Student (College) Loans

[TourSpoon]

17 hours ago, saevel25 said:

1) you can give out student loans where you are always going to collect a guaranteed rate of return because the loans can not be gotten rid of. 

That’s the game. The only one of its kind.  I shared this before, but it really hits home about consumer protections. 

 I never took a student loan (finance major), but from a standard lending practice it’s pretty loose as there is no guarantee the student even has a future stream of income. Even when you declare bankruptcy you keep the loan payments and they DO NOT count in the living expenses you have to report for the bankruptcy terms.  
 

My wife did the public service program in the 90s where you go to school and after 10 years of making payments they forgive the loan only to find out that her loan was sold. After a decade of people complaining the government acknowledged this and fixed it quietly (if you were lucky enough to hear about it). 
 

Anyway, buyer beware is what I say and I send that video to friends that talk up student loans. You have to do your research! Financial literacy just got passed as a required class in Florida so maybe it helps a few kids think beyond the weekend. 

 

16 hours ago, Double Mocha Man said:

I bet he doesn't cut grass himself anymore.  He runs a successful business. 

That’s the point right there. You can run a successful business if you have the smarts and the hustle. 
 

This guy combined trade with college. Running a business, whether it’s software support, accounting, law, a/c, whatever requires a specialized skill set, courage, hustle, and some good bounces along the way. 

Edited September 5, 2022 by TourSpoon
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[Abu3baid]

I personally have already paid off my student loans so do feel like everyone is getting a pass while I get nothing in return.  I have brothers that this will help out so that’s a consolation prize I suppose.  I haven’t had time to read up on everything yet, but not sure if it will change my overall mind that this doesn’t sound fair to the rest of us or those that didn’t go to college.  

[GolfSwami]

On 9/2/2022 at 3:41 PM, Elmer said:

A single semester of college can cost $20,000 per semester. If the student needs to cover housing and meals, they may need to take out a personal loan. Alot of these loans have elevated interest rate.
My neighbor's kid went to medical school and got their doctorate. In the 15 years since graduating they have paid off $120,000 on their $120,000+ loan and still owe $120,000.
It is the interest rate that is burying them.

Taxpayers have bailed out the auto industry , airline, banks,  etc....., and I don't recall that any of these industries drastically changed. The bail out was during tough economic times to keep the business afloat, employees working and lessen the economic impact. 
What is wrong with providing the same support to those who are in debt and are part of the workforce.
The amount of money not going to pay loans will likely go back into the economic and hopefully provide a boost.
I do not see why we punish people who chose to educate themselves, but because of their economic status had to take out what ever loan they could get. And because of this they spend a lifetime paying off the interest that is incurred!

There is literally no upside for society as a whole forgiving student loans.

1. It raises the cost of tuition because you will have some people be less price conscious with the thought of a future loan bailout. So Moral Hazard.

2. A bailout doesn't actually educate more people. The people getting the bailout have already gone to school so there is no increase in human capital.

3. It's regressive.  The typical college grad will earn more over their life than the typical non-grad, even if they aren't currently.

4.  Just from a short term macro perspective, it is inflationary. The Federal Reserve is trying to reduce demand. Nominal GDP is running just under 10% and it should be closer to 5%. Cancelling student debt has basically the same effect on nominal GDP as a tax cut or increased government spending. Demand should be reduced right now not increased.

You are saying a lot of talking points like tax cuts for the rich that are off topic that I won't address.  But since you are coming from a certain political persuasion, it is worth noting virtually every economist across the political spectrum believes student loan forgiveness is poor policy.

Jason Furman was President Obama's Chair of Council of Economic Advisors.  

Biden's student loan forgiveness plan 'much worse' than expected, says former Obama advisor

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Harvard's Jason Furman, former chair of the White House Council of Economic Advisers, joins CNBC's 'Squawk Box' to explain why he's critical of President Joe Biden's student loan forgiveness plan.

 

Here is what Justin Wolfers (very left wing, significant other is Betsey Stevenson who was head economist for Obama's Labor Dept) said about it in 2011   "Forgive Student Loans? Worst Idea Ever. 

Forgive Student Loans? Worst Idea Ever. - Freakonomics

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There's an argument going around right now that forgiving the country's student loan debt would have a stimulative effect on the economy. This online petition by Signon.org, an offshoot of Moveon.org, has nearly...

 

[saevel25]

10 minutes ago, GolfSwami said:

The typical college grad will earn more over their life than the typical non-grad, even if they aren't currently.

I would be interested in seeing this stat looking at it per degree. 

Let's say you take out a degree like finance, and drop all the income earned by those with finance degrees, what the numbers look like. 

This statement, isn't in support of students loan forgiveness. Like I posted above, I think an overall reform of our education system and how it funded is needed. I do think education is very important, but it has gotten way out of control at this point. 

I am just interested in seeing of old adages actually hold up, or are they being propped up by outliers. 

What if like 10% of the degrees out there make up like 60% of the wealth earned when you look at all degrees. That would mean, a lot of people are just going college for the sake of going to college instead of picking a degree that actually has future career mobility or wealth generation. 

 

[chspeed]

8 minutes ago, saevel25 said:

What if like 10% of the degrees out there make up like 60% of the wealth earned when you look at all degrees. That would mean, a lot of people are just going college for the sake of going to college instead of picking a degree that actually has future career mobility or wealth generation. 

This is a very complex topic. There is no doubt that some careers have much higher demand in the past few decades (e.g. technology, health) than others (e.g. academics). Part of this is due to historically low unemployment numbers, low interest rates that drive venture capital, immigration laws, and many other factors.

But to tie education to the jobs has become tougher than ever. The majority of people now have multiple careers, a significant number of which studied something completely different than where they ended up.

Does going to college affect recruiting? Build up your network? Allow you to switch careers more easily? All great questions that are not only very hard to study, but also constantly changing.

[TourSpoon]

I agree that forgiving student loans is not the answer to stimulating the economy. I also think that the current system of allowing someone to pay a minimum interest rate to ultimately pay 4 times their principal is outrageous by not letting them participate in bankruptcy to discharge their debts if they are unable to pay. I think we all agree that there is a problem and it has some shared responsibility.  An 18 year old can't buy a house, car, small business loan, but they can finance an education and the lender is guaranteed by protections that this loan cannot be discharged unless you literally die (federal only). 

Anyway, I never took out student loans, I paid for both of my kids' 4 year degrees (balance after scholarships for academics, athletics, leadership, volunteering, etc), and feel like I should get a 10k credit for paying on time. I know that student debt is the worst kind of debt to have and I was willing to do home equity if I needed to (which you can write off or bankruptcy if you have financial calamity). 

Finally, they were lucky enough to pick good majors (and their professors did not buy out their contracts so they were taught by TAs) in places where they had internships. We made sure that the return on investment would set them up to be able to financially take care of themselves. So far so good. 

I can only say when it comes to student loans, Buyer Beware! 

[Elmer]

On 9/2/2022 at 9:39 PM, Jeremie Boop said:

Except, didn't the Payroll protection thing allow them to keep people on the payroll. Full pay and benefits? Whereas unemployment pays a percentage of the wages and they have no benefits? I could be wrong, but if not it seems like that was a much better solution for employees than unemployment is. I didn't have to deal with any of that, thankfully. 

So, kind of, sort of, assuming they were on payroll and had benefits to begin with.
Around here golf courses are mostly closed from November to April (depending on how early spring shows up). Therefore grounds crew, starter & pro shop (which may be an "independent contractor") are usually seasonal. 
This means staff were most likely collecting unemployment. 
For the pandemic I know grounds crew had not been called back as we had a late spring.
This means instead of having the workers continue to collect UI, which is funded partially by the business (resulting in a increase to the business unemployment charges, which is assessed and paid along with taxes), the business decided to take advantage of tax payer funded loans.

Point is,  I think it is hypocritical to not want your tax dollars to cover forgiveness of student loans, but have no issue with my tax dollars helping you avoid increasing charges.

[iacas]

1 hour ago, Elmer said:

So, kind of, sort of, assuming they were on payroll and had benefits to begin with.
Around here golf courses are mostly closed from November to April (depending on how early spring shows up). Therefore grounds crew, starter & pro shop (which may be an "independent contractor") are usually seasonal. 
This means staff were most likely collecting unemployment. 
For the pandemic I know grounds crew had not been called back as we had a late spring.
This means instead of having the workers continue to collect UI, which is funded partially by the business (resulting in a increase to the business unemployment charges, which is assessed and paid along with taxes), the business decided to take advantage of tax payer funded loans.

Point is,  I think it is hypocritical to not want your tax dollars to cover forgiveness of student loans, but have no issue with my tax dollars helping you avoid increasing charges.

That's an awfully reduced (and incorrect) way of looking at that, with a cherry picked anecdote about which you likely have no real knowledge, but I'm content to say that you're comparing apples (the fruit) to iPhones (an Apple product) here (because it's worse than apples to oranges, as at least those are both fruits), and to move on.

[Elmer]

1 hour ago, iacas said:

That's an awfully reduced (and incorrect) way of looking at that, with a cherry picked anecdote about which you likely have no real knowledge, but I'm content to say that you're comparing apples (the fruit) to iPhones (an Apple product) here (because it's worse than apples to oranges, as at least those are both fruits), and to move on.

You assume I have no knowledge of unemployment insurance?
Or the conditions of employment of those who work at a local golf course? 
I am fine with moving on, but just because you don't believe what i have stated, does not make it any less correct!

[mdl]

I'm pretty anti the forgiveness thing from the progressive side. I'm glad it's means tested, but that's just accomplishing forgiving debt for the middle class rather than the middle and upper class. It's absolutely insane to me that we're going to spend as much forgiving middle class student debt as we are, for example, in additional efforts to fight, you know, the end of the world through climate change (per the bill Manchin agreed to).

On cost, it seems pretty clear to me that the answer is going back to real funding for public universities. Allot an inflation adjusted amount of money per student and mandate something like a yearly student body size in proportion to state population (and is maybe revisited every decade or something to adjust for proportion of folks who want to go to college). That should force state unis to stop going down the private school route turning college back into a finishing school, country club, and sporting association with some classes on the side and an enormous price tag. And be more equitable than the current system.

Wouldn't solve the problem that the elite private schools are more and more turning back into gatekeepers for the elite. But hey, what's America without a little plutocracy?

[GolfSwami]

On 9/6/2022 at 9:59 AM, Elmer said:

 

Point is,  I think it is hypocritical to not want your tax dollars to cover forgiveness of student loans, but have no issue with my tax dollars helping you avoid increasing charges.

They aren't remotely similar situations so it isn't hypocritical at all.

The upside of blanket student loan forgiveness from an societal point of view is nothing.   You don't have more educated people because they already went to school.  You've done nothing to help the economy. In fact it is worse right now because it adds to inflation.  The burden was just shifted to people who didn't get the benefit. And future college students will pay more because the potential for future bailouts gets priced in.

On the other hand, a large percentage of the hospitality industry  which employs a not insignificant percentage of workers would have gone bankrupt.  There would have been a huge societal cost with chronically unemployed people.  The bankruptcy process is slow to begin with and in a situation where you a lot of businesses going bankrupt at once it would have taken years.  There is a whole cascading effect of mass bankruptcy. Banks which made the loans would not get paid back.  The money supply would collapse. The Great Depression happened because of mass bankruptcy. And it also worth noting the financial problems hospitality businesses faced were in large part because government forced these businesses to close and restricted travel. Whether the decision to force business closures  was right or wrong, if you are going to make that decision, you then have to make whole the people affected.

It was the same thing with TARP. The populist argument about not bailing out fat cats sounds great. But everyone would experience the resulting economic depression.  If you don't bailout people with student loan debt, it will have no systemic implication to the economy.

Edited September 8, 2022 by GolfSwami

[saevel25]

1 hour ago, GolfSwami said:

You've done nothing to help the economy.

I mean, you had people who couldn't afford home ownership till they were like 35-40 because they had to pay off student loans to even start working on saving up for a downpayment. 

My realtor told me that the the majority of people looking for new homes over the past 3-4 years has been from people in my age bracket, which would be about the time their student loans were paid off. A lot of my friends and people I know just paid off their student loans the past 5 years. 

Personal debt absolutely has an impact on the economy.

Since the primary cause of bankruptcy in this country is medical costs. The biggest help would be a restructuring of our medical system. 

1 hour ago, GolfSwami said:

he burden was just shifted to people who didn't get the benefit. And future college students will pay more because the potential for future bailouts gets priced in.

Most likely true. 

1 hour ago, GolfSwami said:

The Great Depression happened because of mass bankruptcy.

I would say the Great Depression caused bankruptcy not the other way around...

What Caused the Great Depression? | St. Louis Fed

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This video explores suggested causes such as: the stock market crash, the collapse of world trade, government policies, bank failures and panics, and the collapse of the money supply.

The biggest issue was the mass withdrawal of money from banks, which didn't have the money on hand to cover the withdrawals because the banks were investing the money. 

I did some searching, and didn't find anything saying bankruptcy caused the Great Depression. 

 

[StuM]

On 9/4/2022 at 5:19 PM, Double Mocha Man said:

I bet he doesn't cut grass himself anymore.  He runs a successful business.  Grass cutting in Florida, kind of a given.  Tell him not to try it in Michigan...

Why not in Michigan?

yes shorter grass cutting season than FL but most also do snow and other things.  I am re-landscaping my back yard now, it is costing a ton.

[Elmer]

 

13 hours ago, GolfSwami said:

They aren't remotely similar situations so it isn't hypocritical at all.

The upside of blanket student loan forgiveness from an societal point of view is nothing.   You don't have more educated people because they already went to school.  You've done nothing to help the economy. In fact it is worse right now because it adds to inflation.  The burden was just shifted to people who didn't get the benefit. And future college students will pay more because the potential for future bailouts gets priced in.

On the other hand, a large percentage of the hospitality industry  which employs a not insignificant percentage of workers would have gone bankrupt.  There would have been a huge societal cost with chronically unemployed people.  The bankruptcy process is slow to begin with and in a situation where you a lot of businesses going bankrupt at once it would have taken years.  There is a whole cascading effect of mass bankruptcy. Banks which made the loans would not get paid back.  

It was the same thing with TARP. The populist argument about not bailing out fat cats sounds great. But everyone would experience the resulting economic depression.  If you don't bailout people with student loan debt, it will have no systemic implication to the economy.

if the hospitality industry has a business model which is unsustainable during lean times, then maybe they need a better business model. 

Some one on here had noted that "If you can't afford something, don't buy it."
If we are to hold student's to such fiscal philosophy should the same be applied to business and  corporations? 
Or have we decided that saving the corporations, shareholders and business is more important that saving the student (whom in many cases may work for those companies).

[saevel25]

4 minutes ago, Elmer said:

if the hospitality industry has a business model which is unsustainable during lean times, then maybe they need a better business model. 

In good times 33% of restaurants fail with in the 1st year. 

That industry is just hard to succeed in. The profit margins are slim. It is just how the industry is. 

5 minutes ago, Elmer said:

Some one on here had noted that "If you can't afford something, don't buy it."
If we are to hold student's to such fiscal philosophy should the same be applied to business and  corporations? 

Nope. 

They operate under a different accounting methods, and also different mechanisms. 

Businesses should absolutely leverage debt to their advantage. 

If you have to wait 5 years to build up equity to expand, or you can take out a loan and build it now, which then expands your business by 50%. You make more money by taking on debt now.

A household can not work like that because you can't take out debt to expand your job income by 50%. Maybe if you are investing. I know a guy who used a home equity loan to then reinvest it into some high risk and high reward stocks. The interest rate for the home equity was like sub 4%, and he was thinking he could get a ROR of much more than that. It was an easy way for him to get access to a large sum of money instead of waiting 5 years to save up. There are ways, but that is the only way I know to leverage debt to try to gain wealth sooner knowing that you are going to out pace the interest on the loan, 

Businesses are oranges, home finances are apples. ,

9 minutes ago, Elmer said:

Or have we decided that saving the corporations, shareholders and business is more important that saving the student (whom in many cases may work for those companies).

Depends on the situation. 

Save a business that employee 50,000 people. Which then provided those 50,000 people with jobs that provide substantially more wealth to more people than giving out 10K to x amount of students? 

I mean, it would depend on the math. It isn't as clean as you want to make it. 

 

[Elmer]

2 minutes ago, saevel25 said:

In good times 33% of restaurants fail with in the 1st year. 

That industry is just hard to succeed in. The profit margins are slim. It is just how the industry is. 

Nope. 

They operate under a different accounting methods, and also different mechanisms. 

Businesses should absolutely leverage debt to their advantage. 

Businesses are oranges, home finances are apples. ,

I mean, it would depend on the math. It isn't as clean as you want to make it. 

 

You have many good points.  The math will never be that clean. I also think there is no resolution to either issue which will satisfy all. 

Humans and businesses operate under different accounting methods, however the talking point is still the same "don't use my tax dollars to bail out XYZ)

Now if we can debate something less stressful like the public funding of welfare vs the cost of the military budget and how these funds could be better leveraged, maybe by repairing the tee boxes at my local muni!

[GolfSwami]

53 minutes ago, Elmer said:

 

if the hospitality industry has a business model which is unsustainable during lean times, then maybe they need a better business model. 

Some one on here had noted that "If you can't afford something, don't buy it."
If we are to hold student's to such fiscal philosophy should the same be applied to business and  corporations? 
Or have we decided that saving the corporations, shareholders and business is more important that saving the student (whom in many cases may work for those companies).

Not for the benefit of shareholders or corporations.  For the economy as a whole.

The last major pandemic was a century ago.  I don't think you can criticize a business model that doesn't take into once in a century events.  And when government forces a business close it becomes similar to eminent domain.  Nobody has a gun pointed at their head to go to college and take a loan. 

Edited September 8, 2022 by GolfSwami

[saevel25]

25 minutes ago, Elmer said:

Humans and businesses operate under different accounting methods, however the talking point is still the same "don't use my tax dollars to bail out XYZ)

What if $250 per person in tax dollars then saves everyone like $1000 in net worth? 

Just saying, bailouts, if the math works out, can save us in the long term much more than what we spend in taxes currently. 

I would like to see the math myself and the logic behind it, but I can envision a scenario where that exists. So, I would not make a blanket statement of "Don't use my tax dollars for that!!!" 

4 minutes ago, GolfSwami said:

Nobody has a gun pointed at their head to go to college and take a loan. 

Well, with the way the system works now, they kind of do. When entry level jobs, which use to require HS degrees, to require college degrees. You are kind of saying, go to college or live a life by struggling at menial jobs. 

Maybe go to college is like, take 6-8 years and work a job while doing it. There are other options, but a college degree isn't worth as much as it use to be because it is just used as a door opener for jobs that a company could just train a HS degree person to do.