Best possible solutions to student loan crisis

Parent Cafe
1

<p>Student loans are becoming just as big a crisis<br>
as the housing bubble that has been discussed here before.<br>
I know possible solutions have been discussed here a lot but
I was wondering if any of these s o lutions have been considered good possibilities. </p>

<p>The following are solutions that I have heard before being brought up and/or have been wondering about<br>
and was wondering which of the following you think would be good solutions. , if you think any of these 7 would be workable. </p>

<ol>
<li><p>Privatize student loans entirely</p></li>
<li><p>Cap the amount students can borrow from the Feds at a very strict limit, i.e. no more than 30,000 total for any undergraduate degree</p></li>
<li><p>Force colleges to pay a part of any debt that their graduates default on</p></li>
<li><p>Allow them to be discharged to bankruptcy</p></li>
<li><p>Require that all employers be informed of prospective employees who have had student loans defaulted on or “forgiven”</p></li>
<li><p>Some combination of the above policies</p></li>
<li><p>Eliminate student loans entirely, public and private</p></li>
</ol>

<p>Do you support any of the above options for student loans or do you support a different option?</p>

2

<p>We as a society need to stop regarding college as a romanticized experience and regard it as what it has become in this day and age, a consumer good. Families need to rid themselves of the belief that they are entitled to a pricey world-class experience (read: New York University) if such an experience is not within their financial means. </p>

<p>Approach college the same way you would approach a decision to buy a new car - many rational, level headed people can see that their budget can only allow for a Honda Civic, not a Ferrari, so they purchase a Civic - the Ferrari is unfeasible. Similarly, if after all the financial aid letters have rolled in, a family can only afford Big State U and not the elite private LAC with the picturesque New England background, then that family needs to settle for Big State U and not try to circumvent their financial situation with massive loans and near never-ending crippling debt. </p>

3

<p>^^^ preamble1776 - Thank you for sharing your ideas<br>
here which , admittedly, are still not that popular in the academic world<br>
outside CC, though I imagine that is gonna change very soon.</p>

<p>What do you think about an even less popular idea: that we need a very serious<br>
reevaluation that “college is for everyone” and we need to be sending<br>
everyone who graduates high school into college? </p>

<p>I had always found this write up interesting in light of all of this:<br>
<a href=“Dirty Jobs' Mike Rowe on the High Cost of College”>http://reason.com/reasontv/2013/12/13/dirty-jobs-mike-rowe-on-the-high-cost-of&lt;/a&gt;&lt;/p&gt;

<p>These days, trade schools are often seen as being a totally unworkable option and high schools<br>
do not teach the type of labor skills they used to and indeed often act as if everyone who finishes high school
is meant to complete a liberal arts degree. Maybe it is time to tackle this issue head on as well?</p>

4

<p>College is certainly not for everyone - we need to stop perpetuating the notion that a college degree will make or break your existence because more often than not, a high schooler who learns a vocational trade will see greater lifetime earnings as an electrician or a plumber than a student with a BA in one of a long list of not-so-marketable majors. </p>

5

<p>Deleted</p>

6

<ol>
<li>Privatize student loans entirely</li>
</ol>

<p>–No bank would, or could, make these loans. Most US banks don’t make unsecured loans, and their examinations by whichever agency they are chartered by would find them uncreditworthy after a very short time. Finance companies and payday loan outfits make unsecured loans - at 36-400% APR.</p>

<ol>
<li>Cap the amount students can borrow from the Feds at a very strict limit, i.e. no more than 30,000 total for any undergraduate degree</li>
</ol>

<p>-It is capped. I want to say at $52000? which allows for the Stafford loans, Perkins, some 5th and 6th year loans.</p>

<ol>
<li>Force colleges to pay a part of any debt that their graduates default on</li>
</ol>

<p>-Do you think it is fair to colleges to become the guarantors? If so, they won’t make the loans. They don’t underwrite the loans now as everyone qualifies for the max Stafford. They do have some say in the PLUS loans, but they can’t make blanket rules about denying parents. Banks didn’t do such a good job of underwriting, so I don’t expect colleges will either and they won’t be willing to take the risk. They’d also need a lending license as currently they only process the loans. They don’t make the loans or service them (collect, apply payments).</p>

<ol>
<li>Allow them to be discharged to bankruptcy</li>
</ol>

<p>-that’s ‘fixing’ the problem after it is already a problem. No one would have any incentive to pay, or restrict how much they borrowed after they hit a certain point. If someone knows as a freshman that they are going to file bankruptcy, why is there any incentive to not borrow absolutely the max each year? It was the banks that wanted this provision (when more did private student loans) because they had absolutely no protection at all - no security, no limits on the borrowing</p>

<ol>
<li>Require that all employers be informed of prospective employees who have had student loans defaulted on or “forgiven”</li>
</ol>

<ul>
<li>They are. Defaults are reported on credit reports, and employers can pull a credit report as a condition of employment. Loans are usually only forgiven for public service work after 10 years, after 25 years of reduced payments (but the forgiven portion is taxed), or for full disability, and then the person has restrictions on work anyway</li>
</ul>

<ol>
<li><p>Some combination of the above policies</p></li>
<li><p>Eliminate student loans entirely, public and private</p></li>
</ol>

<p>-That’s certainly one way. Schools would either only have full pays or full merit scholarships or full need scholarship students. You’d lose a lot of the lower and middle class. Maybe tuition would go down but I think first there would be 5 plus years of kids not being able to afford college.</p>

7

<p>Thanks to twoinanddome for your responses. Some things about your responses:</p>

<ol>
<li><p>I thought banks used to cover some sort of student loans and still were relatively recently until the feds made the move to cover everything. I know the banks cannot make the huge amount of loans students are taking out nowadays but my understanding was that they used to be able to give out loans back when they were substantially smaller than what they typically are now. And again, I do realize banks could not be able to make the huge amounts of loans that have become less uncommon today. There could be other private lending institutions that could also make it available to give out loans to go to college that could be used in addition to merit based and need based scholarships, and if they focused on less expensive state schools they would not be needing to issue gigantic loans each year. I stress that I am only bringing up suggestions here. </p></li>
<li><p>I was referring to the idea of making the total amount that could be issued gradually smaller for all fed backed loans, and this includes the huge loans that are classified as “private” but are really just as much federally backed as Stafford and PLUS loans. I meant this as a way to avoid the effects of option 7 which as you said would lead to at least 5 years, if not more, of kids who should be in college not being able to go which would also be real bad too.</p></li>
<li><p>I suppose this is one where we will have to agree to disagree since I feel it is fair to ask colleges to at least aid in being guaranteers if they want students the way they do. I also feel that there should be consequences for colleges that insist on jacking up the tuition at a completely out of control rate and yet in so many cases not being able to prepare students with those loans to pay them all back. There should also be consequences for colleges that advertise certain kinds of liberal arts related majors for all students, whether they can afford it or not, and neglect to be even remotely realistic about job opportunities. It used to be that certain majors had only very wealthy students in them; now we have millions of students choosing these majors, many going into debt and ending up with jobs they could have literally gotten out of high school. I personally do not feel colleges should be let off the hook here. CC members have said how they feel the gov’t needs to do something about this; I feel one way for the gov’t to do something about it is to make universities more accountable for their practices.</p></li>
<li><p>I am not sure about that, since while bankruptcy would be an option, it would rarely be an attractive option and so it is not quite as if everyone would feel the need to take out huge loans and simply rely on being able to declare bankruptcy.</p></li>
<li><p>Your response is fair enough. However, I feel it is worthwhile to note that there is an increasing push for total debt forgiveness, and some believe that employers should also be able to know if prospective employees have ever had debt forgiven.</p></li>
<li><p>I agree with you here and I do think that total elimination of all loans overnight would simply not be realistic. But I do think there are a lot of other options that should be considered. For example, encouraging kids to look at trade schools and having high schools teach business skills and trade skills the way they used to before it was inexplicably decided high schools did not need to do this. And, as I said before, there’s the often highly unpopular idea of at least entertaining the notion that college is not for everyone.</p></li>
</ol>

8

<p>Live at home, community college for two years and then local state college for the last two years. Have a part time job.</p>

<p>No, not flashy but gets the job done. </p>

<p>Colleges will drop their prices when people stop going.</p>

9

<p>

</p>

<p>Banks would make the loans if they weren’t competing with government. I’m guessing it will depend on how the bank thinks of the student’s ability to pay the loan back (like GPA, School, and Major) but I’m sure there would be banks willing to make these loans IF they remain undischargable. </p>

<p>I’d generally agree with your other sentiments, but I think that the only way it can work is if they’re privatized completely.</p>

<p>

</p>

<p>Honestly, I think the vast majority of Americans do approach college in this way. It’s just the few who don’t who you hear stories about, and of 'course, CCers. </p>

10

<p>Allow for more options to work off the debt through community engagement or service.<br>
Sheesh, rather than focusing on taking the loans, getting the education, then magically making the debt go away with bankruptcy or putting your default responsibility on others. You want that education, be smart enough to think this through. Not looking for babying or bailouts.</p>

11

<p>^^^ lookingforward Just for the record, I think your idea is the right one and I am vehemently against having the gov’t forgiving student loans and bailing them out en mass and do NOT advocate discharging them through bankruptcy. I only brought it up because it seemed to be an idea that people discussing this issue were increasingly proposing.</p>

<p>But yes, I do think the main solution is for students and parents alike to be more responsible and cautious in planning for their education, a concept which is indeed often hard for millenials and baby boomers to wrap their heads around, and for universities to stop enabling the current broken system we have and for these universities to face some sort of consequence if they keep enabling them. And also looking at options like community college for the first two years as was pointed out above or trade school for other students as well - plumbers and electricians often make a heck of a lot more than hundreds of thousands of students every year who get liberal arts degrees from dream schools.</p>

12

<p>“Colleges will drop their prices when people stop going.”</p>

<p>Um, no. There’s been too much investment by colleges for them to reduce prices much. What will happen instead is that many colleges will simply close. Prices will remain high because structural costs are high, and because expectations of most students are high. </p>

<p>[Note: When I attended the state’s flagship public, costs were much lower than currently. On the other hand, the standard meal plan was lunch Monday through lunch Friday … and the Student Union was closed weekends … and Chem101 had 750 students in each class. The tutoring center? What tutoring center? Oh, did I mention that 40% of freshmen didn’t return for sophomore year?]</p>

13

<p>^^^ New Hope33 Are you saying it is necessary for colleges to keep having their prices going up the way they do? Considering how bloated university budgets are, how many bureaucrats they have who essentially get paid to do nothing, and the ridiculous luxury experiences they are trying to give college students (as if the right to an education included a right to all of that) I and no doubt numerous other CCers find it obscene the idea that colleges can’t cut their costs and shouldn’t be expected to cut their costs. </p>

<p>If you believe it is too difficult for colleges to cut costs, that is one thing. But you seem to be arguing that current huge university budgets are a good thing. They are clearly not. And if they close rather than cut costs, that is on them for thinking they simply <em>have</em> to have everything their current budgets call for. If we do have loan bailouts, that means taxpayers will be forced to pay for universities’ luxury dorms, 3 or in some places even 4 star restaurant quality food and state of the art gyms and spas and so on. And more and more people, I suspect, are not gonna take that lying down.</p>

<p>It is often discussed how students as well as parents need to be much more careful and prudent in financial planning for college but too often the obligation the universities have is simply overlooked. That remains my contention.</p>

14

<p>I like lookingforward’s thought about more options to work off the debt of student loans. But oh, imagine the wailing and gnashing of teeth! “Public service?! Are you kidding me? I want to get atarted on my dream job managing social media for a fashion designer in New York City.”</p>

15

<p>I doubt you know, from the inside, how bloated any of this is- especially after the 2008 downturn. I doubt you understand how certain cost decisions are made and funded. You need a closer look, not media or CC reports.</p>

16

<p>^^^eastcoastcrazy The thing is, considering our current cultural mindset, when people discuss the gov’t doing something about colleges, many of them think that includes having the gov’t somehow create that dream job managing social media for a fashion designer. They often think gov’t should be creating these jobs that universities often promise will be gift wrapped when they graduate.</p>

17

<p>^^^ lookingforward, Was that comment directed at me? I just wanted to check since on these types of forums it is hard to tell for certain. And I am aware that the true nature of the often obscene budgets of universities is often hidden by media and CC reports. I do have some awareness that more than a few universities are actively exploiting people’s ignorance of the situation and that is why I advocate there should be consequences for those universities that do - a position I realize may be very unpopular around here and in other college focused communities.</p>

18

<p>“Ridiculous luxury experiences” are not the reason for high tuition. Tuition and dorm bills are separate. Tuition is the same whether a student lives on campus or commutes. Yes, I’d like to see the bloated high level administrations reduced. But there are a lot of other reasons tuition is higher: For one, the amazingly expensive digital infrastructure which didn’t exist when we were in college–computer labs, servers, wireless connectivity, office computing, wired classrooms, smartboards, video capabilities–all that’s expensive and needs constant upgrading. Just how it adds to electric bills must be staggering. Another is the amount of support services–federal law requires a huge layer of disabilities services (rightly so) that create whole programs and departments which didn’t exist before. Psychological services are also more extensive now than in the past.</p>

<p>Those are two I can think of off the top of my head. But the idea that colleges can just cut back in big ways means you have to decide what you really want to cut, and what is needed for what we expect of 21st century education. So yeah, just deciding to cut the money to colleges would mean that many, with marginal financial leeway already, would indeed end up closing.</p>

<p>It is not about dorms and climbing walls.</p>

19

<p>Yup, at you. You don’t know. You can look at the annual reports and anything post-2008 re: actual savings implemented. Most people settle for one or two anecdotes about some high paid exec or rising tuition, without exploring where the bulk of the money goes. Are you a grad student? Or I’m mixing you with someone else?</p>

<p>Garland, I think you and I could list all sorts of ways they cut back- and some of the ways they can’t. I saw every single building or reno project go on instant hold, forced or enticed retirements, cutbacks in adjuncts or their pay, no replacements for some faculty on sabbatical, reduced travel budgets for depts (even Harvard admissions,) increased financial aid, lower annual increases in tuition and RB, thermostats lowered/raised, service hours altered (eg, libarary no longer open in the wee hours when few were there.) If I missed something, just add it in. And this is a well known, desirable school. </p>

20

<p>Plus, the extent of this “crisis” is somewhat exaggerated. The students with 100K loans are generally upper middle class students who self-paid (because parents didn’t) to go to private schools (and all seem to be related to the people who write for the NYT, as far as I can tell.) I teach at a good “directional” where students go so they don’t have a boatload of loans; many commute, and even those who live on campus have a better handle on cost. Many are refugees who after a year at an out of state private, come home for the cheaper, perfectly adequate education. I lose sympathy for the ones who don’t, when this is available.</p>