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6/27/12

A WSO user not too long ago wrote a personal, almost poetic piece about his own experience with student debt titled, I Am The Toxic Debt. I can't help but think about the imminent dangers of unscrupulous student loans lending, as many institutions are still being chastised for easy lending which created the housing crash. Is our institutions doing the same thing, lending to students in a lack-luster economy? From Q4 2007 to Q1 2012, student loans have grown from $93 to $452.6 billion, a growth of 332%.

Student loans may be a liability on the consumer balance sheet, but they constitute an asset for Uncle Sam. Just how big? Nearly 35% of the total federal assets, over four times the 8.6% percent for the total mortgages outstanding.

This doesn't include private loans. Estimated total outstanding loans are estimated to be about one trillion dollars. But I get it, human capital and innovation is the driving force of economic growth. In a piece by Bloomberg:

Keep in mind that much of that $1 trillion is "good debt." Most borrowers have manageable loans, and workers with a bachelor's degree earn 84 percent more over their lifetimes on average than those with only a high school diploma. They also face much lower unemployment rates. So a college loan remains a very smart investment for many people.

Do you think student loans could be the next bubble? Is congress doing enough to contain the problem? Or do you think the level of debt will prove to be a worthy investment into the US economy?

Comments (378)

6/26/12

Student loans cannot be discharged in bankruptcy.

So the answer to your question is no, it won't (can't) pop.

6/26/12
mdk6c:

Student loans cannot be discharged in bankruptcy.

So the answer to your question is no, it won't (can't) pop.

That's not true at all. The bubble will pop one day. We cannot substain what we are currently doing with student loans. Just because a loan cannot be discharged, doesn't mean that the person has to pay on it. And I know a handful who aren't paying on them now.

6/26/12
Nobama88:

That's not true at all. The bubble will pop one day. We cannot substain what we are currently doing with student loans. Just because a loan cannot be discharged, doesn't mean that the person has to pay on it. And I know a handful who aren't paying on them now.

The government (which guarantees student loan ABSs) has all sorts of clever ways to get your friends to pay up (like garnishing their wages). So, even if they miss a few payments in the beginning, they will still be on the hook for the rest of their lives. There will never be the epidemic writedowns to student loan ABSs that there were to privately issued MBSs a few years ago.

6/26/12

Why are student loans so hard to discharge?

Get busy living

6/26/12
UFOinsider:

Why are student loans so hard to discharge?

Because some of our politicians believe education is a God give right and that everyone should be able to get a loan for college, regardless of a persons grades / ability / income / test scores / maturity, etc.

In order to allow a plethora of people to attend college, they had to open the flood gates for student loans. Banks wouldn't make loans to people who didnt have the ability / income / scores / correct major / maturity without acceptable collateral. Not being able to discharge loans in bankruptcy allows banks to make these loans without any underwriting done. Private or Public loans, dont matter.. same thing.

6/27/12
Nobama88:
UFOinsider:

Why are student loans so hard to discharge?

Because some of our politicians believe education is a God give right and that everyone should be able to get a loan for college, regardless of a persons grades / ability / income / test scores / maturity, etc.

In order to allow a plethora of people to attend college, they had to open the flood gates for student loans. Banks wouldn't make loans to people who didnt have the ability / income / scores / correct major / maturity without acceptable collateral. Not being able to discharge loans in bankruptcy allows banks to make these loans without any underwriting done. Private or Public loans, dont matter.. same thing.

Because the government does such a good job when it comes to modifying underwriting standards, right? They did such a good job with the housing market.

I can only say that the effects of the student loan bubble on this generation will be profound. If you are an engineer, going to Wall St, becoming a nurse, etc. the loans are no big deal. But how many of your classmates got a decent paying job like the above?

I don't think it will pop; the government seems hell-bent on subsidizing loans further. We are still at the point where a complete bailout would be doable. The government would be the only thing that could pop the bubble, by allowing student loans to be dischargeable.

More profoundly, I think we will see the rise of a college educated working class. You know those reddit people who complain about 80k of debt for their sociology degrees? Those are its new members. These people will barely be able to keep up with the minimum payments, then fall further behind when they default. Servicing this debt will likely keep them in the lower middle class for a majority of their careers.

6/26/12

not sure if this is a stupid question, but can student loans be sliced and diced into CDOs?

6/26/12
Moneyball:

not sure if this is a stupid question, but can student loans be sliced and diced into CDOs?

Sure, want to buy some?

6/27/12

Someone mentioned how you cannot discharge student loans in bankruptcy.

Aside from that will you see an implosion like you did in subprime? No, because a majority of student loans are packaged into government guaranteed student loan ABS called FFELP loans where they are 97% guaranteed by the US government.

Private loans on the other hand which aren't backed by the government... I've seen some bonds that have up to 20% of the loans in some sort of default or delinquency. If they become dischargeable, then a majority of these bonds will be practically worthless

Attended a conference not too long ago about this, and was told that 44% of defaults are from students who attend for profit colleges (University of Phoenix, DeVry, etc) For them I see absolutely no good coming out of the debt they take on. Even for some private colleges unless it's a top 30 school, the debt is questionable.

And I'm sure this highly indebted generation I'm sure is just dying to take out just as big of loans with Fannie/Freddie several years down the line right? If anything I'm almost curious where the next generation of homebuyers will be to buy houses at current prices

6/27/12

I'm expecting some sort of radical change in the way college is priced in the next two decades. The bubble isn't in student loans, it's in the cost of tuition, whether private or public. Student loans are a big driver of this.

6/27/12
GoodBread:

I'm expecting some sort of radical change in the way college is priced in the next two decades. The bubble isn't in student loans, it's in the cost of tuition, whether private or public. Student loans are a big driver of this.

Interesting point. My father runs a major university and he has been saying for the last five years or so that higher education is the next bubble to pop. However, he feels most of the pain will be felt by university faculties of the future. What does this imply? Well, when the currently tenured full professors in subjects like English and Lit-type subjects retire, they will be replaced by non-tenure track adjunct instructors to teach students basic composition and writing skills. They will be hired at a fraction of the cost and without the pompous, entitled attitude that comes with most academics. Professors in totally worthless subjects (i.e. anything with the word "Studies" in it) will simply not be replaced at all.

6/27/12

So the question is how do we profit from this? The implication seems to be that young people won't be able to buy a house as they wont be able to save up money for a deposit. I guess this would suggest that there will be a strong demand for affordable rental property? My guess is that if your parents weren't able to help you through college they won't be able to help you with a deposit. Any thoughts on this?

6/27/12

Thread hijack: best ways to get rid of student debt? My current plan is to just ball out after grad school and pay that shit down or maybe just join the national guard / army (and I've always wanted to anyway). Other ways to knock that shit off quickly? I hate being in debt.

Get busy living

6/27/12

I think the SLABS "bubble" is 33% human interest, 33% hype, and 33% reality.

First - Human Interest: Post-secondary education is seen by many as a birthright, and people are going to get worked up when tons of kids, who were told to "pursue their dreams" with no regrets, graduate swimming in debt. It makes for good news, and more importantly it challenges the basic assumptions of the American Dream, socioeconomic mobility, etc. I.e., these poor kids deserve whatever educational advancement they can attain, and Student Loan lenders are taking advantage of them. Similar to the pathos with the housing bubble - I'm not saying I don't sympathize with borrowers, but they are not guiltless just because they were naive.

Second - Hype: The point of the FFELP backing is to put a floor on losses, enhancing creditworthiness (and subsequent SLABS rating), thereby facilitating a much larger market and subsidizing availability to ultimate borrowers. FFELP-backed deals comprise the vast majority of issuance, at least 80% last time I checked. Given this proportion, the 97% Uncle Sam guarantee effectively takes tail risk out of the picture. Barring the Federal Government cutting FFELP loose and abandoning the wraps, losses are a known quantity. This isn't to say that SLABS are a slam-dunk for investors - the guarantees are well priced in - but the market can't really implode.

Third - Reality: At the end of the day, there are probably too many loans which won't be paid, or their repayment will come at material personal and social cost. We aren't quite facing a generation of art-history majors with 50k in 6.8% loans, but we do need to rectify our attitudes towards university education (both among parents and university officials), encourage responsible decisions among youth, and make financial literacy a god-dammed national priority. How this didn't happen post-08 is beyond me.

"There are three ways to make a living in this business: be first, be smarter, or cheat."

6/27/12

Lots of good input on this thread so far, lets keep this going!

Here to learn and hopefully pass on some knowledge as well. SB if I helped.

6/27/12

College tuition is rising so quickly because states are cutting back on education funding. It is not because costs are spiralling out of control.

6/27/12

What this all comes down to is that many people are accumulating student loan debt without acquiring skills valuable enough to justify the expenditure. Racking up $200k in student loan debt in order to study some arcane course of study with little real world application.

Let's face it, going to NC State and getting a degree in Mech E has a hell of a lot more value added than an Art History degree from an Ivy. A friend of mine's younger brother and younger sister are respectively in those same two positions two and three years out of college. Guess who has an $80k a year job working 9-5 and guess who works as a receptionist?

Everyone involved (students, parents, and university folks) need to pay more due dilligence to make sure that the skills kids acquire for their huge outlays translate are justified by resulting in gainful employment.

6/27/12

Do you need good credit to get a student loan?

The Four E's of investment
"The greatest Enemies of the Equity investor are Expenses and Emotions."- Warren Buffet

6/27/12

For kmess024, I've heard that for private education colleges (DeVry, Apollo etc) they have been very unscrupulous in the past few years. it's incredibly easy. they practically push it on you, because the government pays the college, while saddling the students with debt. they've introduced regulations that's supposed to away this kind of behavior. not sure about state colleges though.

6/27/12

Thread hijack: best ways to get rid of student debt? My current plan is to just ball out after grad school and pay that shit down or maybe just join the national guard / army (and I've always wanted to anyway). Other ways to knock that shit off quickly? I hate being in debt.

Easy 9 step program for getting out of student debt:

Step 1: Apply for credit card.
Step 2: Repeat step 1 until the aggregate credit limit on the various credit cards is equal to that of your total student loan balance.
Step 3: Transfer balances of your student loans onto the various credit cards.
Step 4: Make minimum payments on credit cards for a few months.
Step 5: Stop payments on credit cards. Claim some sort of hardship.
Step 6: Find the finest lawyer $350 can get you in the yellow pages.
Step 7: Use lawyer from step 6 to declare chapter 7 bankruptcy.
Step 8: If step 7 is successful, you are now debt free. Congratulations! You may now stop the 9 step program. If not successful, continue onto step 9.
Step 9: You are going to jail for fraud. Make sure to keep your butthole tight at night.

5/30/13

Not_Quite_So:

Honestly, I wish all students whould just default on all those scammy predatory loans and send a message...


I'ved wondered about this as well. Theoretically, they pose every bit as much of a systemic risk as the banks collapsing. I'm wondering if things get too bad in the job market whether the gov't will act in the name of self preservation?

Get busy living

5/31/13

UFOinsider:

Not_Quite_So:

Honestly, I wish all students whould just default on all those scammy predatory loans and send a message...

I'ved wondered about this as well. Theoretically, they pose every bit as much of a systemic risk as the banks collapsing. I'm wondering if things get too bad in the job market whether the gov't will act in the name of self preservation?

I'm working on a comprehensive piece on this exact topic. I'll share it here when it's ready, hopefully today.

"There are three ways to make a living in this business: be first, be smarter, or cheat."

5/31/13

this is irresponsibility personified. i would never trust someone who borrows money and fails to repay it. If you can't formulate a plan for something as fundamental as a loan agreement and subsequent repayment in future years, then there are significantly larger problems in play here.

5/31/13

Welcome to the future.

5/31/13

Isn't it your fault millennials don't have jobs? I saw a bunch of your companies empty binders getting thrown out the other day at my office... and my dad says you fucked up his 401k

5/31/13

Clearly your dad wasn't diversified or sold at the wrong time. Yes Lehman went belly up due to a number of factors, but one stock blow up should never be enough to fuck up someone's retirement, especially with a 6 year ensuing bull market

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

"The investor's chief problem - and even his worst enemy - is likely to be himself." - Benjamin Graham

Best Response
5/31/13
youngunner:

Isn't it your fault millennials don't have jobs? I saw a bunch of your companies empty binders getting thrown out the other day at my office... and my dad says you fucked up his 401k

YES, EVERYTHING IS MY FAULT.

PS -- Your Dad is a little bitch. No offense.

5/31/13

Another classic one liner. Bravo! You are my idol like Lew Glucksman was your idol.

5/31/13

i recently met a 32 y/o making $32k/year working in a museum and he has $100k in student loan debts which are starting to bury him. He was looking for an collateralized loan.

5/31/13

Delete

5/31/13

I've made it a personal goal to not open the comment section for anything that is public on facebook. The dumbest, loudest voice is rewarded the most. Don't waste your time trying to understand or argue with them.

On topic though, as an Australian, I can confirm that having a debt-free education system (or close to it) is quite inefficient.

5/31/13
YoungHoe:

On topic though, as an Australian, I can confirm that having a debt-free education system (or close to it) is quite inefficient.

Could you expand on this? As an American, I'm not familiar with your system. How does it work and why is it inefficient?

5/31/13

Domestic students receive interest free loans from the government, pegged to inflation. It also isn't repayable until you hit a certain threshold in earnings ($50k i believe). As you earn more, the rate of payment will increase. This is in addition to Domestic students already being partially funded by the government. As an international student, you pay double, and you pay up front. Somewhat of a raw deal, considering the amount of international students at most large universities.

I also believe voluntary repayments earn some type of discount.

In regards to inefficiencies, I will admit, I don't have any exposure to any other education systems, so I can't really speak with too much conviction. I consider it ineffective though simply based on student mentalities. People don't consider it debt. We generally don't care if we drop a course beyond the deadline and have to pay. We don't factor it into our education decisions at all. Obviously I cant speak for everyone, but this is pretty accurate for the majority.

With such frivolous attitude towards student debt, the whole allocation of resources in the education system is implied to be ineffective.

5/31/13
YoungHoe:

With such frivolous attitude towards student debt, the whole allocation of resources in the education system is implied to be ineffective.

I'm not sure the attitude is any less frivolous or more impacted that financial concerns in the US (cf comments in this thread about liberal arts degrees followed by unemployment).

Which suggests that education decisions are the undergraduate level are not that significantly impacted by the financial cost.

Which may suggest that changing the system from Australia's current system to a more US system will do sweet fuck all to change the allocation of resources.

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

That doesn't piss me off. Guaranteeing those lenders won't lose money, and the ensuing predatory lending that takes place pisses me off.

5/31/13

Debt has been around for millenia. And so have people defaulting on their debts.

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

obviously, but this is quite different wouldn't you say? An incoming student (and their parents), should know what they're getting into. Yes there should be more awareness spread about the FULL cost of taking out a loan to this extent, the cost/benefit analysis, etc etc. And obviously a lot more should be done to protect people from predator lending.

I'll respond to your other comment in a little bit, you raise a good point

What is the answer to 99 out of 100 questions?

5/31/13
David Aames:

DON'T TAKE OUT THE DEBT IF YOU CAN'T PAY IT BACK*, ESPECIALLY IF YOU'RE TAKING OUT DEBT TO STUDY PHILOSOPHY AT A LIBERAL ARTS SCHOOL (or any school for that matter).

Just testing how far you feel responsibility goes - would you be fine with piercing the corporate veil and making shareholders responsible for the unpaid debts of a bankrupt company? Or, say, removing the ability of borrowers to go into bankruptcy?

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13
SSits:

David Aames:DON'T TAKE OUT THE DEBT IF YOU CAN'T PAY IT BACK*, ESPECIALLY IF YOU'RE TAKING OUT DEBT TO STUDY PHILOSOPHY AT A LIBERAL ARTS SCHOOL (or any school for that matter).

Just testing how far you feel responsibility goes - would you be fine with piercing the corporate veil and making shareholders responsible for the unpaid debts of a bankrupt company? Or, say, removing the ability of borrowers to go into bankruptcy?

This is the biggest issue that I have with student loans. Every other type of debt is forgivable through negotiations or bankruptcy except for student loans. For all of the piss and vinegar on this board about student loans, why isn't it the same with corporate/commercial debt, personal debt, commercial and residential mortgages, etc? I know student loans contain the language in the loan docs but it doesn't make sense to me why there's one type of debt that is not dismissible and it's the debt that's entered into at the youngest age that most people enter into debt. And the govt backing of the debt argument doesn't work for me any longer because our govt bailed out an implicit guarantee and turned it into an implicit guarantee with the agency bailouts.

When we structure funds or holding companies it's easy to go bk in one LLC and not have it affect the mother ship even though there may be ample funds to repay lenders, or an individual can go 13 and get rid of mortgages and credit cards but a student loan sticks with you forever. I know how it works legally, but it just kind of bullshit.

5/31/13

There is no collateral tied to a student loan other than the person. Since you can't legally enslave a physical person you thus must be able to tie their financial situation to the loan. Other wise people would just go to school and then never pay anything towards their loan. With a mortgage or other kind of loan the bank or whomever lends to the lender can foreclose on the asset.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

The idea that people will go to school and then never pay anything back is simply not true.

They ran that experiment and found that while a tiny percentage of borrowers were bad actors, the overwhelming majority paid back their loans.

Remember that you would still have to declare bankruptcy to rid yourself of loans in this situation, and good luck getting people to trust you with capital post bankruptcy.

5/31/13
surferdude867:

The idea that people will go to school and then never pay anything back is simply not true.

They ran that experiment and found that while a tiny percentage of borrowers were bad actors, the overwhelming majority paid back their loans.

Remember that you would still have to declare bankruptcy to rid yourself of loans in this situation, and good luck getting people to trust you with capital post bankruptcy.

You understand that if student debt was discharge-able in bankruptcy that no lender would lend at any reasonable interest rate, right? If there's no collateral then the risk is worse than that taken on by pawn shops because at least pawn shops have SOME collateral. Making student debt discharge-able in bankruptcy would mean that there would be no student lending market other than the government. Maybe that's a good thing, but it certainly wouldn't make student loan money more ubiquitous.

5/31/13

We don't want student lending to be more ubiquitous, the market is overfunded as it is. It should be difficult to get loans, not everyone should go to college.

5/31/13
heister:

There is no collateral tied to a student loan other than the person. Since you can't legally enslave a physical person you thus must be able to tie their financial situation to the loan. Other wise people would just go to school and then never pay anything towards their loan. With a mortgage or other kind of loan the bank or whomever lends to the lender can foreclose on the asset.

Unsecured LC's and revolvers fall under the code for corporate entities as do unsecured credit cards and other lines of credit for individuals. And if an asset is worth less than the debt, which was the case very often in the mortgage/housing debacle, and the borrower went bk they weren't on the hook for the extra.

I'm not a fan of bk but if you allow it for everything else personal and entities I think it's bullshit to exclude one single type of debt. Would there be abuse? Sure, just like there's abuse at every level of borrowing and bk out there.

And if the debt were able to be discharged lenders may actually underwrite the loans and help contain the cost of higher ed rather than the industry, and I'm not just talking about for profits but the entire racket, using these loans as an infinite ATM.

5/31/13

Haha, this blame the victim stuff on student loans makes me laugh. You can't drink at 18, but you can decide to go to a 40k a year school to study your "passion" because your former-hippy burnout baby boomer parent won't say no to you.

Think for a second how stupid you were in high school, and then realize that you're probably well above average. I think the parent's of these kids still aren't getting enough heat. What high school student can possibly conceptualize what paying back $1k a month in student loans is actually like?

5/31/13

as true as this is, I guarantee some of the high schoolers on WSO would make a 3 statement model with variables for exit opps, prestige, and job prospects and make their decision based upon that.

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

"The investor's chief problem - and even his worst enemy - is likely to be himself." - Benjamin Graham

5/31/13
coreytrevor:

Haha, this blame the victim stuff on student loans makes me laugh. You can't drink at 18, but you can decide to go to a 40k a year school to study your "passion" because your former-hippy burnout baby boomer parent won't say no to you.

Think for a second how stupid you were in high school, and then realize that you're probably well above average. I think the parent's of these kids still aren't getting enough heat. What high school student can possibly conceptualize what paying back $1k a month in student loans is actually like?

Stupid or not, people need to be held responsible for their actions and live with the consequences of their decisions.

There are plenty of high school seniors who are too stupid to realize they need to focus more on education in high school instead of partying and sports, and now their career opportunities are limited. Should we give them a second chance since they didn't know better? Or how about the senior who was too stupid to use protection and got his girlfriend pregnant? Or the senior who made the stupid decision to drink and drive and got arrested? Should they all get a pass because they were too young and stupid to know better? Should we just punish the parents?

We all live with our decisions the same as the guy who took out a $60k loan to get a British Literature degree and now works at Sam's club. If you are an adult who is smart enough to graduate high school and get accepted into college, then you are smart enough to google search "career prospects" or "average salary" for the major you are choosing. Blaming it on parents or stupidity just contributes to the entitlement problem.

5/31/13

The difference between the scenarios you outlined and the original being discussed is external incentives.

As a rule, society does not tell young people to become teenage parents, drink and drive, and abuse drugs and alcohol. They do however encourage children, ALL children, that going to college is a necessity, and that education debt is always good debt.

If you remove the incentive for lenders to make bad loans, then you won't have people going to college who shouldn't.

5/31/13
surferdude867:

The difference between the scenarios you outlined and the original being discussed is external incentives.

As a rule, society does not tell young people to become teenage parents, drink and drive, and abuse drugs and alcohol. They do however encourage children, ALL children, that going to college is a necessity, and that education debt is always good debt.

If you remove the incentive for lenders to make bad loans, then you won't have people going to college who shouldn't.

Society also does not tell young people to steal, and that is what you are doing when you borrow money and do not pay it back. My point is that people are responsible for making informed decisions and should be held accountable to the consequences of those decisions, regardless of what they are. "Everyone told me to go to college" is not an excuse for taking a loan that you cannot repay.

5/31/13

"Everyone told me to go to college" is not an excuse for taking a loan that you cannot repay.

[/quote]

Yeah but it's a pretty harsh penalty to be an indentured philosophy-degree servant for the rest of your life because you had bad parents.

5/31/13
Industry84:

Society also does not tell young people to steal, and that is what you are doing when you borrow money and do not pay it back. My point is that people are responsible for making informed decisions and should be held accountable to the consequences of those decisions, regardless of what they are. "Everyone told me to go to college" is not an excuse for taking a loan that you cannot repay.

As a creditor, you're taking on the risk of your debtor defaulting on their loans. The greater the risk, the greater the interest rate you can charge.

As a debtor, if you default on your loans, you're at the mercy of your creditors - they can seize your assets, and have your wages garnished.

This is the very essence of the Western banking system - BOTH parties involved in a transaction take on risk. You want debtors to have the ability to declare bankruptcy, otherwise you have a riskless situation for one party, and you run into serious moral hazard.

I don't think this is complicated, and it saddens me that the IQ level on this forum has fallen so low...

5/31/13

You approach the situation as if there is no third party flexing its will on the market and skewing the risk curve for all involved. The federal government has essentially created a pricing scenario where a party (the schools) have no incentive to price their cost on a market based system. They actually have a disincentive to price their product at a true market rate in the form of lost federal aid money because their costs aren't at a minimum of the federally allowed student aid amounts. This creates a cost spiral that will constantly climb as the government raises student aid limits to fall in line with college costs that will then increase to meet the requirements created by new student aid levels.

Therefore the customers (students) get stuck in the middle of a system that they have no real control over but should have as customers. The employment industry now requires college degrees to copy information from a bill into a computer via typing it. Something any idiot could do. Therefore the students must go to college to get into anything other than manual labor. Since the government created a situation where they are the main cause of the accelerated rise in the cost of college, it had to assume the responsibility for the increased risk associated with student loans by attempting to force everyone else out of the market by offering loans at a near 0% rate.

There is no "market" in student loans. There is no moral hazard. It's just another example of the government fucking the people. Only in this case the people getting fucked think that just because they are young they can cry enough and have their situation improved.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

i agree that the government shouldn't be involved in student loans, we're on the same page. It doesn't matter if we're talking about private vs. Public lenders in this case, it's still a broken system.

I'm very libertarian, but I also recognize that government isn't inherently evil or bad, it's people that bend it that way, whether intentionally or not.

5/31/13
surferdude867:

Industry84:Society also does not tell young people to steal, and that is what you are doing when you borrow money and do not pay it back. My point is that people are responsible for making informed decisions and should be held accountable to the consequences of those decisions, regardless of what they are. "Everyone told me to go to college" is not an excuse for taking a loan that you cannot repay.

As a creditor, you're taking on the risk of your debtor defaulting on their loans. The greater the risk, the greater the interest rate you can charge.

As a debtor, if you default on your loans, you're at the mercy of your creditors - they can seize your assets, and have your wages garnished.

This is the very essence of the Western banking system - BOTH parties involved in a transaction take on risk. You want debtors to have the ability to declare bankruptcy, otherwise you have a riskless situation for one party, and you run into serious moral hazard.

I don't think this is complicated, and it saddens me that the IQ level on this forum has fallen so low...

Your response to what I said makes no sense. My comment had nothing to do with interest rates, bankruptcy, or the lender. I am well aware of how debt agreements work and the fact that both parties take on risk, and I'm also very aware that student loans cannot be discharged in bankruptcy. My comment was about the responsibility of the debtor, not the lender.

Your original comment was that kids are encouraged to go to college, and that excuses them from making a poor choice to take a loan they cannot repay. I said nothing about whether allowing discharge in bankruptcy would improve the situation. I think you may be contributing to the IQ issue on the forum.

5/31/13

Retard,

The point is that if a debtor can't payback a loan it's not "stealing," it's "defaulting" and there are consequences i.e. they are at the mercy of their creditors who can seize assets or garnish wages. Beyond that, the debtor has LOSER stamped on their forehead and will find it extraordinarily difficult to borrow money through standard channels going forward.

What do you want, debtors prison?

5/31/13
surferdude867:

Retard,

The point is that if a debtor can't payback a loan it's not "stealing," it's "defaulting" and there are consequences i.e. they are at the mercy of their creditors who can seize assets or garnish wages. Beyond that, the debtor has LOSER stamped on their forehead and will find it extraordinarily difficult to borrow money through standard channels going forward.

What do you want, debtors prison?

Ok, the guy with a top tier MBA, CPA, and ten years of real world experience is a retard. You are a joke, and you are likely placing all of the blame on lenders because you are one of the idiotic scum bags who took out a loan for a philosophy degree and now you can't make your student loan payments on your Starbucks salary.

I'm not sure if you're even able to read and comprehend information, but the whole point of the ops post was that we have an entitlement problem in this country and people are taking out loans that they cannot or do not plan to repay. Your solution to people irresponsibly borrowing money is to make it easier for them to be forgiven of that obligation in bankruptcy? That's brilliant.

But please, teach me more about what you learned about interest rates and bankruptcy in your freshman finance class. I didn't cover enough of that when I earned my finance degree, MBA, or CPA.

5/31/13

What I want is to place responsibility for lending back in the hands of lenders, where it should be. Should people who end up underwater with consumer debt be on the hook forever? They shouldn't.

This seems like common sense to me, and if it doesn't to you I question the value of your degrees.

5/31/13
surferdude867:

What I want is to place responsibility for lending back in the hands of lenders, where it should be. Should people who end up underwater with consumer debt be on the hook forever? They shouldn't.

This seems like common sense to me, and if it doesn't to you I question the value of your degrees.

My original point, which many people on this forum would agree with, is that people need to be held accountable for the consequences of the decisions that they make. The fact that student loans cannot be discharged in bankruptcy is even more reason for debtors to make an informed, educated decision when they take these loans.

When a debtor signs a student loan agreement, it is clear upfront that this amount is not dischargeable in bankruptcy, there is no collateral behind the loan, and wages can be garnished to repay it if necessary. If a person still decides to take a loan for a non-value added degree regardless of these facts, then that is a very unintelligent decision and that person needs to take ownership of that decision and face the consequences.

5/31/13

That's completely insane, you're in favour of debt bondage. These laws encourage predatory lending practices, where the rich and powerful further marginalize the poor and stupid.

5/31/13
surferdude867:

That's completely insane, you're in favour of debt bondage. These laws encourage predatory lending practices, where the rich and powerful further marginalize the poor and stupid.

Not sure how you translated "being responsible for our decisions" into "debt bondage".

5/31/13
Industry84:

surferdude867:That's completely insane, you're in favour of debt bondage. These laws encourage predatory lending practices, where the rich and powerful further marginalize the poor and stupid.

Not sure how you translated "being responsible for our decisions" into "debt bondage".

When "being responsible for our decisions" means no recourse to bankruptcy for debtors on student debt (unlike most other debtors), you are talking debt bondage as there is no escape regardless of circumstance, other than repayment or death.

Would you be fine with debtors for student debt being granted the right to clear their student debts through bankruptcy? If not, why do you think they should be treated differently to other types of debtors?

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

Well I can't explain it any better. Seems to me a finance major would be able to extrapolate into the future

If you're the result of a top mba program I weep for the future of America.

5/31/13
surferdude867:

Well I can't explain it any better. Seems to me a finance major would be able to extrapolate into the future

If you're the result of a top mba program I weep for the future of America.

I weep for the future because millenial pussies, such as yourself, would prefer to blame the government and financial institutions for their problems instead of taking responsibility themselves.

You claim it is insane for someone to be required to pay back money that they borrowed, yet it is completely acceptable for the government to take that money out of my paycheck to pay for mistakes that had nothing to do with me.

Your energy is quite misguided in weeping for the future because of me. I am an educated, highly paid, responsible US citizen who has paid back every dollar ever borrowed in addition to paying taxes to cover entitled little shits such as yourself.

5/31/13
Industry84:

I am an educated, highly paid, responsible US citizen who has paid back every dollar ever borrowed in addition to paying taxes to cover entitled little shits such as yourself.

Taking a wild swing at psychoanalysis here - do you think that perhaps you could feel some antagonism to complaining student debtors because of thoughts along the lines of "I paid mine, so you should damn well have to pay yours, otherwise it's not fair"?

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

That's completely insane, you're in favour of debt bondage. These laws encourage predatory lending practices, where the rich and powerful further marginalize the poor and stupid.

5/31/13
Industry84:

surferdude867:What I want is to place responsibility for lending back in the hands of lenders, where it should be. Should people who end up underwater with consumer debt be on the hook forever? They shouldn't.This seems like common sense to me, and if it doesn't to you I question the value of your degrees.

My original point, which many people on this forum would agree with, is that people need to be held accountable for the consequences of the decisions that they make. The fact that student loans cannot be discharged in bankruptcy is even more reason for debtors to make an informed, educated decision when they take these loans.

When a debtor signs a student loan agreement, it is clear upfront that this amount is not dischargeable in bankruptcy, there is no collateral behind the loan, and wages can be garnished to repay it if necessary. If a person still decides to take a loan for a non-value added degree regardless of these facts, then that is a very unintelligent decision and that person needs to take ownership of that decision and face the consequences.

5/31/13

You're out of your mind. Who knows everything they need to know for life at age 16 or 17, which if you've forgotten, is when you apply for college. You're suggesting that pimply faced, light weight, hand job getting, underdeveloped shitheads should know how to plan out their lives. That's hilarious.

For a second let's forget the stereotype of the liberal arts grad who ends up in student debt problems. There are plenty of business grads and certain STEM majors from disreputable schools who are unemployed or underemployed. These kids didn't have an idea about securing a good job outside of graduating from any institution with above a 3.0. Where are you supposed to get advice on what to do? If you're like anyone else you talk to your parents, counsolers, and friends - all of whom recommend going to college, any place you can get into. If you're not from an educated background or if you didn't go to a good high school, you're not going to know shit about the importance of applying to the right colleges - not necessarily defined by access to banking and consulting jobs. There are plenty of good state schools that will get you comfortable jobs ($55K+), however, there are way too many shit universities that are degree mills where even if you major in attractive area and get high grades, you might not be able to secure a good job. These are the institutions where kids get into trouble by attending.

I have my own thoughts on the student loan problem that I might share, but you're insane for trying to put the onus of troubled lending on almost underage debtors. Your arguments are close to those of the idiots who tried to claim that it was the borrowers who were the main cause of the housing crisis. This latest problem is being caused by the government (including the Fed), just like the Great Recession was.

5/31/13
anonguytoibd:

You're out of your mind. Who knows everything they need to know for life at age 16 or 17, which if you've forgotten, is when you apply for college. You're suggesting that pimply faced, light weight, hand job getting, underdeveloped shitheads should know how to plan out their lives. That's hilarious.

For a second let's forget the stereotype of the liberal arts grad who ends up in student debt problems. There are plenty of business grads and certain STEM majors from disreputable schools who are unemployed or underemployed. These kids didn't have an idea about securing a good job outside of graduating from any institution with above a 3.0. Where are you supposed to get advice on what to do? If you're like anyone else you talk to your parents, counsolers, and friends - all of whom recommend going to college, any place you can get into. If you're not from an educated background or if you didn't go to a good high school, you're not going to know shit about the importance of applying to the right colleges - not necessarily defined by access to banking and consulting jobs. There are plenty of good state schools that will get you comfortable jobs ($55K+), however, there are way too many shit universities that are degree mills where even if you major in attractive area and get high grades, you might not be able to secure a good job. These are the institutions where kids get into trouble by attending.

I have my own thoughts that I might share about the student loan problem, but you're insane for trying to put the onus of troubled lending on almost underage debtors. Your arguments are close to those of the idiots who tried to claim that it was the borrowers who were the main cause of the housing crisis. This latest problem is being caused by the government (including the Fed), just like the Great Recession was.

You're right man. What was I thinking in expecting people to make intelligent financial decisions and actually commit to paying back a loan after they agreed to? That was awfully idiotic of me. I forgot that they were 16-17 years old, have pimples, and don't have good sources for advice.

Lets just do the right thing and forgive all of the student loan debt in America, double the tax rate, and elect Bernie Sanders. Thank you for showing me the light.

5/31/13

The argument isn't that loans shouldn't be repaid... It's that guaranteeing the lender a profit and giving students no form of recourse, creates an environment where young people are given wayyy too much rope to hang themselves with.. You'd never make some of those loans if you could lose money.

If student loans weren't guaranteed by the government it would reduce the cost of education, reduce predatory lending (why make huge loans if they can't repay them?) and reduce the need for a college education because not as many people could afford to go. These are all good things... That would save your "hard earned" tax dollars.

5/31/13
ArcherVice:

The argument isn't that loans shouldn't be repaid... It's that guaranteeing the lender a profit and giving students no form of recourse, creates an environment where young people are given wayyy too much rope to hang themselves with.. You'd never make some of those loans if you could lose money.

If student loans weren't guaranteed by the government it would reduce the cost of education, reduce predatory lending (why make huge loans if they can't repay them?) and reduce the need for a college education because not as many people could afford to go. These are all good things... That would save your "hard earned" tax dollars.

I agree with you. Changes can be made so that lenders do not take advantage of borrowers, and more borrowers should make educated, informed decisions and take responsibility for their choices. I don't see these two ideas as mutually exclusive.

5/31/13

@coreytrevor Very good point. Also I want to hear a response to SSits inquiry

5/31/13

Predatory lending? By whom? The government has gobbled up the entire industry. So if you are blaming predatory lenders you have to blame the government. Sure schools that lend directly and private lenders exist, but if you are too stupid to even look into alternatives you are too stupid to be in a junior college.

It's really that simple, I'm ashamed to say that a good chunk of the people in my generation are worthless idealists that couldn't philosophize themselves out of a room with no walls.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
heister:

Predatory lending? By whom? The government has gobbled up the entire industry. So if you are blaming predatory lenders you have to blame the government. Sure schools that lend directly and private lenders exist, but if you are too stupid to even look into alternatives you are too stupid to be in a junior college.

It's really that simple, I'm ashamed to say that a good chunk of the people in my generation are worthless idealists that couldn't philosophize themselves out of a room with no walls.

High school seniors ARE that stupid though. I don't think the government should be held accountable for that, these kids are still under the ward of their parents first and foremost.

5/31/13

Whats your point? Who cares if they are that stupid. I don't blame a HS kid for not fully understanding the cost of college. What I do blame them for is taking out student loans from a for profit school that have interest rates that are 500 BP above the rate you can get on a government loan.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

The government only lets you borrow a certain amount per year and generally it's a small amount. If a student is going to school where the costs exceed that small number, it opens the door to the other lenders.

5/31/13

I read a report somewhere that on average a federal loan more than covers the deficiency in costs after grants. If you cant cover your loan with a federal loan and grants for fucks sake get a loan from your state. Most states offer loans to bridge any additional costs. I will in no way feel bad for someone who took out loans at high interest rates because they were too lazy to even look for an alternative.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

Was going to say the same thing. I wonder how people can afford HYP caliber schools without loans to be honest. Not everyone has MD parents. I've heard they give good aid but even the room & board is probably north of 10k a year.

5/31/13

Are you sure? I recall my Perkins/Stafford loans being upward of $20K a year

5/31/13

Our society is the boiling frog--slowly but surely entitlement, coveting, and envy are being written into our cultural DNA. After a few more generations, every need and want will become an entitlement, an entitlement that will be paid for by those who "unfairly" became financially successful. Our nation's cultural evolution is pretty sad in some respects.

5/31/13
Virginia Tech 4ever:

Our society is the boiling frog--slowly but surely entitlement, coveting, and envy our being written into our cultural DNA. After a few more generations, every need and want will become an entitlement, an entitlement that will be paid for by those who "unfairly" became financially successful. Our nation's cultural evolution is pretty sad in some respects.

Trump 4 President

5/31/13
realjackryan:

Virginia Tech 4ever:Our society is the boiling frog--slowly but surely entitlement, coveting, and envy our being written into our cultural DNA. After a few more generations, every need and want will become an entitlement, an entitlement that will be paid for by those who "unfairly" became financially successful. Our nation's cultural evolution is pretty sad in some respects.

Trump 4 President

Uh, no. Trump is a liberal Democrat.

5/31/13

Obvious sacrcasm. Trump is the most entitled person in the world, and his ongoing support is evidence of the point you are making. I am a conservative and this guy is a fool that makes me and my Grand Old Party lose our, credibility, conservative charm and level-headedness that God worked so hard to build through Ronald Reagan.

5/31/13

The entitlement I see on this forum from kids born on third base is sickening.

Almost every single kid I know that went to a target had wealthy parents, and those born poor were also born brilliant; it's not like everyone starts at zero and then the hardest working inevitably win.

I was lucky to be born with a proclivity for math (among other lucky breaks) which turned out to be very profitable... Many of my friends with language skills were sold on the idea that "education is always a good investment" and pressured into taking loans they couldn't understand from predatory institutions - they lacked the natural abilities and informed role models to succeed in our society.

I don't apologize for my own success, but I also recognize that fate largely determines success.

FYI you're a douchebag. Grow up.

5/31/13

Lol ... be madder at the world

5/31/13

Ha who's mad? I'm #winning, I'm just mature enough to recognize that I'm lucky to be good - I don't "deserve" success anymore than someone else deserves failure.

5/31/13

"Many of my friends with language skills were sold on the idea that "education is always a good investment" and pressured into taking loans they couldn't understand from predatory institutions".

OP's may be lacking in understanding but I still take great issue with a couple points in the sentence: 1) "being sold" on a bad idea doesn't free of responsibility for your choices 2) If you're friends had such great language skills, I have trouble believing 'they couldn't understand' a student loan. As far as complexity goes, student loans are well within the 'simple' bucket.

TLDR; fate does largely determine success; however, claiming that fate largely determines whether you will take out debt for an unprofitable education seems like a stretch to me.

Life's is a tale told by an idiot, full of sound and fury, signifying nothing.

5/31/13

The more I read about student debt the more excited I get at the prospect of Securitzing and packaging it off based on where you graduated from and what your current/projected employment/salary will be. This will form the tranches.

this will be the next CMBS boom.

5/31/13

Always bring this up in conversation. I think it would be interesting if the loans were underwritten based upon some metrics like highschool GPA, choice of major, school etc...

5/31/13

Check out Vested Finance, they actually do that...

5/31/13

Pretty cool, thanks.

5/31/13

my credit union gives 1.8 APR car loans if you have a 3.5+ gpa.

5/31/13

Well, I for one think that education should be free. We live in 2015...a College diploma is the new HS diploma, and it's been like that for the last 10-15 years.
A more educated population will benefit any country, and whatever fiscal losses a "free" education will bring, I'm sure will be repaid down the line by innovation, less crime, etc.

I'm no fan of unwarranted entitlement, but it's even worse how some peoples head will spin at the mere thought of others getting something "for free".

5/31/13

If the college degree is the new high school degree then we should do away with college because it has no benefit to anyone.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

I read recently that a lot of top law firms require a 4 year degree to be hired as an admin.

5/31/13

Okay? What is your point? Law firms want people with 4 year degrees to be administrators because of what the firm does. Many of the top F100 companies the C level execs have executive assistants that have law degrees. The point is the position of the industry dictates what is necessary. When you handle critical or confidential information you need assurance that the information will be properly handled. If they have concluded that this level of burden can be sufficiently blamed on someone who has a 4 year degree then that's what they hire.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
tackytech:

Well, I for one think that education should be free. We live in 2015...a College diploma is the new HS diploma, and it's been like that for the last 10-15 years.A more educated population will benefit any country, and whatever fiscal losses a "free" education will bring, I'm sure will be repaid down the line by innovation, less crime, etc.

I'm no fan of unwarranted entitlement, but it's even worse how some peoples head will spin at the mere thought of others getting something "for free".

Nothing is free.

5/31/13

If college was free, it'd be as effective as HS education. So........not effective. You can't get something good for free.

5/31/13

actually...I agree.

your mom was free last night.

5/31/13

If college was free, it'd be as effective as HS education. So........not effective. You can't get something good for free.

5/31/13

"you can't get something good for free"

yeah you can. are you stupid?

5/31/13
luckycharms25:

"you can't get something good for free"

yeah you can. are you stupid?

^^^Bot

5/31/13

Do you think that 'College being the new HS' is indicative that the public HS system is effective / the best model? Also, since ~70% of HS graduates in the US currently matriculate to College, do you think that the remaining 30% aren't attending due to cost or lack of credentials?

Life's is a tale told by an idiot, full of sound and fury, signifying nothing.

5/31/13

I can tell you that my philosophy degree is more applicable at my current job than my crap econ degree which was in large part a waste of time.

I would say that what you major in is not as important as how resourceful you are afterwards.

5/31/13

This is again a great example of why the government should't get involved in private markets. While the undergrad borrowing limit is fairly low, there's not cap on graduate school and this is where things get really fucked up. Current program has everyone getting loans at the same rate, irrespective of program / school attended, financial prospect, etc which enables students to overpay for degrees with poor ROI and had a significant upward impact on tuition, especially at lower ranked school. A Harvard law school student shouldn't pay the same tuition and get the same loan as someone attending a bottom tier private law school, yet this is what is happening. No lender in their right mind would lend to a significant portion of students getting federal loans. If the government got out of student lending, a pretty significant number of for profit institutions.

Private lending have become extremely competitive though for "high quality" students and private options are now significantly better than federal loan (I am a M7 2014 MBA grad and currently paying ~3.0% on an fully unsecured 100K loan). unfortunately, this means bad news for taxpayers.....

5/31/13

We live in a new financial enviornment, the biggest problem I see now is people are going into this game as if it was 1970 and tuition was $500. People are doing a poor job adjusting, especially students because they have been told how to do things a certain way based off a time period that no longer applies. Just my thoughts on what I see.

5/31/13
Banquero:

We live in a new financial enviornment, the biggest problem I see now is people are going into this game as if it was 1970 and tuition was $500. People are doing a poor job adjusting, especially students because they have been told how to do things a certain way based off a time period that no longer applies. Just my thoughts on what I see.

This is really the crux of the matter: the financial bonanza of student debt has made colleges much more expensive for the students especially with respect to the inflation of everything else. It has added a layer of admin pukes/unnecessary facilities to colleges to convince more people to go etc.

5/31/13

I'm going to be candid.

If you take out more than 60K in student loans without a plan to pay them off then you literally do not deserve to live the good life. Even more than that you hear about people with 30K in loans (governmental limit for dependent stafford loan) complaining about their inability to pay off their loan. That's bullshit.

30-50K in loans with the extended stafford loan program will be at least $200 to up to $400 in a loan payment.

I hired laborer's with no skills other than work hard, for $13 an hour an overtime.
With 60 hours a week (lets assume no overtime) that's over $600 a week post tax.
Even the high end, $400 a month, you're still left with 2K a month to spend.

Not good or great money, but enough for a place to live (even better with roommates) the basic bills and going out money a couple times a month. People bitch because they have to pay back what they borrowed and can't live the traditional suburban life right out of college if they didn't work for it.

People don't have an ounce of grit in them, and have entitlement greater than I have ever seen in this day and age. I think the cost of education should go up a bit more, or have requirements of a specific GPA to continue studying with federal money. But too bad its a 'right' of the people.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

5/31/13

It's no coincidence that government involvement in education and guaranteed federal loans have led to college tuition rates going through the roof. Too bad the majority of students are too dumb to understand the root causes of college prices and only want the debt forgiven or want other people to pay for it through higher tax rates. I'm currently in college at a four-year, in-state, public university and chose to attend because it was more economically feasible than going to a higher ranked, private college. My parents make decent money, but not enough to pay for my college and not enough to receive any federal grants for my education.

I chose a major in finance because it will allow me to earn money while doing something I love. I also love to read history in my spare time, but that doesn't mean I should have majored in history. If one enjoys to paint, write, act, etc. then do that shit in your spare time, but do not complain when you spend 100k on a degree you could have done as a post-graduation hobby or learned through Wikipedia for free.

I'm prepared to work many hours in order to pay off loans and I am fine with living in a shit hole apartment until I do so. The same people who complain about being in tremendous amount of debt will also live beyond their means while earning a salary half (or more than half) of what most people on this board make out of college. Some people should work first, skip college outright, travel, pick up a trade, etc. instead of going into outrageous debt for a worthless liberal arts degree. They only have themselves to blame... and yes, I'll have fries with that.

5/31/13

@GuyFawkes agreed. The biggest problem with increasing tuition prices is on what the money is being spent on. Countless admins, deans, facilities, renovations etc...as you said.

IMO securitize student loans by the school. No more government loans. Each student has 20 years to pay back loans at 15% salary rate. If loans aren't paid back, then the school is in default. Seize their assets and close it down. Only universities that provide economic value will survive.

5/31/13

Super ironic considering your forum handle.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

Another thought is that high school students aren't necessarily stupid, but they are more susceptible to social and peer pressure.

Having been a high school student myself not too long ago, I recall that my college decision was a mostly solely based know what my parents and peers though; my parents said I needed to attend a high ranking school of else I'd just be wasting my time, and my group of friends back then all thought the same thing; many even dismissing or state school to be garbage when it wasn't; sure it wasn't an Ivy but still had a decent business program. Ultimately I chose to attend the highest-ranking out of all the schools I got into, and I was also lucky enough to have a scholarship. But if I didn't I probably still would've chosen to go even if it meant downing in debt, because that's what was ingrained into my mind. In the end it seems to be just another case of as you mature, your perspective on everything expands, but I don't think it's necessarily right to the blame on high school students who probably couldn't know better.

And don't forget that higher education is a profit-driven industry in this country.

I don't know about the rest of you, but if I met an undergrad who told me he got into HYPS but chose to attend some no-name school because of financial reasons (or maybe even family reasons), I would never count that against him. In fact I'd [at least initially] view him more favorably than the kid who choose an ivy probably only because his parents are rich.

5/31/13

Did I run over your dog or something? You seriously went to all my recent posts to MS me? For what?

5/31/13

For the most part you are all arguing the same side. Should students have access to recourse? Yes, however it should be the most difficult of all types of debt to discharge.

The media attention we are seeing now is that some institutions that were so shady someone with an IQ just above that of a dog should have been able to tell that a 100k degree for a dental hygienist job should be the biggest fucking red flag in the world. But hey since they advertised on daytime television to all of the unemployed losers out there they had a huge lazy and stupid audience to tap into.

But this completely ignores the real problem of kids taking 6 years to graduate, taking out loans for school, housing, food, trips, etc. Or those who spent 3 years in school and then dropped out and became a bartender, although any bartender good should be making more than some shitty entry level job holder does.

When you really get down to it of the total college population, about 20% of those people shouldn't even be in college because they can't make even mediocre decisions let alone good decisions. If we want to fix this problem we have to attack it from all sides. With things such as minimum GPA level for bankruptcy considerations, closing of for profit colleges that can't show a minimum value add for their graduates and former students. Educating the public that a lot of those specialty programs that they see advertised on television for medical assistants, mechanics, and other roles can be done at the local junior college. Hell I took a motorcycle engine repair class at a junior college because I wanted to restore an old bike I have. It's not that hard to figure this information out people just have to not be as lazy as they are.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
heister:

Yes, however it should be the most difficult of all types of debt to discharge.

I'm not clear why it should be harder to discharge then, say, an LBO debt package by a PE fund. For an LBO deal, the PE fund knows better than most the risks its taking etc. So would your idea of responsibility for borrowing extend to giving lenders recourse through the corporate veil of limited liability to both the PE fund (rather than just the portfolio company debtor) and also the LPs?

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

Yes, I was referring to personal debt.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
heister:

Yes, I was referring to personal debt.

Does putting a company into the equation change how you see the level of responsibility?

Or is it that, in LBO and other lending, the lenders have recourse to assets (even if the assets are worthless in liquidiation), while in the case of student debt, the borrower gets to walk away retaining full benefit of the asset he/she got through the lending while the lender gets absolutely nothing?

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

That's pretty much my view. Even if my company goes bankrupt the lender can recoup some of their investment in me and my vision. While on the other hand students do not have to relinquish their degree, in other words they reap be benefit while skirting the costs. I'm of the belief that the number of students that go in with the mindset of never repaying their debt to be a inconsequential percentage. However, the number grows exponentially upon graduation when people realize that they can never repay their debt.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
heister:

That's pretty much my view. Even if my company goes bankrupt the lender can recoup some of their investment in me and my vision. While on the other hand students do not have to relinquish their degree, in other words they reap be benefit while skirting the costs. I'm of the belief that the number of students that go in with the mindset of never repaying their debt to be a inconsequential percentage. However, the number grows exponentially upon graduation when people realize that they can never repay their debt.

I feel the same antagonism to the free rider problem (? not sure if it's free rider or something else).

On the other hand, I come from Australia, where student debt ends up being low interest loans from the government, with repayments scaled to your taxable income. That makes student debt relatively cheaper and a lot more serviceable. I think the debt survives bankruptcy, but overall it's a lot less crushing, very deferrable and you get people who get an education, never work that much (or at all) and are never required to repay their debt.

So you have a student debt system in Australia which is a lot less aggressive, a lot more forgiving than in the US. And yet, I wouldn't say that causes masses more people to enroll in university or technical college courses.

There's probably more intelligent comparisons to be drawn with the experience of other countries' systems vs the US, and whether changes suggested for US have brought about the disasters in other countries when the same changes have been made, but they escape me at the moment.

(as an aside, I have noticed that in US policy debates, when something new is proposed, the experience of other countries who have made the same change is rarely cited. I find that strange and odd.)

On the third hand, student debt does seem to be crippling and the social problems caused by it seem to be more significant than the potential social problems that would come from introducing a more sympathetic regime.

On the fourth hand, I have profited from student debt myself, as I've worked on a few deals here in the US where we've bought portfolios of student loans (mainly for former medical students; once they progress to a certain point in their careers, they are very low credit risk).

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

The options you have available in Australia are for the most part available here in the US. The difference is you have to fill out a piece of paper and follow up on it. This goes back to my lack of real emphatic responses for most of these people. They are too fucking lazy to fill out a form and follow up on it.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13
heister:

They are too fucking lazy to fill out a form and follow up on it.

Sometimes it can be family background etc.

Example: My parents were shitty cooks and meals were very bland. Decent food = buying it at a restaurant, where they used some sort of mysterious techniques to make it taste better than my mother's meat + 3 vegetables.

So I grew up never thinking that cooking was easy and that home cooked = bland. This despite the large number of cook books widely available. Despite eating good food cooked by other people in their homes. 18 years of home experience of low food expectations dominated my interpretation of reality.

It's only in my late 20s that I got a girlfriend who liked to cook and was a good cook. Suddenly, I discovered it was possible to get a meal at home that tasted better than a restaurant. And that cooking could be interesting rather than a chore and that it was an enjoyable, stimulating art.

Was I too fucking lazy to learn how to cook? Partly. But I'm not generally a lazy person. I just never knew that cooking good food at home and enjoying the process as well as the results was even an option - even though the information was fucking easily available - because my home life experience meant I was ignorant and blind to the idea.

So I'm cautious in blaming other people for their ignorance of other things which are painfully obvious to me.

Those who can, do. Those who can't, post threads about how to do it on WSO.

5/31/13

The difference here is that these people have a lot to gain for very little actual effort. Like you said cooking is possible, but that takes actual time and effort to learn and a continued effort to do on a regular basis. These people need to fill out a form and then follow up on it. Somewhere someone documented this process and said it takes about 20 min to fill out the form if you didn't know anything about it then another 30 min or so following up on it over the course of a few months. Sure some people might not know about it, but if you are in a situation where you are drowning in student debt and just stick your head in the sand, you are lazy.

Follow the shit your fellow monkeys say @shitWSOsays

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

5/31/13

@SSits Wow, the similarity on the food aspect to my upbringing is so interesting. I ate a lot of boiled chicken and vegetables growing up (without seasoning). Once I learned begrudgingly to cook dishes I realized it's fun and rewarding and now I'm into it but I totally relate to your point about upbringing.

5/31/13

boiled chicken and vegetables, sounds like child abuse haha jk man that beats ramen anyday.

5/31/13

Damn so whens dinner? ha

5/31/13

Who the hell thought it would be a good idea to give an 18 year old 200k to spend on a useless degree.

5/31/13

I completed my MBA a few years out of the Army and realized how much had changed since I finished undergrad 10+ year ago. These 'institutes of higher learning' have been transformed into debt factories full stop. The state school that I attended in NY has nearly doubled its tuition rate since 2003. With 60% GI bill, personal savings, 529 plan, and merit scholarship I still had to take out a few loans, not that much in comparison to many, to complete the MBA program with an all in final cost of ~120k. I have been on track with getting my loans squared away and still cannot understand how funding is being dispensed in this manner. Attending any academic programs without securing multiple sources of funding (I worked and had an ROTC scholarship in undergrad) should be a non-starter not to mention the massive distortion that the Federal government has caused in the market.

5/31/13

The solution is actually pretty simple, cut all federal loan programs and subsidies to lenders. Basically, if lenders have any risk in the equation they won't be lending 100k to an 18 year old art student majoring in pottery. Most people won't be able to afford school, and schools won't be able to milk students for every penny.

The way it is now, colleges basically put the price tag to the point where amortizing the sticker price equals what your average increased earnings would be over the lifetime of your career. And they do so on guaranteed government loans, what a scam.

That will never happen, but I think the next generation is going to be looking at the return on degree metrics. Times have changed.

5/31/13

ArcherVice:

The solution is actually pretty simple, cut all federal loan programs and subsidies to lenders. Basically, if lenders have any risk in the equation they won't be lending 100k to an 18 year old art student majoring in pottery. Most people won't be able to afford school, and schools won't be able to milk students for every penny.

The way it is now, colleges basically put the price tag to the point where amortizing the sticker price equals what your average increased earnings would be over the lifetime of your career. And they do so on guaranteed government loans, what a scam.

That will never happen, but I think the next generation is going to be looking at the return on degree metrics. Times have changed.

Exactly. And the group that profits from it the most are the colleges themselves and more specifically the administration. They're non-profits with a massive pricing power advantage and they get their customers to take out non-dischargeable, federally backed loans. There's no other debt that you can't discharge in a bankruptcy except for student loans. Tuition rates have risen at 7% annually on average for the last 30 years and the cost that has risen the fastest by far at colleges is in administration. Not professors, facilities, technology or something that could benefit the students. So the people who set the price and budget also are the fastest growing part of the organizations. And with the proliferation of technology and increased productivity, shouldn't administrative costs actually decrease?

I'd like to think things will change but who is going to be the first year(s) of people to take a stand?

5/31/13

I think with some revisions to its structure, online education could be the means of getting rid of a lot of admin cost and also getting rid of extra professor. Think about it,10 online sessions of one class can be taught by one professor recording the lectures once and posting it to the different classes. The material could be reused for future semesters. Automated grading systems eliminate a lot of the work for professors and TA. And so all you would need is TAs for grading written responses, essays, research papers and etc. Starbucks recently partnered with ASU Online to allows it employees to have all of their education paid for if they take the classes online, hopefully it catches on and online education develops.

5/31/13

Georgia Tech recently launched a MS in CS, costs roughly 7k and it is all online and designed to be taken part time. Excellent program.

5/31/13

I think what they are doing is great and I believe online education is going to be the norm in a few decades. however, at this moment, i don't think potential employers give that much of a weight on a degree that you got online (even if the quality is excellent), which is sad.

5/31/13

Online education, IMO, has its benefits but will never be a great alternative to the classroom model.

Also, Starbucks is not paying for their employees to attend ASU online...

http://www.komonews.com/news/local/Starbucks-admit...

I'm too drunk to taste this chicken -Late great Col. Sanders

5/31/13

I stand corrected. Thanks for the link. However, it is still a good start into making education cheaper.

5/31/13

If paying 50k/year for art history classes is a "necessity", I have a set of encyclopedias to sell you.

5/31/13

BTbanker:

If paying 50k/year for art history classes is a "necessity", I have a set of encyclopedias to sell you.

This dude knows what's up. The amount I've learned on my own by reading books/websites/publications of my own choice >>>>>>>>>>>>>>>>>>> anything I've learned in the classroom. It's actually disheartening when I think about the amount of time/money I've wasted toward university given that I just end up spending more money on books/subscriptions/other forms of learning.

My professors pretty much just regurgitate textbook material, pass on publisher-provided powerpoints and give us tests from publisher test banks. The worst part? Class attendance at my school drops to less than 50% 3-4 weeks into the semester so my counterparts aren't adding any value to the classroom either. In fact, they're deadweight on group cases. I'm not even going to get into what else sucks about universities these days.

I'm not saying I'm the smartest or most insightful person, but that situation is extremely exasperating for capable kids like me that actually want to learn and care about doing well.

From my experience, the quality of instruction needs to go way up (better qualified and more insightful professors that actually care about their jobs and the students would be a start) and the number of students attending university needs go down. And there needs to be way less people (administrators) at the top and pointless support people...they literally do jackshit all day.

Online education is great for those that need the hard knowledge/technical skills for a given profession. But I still think that the in-classroom experience would be valuable for those who want to learn from and work with an engaging peer group and have insightful discussions - it's definitely not for everyone though. Plenty of students need to stop being fooled into thinking a university degree is some sort of ticket to well-paid career. And universities need to stop marketing themselves as such.

5/31/13

Lucky Charms:
Online education is great for those that need the hard knowledge/technical skills for a given profession.

Agreed. I've learned more about finance through the internet and internships than anything else. Universities only seem useful for their connections and that piece of paper you get when you're done.

5/31/13

brenms:

Lucky Charms:

Online education is great for those that need the hard knowledge/technical skills for a given profession.

Agreed. I've learned more about finance through the internet and internships than anything else. Universities only seem useful for their connections and that piece of paper you get when you're done.

With LinkedIn, the university's connections might not even be a factor anymore

5/31/13

delete

5/31/13

No doubt, I think the only we will actually see change on that front is going to be a generational phase out. I can't even imagine what the cost would be in 10-15 years if things don't change.

The part that gets me the most, is most graduation rates are under 50%. They cap the number of seats in useful majors, so to get your degree the average student either needs to kick ass, plan for another year, or walk away with a useless degree. If you were to ask them why they don't increase the sizes of their programs, "quality of education" and "resources" are their go-to arguments.

It really speaks volumes, very alienating. I am glad I do not have kids.

5/31/13

Agreed in part, my first steps:

All while the following steps are being taken, slow down the amount of loans available through the federal government.

1) Strengthen the secondary school system so time in college can be shorter.
2) Immediately eliminate loans for majors that have no realistic job opportunity.
3) Prioritize loans to go to STEM major, then Business, and then Liberal Arts and Sciences.
4) Eliminate guaranteed loans for everyone and have a stronger application process.
5) Use the credit card limit system for student loans i.e based on one's credit, school, major, and etc; they cannot have more that $xx,xxx in loans at any point. Absolute limit of $60k, adjusting each year for inflation until the government is entirely out of the loan business.
6) Eliminate the college degree requirement for a lower jobs that have the requirement. I do not see why a manager at a local grocery store needs a degree.
7) Allow for the garnishment of wages for student loans because God knows there are people buying cars way out of their price range and then not being able to pay for their student loans
8) Get rid of some of the lucrative loan forgiveness programs.

Ultimately, I would like to see the federal government get out of the student loan business entirely and allow private banks to make the loans on their own risk analysis.

5/31/13

#6, is a big point. Basically many jobs that are now requiring degrees, don't actually need the degree, but it is a job market condition. That being said, if you most people can't afford one by eliminating all of those programs, in time, you won't need one for jobs that do not actually have a use for them.

Well put.

5/31/13