Is The So-Called Student Loan Crisis One Big Exaggeration?

[kayf]

Poetgirl, I wasn't aware of anyone beleiving that the non-dischargeability of student loans will be repealed. Financial institutions and the for-profit schools have and will lobby. If it is not changed, all of us will likely pay for the ultimate bailout.

[BCEagle91]

> I pretty much borrowed every penny for tuition, books, room and board for 4 years
> at state U as my parents informed me they would have $0 to contribute when the
> applications arrived. Had no financial knowledge and did not have scholarships etc.
> Just went with a leap of faith and of course interest rates were crazy then. I was
> very nervous about the debt but persevered and knew I had responsibility to pay it
> back which I did in full.

BC was $3,500 back in 1979 so I imagine that in-state U was a lot cheaper. I take it that the amount that you borrowed was much smaller than $30,000.

[BCEagle91]

> no my questions were not answered in the other thread, that link you keep giving is
> very pretty, but doesnt say what loans it is talking about.

The links later in the thread (and one of my later posts in the thread) says that the data that the Fed used was from Equifax and includes federal and private loans.

[millerflower]

I disagree with the student loan bailout. Ultimately, some group in society will have to pay for the reckless decisions made by others. Taking out loans to pay for a liberal arts degree at an expensive private college, when you could attend a state university, is a reckless decision. Many young people aren't thinking ahead to the future, when they will have to repay those loans. I do think liberal arts studies have value, but there is no need to major in one. If someone enjoys literature or art history, they could minor in those subjects, rather than majoring in them. Please don't anyone think I'm slamming liberal arts, but I've seen firsthand that these degree programs create poverty. I know many people with degrees in religion, sociology, medieval history, anthropology and English, respectively. And they are either on welfare, food stamps or living at home with their parents - and these people are in their late 30s and early 40s. The one woman who majored in world religions has never had a steady job in her life, even though she is intelligent. She goes to the local food bank to get food. Her degree is like the equivalent of a high school diploma or less.

Colleges were traditionally only for children of wealthy parents. It was never meant for the middle classes at all. I hate to say that but its true. As a middle class person myself, I plan to continue my education at the cheapest state university I can find.

[poetgrl]

Senior citizens continue to bear burden of student loans - The Washington Post

[bluebayou]

On the radio I just heard that the administration is considering a 'write-down' of some underwater mortgages.

Yup, and future administrations will write-down education debt. It WILL happen, almost by design.

Lest we forget the "experts" who, back in 06-07, touted that the excessive borrowing for mortgages would not really affect the economy.

Except that there were plenty of "experts" that said the borrowings would affect the economy. It was just the free-lunch crowd that believed otherwise.

[SteveMA]

I'm sorry but student loans should NOT be dischargable. It is a far different debt then say unexpected medical bills. You chose to go to college, you don't choose to have cancer.

I still think that the student loan crisis is more of an exaggeration because you really only hear about the art history majors with $200,000 of loans. You don't hear about the average Joe with $26,000 but making $50,000 right out of college and paying off those loans in 5 years or less, which is more the norm than Sally Art History.

[BCEagle91]

I think that it's an exaggeration too but there are about 10% out there that made mistakes or ran into bad luck and are unlikely to ever get out of debt. I would like to see debt forgiveness after some period of time - the determination of that period of time can be worked out by others. Or it could be phased out.

That would result in lenders being more careful in lending money and maybe them not lending $200,000 to art history majors.

Edit: > You chose to go to college, you don't choose to have cancer.

You see the 60 Minutes piece on sugar causing cancer?

[bsumone93]

@jym626

It depends. For finance, if someone got into a prestigious undergrad business school that is a target like Wharton, Stern (me), Sloan, McDonough, Haas, Ross, or McIntire, I consider a B.S. in finance a wise investment because if you are able to land a front office position at a BB (Goldman Sachs) or top boutique (Lazard), you are pretty much looking at six figures (after bonuses) right out of college as an analyst. And even though you are looking at around a $55,000-$75,000 starting salary, the same applies for engineering at universities such as MIT, Caltech, Stanford, Berkeley, Cornell, et cetera as well as computer science at an institute like Carnegie Mellon.

However, if one opted to go the medical school or the law school route, I would take the best deal I could get whether it be in-state tuition at StateU or a generous financial aid package at a private school because, as to my knowledge, law schools and med schools look more at your GPA and test scores. I find it a good investment to shell out $100,000+ for a law degree or a medical degree from top graduate universities such as Harvard, Yale, Princeton, UChicago, Stanford, NYU, Columbia, Johns Hopkins, Duke, etc.

Now, I would never go into that much debt for a degree in something like art history or sociology no matter what school I got accepted to because I think it is just crazy to do so as you will virtually spend the rest of your life struggling to pay back your student loans.

[jnm123]

Bluebayou--IF there is going to be a partial write-down of mortgages, or Federal educational debt eventually for that matter, is it right to only favor those who are in the worst shape? Those are the ones who speculated, who over-extended, who didn't read the fine print--who screwed up for lack of a better term. Not all of them, mind you, but a fair percentage fall under the financially heedless category.

Most of us here have fought the good fight. We have mortgages, investments, loans, we played it by the book. A partial write-down of our mortgage or PLUS loan would come in mighty handy for retirement. And I think our group is going to get nothing.

[SteveMA]

jnm123--I agree, I think those that are current on loans, etc. aren't going to see any real help but in my opinion, that is where the help should come. If you can free up $500-1000/month for those that are current, they will spend the money on "stuff", stimulating the economy vs those that are behind most likely spending those newly freed up dollars to pay other bills, doing nothing for the economy really. Also, it would be nice, just once, to get some kind of a reward for doing the right thing vs seeing all of the help for those that maybe didn't make the best choices. I think it sends the wrong message--"took too much in loans for your unproductive major, oh well, here is your money anyway'.

[BCEagle91]

> Also, it would be nice, just once, to get some kind of a reward for doing the right
> thing vs seeing all of the help for those that maybe didn't make the best choices.

The reward is financial peace of mind that you can meet your obligations.

The future benefit is that your loan officer can tell you that he won't approve a $50K loan (per year) for Art History at third-tier OOS public.

[SteveMA]

BCEagle91--I know that but again, it comes down to what is going to stimulate the economy more, putting the freed up money into bills for things already bought or increasing the disposable income for others who will buy new things, invest money, etc.?

[juillet]

"I don't think it's a bubble," said Mark Kantrowitz, publisher of Finaid.org, a financial aid website. "Most students who graduate college are able to repay their loans."

And most people who had mortgages were also able to repay theirs. It's not like everyone defaulted; it was just that a large enough number did in a way that changed the market.

Other than that, this article doesn't give one single reason why we are not in a student loan crisis. Saying that it's a "positive investment" is the same as all of those people in the 1990s who sold subprime mortgages by telling people they were making a "positive investment" because housing prices would always rise. Sure, of course it's a good investment in that you'll make a bigger salary - but that doesn't matter if you can't afford to pay for what got you the larger salary. Or if you can't get a job period.

[BCEagle91]

I think that a lot of the student loan debt out there to older folks and those that are way underwater isn't collectable and will probably get written off eventually. There isn't a lot that you can do about that and some kind of forgiveness may result in lenders being more prudent so that less is written off in the future. In this case, there is no freed up money.

From my observations, the things that stimulate the economy the most are asset bubbles. The two usual culprits are the housing and stock markets though we can see that there are some other classes that can help things along quite well. Your proposal involves writing off loans that are current. I can't understand why a lender would do that. The purpose of a private lender is to make a profit. The purpose of a public lender is to increase opportunities for education. I don't think that either have, as their main goals, to stimulate the economy.

The Central Bank and our government may have those goals in mind but I think that we've seen that the private actors want profits in order to take writedowns or renegotiate loan deals. Somebody has to lose in those spaces and nobody wants to be the loser. That's why it has been so hard in coming up with a writedown deal that works.