U.S. Citizens Now Hold About $1.3 Trillion in Student Loan Debt - <AUTHOR> http://financeography.com/us-citizens-hold-about-13-trillion-student-loan-debt/ <comment><USER2> There seems to be a strong sentiment in this thread that the only value provided by education is the contribution to career (e.g. that loans should only be provided for financially viable courses, that studying arts is as useful to one's career as studying finger painting, etc).

This just seems _so_ wrong.

Optimising for vocational training means you're effectively tuning out the abstract arts and sciences and... oh, the humanities. These fields don't usually/directly translate into a financial success, but they broaden our perspective and deepen our experience. And in doing so provide the tools and language to more effectively analyse and engage with human culture.

And to a certain extent, "true" art is antithetical to capitalism, in a similar way that "true" journalism is antithetical to surveillance (honesty/transparency vs main-stream popularity), and I'd argue equally as important. For that reason these fields _absolutely_ should be subsidised, otherwise art becomes about marketing, journalism becomes about propaganda, and science becomes about start-ups...

<comment><USER3> Okay, but how does that translate into policy?

Fact 1: Education in the US is very expensive, in large part because the ready availability of loans removes most downwards pressure on prices.

Fact 2: If you are loaned money to obtain a degree which is not economically valued then you will not be able to pay it back.

Fact 3: If you loan people money without expecting people to pay it back, then it's not a loan, it's a grant.

Fact 4: If you offer grants to high school graduates to take non-economically values classes, a lot of them will do so. This pushes up the cost of the education, and pushes down the wages graduates will make, excerbating the problem.

> For that reason these fields absolutely should be subsidised

Perhaps. But in which case by how much, by whom, and in what fashion? Because offhand offering free arts degrees sounds like one of the worst possible ways you could subsidise art as a field, and one of the best ways you can cause a lot of harm to young people while enriching the existing education institutions and not really advancing art at all.

Mind you...

> otherwise art becomes about marketing, journalism becomes about propaganda, > and science becomes about start-ups...

Artists, journalists, and scientists have always had to earn a living. To the best of my knowledge, there was no "golden age". We've never subsidized artists (or scientists, or journalists) in the way you say we should; the future you're afraid of "becoming" is our present and past.

<comment><USER4> Basic income. Free tuition. An outright grant, no repayments. Literally zero barriers except ability for anyone, for any level of academic achievement in anything. Result: a culture with a lot more understanding of the real world, and the preservation of human and humane values, rather than a laser focus on the hand-to-mouth of Jobs Right Now.

<comment><USER5> If we have basic income, why do we need to be educated at all? Just stay home and live minimally.

<comment><USER6> Because self-actualization is a human need and for a lot of people education is a means for that. Because some of us enjoy creating things that are of value to others. Because life is more than survival, basically.

<comment><USER7> You may be right on some, but if it was a good idea you would have said most.

<comment><USER6> Are we talking about UBI, or about education? Because if it's UBI, what I mentioned was just one of the mechanisms by which it could work. But I honestly don't know if it would. I suspect it would, but we can't know without more research and tests. Human behaviour is too complex to model a priori.

</comment></comment></comment></comment></comment></comment></comment><comment><USER8> This is another example of the law of unintended consequences.

While the idea of helping people become more educated is obviously beneficial to both individuals and the society as a whole, government loans - which are supposed to "help" \- are a huge factor fueling ever-raising costs. The loans, in effect, subsidize the higher-education complex, rather than students.

Many of us have been brainwashed to think that higher education _has_ to cost a lot of money. But it need not: all that great education requires are wise, passionate teachers and a bit of infrastructure: a whiteboard, a few books, and a laptop computer (with a couple of outliers).

We don't need football/hockey teams with coaches paid $3-4M/year. We don't need armies of "Deans of Diversity & Inclusion" (and other phony administrative positions), who make $400K/year, we don't need manicured lawns and Olympics-quality sports facilities (these salaries are from the Univ of California - a state school!)

If a good private university cost < $20K/year and a state university < $10K, we would not have endless discussions wrt who should pay, who should study what, etc.

<comment><USER9> I see this sentiment a lot, and I feel like you fundamentally misunderstand what is actually happening at universities. Discounting athletics, which in some places are revenue neutral and can be counted as marketing/local cultural artifact depending on who you talk to, the "wise passionate teachers" you praise so aren't there to teach idiot undergrads. Instead, they're hired to do research with the teaching as essentially a subset of that in most cases. Pure research, especially in a political climate that's increasingly anti- intellectual and anti science, is expensive and that cost gets offloaded to incoming students since the hard requirement for a college degree for many professional jobs creates inelastic demand.

The "phony administrative positions", lawns, and student facilties you dismiss as pork are the school's way of competing for the piles of grant money replacement known as undergrads.

Then further more, prices are already in the ball park of your supposed ideal. An instate student can go to a school like Georgia Tech (ranked 5 or so in engineering nationally depending on the year) for 12k before scholarships, essentially free if they don't piss away their grades. Private top tier schools cost more, but tend to offer more scholarships and grants so that's harder to compare between institutions. It's not that schools are expensive, it's that students are choosing to not go to the inexpensive schools, usually to get out of their state, or to be in an institution that specializes in their major, or go someplace with better student institutions.

US research is what makes our schools the top in the world, and the actual education gained from an undergrad degree isn't the drive for most people. It's the networking, the exposure, and the certification, none of which can be duplicated in a dinky classroom with a whiteboard and an underpaid teacher. Just look at American High Schools if you want to see how that turns out.

<comment><USER10> > the school's way of competing for the piles of grant money replacement known > as undergrads.

I say it's a consequence of their windfall profits from 3-5% yearly tuition increases. Most institutions have "use-it-or-lose-it" budgets. Their accountants can only be so clever in finding ways to spend it, lest it pile up and get released on a state budget report. Then everyone would scream "Why does UXY have a $50mil surplus when they just increased tuition!".

If they wanted to actually compete, they would _lower_ prices. Thats what attracts buyers.

<comment><USER11>
      If they wanted to actually compete, they would lower prices. Thats what attracts buyers.

That is a dangerously oversimplified view of how markets work. Buyers are attracted by a broad range of factors, only one of which is price.

<comment><USER12> > That is a dangerously oversimplified view of how markets work.

Because university is so expensive, we're told that more things matter than just price.

Buyers are obviously attracted to more than low prices, but some buyers are highly price-sensitive. So, we should let them find something that works for them.

<comment><USER11> There already is a huge range in the cost of university, so what you are describing should already be in effect. Do you have evidence to the contrary?

(FWIW I also think that it is too expensive for various reasons, but also that it is too naive to consider only price here)

</comment></comment></comment></comment></comment></comment><comment><USER13> Every time I read articles about student loans in the USA, the options are always presented as either the current state, or free tuition.

Why are interest free student loans never floated as an option? Here in New Zealand, our student loans are provided by the government and are interest free as long as we reside in New Zealand.

It means that people who don't do tertiary education, or who do a trade, don't subsidise those who go to university. It also means that there's a disincentive to go to university if you don't need to, which I think is a good thing, however everyone is able to go to university if they want to/need to, without worrying about how it's being paid for.

Our student loans are also paid off proportional to our income, I think at a rate of around 8% (and no repayments required if you earn less than $19k per year). This means that you only pay what you can, it's essentially another tax, rather than in the USA where you get people struggling to make payments on their student loan.

Obviously, we also have the advantage of cheaper tuition, although it is rising. It costs around NZ$7,000 (~US$5,000) per year to go to university, it's not cheap, but it's not cripplingly expensive.

<comment><USER14> "Why are interest free student loans never floated as an option?"

Imagine what would happen if the US government made student loans interest free. Who would gain, and who would lose?

(1) Students could afford to take out larger loans (as the repayments would be more affordable with 0% interest vs. 4.66% interest)

(2) As a result of (1) colleges could charge higher tuition fees, without reducing the number of students would could afford to pay

(3) The government would pay interest to the banks (interest that's paid by students under the current system).

Based on what we've seen in the past, increasing access to credit for students mostly benefits colleges. Students end up paying the same monthly payments. Just like how lower interest rates make house prices go up.

This is indeed a sad situation. I'm generally in favour of free-market solutions, but most 18-year-olds don't have sufficient information or ability to act as a rational market participant. So the situation in the UK, where undergraduate education is mostly funded by the government, and prices are centrally capped, seems much better for students.

<comment><USER15> You're right on the money. In fact, I'd argue that almost no one is smart enough (or wise enough) to only borrow what they really need. I went to college when I was 30. I thought I was smart. I knew that new graduates typically make, maybe, $40K. Yet, I signed up for the full boat...taking every last cent they'd loan me. Consequently, my wife and I are now $250K in debt-- and have just bachelor's degrees (plus incomplete master's degrees). Sigh. So much for being so smart.

Basically, I've come to the conclusion that college is not for all. We would be wise to get behind technical schools, and community colleges, and save the university for those pursuing subjects like medicine, science, math, law, etc. At a minimum we should change the paradigm of college--from being an "experience" (parties, socializing, sports), to academics. Getting rid of school sponsored sports would vastly change the perception of college. Plus, we should make it harder to graduate. Require a 3.0, and have controls in place to ensure grades don't inflate to enable everyone to achieve the new minimum. Basically, college should be 100% for learning. Sure, you'll still have friends, go to the occasional party, but on the whole you're only there to learn and do things you couldn't learn or do elsewhere. Right now it's almost day care for 20-somethings. This would also necessitate dropping easy programs and majors. Not that there isn't a place for the arts, but is a four year degree in English or Art History really a good idea?

But yeah, I've noticed the same thing: the more we incentivize people to go to college by way of grants and loans, the more expensive it gets. When was college cheapest? When there was virtually no aid/loans available to anyone, and a much smaller percentage of people went to college.

<comment><USER16> > Basically, I've come to the conclusion that college is not for all.

Of course college is not for all. It is not something everyone just "does" because of "jobs". High schoolers and college students feel entitled. The vast majority should not be in college nor do they need a college education. If you are an 18-20 year old and cannot see this, then you sure as hell should not be in college.

Intellectual exploration? Community college is good enough. Parents taking $40K/year loans for tuition/rent for your private or flagship state university? Majoring in humanities? Ha. Go ask those graduates if college was worth it.

<comment><USER17> Well sure, it's easy to say that in hindsight, but that's not what these students were told growing up.

A generation was told that if they got into university and did well, they'd get much better jobs and be set for life. And it's easy to understand why, because this was true for their parents' generation. Educated employees were in much shorter supply, and thus in a much better position to capture the increased wealth of a booming economy.

Is it any wonder people feel entitled when they were told constantly that they would be rewarded for what they were doing?

</comment></comment></comment></comment></comment><comment><USER18> This is so obviously a scam that I don't see how it can hold up. Tuition has gone to sky high levels, and who is getting that money?

Not the professors, let's get real. They have probably gotten sweet raises, but nowhere near the growth rate of tuition.

The armies of "administrators" are getting huge salaries, but the main point of the whole bubble is that it is a great way to proactively enslave a whole new generation before they even have a chance.

It's so obviously a "sold my soul to the company store" situation that I can't believe everyone doesn't see through it right away.

<comment><USER19> They see through it. They just know they have no other option. Educators raise rates because they can, students pay the rates because they have to. It's the same problem we have in healthcare.

Until employers start scrutinizing education in terms other than "No degree? No thanks.", then we will continue to have this problem, in my opinion.

<comment><USER20> Many students pay way more than they have to. I graduated from a top-10 public school (in-state) after transferring from community college and my total bill was about $35k. That's not nothing, but also not a ball-and-chain six-figure mark that some people accrue.

There are better options than a lot of people have taken. To me the solution has to involve better financial and career counseling for high school graduates.

<comment><USER21> Natural selection at work. Some make the wrong choice to take too much debt.

<comment><USER22> Precisely! Visarga is bold enough to speak the obvious truth!

Problem is many, if not most, incoming students are unable to understand the financial ramifications of student loans. This does not bode well for their futures, especially in technical fields.

David Letterman once joked that "The lotto is a tax you pay for not paying attention in math class." One might say the same about college student loans.

<comment><USER23> As an aside, your lotto comment made me think of expected value (EV) and poker. At some point the pot of a lotto can become large enough where the EV demands you buy a ticket. Taxes I think make this number almost impossible to reach though.

</comment></comment></comment></comment></comment></comment><comment><USER24> I think the solution is ending loans for college. I don't think an 18-year-old with no assets, or even a stable job or no job at all should be given that much money for college. No bank would give them a loan for a house. At least you can foreclose on a house and take it back. You can't take back someone's education.

Plus every time the department of education gives out more money, colleges raise prices.

Imagine how much a television would cost if the government said everyone must have a television. They're older people who tell me back in their day they could work at a restaurant and pay for college debt free. Get the government out of the student loan business and let the free market decide.

If no money is being printed for students to go to colleges, fewer people will go to college and therefore the schools will be forced to compete for student's business. Therefore college will be much more affordable for the people who wish to go.

I totally agree with our President-Elect about getting rid of the DoE, along with Common core. Let things be up to the states.

<comment><USER25> That just means your parents wealth will dictate your future even more.

<comment><USER24> What does parent wealth have to do with it? I watched this documentary years ago. [https://www.youtube.com/watch?v=kC_RYgkkmcM](https://www.youtube.com/watch?v=kC_RYgkkmcM) I totally agree with this film.

Apparently back in the old days you could work a part time job, and pay for college at night debt free. If the gov keeps handing out loans, then what incentive do schools have to keep their prices low and compete with each other?

Oh and then the presidents of some colleges are paid more than the president of the United States. I guess appointing 4,000 people, managing the military, a bunch of departments across the country, etc is easier than managing a bunch of kids by their logic. Oh and don't forget we gotta build a nice stadium so I can put my name on it too!

<comment><USER26> > _Apparently back in the old days you could work a part time job_

Even if that was true, it's not the old days anymore. The college I went to is now at 50,000$+ a year with compulsory room and board. Try paying that off with a part-time job and still competing well with your rich peers.

No matter what, it's an enormous advantage to not have to work while in college. I know I wouldn't have done as well if I was working simultaneously, since I was still stressed out as is.

<comment><USER27> Tuition at the college I went to was about $8000 a year. I graduated in 2013. What did the extra several of tens of thousands buy you?

<comment><USER26> It was one of the the few smaller colleges with a linguistics department, so there's that. I had small class sizes and good, well-known professors, but the main reason is because I was 18 and I was just expected to go to a college like that. I personally didn't want to go to college at all, but it wasn't an option, and my parents fortunately had the money to cover everything. I got a national merit scholarship which knocked about 20,000$ off the price tag (and I contributed ~3000$ a year), but still, way too pricey. Many of my friends took out huge loans to go there. If I had the choice I would've lived abroad for a few years and then went to a state college.

</comment></comment></comment></comment></comment></comment><comment><USER28> Speaking from a purely market-driven position, the Student Loan Debt market has one issue that prevents colleges from not raising tuition prices: its the incapacity to default on loans.

Its obvious a huge part of the loans are used for careers that will never make its money back, and the loans only collateral are the person itself(not his parents assets). So if someone had an arts degree that cost him 150k, and never made that money, he should be able to default on that loan. As he does that, colleges have a strong incentive to keep tuition matched with the income produced by that degree.

My understanding is that college loans have a special protection by the government that makes them undefaultable. Dont subsidy college loans! Dont take more money from all(including under represented poor people) to put it in the pockets of colleges. Just make the loans defaultable, and you will see such a massive movement of defaults that colleges will never put unpayable debt ever again.

<comment><USER29> What if the schools were required to underwrite the loans on behalf of each student? Incentives would be more in line.

<comment><USER28> Im not a policy expert, but I advocate for making things simpler. The capacity to default already exists and will always exist. Devise a new specific mechanism to offset another specific mechanism is like a patch to solve a patch on a bug.

</comment></comment></comment><comment><USER30> I'm curious why we treat student loan debt as being special. We don't make a huge deal out of people taking on other debt and then being unable to pay for it. I think probably if anything, what we should have are better controls for what types of degrees you are allowed to take a loan out for. If your degree of choice is unlikely to yield the kind of return that will pay for it, then you should be required to save up for it, rather than getting a loan, just like there are qualifications for other loans, like auto or mortgages which look at both the value of the asset vs its sale price, and your ability to pay. If some kid takes out $100K in debt to pay for a degree in finger painting how is that anyone but the borrowers (and possibly the bank who approved it) fault?

TL;DR - When handing out student loans, we should consider aptitude (how likely is the person to graduate) & the career potential of the degree as qualifiers.

<comment><USER31> > Why we treat student loan debt debt as being different

Where is the collateral? You buy a house, don't pay... you lose the house.

You buy an education, don't pay... you... lose the education?

No bank is going to give money for degrees without a realistic change of getting paid back. They have no fear of getting paid back because you CANT remove the debt via bankruptcy.

I think there needs to be a different approach because it IS different... but the "you can never remove this debt" is too much.

My personal opinion:

Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy.

That would remove loans for "crap" courses (finger painting) except for those that pay for it out of pocket. Banks would still give loans for courses that lead to real jobs. Kids could still take shit degrees if they can pay for them (although, those would dry up).

<comment><USER32> >No bank is going to give money for degrees without a realistic change of getting paid back.

Then they shouldn't. A big part of the problem is that the negative externalities of loans are all but eliminated from the issuer and completely placed on the borrower, only that these borrowers almost always unaware or don't fully appreciate the risk. If we allowed student loans to be shed through bankruptcy then companies would stop giving out $100k loans for art degrees and history degrees. This is the sort of risk/reward calculation that most incoming students aren't equipped to make, but actuaries are great at. Why don't we let them?

<comment><USER33> > If we allowed student loans to be shed through bankruptcy then companies > would stop giving out $100k loans for art degrees and history degrees.

> Why don't we let them?

You've answered your own question, no ? Or at least pointed out one big center of opposition. Additionally, universities themselves will vehemently oppose this of course.

</comment></comment></comment></comment><comment><USER34> We don't need student debt reform (and I say that as someone who has a lot of student debt). Student loan debt is a middle/upper middle class problem. 2/3 of millennials don't have a college degree, disproportionately in the lower and lower middle class. The majority have no student debt. Public money spent on college or debt reform would be a regressive benefit to those who are already better off than the median person. It would be better to spend that money figuring out how to improve the plight of working class people for whom college isn't in the cards.

<comment><USER35> I would argue that the problem isn't "if the poor are screwed, bad. If the rich are screwed, ok."

I think the problem is eqch individual is pushed to go to college to find a good job which raises demand of college, which raises price. But those good jobs are barely out there for the graduates. And the college institutions didnt guide people down paths of success, instead gave enough freedom to find their own path to failure.

Now, you have a lot of intelligent hardworking (college is not easy) people who are in debt with a very abysmal perspective on their future. Their debt makes them worse off than working poor because any low income job would simply put them in the black. And the gov has their habds tied because america is a great believer in the free market yet a huge group of hardworking young people are effectively worthless and the coming generations are likely to fall in the same trap.

<comment><USER36> It's really hard to work through the framing you've created here, where it's supposed that going to college is a requirement to find a good job, the rich are "screwed" by college debt, and the poor are... what? Screwed from multiple directions simultaneously?

Further: if college is a necessity for a good job, and that's why students are going to college, and they're leaving college with a mountain of debt and no means to pay it off, then _college is not achieving the promise of securing better jobs_ , and the answer isn't to plow even more money into the system but instead to _stop sending kids to expensive colleges_ that have no positive impact on their financial futures.

It would be nice if college in the US was free. If one could wave a magic wand and reach that outcome, one certainly would.

But since we don't have magic wands, we have to prioritize, and we're generally not keen to prioritize the financial well-being of the wealthy before that of the less well-off. In matters other than finance, sure, we don't discriminate that way; we don't, for instance, send the rich off to wars first (we do rather the opposite).

<comment><USER35> Disclaimer : I am a self educated programmer with $0 in debt.

You say this with 20/20 hindsight and a unique perspective on supply and demand. You say this with what sounds anger and resentment towards successful people. I hope you view success and upperclass as a goal, or areat least a believer in independence and hardwork

The mass majority of americans are sheep that are expecting the gov and society to guide them towards a better future. These individuals worked hard for 4, sometimes more, years. What these people are lacking is an understabding of tge employment economy abd supply/demand. Since they dont have mbas its quite understandable to be this naive.

So now we have thousands of intelligent hardworking people who were led to the cloffside to jump. Arguably that is an example of survival of the fittest. Theres only room for cockroaches doing the dirty jobs and allstars doing the big ones. But considering our future depends on the survival and success on understanding the universe, it is in our best interest to ensure these hardworking individuals can be rewarded somehow and that future sheep understand how the world works so that their cliff is one of choice not of ignorance or force.

So your telling me

\- tough luck, let them die

Im telling you

\- these sheep were simply going down the path they were told

\- they were ambitious, smart and hardworking enough to survive 4 years and graduate

\- the economy only selects the best and the rest are left to compete in the same income bracket as the lazy, stupid, young, immigrant, unskilled etc.

Is it on the best interest of the united states as a nation to punish ambition? How do we guide people from here?

<comment><USER36> I'm a self-educated (1 semester at UIC and nothing else) programmer with $0 in debt. I just sold a company a few years back. I do not have "anger and resentment towards successful people".

I do not think we should spend large amounts of money to help refinance the debts of some of the best-off people in our society. I think that's a bad use of funds.

I also do not believe that college selects for "ambition". The overwhelming majority of middle class high school students go on to college. They're not all ambitious. They're just lucky.

Everything else I have to say about this comment, I already said in the preceding comment.

<comment><USER35> Its clear you wish to end this discussion so I will give you the final word after this.

Luck only goes so far. You need grades or sports to get in cheaply. The inflation of college prices isnt related to only the "1%" going to college. Nearly everyone goes [0], 68% in 2014. And if you dont, you either couldnt get in or smarter than the system could handle. To graduate you need to study, pass exams, write essays. College is not a free lunch only for the upper class. Its a bet the the american government guarentees because they believe a well educated workforce is a better workforce.

[0] [http://nces.ed.gov/programs/coe/indicator_cpa.asp](http://nces.ed.gov/programs/coe/indicator_cpa.asp)

<comment><USER34> Only 35% of millenials have student loan debt: [http://www.gallup.com/businessjournal/188984/americans- big-d...](http://www.gallup.com/businessjournal/188984/americans-big-debt- burden-growing-not-evenly-distributed.aspx). As you concede, if you are part of the one-third that doesn't go, it's probably because you couldn't get in. But to the extent the government should be spending public funds to help people, _those_ are the people who it should help first. Moreover, on a dollar basis, it's the people who have the most education that will likely have the most debt. _E.g._ interest free student loans will help those who do a couple of semesters of community college a little bit, but will really help out the doctors, lawyers, etc. who take on six-figure debt.

This is part of a larger phenomenon of the American welfare system helping people who are already relatively better off. Own a million dollar house? You can deduct tens of thousands of dollars a year in mortgage interest! Have $200,000 in debt after going to a private college and getting a masters degree? The government will forgive it! Did you make a six figure income during your working years? Great, the government will not only give you the disproportionate share of social security benefits, it will pay out more than you put in!

</comment></comment></comment></comment></comment></comment></comment><comment><USER37> I can't begin to express the disgust I have over ever-increasing tuition. From what I can tell, a lot of it goes towards pointless fancy buildings, costs for other activities other than learning and the ever present college textbook scam.

There was an interesting episode on Planet Money why college textbooks cost a ton but not high or middle school.

<comment><USER38> Administrators suck up a huge amount of money these days as well. That's the real scam, considering they only seem to make my life harder.

My institution has the added administerial tax of those offices inhabiting all the nicest buildings on the quad. Really drives home the totem pole of who's most important on campus.

</comment></comment><comment><USER39> The thing that worries me most is the delinquency rate. It is at 11%[1]. For comparison the housing market delinquency rate went from 1.6% in 2006 and went to 11.26% in 2010 (height, 2008 went from 3% to 8%[2]). That's where I see the real bubble indicator. I really wonder how much more it can expand. And I don't hear serious talk about what to do WHEN it bursts. Because it is really a matter of when and not if.

[1] [https://studentloanhero.com/student-loan-debt- statistics/](https://studentloanhero.com/student-loan-debt-statistics/) [2] [https://fred.stlouisfed.org/series/DRSFRMACBS](https://fred.stlouisfed.org/series/DRSFRMACBS)

<comment><USER14> This isn't a bubble. There is no stock of assets that are suddenly going to fall in market value. You can see education as an investment, but it's not a tradeable asset. If I buy an apartment, there's a market that (i) tells me the value of the apartment at any time, (ii) let's me (or the bank) liquidate the apartment and turn it into cash.

University degrees aren't like that. Someone holding a degree doesn't suffer additionally when people stop realising that this type of degree isn't worth the sticker price. He's not selling his degree to new students. Whatever his experience is in the job market is not affected by the price new students pay for their degrees.

<comment><USER40> _There is no stock of assets that are suddenly going to fall in market value._

Sure there is, the loans themselves.

Right now a bunch of lenders have $1.3T worth of loans. If those loans don't get paid off, they are $1.3T poorer.

<comment><USER14> What would cause those assets to suddenly fall in value?

<comment><USER40> A huge uptick in default rates. The only reason why student loan paper has value is because there is an expectation that it will be paid off.

<comment><USER14> Ok, then what would cause a huge uptick in default rates?

<comment><USER41> People's inability to service/pay their loans, due to not having enough income, due to the job market collapsing, due to a recession (which is already overdue).

<comment><USER14> What you've described here is the value of an asset (student loan paper) declining due to a change in the underlying cash flows generated by that asset.

This is how asset prices are supposed to work. It's not the busting of a bubble.

<comment><USER42> OK, how about this.

Imagine that employers stop caring about degrees, and evaluate potential hires based on other qualities.

This is already happening in tech.

If employers no longer cared about degrees, then workers who don't have them would now suddenly be on equal footing.

The non degree holders would get much higher paying jobs, and conversely the degree holders would get worse jobs. This causes the "value of education" bubble to pop.

<comment><USER14> Then we're back to my earlier point. There is no 'value of education' bubble analogous to a housing bubble. An individual's degree isn't tradable in the same way as a house is, so the value of that individual's degree isn't being bid up by people competing to buy it. So what would it mean for the bubble to burst?

If you're talking about a mechanism by which the price of newly-issued degrees were to fall (i.e. college tuition sticker prices fall by 50% within a year or two) then, even if it were to happen, that's just a fall in the price of a consumer good. If the price of laptop computers falls because people realise they can do their work with tablets and chromebooks, we don't think of that as a laptop bubble. Not a perfect analogy but I hope you get my general point: if you're calling something a bubble, then you've got to be able to point to the stock of existing assets whose price is out of whack with fundamental value (e.g. based on future cash flows) due to irrational investors bidding up the price.

I'm not claiming tuition fees are in line with fundamental value to the recipient. If they're not, then it's just people buying stuff they shouldn't. If they are in line, but it's for signalling reasons rather than the education received, then there's economic inefficiency due to market failure, but it' seems still not a bubble.

</comment></comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER43> The system here in Israel is roughly as follows:

The gov sponsors universities almost to 100%. The means going to university is almost free for me as a student - about $2500 per year. I can acquire a law degree and become a lawyer for less than $8000. The government is involved in the way the public universities are run so as to keep the subsidies manageable. Total government funding for university education in Israel is about $1.5B [1]. Since universities have high admission standards, many colleges have sprouted to service those who can't or don't want to go to one of the public universities. However, since university prices are so low, even private colleges are forced to operate with tuition fees of roughly $5000 per year, which means they are also very manageable for students. Even so, the quality of education in Israel is amongst of the highest in the world, especially when considering its tiny population. Hebrew University, Israel's best institution, has been ranked 26th in the world [2].

This system has attracted a lot of snark here in Israel, but from what I gather it's actually pretty effective. Israel is the 2nd most educated country in the world, with 46% of its population possessing a university degree [3]. :-)

Sorry for the Hebrew sources!

[1] Hebrew: [https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7....](https://he.wikipedia.org/wiki/אוניברסיטאות_בישראל#.D7.9E.D7.A1.D7.9C.D7.95.D7.9C.D7.99.D7.9D_.D7.9E.D7.99.D7.95.D7.97.D7.93.D7.99.D7.9D)

[2] Hebrew: [http://www.calcalist.co.il/world/articles/0,7340,L-3693018,0...](http://www.calcalist.co.il/world/articles/0,7340,L-3693018,00.html)

[3] Hebrew: [http://mako.co.il/special-mako- news/Article-6489f432bb2f9310...](http://mako.co.il/special-mako- news/Article-6489f432bb2f931006.htm)

<comment><USER44> Every Jew I have ever known in the US, to the last individual, has always placed a high value on education. It would seem to be a cultural value--or at least it is among Ashkenazis. So it does not surprise me that Israel has a decent, functional higher education system.

US culture, as a whole, does _not_ value education for its own sake. We value education only as a business. And much of that business is to suck money from the pockets of those who do value education as intrinsically beneficial, and blow it along to those who provide the illusion of education at the lowest operating cost. If a greater proportion of the population valued _real_ learning, the focus would be on making _high school graduates_ more relevant and useful in the modern workforce, rather than using bachelor's degrees as an arbitrary qualification for jobs that clearly do not require them.

If >25% of kids think they need to go to university to get a "good" job--or even to just not be considered a low-status, ignorant loser--it is not the university system that has failed, but the 12-13 years of public education that usually precedes it.

</comment></comment><comment><USER45> If you'd choose a more social system where the students costs are paid directly from taxes, taxes are higher, yes but you omit banks. The only thing banks do is collect interest because the people have decided, or have been told, that they can't collectively invest in the education of the next generation. And so their kids pay interest, to banks who do nothing but print the money and write down "you have dept" in return.

</comment><comment><USER46> Anyone have any idea what the 20 to 50 year implications are for this? I imagine this will crush the economy eventually if millennials cannot pay it off.

<comment><USER47> Regardless of how much debt there is, this isn't a bubble. These loans are nearly impossible to discharge. Recent graduates will be on the hook for this debt whether they want to be or not.

The largest negative effect of all this debt will be the drag it puts on consumption. Young people are already delaying major purchases like cars and houses due to all their student debt.

<comment><USER48> People can often just leave the country. US law makes it hard to discharge, non US law is another story.

<comment><USER49> >the act of renouncing U.S. citizenship does not allow persons to avoid possible prosecution for crimes which they may have committed in the United States, or escape the repayment of financial obligations, including child support payments, previously incurred in the United States or incurred as United States citizens abroad.

[https://travel.state.gov/content/travel/en/legal- considerati...](https://travel.state.gov/content/travel/en/legal- considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html)

I guess if you successfully renounced you could just try to avoid having any contact with the US ever again...

<comment><USER27> You can't be arrested for not paying debts. You could probably still visit the US as long as you didn't intend to work there.

<comment><USER50> In principle. In practice, renouncing US citizenship is the sort of thing that gets you put on a "make their life hell if they want to come here" list.

<comment><USER27> Why would you need to renounce citizenship?

</comment></comment></comment></comment></comment></comment></comment><comment><USER51> The Wall Street bailout was only...what, a trillion?

If we bailed out real estate speculators, I wouldn't be surprised if something happened with college grads.

Unfortunately. I hate assuming responsibly for monetary decisions other than mine, but judging the trend, that's where we're headed.

<comment><USER26> So, I am not at all an expert in finance, but there are claims (from Jill Stein for example) that the real cost of the bailout was much, much higher.

Here's a Mother Jones article that takes this position:

[http://www.motherjones.com/politics/2009/12/behind-real- size...](http://www.motherjones.com/politics/2009/12/behind-real-size-bailout)

Can someone with more knowledge break down whether or not this is accurate?

<comment><USER52> @maxerickson has a valid response, but there is a larger story here. Consider hidden bailouts and also consider the _unfairness_ of such hidden bailout. I would argue that the bailout was indeed much larger. For example, the Fed started buying distressed mortgage bonds via Quantitative Easing, QE2, and POMO. Should the Fed purchase an asset that is trading at 27 cents on the dollar for 60 cents? That seems unfair...it was a hidden bailout.

Imagine you buy a house for $500,000, the value goes down to $150,000. The government, instead of paying $155,000 pays you $450,000. That sounds like an "open market transaction" but it is a gift, a bailout just by another name. Unfortunately they didn't do that with homes, they did it with mortgage bonds and CDOs, which meant that most of the gifts went to a small sector of society in lower Manhattan and around Greenwich Connecticut.

</comment></comment></comment><comment><USER53> The article is made suspect, in my view, by promoting this Credit Sesame thing. There's a service called [http://annualcreditreport.com/](http://annualcreditreport.com/) that provides access to credit reports from the three major agencies without trying to sell anything, or using any black-hat user experience design to trick people into signing up for services.

</comment><comment><USER54> I wonder how much money could be saved if the US got rid of its general education based system.

<comment><USER27> General education requirements in American universities serves the purpose of getting people up to the level of academic high school students in Europe or Asia.

We could get rid of it, but we'd have to fix high schools first. This would likely require admitting that a focus on academic subjects isn't appropriate for everyone. In many European countries, a majority of students go to trade- oriented secondary schools and the minority that goes to academic schools leading to university have to study quite rigorous material in secondary school. That's why their university programs can focus specifically on individual specialties.

For example, the French academic high school diploma (called Baccalauréat Général) is normally considered equivalent to at least a year in a US university.

<comment><USER54> Agreed. I think that changing the high schools would be the best way to go about this, instead of finding ways of paying massive amounts to colleges.

<comment><USER55> Why not just make colleges cheaper?

I would argue that kids in America have a much better life than say kids in Japan or South Korea, with all night cram schools.

And in the end, the innovation in the world is coming out of America not Japan and South Korea, so at least to some extent it must be working.

<comment><USER56> A lot of innovation occurs in Asia.

Also, South Korea has a similar college funding issue as the USA with rising tuition. However it's blunted in Asia because parents are expected to pay for it so the loans are more bearable. Pay and status tends to be seniority based so the burden doesn't fall on the recent grad living at home.

</comment></comment></comment></comment></comment><comment><USER53> The consumer finance "reform" act of 2005 made it very difficult to discharge student debt in bankruptcy. It's time to undo that reform.

It had a disastrous unintended consequence, by completely shifting the risk of an uncollectable loan away from the lender and onto the borrower. How so?

When a lender carries risk, they underwrite those loans. That means they study them before making them. They pay attention to all kinds of things, including the borrower's ability to pay and the value of the thing being bought with the borrowed money. Underwriters are (usually) knowledgeable about the field they work in. They understand the value of both vocational and liberal education. Some of them even understand the value of giving under-served people a chance.

So, when a school gets calls from underwriters saying "we're having a hard time justifying loans of US$100K to your students taking bachelor's degrees" the school takes notice. They restrain growth in tuition and fees. Maybe they even offer discounts, also known as "scholarships." Those calls, coming from skilled underwriters, are far more effective than student demonstrations against tuition increases.

The 2005 reform made it possible for the lenders to be much lazier. Their underwriting is much more sloppy. The reform freed up a lot of tuition money that the educational institutions were happy to soak up. And their students are stuck with the bill for a lifetime.

I'm aware of the libertarian view which emphasizes individual responsibility, and I have a lot of sympathy for it. I have a young friend who looked at the cost of her first-choice college (Syracuse, it was) a few years back, and wrote them a letter saying "sorry, you're too expensive. I regret that I must decline your offer of admission." That too puts downward pressure on educational costs. But she's rare: she has great presence of mind and forward- thinking parents. Plus, she listened to me. -:)

Most high-school seniors get caught up in the mostly fake competitive admissions system. They aren't in a position to behave like hard-nosed underwriters.

So, let's put some of the loan risk back on the lenders, and bring back the underwriters.

This situation is analogous to the mortgage crisis, which shifted the risk of bad loans away from the mortgage originators. In that case the risk got shifted onto anonymous buyers of securitized mortgages, and onto AIG. In the case of educational loans the risk gets shifted onto the poor schlemiel who wants to be a schoolteacher.

</comment><comment><USER57> A healthy and future ready society needs an educated and literate population. From that it becomes a social goal and a social good with multi generational run off effects that can't be measured in pure short term economics.

That one of the richest countries in the world should shy away from this responsibility is a bit galling, more so because it seems to be purely so that bankers can make some money.

You can't have a country purely of corporations and workers and the US has been moving in this dubious and dystopic direction for decades now. You need to build a society or everyone loses, eventually.

</comment><comment><USER58> Welcome to cheap guaranteed federally backed money. Private institutions will continue to jack up education prices, because they know kids will be able to get loans from the government to pay for them. It's too late for me, and millions of others paying back enormous loans, but I dream of the day school becomes affordable. There was a time, you could work you way through college washing dishes. Schools existed WAAAAAY before federal assistance.

</comment><comment><USER59> > Officially, the nation owes $1.26 trillion in student loan debt.

The nation doesn't owe anything, I would rather said past students who still have loans owe this money.

<comment><USER60> It's a synecdoche.

<comment><USER59> I don't think it is, to allow blur between the society and the individuals is not something without consequences.

</comment></comment></comment><comment><USER61> Free (1) tuition is an interesting option, but it's not the end all answer.

We have basic tuition in Uruguay, and, while people don't leave university with crippling debt, we still have the problem of people spending 4 or 5 years of their lives and leaving with a worthless degree (as in, they cannot get a job in what they studied). And they do end up in debt because they have to pay for food and housing while they study.

I feel very sad whenever I see a working class family breaking their backs to send their child to become an architect or a psychologist, because I know they won't be able to get a decent job (there's one architect per 400 citizens, and one in twelve in the workforce is a psychologist, they usually end up earning less than a store clerk if they don't set up a succesful practice).

Another problem is the strain on infrastructure, in the Engineering faculty they only have capacity to train about 300 to 400 students but over 2000 enter each year. The solution is to have extremely hard and cruel first year courses so at least half drop out in the first year and another half in the second year (I dropped out in second year and enrolled in a private university).

Another country with free university is Venezuela, and a problem I've noticed is that the quality of education is very uneven, there are graduates with titles that aren't worth the paper they're printed on. This doesn't happen in Uruguay that much because they force them to drop out (not a great solution either).

(1) here in Uruguay it's not entirely free, it's deferred - graduates from the public university have to pay about half a normal salary each year from 5 years after they graduate until they retire, so it often ends up more expensive than a private university.

</comment><comment><USER62> "He who works with his hands is a laborer.

He who works with his hands and his head is a craftsman.

He who works with his hands and his head and his heart is an artist."

— American trial lawyer, Louis Nizer [1]

[1] [https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer-a...](https://lawlessstruggle.wordpress.com/2014/11/13/a-laborer- a-craftsman-or-an-artist/)

</comment><comment><USER63> Has there been extensive research or trials of corporate sponsorship (or are there any startups exploring this idea)? There are probably some principal/agent issues but by and large why can't Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports?). In some fields, big corporations already compete for talent, why not start the competition a level earlier (internships could be integrated as well).

I can think of a lot of problems and reasons why this won't work...which makes it interesting :) Apart from "won't work for not highly competitive degrees" and "figuring out who to sponsor is as hard or harder than just hiring" and "how do you grantee the people actually stay with the company and are motivated" there's probably a lot more. I think the principle of reciprocality can make it work in principle though.

<comment><USER56> General Assembly is a boot camp that does this.

ROTC does this for the military.

>Google sponsor some CS students and they sign a 4 year deal with them in return (somewhat similar to sports?

They would probably try to get fired so they can get hired elsewhere for more money leaving Google holding the bag or be lazy as fucks. Non compete agreements are difficult to enforce....you cant create a wage slave and expect it to be enforced by the courts.

<comment><USER63> Weather or not the pro sports model is a good thing to aspire to...I'll leave that up to debate but that's a reference point where this model works. It could be adopted with slight modifications.

The apprenticeship model also works decently well...at least I'm not consciously aware of many carpenters, bakers etc. job hopping once their education is complete.

But like I said the more optimistic view is that employees might actually like your company and that the principle of reciprocality works in this setting. There's going to be a subset of people who are going to be pretty happy that you cared about them and financed their education (and there should certainly be strong mentoring on the side not just "here's your money, call us when you graduate"). If someone just hops away...well that's expensive but might be less expensive than having such a person at your company. Fail early etc.

And I mean noone is forcing you to sign such a deal. If you want to argue evil employers and "wage slaves" (a term I personally think is fairly ridiculous, especially if applied in the context of IT jobs, but Chomsky gonna Chomsky) and say that starting your life with huge college debt isn't exactly going to set the workforce free either. You're pretty exploitable if you need to get rid of crippling debt.

</comment></comment></comment><comment><USER64> So total student loan debt is something like 10% of the cost of the Iraq / Afghanistan war. Tell me again how it's not affordable to make college free, when it's affordable to spend so much money on an unnecessary military intervention?

<comment><USER65> I wasent privileged enough to go to college. Why isn't paying off my mortgage affordable instead?

</comment></comment><comment><USER66> There is something really flawed in a system that puts progress under bank's interests. The advancement of the whole society is beneficial for us all, so I dont see why it should not be subsidiced.

</comment><comment><USER67> I am sure more education can fix this problem as well. Just a few more degrees and we'll be able to afford interest on that debt, that the government will be paying because the students are broke.

</comment><comment> koga-ninja Tuition is very expensive in the U.S.. People take loans because they are banking on the future. They think that Even with debt they will come out ahead.

I'm new on this site, but I assume that most people on this site are computer programmers or are tech savvy enough to get a job that pays a decent wage.

I'm Canadian, but you should also look at the bright side Of US education. There is no Canadian Caltech. If you step out and start a business in America, it is Considered entrepreneurial and a good thing.

</comment><comment><USER68> Queue the political debate over whether this is a failure to provide secondary education to our citizens, or an artificial inflation in its cost by attempting to do so.

<comment><USER69> Other countries don't have this problem. There is no debate to be had - the US can't control costs

<comment><USER70> Agreed. That's the same core problem with the US health care system as well.

Yet in both cases, education and health care, control of costs is pretty much not discussed at all. The only narrative we seem to hear is along the lines of "find more money to pay for it".

<comment><USER69> Everything is a business in the US - which means middlemen everywhere between services and the people consuming them. The fact that costs are hidden in both places to the end user is a huge problem, and the government solution is literally to throw more money into the system instead of controlling costs through evil regulation. You just can't have it both ways - either you subsidize and regulate cost or you remove the middlemen and make the entity compete on the basis of cost. The problem with both health care and education is that the goods aren't elastic - they're required in most cases. This, they don't even compete on cost basis but instead quality, which drives prices ever higher.

</comment></comment></comment></comment><comment><USER71> This is a quick read in case anyone is unfamiliar with student debt "onwership":

[http://www.investopedia.com/articles/personal- finance/081216...](http://www.investopedia.com/articles/personal- finance/081216/who-actually-owns-student-loan-debt.asp)

</comment><comment><USER72> Education makes extensive use of debt factoring for risky loans.

Factoring is selling client debt at a discount for instant cash. The financial institutions that buy the debt are usually responsible for collecting unless they decide to pass it around again.

So in a sense, universities are sort covered against losses from that kind of debt, not students.

</comment><comment><USER73> I was lucky to get out without any debt due to athletic and other scholarships. However the last two-three girls I've dated had 15K-25K in student loans. They all said, "At least I dont have __K like my friend... "

I cant believe do much is being lended to college students.

</comment><comment><USER74> "While an educated populous is a good thing, the number of those not making payments on their student loan debt as soared." \- what language is that? Sounds like written by an undereducated populous...

</comment><comment><USER75> Is this news? The global elites harvest young people for profit just as they do older people with subprime mortgages, etc. Sorry for sounding cynical, but that is just the way I think the world works.

<comment><USER76> While not news, figures like this:

      In the past 12 years, we have added a trillion dollars to
      that amount and gained about 4% in the overall college
      graduation rate.

are important to publish sometimes. I don't think many people realize the scope of modern student debt, which has obvious (?) negative implications for the national economy.

<comment><USER75> I agree, more people need to be aware of the magnitude of the problem.

</comment></comment></comment><comment><USER77> This is an advertisement for "Credit Sesame".

</comment><comment><USER78> Does nobody care that the person holding a debt is the one that gets paid?

</comment><comment><USER79> Debt expansion is no way to run a money supply.

</comment><comment><USER80> The government-enforced student loan system is the problem. Universities know they can charge whatever they want for tuition, they will get their money up- front, and the students will be on the hook for it for life (and it can't be declared in a Bankruptcy).

We need to revamp the system so universities can't charge us these ridiculous rates.

</comment><comment><USER81> Congrats to all the students and recent grads out there.

</comment><comment><USER35> Im glad I got someone with the shock value. Its clear you have a very unique perspective that I appreciate you sharing.

Female in lower income bracket - I believe this. I think this is a rather heartbreaking reality so I am a ok not going into this. What I do know is that Ive met a few peoples whos moms work 16 hour days as much as possible.

\- chronically ill - the college educated are competing with the chronically ill for jobs

\- mentally ill - the college educated are competing with the mentally ill for jobs.

\- unable to afford - so they are working but cannot find housing. I believe it.

I dont think 'bail out' is the solution. Its 'salvage and prevention'. Ensuring that future generations dont fall into the trap and if they do it is an educated risk. And salvaging multiple generations lives who were chasing after the american dream.

Im all for helping those that cant help themselves. But Im also interested in getting those 60% there to 100%. If the "prividged" are having are hard time post graduation. The under privlidged have it even worse. We are talking about the future of basically educated children not just "foolish rich kids"

<comment><USER82> We detached this subthread from [https://news.ycombinator.com/item?id=13009587](https://news.ycombinator.com/item?id=13009587) and marked it off-topic.

Perhaps your intent was sincere, but the effect you had on the thread is indistinguishable from trolling. Please don't do this on HN.

<comment><USER35> My apologies

</comment></comment></comment><comment><USER83> In real world this debt cascades to rest of the world bloom.bg/1O04ymn</comment>