Student Loans Thoughts
I think I have an interesting (potentially profitable) idea that's related to student loans. Any thoughts on student loans and debt? I know this is a really vague question, but that's intentional. I really just want to get an understanding of any sort of thoughts (general or specific) that people have on the matter.
bump
I don’t like them.
Excellent point.
I think that odds are this gets pulled into another stimulus type program - if nothing else, it would at least be a targeted way of providing stimulus... whatever that's worth.
At most they are probably trending downward. There will still be loans, but higher education is going to see long lasting challenges from COVID (if it did nothing else - it might finally blunt the upward charge of tuition or at least force a re-think). Consolidation might floor prices - but I suspect there will be more affordable options.
Regardless - I'm not sure what other thoughts are helpful here. I don't want anything to do with student loans, I generally think that they are a huge drag on people and taken out without any thought to payback or for a very... optimistic payback.
There's a really good chance that happens. I don't know that it would be the most efficient stimulus per se since someone in debt wouldn't go and spend it on anything other than the bare necessities.
I'll be honest, I don't think it's changing that much. COVID isn't making that significant of a long term impact. Top-tier private universities won't even have to give out more aid or charge less for tuition since they can just slightly increase their acceptance rates for the next year or two. Top-tier public universities might have to give out a bit more aid (but they certainly won't lower the tuition because that would set a precedent for the future), but that's nothing they can't handle. The decent universities (public and private) will also likely be fine, they all have pockets deep enough to weather this without losing too much money in the future. The only universities that will have a serious negative impact are probably going to be the for-profit institutions with high tuition and high acceptance rates (low job prospects/low ROI for a student attending). A negative impact on those schools isn't even something I feel bad about.
I can assure you any and all thoughts are helpful (this specific comment was more helpful than you could possibly imagine). I can see why people feel that way about student loans, I think part of it is psychological. Being in debt (even if it's calculated and manageable) puts people in this survival mentality of trying to get out of it as soon as possible, no matter what. If people were to be a bit more calculated in how much they took out and the payback they were considering wasn't that speculative, it wouldn't be that bad.
I really appreciate your comment, have a wonderful day!
It won't be limited to for profit schools. We are already seeing the budgetary squeeze happening to a lot of small to medium sized universities. At best - they can take a slightly higher draw from their endowment (i.e. 7% spending instead of 4%) and, if they are lucky, their returns have either compensated and/or are high enough this year to withstand that without drawing on the corpus. This is where I remind folks that an endowment isn't a slush fund - in most cases, large amounts are restricted as to their use so it complicates matters. Maybe they can withstand the cash flow crunch, get back to in person enrollment next year - international money can come back in, which is great as it's in most cases full rate and cash up front. Depending on the 'name brand' of these types of schools - it will vary, but they as you say will probably survive.
The worst case for those is basically consolidation. If I'm a 2000 person, liberal arts school with an endowment that isn't large enough to really contribute much to the operating budget - you are in for a world of hurt. You were anyway long term probably, but now you are staring down the barrel of the larger schools taking your incremental top tier candidates, budget issues, probably unsustainable draw downs on your reserves and endowment - you just can't survive in many cases. I don't think that this is a 'bad' thing as there's probably an oversupply of institutions anyway - but the damage to higher ed won't be limited to for profits.
It's going to vary across the board - and certainly depends on how long this lasts. I do think it further illustrates the fragility of many schools budgets, and aid programs, once you take out international students and/or stress their budgets. Maybe you'll see less country club schools... that might not be the worst thing.
From a business standpoint I wouldn't touch that industry, too much regulation to deal with.
I'm doing research into the regulation that's there, but how restrictive is it? How seriously would it impact someone trying to get into a lending sort of role? What about for someone facilitating allocation of loans?
Lending is definitely where the market is most heavily regulated and with student debt such a large topic these days it isn't about current regulation but potential regulation to come. Allocation, payment facilitation and consolidation/refinancing are the places where there could be opportunity, especially if loan forgiveness measures are passed and/or public universities become "free" or more affordable through federal assistance.
I wouldn't touch student loans because there is so much regulation. Also more and more top private schools have stopped giving loans in fin. aid packages.
Regulation is legitimate, thanks for pointing that out! If schools stop giving out loans, doesn't that create a space for it?
Loans through the universities make up a fraction of the market, 90%+ are through lending from the DOE (federal government). Most of the opportunity is in payment facilitation and refinancing/consolidation.
They stopped giving loans and are giving grants instead.
Nationalize the universities and seize the endowments to pay off everyone's student debt
This is a joke right?
Shitpost for sure but also somewhat serious. Many people on the right including Peter Thiel think we need to stick some of the student debt burdens to the colleges and universities which are largely sociopathic anyway - bunch of boomers doing bullshit admin jobs and never retiring while turning their kids' generation into debt serfs.
I think I understand what you trying to go for. I had some similar thinking as well.
Read this article: https://www.investopedia.com/articles/investing/081815/student-loan-ass…
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