Student Debt in the U.S.

[iacas]

http://www.vice.com/read/talking-to-american-debt-dodgers-who-moved-to-europe-to-avoid-paying-off-their-student-loans-111

So, the debt problem is getting bad, and some people are moving to Europe to dodge their educational debts.

I had student loans, but paid them off years ago when I re-financed the mortgage on my house, which (except for a 0% interest loan on a car), is the only debt we carry. And it'll be paid off ahead of schedule, and is financed at a pretty darn good rate itself.

[chspeed]

Another tough topic that can draw deep political and ethical divides, and has no easy answer.

On the one hand, it's hard to feel sympathy for someone that took a big loan and "really doesn't want to pay it back." And while one can argue that the strength of our financial system lies in enforcing these types of loans, the truth is our government has a long history of bailing out both individuals and corporations when it's deemed fiscally or politically beneficial.

My guess is that if the next administration is democratic, we'll see some kind of relatively small bail-out package passed.

[saevel25]

That's the next bubble. As the default rates get higher the more unstable it will become. 

For me the main issue is too many majors that have no real world application for a job. They are just fluff majors to attract people to colleges. 

my friend has a degree in political science and he got laughed at at a job fair. He's going back to college to get a masters in HR. A lot of degrees are only good  to create professors for those degrees. 

I think this is not a housing debt issue like befor. I don't think these loans are held by banks. Really it's going to be a federal government issue on the budget. I'm the end they might just forgive the loans and lay it on the tax payers. 

[Pete F]

Those rotten kids!!!!!!!!!!

Now look at this

http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years

Pretty substantial change in costs, it would not be so easy to pay off today.

[jbishop15]

College should be paid for by the government, like in many other countries. Education is too important, not only for getting a job, but for creating a better populace.

[Dave325]

5 minutes ago, Pete F said:

Those rotten kids!!!!!!!!!!

Now look at this

http://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years

Pretty substantial change in costs, it would not be so easy to pay off today.

As this statistic points out... the cost of education has skyrocketed. I went to college in the 70s. When I first started at a state university, the cost was $19/credit hour... I just looked up the current cost ($401.50/credit hour). Wow!  I graduated without needing a loan and had a free ride for post-grad with a graduate assistantship... unfortunately, many of these programs are gone (schools can say that we have doctorates teaching all our courses, not students.... keeping a competitive edge over those that do).

Now, has the quality of education got better?  Maybe. But with a cost increase like that and the hopes of some never going to college (or going and incurring huge debts) is a problem that needs fixed. Students loans are also an issue... There was a news story just this morning about recommendations to re-fi student loans for lower interest loans. So, there are two issues here... the cost of education and loans that are incurred.

[Gunther]

I would be pretty angry if some kind of debt forgiveness action were implemented.

We got my kid through school with no debt but it required planning, hard work and sacrifice that too many people today just aren't willing to put up with.

 He received a partial academic scholarship, which covered about a third of the expense.  I had a 529 that covered another third, and the final third came outta my pocket across those 4 years.

Planning:  I opened a 529 when he was in elementary school.  I also had stock options that I intended to use but in the '08 market crash they went from being worth $50K to $0, and expired before the value came back.  That hurt.

Hard work:  my kid worked from his freshman year.  He wanted to join a fraternity; I told him I was OK with it but he had to pay the dues.  He griped a little cuz most of his friends were wealthy and their folks gave em a couple hundred bucks a week.  I couldn't do that.  Also, most of his buds took only 4 classes a semester.  I made him take 5 cuz at this school the 5th class each semester was essentially free.  I wanted him on the 4 year plan, he wanted the 5.  So, he worked really hard through those 4 years while becoming an officer in the frat and graduating Cum Laude with a business degree.  Hard work.

Sacrifice:  he was accepted into his 2 top schools, however, neither offered a scholarship so we'd have had to take loans to afford it.  I pushed him towards the school that offered the scholarship.

The 1st couple years were tough, he griped a bit and I felt bad I couldn't provide him more.  Had to explain the $50K loss a few times.  By his junior year, he started to realize he was going to graduate with no debt and stopped griping.  Evidently, he learned how many kids had tons of debt upon graduation and he was grateful to be free of that.  He thanked me repeatedly over the next couple years but I reminded him that he paid for a third of his education with his scholarship.  He graduated in May of '14, has a great job and I'm very proud of him.

Anyway, tooting my own horn a little here and my kid's but the point is twofold.  1.  This is a blueprint for getting your kids through school in a cost-effective way but it requires planning, hard work and sacrifice.  2.  I should not have to pay for those who borrowed discriminatingly or indiscriminately to go through school.  If you cannot afford it, go to trade school.  Everyone is not entitled to a college education.

[rehmwa]

37 minutes ago, Dave325 said:

As this statistic points out... the cost of education has skyrocketed.

 

Nonsense.  We addressed that issue just like the housing market.  "Government" threw tons of subsidies (or required loans to those that shouldn't be eligible) at it and the influx of money (OBVIOUSLY) then drove the cost of education down.  It's economics!!  (more money, prices drop - right?).

Government economic theory at its best.  (I'm being a bit ironic, wry, sarcastic for the slower ones in the crowd - they know who they are.....or maybe they don't)  It worked so well for the housing market.......

 

And people still throw out that it needs more "help" or even should be paid for everyone via taxes....... sigh  (good intentions seems to be correlated to people that just don't think things through).  The loans used to be realistic, now they have to be a huge yoke around a student's neck and impossible to pay off.  I'm sure that's by design, keep people in debt and dependent.

On the plus side - all that extra money (even though it's been shown that it never helped the target demographics it was 'supposed' to) at least has resulted in a dramatic increase of high paid administrators in most colleges, and really nice dining halls, dorms, gyms, etc.  So we got that going for it.

I'm on the exact same route as Gunther (good job, G) Had I not saved ahead - Paying for my daughter's college right now would take nearly 1/3 of my take home pay - it's over 5 times what I paid for myself.  But at least that ends after 4-5 years.  If we paid for everybody - the cost would skyrocket, and I'd also be paying forever.  No thanks, take care of your kids, I'll take care of mine.

[saevel25]

31 minutes ago, jbishop15 said:

College should be paid for by the government, like in many other countries. Education is too important, not only for getting a job, but for creating a better populace.

One of the few things I think the government should pay for. 

I do think college degrees are overvalued now. It's more or less used as a way to weed out applicants over actual value of what you learned. I'm in engineering and I probably used less than half of what I learned in college. They probably could cut my years at OSU in half and I would still be qualified to get an engineering job. In the end you are going to learn more on the job. Of course there is exceptions to this. 

 

[rehmwa]

4 minutes ago, saevel25 said:

One of the few things I think the government should pay for.

I suggest you voluntarily sponsor a total stranger (let the government pick that person for you too - not your choice) out of your own pocket.  And when he/she/whatever graduates, they can assign another.  And keep doing that until the end of time.  Let's see how that works.

[sirhacksalot]

High school should end at 16.  Then the options of college, trade school, military, and workforce are offered.  By not paying for a junior and senior year it stands for reasoning that the first year or so of college, trade school could be paid for by some kind of government assistance.  Grades and attendance withstanding.  Entering the military at the younger age would allow more time for training and mental preparedness to hopefully cut down on the amount of PTSD cases that plague the veterans as well as the VA. 

[jamo]

I graduated almost exactly two years ago from a public school. At my current rate, I'll have my degree paid off in ... never. (Trust me on that math. I have an engineering degree.)

(It's really like 10 years or so. 10 years during which I'd instead love to be actually saving money, as any financial advisor would tell a 20-something with a full-time job to do. Fat chance of that happening.)

 

[imsys0042]

Student Loans end up not being worth it if you are under heavy debt for a long time. Not to mention it cannot be discharged in bankruptcy and the student loans companies operate too much for profit.  My wife's parents completely mis-managed this and my wife feels bad that she is still paying them 13 years after college and that she didn't take the lead on doing it.  She probably would have done it differently.

I agree with the posters who have said that the cost of education is higher than it should be.  I've spoken with several people in the financial world and they have mentioned that college costs have almost become a bubble, where it's become so inflated and will price a lot of people out, hence enrollment will be lower.

I believe that there should be government subsidized education based on merit and that private colleges are an option for those who want to pay, or take on that debt.  Whether completely free or heavily subsidized for public school, I don't know.  However much like the mortgage companies, student loan companies decided to monetize as much as possible and they lobbied Congress to not allow these loans to be discharged from bankruptcy.   Clearing not putting students first.

[Mr. Desmond]

In the mid-to-late 70's, I was able to earn a BBA and MBA without loans - public higher education was about $6k/year for me. Going through law school in the late 80's-early '90s, I incurred debt as the law school tuition was artificially higher to subsidize the undergrad tuition. Twenty odd years later, I still have debt at a low interest rate. It does create a burden getting out of school, and they have deferments but it still incurs interest.

I would advise something that if they must take debt the first two years, go to an alternative public undergrad education as in a Community College, and spend the last 2 years going to the more expensive undergrad school.

As to the future, perhaps the government can help subsidize the education or pay loans of those who volunteer for some public service for a couple of years after school.

[David in FL]

1 hour ago, Dave325 said:

As this statistic points out... the cost of education has skyrocketed. I went to college in the 70s. When I first started at a state university, the cost was $19/credit hour... I just looked up the current cost ($401.50/credit hour). Wow!  I graduated without needing a loan and had a free ride for post-grad with a graduate assistantship... unfortunately, many of these programs are gone (schools can say that we have doctorates teaching all our courses, not students.... keeping a competitive edge over those that do).

Now, has the quality of education got better?  Maybe. But with a cost increase like that and the hopes of some never going to college (or going and incurring huge debts) is a problem that needs fixed. Students loans are also an issue... There was a news story just this morning about recommendations to re-fi student loans for lower interest loans. So, there are two issues here... the cost of education and loans that are incurred.

At $402 per credit hour, a student working a part time job at $10 an hour can pretty much pay for their entire college education without any debt at all.  That doesn't even take into account education savings and planing that could have/should have happened in advance.

Are there exceptions?  Certainly.  But like most things in life, making good decisions, working instead of playing, and taking personal responsibility for your own success goes a long ways.

 

37 minutes ago, jamo said:

I graduated almost exactly two years ago from a public school. At my current rate, I'll have my degree paid off in ... never. (Trust me on that math. I have an engineering degree.)

(It's really like 10 years or so. 10 years during which I'd instead love to be actually saving money, as any financial advisor would tell a 20-something with a full-time job to do. Fat chance of that happening.)

 

Just because the term of the loan is 10 years, doesn't mean that it has to take that long.  If paying it off was a priority, I'd be surprised if, as an engineer, there weren't significant adjustments that you couldn't make to your current lifestyle that would allow you to pay that debt off and begin a more aggressive savings/investment strategy in less than 5 years.  

[saevel25]

I do think that some people take on unneeded debt.

there needs to be a way to control the inflated cost. Government isn't going to create criteria like private loans have. 

From what I heard the average salary for  professor hasn't increased at the same rate as tuition. Also administrators salaries haven't spiked. What has spiked is the increase in the actual number of administrators. That's how they are spending the inflated revenues. 

[Mr. Desmond]

When I went to school, $500/hr was the going rate for law, and that did not include several thousand of other mandatory fees/expenses, books, living, etc. So a credit hour dollar is a majority of the expense, but not the entire amount. In law, one rarely had time for play - during the week it was 12-14 hours per day of study/class. I assume the same is true for professional grad schools. Not so much for most undergrads.

[saevel25]

13 minutes ago, Mr. Desmond said:

In law, one rarely had time for play - during the week it was 12-14 hours per day of study/class. I assume the same is true for professional grad schools. Not so much for most undergrads.

I can't remember exactly what our intro to engineering counselor told us. It was something like, expect to spend 2x the number of credit hours outside of class on homework and studying. That doesn't include the professors who never realize you have other classes besides theirs. One reason why I left Mechanical Engineering.