Just how bad are these students loans?

[LegendKiller]

So many people harp on about people with massive debts and liberal arts degrees. The news loves these stories because it plays into our inherent idea that the world is fair and these people got what they deserve. Those people are a drop in the bucket though, examples of an extreme.

The reality is that across the board the student loan debt, both those paying and those in default, has a drag on the economy. At the rate tuition is going up that drag is going to become more pronounced and dire year after year.

Returning to the liberal arts degrees. There is certainly truth to the idea that you should consider CC before University, you should look at cheaper schools before private but I take issue with the idea they should've picked a better degree. People, especially on a tech board such as this, love to say things like "I picked a degree that makes money". Yeah you did but it is highly unlikely you picked a degree in something you were terrible in and had zero interest in. For me it was a decision between astronomy/physics and EE. I went EE because it seemed more likely to lead to a job but it wasn't as if I was uninterested in it or didn't already have an aptitude for math and science. People don't finish engineering degrees or science degrees without some interest a some aptitude. To flip it imagine your least favorite college course, now take 3.5 years of those courses but with increasingly high time demands surrounded by people that just 'get it' while you struggle and after that journey you get to apply for jobs doing it for the foreseeable future. It's awesome to 1) have ideas of what you'd like to do for a living 2) those things you like actually pay decent/have good job prospects 3) have an aptitude in the basis of that thing and 4) have schools that will teach you that thing in a way that is practically designed as job training. Outside of STEM its a crap shoot, I honestly have no idea what people that don't have interests in STEM do but I imagine it frequently involves getting a degree that will hopefully get your foot in the door somewhere.

The reality of the situation is that 16-18% of gov't guaranteed student loans are defaulting. That is non-cosigned and non-underwritten. Sallie Mae's private loans, which were underwritten and mostly co-signed default anywhere from 9-15% currently. Now, do you *really* think that non-cosigned, non-underwritten, loans only default 50% more, or do you think they really default multiple times more?

Another clue as to the real performance of gov't guaranteed loans, rehab loans default at a 50-70% propensity. That means that there is a pretty large population of borrowers who simply cannot afford these loans. They sit in Deferment/Forbearance/grace for several years, all of which keeps the *current* default rate low, then they default and re-default, repeatedly. Since the gov't doesn't have cosigners, they can only then garnish wages. However, we don't see what the performance is since all of those loans then fall off of the "official" rolls.

That doesn't even include the IBR/PAYE loans.

You can sit there and say the problem is a small % of the population, or the media is making a big deal out of liberal arts degrees with high balances, but the *actual* performance indicates that this is a pretty large problem.

 

[CountZero]

The reality of the situation is that 16-18% of gov't guaranteed student loans are defaulting. That is non-cosigned and non-underwritten. Sallie Mae's private loans, which were underwritten and mostly co-signed default anywhere from 9-15% currently. Now, do you *really* think that non-cosigned, non-underwritten, loans only default 50% more, or do you think they really default multiple times more?

Another clue as to the real performance of gov't guaranteed loans, rehab loans default at a 50-70% propensity. That means that there is a pretty large population of borrowers who simply cannot afford these loans. They sit in Deferment/Forbearance/grace for several years, all of which keeps the *current* default rate low, then they default and re-default, repeatedly. Since the gov't doesn't have cosigners, they can only then garnish wages. However, we don't see what the performance is since all of those loans then fall off of the "official" rolls.

That doesn't even include the IBR/PAYE loans.

You can sit there and say the problem is a small % of the population, or the media is making a big deal out of liberal arts degrees with high balances, but the *actual* performance indicates that this is a pretty large problem.

You misunderstood my point. My point was that talking about the "underwater basket weaving" degree holder with $250k of debt is missing the forest for the trees on how bad the situation is. It is a broad based issue but every time it comes up people pile on these outlier cases.

 

[rednas]

I am really glad that I was able to get my degree without ever taking any on any debt.

 

[Babbles]

So many people harp on about people with massive debts and liberal arts degrees. The news loves these stories because it plays into our inherent idea that the world is fair and these people got what they deserve. Those people are a drop in the bucket though, examples of an extreme.

The reality is that across the board the student loan debt, both those paying and those in default, has a drag on the economy. At the rate tuition is going up that drag is going to become more pronounced and dire year after year.

Returning to the liberal arts degrees. There is certainly truth to the idea that you should consider CC before University, you should look at cheaper schools before private but I take issue with the idea they should've picked a better degree. People, especially on a tech board such as this, love to say things like "I picked a degree that makes money". Yeah you did but it is highly unlikely you picked a degree in something you were terrible in and had zero interest in. For me it was a decision between astronomy/physics and EE. I went EE because it seemed more likely to lead to a job but it wasn't as if I was uninterested in it or didn't already have an aptitude for math and science. People don't finish engineering degrees or science degrees without some interest a some aptitude. To flip it imagine your least favorite college course, now take 3.5 years of those courses but with increasingly high time demands surrounded by people that just 'get it' while you struggle and after that journey you get to apply for jobs doing it for the foreseeable future. It's awesome to 1) have ideas of what you'd like to do for a living 2) those things you like actually pay decent/have good job prospects 3) have an aptitude in the basis of that thing and 4) have schools that will teach you that thing in a way that is practically designed as job training. Outside of STEM its a crap shoot, I honestly have no idea what people that don't have interests in STEM do but I imagine it frequently involves getting a degree that will hopefully get your foot in the door somewhere.

I get frustrated with people, most of whom on the internet and sites like this, that bash humanities & liberal arts degrees. Oddly enough it seems as if it is those people who bash such degrees that would most benefit from taking additional humanities & liberal arts courses.

I think the world would be absolutely miserable if it was full of 'tech' oriented people or scientists and engineers. Heaven forbid we love things such as television, movies, music, museum, theater, art, and so forth. Obviously somebody that studies calligraphy would never get into the computer/tech industry, right?

As a card-carrying scientist, I also firmly believe that most STEM fields are highly over-rated. Salaries and jobs in the physical sciences are miserable. They are not some magical make a lot of money opportunities. Obviously there are outliers, but in general the science idustry is miserable.

Anyhow, even though both my wife and I have multiple degrees and she is a university professor, I am a bit cynical about higher education. The so-called business model of the industry is messed up; unnecessary growth, expenses, and the market 'pricing' of tuition is screwed up with easy access to student loans.

 

[OverVolt]

Basically no one is going to do anything until everyone my age is indebted up to their eyeballs. So the only choice is to play it smart in college or go into a trade. Since its backed by the government no one is going to admit there is a problem until the buying power of the new generations is entirely decimated. Thats all you can do.

One specific detail reminds me of the mortgage crisis. When people took out huge home loans they couldn't afford the bank would work out a deal with the borrower to get them to start paying just about anything monthly (like half of the interest and other such ridiculousness) and they ended up foreclosing the house anyway. They just wanted to get more money out of them as short selling an underwater house was the worst possible outcome for the bank. I think all these repayment plans are the same thing. Fact is many can't pay off the loans. It doesn't matter if they allow you to pay only the interest or 10% of your walmart cashier job salary or whatever, you're still screwed.

 

[LegendKiller]

I get frustrated with people, most of whom on the internet and sites like this, that bash humanities & liberal arts degrees. Oddly enough it seems as if it is those people who bash such degrees that would most benefit from taking additional humanities & liberal arts courses.

I think the world would be absolutely miserable if it was full of 'tech' oriented people or scientists and engineers. Heaven forbid we love things such as television, movies, music, museum, theater, art, and so forth. Obviously somebody that studies calligraphy would never get into the computer/tech industry, right?

As a card-carrying scientist, I also firmly believe that most STEM fields are highly over-rated. Salaries and jobs in the physical sciences are miserable. They are not some magical make a lot of money opportunities. Obviously there are outliers, but in general the science idustry is miserable.

Anyhow, even though both my wife and I have multiple degrees and she is a university professor, I am a bit cynical about higher education. The so-called business model of the industry is messed up; unnecessary growth, expenses, and the market 'pricing' of tuition is screwed up with easy access to student loans.

I have a psychology undergrad and I actually appreciate my schooling even now. I apply some of what I learned in my finance job. The problem isn't the degree, it is the price paid for the degree and the loans assumed to finish it. The degree cannot support the loan.

This is the problem with PAYE/IBR, it doesn't actually solve the problem. It's effectively giving an Option Arm mortgage to students and saying it doesn't matter what college costs, as long as you can "afford" it (with loans) and pay some small amount (that doesn't pay the loan off) then you are all good.

 

[justoh]

I get frustrated with people, most of whom on the internet and sites like this, that bash humanities & liberal arts degrees. Oddly enough it seems as if it is those people who bash such degrees that would most benefit from taking additional humanities & liberal arts courses.

Yes, except it's not odd at all, as it's exactly what you would expect from people taught at a young age that simple memorization of facts = education. Where they learn that University isn't about education but rather an investment to increase future earning potential. Then they wonder why their government is broken. Democracy fails when people aren't educated.

From perennialists Adler and Hutchins,

our political democracy depends upon the reconstitution of our schools. Our schools are not turning out young people prepared for the high office and the duties of citizenship in a democratic republic. Our political institutions cannot thrive, they may not even survive, if we do not produce a greater number of thinking citizens, from whom some statesmen of the type we had in the 18th century might eventually emerge. We are, indeed, a nation at risk, and nothing but radical reform of our schools can save us from impending disaster... Whatever the price... the price we will pay for not doing it will be much greater

The products of American high schools are illiterate; and a degree from a famous college or university is no guarantee that the graduate is in any better case. One of the most remarkable features of American society is that the difference between the "uneducated" and the "educated" is so slight

http://en.wikipedia.org/wiki/Educational_perennialism

 

[Mai72]

I met a guy yesterday and he owed close to $90k in student loan debt. He was making $10 an hour.

He told me that he isn't going to pay back his loan, and that he felt ripped off.

Who pays for these people? We do.

Get out your wallets people.

 

[Naeeldar]

Anyhow, even though both my wife and I have multiple degrees and she is a university professor, I am a bit cynical about higher education. The so-called business model of the industry is messed up; unnecessary growth, expenses, and the market 'pricing' of tuition is screwed up with easy access to student loans.

I Could not possibly agree more. It doesn't help that business now require degrees for entry level jobs where you learn on the job regardless and never in previous years required a degree. This type of thing is only compounding the issues you lay out above.

I have an unusual view point though being a 30 year old Director without a degree where I become a bit cynical about how poorly prepped kids coming out of college are when entering work force or entitled etc. They are smart but their ability to think on their own and manage problems is poor to say the least.

 

[Mai72]

I love Mike Rowe's motivational poster.

 

[Mai72]

Here is another.

 

[Mai72]

Not everyone needs to go to college. We have good paying jobs that are going unfulfilled because people look down on trade jobs. My neighbor just retired from a union electrician job. He was getting paid over $40 an hour. His pension is exactly the same as when he was getting a monthly paycheck.

Compare that to someone who majors in literature or history. Show me a history job that pays over $40 an hour. You cant. Money isn't everything, but if you want a nice life you need to make a decent wage today.

Would you rather take a trade and make good money with zero debt? Or would you rather graduate college with a ton of debt and little prospect for employment in your major? Sadly, young people don't see this until they have been in the workforce for a few years, Most romanticize about what job they're going to have and when reality kicks them in the ass they ask "What happened?"

 

[HumblePie]

College is such a high demand commodity that has made those that own and run them filthy rich. And most people are too stupid to realize it.

First, the cost of public funded state colleges has gone up dramatically by itself in the last 30 years. 30 years ago the average cost for a 4 year college education at a state school was $2800 total. The maximum Pell Grant was $1800. That was easy to get because if you could sign your name to a piece of paper you got the grant. This left an average student on the hook for $1000. Which was easy enough to get a scholarship or grant for. Even easy enough to just pay off on your own. 30 years ago with a min wage job making $3.35 an hour, it only took a couple hours a week of work in 4 years to pay that $1000 off. You could work while going to school for a few hours on the weekend and not screw up your study time.

That has massive changed for several reasons compared to 30 years ago. For state schools, there has been funding cuts, as well as dubious cost increases. Cost increases aren't really to paying teachers as most schools now just pay a pittance for adjunct teachers instead of full tenured professors which are paid more. No, the increased costs are for things like newer buildings for that new Egyptian studies area, or the full glass wall in the cafeteria, or because the head admin guy needs a new porsche.

So today the average cost for a state funded 4 year education at a public state school is $18,000 which the max Pell Grant, which is now harder to get, is at $5500. Leaving a student on the hook for $12,500 on average. At $7 min wage, a person has to work over 20 hours a week to pay that off during their time at school.

Ahh... but the allure is in the private schools though. That is where the real kicker to our education costs problem lies. People are fucking stupid. They don't know how to judge how good school A is to school B. They know that certain elite private school like Harvard and Yale and such have their graduates go on to earn large lifetime sums of money. So many people mistakenly today believe private schools are better in all cases over public schools. Since there really is no way for the normal person to realize how good of an education they are paying for is really worth, the only real metrics an average person can view is costs and how pretty the school looks. So if school A costs more than school B then to most people that means that school A is better. Even more of a bonus if they have a nicer water fountain in the student square too!

Seriously, that is how most people think, and colleges know this. So the private schools hike up their rates dramatically and cash in on the stupidity of the average American family. Then they convince them to take out $100K loan to attend their "expensive" and "prestigious" school for attending their new Basket Weaving classes in a luxurious all glass encased building complete with a 1000 gallon aquarium with dolphins that fart rainbows.

Upon graduation they become upset they can't find a job with their degree in making stylized modern art from popsicle sticks. They can't pay back their retarded loans and either default or expect the average working stiff to bail them out for their stupidity. Which is the sad part because normally if there was only a few people this effected then society would tell them to pound sand. But the problem is so systemic that it effects a huge portion of the population. So we have a society of people with huge college loans for stupid degrees that don't get them anywhere in life. Because Mommie, Daddy, and the greedy ass college bureaucrats told them to follow their hearts to have to "dream" job and that with any college degree they'll have a wonderful job that could back that "tiny" college loan. What is money compared to lifelong happiness of working what you really want to do? That is what they were told. Pure bullshit to make them feel good at the time and to line the pockets of greedy ass college admin/owners.

So that is the real problem.

 

[MaxFusion16]

graduated in 08 with about 10k in student loans, wrote them a check after the 6 month grace period and paid it all off.

I actually could've graduated without any student loans, went to an in-state school, got grants, plus worked part time, so had no problems paying the tuition.

but it's an interest free loan, so why not take the money and put it in a savings account, just make sure you are responsible and don't overspend.

i'd say if people are dumb enough to spend 60k on a useless liberal arts degree, then they deserve to be in debt, it's not fair to forgive their loans while some of us worked hard to pay off our debt.

 

[PricklyPete]

I have a psychology undergrad and I actually appreciate my schooling even now. I apply some of what I learned in my finance job. The problem isn't the degree, it is the price paid for the degree and the loans assumed to finish it. The degree cannot support the loan.

This. The cost of the degree should be relative to its worth in the marketplace. At least that is the way students/student families should be looking at it.

College should be a vehicle for improving your economic abilities, not a right of passage. If you want knowledge, get a library card and start reading (books/Internet). The only people who should be looking at college as an "entitlement" where they can take whatever major interests them are people/families who can afford to throw that money away.

 

[justoh]

This. The cost of the degree should be relative to its worth in the marketplace. At least that is the way students/student families should be looking at it.

College should be a vehicle for improving your economic abilities, not a right of passage. If you want knowledge, get a library card and start reading (books/Internet). The only people who should be looking at college as an "entitlement" where they can take whatever major interests them are people/families who can afford to throw that money away.

Again, education shouldn't be about earning potential. A library card isn't really a substitute. But at the same time i agree that not everyone should be going to university.

A better solution is to spend more public funds on schools while making it more difficult to go to university (also by not encouraging absolutely everyone to go). In switzerland, for example, university is pretty much free, but requires more than a fafsa application. Depending on earlier school performance, most opt for vocational training instead of university. Many start an apprenticeship at 16, combined with technical training, and they're employed immediately thereafter, often by the same company where they did they apprenticeship. Spending is under control and unemployment rates hover around 4%, with less than 3% youth unemployment, which is apparently a huge problem in the US.

http://world.time.com/2012/10/04/who-needs-college-the-swiss-opt-for-vocational-school/

Who Needs College? The Swiss Opt for Vocational School

 

[Exterous]

All I'm saying is Halik's choice of go for the money is really a bad way to make a big decision. It just worked out for him and that's great.

And potentially risky. A lot can change in a year for grads (MBA 2007 vs 2008) or over the course of lengthier education required by certain professions (see: architecture 2005 and lawyers currently)

Just because you pick a job that makes good money that doesn't mean it will still be making good money by the time you can join the job force.

Ever met a poor doctor?

income =/= wealth. I've met several doctors struggling financially under loans\dept\insurance costs.

 

[Phoenix86]

income =/= wealth. I've met several doctors struggling financially under loans\dept\insurance costs.

Everyone can outpace their income, but by and large doctors are neither poor nor have low income.

edit: when you are behind on loans, a high income is pretty much the #1 best way to get around it. They have the ability to change their lifestyles, still live a decent life and pay down debt. If they choose to do so.

 

[PricklyPete]

Again, education shouldn't be about earning potential. A library card isn't really a substitute. But at the same time i agree that not everyone should be going to university.

In the context of taking out loans to pay for it, it certainly should be. I assume (based on your follow up text) that you believe education should be publicly funded and thus "free". This is really a whole new argument, but I agree that in that scenario (where the public funds), it should not be a one size fits all approach where college becomes an entitlement, but rather something earned from past performance with different avenues available at different levels. In other words, everyone should not be able to get a doctorate for free just because they want to...but because they earned it. Otherwise you will dilute that level of education.

In the current world where most families can not afford college outright and take loans to pay for college, the degree taken should definitely be chosen with regard to it ROI and in turn the ability to pay off those loans. If parents aren't guiding their children with that knowledge, they are hurting their children's future prospects immensely.

 

[Exterous]

but by and large doctors are neither poor nor have low income.

Never argued otherwise but that wasn't your question.

edit: when you are behind on loans, a high income is pretty much the #1 best way to get around it. They have the ability to change their lifestyles, still live a decent life and pay down debt. If they choose to do so.

You make an awful lots of assumptions in that statement; the first being that there debt\income ratio is such that their income will offset the debt. The second is that their lifestyle is such that they can make changes. Neither are necessarily true.

Having a high income after necessary expenses to debt ratio is pretty much the #1 best way to get around it - NOT having a high income. While similar the two are not the same although often confused

 

[SP33Demon]

Everyone can outpace their income, but by and large doctors are neither poor nor have low income.

And they're almost 2X more likely to kill themselves because of their profession:
http://www.businessinsider.com/most-suicidal-occupations-2011-10?op=1

Fuck that.

 

[OverVolt]

graduated in 08 with about 10k in student loans, wrote them a check after the 6 month grace period and paid it all off.

I actually could've graduated without any student loans, went to an in-state school, got grants, plus worked part time, so had no problems paying the tuition.

but it's an interest free loan, so why not take the money and put it in a savings account, just make sure you are responsible and don't overspend.

i'd say if people are dumb enough to spend 60k on a useless liberal arts degree, then they deserve to be in debt, it's not fair to forgive their loans while some of us worked hard to pay off our debt.

Mmhm something tells me you weren't even aware of your own finances at the time. My sister was shocked to get billed $5k her last semester there, the grandparents had stopped paying it.

Car? Living expenses? About $10k/year minimum. You can live at home and commute but you still need a car, and that limits you to local colleges which may not have good STEM programs.

Something tells me you don't even know how much it actually cost you to go through college. My sister is like you and "put herself through college" but the secret is that my parents/grandparents helped out to the tune of like $50k. What was your EFC and did your parents actually have it? Cause mine didn't. And my you're-full-of-shit detector is going crazy.

60k on a liberal arts degree isn't dumb THATS WHAT A LIBERAL ARTS DEGREE COSTS IN 2014. You're dumb.

 

[OverVolt]

Everyone can outpace their income, but by and large doctors are neither poor nor have low income.

edit: when you are behind on loans, a high income is pretty much the #1 best way to get around it. They have the ability to change their lifestyles, still live a decent life and pay down debt. If they choose to do so.

Do you even go to a doctor or a PA and do you know the difference?

 

[Cappuccino]

Grant & loan
9000000000000000 pounds per year i fucking hate the uk government i will slit every mutheruckes throat and grill them into kebabs!

 

[halik]

Here is another.

His open letter is also badass:
http://www.lifebuzz.com/mike-rowe/#!0jkJV