1) Move most good careers that do not require a college degree out of the country for the benefit of shareholders
2) Tell everyone born between 1980 and 1995 that they'll be unable to compete in the global marketplace if they don't get at least some post-high school education, and imply that the mere presence of a degree will help instead of having a specific type of degree
3) Have next-to-zero standards for public funds used in grant and loan programs for college education, meaning people can take out loans for any sort of degree program at almost any sort of institution
4) Hold these debtors to standards that aren't applied to other types of debtors. You cannot discharge them through bankruptcy, it's very difficult to renegotiate, and SCOTUS has said that the chief executive of the note-holding institution (in this case, the President of the United States) cannot use discretion in deciding who he gets to forgive for loans.
You forgot the most important part. The people agreeing to these debts, by definition, do not have an education in complex debt instruments that cannot be discharged.
Taking our a vast loan to study English literature might seem unwise, but it’s something I could definitely see a starry eyed 17 year old deciding to do.
I don't like this type of comment because it's makes it seem like that this was all planned like this on purpose (by some cabal of evil schemers, I suppose?), but without the need to provide any evidence that that's indeed how it went, because nothing of the kind of is explicitly claimed.
Things can go wrong without people scheming to do evil. It's not helpful to twist "these and these circumstances combined to produce a bad outcome" into a plan description unless you bring at least some evidence that it was, in fact, planned to go like that.
Unless I missed it in the article, I don't think the author mentioned one of the biggest factors. The big lenders in America are effectively extensions of the US government, and the government guarantees over 90% of loans.
That means there is no risk (for the lender) to give out student loans. The taxpayers take on the risk
I feel like the key thing missing from this discussion are the employers who still demand these degrees. Let's say we reformed both higher education and student loans - does that have any meaningful impact on the demand side beyond pushing the salaries of degree holders up (thus increasing the value of a degree, thus making larger loan values easier to justify, thus...)
5) Do nothing about the problem until the debt becomes too large, then attempt to blanket cancel the debt without expecting any fallout. All the while doing nothing to fix the underlying issues.
> Lenders keep issuing loans without regard for the borrower’s ability to repay, knowing the debt can’t be discharged. ... Meanwhile, lenders—both government and private—keep the money flowing. Why wouldn’t they? With loans that can’t be discharged in bankruptcy, they’re guaranteed a return, even if it takes decades to collect.
From the first chapter of David Graeber's "Debt: The First 5000 Years".
> “But,” she objected, as if this were self-evident, “they’d borrowed the money! Surely one has to pay one’s debts.” It was at this point that I realized this was going to be a very different sort of conversation than I had originally anticipated.
Sounds like the perfect way to create a system where the only way out is some kind of black swan bubble burst. I (genuinely) wonder who will be protected from the shockwave when it does: the number of people on the debt side is presumably enormous.
> cannot use discretion in deciding who he gets to forgive for loans
You present this as though it doesn't make sense, but as far as the federal government is concerned forgiving a debt is spending (which is why the IRS will tax you for forgiven debts, income is the other side of spending). And spending is explicitly under Congress's authority.
> Hold these debtors to standards that aren't applied to other types of debtors
That’s because these loans are made using standards that aren’t applied to other loans. The government basically does not consider credit risk or traditional underwriting standards when making student loans.
5) Don't forget the massive rise in tuition. My brother went to college a few years before me, and by the time I got there (born before 1990), the price was double what it was his first year. It was only 2 years of increases.
6) Only allow help for families making under a certain amount, so those from abusive homes are shit out of luck.
>>> 1) move most careers...out of the country....to the benefit of shareholders.
You've hidden very carefully the causality in this sentence. Who moved them? Why? Its perhaps implied that since shareholders benefited, that they did it. Yet a careful examination reveals quickly the elephant in the room in that thesis: why did outsourcing now, and not before, if the benefit to shareholders has always been there? why did this happen mostly in the US, and not other countries?
Of course, the reality is far more complex and reveals that the road for manufacture hollowing in the US was a road paved with good intentions. History is there for anyone who wants to read it.
I'm glad that everyone is calling out that it is in fact a very good thing that the President is prohibited from arbitrarily deciding who to gift free college to. Loan forgiveness should rarely if ever be used. Too much opportunity for abuse by politicians who would love to dangle it as a carrot during election season.
For number 2, how did you come up with the very narrow 15 year window of birth from 1980 to 1995? I was born in 1963 and for the entirety of my upbringing it was a forgone conclusion that the lack of post high school education had a dire and inescapable consequence in future earning and socioeconomic status.
> Hold these debtors to standards that aren't applied to other types of debtors. You cannot discharge them through bankruptcy
That's because other types of debts are backed up with collateral. 18 year olds have no collateral, and so can easily just declare bankruptcy - and what is the note holder gonna do about it?
That means the note holder needs some sort of guarantee to get paid back, otherwise they are simply not going to grant the loan.
SCOTUS ruled that the President exceeded the authority over this that was authorized by Congress. I.e. it's Congress' purview to do this, not the Executive. The Executive does not get to make up laws.
>SCOTUS has said that the chief executive of the note-holding institution (in this case, the President of the United States) cannot use discretion in deciding who he gets to forgive for loans.
Yes, because the power of the purse rests solely with the House of Representatives.
Despite terms like "the President's budget", the White House has next to no authority in regards to what budget they get and how it will be spent. The legislature (House of Representatives) legislates and the executive (White House) executes; the executor cannot legislate.
This is why the often mentioned PPP loan forgiveness was fine (it was codified by the House) but Biden unilaterally deciding that certain debts to the government are forgiven is not.
> SCOTUS has said that the chief executive of the note-holding institution (in this case, the President of the United States) cannot use discretion in deciding who he gets to forgive for loans
It's really amusing how the unitary executive oscillates in fashionability according to which political tribe is currently in power. Congress is responsible for appropriations. Full stop. Whenever this has been bypassed via some loophole, by Bush, by Trump, by Biden, etc, it has been at its core unconstitutional. And it is in our collective interest that it remains that way.
We should be way more willing to straight up kill multi-billion dollar industries. Without that willingness, most modern problems are impossible for governments to solve, and such industries and even their potential competitors are incentivised mostly to exacerbate the problem. I love a good market as much as anyone but there really are problems
markets will never solve
But…the whole point is that it is NOT a market. If student debt is dischargeable and the government guarantee is removed or dramatically reduced, pretty much all problems are “solved”.
Universities will have to start focusing on ROI. Universities that provide a poor ROI will shut down. Universities will need to reduce costs for traditional coursework, cut courses with poor returns, add courses with higher returns.
The inflation in higher education that has run rampant due to subsidized demand being removed.
1. Provide a counterbalance to private industries by having the government player to be a significant player in that market. That means a free or near-free high-quality state higher education system like the California system used to be until it was made an explicit political goal to avoid an "educated proletariat" [1]. It also goes for housing, hospitals, banks, ISPs and so on;
2. Nationalize failing industries rather than providing them loans for no reason. Banks fail in 2008? Well, you belong to the state now. Just like the FDIC does with failing banks.
3. Federal dollars for pharma research should come with an equity stake in the private corporations that monetize it. Most drugs are developed with Federal grants.
> I love a good market as much as anyone
Just curious: where do you see markets actually working?
Multi-billion dollar industries represent jobs, stocks, and campaign contributions. The US government is not designed to beat those forces. It's the same reason we'll never see universal healthcare unfortunately.
You seem to imply that a general willingness is what would allow this to happen when the article spells it out pretty clearly: it's powerful organizations clinging to power. Your sentiment amounts to nothing more than wishful thinking.
It's tempting to just agree with your sentiment, but I think that day dreaming about an unrealistic solution sucks energy away from more effective actions. The main challenge of solving a difficult puzzle is to avoid dead ends and red herrings.
A more promising plan involves explicitly strategizing against the agents who have the opposite agenda.
Can you imagine if we could kill MLMs, pay day loan sharks, bail-bondsmen (My state fully banned this lunacy), Psudoscientific medicine (chiropractors), Scientology and other useless trash from society?
God going after just one is liable to get you a fate worse than Daphne Caruana Galizia
> I love a good market as much as anyone but there really are problems markets will never solve
The problem with student loans is that they are not driven by markets. If they were, absolutely nobody would give a loan to an 18 yo to spend 4 years and $160k to study psychology.
We shouldn't see the government as solution to too many problems. If we overdo on it, we get socialism. And we know how it always ends.
Let the market forces decide. Eventually people will realise college doesn't work and will stop going there. Seriously problem is that too many people think they are smart and can benefit from a degree, when most can't. If 10% top graders go to college from school as it was in the boomers' era, ROI of higher education will be enormous (as there won't be an oversupply of useless graduates), and costs will be low (as low demand always reduces prices).
We shouldn't punish people who take the money because people are willing to pay it. Who's fault it is that they are dumb? Do we see much say, annoying advertisement to the tune of "go study X with us, you'll be rich and women will love you"? No. People are doing it because they are dumb. If we try to build a system that prevents smart people from taking money put on the table by dumb people, we will make the whole system dumber by incentivising dumbness.
That's too disruptive, and there's too high a chance of unintended consequences. Instead of that what you'll see is a 'we'll kill this multi-billion dollar industry over the course of the next 30 years'
I don't know if this is some kind of heresy, but here we go.
I don't think universities provide much value at all to the common student who is not going to be a PhD.
I went to a very well-known institution known for putting the students in a room with the professors, maybe two or three students, to one professor. My economics professor taught me one on one.
I still think, in the end, the work is mostly done alone, in a pile of books, on your own time.
Not with other students, and not in lectures, and not in tutorials.
This is a bit different from school where you can actually learn the material in class because, let's face it, school doesn't have a very deep curriculum.
So at university my impression is that they mainly tell you what to go and read about, and then you read about it yourself. The tutor is there to course correct you a bit, but they aren't going to do much other than save you a bit of time learning the orthodoxy of your subject. The lectures are a table of contents. At most, it's really just a guy telling you that you should know what an eigenvalue is, or you should have read about the ISLM model, and so on. For you to actually understand something, well, you have to have spent a lot of time in the books rearranging your mind.
Given that this is what you actually do at university, why have it this way?
Make an examination authority. "Here is the national linear algebra test. Anyone who wants to try it, sign up, and come to this hall on this date." Everyone who passes, whether they studied at home or went to fancy U, gets a paper that says they passed it. Do it as a 12 year old prodigy or a 75 year old grandma, you get a diploma.
Now, maybe there is already an authority that does this, I don't know. But it isn't very well known or authoritative.
The current incumbents are gatekeepers. Everybody thinks that smart kids go to the most prestigious universities, and that includes employers. It's a Schelling point that doesn't need to be there, and it allows the universities to extract a great deal of value from the kids.
If you made this authority of examinations, many people could learn the material and show their competence without incurring huge costs.
People could start working earlier. You could separate the coming-of-age experience from academic learning. Poor people could participate more.
I’ve said it before on HN and I’ll say it again: I don’t support any reform with respect to student loans that doesn’t see the academic institutions participate in the pain. I’d like to see a large number of universities get bankrupted by assuming some portion of the student loan liabilities of their alums, then allow the alums to file bankruptcy if they can’t pay off any remaining balances.
Did you know that federal student loans cannot be discharged via bankruptcy AND if you carry federal student loans into retirement, your social security income can be garnished?
1) I do not agree with applying this retroactively. You shouldn’t change the rules in the middle of the game.
2) it would be unfair to make universities participate in the downside but not the upside. Perhaps the federal government should also turn the interest earned over to universities. This could actually go some way towards lessening resistance.
Seems like a good overview, but I do find this bit unclear:
"But why don’t market forces correct these issues?
The answer lies in the unique shield that non-dischargeable student loans provide to educational institutions and lenders.
In a normal market, if a product consistently fails to deliver value, consumers stop buying it. Producers either improve or go out of business. But in the world of higher education, this feedback loop is broken.
Colleges and universities, shielded by the guarantee of student loan money, have no real incentive to improve their product or direct students to majors that have an ability to pay back their loans.
They can raise tuition year after year, even as the value of their degrees stagnates or declines. "
Sure, colleges can charge a lot due to loans, but they are still competing with each other and differences in tuition could make a big difference. I went to Georgia Tech over other universities because it was in-state and Georgia has generous scholarships for students with good grades. So why does competition among schools not lower costs?
I think it's really sad that we so reflexively consider universities vocational training that criticism of universities so often includes "offering degrees that won't get you a job"
Actually academia predates the push to gate jobs behind undergraduate degrees, and trying to repurpose these institutions that mainly exist to train and employ researchers to be fully general vocational schools has been a disaster in every respect for everyone but the parasitic class of administrators it's spawned
I agree with the article's diagnosis: the system is out of control, with no market forces are in place to keep costs in check. It's unsustainable for students to take on this level of debt.
I'm not sure I agree with the solutions though. Making student loan debt dischargeable doesn't make a lot of economic sense. We're talking about 17-year-olds with no income and no collateral. Why would any lender want to be in this business? Who will lend to students if the debt is dischargeable?
The article's solution is to essentially make the school the co-guarantor of the loan, such that the school absorbs part of the financial impact of student default. Ok, but now the school has a direct financial stake in the student's overall finances. Do you really want to have that kind of relationship with your school? Do you want an admissions process that is partially trying to decide if you're financially responsible? Do you want your school pressuring you to choose a more lucrative major? Do you want communications from your school reminding you that it's important to be making good financial decisions? If your school is co-guarantor of your loan, it's their business to make sure you're going to repay on time.
There has to be an element of responsibility that falls to the borrowers themselves. It's true that a 17-year-old does not have the experience to know for themselves how much debt is reasonable, especially when they cannot necessarily predict their future earnings. But there has to be some incentive to borrow less. I don't think it's healthy if student can borrow with abandon, safe in knowing that they can just discharge the debt in a few years if it doesn't work out.
Ideally students would be voting with their feet, and would make it clear to colleges that the cost of tuition is a significant factor in their decision. But I guess prestige and tradition are so powerful that people will want to go to name-brand colleges no matter the cost.
Meanwhile, I know of German and Dutch peers of mine who upon completing their masters in Europe, enrolled in California to do a second Masters ( at the time I believe they paid in the range of $100k) for the VISA and internship opportunities. And IIRC, the bet paid off because they all found employment in California, with salaries 3x to 4x what they could get here.
I've been saying this to anyone who would listen for years. All the problems with higher education in the US are the direct result of student loans being unable to be discharged in bankruptcy. Usually complex problems have complex causes, usually if someone says "simple, just do this" it means they probably don't understand the problem. Not this one. This is one of those rare problems with a singular cause and a "simple" solution: allow student debt to be discharged in bankruptcy. I put quotes on simple because, while the solution is simple, it's easier said than done as the author points out, the regulation of the industry is captured and making it actually happen is very difficult due to incumbent institutions benefitting from the status quo. But we have to set the bone, it's going to hurt but there's no way around it. We are very fortunate that the solution is so simple.
Getting a BA in Underwater Basketweaving from your local commuter state university is much less financially damaging than at Duke or UChicago.
I'm not a fan of the idea of "useful" and "useless" degrees (ime, the best predictor for success is critical thinking skills, not major), but I do find private universities don't make as much financial sense, especially given that well paying industries like Engineering, Accounting, etc don't place much weight on your initial Alma mater beyond your first job.
Anecdotally, I had an alumni interview with a successful tech IB/PE/HF alum from CS@CMU years ago while I was applying to colleges, and he was very insistent about how he felt the RoI at SJSU or CalPoly is superior to CS@CMU. I didn't end up attended CMU (I was lured to a more "prestigious" LAC) but he was absolutely right.
I agree, and another way out is educating people who are about to enter university properly so they make an informed decision about the major they wanna choose more than their feelings and more on facts to see the outcome.
It is genuinely insane that US Colleges are basically holdings companies at this point. They priority is investments. It seems hostile to the goal of students
Human capital contracts are another partial solution that flips the incentives: instead of using loans to pay tuition up front, institutions are paid a % of your income for a fixed period of time, after which any remaining amount is forgiven. Typically this only applies to income over a base amount (such as 10% of income above a 40,000 base). Naturally this works great in fields with strong employment outcomes and terribly everywhere else.
> So, what’s the solution? It’s simple, but not easy:
"Make student loans dischargeable in bankruptcy again.
Tie lending terms to the value of the degree.
Impose risk-sharing requirements on educational institutions – Schools would face financial penalties or need to contribute to a risk-sharing pool if their graduates default at high rates."
=================
Sounds reasonable. Making people who were either faithful repayers or non-borrowers in the first place, pay for the bad or unlucky choices of a few is obvious bad and unfair policy.
There are always situations where people who make mistakes have them forgiven but pay a price. I think the public would accept something like that, but not a program where the debts are forgiven outright.
Schools need to take a haircut and repay some of the bad debt themselves, just like a bond default does not result in the bondholders receiving 100% of what's owed them.
This is an important topic, but I wouldn't recommend reading this post to learn about it. There are numerous flaws and jumps in the logic.
However, without getting into all that (time is too valuable to comment on the 50,000th iteration of the same points) I will just point out that the solution is much simpler than the author's. Make the maximum repayment of student loans a percentage of income over a period of time. For example, you have to repay a maximum of 7% of your income per year for 15 years. No need to get into complicated issues of bankruptcy law. If you want universities to align their incentives more than they already are, make them cover some or all of the unpaid loan balances after the repayment period ends.
There's a certain point in time for any industry where it has a chance to capture both the user and the legislator. Once that happens, prices for consumers start to grow faster than wages because the industry has more money for lobbying, it's a positive feedback loop.
Political solution to this is very unlikely unless there's a major stress in the system that, at least temporarily, takes out the one piece of the price growth puzzle.
Many years ago I went to university in the uk. Entry required good grades but tuition was free and there was a reasonable grant to live on.
Twenty or so years ago the grant became a loan and, more recently, tuition fees were introduced.
Nowadays way more people go to uni but come out saddled with debt.
Presumably the incentives are the same as described in the article for the US: the uni wants as many students as possible because they get tuition fees and short term the administrators don’t care about graduation rate or job outcomes because it will be on some future administrators watch when the feedback loop stops new undergrads joining?
[+] [-] lenerdenator|1 year ago|reply
2) Tell everyone born between 1980 and 1995 that they'll be unable to compete in the global marketplace if they don't get at least some post-high school education, and imply that the mere presence of a degree will help instead of having a specific type of degree
3) Have next-to-zero standards for public funds used in grant and loan programs for college education, meaning people can take out loans for any sort of degree program at almost any sort of institution
4) Hold these debtors to standards that aren't applied to other types of debtors. You cannot discharge them through bankruptcy, it's very difficult to renegotiate, and SCOTUS has said that the chief executive of the note-holding institution (in this case, the President of the United States) cannot use discretion in deciding who he gets to forgive for loans.
[+] [-] scoofy|1 year ago|reply
Taking our a vast loan to study English literature might seem unwise, but it’s something I could definitely see a starry eyed 17 year old deciding to do.
[+] [-] skrebbel|1 year ago|reply
Things can go wrong without people scheming to do evil. It's not helpful to twist "these and these circumstances combined to produce a bad outcome" into a plan description unless you bring at least some evidence that it was, in fact, planned to go like that.
[+] [-] spencerchubb|1 year ago|reply
That means there is no risk (for the lender) to give out student loans. The taxpayers take on the risk
[+] [-] bufferoverflow|1 year ago|reply
5) Don't educate young people on what their degree would earn them.
So many young people think their hobby can become their career and pay for a nice life style. Unfortunately, it's not the case for many majors.
[+] [-] spamizbad|1 year ago|reply
[+] [-] freshtake|1 year ago|reply
[+] [-] DavidPiper|1 year ago|reply
> Lenders keep issuing loans without regard for the borrower’s ability to repay, knowing the debt can’t be discharged. ... Meanwhile, lenders—both government and private—keep the money flowing. Why wouldn’t they? With loans that can’t be discharged in bankruptcy, they’re guaranteed a return, even if it takes decades to collect.
From the first chapter of David Graeber's "Debt: The First 5000 Years".
> “But,” she objected, as if this were self-evident, “they’d borrowed the money! Surely one has to pay one’s debts.” It was at this point that I realized this was going to be a very different sort of conversation than I had originally anticipated.
Sounds like the perfect way to create a system where the only way out is some kind of black swan bubble burst. I (genuinely) wonder who will be protected from the shockwave when it does: the number of people on the debt side is presumably enormous.
[+] [-] abnry|1 year ago|reply
You have some really perverse incentives too if you allow loan forgiveness by the executive branch, something close to buying votes.
[+] [-] User23|1 year ago|reply
You present this as though it doesn't make sense, but as far as the federal government is concerned forgiving a debt is spending (which is why the IRS will tax you for forgiven debts, income is the other side of spending). And spending is explicitly under Congress's authority.
[+] [-] rayiner|1 year ago|reply
That’s because these loans are made using standards that aren’t applied to other loans. The government basically does not consider credit risk or traditional underwriting standards when making student loans.
[+] [-] WalterBright|1 year ago|reply
The economic law of comparative advantage means that expenses go to where they are the cheapest.
The solution is not to punish companies, because if you do then the entire company moves out of the country.
The solution is to look at why foreign labor is cheaper, and what can be done to make domestic labor more competitive.
[+] [-] diob|1 year ago|reply
6) Only allow help for families making under a certain amount, so those from abusive homes are shit out of luck.
[+] [-] IG_Semmelweiss|1 year ago|reply
You've hidden very carefully the causality in this sentence. Who moved them? Why? Its perhaps implied that since shareholders benefited, that they did it. Yet a careful examination reveals quickly the elephant in the room in that thesis: why did outsourcing now, and not before, if the benefit to shareholders has always been there? why did this happen mostly in the US, and not other countries?
Of course, the reality is far more complex and reveals that the road for manufacture hollowing in the US was a road paved with good intentions. History is there for anyone who wants to read it.
[+] [-] api|1 year ago|reply
5) Systematically under-build housing so that future generations will be unable to simultaneously repay these loans and afford a place to live.
[+] [-] qwerpy|1 year ago|reply
[+] [-] mbostleman|1 year ago|reply
[+] [-] WalterBright|1 year ago|reply
That's because other types of debts are backed up with collateral. 18 year olds have no collateral, and so can easily just declare bankruptcy - and what is the note holder gonna do about it?
That means the note holder needs some sort of guarantee to get paid back, otherwise they are simply not going to grant the loan.
[+] [-] Log_out_|1 year ago|reply
[+] [-] WalterBright|1 year ago|reply
SCOTUS ruled that the President exceeded the authority over this that was authorized by Congress. I.e. it's Congress' purview to do this, not the Executive. The Executive does not get to make up laws.
[+] [-] Dalewyn|1 year ago|reply
Yes, because the power of the purse rests solely with the House of Representatives.
Despite terms like "the President's budget", the White House has next to no authority in regards to what budget they get and how it will be spent. The legislature (House of Representatives) legislates and the executive (White House) executes; the executor cannot legislate.
This is why the often mentioned PPP loan forgiveness was fine (it was codified by the House) but Biden unilaterally deciding that certain debts to the government are forgiven is not.
[+] [-] sp527|1 year ago|reply
It's really amusing how the unitary executive oscillates in fashionability according to which political tribe is currently in power. Congress is responsible for appropriations. Full stop. Whenever this has been bypassed via some loophole, by Bush, by Trump, by Biden, etc, it has been at its core unconstitutional. And it is in our collective interest that it remains that way.
[+] [-] advael|1 year ago|reply
[+] [-] mchusma|1 year ago|reply
Universities will have to start focusing on ROI. Universities that provide a poor ROI will shut down. Universities will need to reduce costs for traditional coursework, cut courses with poor returns, add courses with higher returns.
The inflation in higher education that has run rampant due to subsidized demand being removed.
[+] [-] jmyeet|1 year ago|reply
1. Provide a counterbalance to private industries by having the government player to be a significant player in that market. That means a free or near-free high-quality state higher education system like the California system used to be until it was made an explicit political goal to avoid an "educated proletariat" [1]. It also goes for housing, hospitals, banks, ISPs and so on;
2. Nationalize failing industries rather than providing them loans for no reason. Banks fail in 2008? Well, you belong to the state now. Just like the FDIC does with failing banks.
3. Federal dollars for pharma research should come with an equity stake in the private corporations that monetize it. Most drugs are developed with Federal grants.
> I love a good market as much as anyone
Just curious: where do you see markets actually working?
[1]: https://www.bestcolleges.com/news/analysis/threat-of-educate...
[+] [-] candiddevmike|1 year ago|reply
[+] [-] AndyKelley|1 year ago|reply
It's tempting to just agree with your sentiment, but I think that day dreaming about an unrealistic solution sucks energy away from more effective actions. The main challenge of solving a difficult puzzle is to avoid dead ends and red herrings.
A more promising plan involves explicitly strategizing against the agents who have the opposite agenda.
[+] [-] Der_Einzige|1 year ago|reply
God going after just one is liable to get you a fate worse than Daphne Caruana Galizia
[+] [-] brigadier132|1 year ago|reply
The problem with student loans is that they are not driven by markets. If they were, absolutely nobody would give a loan to an 18 yo to spend 4 years and $160k to study psychology.
[+] [-] anovikov|1 year ago|reply
Let the market forces decide. Eventually people will realise college doesn't work and will stop going there. Seriously problem is that too many people think they are smart and can benefit from a degree, when most can't. If 10% top graders go to college from school as it was in the boomers' era, ROI of higher education will be enormous (as there won't be an oversupply of useless graduates), and costs will be low (as low demand always reduces prices).
We shouldn't punish people who take the money because people are willing to pay it. Who's fault it is that they are dumb? Do we see much say, annoying advertisement to the tune of "go study X with us, you'll be rich and women will love you"? No. People are doing it because they are dumb. If we try to build a system that prevents smart people from taking money put on the table by dumb people, we will make the whole system dumber by incentivising dumbness.
[+] [-] WorkerBee28474|1 year ago|reply
[+] [-] lordnacho|1 year ago|reply
I don't think universities provide much value at all to the common student who is not going to be a PhD.
I went to a very well-known institution known for putting the students in a room with the professors, maybe two or three students, to one professor. My economics professor taught me one on one.
I still think, in the end, the work is mostly done alone, in a pile of books, on your own time.
Not with other students, and not in lectures, and not in tutorials.
This is a bit different from school where you can actually learn the material in class because, let's face it, school doesn't have a very deep curriculum.
So at university my impression is that they mainly tell you what to go and read about, and then you read about it yourself. The tutor is there to course correct you a bit, but they aren't going to do much other than save you a bit of time learning the orthodoxy of your subject. The lectures are a table of contents. At most, it's really just a guy telling you that you should know what an eigenvalue is, or you should have read about the ISLM model, and so on. For you to actually understand something, well, you have to have spent a lot of time in the books rearranging your mind.
Given that this is what you actually do at university, why have it this way?
Make an examination authority. "Here is the national linear algebra test. Anyone who wants to try it, sign up, and come to this hall on this date." Everyone who passes, whether they studied at home or went to fancy U, gets a paper that says they passed it. Do it as a 12 year old prodigy or a 75 year old grandma, you get a diploma.
Now, maybe there is already an authority that does this, I don't know. But it isn't very well known or authoritative.
The current incumbents are gatekeepers. Everybody thinks that smart kids go to the most prestigious universities, and that includes employers. It's a Schelling point that doesn't need to be there, and it allows the universities to extract a great deal of value from the kids.
If you made this authority of examinations, many people could learn the material and show their competence without incurring huge costs.
People could start working earlier. You could separate the coming-of-age experience from academic learning. Poor people could participate more.
[+] [-] next_xibalba|1 year ago|reply
Did you know that federal student loans cannot be discharged via bankruptcy AND if you carry federal student loans into retirement, your social security income can be garnished?
[+] [-] seizethecheese|1 year ago|reply
2) it would be unfair to make universities participate in the downside but not the upside. Perhaps the federal government should also turn the interest earned over to universities. This could actually go some way towards lessening resistance.
[+] [-] andreyk|1 year ago|reply
The answer lies in the unique shield that non-dischargeable student loans provide to educational institutions and lenders.
In a normal market, if a product consistently fails to deliver value, consumers stop buying it. Producers either improve or go out of business. But in the world of higher education, this feedback loop is broken.
Colleges and universities, shielded by the guarantee of student loan money, have no real incentive to improve their product or direct students to majors that have an ability to pay back their loans.
They can raise tuition year after year, even as the value of their degrees stagnates or declines. "
Sure, colleges can charge a lot due to loans, but they are still competing with each other and differences in tuition could make a big difference. I went to Georgia Tech over other universities because it was in-state and Georgia has generous scholarships for students with good grades. So why does competition among schools not lower costs?
[+] [-] advael|1 year ago|reply
Actually academia predates the push to gate jobs behind undergraduate degrees, and trying to repurpose these institutions that mainly exist to train and employ researchers to be fully general vocational schools has been a disaster in every respect for everyone but the parasitic class of administrators it's spawned
[+] [-] haberman|1 year ago|reply
I'm not sure I agree with the solutions though. Making student loan debt dischargeable doesn't make a lot of economic sense. We're talking about 17-year-olds with no income and no collateral. Why would any lender want to be in this business? Who will lend to students if the debt is dischargeable?
The article's solution is to essentially make the school the co-guarantor of the loan, such that the school absorbs part of the financial impact of student default. Ok, but now the school has a direct financial stake in the student's overall finances. Do you really want to have that kind of relationship with your school? Do you want an admissions process that is partially trying to decide if you're financially responsible? Do you want your school pressuring you to choose a more lucrative major? Do you want communications from your school reminding you that it's important to be making good financial decisions? If your school is co-guarantor of your loan, it's their business to make sure you're going to repay on time.
There has to be an element of responsibility that falls to the borrowers themselves. It's true that a 17-year-old does not have the experience to know for themselves how much debt is reasonable, especially when they cannot necessarily predict their future earnings. But there has to be some incentive to borrow less. I don't think it's healthy if student can borrow with abandon, safe in knowing that they can just discharge the debt in a few years if it doesn't work out.
Ideally students would be voting with their feet, and would make it clear to colleges that the cost of tuition is a significant factor in their decision. But I guess prestige and tradition are so powerful that people will want to go to name-brand colleges no matter the cost.
[+] [-] jackdaniel|1 year ago|reply
[+] [-] dachworker|1 year ago|reply
[+] [-] big-green-man|1 year ago|reply
[+] [-] honksillet|1 year ago|reply
[+] [-] alephnerd|1 year ago|reply
Getting a BA in Underwater Basketweaving from your local commuter state university is much less financially damaging than at Duke or UChicago.
I'm not a fan of the idea of "useful" and "useless" degrees (ime, the best predictor for success is critical thinking skills, not major), but I do find private universities don't make as much financial sense, especially given that well paying industries like Engineering, Accounting, etc don't place much weight on your initial Alma mater beyond your first job.
Anecdotally, I had an alumni interview with a successful tech IB/PE/HF alum from CS@CMU years ago while I was applying to colleges, and he was very insistent about how he felt the RoI at SJSU or CalPoly is superior to CS@CMU. I didn't end up attended CMU (I was lured to a more "prestigious" LAC) but he was absolutely right.
[+] [-] michelsedgh|1 year ago|reply
[+] [-] sweeter|1 year ago|reply
[+] [-] pj808|1 year ago|reply
[+] [-] victor106|1 year ago|reply
> That’s not growth; that’s an explosion.
That's about 9.5% CAGR. About the same as the return of S&P 500 over the long term.
https://www.investopedia.com/ask/answers/042415/what-average...
[+] [-] AlbertCory|1 year ago|reply
"Make student loans dischargeable in bankruptcy again.
Tie lending terms to the value of the degree.
Impose risk-sharing requirements on educational institutions – Schools would face financial penalties or need to contribute to a risk-sharing pool if their graduates default at high rates."
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Sounds reasonable. Making people who were either faithful repayers or non-borrowers in the first place, pay for the bad or unlucky choices of a few is obvious bad and unfair policy.
There are always situations where people who make mistakes have them forgiven but pay a price. I think the public would accept something like that, but not a program where the debts are forgiven outright.
Schools need to take a haircut and repay some of the bad debt themselves, just like a bond default does not result in the bondholders receiving 100% of what's owed them.
[+] [-] bachmeier|1 year ago|reply
However, without getting into all that (time is too valuable to comment on the 50,000th iteration of the same points) I will just point out that the solution is much simpler than the author's. Make the maximum repayment of student loans a percentage of income over a period of time. For example, you have to repay a maximum of 7% of your income per year for 15 years. No need to get into complicated issues of bankruptcy law. If you want universities to align their incentives more than they already are, make them cover some or all of the unpaid loan balances after the repayment period ends.
[+] [-] kachurovskiy|1 year ago|reply
https://www.abi.org/newsroom/chart-of-the-day/price-changes-...
Political solution to this is very unlikely unless there's a major stress in the system that, at least temporarily, takes out the one piece of the price growth puzzle.
[+] [-] wood_spirit|1 year ago|reply
Twenty or so years ago the grant became a loan and, more recently, tuition fees were introduced.
Nowadays way more people go to uni but come out saddled with debt.
Presumably the incentives are the same as described in the article for the US: the uni wants as many students as possible because they get tuition fees and short term the administrators don’t care about graduation rate or job outcomes because it will be on some future administrators watch when the feedback loop stops new undergrads joining?