from doing that.

I personally think that high amount, undischargeable, unsecured loans to 18 year olds is generally a bad policy idea. Your mileage may vary.

Then, how to we pay for these loans?

If getting an education is good for the economy, then why do we need the government to subsidize anything?

Colleges have recruiters that go around the country looking for HS talent to play sports for their school. The reason is because sports pay big money. Its worth it for the school to pay someone and invest in not only the recruiter but the student as well. Why would that not also work for a degree? If the expected income the grad would get is higher than the cost of the degree, then colleges would be more than glad to spend money investing right?

 

[Doc Savage Fan]

This will be the end of collage education for the poor. Those loans are what make a degree possible for many people, and the only reason they get them is that they can't be discharged in bankruptcy.

The poor typically get tons of financial aid as their EFC is zero...any debt they incur will be much less than those from "middle class" families.

 

[fskimospy]

Then, how to we pay for these loans?

If getting an education is good for the economy, then why do we need the government to subsidize anything?

There are lots of things that are good for the economy that we need the government to subsidize due to various incentive/capability structures. For example, K-12 education. If you limited basic education to only those who could pay for it like in the old days I think most people would agree our country would be worse off. Sure there could be some alternative financing somehow, but that seems like it would be predatory lending city.

Colleges have recruiters that go around the country looking for HS talent to play sports for their school. The reason is because sports pay big money. Its worth it for the school to pay someone and invest in not only the recruiter but the student as well. Why would that not also work for a degree? If the expected income the grad would get is higher than the cost of the degree, then colleges would be more than glad to spend money investing right?

You can recruit top sports players because there aren't that many of them. While it might be practical to send out recruiters to grab up people for your ten person basketball team it doesn't sound practical to send out recruiters to fill your 8,000 person freshman class, especially when you account for different interdepartmental priorities, etc. Coordinating it would be a logistical nightmare, at a minimum.

 

[Mxylplyx]

The arms race many colleges are engaged in with building ever more extravagant student amenities, athletic facilities, and other major capital projects of questionable need in the face of declining public funding has to stop.

What sucks is that those buildings are now sunken costs, and thus cannot simply be undone. I was shocked at the facilities being constructed at my alma mater in the depths of the recession. The rec center they were building could be mistaken for a luxury spa. It doesnt seem like a big deal until you realize that many kids wont be able to afford college due to these unnecessarily lavish luxuries. We need to reign in the out of control arms race fueled by the unshakable dogma that a college education is the only way to a successful career. I've worked with highly capable software engineers who are shut out of major corporate opportunities because of their inflexible requirement of a college degree.

 

[realibrad]

There are lots of things that are good for the economy that we need the government to subsidize due to various incentive/capability structures. For example, K-12 education. If you limited basic education to only those who could pay for it like in the old days I think most people would agree our country would be worse off. Sure there could be some alternative financing somehow, but that seems like it would be predatory lending city.



You can recruit top sports players because there aren't that many of them. While it might be practical to send out recruiters to grab up people for your ten person basketball team it doesn't sound practical to send out recruiters to fill your 8,000 person freshman class, especially when you account for different interdepartmental priorities, etc. Coordinating it would be a logistical nightmare, at a minimum.

A single Division I football team can have a max of 85 scholarships. That is for 1 sport.

http://www.scholarshipstats.com/ncaalimits.html

Its a billion dollar industry, so schools are willing to spend a lot of money on it.

I agree that the structure would not be scalable, but it could be done. The school could search out private funding to back their degrees. The school would then go out looking for students, or students would seek them out. The school would then figure out what degree they feel they could provide for the student, and the cost of teaching them. If they came to an agreement, they would then request a loan from the investor to back them. The school then would then get paid based off of how the agreement would be structured with the school and the investor. It could be x amount over x amount of years, with a % of the actual income earned. That would incentive the school to only teach what is needed, and to actually get the student a job.

As you know, many people that get their degree find it hard to get a job. That is because so far as the school is concerned they have their money, so job done. Nobody has the incentive to give a worth while degree. Society does not help, because they push the idea to get any degree, as it does not matter.

 

[fskimospy]

A single Division I football team can have a max of 85 scholarships. That is for 1 sport.

http://www.scholarshipstats.com/ncaalimits.html

Its a billion dollar industry, so schools are willing to spend a lot of money on it.

Exactly. For a division 1 football team, which means the pinnacle of the most profitable sport for any college, they have 85 spots to fill, which means approximately 22 scholarships to fill per year at the most prestigious schools, and football gets by FAR the most scholarships.

According to your chart if a school decided to max out its scholarships in every sport and decided to actively recruit for every scholarship, which they don't do, they would be looking to award 58 scholarships per year. (don't double count football for FBS and FCS)

It's easy to recruit for 58 people. It's a lot harder to recruit for 12,000.

 

[realibrad]

Exactly. For a division 1 football team, which means the pinnacle of the most profitable sport for any college, they have 85 spots to fill, which means approximately 22 scholarships to fill per year at the most prestigious schools, and football gets by FAR the most scholarships.

According to your chart if a school decided to max out its scholarships in every sport and decided to actively recruit for every scholarship, which they don't do, they would be looking to award 58 scholarships per year. (don't double count football for FBS and FCS)

It's easy to recruit for 58 people. It's a lot harder to recruit for 12,000.

Harder no doubt, but profitable, I would bet it is. I'm not saying the government does not have a role in helping remove frictions, but the system of just giving away money for any degree is a bit absurd.

If a college bound kid asked you for money to get a degree, would you not care about the expected return? In the system we have now, nobody else seems to. At the very least, I would think you would see the current system as being exploitive because it burdens kids with debt and a degree that will never pay it off. Only the school is winning there.

 

[Paratus]

I say student loans should be non-dischargeable, that way they are still obtainable and people going into high-paying professions can still be successful. You say something vague about "education should be cheaper". That's all well and good but it's not a solution, it's a wish.



Well it depends on the situation. I do not think 18 year olds should be granted enormous loans to get arts and humanities degrees at private colleges. But if they are going to medical school, I don't see why not.

It's not just underwater basket weaving degrees that are being priced out of the market.

My alma-mater, a Midwest top 10 engineering University, charged $18K for out of state back in the 90's. Now $43K+. That's insane. It shouldn't cost me $500K-$600K to send my 3 kids to school.

When they call looking for donations I absolutely won't give a cent. It feels to much like giving money to a relative with a gambling problem.

If families on two engineering salaries are going to struggle to cover their kids college tuition, there's no way the average family can.

Somewhere between the new construction, luxury student accommodations, fancy dinning, and the excessive increase of 6 figure administrators, colleges are going to have to find a way to reign in the spending that requires such onerous debt.

 

[realibrad]

It's not just underwater basket weaving degrees that are being priced out of the market.

My alma-mater, a Midwest top 10 engineering University, charged $18K for out of state back in the 90's. Now $43K+. That's insane. It shouldn't cost me $500K-$600K to send my 3 kids to school.

When they call looking for donations I absolutely won't give a cent. It feels to much like giving money to a relative with a gambling problem.

If families on two engineering salaries are going to struggle to cover their kids college tuition, there's no way the average family can.

Somewhere between the new construction, luxury student accommodations, fancying dinning, and the excessive increase of 6 figure administrators, colleges are going to have to find a way to reign in the spending that requires such onerous debt.

The price is going up because kids are using other people to pay for their education. The huge expenses you now see are only coming around in the last 20 years or so. The system will collapse under its own weight eventually and when that pops, it will be painful. Many people are taking on debt that their degree wont pay for.

 

[fskimospy]

The price is going up because kids are using other people to pay for their education. The huge expenses you now see are only coming around in the last 20 years or so. The system will collapse under its own weight eventually and when that pops, it will be painful. Many people are taking on debt that their degree wont pay for.

I disagree. The elite university market seems to be unsustainable, but the market where the most students go seems to be just fine. As I mentioned before their per student spending has remained flat or even declined.

Additionally the median student debt is about $30k for those who have loans, meaning actual median debt is considerably lower than that. (I have no student debt, for example. Yay!) If you look at the cost of a degree vs. the increase in lifetime earnings they are still an excellent deal, which implies costs could rise considerably further and still make economic sense.

 

[realibrad]

I disagree. The elite university market seems to be unsustainable, but the market where the most students go seems to be just fine. As I mentioned before their per student spending has remained flat or even declined.

Additionally the median student debt is about $30k for those who have loans, meaning actual median debt is considerably lower than that. (I have no student debt, for example. Yay!) If you look at the cost of a degree vs. the increase in lifetime earnings they are still an excellent deal, which implies costs could rise considerably further and still make economic sense.

For many, the cost of getting a degree is still worth it. The problem comes into play when you look at the fact that most do not finish school.

Also, this is where I got my statement that school is getting more expensive.

http://nces.ed.gov/fastfacts/display.asp?id=76

I might be reading the data wrong, but it looks to have gone up across the board.

 

[chucky2]

Except the lending institution, i.e. the federal government, will never say no. The universities get all the free money they want, government officials get their kickbacks, and taxpayers are saddled with the debt. This will lead to even higher tuition costs and even higher interest rates for those who can pay them, and a free ride 8 year all-expenses paid party for the rest. If this ever goes through, making student loans easily discharged, it will be a disaster.

Can't they just make the Fed loans non-dischargeable and the non-Fed loans dischargeable? I completely get what you're saying btw.

 

[OverVolt]

Student loan debt has officially passed _ALL_ credit card debt. This is a HUGE issue, and a completely insane move to EVER suggest allowing student loan debt to be discharge-able. The following will occur.

1) Think college is costly now? Think again. Tuition costs will be 10x the current price now to account for all of the people that will be manipulating the system to get rid of their $50k Art History / Psychology degrees.

2) Want to get extra student loans because you can't get any through the federal government? Too bad, you think banks are going to take that kind of risk? BWAHAHA

3) Think interest rates are high now? BOO HOO! They will need to skyrocket them to account for people discharging.

It can't go both ways at the same time. Its a fundamental misunderstanding about the effects of loans. Less loans will mean less money flooding into the college system. Since they temporarily create more money until paid off. Tuition would actually drop because less people could get financing to go.

 

[LegendKiller]

Obama buying votes, news at 6pm. Never gonna happen (on retroactive basis) because:
1) 2016
2) Congress
3) Strategic default as students have no assets

With my grad school loans at 6.8% I've already subsidized a score of humanities majors with absolutely no discernible skills. What we need is underwriting based on ability-to-repay, rather giving out money (bankruptcy) like it's candy.

Votes for what? Hillary isn't saying this.

1) All it takes is somebody to make it a national issue, Obama has started that, to build momentum.
2) Congress changes
3) Doesn't matter.

It is going to happen, one way or another, and it won't be armageddon. If anything it'll force fiscal discipline on students, parents, and most importantly, schools.

They will underwrite on ability when they are forced to, not a second before. Until then they'll underwrite to the government and parent co-signers who can't afford to go BK.

 

[the DRIZZLE]

Votes for what? Hillary isn't saying this.

1) All it takes is somebody to make it a national issue, Obama has started that, to build momentum.
2) Congress changes
3) Doesn't matter.

It is going to happen, one way or another, and it won't be armageddon. If anything it'll force fiscal discipline on students, parents, and most importantly, schools.

They will underwrite on ability when they are forced to, not a second before. Until then they'll underwrite to the government and parent co-signers who can't afford to go BK.

Easing dischargability while the government is giving out loans to all comers will in no way impose fiscal discipline on anyone. In fact, it will remove the only vestigial discipline left in the system. Easing dischargability without market / risk-based pricing is the worst of all worlds combination.

 

[s0me0nesmind1]

It can't go both ways at the same time. Its a fundamental misunderstanding about the effects of loans. Less loans will mean less money flooding into the college system. Since they temporarily create more money until paid off. Tuition would actually drop because less people could get financing to go.

You think colleges can AFFORD to drop tuition and naturally have 20% less revenue? HAHAHA you're funny and you CLEARLY don't understand how business works.

What, are they going to tell all the high paid professors: "Okay, you guise, you all need to take a 20% paycut ok???"

Yeah, sure, nice idea. I can tell your glass is half full, but it's rather cute to imagine.

 

[highland145]

Strange. My bro, with his 10th grade education, is clearing $150K/yr, no debt.:\


Oh, wait, he works. Has been for 35+ years. Dealing with other peoples crap....literally.


Anyway...don't guarantee the loans from the government( eg, taxpayers) and the private system will dry up, tuition will fall like mentioned or else the colleges will be out of business.

IDK what the solution is for the poor. They need a way out if they're willing/able. Maybe executing the people that use the system to make $$ off of the poor and taxpayers? tongue meet cheek, kind of.

As far as excusing debt, B.S. That's why college loans aren't allowed under bankruptcy now. People ripped off the system, en mass before.

Aside, I know of 1 lady that used the system to get her school paid for, her child care, her gas, etc...1 lady. That's it and that's sad.

 

[the DRIZZLE]

You think colleges can AFFORD to drop tuition and naturally have 20% less revenue? HAHAHA you're funny and you CLEARLY don't understand how business works.

What, are they going to tell all the high paid professors: "Okay, you guise, you all need to take a 20% paycut ok???"

Yeah, sure, nice idea. I can tell your glass is half full, but it's rather cute to imagine.

Colleges are probably the least financial disciplined institutions that we have in the US. If the Government stopped pumping cheap money into the system most would become more efficient and the really bad ones that don't create value for the students would disappear.