Pages

8/5/13

Student loans provided by the Government to the dumb and lazy are a disaster. It is a disaster for the student, for the Government and for society as a whole. One can only wonder how providing unqualified people with money they cannot afford to pay back, to be used for something that they should not be purchasing can end up. For starters - this is identical to subprime mortgages and the housing bubble. #FinancialMeltdown #Recession

Hash tags aside, let's take a look at some reasons why providing subsidized Government loans to the dumb and lazy to attend college is a horrible idea:

  1. It Provides Poor Incentives:
  2. When a dog pees in the house, do its owners throw him a bone? The Government, by providing student loans not based on intelligence or work ethic, is letting the student know that no matter how hard he/she does not work he/she will still be rewarded. Subsidized alcohol and sex (college) is that reward.

  3. It Is Simply Not Affordable:
  4. With an estimated amount of student debt nearing $1T, the weight on student's shoulders is just too much. People would like to make it sound insensitive to reject someone the chance at college. I believe that it is insensitive to put debt on these kids' shoulders that they cannot pay back. Roughly 60% of borrowers are still paying back student debt over the age of 30 with 17% older than 50 (asa).

  5. It Artificially Drives Up Price:
  6. Simple economics here. Providing subsidized student loans artificially drives up demand for college the same way subprime mortgages drove up the price of housing. The price for college is way above its fair market value because of this excess demand and is making tuition unaffordable to the vast majority of people. This is working in a vicious continuous cycle.

What happens when the $1T in debt outstanding in student loans is not able to be paid back? Currently with youth unemployment as high as it is, this is not a possibility but rather inevitability.

Riots in the streets? Chronic unemployment? A skipped generation?

Please share your thoughts.

Disclaimer: I am purposely not talking about the qualified individuals. Smart people, with strong work ethic from a poor family who proved themselves to have potential during high school should definitely be given aid to attend the college of their choosing.

Comments (99)

Best Response
8/5/13

There's a lot of high handedness in this discussion, not everyone is gifted with above average intelligence, good parents, or a privileged background. Education is the great equalizer, and everyone in the US should be given access to it. Denying funding to poor students looking to go to a local University in middle America is wrong in my opinion. These kids for the most part don't have ambitions of working in finance in NYC, they simply want a college degree to get a white collar job in their local community. I agree students need to be vetted before being given $50k in loans, but not because of the institution they attend (unless it's an online joke of a school).

The WSO Advantage - Land Your Dream Job

Financial Modeling Training

IB Templates, M&A, LBO, Valuation.

Wall St. Interview Secrets Revealed

30,000+ sold & REAL questions.

Resume Help from Finance Pros

Land More Interviews.

Find Your Mentor

Realistic Mock Interviews.

8/5/13

Actually gov't student loans are somewhat based on work ethic/grades.

Students are required to pass/not withdrawal from at least 75% of their classes, and for stupid people that seems to be impossible. That said, universities have the option of not funding students whom they believe are not performing.

8/5/13

But I will agree the price is artificially driven up due to the easy access to student loan money, and most people will not be responsible enough to pay back their student loans in a more timely manner.

8/5/13

College has become a four year party funded by taxpayers. We're making an investment that will return pennies on the dollar (if we're lucky).

I think a huge problem is the sheer number of schools in the US. I know this seems like a strange thing to say (schools=success, right?), but little Johnny has no incentive to work hard to get into a top 50 program if he knows he can graduate high school with no effort, and slide into "Bullshit University of *insert several cardinal directions*"

I hate to be pessimetic, but I don't see an easy solution to this problem. In a decade or two, we'll have a country full of failures with no marketable skills leeching off the dwindling few that made something of themselves.

8/5/13

And why not offer different interest rates to different individuals? Surely the electrical engineering major with a 3.8 at MIT has a better chance of not defaulting than the communications major with a 2.7 from ASU. Why not offer differentiated interest rates dependent on major, GPA, and university?

In reply to Augustus
8/5/13

In an ideal world.

Good luck passing that piece of legislation though. Whichever politician dares tread that ground can kiss re-election goodbye.

8/5/13

I do agree with the response above that loans are based already on merit. However, the standards to obtain a loan doesn't cull out the stupid people. Even some smart but lazy students or hard-working but stupid students aren't able to service their loans.

8/5/13

Augustus:

And why not offer different interest rates to different individuals? Surely the electrical engineering major with a 3.8 at MIT has a better chance of not defaulting than the communications major with a 2.7 from ASU. Why not offer differentiated interest rates dependent on major, GPA, and university?

Good point. If was going to invest in securitized student loans, structured similarly to a MBS, I would definitely want to know the quality of the assets contained therein. You could probably make some good money by 'prestige arbitrage.' What do I mean by that? Well, some idiots will probably pay more for an asset backed by loan payments from an MIT EE major than an NC State EE major, but, assuming the student whose human capital is going to be providing the cash flows to the investor graduated in four years with similar GPAs, the ultimate payout will probably be about the same.

8/5/13

If you're admitted to a top tier institution, you deserve a loan to cover the complete cost of attending that school. Idc if you're lazy or stupid, but you obviously did something right to get accepted. Now if you're going to attend a second or third tier private school, you shouldn't get a loan to covert the FULL cost of your education. We shouldn't reward someone who got into Pepperdine or some shitty local private school with a $150k loan to cover their education cost. Everyone going to public universities should get a student loan (sadly). Yes, even those dumbasses from LSU and Ole Miss...

8/5/13

fez:

If you're admitted to a top tier institution, you deserve a loan to cover the complete cost of attending that school. Idc if you're lazy or stupid, but you obviously did something right to get accepted.

Hmm I don't think the world/government owes you shit.

Few points:
The reason universities are getting away with charging higher tuition is because they are going to get paid regardless. The government covers what you can't put up. If everyone wasn't getting a loan, kids might actually have to think twice about making the investment, which is basically what it is. The universities would also drop prices to make it more affordable.

The top colleges already offer grants and financial aid to those who really need it. Private loans (as for everything else in this world) should make up the rest for those who can't afford. This would probably be more meritorious with lower rates for certain majors and universities - like it should be.

"So who lost the hundy?"

8/5/13

GoldPeak:

College has become a four year party funded by taxpayers.

College has become a four year party funded by taxpayers and international students.*

8/5/13

This is precisely how the 1%-ers will become the .5%-ers.

While I agree that some mechanics need to be in place to prevent handing out poor loans, I think everyone deserves a chance to better their life. If your mom is a crack whore and your dad is in the pen for consecutive life terms then I think you deserve some fucking slack. IMO a kid with this background with a 2.5 gpa is way better than a ivy league bound douche with a 3.8 whose had tutors his whole life.

"Don't quit. Suffer now and live the rest of your life as a Champion" - Muhammad Ali

In reply to Upper Left Quadrant
8/5/13

cheme-ib:

Deserve may not have been the right word, but they should be rewarded with a full loan. I would rather give a FULL loan to a kid who is studying political science at at ivy instead of the kid who screwed around in hs and will be majoring in finance at hofstra. I'm 99% sure that the kid at the ivy will not only pay back their loan, but is more likely to contribute to society.

8/5/13

I think we should fund the cost if in-state tuition.

If you want to spend $60k/year to go to Princeton, fine, but do it with your own damned money, not with federal student loan guarantees.

I did my undergrad at a state school. I'm now paying cash for a masters degree at a private school. I got lucky in some ways (we have a really strong engineering school in my state), but I went in-state because I could not afford private school. (My parents had money but did not want to spend it).

The US needs strong state universities (which also happen to be the most efficient way to educate hordes of people), and we need to make it very easy to attend one. If you do well in undergrad, you can go to private school for a PhD or work for a few years and pay cash for a master's degree. If you suck in undergrad, now you are only $60k in debt instead of $200k.

Also at some point schools no longer serve the public interest with regard to educating people and flattening the Gini curve as charities if they have an endowment of millions of dollars per student. At some point we need to limit the deductibility of donations to universities that have an endowment of say, more than $500k per student. This would force schools like Harvard, Yale, and Princeton to either admit more students or allow other schools to catch up.

8/5/13

There was a good post a few months ago on zerohedge about some douche canoe who managed to get his student loans discharged from bankruptcy. I always thought that was close to impossible, but apparently a precedent has been set to force the taxpayers to foot the bill for people attending subpar schools with outrageous amounts of debt.
http://www.zerohedge.com/news/2013-05-28/student-l...

8/5/13

fez:

cheme-ib:

Deserve may not have been the right word, but they should be rewarded with a full loan. I would rather give a FULL loan to a kid who is studying political science at at ivy instead of the kid who screwed around in hs and will be majoring in finance at hofstra. I'm 99% sure that the kid at the ivy will not only pay back their loan, but is more likely to contribute to society.

Dollars to doughnuts that the Hofstra kid will contribute more to society. Also, why do all of your examples have only two types of people, Ivy Leaguers and dumb/lazy/screwed up etc.?

8/5/13

Strong elitist sentiment in this thread. Plenty of intelligent kids with bags of potential go to state schools.

8/5/13

There's zero reason college should cost anywhere near as much as it currently does. Solution? Take the most qualified teachers (their research aside) in the country, help them produce recorded lectures, put the entire course online, and let people test for credit. Can be free or can be for a small fee. Zero reason to let cost be a barrier to entry for the qualified among us.

I really struggle to understand society sometimes.

"Be a yardstick of quality. Some people aren't used to an environment where excellence is expected." - Jobs

8/5/13

Superlative:

Strong elitist sentiment in this thread. Plenty of intelligent kids with bags of potential go to state schools.

Bingo. If you live in CA or IL or TX and go to Princeton to study engineering, you might be smart but you're clearly not that wise. Why go to a #6 ranked school for $65k/year when you can go to a #5 or #1 ranked school for $18k/year?

8/5/13

moneymogul:

There's zero reason college should cost anywhere near as much as it currently does. Solution? Take the most qualified teachers (their research aside) in the country, help them produce recorded lectures, put the entire course online, and let people test for credit. Can be free or can be for a small fee. Zero reason to let cost be a barrier to entry for the qualified among us.

I really struggle to understand society sometimes.


There's a lot of value in the on campus experience. Office hours, student projects, living as an adult with very mild supervision (albeit some) to name a few. When the cost of in-state tuition at most state schools is $4k/semester, arguing that people should stay at home and watch videos is a bit like saying that people can watch yoga videos on YouTube rather than paying for a $10/week class at the community center. Yes, it can be a hardship for some people, but an in-state education still makes sense in most cases for most people. And some of the stronger schools that charge private tuition are also still worth it for the signaling value.

I think the videos have their place too, but I don't see cost effective, high quality factory style state educations going anywhere.

I think the more marginal private schools will be hurt by this. (Both for profit and not for profit)

I think that when state budget problems begin to attenuate in 10 years, the UC system will start getting a lot more funding and I would not be surprised to see USC or UC Berkeley outranking a couple of the weaker Ivies. Why go to the frozen northeast when you can get a higher quality lower cost education in sunny CA?

In reply to Superlative
8/5/13

You're missing the point - no one has said anything about state schools (except one poster).

What I have a problem with, is the number of kids that go to no name private schools that cost $50K+ a year.

I go to a top 20 U.S. News school in a pretty big city (relatively speaking) and I'm shocked at how many private schools there are around me with bigger student bodies and names that no one 5 miles outside of the city will have heard of.

8/5/13

Some of you guys are absolute douches and obviously have never worked for anything in your lives. lliniProgrammer is spot on. And this is coming from someone who attended an expensive West Coast target. If you had your parents pay for any of your college, GFTO.

In reply to Kiron
8/5/13

What? How are you not getting this?

I paid for my school via scholarships, and STUDENT LOANS. I have nothing against student loans. I encourage them!

I have a problem with students attending expensive private schools that no one has ever heard of, majoring in communications, and graduating with a sub 2.0 GPA.

These people have no chance of paying back the $50k they were borrowing each year.

In reply to GoldPeak
8/5/13

Retracted. You are an idiot.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."

In reply to GoldPeak
8/5/13

GoldPeak:

You're missing the point - no one has said anything about state schools (except one poster).

Really? We've had multiple people in this thread rag on kids who choose to go to places like ASU or SEC schools. People's perceptions of those schools are skewed because those schools have very loud people who make a lot of noise. The average kid going to the average state school probably has a decent head on his shoulders and deserves the opportunity to get an education just as much as anybody else. This isn't fucking China where only the smartest and wealthiest get to go to school... we have plenty of schools here in the U.S. and people use that to level the playing field.

What I have a problem with, is the number of kids that go to no name private schools that cost $50K+ a year.

I go to a top 20 U.S. News school in a pretty big city (relatively speaking) and I'm shocked at how many private schools there are around me with bigger student bodies and names that no one 5 miles outside of the city will have heard of.

[

To be fair, the kids who choose to go to no-name private schools and go very heavy on student loans are in the minority. Most kids who go to no-name privates like Pepperdine (as someone mentioned earlier) are either very rich to begin with and can afford their education or are on scholarship.

In reply to yeahright
8/5/13

If you're going to call me an idiot, then don't be a pussy and retract your post.

Sack up tough guy.

The WSO Advantage - Land Your Dream Job

Financial Modeling Training

IB Templates, M&A, LBO, Valuation.

Wall St. Interview Secrets Revealed

30,000+ sold & REAL questions.

Resume Help from Finance Pros

Land More Interviews.

Find Your Mentor

Realistic Mock Interviews.

8/5/13

Keep going GoldPeak, keep going

8/5/13

Kiron:

Some of you guys are absolute douches and obviously have never worked for anything in your lives. lliniProgrammer is spot on. And this is coming from someone who attended an expensive West Coast target. If you had your parents pay for any of your college, GFTO.

Ditto. There's been a fair amount of pretentious douche nonsense in this thread. This may shock some of you, but not everyone has private SAT tutors and college counselors in high school. The MAJORITY of high school students in this country have limited to no college guidance. For me, college admissions, school research, SAT / ACT, essays, recommendations, etc., was all 100% through self-study. I was fortunate enough to be driven, but still made some unwise college decisions as a 17 year old in high school. The result is $38K in student debt from a non-target private school, as opposed to staying in community college for two years, transferring to a target in-state public school, and perhaps graduating with zero debt. Of course, there's always a target MBA on my radar. But the point is, you can't criticize 16 to 17 year old high schoolers for wanting to pursue careers in Art History or Humanities at a non-target university. Further, charging different interest rates based on major or quality of school is elitist bullshit and borderline un-American. I'm not saying tax-payers should foot the bill for student loans, but forcing every student to become an engineer or scientist isn't the answer either.

For me, the answer is financial education and literacy. Teach students the impact of debt and accumulating interest at a young age. Educate high schoolers about the importance of college, your major, and how it impacts your future income and career trajectory. Those of you attending Deerfield or Exeter can't relate to any of this. Step foot on a high school campus with a 30% drop out rate (which is probably good for California), and then you'll see what I mean...

8/5/13

Assuming each Ivy League college has 30K students per grade level, does this mean that only 240K students should be admitted to college every year? Morons...

8/5/13

Superlative:

GoldPeak:

You're missing the point - no one has said anything about state schools (except one poster).

Really? We've had multiple people in this thread rag on kids who choose to go to places like ASU or SEC schools. People's perceptions of those schools are skewed because those schools have very loud people who make a lot of noise. The average kid going to the average state school probably has a decent head on his shoulders and deserves the opportunity to get an education just as much as anybody else. This isn't fucking China where only the smartest and wealthiest get to go to school... we have plenty of schools here in the U.S. and people use that to level the playing field.

What I have a problem with, is the number of kids that go to no name private schools that cost $50K+ a year.

I go to a top 20 U.S. News school in a pretty big city (relatively speaking) and I'm shocked at how many private schools there are around me with bigger student bodies and names that no one 5 miles outside of the city will have heard of.

[

To be fair, the kids who choose to go to no-name state schools and go very heavy on student loans are in the minority. Most kids who go to no-name privates like Pepperdine (as someone mentioned earlier) are either very rich to begin with and can afford their education or are on scholarship.

Everyone attending a public institution should have their education cost covered. I think we have all agreed on that. What OP is questioning is why would the government give out a $50K/year loan to a kid attending a crappy private school. Take Georgetown for example. Kids who get into G'town are smart, therefore they should be rewarded with a decent loan amount. Within close proximity, you have American, Howard, Hood College (yes Hood College) and Catholic (4 crappy private schools). Why the hell should these kids get a $50k/yr loan when they have public schools like UVA, VT, W&M and George Mason that offer better education at half the price? Yes, they may not have been admitted, but a $50K/yr loan is insane. Imagine this on a national scale... Dude, it's not that hard to understand he has a point.

In reply to GoldPeak
8/5/13

First, no one is graduating with a subpar of 2.0 from a private school considering the typical requirements to not be on probation is 2.0 GPA or above.

Second, my girlfriend and I attended subpar private schools ranked in the 200s. She majored in communications, I majored in CS. We both have loans of about $60k left to payoff with a lot already paid off from working during school and internship pay. We both graduated with under 3.0 GPAs.

She now works for the top public relations agency in NYC and I work in MO at a BB. We both will have no issue paying our loans off.

Yet your argument is individuals who attend subpar expensive private school and get loans, then graduate with subpar gpa's and different degrees can't pay their $50k in loans back? This is untrue and just not the case.

Also, believe me if either of us had known the decision we made prior to starting undergrad, I would have chosen to go to a state school and pay less while experiencing an easier curriculm. These are 17-18 year old kids making these decisions, often with limited to no guidance.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."

8/5/13

My goal here is to help the middle class suburban public high school kid.

He probably goes to a school with a 80% graduation rate.

He is probably White or Asian. He probably plays one or two sports, is captain of one of the teams. He is probably good at what he does but isn't a state athlete. He is probably smart, but he doesn't think he is particularly special at anything.

His parents have enough money to help him pay for college but aren't made of money. Like most families with two working educated parents in their early 50s, his earns $180-$250k, which is too much to benefit from tuition discounts at even HYP.

This is a kid that needs a good in-state education.

80% of these kids will go back to middle class lives like their parents, but 20% have a shot at significant wealth, boosting state and federal tax revenue. To be honest, these kids' chances of making it into the 39.6% bracket don't look much different than any ivy leaguer's aside from savvy marketing.

I think it makes sense for everyone in the 25-39.6% tax brackets to pay an extra half a percent in taxes so more of these kids can get cost-effective, high quality college educations at state schools. State universities can be incentivized to deliver high quality, practical educations by getting 5% of all federal tax revenues from individual income tax paid by their graduates for 10 years following graduation.

Seriously, I'd pay an extra 2% in taxes to know kids like I was can get an education that will help them compete globally. If we just paid 0.5%, though, that's all it would take.

8/5/13

There are many factors contributing to increased tuition, but subsidized students loans from Sallie Mae is a major one. Others induce qualifying for pell grant. The more the government meddles in Universities, the higher the costs go.

8/5/13

IMHO, I don't really see the government loans as the source of the problem. May create some moral hazards (still screws up your credit if you plan on graduating and not paying back gov't loans), but a lot of the problem stems from how we are educated and brought up in America. College is shoved down high school kids throats by all facets of society and most enroll into university, while having absolutely no clue what they're going to do afterwards, even if they do know what they want to study.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

In reply to fez
8/5/13
8/5/13

fez:

If you're admitted to a top tier institution, you deserve a loan to cover the complete cost of attending that school. Idc if you're lazy or stupid, but you obviously did something right to get accepted. Now if you're going to attend a second or third tier private school, you shouldn't get a loan to covert the FULL cost of your education. We shouldn't reward someone who got into Pepperdine or some shitty local private school with a $150k loan to cover their education cost. Everyone going to public universities should get a student loan (sadly). Yes, even those dumbasses from LSU and Ole Miss...

Yeah those guys from LSU with degrees in petroleum engineering making $100k a year straight out of school after paying like $5k a year for college sure are dumbasses...

8/5/13

fez:

Everyone attending a public institution should have their education cost covered. I think we have all agreed on that. What OP is questioning is why would the government give out a $50K/year loan to a kid attending a crappy private school. Take Georgetown for example. Kids who get into G'town are smart, therefore they should be rewarded with a decent loan amount. Within close proximity, you have American, Howard, Hood College (yes Hood College) and Catholic (4 crappy private schools). Why the hell should these kids get a $50k/yr loan when they have public schools like UVA, VT, W&M and George Mason that offer better education at half the price? Yes, they may not have been admitted, but a $50K/yr loan is insane. Imagine this on a national scale... Dude, it's not that hard to understand he has a point.


Why? We all pay the same taxes; we all deserve the same services. And the government shouldn't be in the business of picking private winners and losers.

If we're going to pay for Georgetown, we should pay for George Washington, too.

My view is that if you go to a private school, we should allow loan guarantees for 10th most expensive decile of in-state tuitions for public schools. After that, figuring out the rest of the loan should be between you, Georgetown, and the private sector.

Sorry, but we're all equal under the law, we all pay the same taxes; getting into Georgetown, let alone an actual target like UVA or Berkeley, doesn't entitle you to special treatment.

In reply to fez
8/5/13

fez:

Superlative:
GoldPeak:

You're missing the point - no one has said anything about state schools (except one poster).

Really? We've had multiple people in this thread rag on kids who choose to go to places like ASU or SEC schools. People's perceptions of those schools are skewed because those schools have very loud people who make a lot of noise. The average kid going to the average state school probably has a decent head on his shoulders and deserves the opportunity to get an education just as much as anybody else. This isn't fucking China where only the smartest and wealthiest get to go to school... we have plenty of schools here in the U.S. and people use that to level the playing field.

What I have a problem with, is the number of kids that go to no name private schools that cost $50K+ a year.

I go to a top 20 U.S. News school in a pretty big city (relatively speaking) and I'm shocked at how many private schools there are around me with bigger student bodies and names that no one 5 miles outside of the city will have heard of.

[

To be fair, the kids who choose to go to no-name state schools and go very heavy on student loans are in the minority. Most kids who go to no-name privates like Pepperdine (as someone mentioned earlier) are either very rich to begin with and can afford their education or are on scholarship.

Everyone attending a public institution should have their education cost covered. I think we have all agreed on that. What OP is questioning is why would the government give out a $50K/year loan to a kid attending a crappy private school. Take Georgetown for example. Kids who get into G'town are smart, therefore they should be rewarded with a decent loan amount. Within close proximity, you have American, Howard, Hood College (yes Hood College) and Catholic (4 crappy private schools). Why the hell should these kids get a $50k/yr loan when they have public schools like UVA, VT, W&M and George Mason that offer better education at half the price? Yes, they may not have been admitted, but a $50K/yr loan is insane. Imagine this on a national scale... Dude, it's not that hard to understand he has a point.

Did I ever say I disagree with that?

OP has only posted once in this thread and nowhere did he say he was talking explicitly about private schools. My comment was directed at the people who took that as reason to go off on the state schools in this country and say that kids who go to state schools are "lesser" than kids who go to MIT to do EE or an Ivy.

Also, kids who take out $50k/yr loans are in a very, very small minority in this country. The statistic was like 0-3% of college graduates are $100k-$200k in debt from student loans. Here's the source: http://www.asa.org/policy/resources/stats/

8/5/13

Etiquette for Gentlemen, 1950:

"Never discuss politics or religion in polite company"

Etiquette for WSO, 2013:

"Any discussion about politcs, religion or college, will eventually turn into a flame war."

8/5/13

IlliniProgrammer:

Etiquette for Gentlemen, 1950:

"Never discuss politics or religion in polite company"

Etiquette for WSO, 2013:

"Any discussion about politcs, religion or college, will eventually turn into a flame war."

Because WSO is like the only place where its controversial to say that you can live a successful fulfilling life after graduating from a state school.

In reply to IlliniProgrammer
8/5/13

*immediately

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

8/5/13

this is extremely smart, this notion that everyone should go to college is so off base. If everyone gets a college degree then it becomes meaningless, people who aren't intelligent enough or don't work hard enough go to college get thousands of dollars of debt then blame the government and corporations when their classical literature studies major doesn't get them a job.

8/5/13

Student Loans can be used in a good and bad way:

Bad: my cousin went to an in state school for all four years as an education major and ended up with 50K in debt and making only 30k a year out of school, she needed to make more money to pay back her student loans so she got a masters degree so now she is 70k in debt making 50k a year, she complains about how it is unfair that she has to pay all this back how she should be helped by rich people. I always ask her, was it a secret that teachers only make 30 or 40k a year? did you not do the math of how much your loans would be and how much you would be making? I couldve told her before she started school she would end up in that situation.

Good: Im taking out large loans and ill graduate at around 60K in debt, but I'm majoring in finance, graduating a year early, and saving as much money as i can, ill end up with a job paying me around 65K and ill have no problem paying my loans back in a relatively timely manner.

if you take out a loan for a hummanities major thats not very smart, for STEM or a business degree from a legit school theres nothing wrong with it

8/5/13

ptverdov:

There are many factors contributing to increased tuition, but subsidized students loans from Sallie Mae is a major one. Others induce qualifying for pell grant. The more the government meddles in Universities, the higher the costs go.


That's not really true. The public approach to education- funnel kids into gigantic lecture halls and let them organize their own projects (at least in engineering) and clubs in the evening is actually cheaper and more efficient than the private model.

The USPS and flagship state schools are the two government institutions that run more effectively and efficiently than the private sector. The USPS allows me to overnight a package at half the cost of FedEx; UC Berkeley produces a higher quality engineer for $90k than Georgetown produces for $250k.

In reply to Harshman
8/5/13

So by your logic then, there should be no humanities majors? We should all be STEM and business majors?

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

8/5/13

This thread is clueless. Your daddy paid for your education and used his contacts to get you that first internship. We all know it, you're not kidding anybody

8/5/13

Bad: my cousin went to an in state school for all four years as an education major and ended up with 50K in debt and making only 30k a year out of school, she needed to make more money to pay back her student loans so she got a masters degree so now she is 70k in debt making 50k a year, she complains about how it is unfair that she has to pay all this back how she should be helped by rich people. I always ask her, was it a secret that teachers only make 30 or 40k a year? did you not do the math of how much your loans would be and how much you would be making? I couldve told her before she started school she would end up in that situation.

See, that's what's fucked up about student loans. That you can go in-state and still be in deep shit.

In reply to Take_It_To_The_Bank
8/5/13

Agree. Love how everyone bashes humanities majors as the clueless, lazy, and irresponsible ones who are leeches of the system. God forbid that anyone with a STEM or business major be categorized in with those worthless members of society.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

In reply to pacman007
8/5/13

While I think the title of the OP's post is misleading, offensive and oversimplifies a complicated issue, you (along with many other's on this forum) are kind of missing the point.

If you have a kid who is from a disadvantaged (or even middle class) background, the solution to helping him find a way to improve his situation isn't too saddle him with loads of debt coming out of college. This hurts him and the economy, as he can't contribute as a consumer as he's too busy paying off student loans.

The fact of the matter is that more degrees have more merit than others in terms of total financial returns. NOTE: I am not saying that degree pedigree (whether or not you went to an ivy or similar) matters; rather it's what you study while in school.

I am dating a girl who went to a relatively unknown private school and financed said education via loans and grants. She studied structural engineering, got a job at a major contractor, and now makes more per hourly than your average i-banking analyst.

But she has plenty of friends who went to her school and got degrees in all sorts of mickey mouse disciplines and are now working at Outback Steakhouse as hostesses. To think that these kids should go into college thinking it's okay to finance these overpriced educations with debt is absolutely insane, mainly because of how harmful it is to the kids themselves.

There needs to be more audit of degree subject matter and study, plain and simple. I am totally for more investment in public education, but we need to be methodical in how we provide loans to students. Kids studying engineering, computer science, and the like have much better career prospects than journalism and cultural studies majors usually, plain and simple.

ANOTHER NOTE: I am not saying that banking jobs in NYC are the ultimate form of employment, since that seems to be an accusation that a lot of people on this forum are making: there are plenty of quality careers in other areas. Finance isn't needed to break into these fields, but something of equal or more difficulty usually is.

"Yes. Money has been a little bit tight lately, but at the end of my life, when I'm sitting on my yacht, am I gonna be thinking about how much money I have? No. I'm gonna be thinking about how many friends I have and my children and my comedy albums."

8/5/13

Anihilist:

So by your logic then, there should be no humanities majors? We should all be STEM and business majors?

At the very least, we need to recognize the differences between STEM/Business and the arts.

Arts majors should get grants; Engineers should get loans. The benefit should be the same, but an Art History major isn't capable of bearing $50k in loans while an engineer is. So the engineer should get a $5k subsidy on the loan interest while the art major should get a $5k grant for school.

Irony of ironies, some of the best schools for teaching the practical disiciplines (Engineering, CS, Accounting) also charge in-state tuition.

Bottom line is that we should be fair about education benefits, but we shouldn't make loans that people can't pay back just for the sake of sending them to college. We should just give them a grant instead, and let them figure out how to graduate from NYU as a starving artist without $100k in student loans.

Artists, certainly teachers, serve an important public purpose. I have no problem giving them a little more net help than engineers. Just so long as we aren't writing loans people can't pay back, and we force them to be pragmatic about how they pursue their passion. If you want to be an artist, great, but can't you go in-state or spend a year or two at a community college? If this is something that really matters to you, you don't need to go to Stanford to get an art degree.

In reply to parctribe
8/5/13

Thanks for posting the ZH article. I can't even begin to imagine what was going through that guys head. "Hey, I'm $85k in debt with a useless degree, barely making ends meet, failed the bar 3 times... lets marry a chick that works one day a week and pop out 3 kids. I am a victim!"

8/5/13

IlliniProgrammer:

Anihilist:

So by your logic then, there should be no humanities majors? We should all be STEM and business majors?

At the very least, we need to recognize the differences between STEM/Business and the arts.

Arts majors should get grants; Engineers should get loans. The benefit should be the same, but an Art History major isn't capable of bearing $50k in loans while an engineer is. So the engineer should get a $5k subsidy on the loan interest while the art major should get a $5k grant for school.

Irony of ironies, some of the best schools for teaching the practical disiciplines (Engineering, CS, Accounting) also charge in-state tuition.

Bottom line is that we should be fair about education benefits, but we shouldn't make loans that people can't pay back just for the sake of sending them to college. We should just give them a grant instead, and let them figure out how to graduate from NYU as a starving artist without $100k in student loans.

Artists, certainly teachers, serve an important public purpose. I have no problem giving them a little more help than engineers. Just so long as we aren't writing loans people can't pay back, and we force them to be pragmatic about how they pursue their passion. If you want to be an artist, great, but can't you go in-state or spend a year or two at a community college? If this is something that really matters to you, you don't need to go to Stanford to get an art degree.

It's not that we shouldn't have humanities majors, we just don't need as many as we're getting. At the end of the day, the people who get hurt the most by the over supply of humanities majors are humanities majors themselves, as they can't differentiate themselves.

Also, I could definitely support a limited grant system, again, with some form of audit who's getting them.

Say you have a theater major at NYU. If that student is going to receive a grant they don't have to pay back, they better be working on some legit shit while they're in school. We need some review process to make sure they're actually working as understudies, helping produce productions, acting, anything related to their study on a constant basis. I know that sounds self-evident, but I know plenty of arts majors who go to studio, fulfill basic requirements, and that's it.

"Yes. Money has been a little bit tight lately, but at the end of my life, when I'm sitting on my yacht, am I gonna be thinking about how much money I have? No. I'm gonna be thinking about how many friends I have and my children and my comedy albums."

8/5/13

LOL finance people with ideas on how to govern

Get busy living

8/5/13

Love how overwhelmingly libertarian this board gets when talking about what you want to eat, smoke, inject or screw, but some middle class kid wants to study art, you turn into little statists.

Im all for solvency, but i dont get the nastiness. Just the level of nastiness towards fellow humans is astonishing. Did your sissy WASP fathers hold you in the same contempt you show the masses? Can't you just be superior a little more politely?

8/5/13

As a student in the California Community College, figuring out what path to take when I do get to transfer to a university, there's a lot to look at. I'm looking at USC, UC Berkeley, and a couple of CSUs. The problem I'm facing is how much debt is worth making it in to the university that can help you land the best job? My cousin was able to go to USC, and through their alumni programs, was able to land a job at a big 4. However, when you come from the position I'm in, I have to take out the loans. My parents "make enough" to where I don't get much help (at least not at the moment. Maybe things will change when the tuition's 5x, or more, expensive). I can't speak for the Liberal Arts majors or Humanitarian majors. All I can say is people should think about what they're getting themselves into. Of course there are always exceptions and different situations. I'm just saying that mine is rough, personally. I didn't do the best in HS because shit happens, and it wasn't until the beginning of 2012 that I got my life straightened out. Now I'm paying for it (literally). But when in a situation like mine and wanting to break into IBD or HF or AM, most good firms look at the school. Most lower-tier schools don't have the resources. It's situational. When in my situation, you could get 100k in debt at USC and land an awesome job right out, or go to a CSU and get 20-30k in debt, then go to graduate school and still get another 50-100k in debt. These are some of the things I have to weigh. As for the arts majors, I know people that have gone to art schools and gotten 20-100k in debt in 2-3 years. The people who do this that I know usually get jobs in advertising, marketing, graphic design, and can pay back there loans. Like it's been said, it depends on the work ethics and desires of the people. But on the same note, also like it's been previously said, most kids in high schools don't know what the hell they want to do for the rest of their lives. That's half the reason it took me so long. There are many variables to all of this, and we can't go making assumptions. Especially about the work ethic of entire populaces of kids and people. It's all situational. If we could set up a regulatory system to ensure people are actually being proactive and sticking to their stipulations (which is completely unlikely with how our gov't is structured), then yes, I'd be all for the regulation of the loans. But there's no way of really knowing who's worthy and who isn't without profiling to an extent.

In reply to Anihilist
8/5/13

no im just saying its no secret what jobs and salaries come from which degrees, people need to research into their academic choices before taking out a loan, dont take out a monstrous loan when your going to become a music teacher and never make enough money to pay it back

8/5/13

Scott Irish:

Love how overwhelmingly libertarian this board gets when talking about what you want to eat, smoke, inject or screw, but some middle class kid wants to study art, you turn into little statists.

Im all for solvency, but i dont get the nastiness. Just the level of nastiness towards fellow humans is astonishing. Did your sissy WASP fathers hold you in the same contempt you show the masses? Can't you just be superior a little more politely?


I'm sorry but the current system is more statist than the one I advocate. People should not be held in debt peonage to the state, which is what is currently happening with people racking up $200k in federally guaranteed, nondischargeable student loans to get a music theory degree from NYU.

That leaves them unhappy, and it leaves the federal government unhappy.

Call me crazy but I don't think a 17 year old should be allowed to take out a $200k loan that he can't BK on and probably can't pay back just because the government wants to support education. The Feds shouldn't be underwriting the credit risk on these loans, and they should be dischargeable in bankruptcy 7-10 years after graduation.

Engineers, Doctors, Accountants? Different story. We should write these loans (albeit with the BK provisions).

I guess my point is that we should be providing support for education through grants rather than loan guarantees and special, non-bankruptable debt visited upon 18-year-old decision makers.

8/5/13

Scott Irish:
Can't you just be superior a little more politely?
where's the fun in that?

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

8/5/13

IlliniProgrammer:

Scott Irish:

Love how overwhelmingly libertarian this board gets when talking about what you want to eat, smoke, inject or screw, but some middle class kid wants to study art, you turn into little statists.

Im all for solvency, but i dont get the nastiness. Just the level of nastiness towards fellow humans is astonishing. Did your sissy WASP fathers hold you in the same contempt you show the masses? Can't you just be superior a little more politely?

I'm sorry but the current system is more statist than the one I advocate. People should not be held in debt peonage to the state, which is what is currently happening with people racking up $200k in federally guaranteed, nondischargeable student loans to get a music theory degree from NYU.

That leaves them unhappy, and it leaves the federal government unhappy.

Call me crazy but I don't think a 17 year old should be allowed to take out a $200k loan that he can't BK on and probably can't pay back just because the government wants to support education. The Feds shouldn't be underwriting the credit risk on these loans, and they should be dischargeable in bankruptcy 7-10 years after graduation.

Engineers, Doctors, Accountants? Different story. We should write these loans (albeit with the BK provisions).

I guess my point is that we should be providing support for education through grants rather than loan guarantees and special, non-bankruptable debt visited upon 18-year-old decision makers.

I don't think you've really thought this through. So, if I get a useless degree, I can declare bankruptcy or just not have to pay tuition? Don't you think this will encourage more of the types of degrees that we don't need? Or, I can fufill all the requirements of an engineering major and get an arts degree which I can renege on the payments later (trust me people will game the system).

You either cut federal subsidies and the market will charge different rates on either the institution or the major. (the good news is that the worthless for-profit institutions will mostly vanish)

Or, you subsidize specific degrees that are in public policy to support (STEM). (this has a lot of logistical challenges)

Or, you do it as we currently do.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

8/5/13

How does the government determine who is ambitious and hardworking enough to more likely pay back their loans? Y school? By major?

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln

In reply to SilvioBerlusconi
8/5/13

SilvioBerlusconi:

While I think the title of the OP's post is misleading, offensive and oversimplifies a complicated issue, you (along with many other's on this forum) are kind of missing the point.

If you have a kid who is from a disadvantaged (or even middle class) background, the solution to helping him find a way to improve his situation isn't too saddle him with loads of debt coming out of college. This hurts him and the economy, as he can't contribute as a consumer as he's too busy paying off student loans.

The fact of the matter is that more degrees have more merit than others in terms of total financial returns. NOTE: I am not saying that degree pedigree (whether or not you went to an ivy or similar) matters; rather it's what you study while in school.

I am dating a girl who went to a relatively unknown private school and financed said education via loans and grants. She studied structural engineering, got a job at a major contractor, and now makes more per hourly than your average i-banking analyst.

But she has plenty of friends who went to her school and got degrees in all sorts of mickey mouse disciplines and are now working at Outback Steakhouse as hostesses. To think that these kids should go into college thinking it's okay to finance these overpriced educations with debt is absolutely insane, mainly because of how harmful it is to the kids themselves.

There needs to be more audit of degree subject matter and study, plain and simple. I am totally for more investment in public education, but we need to be methodical in how we provide loans to students. Kids studying engineering, computer science, and the like have much better career prospects than journalism and cultural studies majors usually, plain and simple.

ANOTHER NOTE: I am not saying that banking jobs in NYC are the ultimate form of employment, since that seems to be an accusation that a lot of people on this forum are making: there are plenty of quality careers in other areas. Finance isn't needed to break into these fields, but something of equal or more difficulty usually is.

Great point. While the title of my post was partly meant to evoke strong emotion - your comment hits the point. Student loans should not indiscriminately provide people with money and future debts. Student loans must discriminate. What the factors of discrimination (such as future major, past work ethic, choice of school etc)are definitly up for debate .. The debate must be had. Too much is at stake for the student and for the economy as a whole

Money never sleeps, so why should you?

See my WSO Blog

In reply to OkComputer
8/5/13

OkComputer:

How does the government determine who is ambitious and hardworking enough to more likely pay back their loans? Y school? By major?

By providing opportunity for a student to show his true colors. How about having the student go to an inexpensive community college for two years and earn good grades before being given the 30k to attend the state party school ? . There are definitly ways.

Money never sleeps, so why should you?

See my WSO Blog

8/5/13

Frankly, I don't see why everyone is shitting on humanities majors. Although my FT work experience is limited to ~2 years, as far as I can tell, everyone I've worked with who majored in accounting or finance has still had some serious OTJ training they've had to do in the finance sector (and about as steep a learning curve as anyone else). I'm not saying people shouldn't go major in finance or accounting - I think being familiar with a lot of the core concepts and terminology of finance may be the only real advantage from the get-go, but I think people on this board, maybe mostly people still in college, are putting a little too much stock into having a business major.

More importantly, for the most part, humanities majors get a strong background in analytical thinking. No, a philosophy major doesn't even have finance on his or her radar (probably) while in undergrad, but a lot of the skills upper management starts looking for once someone surpasses the analyst and associate levels (depending on the size of the company), is strategic and analytic thinking (in-house strategy consultant at a f500 anyone?). I'm not saying that business majors don't get that, but there are plenty of other paths to go down to gain the same skills, and even end up in the same place, as a business major even if working at a BB wasn't in your crosshairs since you were 17 or 18.

I don't mean to turn this into a liberal arts vs. business major thread, because it's pointless, but any time a thread with some nice hints of elitism, like this one, gets rolling, there often seems to be a bunch of shit thrown at non-target schools, non-business majors, and whatever else doesn't fit the profile of what "belongs" on wall street.

And, @illiniprogrammer, I graduated from NYU with ~100k in debt with a liberal arts degree (though not a theater major). Even us liberal arts grads can pay off our debts (although to be fair, I probably make a bit more on average than my non-finance friends who graduated with me).

Remember, once you're inside you're on your own.
Oh, you mean I can't count on you?
No.
Good!

8/5/13

Are we overinvesting or underinvesting in human capital? In the end, debt is nominal but human capital stock is real and does not depreciate in the same way physical capital does. If you look at bubbles of past -- railways, radios, the internet, we always see an initial period of apparent overinvestment followed by a drastic correction but over the long run society benefits from the real capital that remains. Not saying the system is perfect but I don't think the solution is to create barriers to education.

8/5/13

snakeplissken:

Frankly, I don't see why everyone is shitting on humanities majors. Although my FT work experience is limited to ~2 years, as far as I can tell, everyone I've worked with who majored in accounting or finance has still had some serious OTJ training they've had to do in the finance sector (and about as steep a learning curve as anyone else). I'm not saying people shouldn't go major in finance or accounting - I think being familiar with a lot of the core concepts and terminology of finance may be the only real advantage from the get-go, but I think people on this board, maybe mostly people still in college, are putting a little too much stock into having a business major.

More importantly, for the most part, humanities majors get a strong background in analytical thinking. No, a philosophy major doesn't even have finance on his or her radar (probably) while in undergrad, but a lot of the skills upper management starts looking for once someone surpasses the analyst and associate levels (depending on the size of the company), is strategic and analytic thinking (in-house strategy consultant at a f500 anyone?). I'm not saying that business majors don't get that, but there are plenty of other paths to go down to gain the same skills, and even end up in the same place, as a business major even if working at a BB wasn't in your crosshairs since you were 17 or 18.

I don't mean to turn this into a liberal arts vs. business major thread, because it's pointless, but any time a thread with some nice hints of elitism, like this one, gets rolling, there often seems to be a bunch of shit thrown at non-target schools, non-business majors, and whatever else doesn't fit the profile of what "belongs" on wall street.

And, @illiniprogrammer, I graduated from NYU with ~100k in debt with a liberal arts degree (though not a theater major). Even us liberal arts grads can pay off our debts (although to be fair, I probably make a bit more on average than my non-finance friends who graduated with me).

Yeah, humanities majors and math majors or engineers need the same amount of training, LOL. Try that for an engineering job: the engineer will be fine and the humanities major will be fucked.

Or how about a:
Graphic design job: both will be fine but will require on the job training.
Sales job: both will require on the job learning about how to sell; if the product is technical, one person will not be able to speak to the math or engineering features in depth with technical people well.

I could go on, but the reality is one way trains you and the other is bullshit. Majoring in humanities is not training for 20 years down the line....very few things are. The reality is, if you become a senior manager, there is nothing in school that prepares you for that. That is the type of thing that is something you learn on the job and/or are born with. I minored in bullshit in college, so I write with authority.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

8/5/13

snakeplissken:

And, @illiniprogrammer, I graduated from NYU with ~100k in debt with a liberal arts degree (though not a theater major). Even us liberal arts grads can pay off our debts (although to be fair, I probably make a bit more on average than my non-finance friends who graduated with me).

Sure. Most liberal arts majors are current on their student loans. But don't tell me none of your former classmates are having trouble paying their loans off.

At UIUC, I don't know a single CS major who wound up in student loan trouble. I had a few liberal arts major friends who thought their loans were a bit of a hardship, but I didn't have any friends paying out-of-state tuition outside of engineering. It's very difficult to get into serious trouble with debt paying $5K/semester in tuition.

It does seem to be that all of the horror stories about student loans are from liberal arts majors (and perhaps the occasional math or physics major).

8/5/13

[Insert race baiting statement here]

I hate victims who respect their executioners

8/5/13

SirTradesaLot:

IlliniProgrammer:
Scott Irish:

Love how overwhelmingly libertarian this board gets when talking about what you want to eat, smoke, inject or screw, but some middle class kid wants to study art, you turn into little statists.

Im all for solvency, but i dont get the nastiness. Just the level of nastiness towards fellow humans is astonishing. Did your sissy WASP fathers hold you in the same contempt you show the masses? Can't you just be superior a little more politely?

I'm sorry but the current system is more statist than the one I advocate. People should not be held in debt peonage to the state, which is what is currently happening with people racking up $200k in federally guaranteed, nondischargeable student loans to get a music theory degree from NYU.

That leaves them unhappy, and it leaves the federal government unhappy.

Call me crazy but I don't think a 17 year old should be allowed to take out a $200k loan that he can't BK on and probably can't pay back just because the government wants to support education. The Feds shouldn't be underwriting the credit risk on these loans, and they should be dischargeable in bankruptcy 7-10 years after graduation.

Engineers, Doctors, Accountants? Different story. We should write these loans (albeit with the BK provisions).

I guess my point is that we should be providing support for education through grants rather than loan guarantees and special, non-bankruptable debt visited upon 18-year-old decision makers.

I don't think you've really thought this through. So, if I get a useless degree, I can declare bankruptcy or just not have to pay tuition? Don't you think this will encourage more of the types of degrees that we don't need? Or, I can fufill all the requirements of an engineering major and get an arts degree which I can renege on the payments later (trust me people will game the system).

You either cut federal subsidies and the market will charge different rates on either the institution or the major. (the good news is that the worthless for-profit institutions will mostly vanish)

Or, you subsidize specific degrees that are in public policy to support (STEM). (this has a lot of logistical challenges)

Or, you do it as we currently do.

I'm trying to push the loans over to the private market, subject to state usury laws, etc. If you can't get a loan at less than 16% given all of the facts and circumstances of your education on the private market, it's probably because you can't pay it back.

As for reneging, people can study to be artists under the current system and renege on the payments without even the extra work of getting an engineering degree. At least now a private lender has the opportunity to evaluate the borrower's character and creditworthiness.

We do need to support higher education, but let's replace the loans with grants.

8/5/13

IlliniProgrammer:

SirTradesaLot:
IlliniProgrammer:
Scott Irish:

Love how overwhelmingly libertarian this board gets when talking about what you want to eat, smoke, inject or screw, but some middle class kid wants to study art, you turn into little statists.

Im all for solvency, but i dont get the nastiness. Just the level of nastiness towards fellow humans is astonishing. Did your sissy WASP fathers hold you in the same contempt you show the masses? Can't you just be superior a little more politely?

I'm sorry but the current system is more statist than the one I advocate. People should not be held in debt peonage to the state, which is what is currently happening with people racking up $200k in federally guaranteed, nondischargeable student loans to get a music theory degree from NYU.

That leaves them unhappy, and it leaves the federal government unhappy.

Call me crazy but I don't think a 17 year old should be allowed to take out a $200k loan that he can't BK on and probably can't pay back just because the government wants to support education. The Feds shouldn't be underwriting the credit risk on these loans, and they should be dischargeable in bankruptcy 7-10 years after graduation.

Engineers, Doctors, Accountants? Different story. We should write these loans (albeit with the BK provisions).

I guess my point is that we should be providing support for education through grants rather than loan guarantees and special, non-bankruptable debt visited upon 18-year-old decision makers.

I don't think you've really thought this through. So, if I get a useless degree, I can declare bankruptcy or just not have to pay tuition? Don't you think this will encourage more of the types of degrees that we don't need? Or, I can fufill all the requirements of an engineering major and get an arts degree which I can renege on the payments later (trust me people will game the system).

You either cut federal subsidies and the market will charge different rates on either the institution or the major. (the good news is that the worthless for-profit institutions will mostly vanish)

Or, you subsidize specific degrees that are in public policy to support (STEM). (this has a lot of logistical challenges)

Or, you do it as we currently do.

I'm trying to push the loans over to the private market, subject to state usury laws, etc. If you can't get a loan at less than 16% given all of the facts and circumstances of your education on the private market, it's probably because you can't pay it back.

As for reneging, people can study to be artists under the current system and renege on the payments without even the extra work of getting an engineering degree. At least now a private lender has the opportunity to evaluate the borrower's character and creditworthiness.

We do need to support higher education, but let's replace the loans with grants.

My understanding is that the only loan in the US that can't be wiped out in bankruptcy is a student loan. I don't think artists are exempt from that under the current system. Nobody is forcing anyone to paint landscapes a la PBS Bob with a whip. Nor is anybody forcing impractical majors at shitty schools.

If you're going to pass out grants, the government can't be in the business of choosing which school is more prestigious (or whatever). Giving loan forgiveness for earning a degree in a desirable major, might work, but I don't know how you get broad support for Art History majors........that doesn't create jobs. Loan forgiveness at least forces people to get the degree and in the desired major.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

8/6/13

Is this seriously a financial forum? Guys, what about equity financing as opposed to debt financing? That is, suppose universities calculated how much you would owe, and allowed you to pay some percentage of you income in the future to cover this. Just like how a stock gives you a share of a corporation's income stream, so too would this equity financing of student fees. I believe Oregon is doing this now, and it sounds like a decent idea.
http://www.salon.com/2013/07/11/oregon_students_pa...

It might be a while before they're cash flow positive, but it makes sense for the same reasons that someone that someone would seek equity financing as opposed to debt financing (by issuing bonds for a company or student debt for a student). Doing so better aligns incentives, meaning that schools have more of stake in a students future - career services would likely improve, among other things. Students might still be able to take on debt if they don't want to lose 3-5% of their future income (especially if they think they'll earn a lot, and don't want dilute their "share" of their income), but it's very similar to a corporate line of thought. Additionally, it doesn't constrain students as much, so students wouldn't be as likely to be trapped in a spiral of debt. You might argue that it's similar to indentured servitude, but so is ROTC, and at least in this case the government/university doesn't control what you do as they only get a share of whatever income you earn.

Now, this isn't necessarily the perfect solution - there are a lot of way the incentives can go wrong. However, this is a financial forum - I would expect that career financiers would be creative enough to figure out a way to finance university studies in a way that works. So disagree with this idea if you must, but give a good reason, and maybe give a better idea? I mean seriously, figure out a way to expand the market in a way that works well for everyone involved instead of just saying "screw it, it isn't worth it."

8/6/13

Jerome,

Go fuck yourself you piece of shit.

adapt or die:
What would P.T. Barnum say about you?

MY BLOG

8/6/13

this account won't make it to morning

8/6/13

SirTradesaLot:

My understanding is that the only loan in the US that can't be wiped out in bankruptcy is a student loan. I don't think artists are exempt from that under the current system. Nobody is forcing anyone to paint landscapes a la PBS Bob with a whip. Nor is anybody forcing impractical majors at shitty schools.

If you're going to pass out grants, the government can't be in the business of choosing which school is more prestigious (or whatever). Giving loan forgiveness for earning a degree in a desirable major, might work, but I don't know how you get broad support for Art History majors........that doesn't create jobs. Loan forgiveness at least forces people to get the degree and in the desired major.

Sure. My point is that the art history major can simply refuse to go earn money to pay the loan back under the current system. Get the art history degree, take the 25% wage garnishment waiting tables (oh, and cash tips), never pay loan back to the feds.

Honestly, I'd rather just give people grants. Here's $2K/semester to pay for school. Go earn the other $3K/semester to pay in-state tuition. Want to study art history? Great! As long as you're paying for it. Or, if you plan on being an actuary, you can go out and get a loan. Want to study art history and actuarial science? Well, maybe you can get a loan if a lender will go for it.

The nondischargeable portion of the loan should either be limited in duration or amount, maybe both. The whole point of bankruptcy is to avoid situations like student loans where people can't declare BK at some point and get a fresh start.

8/6/13

Things aren't as black and white as people are here are making it sound. There are lots of humanities majors who do make it, and lots of non-humanities majors who don't. Also, how many people actually graduate with a liberal arts degree and $200k in debt? I get the feeling there aren't as many out there as we assume.

8/6/13

Lets not forget public universities are subsidized by taxpayer money, they can offer lower sticker prices because of the appropriations from the government. So end of the day, taxpayers are still subsidizing students at state universities, only its direct to the university and the student has lower out of pocket costs / loans.

8/6/13

If anything student loans subsidize UNIVERSITIES, not students. If there weren't low cost education loans- then the price of college wouldn't keep skyrocketing past the inflation these past decades.

What we really should be angry about is these lazy useless humanities professors, empire building administrators, and various research wastes. Funny thing is- college would be more efficient and useful to our economy if they couldn't charge inflated tuitions. They'd have to market and provide economically useful programs.

8/6/13

GoldPeak:

I'm not crucifying kids that go to non-target privates. I'm only making the argument that they should go to state schools where the education is almost excellent, they gain access to an enormous alumni network, and can graduate school with little to no debt.

I wish someone would have told me that while I was in high school. Thanks to my non-existent counsellor, I ended up at a liberal arts school. I love my time here, but there are about 5 alumni in the entire finance industry.

Edit:
This is a little different for me though. I am an international student and my government does not offer loans to students who study outside of my geographic region. I "get to" pay for most of my education.

In reply to yeahright
8/6/13

Ok, I understand what you're saying.

In this situation, I would say lack of financial education/high school counseling was the problem.

I'm not crucifying kids that go to non-target privates. I'm only making the argument that they should go to state schools where the education is almost always excellent, they gain access to an enormous alumni network, and can graduate school with little to no debt.

8/6/13

freeloader:

Lets not forget public universities are subsidized by taxpayer money, they can offer lower sticker prices because of the appropriations from the government. So end of the day, taxpayers are still subsidizing students at state universities, only its direct to the university and the student has lower out of pocket costs / loans.

Sure, but their net cost per student is about 1/3 that of an Ivy's. IIRC, Princeton's cost per student is about $20k/year, while UIUC's is $20k/year. And the other $10k is really money that's getting returned to middle class taxpayers that they've been paying for the past 18 years and helps to reduce Gini coefficients.

Frankly it's money well spent from a social justice/taxpayer value/economic value perspective. And in terms of the taxes paid by one engineer- this is before we get to our economic competitiveness or any sort of social justice issues, the Feds and the state make their money back in three years from providing the $10k/year subsidy for their education.

Frankly I always thought state schools should get more federal funding, because the economic benefits accrue nationally rather than locally. Families are willing to pay higher taxes to support them because they have kids, but when the kids graduate, they may not stay in state but they'll probably stay in the US.

If we were to take Harvard's $15 billion endowment and spend it on UC Berkeley, we'd get 200k top-notch electrical engineers who would largely stay in the US and work for tech firms, and add substantially to the middle class. And we'd win the trade war with China and Singapore. Spending that at Harvard College, the same amount would yield only 50k engineers with less skill who would mostly go into consulting or banking.

8/6/13

AMLady:

Actually gov't student loans are somewhat based on work ethic/grades.

Students are required to pass/not withdrawal from at least 75% of their classes, and for stupid people that seems to be impossible. That said, universities have the option of not funding students whom they believe are not performing.

hahahaha."Required to pass 75% of their classes.....based on work ethic." Thought this was rather funny. Also, have you ever thought about the incentive that this creates for universities? (Hint: it has something to do with adjusting the difficulty of classes and the grading process so that large blocks of the schools consumers can continue to provide revenue streams via government granted loans).

"Elections are a futures market for stolen property"

8/6/13

I think Illini is spot on - I'd like to introduce a few ideas to the ideas he's advocating though. I think there should be MUCH better career counseling as you figure out what to major in in college; say that does mean in the short-term there's a significant jump in STEM majors over art/music/humanities majors - eventually the STEM market will inflate, jobs will be sparse, and based on simple microeconomics, demand for humanities majors will rise. There shouldn't and there never will be a permanent solution for this - the job market a student is graduating into should determine student loan issuance.

8/6/13

College is the biggest scam going these days

I can't help but chuckle when I see all these poor dads freaking out about internships at banks and whatnot.

That's what you get for being a certified prole (college educated)

alpha currency trader wanna-be

8/7/13

Government should raise taxes to give everyone that gets in $6K/year for your first 4 years of college (only if you are still enrolled). The rest is up to the individual, whether you choose an expensive private or a state university.

Prices would rapidly adjust downward with students no longer able to mortgage their futures to overpay tuition.

8/8/13

Fuck em all only the kids with millionaire parents should be able to go to college, this way I don't have to worry about finding some gold digging whore at school and getting her pregnant. Plus there's that little bit that they can actually afford it.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

8/8/13

dazedmonk:

Government should raise taxes to give everyone that gets in $6K/year for your first 4 years of college (only if you are still enrolled). The rest is up to the individual, whether you choose an expensive private or a state university.

Prices would rapidly adjust downward with students no longer able to mortgage their futures to overpay tuition.


Fuck this shit, why should I be far more responsible for paying for some dumb fucks schooling than she ever will be? That's a load of horse shit.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

8/8/13

Read college unbound, it will blow your minds about how fucked up our college system is in the USA.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

8/8/13

Phoenix2017:

Things aren't as black and white as people are here are making it sound. There are lots of humanities majors who do make it, and lots of non-humanities majors who don't. Also, how many people actually graduate with a liberal arts degree and $200k in debt? I get the feeling there aren't as many out there as we assume.


What humanities majors make it? Do you mean make it through their phd programs then become professors and make college cost even more? Yea that's "making it"

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

8/8/13

heister:

Phoenix2017:

Things aren't as black and white as people are here are making it sound. There are lots of humanities majors who do make it, and lots of non-humanities majors who don't. Also, how many people actually graduate with a liberal arts degree and $200k in debt? I get the feeling there aren't as many out there as we assume.

What humanities majors make it? Do you mean make it through their phd programs then become professors and make college cost even more? Yea that's "making it"

Can you explain the link between being a professor and rising college costs?

There are tons of jobs in between working in IB and working at McDonald's that we're not mentioning. The ideal job for a humanities major isn't necessarily in academia/research (though, these positions are comparably elite compared to law/biz/med). People on this forum focus on the extremes way too much.

Sure, the ROI for a humanities major probably isn't as high compared to other majors (it's probably near the bottom), but people should be able to major in what they're interested in. That being said, we need more regulations to make sure these people understand what they're getting into.

8/9/13

Stats distributions are very important. For example if you are obtaining a degree at a school that costs 5+ standard deviations above the mean for a degree that results in returns 3 standard deviations below the mean then you pretty much failed at life.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

8/9/13

The said part is, the "stupid and lazy" individuals you're talking about don't know that they're screwing themselves to the degree that they are.

I live in a fairly expensive building in the Washington DC area with my girlfriend. Without a good job, family money, or a veterans GI Bill, you can't afford to live here. That being said, there are way too many undergraduate and graduate students that are obviously living well over their means.

We live in a 1 bedroom apartment at 2k/month. There are plenty of people on our floor that live alone, and are students. It's normal to want more; who doesn't!? But, you have to be realistic. These people, even if they're relatively hardworking and smart, are handicapping themselves as soon as they enter the workforce. Some people really just don't get it.

-Cheers

Pages

What's Your Opinion? Comment below:

Login or register to get credit (collect bananas).
All anonymous comments are unpublished until reviewed. No links or promotional material will be allowed. Most comments are published within 24 hours.
WallStreet Prep Master Financial Modeling