Student loan bankruptcy

[Exterous]

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.

The problem is that if they reign it in too soon they will lose their prestige, enrollment and prominence. Their competitors will snatch up the best grants, professors and students by throwing money at them (in various ways). Sure if you can predict when the fall happens you'll be fine but no one can really do that. How many 6 figure admins are going to risk their jobs and their University's reputation on trying to guess when things might go to shit?

 

[highland145]

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.

That's why he's on ignore.

Prior to 2015, Clemson's tuition went up 36% over the last 5 years. I'd bet $1K that the quality of education hasn't increased half that much since I graduated in 1986.

Anyway, in state is $27K for fall 2015 student.

 

[Sonikku]

Germans must be having a hearty laugh at us these days.

 

[highland145]

The problem is that if they reign it in too soon they will lose their prestige, enrollment and prominence. Their competitors will snatch up the best grants, professors and students by throwing money at them (in various ways). Sure if you can predict when the fall happens you'll be fine but no one can really do that. How many 6 figure admins are going to risk their jobs and their University's reputation on trying to guess when things might go to shit?

Not if they all get the much needed shaft at the same time.


Our local "B" uni is tops in the country. $10K/yr.


Another aside, the Uni of SC and the satellite schools don't transfer all of their credits between each other....WTH?

 

[LegendKiller]

People tend to grossly exaggerate the amount of loans people generally take out. Median student debt is about $30k and those with $100k or more are overwhelmingly concentrated in professional degrees.

Making loans dischargeable under certain circumstances is just common sense. Debt in large amounts that can never be discharged is ridiculous as a concept. That being said, student loans are simply unsecured loans, which aren't going to be offered at reasonable rates in those amounts.

This is why we should probably restore funding to public education, by the way.

Yes, this is why only 1/3 of borrowers are actually paying their loans, because $30k in debt is nothing. Default rates among many of the cohorts is 15-20%. Default rates increase with balances, mainly because the advanced degrees don't pay as much. Then you get high defaults among lower balances because the borrowers fail to graduate.

Did you know that among the 2005 cohort of loans the remaining balance is ~60%. They should only have ~10% remaining.

You do realize that taking out $30k in debt when you're making $40k, while trying to afford a car, and a place to live, is a pretty huge burden?

Student loans were offered at reasonable rates before 2005, when *PRIVATE* student loans were dischargable. This is the continual lie told, that the market simply didn't exist before 2005. Sallie Mae, Access, Nelnet, MyRichUncle, First Marblehead, were all making private loans then. Most did so pretty successfully, at least until they did so stupidly (Direct To Consumer loans).

 

[LegendKiller]

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.

Ever look at the maximum for a borrower for DirectLoan Sub and Unsub? $9,500 for an independent freshman borrower. That's it.

Ever look at the aggregate maximums? Plus loans fill the gap. Along with private loans.

 

[LegendKiller]

Germans must be having a hearty laugh at us these days.

They can laugh because they actually send people who *want* and *deserve* an education to get that education. It's not a huge frat party the whole time.

 

[highland145]

Ever look at the maximum for a borrower for DirectLoan Sub and Unsub? $9,500 for an independent freshman borrower. That's it.

Ever look at the aggregate maximums? Plus loans fill the gap. Along with private loans.

IDK what those are...

So is the gvt only guaranteeing the $9.5K and the rest is dischargable under BK?

 

[highland145]

They can laugh because they actually send people who *want* and *deserve* an education to get that education. It's not a huge frat party the whole time.

http://www.cnn.com/2015/03/09/us/oklahoma-fraternity-chant/


:whiste:

 

[LegendKiller]

IDK what those are...

So is the gvt only guaranteeing the $9.5K and the rest is dischargable under BK?

The maximum a freshman can borrow is $9.5k. How much do you think a public university costs right now?

All-in cost for the University of Minnesota is $20k+.

Those maximums have barely changed and have *not* kept up with inflation, not even close.

Where does the rest come from? Private student loans and the parents with Plus loans.

 

[Exterous]

Not if they all get the much needed shaft at the same time.

True - my point was more that they face significant challenges and risks if they choose to abstain from drinking from the 'unlimited' money faucet that others have provided. Not to mention that the government has decided to place the burden of funding higher education on the shoulders of the students

Germans must be having a hearty laugh at us these days.

With their one university in the top 50 world renouned universities

 

[highland145]

The maximum a freshman can borrow is $9.5k. How much do you think a public university costs right now?

All-in cost for the University of Minnesota is $20k+.

Those maximums have barely changed and have *not* kept up with inflation, not even close.

That's from the fed backed loans? Surely, the students are getting $$ from somewhere else otherwise every college would be defunked.

I already posted it, Clemson is $27K for 2015...😱

Where does the rest come from? Private student loans and the parents with Plus loans.

Federally backed?

 

[highland145]

True - my point was more that they face significant challenges and risks if they choose to abstain from drinking from the 'unlimited' money faucet that others have provided. Not to mention that the government has decided to place the burden of funding higher education on the shoulders of the students



With their one university in the top 50 world renouned universities

😛

'sup, Matt. Hope you and yours are doing well.

 

[LegendKiller]

That's from the fed backed loans? Surely, the students are getting $$ from somewhere else otherwise every college would be defunked.

I already posted it, Clemson is $27K for 2015...😱


Federally backed?

Private student loans are not federally backed. They are originated by Sallie Mae/Navient for the most part. These are the ones he's talking about being dischargable. They were pre-2005.


They are getting the money from Sallie or their parents are signing up for Plus loans, which are federally backed and have no borrowing limit.

 

[the DRIZZLE]

Ever look at the maximum for a borrower for DirectLoan Sub and Unsub? $9,500 for an independent freshman borrower. That's it.

Ever look at the aggregate maximums? Plus loans fill the gap. Along with private loans.

I'm not sure what your point is. First, the aggregate maximum for Directloans (58K for Undergrad, 139K for Grad) is more than enough to get someone in trouble (per your post at 8:45) Second, my understanding is that the only thing that disqualifies you from a Plus loan is poor credit history and that your future earnings potential are not a factor)

 

[LegendKiller]

True - my point was more that they face significant challenges and risks if they choose to abstain from drinking from the 'unlimited' money faucet that others have provided. Not to mention that the government has decided to place the burden of funding higher education on the shoulders of the students



With their one university in the top 50 world renouned universities

Yeah, gotta love re-nouning.

What good is a top university if the students are shit and live shitty lives because they can't afford anything else?

Ever look to see how many young people are starting businesses since this whole frackas started? How many households are being formed? How many vehicles are being purchased? How many kids are living at home?

$30k doesn't seem like much, but it is a *HUGE* number for a lot of people.

 

[LegendKiller]

I'm not sure what your point is. First, the aggregate maximum for Directloans (58K for Undergrad, 139K for Grad) is more than enough to get someone in trouble (per your post at 8:45) Second, my understanding is that the only thing that disqualifies you from a Plus loan is poor credit history and that your future earnings potential are not a factor)

Compare that to the total cost of attendance for a public university. As posted above Clemson is $108k if you graduate in 4 years. Gotta come up with $50k more.

I agree, you can load up on Plus loans.


The problem there is that you're now in your 50s, with $50k in additional debt, and you can't retire in 10-15 years. If you can't, who is going to take your job? Nobody. If that lower person can't move up, then neither can the person below them.

Ever wonder why unemployment among older workers is low (and going lower) and younger sucks so much? This is a fucking massive demographic problem.

Massive, as in, economically changing for the next two decades until parents can retire and those below them can move up and entry-level jobs open up more.

I think that economists have just begun to understand the hole we have dug for the latest generation and won't see it for another 10+ years.

 

[highland145]

Private student loans are not federally backed. They are originated by Sallie Mae/Navient for the most part. These are the ones he's talking about being dischargable. They were pre-2005.


They are getting the money from Sallie or their parents are signing up for Plus loans, which are federally backed and have no borrowing limit.

So the tax payers may eat it? No thanks. Borrowers can usurp the labor from the south of the US and work off their basket weaving debt. Otherwise, flip burgers, starve, or OMG learn a skill

I don't really care if the parents lose it all. They should have known better..

 

[s0me0nesmind1]

That's why he's on ignore.

Prior to 2015, Clemson's tuition went up 36% over the last 5 years. I'd bet $1K that the quality of education hasn't increased half that much since I graduated in 1986.

Anyway, in state is $27K for fall 2015 student.

And I bet people as financially retarded as yourself have absolutely no clue. Every place of business has a financial well-being that they live up to. Your lack of belief on matters such as this is unbearably laughable.

But go ahead. Keep thinking professors are going to take up 20% pay-cuts across the board. I'm sure if your boss told you and all of your peons you need to take a 20% paycut you would be totally down for it. Right brah?

 

[LegendKiller]

So the tax payers may eat it? No thanks. Borrowers can usurp the labor from the south of the US and work off their basket weaving debt. Otherwise, flip burgers, starve, or OMG learn a skill

I don't really care if the parents lose it all. They should have known better..

Do you really "get" this problem? It's like any situation where you lend an unlimited amount of riskless capital into a system that has a finite supply but and infinite demand budget. You get an infinite price. Supply and demand can't reach an equilibrium.

The lending equation can't work, so you get unlimited riskless capital driving up prices.

Want tuition to go down? change the lending equation. Both parties take risks. The lending party only lends the amount of money that the borrower can repay. The borrower only takes out the amount of money they can repay.

Put a means test in for dischargability, a PV of the future earnings at a reasonable risky discount rate. Charge the school 50% of the discharged amount if the loan is a federal loan.

Watch how quickly bullshit degrees stop getting funded.

Capella University, despite being a for-profit private school, gets some credit for charging more for certain degrees.

 

[Exterous]

😛

'sup, Matt. Hope you and yours are doing well.

Thanks. Same to you and hope your health is doing well

Yeah, gotta love re-nouning.

What good is a top university if the students are shit and live shitty lives because they can't afford anything else?

Ever look to see how many young people are starting businesses since this whole frackas started? How many households are being formed? How many vehicles are being purchased? How many kids are living at home?

$30k doesn't seem like much, but it is a *HUGE* number for a lot of people.

Yeah - I don't do well typing replies on phones...

Being a top University is about more than students these days. Being a top University means getting millions of dollars in research funding from government and private companies to carry out projects. IndianaU got over $25 million last year just for IT related projects. UofM is getting $7 million from private and another $4 million from government funding for their Self Driving Car test facility.

I am not trying to say the system is perfect but blaming the Universities is looking at less than 1/3 of the problem. Hell no one has even bothered to mention out of state students yet. Lets look at UofM:
In state tuition: $13k
Out of state: $42k
Yet almost 50% of the students choose to come in from out of state. Is that somehow the University's fault?

 

[Hugo Drax]

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.

Banks will stop loaning people money for 50K Art history degrees. So the people who want to loaf for 4 years will have to pony up the money straight up. But by then those Art Degrees will drop to 20K since there will be less money chasing those degrees.

The moment the money spigot dries up, college prices will drop to the point that people could actually save up and pay for college without having to borrow money. You would see a massive deflation in the cost of getting a college degree.

 

[LegendKiller]

Thanks. Same to you and hope your health is doing well



Yeah - I don't do well typing replies on phones...

Being a top University is about more than students these days. Being a top University means getting millions of dollars in research funding from government and private companies to carry out projects. IndianaU got over $25 million last year just for IT related projects. UofM is getting $7 million from private and another $4 million from government funding for their Self Driving Car test facility.

I am not trying to say the system is perfect but blaming the Universities is looking at less than 1/3 of the problem. Hell no one has even bothered to mention out of state students yet. Lets look at UofM:
In state tuition: $13k
Out of state: $42k
Yet almost 50% of the students choose to come in from out of state. Is that somehow the University's fault?

So what's the cost of that?

 

[the DRIZZLE]

Compare that to the total cost of attendance for a public university. As posted above Clemson is $108k if you graduate in 4 years. Gotta come up with $50k more.

I agree, you can load up on Plus loans.


The problem there is that you're now in your 50s, with $50k in additional debt, and you can't retire in 10-15 years. If you can't, who is going to take your job? Nobody. If that lower person can't move up, then neither can the person below them.

Ever wonder why unemployment among older workers is low (and going lower) and younger sucks so much? This is a fucking massive demographic problem.

Massive, as in, economically changing for the next two decades until parents can retire and those below them can move up and entry-level jobs open up more.

I think that economists have just begun to understand the hole we have dug for the latest generation and won't see it for another 10+ years.

I agree it's a major problem and that there will have to be a write-off for a subset of existing borrowers. However, that doesn't mean that we should support loosening dischargability while the government continues to pump money in, that will just create more problems. First fix the system, then deal with bailing out existing borrowers.

 

[the DRIZZLE]

And I bet people as financially retarded as yourself have absolutely no clue. Every place of business has a financial well-being that they live up to. Your lack of belief on matters such as this is unbearably laughable.

But go ahead. Keep thinking professors are going to take up 20% pay-cuts across the board. I'm sure if your boss told you and all of your peons you need to take a 20% paycut you would be totally down for it. Right brah?

They would have no choice. A borrower will only be able to finance a finite amount for their degree based on the market's view of their ability to pay back their loan. For degrees with lower earning potential, the schools will have to lower prices and costs or shut down. Professors can take their pay cut or take a layoff. Also, their is a ridiculous amount of administrative overhead at Universities that would be a prime target for cuts.