Do you think they'll keep lending free money to people when they start taking it in the shorts? No, reform has to come with bankruptcy discharge. First the private loans get it, then the governments.
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.
Which "they" are we talking about? I fully expect the Government to keep making loans, at least for a few years until the loses become too large to ignore. I wouldn't be surprised if they just raised interest rates on all borrowers to cover the loses.
I have absolutely no confidence in our current leaders implementing an economically sensible solution. Have you heard a single politician correctly articulate the issue and the types of the solutions that we are discussing? Even the ones on the right don't seem to understand the mechanism by the Government has caused these problems.
And so it begins...
http://www.wsj.com/articles/white-h...options-for-student-loan-borrowers-1426004272
I predicted this over 4 years ago.
I do not think the government would keep lending unsecured loans to borrowers who cannot repay them and can discharge the loans. The cry of outrage would simply be too large. It just won't happen.
The initial action needs to be dischargability for *PRIVATE* loans. That alone will cause a drop in tuition. Then they need to phase in dischargability for government loans with means testing.
Yep. I remember that.And so it begins...
http://www.wsj.com/articles/white-h...options-for-student-loan-borrowers-1426004272
I predicted this over 4 years ago.
Sure it will happen. The more student loans given out, the bigger the voting block motivated to vote themselves largesse. The bankers will scream, but they'll still have to pony up campaign cash, because they'll still face other threats.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.
Nope. Private loans will dry up, but the government will step in to maintain educational opportunities.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.
So what's the cost of that?
Maybe this will work out well long term LK? If students who are getting lent money for useless degrees get told No, because the lending institution deems them too high of a BK risk, perhaps less of them will take said useless degree? Also, if lending institutions are more at risk overall, even considering worthwhile degrees, perhaps they will lend out less. Less available quasi-"free" money available to young 18 year olds may mean these colleges/Uni's might have to start charging less.
the lending institution doesn't deem them to be a risk because the loans are guaranteed by the Federal Government.
The government bares the risk, the student gets the loan, and the bank gets the risk-free interest payments
Yep. I remember that.
Sure it will happen. The more student loans given out, the bigger the voting block motivated to vote themselves largesse. The bankers will scream, but they'll still have to pony up campaign cash, because they'll still face other threats.
Nope. Private loans will dry up, but the government will step in to maintain educational opportunities.
This is what fundamental transformation looks like.
The cost of what? The money given to them for research projects? Indiana U's $25mill IT projects were 100% funded by grants and not tuition. The self driving 'city' was 75% funded by non-tuition based sources with 0-25% of the remainder potentially being funded by non-tuition sources depending on the success of the project
Less than 30% of U of M's funding comes from tuition
So I saw that tuition revenue increased 5% last year but couldn't find anything quick on where that came from (increase in enrollment, out of state...etc?).
You have a lot more faith in the Government than I do. First, I don't think the anyone in Washington understands the simple idea that cheap credit makes assets more expensive rather than less expensive.
Second, politicians will pander the younger people and parents by saying that the evil Conservatives want to deprive them / their kids of a college education.
Third, remember that there are many people who benefit from our current dysfunctional system. If anyone started seriously discussing what we are talking about the higher education industry would realize what it would mean for them and would fight it tooth and nail, and I'm not talking about the "evil" for-profit schools. There are hundreds of thousands of professors, administrators, and bureaucrats that depend on the credit fueled bubble for their livelihoods.
According to this source Federal loans are 70% of the outstanding debt. I would guess that the Federal share of new issuances is even higher than that.
http://www.cnsnews.com/commentary/terence-p-jeffrey/federal-student-loan-debt-tops-800-billion
I suppose it depends on what one means by dry up, but at the very least they will return to 2005 levels. If Obama makes them easier to discharge, then they'll dry up beyond that level, facing increased competition from the federal government (which does not need or even really want them repaid) as well as increased ease of discharge. In any case, this area already has been largely taken over by the federal government under Obama. Do you really believe he is not intending to increase government's share of school loans and decrease the private sector's share even as he morphs those government loans into gifts?For fucks sake - private loans will *NOT* dry up. How many times do I have to repeat that there were private loans made *BEFORE* 2005? Those loans were subject to dischargability.
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.
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?
Um.... riiiight.... All college debt was dischargeable under bankruptcy up until the late 70s. Since then, it has become increasingly less so until college debt to for-profit institutions became non-dischargeable in 2005 (about 10 years ago). All the while college tuition ballooned out of proportion. The cost of tuition has grown at a FASTER rate when debt became more non-dischargeable than when it was dischargeable. I would like to see a law FORBIDDING for-profit businesses make student loans. These loans are best made by the federal government.
American lending insitutions have basically rendered meaningful bankruptcy impossible. Bankruptcy is no longer the slate-clearing process that it was for your grandfathers. I suppose if you are clever enough and convert your non-clearable debt into clearable debt, you can still do it, but probably risk imprisonment in the process.
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".
I highly doubt that the majority of the costs, nor the majority of the increased costs over the last few decades, are in administrative payroll.
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.
More importantly, government is going to need to fund higher education more fully for public institutions starting now. 2k per year for anyone who wants to attend a 4 year and can maintain 3.0GPA. I don't care if it's a direct check to the kids or a means tested to check to the university to offset costs and which reduced costs are relayed to qualified students.
The number of administrators and their salaries have increased dramatically over the last three decades. There are more administrators on college campuses than ever before.
Administrative salaries and benefits are up close to 100% in that time frame, from ~7-8% to ~15% of a university's budget.
I'll give you an example. In the mid 2000's, the library at the University I went to went from having a Director making in the $160k range, to having a Dean and 4 Assistant Deans. The Dean makes over $260k and his Assistants all make in the $120k range.
FYI: Salaries and benefits for all staff, faculty, and administrators has stayed constant at around 50-60% of most campus budgets.
I highly doubt that the majority of the costs, nor the majority of the increased costs over the last few decades, are in administrative payroll.
The number of administrators and their salaries have increased dramatically over the last three decades. There are more administrators on college campuses than ever before.
Administrative salaries and benefits are up close to 100% in that time frame, from ~7-8% to ~15% of a university's budget.
I'll give you an example. In the mid 2000's, the library at the University I went to went from having a Director making in the $160k range, to having a Dean and 4 Assistant Deans. The Dean makes over $260k and his Assistants all make in the $120k range.
FYI: Salaries and benefits for all staff, faculty, and administrators has stayed constant at around 50-60% of most campus budgets.