Student (College) Loans

[iacas]

I have to admit that I don't quite understand the push to forgive all student loans.

And sure, some of that is "I paid of my student loans, why should you get them paid off just because you happened to have just graduated and lucked into this sweet spot? You knew the deal when you signed up for them."

I'd be in favor of college reform. There's no way it should cost $8k to live in a dorm room, and $6k for food for seven months, for example. There's no way colleges should have cost $30k in the late 90s, and $50k now only 25 years later.

Colleges don't have to compete on price because banks are willing to give anyone a student loan, because they're one of the few loans that can't be wiped out in bankruptcy court.

So either:

• mandate a cap of 1% or 1.5% or something low for student loans, maybe with several years deferred for the person to start their lives, or…
• mandate college reforms so colleges compete on price again, or…
• both.

What do y'all think?

P.S. I thought we had a topic on this somewhere, but I didn't find it.

This one is older: 

 

[dennyjones]

I don't agree with forgiving the loans but I like your idea of low rate loans or deferred loans for several years.    The cost of tuition, room and board are just crazy expensive.   

[boogielicious]

Sadly, a rule of thumb on tuition is an order of magnitude per generation. When I was a freshman at WPI, my roommate and I were paying $6000 tuition. His dad, who went to WPI, pay $600. Now it $60,000. And frankly, it’s not like the school is worth a 1000% more now. 

I would only agree to forgiveness or help where the loans were predatory in nature. There have been instances of this, especially in the for-profit universities. But the cost has to be reined in. It’s far greater than inflation would justify.

[iacas]

  On 12/5/2021 at 12:22 PM, boogielicious said:

Sadly, a rule of thumb on tuition is an order of magnitude per generation. When I was a freshman at WPI, my roommate and I were paying $6000 tuition. His dad, who went to WPI, pay $600. Now it $60,000. And frankly, it’s not like the school is worth a 1000% more now.

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My college was about 50% Natalie's cost. An order of magnitude would be crazy. I don't think that rule of thumb holds up. 10x over 20-25 years? That's so far out of whack I can't imagine it. Denison costs about $75,000 per year. No way it cost only $7500 in 1996. Allegheny almost as much, and no way did it cost < $7k 25 years ago.

It's gone up but I have no belief it's an order of magnitude.

[Big C]

I've been thinking a lot about this topic myself. I have two kids, ages 5 & 7 and I have been pretty diligent about putting money away into their 529 college savings plan. Even so, if tuition inflation continues at it's current rate, I would probably need around $800,000 to be send them to any college they want debt-free. That's just not going to happen. 

I don't agree that schools don't have to compete on price, but I do think that society's emphasis on a 4 year degree as a pre-requisite for success has led to a "cost be damned" mentality when it comes to choosing schools. For the last 30 years, it was never a question that the value of a degree was greater than the cost for most parents. Now we are starting to see chinks in that armor, as more stories of college graduates who are living under the crushing burden of their debt come to light.

I think the real change will start to happen in several years, when this generation of 20 and 30 somethings, who lived and raised families while paying down their 6 figure student loans start to send their own kids to college. They are going to know that burden first hand and are not going to want their own children to have to deal with it. I think the middle tier private schools will be the first to feel the pinch. Will Dennison be able to charge $100k per student in 10 years? What about Claremont McKenna in California or Brandeis in Massachusetts? I think it's unlikely.

Dave Ramsey has been beating this drum for awhile and I happen to agree with him. If you aren't going to Harvard/Yale (or a peer institution), or a state school, you are probably getting ripped off for your college degree. Once parents start to realize this en masse and speak with their checkbooks, the dominoes will start to fall. 

[phillyk]

WA state put in place caps on state schools so they couldn’t keep raising tuition. In 2008, out of state was around 27,000 for WWU. 2019/2020, it was 25,000. Hope that holds for when my kids decide their futures. 

I talked to a buddy of mine who worked his ass off during college and paid for what he could at cosco 40hr/wk. He and his wife have good jobs and have nearly paid off all their student loans. It would be a rather hefty slap in the face to all of a sudden know it could’ve disappeared on its own.

I do think costs are way too high right now across the country, but WA has a good plan for it.  I also think people need to have some financial responsibility for their decision to attend college.

[Carl3]

Scale back the Federal backing of student loans. Allow students to default like any other loan. Universities can offer loans in conjunction with private banks. The universities would be responsible for making sure they have good, sound programs and solid students who can then get appropriate jobs after graduation to repay the loans.

If a university pushes too many marginal degree programs to students who have questionable academic talents, they will pay the price with high defaults that hurts their bottom line. That is the only way to change this. There is nothing stopping universities coming up with endless silly programs, recruiting foolish or desperate people to take out huge loans that they will never be able to repay. We have laws against the payday loan people abusing the poorest in society, but here we are abusing the naïve youth of our nation who lack experience at life.

Additionally, too many people go to universities. Some schools have programs for the mentally challenged and learning disabled. Why saddle them and their parents with useless debt? In some cases this has become a system rigged to fleece a class of people and the government is complicit. We are allowing the government at the state and federal level take advantage of its citizenry.

With the government backing this scheme, prices naturally go up. If the government allows these loans to be written off, the prices will go higher thereby compounding the problem.

I have 4 children who have earned a total of 7 university degrees and none have had any student debt, so I have thought a lot about this. I have also interviewed a lot of new graduates some of who have had loan amounts that are ridiculous. Two guys in particular with BS in mechanical engineering with loans just under $200k. To me that is a red flag they won't be able to solve basic engineering problems.

 

[boogielicious]

  On 12/5/2021 at 12:40 PM, iacas said:

My college was about 50% Natalie's cost. An order of magnitude would be crazy. I don't think that rule of thumb holds up. 10x over 20-25 years? That's so far out of whack I can't imagine it. Denison costs about $75,000 per year. No way it cost only $7500 in 1996. Allegheny almost as much, and no way did it cost < $7k 25 years ago.

It's gone up but I have no belief it's an order of magnitude.

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Well those are actual numbers for one school, so it’s a small sample. And it’s more years. 1957 was $600, 1978 was $6000 and WPI was $60,000 when my son graduated from HS in 2013. When I was in school it went from $6k to $8K in 4 years.

[The Flush]

I was able to pay off my loans early all by myself, so everyone else should too.  Of course I was only paying $1200 per year in tuition for a chemical engineering degree. Now get off my lawn.

It does "feel" like colleges compete based on amenities more than cost than they did when I was in school.

In addition to the added cost of those amenities, state governments have reduced funding per student to the schools which forced the schools to rely on  tuition more. The availability of student loans allowed the states to cut the funding. I don't know which happened first, the loans or the funding cuts. I assume there is also some waste at schools in the form of a higher administrator to student ratio.

I don't know what to do about the high cost of college and the debt burden on students.  I don't think that the ROI is high enough for some degrees. Many would be better off learning a trade.  In addition to the limits Erik mentioned, I think loan forgiveness for certain degrees in certain locations could help. 

In the mean time I recommend everyone use the plan that I used for my kids to graduate college debt free. I have 2 single siblings who make good money who started contributing to a 529 for my kids when they were little.  I only paid about $4K per year which was in order to get the max tax credits. Each kid did/does get some scholarships that covered around 25% of total costs. My son is currently in school and plays on the golf team, but he does not get any money for it. Maybe he can earn a little next year with some continued improvement. My back up plan was for my wife to get a full time job after having been a SAHM and then substitute teacher for all of our kids' lives.

[saevel25]

  On 12/5/2021 at 3:11 AM, iacas said:

And sure, some of that is "I paid of my student loans, why should you get them paid off just because you happened to have just graduated and lucked into this sweet spot? You knew the deal when you signed up for them."

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There are a good number of students who sign up for students loans on their own. Being at that age, I doubt they understand loan terms, and what it means later on. Colleges obviously push for them to take out loans because it means more money for them. 

I doubt majority of HS students know the ins and outs of student loan debt, and how to manage their finances. 

  On 12/5/2021 at 3:11 AM, iacas said:

I'd be in favor of college reform. There's no way it should cost $8k to live in a dorm room, and $6k for food for seven months, for example. There's no way colleges should have cost $30k in the late 90s, and $50k now only 25 years later.

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I agree. 

It's mostly because of administrative expansion so they can keep raising tuition. Basically, colleges are bloated with administrative positions that add no benefit to the students. 

  On 12/5/2021 at 3:11 AM, iacas said:

Colleges don't have to compete on price because banks are willing to give anyone a student loan, because they're one of the few loans that can't be wiped out in bankruptcy court.

So either:

• mandate a cap of 1% or 1.5% or something low for student loans, maybe with several years deferred for the person to start their lives, or…
• mandate college reforms so colleges compete on price again, or…
• both.

What do y'all think?

P.S. I thought we had a topic on this somewhere, but I didn't find it.

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That might be for private schools, but public schools can have their tuition capped by the governor. This happened to many State schools in Ohio to combat tuition cost. 

I wonder if we have a shortage of colleges? At Ohio State, the required ACT and SAT scores skyrocketed a few years after I got accepted. I think there is just so many more people wanting to go to college, there isn't enough spots. 

I do think there needs to be some regulatory reform to help change the price point for colleges. At least for things like room and board. By your example, it is $1333 for rent! Like, that is a good apartment in most places. I lived in a nice apartment for $550 a month after college. Two bedroom, kitchen, like 800 square foot. Maybe room and board should be based on local renting pricing, based on living space and amenities in the room. Where I had that apartment, maybe the room and board needs to be like maxed out at 20% higher than apartments with in 10 miles of the campus. 

  On 12/5/2021 at 2:32 PM, Big C said:

Dave Ramsey has been beating this drum for awhile and I happen to agree with him. If you aren't going to Harvard/Yale (or a peer institution), or a state school, you are probably getting ripped off for your college degree. Once parents start to realize this en masse and speak with their checkbooks, the dominoes will start to fall. 

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I think it is degree based. If your school is like a top-5 in business, it might be worth it. Otherwise, just go to your state college or community college. No need to go to a private college unless you are getting a scholarship opportunity. I wouldn't send my kid to Harvard/Yale if they paid me. BLEH!!!  Not a fan 😛 

In the end, 99% of jobs don't say, "Bachelor degree from Yale". Some do, like high level entry jobs on Wall Street. Most jobs just care if you have a degree. 

  On 12/5/2021 at 2:47 PM, phillyk said:

I talked to a buddy of mine who worked his ass off during college and paid for what he could at cosco 40hr/wk. He and his wife have good jobs and have nearly paid off all their student loans. It would be a rather hefty slap in the face to all of a sudden know it could’ve disappeared on its own.

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I never see it this way. If everyone thought this way, progress would never happen. I do think some reduction in college cost or refund of some kind is needed. The student debt is crippling an entire generation of students who have no other choice. It makes it so they can't buy a home till they're 40. It just kills the ability to save for retirement and gain net worth. I think fixing the system, even if it means those who paid off their student loans before hand are upset, is better for everyone in the long run. 

[woodzie264]

  On 12/5/2021 at 3:11 AM, iacas said:

I have to admit that I don't quite understand the push to forgive all student loans.

And sure, some of that is "I paid of my student loans, why should you get them paid off just because you happened to have just graduated and lucked into this sweet spot? You knew the deal when you signed up for them."

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I’d agreed with this logic 100%. I paid off my loans. It’s called being responsible for your decisions. Simply enough, I think people should be held responsible and be accountable for the decisions they make. I think our society is becoming increasingly irresponsible or denying personal accountability as people want to make excuses as to why they shouldn’t be held accountable for their own choices. 

 

  On 12/5/2021 at 9:04 PM, saevel25 said:

There are a good number of students who sign up for students loans on their own. Being at that age, I doubt they understand loan terms, and what it means later on. Colleges obviously push for them to take out loans because it means more money for them. 

I doubt majority of HS students know the ins and outs of student loan debt, and how to manage their finances. 

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Ignorance is no excuse. They made the decision. They should seek wise council before taking the loan out. Maybe they could learn from their mistakes instead of bailing everyone out and they learn nothing except that they won’t be held responsible for the decisions they make.

 

having said all of that, moving forward, I’d agree college unjustifiably expensive and reform would be welcomed

[Double Mocha Man]

A lot of students, if they didn't take out the loan, would have to drop out of college.  In the STEM areas we need those students in school.  So I'm not terrifically opposed to forgiving loans.  Also, it's a small boost to the economy, allowing those graduates to spend their discretionary income and feed the the consumer economy.

I paid off all my student loans... took some time.  Now, I need to call a credit card company or two to see if they'll forgive my loans...

[woodzie264]

  On 12/5/2021 at 10:30 PM, Double Mocha Man said:

A lot of students, if they didn't take out the loan, would have to drop out of college.  In the STEM areas we need those students in school.  So I'm not terrifically opposed to forgiving loans.  Also, it's a small boost to the economy, allowing those graduates to spend their discretionary income and feed the the consumer economy.

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It sounds like you’re arguing that some students would have to drop out is a reason to forgive the loan…as if college college is an entitled right…that everyone is entitled to college.  It’s not; it’s like a car: you might need it for a job or career, but you’re not entitled to a car. You can buy one if you can afford it.  With that line of logic, where do you draw the line?  If I can’t afford my house and I would otherwise need to be homeless, then is the bank supposed to forgive my loan? 

I’m not entitled to anything I can’t afford. It’s called living within my means and being fiscally responsible.

[Double Mocha Man]

I think it might be said that if you can succeed in college then you are entitled to loan forgiveness.  Do you want China and other countries far exceeding us in education?  The bottom line is that loans shouldn't be a factor.  We need to find a way for kids who have a drive to succeed in school get to go to school.  Advanced education, in certain areas, should be covered.  Doctors and lawyers and such...

[woodzie264]

  On 12/5/2021 at 10:47 PM, Double Mocha Man said:

I think it might be said that if you can succeed in college then you are entitled to loan forgiveness.  Do you want China and other countries far exceeding us in education?  The bottom line is that loans shouldn't be a factor.  We need to find a way for kids who have a drive to succeed in school get to go to school.  Advanced education, in certain areas, should be covered.  Doctors and lawyers and such...

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1. So people who fail out, have to pay loans back, but if you graduate then your loan should be forgiven? I don’t see why banks would ever give loans out then. With that logic, I would think college would become less accessible not more accessible. 
 

2. If you don’t think cost should be an issue, then are you willing to pay for others to go? Things cost money. That’s life, that’s reality. Someone will have to pay for it…are you willing to pay for others to go?  I have two kids I’d love for you to pay for.  I’m not willing to pay for others’ college education as it’s a privilege, not a right. I’ve already paid for my own.  Again, people should be responsible for themselves and stop acting as if they are entitled to everything regardless of their ability to pay for things.  

And if you and others who want their education paid for want to live in China under their form of government, go ahead. I’m not interested in that. 

[woodzie264]

  On 12/5/2021 at 2:56 PM, Carl3 said:

Scale back the Federal backing of student loans. Allow students to default like any other loan. Universities can offer loans in conjunction with private banks. The universities would be responsible for making sure they have good, sound programs and solid students who can then get appropriate jobs after graduation to repay the loans.

If a university pushes too many marginal degree programs to students who have questionable academic talents, they will pay the price with high defaults that hurts their bottom line. That is the only way to change this. There is nothing stopping universities coming up with endless silly programs, recruiting foolish or desperate people to take out huge loans that they will never be able to repay. We have laws against the payday loan people abusing the poorest in society, but here we are abusing the naïve youth of our nation who lack experience at life.

Additionally, too many people go to universities. Some schools have programs for the mentally challenged and learning disabled. Why saddle them and their parents with useless debt? In some cases this has become a system rigged to fleece a class of people and the government is complicit. We are allowing the government at the state and federal level take advantage of its citizenry.

With the government backing this scheme, prices naturally go up. If the government allows these loans to be written off, the prices will go higher thereby compounding the problem.

I have 4 children who have earned a total of 7 university degrees and none have had any student debt, so I have thought a lot about this. I have also interviewed a lot of new graduates some of who have had loan amounts that are ridiculous. Two guys in particular with BS in mechanical engineering with loans just under $200k. To me that is a red flag they won't be able to solve basic engineering problems.

 

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Exactly - well said

[Denny Bang Bang]

It’s a bit of a mess some people are in with student loans.  There does need to be some accountability for the decisions individuals make on their education.  That said, I do believe there are a lot of people who are in real trouble with their loans, and there could be ways to help them and future generations that don’t involve debt forgiveness.

Perhaps legislate reasonable fixed interest rates (3%)?

Limits on the amount of debt a student is allowed to access for undergrad and graduate school?

Mandatory high school curriculum on college, careers, cost/benefit?  (my kids actually have a class in jr high that includes this content)  There are also plenty of good paying careers and trades that don’t require much college, if any.

A lot of state schools do a better job at keeping costs down for in-state tuition (with it being free in some states).  Choice of school could obviously be a huge savings/debt reduction.  I’m not sure how appropriate legislation is to control private school tuition.

Parents, be involved.  If your child decides to pursue a degree in basket weaving… tell them it’s crazy.  If that’s their passion, don’t push college, tell them to just go get a job at a basket company… plus there’s a great golf course in OH right by Longaberger Basket Company!

From a personal perspective… My oldest wants to be an elementary school teacher (which could always change).  We’ve had the conversations already that she should be looking at lower cost state schools, as she’s likely not going to make a substantial amount of money if she went that route.  Now, if she wanted to be a CFO or something, it would make sense to consider an MS from a program at the likes of Wharton.  That said, I’m a finance exec and I didn’t take the premier university route.

[saevel25]

  On 12/5/2021 at 9:45 PM, woodzie264 said:

Ignorance is no excuse. They made the decision. They should seek wise council before taking the loan out. Maybe they could learn from their mistakes instead of bailing everyone out and they learn nothing except that they won’t be held responsible for the decisions they make.

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Sure it is, pending the situation. 

You have an 18 year old, who doesn't need an parent to co-sign on a loan, being lured into signing for an expensive student loan by a college because they make it seem like its the best thing for them.

So, they learn from their mistake, 10-15 years down the line when they realize the students loan debt was a bad idea?  The outcome of this decision isn't something you get instant return on as a learning situation. This isn't like placing your hand on a hot stove. 

Why should the biggest mistake 17-19 year olds make be getting hit with hundreds of thousands of dollars in debt? That is just asinine thinking really. 

Really, colleges are bad faith actors who are swindling people out of money with no regulatory control. 

It is even worse since you can not get rid of the student debt in bankruptcy. Guess what, in the end, bankruptcy is a form of loan forgiveness. You can file for bankruptcy, sell off your assets, and the courts decide to void out a good portion of the loan amount in a lot of cases. Except for students loan debt. Which is idiotic. What makes students loan debt so special? 

What about this, you get your students loan forgiven, but it hits your credit score like any other bankruptcy? You choose, to work off your students loans, or take a hit to your credit score. I think that is fair. 

  On 12/5/2021 at 10:37 PM, woodzie264 said:

It sounds like you’re arguing that some students would have to drop out is a reason to forgive the loan…as if college college is an entitled right…that everyone is entitled to college. 

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No one is arguing they are entitled to a degree. How did you jump to that? 

  On 12/5/2021 at 11:23 PM, Denny Bang Bang said:

A lot of state schools do a better job at keeping costs down for in-state tuition (with it being free in some states).  Choice of school could obviously be a huge savings/debt reduction.  I’m not sure how appropriate legislation is to control private school tuition.

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I think it is because they can't be for-profit. Also, state governments can control tuition.