The Incredible, Rage-Inducing Inside Story of America’s Student Debt Machine (2 Viewers)

[bclemms]

No student loans? That's a high bar. Almost no one would be able to go to medical school .... yet if you get in, its pretty much a no-brainer (assuming you do really want to be a doctor) ... Education can be a tremendous investment, though I agree though coasting by a some lame liberal arts degree, probably not the best idea.

On the house buying, unfortunately out of reach for alot of young people, many of whom live to high-cost of living urban centers because thats where all the jobs are.

I agree completely on the student loans, there are exceptions for high paying degrees where the investment is rewarded. Just speaking in general for the 80% of degrees that don't pay enough to justify it.

There are also exceptions on the housing but like the student loan. The job in the big expensive urban centers has to create a salary to overcome the cost of living to be worth it. Most cities have an option within a 45 minute commute where housing is affordable.

 

[Clarkey]

Clarkey every time I see your avatar I am so jealous of where you live. Tried to convince my wife to move there and she quickly vetoed that idea. I think it’s beautiful where you are.

LOL! Maybe visit first, then work on her/family members before making such a move?

Here's a larger version of the photo used in my avatar; it's taken from Gros Morne National Park (part of the UNESCO series of parks/places around the world that have a unique status or feature).

https://c1.staticflickr.com/2/1076/5099187295_628317e197_b.jpg

Plenty of beautiful pictures/reasons to visit here:

Welcome to Newfoundland and Labrador

I was playing soccer earlier this summer in the local men's league and there were several students attending university here from Mexico/South America. Education is cheap in Canada, even cheaper in Newfoundland. And despite what you'd think, the quality of the system is quite good.

 

[sfidc3]

Start your kids a college fund, like a 529. Instead of an abundance of toys and crap they don't need for Christmas and birthdays ask friends and relatives to put in their $20 or whatever into that. Put half your tax return into it. etc. It adds up fast. My oldest is 7 and we already have $20K in his. They will still have all the toys and crap they can handle trust me.

My folks farted around and wasted money all their lives on stupid stuff and when I wanted to go to college I had to do it all by myself. I'm not letting that happen to my kids.

Word, I highly suggest starting annuities (mutual funds, etc) for your kids very early on. Put a few hundred bucks a month in and you will be surprised how fast it grows, if they don't use it for college then it may be a good source of funds for purchasing their first home or property....

College isn't for everyone to be sure, but it should be a lot more accessible than it is now...it really is disgraceful.

 

[Krodwhodat]

If you join the Louisiana National Guard they will pay your tuition for up to 5 years and give you a monthly GI Bill. Always an option...

 

[DavidM]

We need people who are willing to do lower paying jobs (teaching is the perfect example) so the idea that students should just pursue high paying occupations isn't practical, and isn't beneficial to society.

According to one source, the annual cost for a full-time resident student at Louisiana Tech, for example, exceeds $20,000. That's a lot of money, even if cut in half through other means, for a student to get an education degree.

I think there is good understanding of the problem - the exorbitant cost of a higher education - so then how do we go about educating and preparing people for a wide range of occupations and to succeed in the workforce? Not everybody is cut out for college, but for those who are, what can be done to make a competitive college education more accessible?

 

[dtc]

We need people who are willing to do lower paying jobs (teaching is the perfect example) so the idea that students should just pursue high paying occupations isn't practical, and isn't beneficial to society.

According to one source, the annual cost for a full-time resident student at Louisiana Tech, for example, exceeds $20,000. That's a lot of money, even if cut in half through other means, for a student to get an education degree.

I think there is good understanding of the problem - the exorbitant cost of a higher education - so then how do we go about educating and preparing people for a wide range of occupations and to succeed in the workforce? Not everybody is cut out for college, but for those who are, what can be done to make a competitive college education more accessible?

I find it quite ironic that we're having this discussion when for 30 years or more economic policies in this country have been intended to foster greater wealth at the top of the income levels and middle class earnings have eroded all while costs of everything have increased.

It seems we are focused on the short term or the small frame rather than the larger problem. And there's been great advice about trade schools, avoiding debt, and making good decisions, but nothing has been said about why the wages for teachers and others have remained so low while the average CEO or top athlete/lawyer/doctors are making huge sums of money.

I bet the folks running that nasty scam outfit managing student loans in the OPs article are making a mint while the folks in the pits dealing with the customers make nothing and can't even pay their student loans.

 

[DavidM]

I find it quite ironic that we're having this discussion when for 30 years or more economic policies in this country have been intended to foster greater wealth at the top of the income levels and middle class earnings have eroded all while costs of everything have increased.

It seems we are focused on the short term or the small frame rather than the larger problem. And there's been great advice about trade schools, avoiding debt, and making good decisions, but nothing has been said about why the wages for teachers and others have remained so low while the average CEO or top athlete/lawyer/doctors are making huge sums of money.

I bet the folks running that nasty scam outfit managing student loans in the OPs article are making a mint while the folks in the pits dealing with the customers make nothing and can't even pay their student loans.

Agreed. there are some good thoughts in this thread especially in terms of individual choices, but I think what needs more attention is the health and well-being of society. There is a huge wealth disparity and no matter what any of us think about that, history strongly indicates there will come a time of reckoning.

The middle class is under increasing financial pressure. Housing, education, health care, wages, retirement - we often segment these topics into separate discussions even though they are closely connected.

 

[superchuck500]

I agree totally. Colleges are raising tuition for one simple reason. The individual is not actually paying, and they know it. They know the gov't will hand out the money. And Bernie Sanders wants free tuition. Yeah, ok.

While I don't agree with everything in this post, I think it does raise a point that I don't think anyone else has addressed. We all know about the cost of college and how difficult it can be for students and their families - the need for a comprehensive and thoughtful student loan program is necessary under these dynamics. But the underlying cost dynamics bear consideration - in fact, college tuition is not a true market.

When all American students have access to the government-guaranteed loan program, demand and affordability are artificially driven by that access to capital. In any market where the buyer has extremely easy access to capital, demand is supported and price levels are supported at an amount that roughly corresponds to the level of available capital. Some people call it a bubble, and I don't think that's quite the right concept.

But it is indeed price support and most institutions can plan on that price support. It certainly makes you wonder what would happen to tuition costs if the price support mechanisms were removed and a more genuine market were established. In the past, this question was academic - the risk of meaningful social costs of removing access to tuition money to examine whether the lack of price support would reduce the cost of education is just too great. I suspect, now, however, we can model some of these questions with advanced data analytics and modeling (I might do some research to see if anyone has done this). Of course a model is going to be based on how the inputs/variables are controlled - but a well made model could be insightful.

But with these dynamics, you have three parties: the school, the student, and the lender. And it seems that we have a structure that directly benefits the schools and lenders. The guaranteed loan program benefits the school because it supports tuition levels, the school gets paid - perhaps even artificially high amounts. And the program benefits the lenders because the amounts borrowed are high, perhaps even artificially - which means that interest revenues are increased and with virtually no risk because the loan program is almost completely guaranteed by the government. Perhaps ironically, though, the student doesn't benefit from the program - at least with respect to the cost. The price support dynamics drive tuition costs to the student - and in a lending environment, cost = debt. So the program supports tuition price, which is the same thing as supporting debt amounts.

That's the problem I have with the DeVos viewpoint, which seems to be that student loans are a business transaction entered into by adults and financial institutions and the government has no business playing with the rules that govern that on-going debt relationship and how it is managed, including collections. This viewpoint ignores the fact that the federal student loan guarantees to lenders drive the entire process and the amount of debt required of students.

It is not a true market, it is a market where the government provides price support to the institutions and removes lender risk - to refuse to support the interests of the third party to the equation, the students, seems both arbitrary and misplaced. When you consider that the entire purpose of the program in the first place is to help American students afford a higher eduction, as a matter of national interest, it seems that we have missed the target. Sure, we have made a college education more widely available, but we have also artificially supported cost levels, and the manifestations are becoming more and more problematic.

 

[SigFreudianSlip]

LOL! Maybe visit first, then work on her/family members before making such a move?

Here's a larger version of the photo used in my avatar; it's taken from Gros Morne National Park (part of the UNESCO series of parks/places around the world that have a unique status or feature).

https://c1.staticflickr.com/2/1076/5099187295_628317e197_b.jpg

Plenty of beautiful pictures/reasons to visit here:

Welcome to Newfoundland and Labrador

I was playing soccer earlier this summer in the local men's league and there were several students attending university here from Mexico/South America. Education is cheap in Canada, even cheaper in Newfoundland. And despite what you'd think, the quality of the system is quite good.

Oh I know. One of my customers lives there in Corner Brook. He swore by it, so I did a bunch of research, presented to the wife and got shot down. ?
We will definitely visit, and would have many times before we’d move so who knows. We are definitely leaving Texas and the Oregon coast is still the front runner but I’ve pushed for parts of NL and BC. Thanks for the additional pics. Beautiful place.

 

[boutrous]

While I don't agree with everything in this post, I think it does raise a point that I don't think anyone else has addressed. We all know about the cost of college and how difficult it can be for students and their families - the need for a comprehensive and thoughtful student loan program is necessary under these dynamics. But the underlying cost dynamics bear consideration - in fact, college tuition is not a true market.

When all American students have access to the government-guaranteed loan program, demand and affordability are artificially driven by that access to capital. In any market where the buyer has extremely easy access to capital, demand is supported and price levels are supported at an amount that roughly corresponds to the level of available capital. Some people call it a bubble, and I don't think that's quite the right concept.

But it is indeed price support and most institutions can plan on that price support. It certainly makes you wonder what would happen to tuition costs if the price support mechanisms were removed and a more genuine market were established. In the past, this question was academic - the risk of meaningful social costs of removing access to tuition money to examine whether the lack of price support would reduce the cost of education is just too great. I suspect, now, however, we can model some of these questions with advanced data analytics and modeling (I might do some research to see if anyone has done this). Of course a model is going to be based on how the inputs/variables are controlled - but a well made model could be insightful.

But with these dynamics, you have three parties: the school, the student, and the lender. And it seems that we have a structure that directly benefits the schools and lenders. The guaranteed loan program benefits the school because it supports tuition levels, the school gets paid - perhaps even artificially high amounts. And the program benefits the lenders because the amounts borrowed are high, perhaps even artificially - which means that interest revenues are increased and with virtually no risk because the loan program is almost completely guaranteed by the government. Perhaps ironically, though, the student doesn't benefit from the program - at least with respect to the cost. The price support dynamics drive tuition costs to the student - and in a lending environment, cost = debt. So the program supports tuition price, which is the same thing as supporting debt amounts.

That's the problem I have with the DeVos viewpoint, which seems to be that student loans are a business transaction entered into buy adults and financial institutions and the government has no business playing with the rules that govern that on-going debt relationship and how it is managed, including collections. This viewpoint ignores the fact that the federal student loan guarantees to lenders drive the entire process and the amount of debt required of students.

It is not a true market, it is a market where the government provides price support to the institutions and removes lender risk - to refuse to support the interests of the third party to the equation, the students, seems both arbitrary and misplaced. When you consider that the entire purpose of the program in the first place is to help American students afford a higher eduction, as a matter of national interest, it seems that we have missed the target. Sure, we have made a college education more widely available, but we have also artificially supported cost levels, and the manifestations are becoming more and more problematic.

A lot of what's being said in this thread is what I have been saying for years. Stop looking down on blue-collar workers. Stop making all kids feel as if college is the only path to success. Stop the insane student loan cycle of debt.

My boss has an interesting idea, one that I didn't buy into at first, but the more he says it the more it makes a bit of sense. Colleges should charge tuition based on the expected salary of the degree. This would also help to direct more money to college programs that could then raise the wages and get more qualified teachers in expert fields.

 

[SigFreudianSlip]

A lot of what's being said in this thread is what I have been saying for years. Stop looking down on blue-collar workers. Stop making all kids feel as if college is the only path to success. Stop the insane student loan cycle of debt.

My boss has an interesting idea, one that I didn't buy into at first, but the more he says it the more it makes a bit of sense. Colleges should charge tuition based on the expected salary of the degree. This would also help to direct more money to college programs that could then raise the wages and get more qualified teachers in expert fields.

Great post boutrous. I like the idea your boss presented. However you and I both know many that won’t stop looking down on blue collar. The degree gives many a way to thumb their nose at people. Which I find fascinating given the salary my wife and I make compared to many of our degreed friends. My wife did go to and graduate a trade school though. I have so far zero higher learning and it has not stopped me at all from attaining a good career that pays very well and a nice life.

When I go for fun it will not advance my career in any way shape or form. I wanted both of my kids to go, and they are/will. But I understand that there are other avenues.

 

[guidomerkinsrules]

My boss has an interesting idea, one that I didn't buy into at first, but the more he says it the more it makes a bit of sense. Colleges should charge tuition based on the expected salary of the degree. This would also help to direct more money to college programs that could then raise the wages and get more qualified teachers in expert fields.

makes logical sense, BUT it also means that only rich kids can afford to take the classes that yield the higher salary positions - not a good recipe for a dynamic economy

 

[brandon8283]

Obviously the focus on the article is the companies that service the debt and some congressional actions/inactions.

It sure doesn't get into the rising cost of tuition, what people are using their loans for, etc...

My wife is getting her masters for $11k. (granted, no room and board). Why are people spending over $100k?

My master's, after some grants from the school, was $9k (tuition only - didn't need room and board as I owned my own place by the time I started). I paid it out of pocket on a teacher's salary. But I waited probably a bit longer than most teachers to start mine. I waited until I was completely financially stable. I should also note that my bachelor's was paid for as I went, as well, with scholarships, grants, and good old fashioned money. I have a master's degree, have never had student loan debt. I'm 35.

People really need to do a CBA before they get their masters to determine if it's worth it for them, and if so, they need to pay for it.

Side note: When I was getting ready for my masters, the university repeatedly asked me why I wasn't filling out the FAFSA and what I was going to do to pay for the degree. I kept telling them "I'm just going to write you a check every semester." That seemed to be the most unheard of thing they had ever experienced.

 

[Devildog]

makes logical sense, BUT it also means that only rich kids can afford to take the classes that yield the higher salary positions - not a good recipe for a dynamic economy

Well, the poorer kids can just pull themselves up by their boot straps.

 

[guidomerkinsrules]

This, like insurance, banking and medical sectors are no less than a giant Ponzi scheme saturated with fraud. Until we change the increasing price of tuition and change the mindset that everyone needs to go to 4 year university college then we are simply treating the symptoms.

agree with this
unfortunately i disagree with about everything else in practical terms even though it's logically sound

Until that changes, you have to play the game.

it's a rigged game - it will keep producing the winners/losers it wants - the only thing to do is change the game and make it more productive and effective

#1- If you are racking up massive debt to get a degree that has average to below average salaries, you are doing it wrong.

when i was in undergrad Physical Therapy was the 'next big field'
guess what? everyone went into PT - and now there are way more licensed PTherapists than positions
an 18 yr old is going to suck at what's going to be a viable field in 15 yrs. why? because everyone sucks at that
plus the whole idea behind universities (and it's a good idea - really a great idea) is that it should be progressive and expansive not regressive and restrictive

#2- Skilled trade and technical colleges offer many courses that are cheap and lead to average to above average wages. We as a country have to stop looking down on blue collar jobs and encouraging our youth to get behind a desk.

actually do agree with this whole-heartedly - the problem was this sector use to be the dumping ground for economic, racial, regional segregation - -how to we re-institute it so that it is equitable?
and then the same problem as #1 remains - are these jobs going to be there in 15 years?

#3- Most 4 year degrees can be obtained very easily in 3 years reducing costs drastically and for those that want to be a full time student without a job then there is no reason not to be able to finish in 3 years.

unfortunately for too many kids year 1 of college is remedial - they are being taught the things that should have been taught in their crappy high schools
BUT your #4 is the best remedy for this, so i 'agree' with #4 also - no caveat

#4- Community College offer plenty of classes for the first two years, sometimes at a 90% discount. Those credits transfer and nobody cares where you started.

#5- Most states offer scholarships that are pretty easy to obtain. If you don't meet those standards then there is a good chance you shouldn't be at a 4 year college.

i've taught some of the more accomplished students in La. and even with TOPS - -tuition was going to be a struggle for most
one of the problems with my former school is that getting students into BIG schools was a huge selling point which the counselors drove relentlessly - -so I had many students, say who went to NYU or Howard for a year and couldn't afford to keep going (and obviously never could afford it)
and then transferred to Xavier or UNO or similar

Everyone wants to make Government, schools and banks the scapegoat which I get. It's a shirtty system but the rules to the game are pretty clear. Play the game or don't. Yes, the system needs to be changed but until it is, their are options.

it is in the best interest for the country as a whole that the best students are given every opportunity to chart the future - esp as the country will get more and more diverse and the need to adapt to that will continue to grow
this means keeping doors open

I have so many friends that are Meteorologists with huge student debt looking for jobs in the field that aren't there and the ones that are don't pay enough to earn a living. That hasn't changed the last 20 years yet every year a full class of students make the same mistake. Worst part is, they all want jobs that they think involve getting up close to mother nature when in reality the jobs that are available consist of cubicles and low wages.

i was studying to be a psychologist when i was kidnapped by dance (i still think it's important that we are broad in many fields vs deep in middle management) and even with living hand-to-mouth in my 20s while touring the world (which psychology never would have allowed me to do)
i was fine with landing my 1st university position and only a bit of debt (i've never paid for tuition -all 3 college experiences were full-rides and even had grad stipends, but it was not nearly enough to live off of)
my problem came with family health issues that brought me back to NO, adjunct and Visiting Prof positions and then Katrina - "bad choices" aren't always the issues - -i would even guess that "other shirt" is more of a problem then just a glut in the workpool